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I still don't fully understand this restructuring plan. Wizard you say that it is a game changer. Why? -- Because it looks good? The cabin although better than a CRJ200, is no better than a CRJ705. The economics associated with operating similar size a/c (CRJ705 & EMB175) just don't make sense to me. Would it not have been much wiser in the long term to stay with Bombardier Regional products in the less than 100 seat market, and stick with Airbus for the larger than 100 seat market. If something was needed in between the A319 and the CRJ705 then perhaps the A318 may have been a better fit. Dagger?

Edited by MAYDAY
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I say it's a game changer because they can use the E175 and the RJ705 where the the loads are to thin for a A319 and the A318 is not a good aircraft because it's to heavy. I say game changer because it will also be cheaper to operate these aircraft as the fuel usage is less the landing fees will be less and when the E195 comes online AirCanada will take that aircraft on thin A320 routes just to name a few reasons they are game changers when you have $60 oil.

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Mayday,

The A318 is a nice aircraft but it's fuel burn is closer to the 320 then to the CRJ. With the cost of fuel being so high, the A318 doesn't make much sense. You might as well do the flight with an A319 then a A318.

There is also the question of purchase price. The A318 goes for approx. 45 million versus the Embraers which go for approx 28 million. (list prices)

As for CRJ versus Embraer, The CRJ 705 is the largest regional jet built by bombardier.You can't get any more seat in there unless tou take away J class.The Embraer 175 is a 73 seat aircraft with tons of interior room.On top of the increase comfort, you can get the 190 with an extra 20 seats.(with a common cockpit)

AC then has the availability of Aircraft with 37,50,73-(emb175),75- (CRJ705),94- (emb190),120,140,166(the babybusses),210-(767),274-(A330),286-(A340-300)

With that many airplanes types you get the ability to right size the airplane to the route.

The thing I don't understand is why the CRJ705? where does it fit into the picture? Why not fly it's routes with the EMB 175?

Eric

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I still don't fully understand this restructuring plan. Wizard you say that it is a game changer. Why? -- Because it looks good? The cabin although better than a CRJ200, is no better than a CRJ705. The economics associated with operating similar size a/c (CRJ705 & EMB175) just don't make sense to me. Would it not have been much wiser in the long term to stay with Bombardier Regional products in the less than 100 seat market, and stick with Airbus for the larger than 100 seat market. If something was needed in between the A319 and the CRJ705 then perhaps the A318 may have been a better fit. Dagger?

I've been over this argument so many times, I don't think I have the energy to restate it. Oh well... Air Canada is adding an Embraer fleet with 90% plus commonality between the two models. They are adding more CRJs to a fleet type with great commonality. The engines for all the Embraers and all the CRJs are derivatives of the GE34. There were also labor issues that were debated here ad nauseum. And there probably was a political sensitivity issue, a benefit in supporting Bombardier. At the same time, AC retired three entire fleet types: 737s, 747s and BAe146s. One could make the argument that mainline should have been given CRJ-705s instead of E75s, but the E90 has nothing comparable in the CRJ lineup. The E90, as configured for AC, has 93 seats include 9 in business class for a minimum Y-class seat pitch of 33 inches, and the CRJ-900 just can't offer that kind of two-class comfort. Once E90 is the plane that really attracted AC. So even if it had subbed CRJ-705s for the E75 at mainline, it still would have had to add a fleet type with the E90.

AC considered the 318. It decided that it was too large (still over 100 seats) and is an iron pig - too large, too heavy, not as fuel efficient... Sure, there would be commonality, but anytime you have a fleet as large as the Ejets will have at AC - you'll see over 100 of them by 2008 - that introduces a significant economy of scale... commonality recedes as a cost saver. With rising fuel costs, declining labor costs (I can hear Jaydee having another hairy), the case swung decisively for the smaller, lighter Ejets.

AC knows the average load on each flight, and believes it saves a lot more per flight with a smaller jet than it would with the commonality. When you substitute an E75 for a 319 and hold the same passenger load, you improve your profitability by 25% or more. That's why the E75 is being liberally substituted for 319s on routes like YUL-LGA, YUL-ORD, YYZ-BOS, etc. The 319 might handle peak hour flights, while the E75 handles all off peak rotations. You improve flight profitability as a way to improve route profitability. The CRJ-200 is just too small, and while the 705 is a big improvement, the Ejets are simply better designed. They look and feel like a full-sized jet, and frequent flyers who previewed the plane raved about it. AC is a launch customer for the 190 and 175, and got fabulous pricing. Milton calls the Ejets game changers because the better match capacity to demand on many routes - both existing and future ones - allowing for AC to improve its profitability on existing services and pursue profitable growth with a smaller aircraft than the 319. There are believed to be many situations where a route can become profitable rather more quickly with a 175 or 190 than with a 319.

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That’s all great but getting back to my original point, why the CRJ-705? If the ERJs are so perfect for the mission then why bother? Is it perhaps to assist in the tiresome labor whipsaw effect?

I have high hopes for AC but it seems like every direction I look the same stupidity that we have all seen before repeats itself. Morale sucks. The mainline is hiring 1500hr pilots with no post secondary education while Jazz recruits 5000hr+ jet pilots. I wonder how morale will be at Jazz in 3 years when these experienced pilots are stagnated watching everyone with over 1000hrs and a year in the industry cruise right into the mainline. Dagger I share a lot of your optimism about the bright future of AC but the one thing I have always noticed about truly successful companies is the attitude / spirit of the employees. I don't think Microsoft, Apple, Jetblue, Southwest, Westjet, Virgin, etc. got to where they are by treating their employees like crap. I spend more time than I would like to in the back of AC airplanes and although better than American / United, we have a long way to go before this is the world class product that Milton dreams of.

All I am trying to say here is that if AC is to grow into the world class airline that it hopes to be, the attitude is going to have to change from the top and so far it hasn't.

Edited by MAYDAY
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"All I am trying to say here is that if AC is to grow into the world class airline that it hopes to be, the attitude is going to have to change from the top and so far it hasn't."

Perhaps from the bottom as well.

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Perhaps from the bottom as well.

Where have you been? If taking cuts in pay, pension, benifits, and work rules does not constitute change then what does? Disagree all you want but as long as front line employees are blamed history will continue to repeat itself. A good military leader does not blame his troops for failure.

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Is there a morale problem at AC? I've been hearing about it for almost 19 years now. I sometimes think it's something you are expected to complain about at AC. Could employee/management relations be better? You bet, but the employee's I talk to are (for the most part) feeling a lot better about things lately. Give us a few years of stability and perhaps some profit sharing checks and I think you'll find employee's really start to change their attitudes. We've had quite a few years of turmoil, and now things are looking good, employee's have noticed and it shows in how we are doing our jobs.

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Where have you been?  If taking cuts in pay, pension, benifits, and work rules does not constitute change then what does?  Disagree all you want but as long as front line employees are blamed history will continue to repeat itself.  A good military leader does not blame his troops for failure.

Good military leaders are often reviled by their troops, not loved or admired by their troops. What they do earn is grudging respect for their ability to deliver success. Ulysses S. Grant was a bloody butcher, while Robert E. Lee was beloved, and was viewed as the smartest tactician of the war. But the Union troops followed Grant, and gave him grudging respect, because after suffering through a barrage of fools at the helm, they were ready for a man who gave them victories. Patton was never revered by his troops. He demanded so much of them, it was brutal. They swore at him behind his back, but he delivered victories and he earned their grudging respect. It may well be that whoever is president of ACE is destined to be reviled by the unions. All that matters is that he deliver victories. I'm afraid that to ever earn your praise, he would have to surrender to outrageous union demands. Therefore, better he earn grudging respect.

Edited by dagger
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That’s all great but getting back to my original point, why the CRJ-705? If the ERJs are so perfect for the mission then why bother? Is it perhaps to assist in the tiresome labor whipsaw effect?

I have high hopes for AC but it seems like every direction I look the same stupidity that we have all seen before repeats itself. Morale sucks. The mainline is hiring 1500hr pilots with no post secondary education while Jazz recruits 5000hr+ jet pilots. I wonder how morale will be at Jazz in 3 years when these experienced pilots are stagnated watching everyone with over 1000hrs and a year in the industry cruise right into the mainline. Dagger I share a lot of your optimism about the bright future of AC but the one thing I have always noticed about truly successful companies is the attitude / spirit of the employees. I don't think Microsoft, Apple, Jetblue, Southwest, Westjet, Virgin, etc. got to where they are by treating their employees like crap. I spend more time than I would like to in the back of AC airplanes and although better than American / United, we have a long way to go before this is the world class product that Milton dreams of.

All I am trying to say here is that if AC is to grow into the world class airline that it hopes to be, the attitude is going to have to change from the top and so far it hasn't.

Hey MAYDAY back to the RJ705. I would think the 705 was put in place at Jazz because the BA-146 was retired and it would make sense to keep adding RJ's to Jazz because they have the 200's and AC is adding all the 100's so this would keep all the cockpits the same with Jazz and AC gets the E175's and E190's as it sounds strange why they would order two different aircraft with almost the same number of seats. But it's not because Jazz is under the ACE umbrella but is running as a separate company from AirCanada just like Aeroplane and I would bet you, you will see Jazz going public on the TSX soon. So you see it dosen't matter what type of aircraft AirCanada has and say why does Jazz have the 705's and AC has the 175's as you have to look at them as two complety separate companys but they work hand in hand as partners that feed off of each other but that's just my opinion of how ACE works.

Edited by wizard
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Good military leaders are often respected by not loved or admired by their troops. What earns military leaders respect is not the ability to be a glad handing politician, but to deliver success. Ulysses S. Grant was a bloody butcher, while Robert E. Lee was beloved, and was viewed as the smartest tactician of the war. But the Union troops followed Grant, and gave him grudging respect, because after suffering through a barrage of fools at the helm, they were ready for a man who gave them victories. And after Pickett's Charge at Gettysburg ended in utter disaster for Lee, General Pickett (and his superior, Longstreet) never stopped blaming Lee for the loss of his corps. Patton was never revered by his troops. He demanded so much of them, it was brutal. They swore at him behind his back, but he delivered victories. It may well be that whoever is president of ACE is destined to be reviled by the unions. All that matters is that he deliver a few victories. I'm afraid that to ever earn your favor, he would have to surrender to outrageous union demands. Therefore, better he earn grudging respect than your flattery.

Nice Dagger. Thanks for your clear and concise explanation of the CRJ-705s role within the AC fleet. And I see your point about commanding respect by winning a few vitories. We sure knocked them dead with Tango and Zip. Soon the westjetters will flee into the hills.

Edited by MAYDAY
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That’s all great but getting back to my original point, why the CRJ-705? If the ERJs are so perfect for the mission then why bother? Is it perhaps to assist in the tiresome labor whipsaw effect?

I have high hopes for AC but it seems like every direction I look the same stupidity that we have all seen before repeats itself. Morale sucks. The mainline is hiring 1500hr pilots with no post secondary education while Jazz recruits 5000hr+ jet pilots. I wonder how morale will be at Jazz in 3 years when these experienced pilots are stagnated watching everyone with over 1000hrs and a year in the industry cruise right into the mainline. Dagger I share a lot of your optimism about the bright future of AC but the one thing I have always noticed about truly successful companies is the attitude / spirit of the employees. I don't think Microsoft, Apple, Jetblue, Southwest, Westjet, Virgin, etc. got to where they are by treating their employees like crap. I spend more time than I would like to in the back of AC airplanes and although better than American / United, we have a long way to go before this is the world class product that Milton dreams of.

All I am trying to say here is that if AC is to grow into the world class airline that it hopes to be, the attitude is going to have to change from the top and so far it hasn't.

Thanks for your clear, concise explanation as to why the fleet plan is flawed. ohmy.gif

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Nice Dagger.  Thanks for your clear and concise explanation of the CRJ-705s role within the AC fleet.

I said earlier that there were union and labor issues involved in the 705 going to Jazz. How many times do you want me to say the obvious? However, moving Jazz to an all-CRJ jet fleet makes perfect operational sense rather than a mixed CRJ-200/EMB-175 fleet, now doesn't it? And using the 705 and 190 together at AC Mainline would be less cost-effective than an all-Embraer fleet of 75-93 seaters, would it not? If Jazz is spun off, the fact it would have an all-CRJ jet fleet would be attractive to investors. Furthermore, one point I didn't make. The CRJ-705 has greater range than the EMB-175, so when a 75-seater is needed for a flight of more than three hours, the 705 can handle missions the 175 cannot and for which the 190 would be too big.

Edited by dagger
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Nice Dagger.  Thanks for your clear and concise explanation of the CRJ-705s role within the AC fleet.  And I see your point about commanding respect by winning a few vitories.  We sure knocked them dead with Tango and Zip.  Soon the westjetters will flee into the hills.

Actually, Tango ushered in the one-way fares that are part of AC's growing success, and ZIP ushered in the labor agreements that are part of AC's growing success. Both became redundant when AC achieved the lower labor costs through CCAA. Then Zip costs could be applied across the airline, so why have a separate discount carrier? And we know Mark Hill was following ZIP's progress and was wary of some significant successes ZIP was starting to achieve. I wouldn't say ZIP had WS on the ropes, but it was certainly getting its attention.

I am looking forward to AC's second quarter results. I already posted my profit prediction in another thread: $120 million, excluding the Aeroplan gain. If the third quarter holds up, AC is going to be flirting with its best profit ever excluding asset sales.

Edited by dagger
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Hey Dagger I think I said it three post ago but I don't think people can grasp what ACE is and how the whole structure works as it's not just your mainline and feeder operation.

That was the point in creating ACE: To showcase each part of the former AC so that the unrecognized value in operations like AP, Jazz and ACTS could be surfaced and properly priced into the stock. It's interesting that since the 12.5% tranche of AP was floated, the units have risen over 25% in price, meaning AC's 87.5% holding in ACE is worth more today than its 100% holding was a month ago. And just watch as AP moves into more revenue generating agreements with some major retailers as the year goes on. The remaining shares of AP could be worth $2.5-3 billion on ACE's books by this time next year. Jazz is expanding. ACTS will land big US Airways business when ACE's investment in that restructuring goes through. And the small jets are coming like the little marching broomlet's in the Sorcerer's Apprentice scene in Fantasia. It's a very exciting time for ACE, even with $60 oil.

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I was hoping Aeroplan Fund would drop off a bit in the dog days of summer so I could buy in lower but I don't think it will and I can see it going into the $20.00 range sometime in the new year so I think I just might bite the bullet and jump in at $12 range but I just want to hold off until mid Aug and see where it's at.

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I was hoping Aeroplan Fund would drop off a bit in the dog days of summer so I could buy in lower but I don't think it will and I can see it going into the $20.00 range sometime in the new year so I think I just might bite the bullet and jump in at $12 range but I just want to hold off until mid Aug and see where it's at.

New partnerships that expand the revenue stream have to go into place for the Fund to move to $20. There has to be an anticipation of bigger distributions to achieve a big bump in the price. I'd look on any announcement of a large partnership as an opportunity. Wait a few days after that assumption and if the price returns to current levels, buy. The market doesn't have enough experience with the Fund to know how new partnerships will hike distributable cash.

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