Thebean Posted May 22, 2014 Share Posted May 22, 2014 https://raymondjames.bluematrix.com/sellside/EmailDocViewer?encrypt=4f1cb277-add4-4540-a993-70360792c8c7&mime=pdf&co=RaymondJames&id=dchan@phn.com&source=mail Link to comment Share on other sites More sharing options...
CanadaEH Posted May 22, 2014 Share Posted May 22, 2014 Interesting analysis. Can't comment specifically on how realistic it is but some of what's written echo's what you've been saying for months (specifically re: Porter and it's walk-up fares). Link to comment Share on other sites More sharing options...
rudder Posted May 22, 2014 Share Posted May 22, 2014 Considering that it is represented as an objective professional analysis, some of the language used is immature and as a result conspicuously biased. Having said that, it does not bode well for Porter and their precarious cash flow model.Hey MD2 - how is that IPO thing going anyway? If WJ calls to talk acquisition again, I would take the call. And this time, give WJ a realistic price tag. Link to comment Share on other sites More sharing options...
Zan Vetter Posted May 22, 2014 Share Posted May 22, 2014 The opinion expressed may have some merit, but it's written poorly. But then again financial analysis for the purpose of investment decisions is usually worthless because it is so biased or thinly disguised support of a trading position that exists either in house or at arms length. Link to comment Share on other sites More sharing options...
Maverick Posted May 22, 2014 Share Posted May 22, 2014 Hey MD2 - how is that IPO thing going anyway? If WJ calls to talk acquisition again, I would take the call. And this time, give WJ a realistic price tag.I think that horse left the barn right around the time Encore tail 401 showed up... Link to comment Share on other sites More sharing options...
rudder Posted May 22, 2014 Share Posted May 22, 2014 I think that horse left the barn right around the time Encore tail 401 showed up...You would be surprised. Encore operational roll out went poorly and several factors continue to work against the organic solution. Growth through acquisition may again present itself as the more effective strategy. It will however require a motivated vendor. If the Raymond James forecast is even partially correct, the value of PAH is going to trend in a negative direction. Perhaps peak value is today? Link to comment Share on other sites More sharing options...
MD2 Posted May 22, 2014 Share Posted May 22, 2014 Ah, more "analysis" with a colorful conantative biased language to support a position, perhaps some old buddies returning a favor?!Hey rudder, I have not heard any talk of an IPO recently, but why let facts get in the way of stirring the pot? Link to comment Share on other sites More sharing options...
Fido Posted May 22, 2014 Share Posted May 22, 2014 Pump and dump: "This scheme is generally part of a more complex grand plan of market manipulation on the targeted security. The Perpetrators (Usually stock promoters) convince company affiliates and large position non-affiliates to release shares into a free trading status as "Payment" for services for promoting the security. Instead of putting out legitimate information about a company the promoter sends out bogus e-mails (the "Pump") to millions of unsophisticated investors (Sometimes called "Retail Investors") in an attempt to drive the price of the stock and volume to higher points. After they accomplish both, the promoter sells their shares (the "Dump") and the stock price falls like a stone, taking all the duped investors money with it."Some stock market 'analysts' (promoters) run very close to this. Link to comment Share on other sites More sharing options...
MD2 Posted May 22, 2014 Share Posted May 22, 2014 Some stock market 'analysts' (promoters) run very close to this. The financial gain could be quite lucrative, especially if dealing in options, and for some that is all that matters... Link to comment Share on other sites More sharing options...
Pivot Posted May 23, 2014 Share Posted May 23, 2014 Ah, more "analysis" with a colorful conantative biased language to support a position, perhaps some old buddies returning a favor?!Hey rudder, I have not heard any talk of an IPO recently, but why let facts get in the way of stirring the pot?Well they downgraded the stock before. I've read a few of Ben's reports and if my memory serves me correctly they have been negative for some time now. Would "colorful" be "flight attendants in cute hats"? I can't remember ever seeing any cute hats. Link to comment Share on other sites More sharing options...
MD2 Posted May 23, 2014 Share Posted May 23, 2014 It seems some "analyst" has been sour ever since he was left out of Porter's shelved IPO. Analysis is technical, denotative with little or no emotion. It's not "analysis" one which uses a derisive language and terms like "dustbin of industry" attacking one company in favor of another in the very industry that it is supposedly "analyzing". I doubt that even WestJet would use such language in its prospectus if it were to do one; but I wonder if this sales pitch, which is reminiscent of a certain information minister who used to say things like "we are slaughtering the enemy on all fronts" hasn't already raised a few eye brows among CSA members. Link to comment Share on other sites More sharing options...
CanadaEH Posted May 24, 2014 Share Posted May 24, 2014 Ya, who wouldn't want to have been a part of that fantastic investment. Shame on that "analyst". You can discredit the report all you want but I think it paints a pretty realistic but bleak picture for Porter. Link to comment Share on other sites More sharing options...
MD2 Posted May 24, 2014 Share Posted May 24, 2014 It does not.The point is not the IPO, but the lingering resentment of the "analyst" who didn't get in.The report is hardly worth the paper it's written on, because it's founded in emotions...if you like it, then enjoy. Life's too short! Link to comment Share on other sites More sharing options...
CanadaEH Posted May 24, 2014 Share Posted May 24, 2014 I enjoyed the information contained within not because it painted a bleak picture about Porter but because it points exactly to the effect that WestJet has been suggesting Encore would have in those smaller communities. Link to comment Share on other sites More sharing options...
Thebean Posted May 24, 2014 Author Share Posted May 24, 2014 Analysts are in business to generate opportunities for the brokerages IPO and Sales Group. Ben has been negative on ALL Canadian airlines over the years at one time or another. Like it or not, no one produces the in-depth stuff he produces. No one is even close in Canada.Should Porter ever try to go public again, they will likely use a syndicate that will include at least three and as many as five brokerages to get the widest distribution and take up as possible.If they follow WJ's very successful IPO, they'll make sure they include brokerages with the top analysts. Ever wonder why CIBC World Markets was heavily involved with WJ's IPO? Julius Maltudis. You can look at all the syndicate members and in virtually every case, it came down to the strength of the analysts covering the file.Without question, Cherniavsky is the top airline analyst in Canada, and likely the longest serving one as well.You can poo poo the numbers all you want, but in the absence of any counter position, other than vague references about "revenue initiatives and cost savings plans", I'll take Ben's assessment over anything Porter dreams up. There was a time when a 737-200 could be counted upon to generate about $22m a year in revenue with 120 seats and 75% loads.Let's say that in 2014, Porter's fleet with 70 seats each and a generous 65% load can generate $15m a year in revenue per tail, or about $400m a year in total revenue. Let's be very, very generous and say Porter produces a 5% operating margin, or about $20m a year. Knock $65m a year in revenue off that number and thats a $45m a year loss and an operating margin of -11%. I don't know many airlines that can manage with that sort of catastrophic decline in revenue. WJ sure as hell couldn't have when they had that sort of revenue base.... Link to comment Share on other sites More sharing options...
Thebean Posted May 24, 2014 Author Share Posted May 24, 2014 Ah, more "analysis" with a colorful conantative biased language to support a position, perhaps some old buddies returning a favor?!Hey rudder, I have not heard any talk of an IPO recently, but why let facts get in the way of stirring the pot?Take the time to read some of Mike Boyd's stuff. He's one of the top analysts out there and his material is both very cleverly written and absolutely on target. http://www.aviationplanning.com/PDF/BGI_Realistic_Dream_%20to_Outright_Flim-flam.pdfShooting the messenger is a very dubious method of countering a very carefully thought out and researched argument, especially when the methodology has been meticulously detailed. If Porter claims in a memo to all staff that the research is "essentially worthless", surely Porter's brain trust should specifically explain why that is the case? Go through and follow the logic of the analysis very carefully, (which I doubt many have done). Anyone with a 4 year degree has the skill set to clearly and concisely illustrate problems with the argument and logic. Anyone with the same degree knows precisely what grade they'd receive from their prof if the prof wrote an exam question that layed out a theory, backed with meticulous research, asked for an analysis of the theory and the student answered, "the theory is essentially worthless" with no back up or counter arguments. F for Fail. Is the US DoT data that provides specific loads that are the basis of both before and after stimulation effect in the Toronto - NYC market wrong? I doubt it.Was it wrong to assume that fares to Boston, Chicago and Washington will drop to the same rate per mile as Toronto - New York when WJ / Encore enters the markets? If anything, they'll drop lower per mile as all three have longer stage lengths than Toronto - NYC, which only makes the numbers worse.Was it wrong that price stimulation boosted loads about 5% across the board, and that the new entrant captured the bulk of new traffic? That's exactly what happened in Toronto - NYC. Is the fare information on Toronto - NYC pre WestJet wrong? I doubt it. Raymond James captured the data for a previous report in 2012. It's pretty consistent with what fares are like today in US markets WJ doesn't operate in.Was it wrong to base current fare information on the basis of an average of 14 days in the first quarter of the year that presumably included a mix of busy school holiday periods, weekends, seats sales, normal business days and everything else? I doubt it. Was it wrong to assume that the majority of seats on any given flight were sold at the lowest fare? Was it wrong to assume that less than 10% of capacity was sold within 3 days of departure at the highest fare levels? If that is wrong, then the average fare before should be higher than reported and therefore revenues would be higher, making the problem worse, not better. Is it wrong to assume that the fare "compression" that occurred on Toronto - NYC, not to mention all the domestic markets WJ and WJE have entered over the years will NOT occur when they enter Boston, Washington and Chicago down the road? And even then, the majority of tickets sold will STILL be at the lowest fare levels to account for through and connecting traffic?Is the math fundamentally wrong? Did they add when they should have subtracted? Divided when they should have multiplied?Where EXACTLY are the mistakes that makes the conclusions, in Porter's memo to all employees, "essentially worthless"?Desperately claiming "but it isn't so!" or "the analyst is biased against us" is not a counter argument that anyone is going to pay attention to. If anything, it makes Porter's rather shrill denials a little more suspect than usual.I think Porter has already figured this scenario out and recognize that without a huge, and in airline terms, a fast strategic change in direction before this all comes to fruition, their days are quite likely numbered. Thus the reason for trying to ram through the runway expansion and change the rules so they, and they alone, can operate jets out of BBA.There will be many decision makers looking at this analysis wondering whether or not it makes any sense to continue to put any further energy into the file when there's pretty comprehensive analysis out there that points to an outcome that makes the entire matter moot.That is probably why Porter is so vehement in its efforts to claim the report is hopelessly biased, the conclusions are "worthless" and it is nothing more than a hatchet job. What else are they gong to do? Say nothing and acknowledge that the airplane is flying into a box canyon with no way out?I'd say Raymond James and the Dean of Canadian aviation analysts put together a pretty compelling story backed by hard core research and analysis. It's now time for Porter to quit their usual pattern of rhetoric, happy pills and unsubstantiated claims and come up with some hard core counter arguments.If the analysis is "essentially worthless", prove it. Link to comment Share on other sites More sharing options...
spm Posted May 24, 2014 Share Posted May 24, 2014 Does nobody else see the major flaw in this guy's route analysis??He seems to only care about the details of the RASM side of the equation when assessing how the addition of WJ Encore and change in fleet type by AC Express (CRJ to Q400) has affected this particular route's economics. His use of what he thinks is Air Canada's CASM of 26 cents on the route is not accurate. In fact it's far from it now that the route has been changed to a Jazz Q400. Personally I expect more from an analyst and I'm not surprised he didn't win any analyst awards this year like Tim James from TD Securities who seems to have a better grasp of the details and big picture of the current business plans from each Canadian carrier. There is no doubt Encore will have a major impact on the Canadian aviation marketplace, and Porter may feel the most pressure due to the lack of diversity of their business plan but the numbers provided in this analysis, in terms of lower profits for AC, are greatly exaggerated and in my opinion worthless. @ TheBean - I'm surprised you are supporting such an inaccurate analysis... Link to comment Share on other sites More sharing options...
moeman Posted May 24, 2014 Share Posted May 24, 2014 Going to get some popcorn. This should be fun.... Link to comment Share on other sites More sharing options...
Fido Posted May 24, 2014 Share Posted May 24, 2014 Going to get some popcorn. This should be fun....In 1994......adjusted stage......casm....rasm....walk-up fares....compared to Moscow to Timbuktu....Still go get the popcorn but don't wait for anything new. Link to comment Share on other sites More sharing options...
MD2 Posted May 24, 2014 Share Posted May 24, 2014 Well a "good" analyst of any kind sees the landscape through all "perceptions" and has a good grasp on "the reality" with which to compare. This report does none of those things and its language resembles more the propaganda that used to come from a well-known Iraqi minister!Undoubtedly, there are signs of bias and unlike what bean asks, the responsibility is with him to prove his "analysis" right, not with others to prove him wrong. But suffice it to say that 1) Porter has already been competing with WestJet in the East and eroding its market share particularly in the triangle because of its product, 2) introduction of Encore and its Q400 instead of B737 is in fact is a reduction of available seats from them, and 3) is so obvious that it need not be said! Link to comment Share on other sites More sharing options...
mrlupin Posted May 24, 2014 Share Posted May 24, 2014 Can anyone blame Bean for promoting a report that agrees with his personal assessment? it's human nature. I mean he's got to be looking for some positive correlation with analyst reports and his own views after all this time. It probably makes the multiple years of bad predictions and prognosis seem trivial when someone shares his vision.At some point he's bound to be right if he keeps repeating the same rhetoric.... Even a non working grandfather clock shows the time accurately twice a day... Link to comment Share on other sites More sharing options...
Fido Posted May 24, 2014 Share Posted May 24, 2014 a report that agrees with his personal assessment?and helps his own personal stock holdings. Link to comment Share on other sites More sharing options...
Zan Vetter Posted May 24, 2014 Share Posted May 24, 2014 Analysis is the cousin of sales and is like lawyering- you start with the facts, but at the end of the day you're just trying to win (buyers for further research, investment banking business, a trading position), not necessarily argue a scientific thesis. Link to comment Share on other sites More sharing options...
thor Posted May 25, 2014 Share Posted May 25, 2014 However, over the last 15+ years Bean has been able to call a spade a spade with a high degree of accuracy. Link to comment Share on other sites More sharing options...
Fido Posted May 25, 2014 Share Posted May 25, 2014 'They will run out of money shortly' Link to comment Share on other sites More sharing options...
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