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Kamloops Won't Pay


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TV7 News Headlines

WestJet Proposal Shot Down July 18th, 2006

Doesn't look like WestJet will be coming to Kamloops any time soon. WestJet told the city they wanted a $150,000 a month revenue guarantee to fly here. Mayor Terry Lake says it's too rich, and the city isn't interested in pursuing that option. Lake says Air Canada isn't demanding any revenue guarantees and they've stuck by Kamloops all these years, so it doesn't make sense to abandon them. He says WestJet already gets passengers from Kamloops who drive to Kelowna, and they don't see any reason to come here at this point without the huge guarantee.

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This will be interesting to watch, I have many relatives in the vicinity of Kamloops and they aren't gonna' like this! There is a very strong wish to have WJ and it's brand of service in the Thompson and Nicola valleys and I don't mean just my relatives!

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Guest rattler

Well, I guess if the demand is there, then Westjet may withdraw their need for a guarantee, if not then I guess folks with be stuck with AC . Of course if Westjet were to drop in with a revenue guarantee, then perhaps old reliable AC would be forced to pull out leaving the community with a (dare I say it?) monopoly carrier. tongue.gif

Of course I am ignoring CMA in this equation.

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This will be interesting to watch, I have many relatives in the vicinity of Kamloops and they aren't gonna' like this! There is a very strong wish to have WJ and it's brand of service in the Thompson and Nicola valleys and I don't mean just my relatives!

biggrin.gif

There is some Merritt to that...

Edited by Databus
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The whole thing sounds like blackmail and if spun correctly, it will do serious damage to WestJet's reputation! ohmy.gif

Blackmail?? That's quite a leap in logic methinks. What WestJet seems to want (I can't find a link to the quote used at the start of the thread) is a revenue guarantee similar to the one that was in place last year for YYG. That as you remember was not required but created quite of bit of angst on this site as well. I did find this though.

http://www.kamloopswantswestjet.com/

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I suppose in its simplest form all business is business risk vs. reward (profits). It seems the accountants at Westjet have determined that when it comes to servicing Kamloops the risk is greater than the potential reward.

The proposal is to off-load the risk onto the Kamloops taxpayers (revenue guarantee) while still collecting the reward. Perhaps Kamloops should counter by taking on some of the risk but demanding a percentage of any profits.

Then we would likely see Westjet as the one saying No, No.

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I suppose in its simplest form all business is business risk vs. reward (profits). It seems the accountants at Westjet have determined that when it comes to servicing Kamloops the risk is greater than the potential reward.

The proposal is to off-load the risk onto the Kamloops taxpayers (revenue guarantee) while still collecting the reward. Perhaps Kamloops should counter by taking on some of the risk but demanding a percentage of any profits.

Then we would likely see Westjet as the one saying No, No.

If one assumes Kamloops wants daily service to YYC, we're talking about 2hrs of block time a day. Let's say it costs WJ about $5,500 per hour to operate a -600. That's a $4.1m commitment to service Kamloops, a small market that's 1.5 hrs from YLW and about 3hrs from YXX.

I'll guarantee you that Kamloops has had a study done by Erickson or Intervista that suggests there's a huge untapped market there.

WJ looks at it as a business case. They are asking WJ to commit a $40m asset to Kamloops for 1/6th of its working day that will cost $4.1m a year to operate, in a market that already has service.

WJA's margins are at least 10% a year, but they'll pencil it in at 15% so at the very least, the city pair must produce about$4.7m a year in revenue.

WJ is simply saying that if you want WestJet's full size aircraft to serve the community, what are you, the community prepared to bring to the table?

I'd say a $1.8m risk by Kamloops is pretty fair given the risk taken by WJA to operate 119 seat aircraft into a market that hasn't seen regular Boeing service for about 20 years.....

I'd bet the added revenue to Sun Peaks, (the interiors best ski secret), yet alone the developers building vacation homes, hotels, restaurants and taxi revenue would more than cover off the $1.8m.

It's simply priorities.....

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Don't throw stones in glass houses, dag..... remember that AC has a revenue guarantee that it regularly uses from Quebec.

It's not a revenue guarantee. It's low fixed pricing, like a huge corporate deal.

Nothing stopping WJA from offering Quebec a similar deal... ooops, you don't have regional aircraft.

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It's not a revenue guarantee. It's low fixed pricing, like a huge corporate deal.

Nothing stopping WJA from offering Quebec a similar deal... ooops, you don't have regional aircraft.

YKA would be taxpayers providing a revenue guarantee to a corporation. If the corporation hits its targets, no revenue would ever flow from taxpayers to the corporation as was the case in YYG.

The Quebec deal is taxpayers providing a revenue guarantee to a corporation, regardless of the route profitability.

6 of one, half dozen of the other.

You know well enough that due to their high unit costs, regional aircraft do not, and will never fit into the plans of LCC's.

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Guest rattler

Driving through YKA this morning and picked up the local station. The editorial of the day was about how Westjet had lead on the community for several years and now had turned on them. The summation was that perhaps it was time that the city stopped looking for a low cost alternate and instead supported the carrier who had been there for a long time (yes they were talking about Jazz).

I picked up the broadcast in Salmon Arm so I suspect it was relayed via repeater stations through the area. Not exactly good press for Westjet.

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Driving through YKA this morning and picked up the local station.  The editorial of the day was about how Westjet had lead on the community for several years and now had turned on them.  The summation was that perhaps it was time that the city stopped looking for a low cost alternate and instead supported the carrier who had been there for a long time (yes they were talking about Jazz). 

I picked up the broadcast in Salmon Arm so I suspect it was relayed via repeater stations through the area.  Not exactly good press for Westjet.

Oh don't get your knickers in a knot, I was up there this weekend as well and this was just an editorial rant from the ever so neutral (not!) Radio (A)N(A)L as in CHNL, CJNL, CINL (I think) etc.

(I grew up in the area and reserve the right to badmouth them. They always played crappy music and I was forced to listen to scratchy Vancouver stations)

Bottom line, if Kamloops wants WestJet service then pony up to the bar and make sure it's at least revenue neutral to the carrier or stop being a pretender. Simple business.

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I don't like this revenue guarantee game.  If the market supports another carrier then one will appear and if not then why should any business take a shot at bad economics only to please a community. dry.gif

I guess the short answer would be that if a community says they can support a carrier then perhaps they have more data to support it than the carrier does. If Kamloops was certain that the community would support WestJet and it would be profitable for both entities then they would put the guarantee up with the full knowledge that they would never have to pay a nickle to WestJet.

The fact that they are balking at this point tells me that perhaps they know that the business plan is not as solid as they would like it to be.......

I'll say it again, pony up to the bar or go home. WestJet has moved into many markets without guarantees, Kamloops sounds like it might be a lame horse.

As an owner of WestJet I support this kind of thinking!! thumbs_up.gif

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