McClean's Article on AC's LCC idea

[Chipndeal]

Reading between the lines of Rovinescu's explanation in that article I think I get what this LCC is all about.

Key point is AC will not grow its fleet. Therefore it will use existing aircraft in the LCC. Basically a zero sum game for the 200 or so aircraft in the mainline.

The average age of the fleet is very old especially with the 767s and therefore, the company will not be able to get the same productivity from those airplanes next year and the year after. A brand new 767 that can work 5,000 hours per year will do perhaps 4,000 hours after ten years and maybe 3,000 after 20 years. Please feel free to correct me if I am wrong on this assumption.

Since many of the 767s will be older than 20 years productivity (due to maintenance) will likely drop even further over the next 2 to 5 years. I think the growth in ASM in 2011 is a one-time event because you can push utilisation up only so much.

So if a 767 has 211 seats and works 3500 hours per year today producing 738,500 seat-hours, and this productivity will decline to 3,000 hours or less over the next 5 years, to keep the same 738,500 seat-hour production the number of seats per aircraft must be raised to 246. Remove the 24 J Class seats and replace those with 63 Y class seats brings the number to 250 seats. There you got your LCC. Places like Athens, Copenhagen, Barcelona and some frequencies to Paris and London do not need the J pods.

Basically in order for AC to keep its capacity flat it needs to increase aircraft density. In order to not dilute the AC brand with two different layouts it would rebrand the all-economy product something else, hence the LCC.

Just my (perhaps worthless) thoughts.

[Fido]

..... In order to not dilute the AC brand with two different layouts it would rebrand the all-economy product something else, hence the LCC.

Just my (perhaps worthless) thoughts.

You have given what is the only reason for the seperate branding. Take away the expectation of offering the same product as the 'regular' AC.

[mrlupin]

Reading between the lines of Rovinescu's explanation in that article I think I get what this LCC is all about.

Key point is AC will not grow its fleet. Therefore it will use existing aircraft in the LCC. Basically a zero sum game for the 200 or so aircraft in the mainline.

The average age of the fleet is very old especially with the 767s and therefore, the company will not be able to get the same productivity from those airplanes next year and the year after. A brand new 767 that can work 5,000 hours per year will do perhaps 4,000 hours after ten years and maybe 3,000 after 20 years. Please feel free to correct me if I am wrong on this assumption.

I do not have exact numbers nor have I studied hard data on this but the older aircraft can work just as hard as the younger ones. The maintenance programs are pretty thorough and if the quality of your heavy maintenance is there, the aircraft should have similar usage rates. If you send out the aircraft to the lowest bidder, you might incur higher line maintenance cost and more delays but with good maintenance that should not be a problem. The only difference I can see is the time needed to complete those longer checks (they do not come every year) and the extra cost of heavy maintenance as an aircraft ages. The extra cost of maintaining an older aircraft can sometimes be partially offset by the fact that monthly/hourly rent or ownership cost of these birds is usually lower.