Hmmm... Southwest version

[dagger]

http://www.bloomberg...r-pressure.html

Seems like this is the week for staff memos from the CEO.

“The sloth-like industry you remember competing against is now officially dead and buried,” Kelly said. “We fought them and we won. Now the enemy is our own cost creep, our own legacy- like productivity and our own inefficiencies. Fighting this cost enemy is an imperative.”

Southwest has the industry’s highest labor rates, and Kelly urged workers to take advantage of opportunities to “improve our productivity, eliminate waste and preserve our pay rates.”

[Don Hudson]

I was wondering when the mythology of "lo-cost" would meet reality, or at least the "reality as portrayed by press releases". Yesterday's brand new "lo-cost" becomes today's new standard and then the message becomes, "What have you done for us lately?"

The gig is to discern who to believe and by how much, and who is to be taken seriously, and by how much. Both must play. Control of such messages and more importantly the outcome is never certain once "in play". It's dice for everyone, even if that isn't the ultimate intended outcome.

[rudder]

SWA delivered consistent profits due to growth, efficiency, and opportunistic fuel hedging. Now growth comes via acquisition and the days of profit by hedging are over. So all that leaves is efficiency at a time when the recalibrated costs at the legacy carriers are now very similar to SWA.

SOUTHWEST AIRLINES CO.

Gary C. Kelly

Chairman of the Board, President &

Chief Executive Officer

P.O. Box 36611

Dallas, Texas 75235-1611

To: All Southwest and AirTran Warriors

From: Gary Kelly

Date: December 5, 2011

RE: American Airlines – More Challenges for Southwest than Opportunities

The past week has been extraordinary with the bankruptcy of American Airlines and the

unexpected retirement of their Chief Executive Officer. Not surprisingly, I have had questions

from our People about what this means for us. I have heard comments like, .I’m sure glad I’m

not at American. I’m glad to be at Southwest.. I can assure you, in this season of giving

thanks, it is the correct perspective. In this time of enormous world-wide economic uncertainty,

it is the right perspective.

Just as I wrote in an article in LUVLines after 9/11: While an airline needs to be good at many

things to be successful; low costs and profitability, ultimately, mean the difference between

survival or not. To be clear, American Airlines, as you knew it, will not survive. Bankruptcy, by

definition, means that it will be radically reorganized, or it will be completely shut down and

liquidated.

American isn’t the only airline not to survive without bankruptcy. Let’s look back to 1989—the

year Southwest became the newest member of the old major airline club, based on annual

revenues. All the majors from 1989 have gone bankrupt. Pan Am. Eastern. Braniff.

Continental. America West. TWA. US Air. United. Delta. Northwest. And now, American.

Every single one failed. Why? Not because of Customer Service, but because of high costs.

Great Customer Service cannot overcome high costs. That is the imperative I wrote about a

decade ago: low costs.

Southwest Airlines is the only major airline from 1989 that has survived this tumultuous industry

without bankruptcy. Why? Because our low costs have preserved our profits. Period.

If American Airlines emerges from the ashes of bankruptcy, and I believe they will, you can be

certain their costs will be substantially lower, especially their labor and aircraft costs. If they

can’t achieve that, they will cease to exist (like Pan Am, Eastern, Braniff, and TWA). If they do

emerge from bankruptcy, as I believe they will, they will join the New United, New Delta, and

New US Airways as giant, lower-cost airlines. They are, collectively, much more formidable

competition than their predecessors. The term, .Legacy Carrier,. no longer will apply.

December 5, 2011

Page 2

In the good old days, when the Legacy Carriers’ costs were higher, we brought our low costs

and low fares to their markets, stimulated demand, and expanded dramatically. Now, while our

costs are still lower, our advantage has been cut in half. We currently do not have a sufficient

cost advantage to stimulate the market – because our fares are much closer to our New Airline

competitors. These New Airlines, reconstituted from their Legacy ashes, join younger, lower-

cost airlines like JetBlue and Frontier, as well as an even newer group of ultra low-cost airlines

like Allegiant and Spirit. As predicted, the industry has transformed to lower costs.

Of course, one major point of low costs is to drive profits. The old airline industry was famous

for not achieving profits, which rendered them very weak competitors. The New Airline industry

is profitable. In fact, the New Delta and New United had better profit margins than Southwest in

the third quarter, despite the magnificent gains we’ve made over the last four years with our

Customer Experience enhancements and our revenues. On that front, we have outperformed

all competitors. We have a cost challenge, and it is one that looms large.

American Airlines lost its way. It made promises it could not keep. It tried very hard to avoid

bankruptcy. As every other major airline used that tortured strategy, American became higher

and higher cost relative to the New Airline industry. Just when we thought 2011 would be safe

from the perils of the 2009 recession, American is posting another massive loss. The New

Delta and the New United are producing strong profits. Why? You know – lower costs. It puts

New Delta and New United in a position to grow from here. American has shrunk dramatically

this past decade. They will shrink more. That may provide Southwest some opportunities to

capture more Customers and grow; however, we will have to compete with a stronger

marketplace for American’s customers. You know how much harder that is because of our

diminished cost advantage.

American’s employees will make many sacrifices. It is convenient to lay the blame at the feet of

American’s management. Certainly, they deserve their share of the blame. But, just as

employees deserve credit when a company does well, so do they deserve some of the blame

when it does not. American has outdated and inflexible work rules that render it less productive

than the New Airline industry. That’s just one example of how the company lost its way, and

just one example of what is imperative to change, lest they be shut down.

For us, the bottom line is simple. There may be some near-term opportunities for Southwest as

American shrinks and is distracted with the human struggle of bankruptcy. American will be

governed through a bankruptcy court and a creditor committee, and it will be sheer hell for them.

Once they get through it though, several years from now, they will join the New Airline industry

as a much more formidable competitor. We need to prepare ourselves better right now for this

New Airline industry.

So, what if we don’t? As stated earlier, Southwest is the only 1989 major airline that has

survived without bankruptcy. Why? Because our low costs have preserved our profits.

December 5, 2011

Page 3

Our labor rates are now, far and away, the highest in the industry. Through bankruptcy, very

large New Airlines have emerged with lower rates than us and better productivity. Next to fuel,

labor is our highest expenditure. We can’t have lower overall operating costs if our labor costs

aren’t lower. We can’t have lower labor costs if we aren’t more productive. The good news is

that we have a lot of opportunities to improve our productivity, eliminate waste, and preserve our

pay rates and benefits for the foreseeable future. It’s crucial that we take advantage of those

opportunities.

The imperative I spoke about nearly a decade ago has been fulfilled by our remaining, formerly

.Legacy,. competitors. The imperative is now squarely upon Southwest. I know you all

understand the evidence – hundreds of airlines perished since deregulation. No 1989 major

airline has survived without bankruptcy – except Southwest. We are the maverick. We are

different. That’s how we have prevailed with a Warrior Spirit, a .Never Give In. resolve, and a

burning desire to be the very best. The sloth-like industry you remember competing against is

now officially dead and buried. We fought them, and we won.

Now, the enemy is our own cost creep, our own legacy-like productivity, and our own

inefficiencies. Fighting this cost enemy is an imperative to remain the Maverick. We will fight,

and we will remain the Maverick.

It is important to say that low costs, alone, will not win the day. Our People are most important.

It is our People who produce this great low-cost airline. It is our People who serve our

Customers in an outstanding way. And, it is our People who will continue to transform

Southwest with four big initiatives: AirTran, All-New Rapid Rewards, B737-800, and a new

reservation system.

Finally, please remember, all the great things our People do will be for naught without low costs.

Just ask the old .Legacy. airlines.

I am very grateful and very thankful for all of you.

[internet]

Cost creep - WJ today is very different than WJ of 2001. To the WJ people here, this kind of letter is coming your way one day soon too.

[dagger]

Note the very blunt mention of Labor Costs and productivity.

All of which is to say that while Air Canada has weaknesses we debate endlessly, nothing in this industry happens in a vacuum. Not since deregulation.

[ModerateChop]

WJ today is very different than WJ of 2001.

Cost per available seat miles (CASM) in 2001 = 14.00

Cost per available seat miles (CASM) in 2010 = 12.09

(source: WestJet Annual report)

That's a 13.6% DECREASE in costs 2001 vs 2010.

I'll agree with you it's not the same company though, the pilots aren't getting compensated by millions $$ in stock options like they were back in 2001.

[CANCELIFR]

Cost creep - WJ today is very different than WJ of 2001. To the WJ people here, this kind of letter is coming your way one day soon too.

I'll second that.

[Thebean]

Be careful of comparing cost per available seat mile without noting changing average stage length.

[E-HANDLE]

Cost creep - WJ today is very different than WJ of 2001. To the WJ people here, this kind of letter is coming your way one day soon too.

Yeah. Misery do love company, doesn't it?

[Don Hudson]

All of which is to say that while Air Canada has weaknesses we debate endlessly, nothing in this industry happens in a vacuum. Not since deregulation.

Precisely.

The notion of 'sustainability' (for all) requires a certain restrain from the worst that predatory greed which, it has been clearly demonstrated, can and does take a system past its normal limitations into instability and failure.

There are good reasons to have a modicum of regulatory sense in human activities, otherwise unpredicability results.

The emergence of the notion, "Bricks and Mortar" signalled a shift in thinking regarding the value and need for the kinds of long-term capital investments in equipment and infrastructure required in any aviation enterprise. The notion of "lo-cost" wasn't a solution, it was a rallying call in response to greater unpredictability in an industry which relied upon twenty-year planning horizons. One of aviation's principles is that it can't be done cheaply.

While it can't be done cheaply without increasing risk of an accident, it can be done efficiently up to a certain point, but it must always come to terms with two critical factors about what its real product is: time and space, (seats).

Regarding our perceptions of time, while we consistently choose to stand in line twenty minutes for a designer coffee, a donut, a hockey game, the super-market or the bank, we complain bitterly and mark an airline as substandard in its "service" if we're a few minutes late. Moving something this complex with the record it has is an under-appreciated, remarkable technical and economic feat which is somewhat more involved that making the perfect latte or grilling the cheapest burger.

In my view the industry's performance in terms of sustaining remarkable reliability in the face of significant challenges is on object lesson for other businesses, but the metrics against which our industry is typically measured do not emphasize this. "What have you done for us lately that we should continue to spend our money with you?" applies everywhere, but a certain restraint in the implied impatience is required when it comes to aviation.

The second factor is the evaporation of its money-making capacity once the aircraft doors and hatches are closed. An empty seat cannot be inventoried once that has occurred yet it must be paid for in fuel, maintenance, labour costs and surcharges and taxes and fees, etc. No other industry faces the loss of its inventory in quite the same way yet does it with comparative success.

The squirrelly fare systems that confront passengers is a direct result of these two factors. Computers and thousands of sophisticated software solutions to manage fuel, routing, crew-costs and the airline's seat inventory before the doors close have made more efficient fares possible, but there is a limit to how low all this can go before the risk begins to increase. In my view, we have recently crossed that boundary and I wrote about it about a month ago here.

De-regulation, and the industry itself, promising unattainable, (therefore partially subsidized by wage reductions) cheap fares instead of conveying the truth about aviation's costs has built a generational mentality that it can do all this on "$79 return fares to Las Vegas" and "$329 one-way to Europe". It can't. To be fair, most know that those fares are for seats that otherwise may have been empty, but the notion of "entitlement" is built in when we go online shopping for fares.

Concentrating on the quarterly-report phenomenon in this "free-market" speculation economy, the industry has done an atrocious job of managing its own "supply-side economy" - that 'economy' of how much its customers need to pay for a sustainable business model and a viable, profitable industry for employees, passengers and investors alike. Utopia? Compared to today's circumstances and challenges, sadly so.

Don

[chockalicious]

I'll take all of the warnings from the posters above with the spirit with which it was intended.

This kind of message is not something new at WS, Clive preached it just as Gregg does. Everyone knows that we all have to be vigilent on cost.

[ModerateChop]

Be careful of comparing cost per available seat mile without noting changing average stage length.

Fair enough (it was 458 back in 2001 vs 982 in 2010), but the bottom line is still the bottom line, the company today is much more productive than it was back in 2001.

If you strip out the cost of fuel, leasing, profit share, amortization, the CASM differential between 2001 vs 2010 increases even more to around 23%.

The argument of "cost creep" is also hard to find when looking specifically at "Flight Operations and Navigation Charges" that have DECREASED 8.7% over the last 5 years (2006 vs 2010)..

But why let facts get in the way of a good argument ?

[GDR]

Precisely.

The notion of 'sustainability' (for all) requires a certain restrain from the worst that predatory greed which, it has been clearly demonstrated, can and does take a system past its normal limitations into instability and failure.

There are good reasons to have a modicum of regulatory sense in human activities, otherwise unpredicability results.

The emergence of the notion, "Bricks and Mortar" signalled a shift in thinking regarding the value and need for the kinds of long-term capital investments in equipment and infrastructure required in any aviation enterprise. The notion of "lo-cost" wasn't a solution, it was a rallying call in response to greater unpredictability in an industry which relied upon twenty-year planning horizons. One of aviation's principles is that it can't be done cheaply.

While it can't be done cheaply without increasing risk of an accident, it can be done efficiently up to a certain point, but it must always come to terms with two critical factors about what its real product is: time and space, (seats).

Regarding our perceptions of time, while we consistently choose to stand in line twenty minutes for a designer coffee, a donut, a hockey game, the super-market or the bank, we complain bitterly and mark an airline as substandard in its "service" if we're a few minutes late. Moving something this complex with the record it has is an under-appreciated, remarkable technical and economic feat which is somewhat more involved that making the perfect latte or grilling the cheapest burger.

In my view the industry's performance in terms of sustaining remarkable reliability in the face of significant challenges is on object lesson for other businesses, but the metrics against which our industry is typically measured do not emphasize this. "What have you done for us lately that we should continue to spend our money with you?" applies everywhere, but a certain restraint in the implied impatience is required when it comes to aviation.

The second factor is the evaporation of its money-making capacity once the aircraft doors and hatches are closed. An empty seat cannot be inventoried once that has occurred yet it must be paid for in fuel, maintenance, labour costs and surcharges and taxes and fees, etc. No other industry faces the loss of its inventory in quite the same way yet does it with comparative success.

The squirrelly fare systems that confront passengers is a direct result of these two factors. Computers and thousands of sophisticated software solutions to manage fuel, routing, crew-costs and the airline's seat inventory before the doors close have made more efficient fares possible, but there is a limit to how low all this can go before the risk begins to increase. In my view, we have recently crossed that boundary and I wrote about it about a month ago here.

De-regulation, and the industry itself, promising unattainable, (therefore partially subsidized by wage reductions) cheap fares instead of conveying the truth about aviation's costs has built a generational mentality that it can do all this on "$79 return fares to Las Vegas" and "$329 one-way to Europe". It can't. To be fair, most know that those fares are for seats that otherwise may have been empty, but the notion of "entitlement" is built in when we go online shopping for fares.

Concentrating on the quarterly-report phenomenon in this "free-market" speculation economy, the industry has done an atrocious job of managing its own "supply-side economy" - that 'economy' of how much its customers need to pay for a sustainable business model and a viable, profitable industry for employees, passengers and investors alike. Utopia? Compared to today's circumstances and challenges, sadly so.

Don

Hi Don

Good post so here is my two cents worth on this from this retired pilot’s POV.

As a career from beginning to end pilot’s salaries are not high enough to entice sufficient young people into the trade to cover requirements in future years. To get the licences necessary the costs approach $100,000.00, the failure rate is high and then at the end of it you will have to take a job that leaves you not much above the poverty line for what is most likely ten years, with virtually zero hope of remaining in the place you grew up. There is also the uncertainty that comes from losing your licence for health reasons and all of us have friends who lost their lives in while young and inexperienced. The fortunate minority wind up with someone like AC and WJ and in the left seat where they earn an above average income but for those I venture to say that if they had gone into something like plumbing they would earned more over a whole career.

The hope would be of course that because of the looming shortage that the situation will change but who at 18 and wondering what to do is going to figure that out. From a Canadian perspective there is also the problem of the financial attractiveness of working off-shore, and maybe even on-shore for a foreign carrier such as Cathay. From that POV I think that pilot compensation needs to take a leap ahead and particularly for those that are earlier on in their careers.

We have talked about the safety side in other discussions but the fact still remains that all the cost cutting in this highly competitive business reduces safety whether it be in reduced training and monitoring, or in the fact that they will be forced to hire less qualified candidates.

Having said that there is the problem from the cost side. The airlines have encouraged people to book their flights on the internet in order to cut down on staffing. What this has meant is that people now go on-line and choose the carrier that well sell them a ticket at the lowest cost. The two big costs for an airline are fuel and salaries. (Other than the fees and taxes that various government agencies suck out of the airlines. ) There isn’t much they can do about the price of fuel so that leaves salaries.

A few years ago there were several carriers operating in Canada. The majority of them wound up combined into “Canadian Airlines”, leaving the two major carriers both with high costs but competing on a more or less even playing field. This provided an opening for WJ to jump into the market with low costs and a new product. As it started in the west, the area in which Canadian was strongest it weakened that carrier until the only option was the merger. Now we are back in the same position again with two major players competing domestically. There will be another new carrier, (maybe Porter) who will come along with lower costs and make life very difficult for WJ and AC. Eventually one of them will fold or they also will merge.

Every legacy carrier in North America has had to go through some form of bankruptcy. That is only a band-aid solution that buys time. I have sympathy with all parties that are trying to work their way through this and there is no easy solution. I suggest that one of the biggest problems is government in that they have diminished their role as overseers of the safety aspects while at the same time sucking up a huge percentage of the costs an airline ticket. Airport authorities who have a mandate to spend money are doing just that. Can anyone in the business name an airport that doesn’t have some capital project going on at any given point in time. Nav Canada has no financial accountability, nor does our ridiculous security system. I think that we need a huge government review of the industry and a wholesale change in how government and the airlines relate to each other.

From a selfish POV I just hope the airline lasts as long as I do so that the pension keeps coming in.

[Kip Powick]

I really get tired of the "bashing" of people who have been in charge of AC as well as the present management. There is nothing anyone is going to do about those that used to be in charge, so get over it.

The present CEO has advisers that have access to more data than any one individual here, so all the numbers, and "we shoulda" that are dredged up on this forum don't mean diddly squat to upper management.

Dagger is not, nor has he ever been, employed by AC in any manner.

Instead of the constant bitching about the industry ,( includes AC and WS), why not try to work from within the organization.

As an outsider now,..... one of the most obvious errors in the industry is the pricing of fares. (These are just MY numbers and certainly not precise)

YYZ to YVR - TWO ADULTS

WS = approx 7-800.00 - 5 hours

AC = approx 7-800.00 - 5 hours

VIA Rail = approx 2928.00 - 4 days

Let us assume that for each pax WS makes 100.00 (assume lower costs to operate etc)

Let assume that for each pax AC makes 50.00 (assume higher costs to operateetc)

So, in my mind the fares are too low so we'll boost them 30 % (pick a number...anything more than ZERO would help)

Therefore each airlines profit goes up by 30%

Still cheaper than by bus or train and a helluva lot faster

Instead of the two major carriers attempting to cut each others throat, why not both get on the same page and have the same fares,(almost like today), but at a HIGHER price point.

In my opinion the public feels that it is their right to fly for peanuts and when one considers the cost of running an airline, that is just not right....make'm pay for the privilege of flying...if they don't like it..take a train.

Yes, it is a very simple premise and only works if both companies realize that the fare structure is, at present, nuts.

Go ahead...bring on the "flames"........and on the other hand I realize that "venting" while maintaining anonymity is probably very cleansing for some.

[Fido]

Hey Kip:

A snapshot of the cheapest fares is not a reflection on the total market. Many airline people lose sight of the Revenue Management side of things.

A theater for a concert is 'scaled' so that the seats with the best view or best sound are more expensive than those seats way in the back or the ones blocked from a full view.

In the airline world there must be the same scaling of the fares offered. The process is complex, requires a lot of management and sophisticated computer software is needed. However, even the best software and management falls apart when people decide that 'we must always offer the cheapest fares'. There have been situations that I have witnessed where the people charged with managing the revenue have closed off the ability to sell higher fares in order to offer for sale the lower fares (these airlines were losing bundles of money).

It takes discipline to hold open the last seats for a higher price when they are getting calls all the time from the botoom feeders to open up the cheaper fare buckets. In Canada I do not see this as a problem. Both WS and AC are very good at inventory management in the Domestic market.

For Air Canada the problem comes with the International routes where they are stuck with big airplanes for small markets and it is tough to fill those airplanes with higher fares. The pressure comes from executives judging a route by its load factor when it is the same executive that put the too big airplane on the route. As an example the stupid decision at AC to fly all of the Asian routes with 777-300 and then having to lower the prices to fill the airplane. The same thing occurs on the Chile and Argentina flights.

AC and WS are making good profits on the Domestic routes. AC costs on the narrow body fleet are competitive with WS costs. The problem is on the longhaul International routes.

[zipped]

Simple yes, maybe too simple.

If there is little or no difference in the product WS and AC have on domestic service does that mean the layoff of all the Marketing guru's and the Sales Managers that come up with sales gimmicks to entice customers. At one time these departments had a huge budget.

In Canada it seems we pay more for just about everything. It's always dangerous to raise fares. Look at BC Ferries? As the cost goes up the less people travel on them.

[chockalicious]

I really get tired of the "bashing" of people who have been in charge of AC as well as the present management. There is nothing anyone is going to do about those that used to be in charge, so get over it.

The present CEO has advisers that have access to more data than any one individual here, so all the numbers, and "we shoulda" that are dredged up on this forum don't mean diddly squat to upper management.

Dagger is not, nor has he ever been, employed by AC in any manner.

Instead of the constant bitching about the industry ,( includes AC and WS), why not try to work from within the organization.

As an outsider now,..... one of the most obvious errors in the industry is the pricing of fares. (These are just MY numbers and certainly not precise)

YYZ to YVR - TWO ADULTS

WS = approx 7-800.00 - 5 hours

AC = approx 7-800.00 - 5 hours

VIA Rail = approx 2928.00 - 4 days

Let us assume that for each pax WS makes 100.00 (assume lower costs to operate etc)

Let assume that for each pax AC makes 50.00 (assume higher costs to operateetc)

So, in my mind the fares are too low so we'll boost them 30 % (pick a number...anything more than ZERO would help)

Therefore each airlines profit goes up by 30%

Still cheaper than by bus or train and a helluva lot faster

Instead of the two major carriers attempting to cut each others throat, why not both get on the same page and have the same fares,(almost like today), but at a HIGHER price point.

In my opinion the public feels that it is their right to fly for peanuts and when one considers the cost of running an airline, that is just not right....make'm pay for the privilege of flying...if they don't like it..take a train.

Yes, it is a very simple premise and only works if both companies realize that the fare structure is, at present, nuts.

Go ahead...bring on the "flames"........and on the other hand I realize that "venting" while maintaining anonymity is probably very cleansing for some.

Hi Kip

While I don't disagree entirely with your premise I am wondering about something in your scenario.

If WS can make money on the flight at that price point why should they have to raise their price point to make more money and give AC the ability to match? I am not sure the carrier with the lower costs should be penalized.

[Thebean]

I really get tired of the "bashing" of people who have been in charge of AC as well as the present management. There is nothing anyone is going to do about those that used to be in charge, so get over it.

The present CEO has advisers that have access to more data than any one individual here, so all the numbers, and "we shoulda" that are dredged up on this forum don't mean diddly squat to upper management.

Dagger is not, nor has he ever been, employed by AC in any manner.

Instead of the constant bitching about the industry ,( includes AC and WS), why not try to work from within the organization.

As an outsider now,..... one of the most obvious errors in the industry is the pricing of fares. (These are just MY numbers and certainly not precise)

YYZ to YVR - TWO ADULTS

WS = approx 7-800.00 - 5 hours

AC = approx 7-800.00 - 5 hours

VIA Rail = approx 2928.00 - 4 days

Let us assume that for each pax WS makes 100.00 (assume lower costs to operate etc)

Let assume that for each pax AC makes 50.00 (assume higher costs to operateetc)

So, in my mind the fares are too low so we'll boost them 30 % (pick a number...anything more than ZERO would help)

Therefore each airlines profit goes up by 30%

Still cheaper than by bus or train and a helluva lot faster

Instead of the two major carriers attempting to cut each others throat, why not both get on the same page and have the same fares,(almost like today), but at a HIGHER price point.

In my opinion the public feels that it is their right to fly for peanuts and when one considers the cost of running an airline, that is just not right....make'm pay for the privilege of flying...if they don't like it..take a train.

Yes, it is a very simple premise and only works if both companies realize that the fare structure is, at present, nuts.

Go ahead...bring on the "flames"........and on the other hand I realize that "venting" while maintaining anonymity is probably very cleansing for some.

Raise the fares that sort of percentage and you'd have all sorts of new entrants appearing nipping at the heels of the incumbents, and whole new batch of millionaire pilots.

Pandora's box has been opened. The days of regulated fares in Canada are long gone, never to return.

[Kip Powick]

Hi Kip

While I don't disagree entirely with your premise I am wondering about something in your scenario.

If WS can make money on the flight at that price point why should they have to raise their price point to make more money and give AC the ability to match? I am not sure the carrier with the lower costs should be penalized.

Hi Chock..

Actually my premise was not who would make more/less or anyone being penalized. In my "dream world" raise the fares and both airlines now have a profit of the base profit I indicated plus 30 %. WS is still doing better..yes?

My point is that all airline fares in NA are too low based on the operating costs of every airline. The public is so used to having the ability to search out low fares and use those fares that the profit margins are too low for everyone.

If both AC and WS raised their fares..no one is penalized, (well OK the public has to suck it up a bit), but in the interest of maintaining a workable airline the fares should increase.

However FIDO has alluded to factors I did not take into consideration because I was merely looking at the whole mess in a very simplistic way

[Don Hudson]

"millionaire pilots." - TheBean

LOL!!!!

The only pilots that may have come close to "millionaire" status are those that stayed married to their original partner, those that never invested in another pilot's money-making scheme, those that didn't finance their kids' education (or who don't have kids) or those who never placed signficant bets in the stock market or those who wanted to be pilots because of the money but took up law instead.

[mrlupin]

The wage creep is already well started at Westjet.Top wage for an AME is already 5$/hour (or 15%) richer then AC.

[boestar]

the fares are so low in canada to offset the rediculous taxes. eliminate the taxes and the fare could be increased with no effect on the flying public..

[dagger]

The wage creep is already well started at Westjet.Top wage for an AME is already 5$/hour (or 15%) richer then AC.

What's the pension creep like?

[Spinnaker]

The wage creep is already well started at Westjet.Top wage for an AME is already 5$/hour (or 15%) richer then AC.

What are the wages like when compared to efficiency? Is there a night premium? Pension? Vaughn Cordell did a review on North American pilot wages a few years ago and although the Southwest Pilots were the highest paid, they were also the highest efficiency. If you saw the way the WestJet fleet was maintained, or the speed at which something on the line is fixed... you would see the AME's there are worth every penny and more. These guys are paid by the hour everyday regardless; yet a deferral rarely lives to see the next day in a fleet of almost 100 aircraft.

[conehead]

These guys are paid by the hour everyday regardless; yet a deferral rarely lives to see the next day in a fleet of almost 100 aircraft.

That's because they are happy, and motivated. Air Canada Maintenance used to be like that too. Deferrals now run until expiry date. Who cares? There's no motivation to bust our asses fixing snags, when Management treats us like crap...