Kip Powick Posted October 28, 2003 Share Posted October 28, 2003 http://www.globeandmail.com/servlet/story/RTGAM.20031028.rwest1028/BNStory/Business/ Link to comment Share on other sites More sharing options...
Guest Patrick Bergen Posted October 28, 2003 Share Posted October 28, 2003 "WestJet has crunched the numbers and believes it could operate the Embraer aircraft at unit costs about 45 per cent below Air Canada's. "That throws a monkey wrench into their latest plan," the WestJet source said."" I thought WJ would make the decision based on what was right for their company and not what would try to drive nails in the coffin of AC. JMO Link to comment Share on other sites More sharing options...
Guest CDB Posted October 28, 2003 Share Posted October 28, 2003 Of course they're going to do what is right for WestJet; it just happens to be not so great for AC's domestic operations Link to comment Share on other sites More sharing options...
Guest Patrick Bergen Posted October 28, 2003 Share Posted October 28, 2003 Then you won't mind AC's low pricing to get market share. Link to comment Share on other sites More sharing options...
Guest Operation Bomberclad Posted October 28, 2003 Share Posted October 28, 2003 I guess there is no more hiding the fact that Klyde was outright lying on ROBTV, that his intention is not to operate turboprops, but Embraer jets. One might also presume that the current stream of exaggerated invective at the mothercorp is to generate a market psychology to attract travellers onto Embraer jets. There is no hiding the fact now that Wejest was taking on debt, diluting shares, and pumping their share price in order to take on a new operational strategy of market share. Every "low cost" (read: market-subsidized) operator in the U.S. is involved in exactly the same manouevre. :[ Flan Zuginda Kimono wearing Japanese Woman From Okinawa Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 Low pricing to get market share worked brilliantly in the past, didn't it. WJ's costs remain 40% lower than AC's, even after CCAA. They have access to $400m cash, and they own most of their fleet. AC is bankrupt. WJ can offer fares 40% below Air Canada and hold the same relative position in the marketplace as it does today. Imagine what happens to AC if 50% of their revenue stream is cut by 40%, when overall costs will only be down 15%. AC cannot compete on price in the domestic marketplace and sustain operations for any significant length of time. Get over it. Link to comment Share on other sites More sharing options...
Guest Patrick Bergen Posted October 28, 2003 Share Posted October 28, 2003 If you think that AC's low pricing is not an issue to WJ then why does your leader and company keep complaining about it? Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 Keep it coming, Bummerdud. We all need the comic relief of your paranoid, "kill the rich" union ramblings. Market subsidized? Turboprops? Marketshare? Uh huh....... we believvve you, we realllly do.......... Things slow down at the union hall today? Maybe you should organize another walkout today. LOL Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 CALGARY, ALBERTA--WestJet today announced that its net earnings for the third quarter of 2003 increased 39.8% to $32.3 million compared to $23.1 million achieved during the same period last year. In the first nine months of 2003, the airline's net earnings grew 12.5% to $47.8 million from $42.5 million during the first nine months of 2002. If AC priced it's product sensibly, and WJ's yields had dropped half of the 1.9 cents in the third qurater to .095 cents, WJ would have had an operating profit of $81m. Profit sharing for the quarter would have been $16m vs. about $10m and earnings per share would have been about 54 cents vs. 42 cents. At a 25x multiple, that would suggest a share price about $3 higher than it is today, and a market cap about $230m higher than it is today. In otherwords, sensible pricing would result in a 20% profit share bonus for all employees and this years options would be worth about $16k more than they are today. The end result is I'd be making over $200k a year instead of $150k for flying 13 days a month in brand new 737-700's for the "discount, no frills, lousy pay" airline with the highest margins and lowest costs in the industry. Oh, by the way, if AC had priced sensibly, it might not be in bankruptcy protection and you might have some job security. Link to comment Share on other sites More sharing options...
Guest M. McRae Posted October 28, 2003 Share Posted October 28, 2003 So your solution, rather than offering the public "true low cost fares" would be for AC to up their price so that you could do the same. Is this true to the "low cost" ideal of providing "cheap" fares for your guests???? (6) Link to comment Share on other sites More sharing options...
Guest M. McRae Posted October 28, 2003 Share Posted October 28, 2003 So your solution, rather than offering the public "true low cost fares" would be for AC to up their price so that you could do the same. This would seem to be contrary to the "low cost" ideal of providing "cheap" fares for your guests???? Link to comment Share on other sites More sharing options...
Guest Kilo Mike Posted October 28, 2003 Share Posted October 28, 2003 Wow Simcoe. That was one of your better rants... Wheeew. If if if if ...lot's of if's? What if SAR's hadn't happened, no war in IRAQ, and we had a transport minister that had material other than feeces for brains. Lot's of stuff just doesn't seem to go the way alot of people want. That's life !! It's great that you are finally reallizing some financial reward for your time at WJ... Lot's of people I know aren't in the same position over there and don't share the same "yee haa" attitude. I guess being in your 30's and having to live 4 guys to a one bedroom appartment because you can't afford anything else on the WJ gravytrain will do that to a person. Oh yeah..they keep the negative talk to themselve as they can't afford to get fired for speaking out. Ahh the joys of not having a union... such wonderful job security. Enjoy the ride Simcoe..Competition can be a bugger when it cramps your expectations. KM Link to comment Share on other sites More sharing options...
E-HANDLE Posted October 28, 2003 Share Posted October 28, 2003 True low-cost fares would be sustainable. Air Canada's offerings are not, IMO. When AC/Zip can make money at $30 between YYC-YYZ with a 35% load factor, I'll agree with your POV. Link to comment Share on other sites More sharing options...
Maverick Posted October 28, 2003 Share Posted October 28, 2003 Look at it this way, If AC doesn't raise its prices then it's (insert Chicago gangland accent here) "coytens I tell ya, coytens" If AC continues to price below what it costs then WJ is forced to match it. If everyone raised their fares to a level commensurate with costs then AC would not be in this predicament, Oui? The public perception, right or wrong is that AC is still picking on the competition and it can arguably be said that if AC was healthy and lean then none of the rest would have a chance. JMO Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 The issue is whether or not ACD can afford to match WJ toe to toe in the domestic marketplace. No US carrier has been able to do it with SWA, even post Chapter 11 US Airways. Post CCAA AC will have costs about 15 cents a mile over 1,200 mile flights. WJ will have costs aroungd 10.5 cents on a 700 mile flight. Over 1,200 miles, WJ costs will be around 8 cents a mile. You don't have to be Werner von Braun to figure out that if AC's costs are double WJ's, it's only a a matter of time before they go bankrupt again trying to match fares, (or offer $30 walkup fares for 6 months in row between Abbottsford and Calgary). That alone is costing AC $5m a year - your salary cuts at hard work. Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 Well, the FO I flew with the other day started 15 months ago and T4'd over $80,000 last year and will be a captain within the next 12 months. In his case, he has a crash pad in YYC and has a pretty spectacular place in the Okanogan Valley where he spends about 17-18 days a month. Keep those $35 Abbottsford Calgary fares in place, or the $79 fares from Toronto to Calgary and the hatchet man will be asking for another 20% pay cut by late January to pay for their market share strategy. Link to comment Share on other sites More sharing options...
Guest CDB Posted October 28, 2003 Share Posted October 28, 2003 "The issue is whether or not ACD can afford to match WJ toe to toe in the domestic marketplace." You should remove the hood over your eyes and start to look at the bigger picture. AC does not have to lower costs to WJ's level in order to be succesful in the long term. The relevant market is not Abbottsford to Calgary - it is the world. Link to comment Share on other sites More sharing options...
E-HANDLE Posted October 28, 2003 Share Posted October 28, 2003 No Mon. I flew the mighty bionic buzzard at Time Air. And a delightful old tank she was, too. Link to comment Share on other sites More sharing options...
Guest Simcoe Posted October 28, 2003 Share Posted October 28, 2003 AC derives about 45% of its revenue from the domesti market and has a cost structure that is double its largest competitor. If you think for a second C can continue to do wha tit's doing in the domestic marketplace and survive, you are dreaming in technicolor. Their are dozens of Abbottsford-Calgary fiascos out there. Losing $5m a year on it means that if a system 10% margin is desired, another, profitable route with $50m in annual revenue is subsidizing those losses. That's dumb thinking anyway you slice it. Link to comment Share on other sites More sharing options...
dagger Posted October 28, 2003 Share Posted October 28, 2003 First, I don't think you can project where post-CCAA AC costs will be because from my discussions with AC types, they don't have a good handle on the long-term cost reduction. They know the interim levels, but there are a lot of projects under way that will lead to further lowering of costs in ways that are pretty well unique to AC. By unique to AC, I mean they chip away at infrastructure costs that WJ doesn't have to begin with. So to say AC's costs will be double or 675% more than WJ's costs is a bit disingenuous. Also disingenuous is the notion that AC has to match WJ costs to be competitive of price. It only has to match if it wants the same magnitude of profit. If it is content to make a 10% margin instead of a 15% margin, then it doesn't need the same costs. Moreover, there will always be RASM as well as CASM differences between the two airlines because AC serves a whole international marketplace. That's why the thrust of your analysis - that AC can never compete - is wrong. AC can never make the same magnitude of profit with the cost differential, but that doesn't mean it can't be profitable. Link to comment Share on other sites More sharing options...
Southshore Posted October 28, 2003 Share Posted October 28, 2003 They had both. Ehandle - that you Paul? Link to comment Share on other sites More sharing options...
Kip Powick Posted October 28, 2003 Author Share Posted October 28, 2003 Had 6 years on the CV580..Mil designation "Cosmo" and really enjoyed it. I think DND put "glass" in the cockpits in the late 80's and then grounded the fleet and they were all sold to ???? Link to comment Share on other sites More sharing options...
Guest CDB Posted October 28, 2003 Share Posted October 28, 2003 I'll refer you to the article below which I posted in a response to one of your posts in another thread, to which you didn't respond. Air Canada chief executive Robert Milton said yesterday his airline intends to match the fares offered by domestic competitors but focus much of its growth on international markets. In an internal newsletter to employees, Milton said the recent suggestion that Air Canada is attempting to cripple rivals by selling seats way below cost is "not only-self serving but also entirely false." Clive Beddoe, chief executive of Calgary-based discounter WestJet Airlines Ltd., made the assertions Monday. "The fact is that Air Canada intends to be fully competitive and match fares initiated by our competitors - a perfectly legitimate business response in a highly competitive environment," Milton wrote. "As we focus much of our growth on international markets such as Delhi, Buenos Aires and Santiago, we have also reduced capacity in the domestic market." Milton said Air Canada is the only Canadian airline that has cut its domestic capacity. Analysts warned this summer of the negative effects Air Canada's pricing would have on other airlines. At one point, for example, Air Canada was offering one-way fares between Toronto and Ottawa for $12. More details about Air Canada's restructuring came to light yesterday when Ernst & Young, the accounting firm appointed by the court to oversee the carrier's bankruptcy protection, said in a report that American Express will hand the airline an $80-million loan to fund its exit from bankruptcy protection. The loan is part of a deal letting the financial-services company distribute Air Canada frequent-flier miles to its customers. Under the deal, Amex is also to provide Aeroplan with a minimum revenue guarantee. Amex will pay Aeroplan an undisclosed price for each Aeroplan mile. Air Canada already has a similar agreement with the CIBC and Diners International. http://www.canada.com/montreal/montrealgazette/story.asp?id=8FBB26B9-3B1A-4AB7-9F34-4EF03A6F4017 It is obvious that past decisions and market circumstances led to the current situation AC finds itself in. But to suggest that AC will continue along the same path is silly. As much as everyone loves to bash Milton, he recognized back in 2000 - long before any other major airline - that the marketplace was being permanently altered and took steps to adapt to those market conditions. He just couldn't do it fast enough to avoid CCAA. Link to comment Share on other sites More sharing options...
E-HANDLE Posted October 28, 2003 Share Posted October 28, 2003 Actually, I believe you mean the CV-640. It was powered by R-R Darts. Although a lot less powerful than a 580, the guys who flew it liked it. They were just being retired when I started at Time Air. We had 3 580's, KFW, TAO and TAP. Link to comment Share on other sites More sharing options...
E-HANDLE Posted October 28, 2003 Share Posted October 28, 2003 Nope not Paul. Link to comment Share on other sites More sharing options...
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