Wj Q2 Results + Widebody Type Confirmation

[Thebean]

It's the pennies that make the dollars, my friend. Add up all those costs and it starts to get interesting.

Consider what CRS costs look like per booked passenger in the two scenarios. 96 flights with an average of about 120 seats with Encore in the mix at an 80% lf, multiplied by, say, $4 per sector flown.

Then take 85% of the total capacity of a 777 HD round trip to PEK and multiply that by the same $4.

The CRS casm on the single r/t long haul flight is a fraction of the CRS casm on the 48 short haul round trip flights, even though the one long haul flight generates more ASM's than the myriad of short haul flights combined.

How many person- hours of labor does it take to check-in, handle luggage, and board 800 passengers on a round trip flight to Asia?

How many person- hours of labor does it take to do the same task on 48 round trips within Western Canada that collectively produce the same daily asm production as one r/t to Asia?

There are countless examples of this sort of thing that go way beyond maintenance.......

Long haul flying is cheap flying.

[Fido]

Fuel is the number one cost factor now.

After six hours of flying the cost of carrying fuel starts to reverse the CASM decline and after about 10 hours the CASM is higher than shorthaul sectors.

[dagger]

It's the pennies that make the dollars, my friend. Add up all those costs and it starts to get interesting.

Consider what CRS costs look like per booked passenger in the two scenarios. 96 flights with an average of about 120 seats with Encore in the mix at an 80% lf, multiplied by, say, $4 per sector flown.

Then take 85% of the total capacity of a 777 HD round trip to PEK and multiply that by the same $4.

The CRS casm on the single r/t long haul flight is a fraction of the CRS casm on the 48 short haul round trip flights, even though the one long haul flight generates more ASM's than the myriad of short haul flights combined.

How many person- hours of labor does it take to check-in, handle luggage, and board 800 passengers on a round trip flight to Asia?

How many person- hours of labor does it take to do the same task on 48 round trips within Western Canada that collectively produce the same daily asm production as one r/t to Asia?

There are countless examples of this sort of thing that go way beyond maintenance.......

Long haul flying is cheap flying.

Long haul flying is cheap, hah hah hah

There are so many buried costs it's not funny. Just dealing with government rules for security, immigration, COMPENSATION - you ain't seen nothing until you deal with the EU. Oh, immigrant smuggling, volcanoes, Russian nut bars, Islamic terror threats, cargo - there's a good one - European ATC and airport strikes, foreign languages you've never heard of, SARS (or now ebola). Remember how WS was hardly affected by the SARS scare because it was purely domestic at the time?

Did I mention Venezuelan dictatorships that refuse to release airline revenues. (By all accounts, Venezuela has sequestered over US $400 million it won't let airlines, mainly NA airlines include AC) take out of the country,

Oh, the Nigerian ticket scams. Don't forget that one.

If long haul flying was cheap, Westjet would have been doing it a decade ago. It would have skipped Encore - is short haul Q400 flying cheap, too, if so the whole Porter-is-doomed thing goes down the crapper.

Come on Bean, I know you live the high life but don't get high.

If you want to believe that long haul flying is cheap, I'm going to refer you to Norwegian Airlines, a nice startup with nice costs and by all indications, good service when they can manage it. They even fly pretty new or very new aircraft like the 787. Then again, with a small fleet, things can go wrong.

http://www.airlinequality.com/Forum/norwegian.htm

Right now, they have a delay at LAX that has passed 50 hours. People are sleeping on cots at the airport. I assume WS would put long-haul passengers into hotels, but imagine the cost of an overnight delay that necessitates reserving over 100 rooms, even at ridiculously low airline rates. And feeding the people, and paying them compensation.

[J.O.]

... and the smaller your fleet, the greater those delay costs will be as you scramble to catch up from a lengthy delay, especially in today's high demand consumer environment - not to mention WestJet's reputation for taking good (i.e. expensive) care of their customers when lengthy delays happen. Flying long haul with a small fleet will be the greatest challenge WestJet has faced to date. I'm not saying they can't handle it, but they'll need their "A" game for several years to make it work.

[moeman]

http://www.airpassengerrights.eu/en/flight-delay.html

[Guest longtimer]

And then re the overall cost to the passenger. Most of the time AC and WestJet are within a few dollars of each other, the only variance seems to be the allocation of the extra fees. For example here is a comparison on a flight from YLW - YYC 1st quote being WestJet and the 2nd one AC

Flights Westjet

Total with taxes:

$216.43 CAD

Kelowna (YLW)

Depart: Fri Aug 1, 6:20 AM

Calgary (YYC)

Arrive: Fri Aug 1, 8:18 AM

Fare rules

Air transportation charges (ATC)

1 adult - base fare: $172.00 CAD

Other ATC: $12.00 CAD

Taxes, fees and charges: $32.43 CAD

Total with taxes:

$216.43 CAD

Adult Air Canada

Air Transportation Charges

Departing Flight - Flex

174.00

Surcharges

12.00

Taxes, Fees and Charges

Canada Airport Improvement Fee

15.00

Canada Goods and Services Tax (GST/HST #10009-2287 RT0001)

10.41

Air Travellers Security Charge (ATSC)

7.12

Total airfare and taxes before options (per passenger) 218.53

Number of passengers 1

Grand Total - Canadian dollars $218.53

[DEFCON]

WJ has done pretty much everything really well since its inception. Perhaps their newest foray into wide-bodies will go just as well, but only time will tell? It's no secret that WJ was hatched into the giant hole that was left by CDN and it's planned future operations are now making it look a whole lot like it's destined to become a reconstituted CDN, which is quite a departure from the promises made by the founding father himself. From my pov, it looks like the Canadian aviation industry has come full circle and the only measurable change overall is represented by the great reductions in airline employee wawcon that have taken place and the corresponding introduction of disgusting bonus programs that reward executives for their non-performance..

[CanadaEH]

The only measurable change has been that one airline has been able to consistently deliver results that are positive. The other hasn't.

[DEFCON]

The position you're taking is a little short-sighted, biased & self-serving, don't you think CanadaEH?

[UpperDeck]

From my pov, it looks like the Canadian aviation industry has come full circle and the only measurable change overall is represented by the great reductions in airline employee wawcon that have taken place and the corresponding introduction of disgusting bonus programs that reward executives for their non-performance..

You pov is probably not shared by those who invested in Air Canada. They probably feel that the executives who actually manage the company are worth every penny they receive. In 2007 when the stock market was at an all-time high, AC stock was worth less than $1.00. The same was true in 2009 as the market began to see the light of day. Today---now---AC stock is trading at $9.79.

Those who believe in the company---the investors----have done very well. And they come to praise Calin's team; not bury him.

[Maverick]

The position you're taking is a little short-sighted, biased & self-serving, don't you think CanadaEH?

WestJet has been around for about three years longer Canadi>n existed. I was at CAIL for 8 years and have been at WJ for 15+.

CAIL was a tough place to work, 10% salary cuts, $16 stock that was worth $2, constant doom and gloom etc.

No my friend, WJ is not anything remotely like a "reconstituted CDN"

[DEFCON]

Well bully for them UD!

I don't think any corporation is entirely about its labour force, which also includes management. It was the management part of the corporations labour force that drove the ship up on the rocks and destroyed the lives and pensions of their often selfish employees and the shareholders they represented through bankruptcy. The managers went on to reward themselves with the huge bonuses I have previously described as 'disgusting'. The fact that many of these same people are continuing to reward themselves in the same disgusting manner should I think be interpreted to mean there's no long term future for labour within the currently themed corporatocracy. Ultimately this will bring things full circle and lead to a labour revolt, aka the union movement of better times. It's all just a big game anyway through which the rich keep getting richer and not in any kind of morally justifiable manner.

[Thebean]

And if trans-border flying was as easy and profitable as everyone says it is, WJ shoulda / coulda been there 15 years ago.....but they didn't.

Like all decisions, that was specifically by design, not by accident. WJ has always walked before it tried to run. See Canada 3000, Jetsgo and countless others for details.

I recall seeing similar lists of all the issues that would make it impossible for WestJet to:

1. Launch in the first place.

2. Last more than a couple of months

3. Expand beyond 5 aircraft

4. Expand beyond 10 aircraft, then 20, then 30, then 50, then 75 etc

5. Expand east of Winnipeg

6. Expand into the US

7. Expand into the Caribbean and Mexico

8. Operate 737's to Hawaii

9. Code share with full service airlines

10. Launch Encore with a new fleet type and remain profitable in every quarter since launch.

11. Operate to Europe.

12. Remain net profitable in all but a handful of the 72 quarters since launch and 38 quarters in a row.

Every milestone has come and gone with a yawn. There are always ghosts lurking around the corner that are gonna getcha.

There have been lots of "oh my gosh" issues over the years that have all been overcome with, quite obviously, very good results. It's not as if any of the issues are unknowns.

There's a great saying that is probably applicable here: Proper prior planning prevents pi$$ poor performance.

I wouldn't be benchmarking anything against NAS. From what I've read, it is not a business plan that should be emulated. The analyst community has not been kind to them.

Are prices the same after a LCC enters the market? Of course they are the same. Why would you expect anything else? For 99% of travelers, a seat is a commodity, just like a Dole banana is no different than a Chiquita banana. I'd be more concerned if they weren't matched.

The difference is the consistently hard to dispute fact that WJ produces quarter after quarter of profitable results, without dramatic swings of seasonality and regardless of external economic conditions. Good times and bad times, WJ has proven over and over they are more than up for any challenge.

The highest casm, highest yield aircraft in WJ's fleet are the Q400's. The lowest casm, lowest yield aircraft will be the B767's.

You can bet your life savings on that nugget.

[DEFCON]

Hey Maverick

I wasn't trying to compare the internal workings of these two groups, only making note of the type of operations and overall size & composition of its fleet.

CDN was as you know the product of many a merger. My comment might have been a little more accurate and inclusive had I used Pac Western, or even CP Air instead of CDN. When that whole CDN mess was finally removed from the scene, its absence meant there was a great gapping transportation infrastructure hole in the mind of the westerner. Your founding fathers saw the niche and moved to fill it, which made them and a handful of others quite wealthy.

[Thebean]

I can guarantee the WJ business plan was not predicated on knocking Canadian or anyone else out of the market.

[dagger]

The highest casm, highest yield aircraft in WJ's fleet are the Q400's. The lowest casm, lowest yield aircraft will be the B767's.

You can bet your life savings on that nugget.

O come on Sherlock, even Erickson knows that. And I'd guess, flying by the seat of my pants here, that the CASM difference between a 767-300ER and 500-seat High Density 777-300ER favours the latter.

Don't get me wrong. WS will make money with wide bodies. It's just that there is never anything "easy" about intercontinental flying.

Every single day, something new crops up that makes one wonder why airlines bother with it.

[Thebean]

And that is what makes the business so irresistible!

Taken as a whole, the business is very complicated. Strip it down to its component parts with the right team of people all rowing together in the same direction and it's all manageable. There aren't many unknowns out there.

Unlike Transat and Zoom and the others who have tried and failed over the years, WJ has feed. Lots of feed. And more of it every month.

Transat's core Montreal long-haul business will be fine. WJ won't usurp that market anytime soon. However, in time, everything else is open season.

As much as it might not appear to be the case, WJ is going at this with it's usual "highly risk adverse / baby steps" modus operandi.

I suspect you'll see the 767's iron on domestic high density trunk routes next summer for various reasons.

[dagger]

Yes, some domestic flying for those four planes makes sense, if only to position the aircraft.

But domestic is kiddie's stuff.

International has so many layers of complexity: lounges, frequent flyer status, visa verification, let's remember to spray the cabin with insect repellent before landing in Oz

refugees who flush their docs down the toilet before deplaning, expat employees and local hires, currency swings that can kill your margin after you've sold the seats, political upheaval, rumours of terrorists targeting western airlines, catering abroad, long crew layovers, offseason yields - or is WS just going to be flying seasonally to Europe some day? Baggage loss and retrieval is more complicated when it happens abroad, as opposed to at your own hub. Unexpected tech stops when the winds blow afoul. It's just so much fun.

[Guest longtimer]

and we should not forget, Canadian Pacific/CPAir/Canadian International/Canadian who also had lots of feed, favorable contracts/ modern fleet but lots of competitors///////

[Thebean]

and we should not forget, Canadian Pacific/CPAir/Canadian International/Canadian who also had lots of feed, favorable contracts/ modern fleet but lots of competitors///////

.....not to mention a bloated cost structure.

Or was it just their western 737 and Airbus flying that had the bloated cost structure and everything else was lean and mean?

It's so long ago. It's hard to keep up with all the reasons why airlines fail.

[Guest longtimer]

.....not to mention a bloated cost structure.

Or was it just their western 737 and Airbus flying that had the bloated cost structure and everything else was lean and mean?

It's so long ago. It's hard to keep up with all the reasons why airlines fail.

hard to say for sure, but the acquisition of Wardair was the final nail in their coffin. Plus in the west the impossible task of keeping up with a predatory new carrier with no unions and very cheap to operate old 737s.

[thor]

Good answer bean.

[blues deville]

Good answer bean.

What was the question?

[Thebean]

hard to say for sure, but the acquisition of Wardair was the final nail in their coffin. Plus in the west the impossible task of keeping up with a predatory new carrier with no unions and very cheap to operate old 737s.

How can a business that has been profitable for all but a handful of quarters in its nearly 20 year history be accused of being predatory?

I can see how an airline that usually loses money hand over fist matching or under cutting a competitor could be accused of that but not a profitable airline.

It was not WJ's fault that their competitors had bloated cost structures.

[Fido]

No one at WestJet has ever done anything wrong!