Jetsgo to Fly Agaian?

[handyman]

Ambivalent my arse... Air Canada with it's $35 a barrel plan in $55 a barrel reality should and would be just as concerned about depressed yields from a JetsGo II as Canjet and WestJet.

It is true that AC feels the effect of high oil prices as others do such as WS, CanJet and JG did. But, AC has friends with deep pockets as we have seen in the recent past.

As for Jetsgo II, I hope not for the good of the Canadian airline industry.

[Kip Powick]

CTV interviewed a few x-employees who were at a job fair, about the "revival" ...all but one said they would go back and work for Jetsgo.

[Jumpy]

The "true" difference in cost of an EMB-190 over a 737-600 is only about $500.00 per hour and you get an additional 25 seats. When you factor in the common type the cost difference is negligible. I would doubt very much we will get small jets any time soon as the costs outweigh the benefits by a large margin. With the 600's, 700's and 800's we will be able to better right size the aircraft to the route (perhaps not as efficiently as AC with 5-7 types) but it will be better than it is right now.

[dagger]

The "true" difference in cost of an EMB-190 over a 737-600 is only about $500.00 per hour and you get an additional 25 seats. When you factor in the common type the cost difference is negligible. I would doubt very much we will get small jets any time soon as the costs outweigh the benefits by a large margin. With the 600's, 700's and 800's we will be able to better right size the aircraft to the route (perhaps not as efficiently as AC with 5-7 types) but it will be better than it is right now.

The difference in cost means many things to each airline. You have to factor in pay rates for each aircraft type, fuel costs and financing costs. Under WS market conditions, with commonality considerations, the gap might be $500 per hour, and nobody begrudges WS for choosing the -600, even if it an overly heavy "stump" that the market is rejecting along with the A318. For WS, the plane makes sense. PERIOD. No argument.

(Mind you, I wonder when that analysis was made what fuel prices were and how higher fuel prices have widened that gap. There is no getting around the fact that the -600 is one-third heavier; weight is fuel. And that $500 per hour is nevertheless a difference of $6,000 per high utilization day or about $1.8 million per plane over the course of a year assuming one day a week on the ground.

Under AC's cost/revenue conditions, the relative savings can be much greater because of the variability in wage scales and a breath-taking price. AC ordering the E-Jets made a statement to airlines around the world about the desirability of EMB vs BBD 75-100 seat products. EMB "paid" for that endorsement with a great price on the E-jets.

While WS has common-rated pilots, AC will have differentiated pay scales, with the E175 and E190 drivers earning significantly less than the Airbus jockies (though many E drivers will be moving off the CRJ-100/200s so it's not exactly a pay cut for them). The point is, and this is what is lost on most people attempting to analyze AC's smaller jet concept, AC isn't benchmarking the E-jets against WS, it's benchmarking against its own cost/revenue profile. AC knows what flights and routes regularly have loads under 100 passengers, and it knows what developmental routes with fewer than 100 passengers per flight are out there and capable of turning a profit with a suitably sized aircraft. It will use the E-jets to sub for older A320s that will be reassigned or, more likely, sent back to lessors. Each substitution will generate aggregate trip savings on the order of 20-30% without the loss of any revenue.

The E-jets were chosen because they are unique: The cabin is designed to provide the feel of an Airbus or Boeing narrowbody and to permit AC to do new things that will confer additional competitive advantages.

[wjafa]

How Jetsgo's former employees are feeling about returning to work:

http://www.jetsgone.net/viewtopic.php?t=268

[CanadaEH]

Dagger, Dagger, Mr. Dagger....

The difference in cost means many things to each airline. You have to factor in pay rates for each aircraft type, fuel costs and financing costs. Under WS market conditions, with commonality considerations, the gap might be $500 per hour, and nobody begrudges WS for choosing the -600, even if it an overly heavy "stump" that the market is rejecting along with the A318. For WS, the plane makes sense. PERIOD. No argument.

(Mind you, I wonder when that analysis was made what fuel prices were and how higher fuel prices have widened that gap. There is no getting around the fact that the -600 is one-third heavier; weight is fuel. And that $500 per hour is nevertheless a difference of $6,000 per high utilization day or about $1.8 million per plane over the course of a year assuming one day a week on the ground.

I can't argue with you on the 737-600 being a "reject", but you need to look at the bigger picture. Predictions place our CASM as being one of the lowest in North America once all of our 737-200's have left the fleet. The increase in efficiency ranges from fleet commonality to crew scheduling and route planning to training and maintenance. You can micro-analyze Westjet vs. Air Canada until your red in the face, but at the end of the day the differences aren't that significant.

[Seeker]

CanadaEh:

Dagger is obviously in the business of "micro-analysing" Air Canada, Westjet and others. The fact that he's posted some of it here is because Flapsforty just asked for it with his bonehead "CASM is everything" statement. The reasons why CASM isn't everything have been listed on this site many, many times. At least two times by me. Either you have a very short memory or you're a bit dense....which is it? Westjet has a low CASM, the lowest in the country? the continent? the world? Whichever. It's a good thing. Be proud of it but don't think that's all you need to know to assess one airline against another.

[dagger]

CanadaEh:

Dagger is obviously in the business of "micro-analysing" Air Canada, Westjet and others.  The fact that he's posted some of it here is because Flapsforty just asked for it with his bonehead "CASM is everything" statement.  The reasons why CASM isn't everything have been listed on this site many, many times.  At least two times by me.  Either you have a very short memory or you're a bit dense....which is it?  Westjet has a low CASM, the lowest in the country? the continent? the world?  Whichever.  It's a good thing.  Be proud of it but don't think that's all you need to know to assess one airline against another.

Thank you, Seeker, for stating the obvious. The fact is, the -600 is the right plane for replacing the -200 at WJ, with the WJ fare structure, and the E-Jets are right for AC's economic model. That was my point. It wasn't another AC-vs-WJ comparison... On the CASM argument, if CASM were the only thing, I submit to you that the true SW model would require WJ to offer consistently lower fares on all flights, all routes, even very popular ones. SW model assumes that the best way to beat the competition is not merely to gain share, but to hold it, by seeking a consistent RASM to match the CASM, thereby generating a steady level of profitability that increases with expansion of capacity. After SW basically ousted the legacy carriers on intra-California routes, using very aggressive pricing, it didn't raise its fares once it had established a de facto monopoly. It left them in year-round. The prevents any legacy carrier from re-entering that market, and it makes it real hard for another LCC to do it, too. Obviously, WJ doesn't subscribe to that theory because a transcon at Xmas can cost $1000 or more on WJ. So WJ believes it has to have a more sophisticated RASM strategy than SW to meet its profit goals. Obviously, CASM isn't everything. Maybe it's because the Canadian market is smaller and there is just less room to expand profitably, and some growth has to be achieved by RASM-building which made getting rid of SG such a WS priority. Perhaps the most intriguing thing I saw this week is the tagline on a WJ print: "We offer competitive fares"... Competitive? What happened to cheap? What happened to affordable. What happened to Canada's low fare carrier? Competitive with whom? Air Canada? Why do your fares have to be competitive with AC if you have lower CASM? Your fares should always be lower than AC's, particularly since AC offers scheduling and frequent flyer benefits.

[Guest prob30]

I think the big RJ's add a tremendous amount of flexibility. Previously (ie. now) in order to upsize capacity it went from 50 seat RJ to a 120 seat 319- a nearly 150% jump in ASM. Frequency or profitability had to suffer. With the gap filled by the new types, demand can be matched much, much more accurately without sacrificing either nearly as much.

The RJ will have an advantage over anything else on business markets like Calgary-Regina, or Calgary-Saskatoon. Just as the 737 has an advantage on the same cities for the VFR market. If WJ tried to match frequency, the 737 gets squashed. Just as if AC tried to match fares, the RJ gets squashed. The two concepts can coexist, but can not overlap and be profitable at the same time.

[sambucca]

Why do your fares have to be competitive with AC if you have lower CASM? Your fares should always be lower than AC's, particularly since AC offers scheduling and frequent flyer benefits.

Let's face it ...AC's domestic operation loses money. They can not match WestJets costs. Domestic is subsidized by it's profitable international operations. Throwing good money after bad to make more good money.

The difference is that WestJet HAS to make money domestically. Very little to support the airline otherwise , although the Transat work helps somewhat.

If we lowered our fares and made a little less profit , guess what ? AC would lower their's too and the downward spiral starts again.

[Guest directlaw]

Let's face it ...AC's domestic operation loses money.

Where did you get that from?

[dagger]

Let's face it ...AC's domestic operation loses money. They can not match WestJets costs. Domestic is subsidized by it's profitable international operations. Throwing good money after bad to make more good money.

The difference is that WestJet HAS to make money domestically. Very little to support the airline otherwise , although the Transat work helps somewhat.

If we lowered our fares and made a little less profit , guess what ? AC would lower their's too and the downward spiral starts again.

I don't accept AC's domestic net will lose money this year. The fact that Westjet's costs are lower doesn't negate the fact AC has higher per-passenger revenues. I guess that's not easy for some Westjetters to understand because the lyrics aren't in your hymn book. You also presume that AC is market share driven as it was in the past, but with AC's smaller jet strategy, it has less and less incentive to adopt a matching fare strategy if it can maintain a high load factor at current fares. As I explaining in another thread, AC's smaller jet strategy creates a paradox. It pushes up CASM (while aggregate costs decline) and pushes up RASM even more (while aggregate revenues remain static). There just isn't the same incentive to protect market share or drive down fares that AC may have had in the fact.

[sambucca]

So Dagger , you disagree with me when I say that if we dropped prices AC would drop theirs about 3 nanoseconds later...

[Fido]

WestJet people like to look at the absolute numbers and declare as some badge of honour, 'Our CASM is lower than your CASM'.

There is an exercise that I am sure AC has done more than a few times, where one deducts the cost elements that are associated solely with attracting the premium flyer (the ones that pay more) and the international network flying. This leaves just the cost elements that compare directly with the LCC competitor.

Deduct the following:

Cost of frequent flyer/Executive class lounges.

Cost of priority call centre handling

Cost of specialty check-in desks

Cost of added manpower for concierge services

Cost of Executive class cabin service, food and amenities

Pro-rate the Economy cabin costs by moving some costs for the space taken by the premium cabin.

Costs associatted with carrying passengers on domestic services into the international network

I believe that when one considers the 'cost' of carrying a pure domestic passenger at AC versus WS, the CASM is very close. The higher cost elements are covered by the higher revenue associated with the value added services given.

[Guest Kilo Mike]

Sambu.

I'm pretty sure even 'you' can get the gist of what Dagger is saying. Of course there would be fare matching in your scenario, but it wouldn't entail the entire seat inventory. Hence the reality of AC's yield primium over WJ.

Take the blinders off for a sec and you might get some insights. I agree Dagger can come across as grating, espcially when he's hitting a nerve. The fact is he posts logical arguements for his assumptions while WJ'rs tend to be a tad light in the "put-up or shut-up" department. Your blanket statement regarding AC's domestic profitability is a case in point. What are you basing this wonderous insight from?

Kilo

[sambucca]

Sambu.

I'm pretty sure even 'you' can get the gist of what Dagger is saying. Of course there would be fare matching in your scenario, but it wouldn't entail the entire seat inventory. Hence the reality of AC's yield primium over WJ.

Take the blinders off for a sec and you might get some insights. I agree Dagger can come across as grating, espcially when he's hitting a nerve. The fact is he posts logical arguements for his assumptions while WJ'rs tend to be a tad light in the "put-up or shut-up" department. Your blanket statement regarding AC's domestic profitability is a case in point. What are you basing this wonderous insight from? 

Kilo

OK. I'll come clean. I'm only guessing that AC is not profitable on domestic flying but with oil at 55 bucks a barrel without comensurate fuel surcharges I don't think it is much of a stretch. Just look at the thin numbers they are producing. If they are as skinny as that , it seems that the highly profitable intl. flying must be propping up the domestic. Certainly no more a stretch than Dagger's claim of profitability without the figures to back it up. I don't know if it would even be possible to break the figures down unless you worked deep in the bowels of the AC bean counting department.

As for your take on the fare matching I'm sure that even "you" can understand that AC's fare matching on only our similiar routes still results in WestJet making less money on those routes. Why in the world would we want to initiate something like that without the yield premium AC possess?

[dagger]

I would presume that even with $55 oil, AC will be profitable domestically. However, I need to see the second and third quarters to get a real sense. If you had said, AC isn't making money domestically in January, I would agree, and I believe WS - even with its lower CASM - wasn't profitable in January and won't be profitable in the first quarter. On a full year basis, WS might well be profitable.

If you happened to open a newspaper in January, you would have seen $498 return fares to London. Then you would know that international isn't really a profit centre in off peak months and isn't subsidizing Jack Squat.

But hey, keep asking questions, because you need to hear all the facts. It's clear now that the 2005 WJ hymn book must be out and the new chorus is "AC is using Tokyo to sink us on Toronto".

[sambucca]

Dagger

Do you deny that AC makes more money internationally than domestically?

THAT is the heart of the matter.

[Guest Kilo Mike]

"Just look at the thin numbers they are producing"

Where you getting this from? The latest quarterly numbers are trending in a upwards direction, even with fuel at the present levels. On a subjective level, my flights have been just hammered regarding loads so from a gut level, I tend to believe the posted numbers as published without diving into the bowels of the accounting world of ACE.

ACe quarterly report

We're getting off the thread topic Sambuca, so if you want to continue, recommend you start a new thread.

[dagger]

OK. I'll come clean. I'm only guessing that AC is not profitable on domestic flying but with oil at 55 bucks a barrel without comensurate fuel surcharges I don't think it is much of a stretch. Just look at the thin numbers they are producing. If they are as skinny as that , it seems that the highly profitable intl. flying must be propping up the domestic. Certainly no more a stretch than Dagger's claim of profitability without the figures to back it up. I don't know if it would even be possible to break the figures down unless you worked deep in the bowels of the AC bean counting department.

As for your take on the fare matching I'm sure that even "you" can understand that AC's fare matching on only our similiar routes still results in WestJet making less money on those routes. Why in the world would we want to initiate something like that without the yield premium AC possess?

Because if you lowered your fares on these routes, you would take business away from AC. As you did, you could add flights, increase critical mass and make yourselves more attractive to the business traveller. Then you could add a second, more flexible premium fare... However, you would still be Canada's low-fare airline, something you can't be for long if the new tagline is "Our fares our competitive"

By not pre-empting the return of SG or another lower cost, focussed discounter, you are making their return inevitable.

[dagger]

Dagger

Do you deny that AC makes more money internationally than domestically?

THAT is the heart of the matter.

You keep changing the issue. First you say AC domestic is unprofitable. Then you challenge me on whether intl is MORE profitable, which, of course, allows for the possibility that domestic IS profitable. Yes, international probably has a bigger profit margin, just as some of your routes are better than others. Whatever. That doesn't mean one is cross-subsidizing the other on a full-year basis.

That is the "heart" of what "matter"?

Is that what the hymn book tells you to say? Is the new song, "We're hard done by" ?

[sambucca]

Because if you lowered your fares on these routes, you would take business away from AC. .

Man O Man , is this going in circles. My whole point is that AC would just match "Our" low fares resulting in zero gained business and less profit for both carriers. If you ask me how I know this I can only say "because it has always been so"

Great plan otherwise.

[sambucca]

Is that what the hymn book tells you to say? Is the new song, "We're hard done by"  ?

Not at all. I think we are doing very well , thank you very much.

The point is that AC has a whole other dimension to their business , that being their international routes that you now admit has a larger profit margin. This is a good thing. That larger profit supports the questionably profitable domestic routes. That is what I'm getting at.

The proof lies in this hypothetical. AC drops all international routes and competes head to head with WestJet with both carriers current cost structures. Who makes money then , Dagger?

[Seeker]

AC drops all international routes and competes head to head with WestJet with both carriers current cost structures. Who makes money then , Dagger?

Let's say Canadian Tire stops selling tools and competes directly with Zellers or maybe we can imagine that Home depot stops selling lumber and competes with Canadian Tire? WTF?

[sambucca]

Let's say Canadian Tire stops selling tools and competes directly with Zellers or maybe we can imagine that Home depot stops selling lumber and competes with Canadian Tire? WTF?

Exactly. Wouldn't work , would it.

Because without the international flying AC is not profitable.

Thanks for proving my point.