We're Number 1!

[Seeker]

http://www.fool.com/investing/general/2015/03/22/when-it-comes-time-to-fly-this-is-the-airline-amer.aspx

But taking the crown as the airline fliers prefer most is Air Canada (TSX: AC ) , for a second straight year. Though it's not as well known as the major airlines, Air Canada is no stranger to receiving accolades, having been named the best airline in North America by Global Traveler, and the best North American in-flight experience by Premier Traveler.

[boestar]

Go on Facebook and find an AC ad. In the comments there are haters galore. The "I will never fly on AC....EVER" Crowd. Drives me nuts because they must have never flown on any other airline to compare it to.

I blasted one guy online as he said EVERY time I fly with AC I have cranky agents and flight attendants. My response was that he was the common denominator and you get what you give.

AC is always a pleasure to fly...Except for the passengers stuffing huge bags into the overheads.

[Seeker]

Every day I work I see many hundreds of passengers. I chat with them at the gate and I say goodbye as they get off the airplane - the vast majority are happy and seem satisfied. I'm not surprised to see AC winning these awards since they jive with my normal experience.

[Thebean]

Does this refer to Air Canada or Rouge?

[acsidestick]

Does third place belong to WestJet or Encore?

[Thebean]

The article is a perfect example of brand confusion.

The accolades go to Air Canada, not to Rouge.

A customer in the US city I'm currently in could very well read the story and decide to use Air Canada because of the reputation.

There is NOTHING, other than aircraft livery, at this particular airport that refers to Rouge. Everything is branded Air Canada, even though 100% of the flights are Rouge.

Customers likely make the buying decision on the basis of the "Air Canada" reputation, earned over decades.

Imagine the surprise, and annoyance, of having been sold on one product, and having the fulfillment being an inferior product compared to what the customer thought he / she had paid for.

Now they are thinking, "what a load of bunk. I bought Air Canada and the product sucked. I'm not falling for that again".

And then they tell their friends, and they tell their friends and slowly the word gets out and the brand becomes so diluted that everything that has been built up over the years that has resulted in the yield premium that was necessary to offset higher costs is watered down to nothing.

It is similar to the phenomina that killed jetsGo. They could only rely on cheap fares for so long before their reputation as a crap carrier superceded the attactiveness of the cheap fares. Fool me once, shame on me, fool me twice, shame on you.

When you book a JW Marriott property at JW Marriott rates, you don't want to end up in a Fairfield Inn and Suites. When you pay for a Lexus, you won't be happy if you end up with a Toyota.

You'll get 'em once, but not twice. Rouge still carries just a tiny fraction of AC traffic. As it grows, the issue will get exponentially larger.

That's the danger and challenge facing AC. They need to figure out where the lines on the graph cross.

[FA@AC]

Does third place belong to WestJet or Encore?

Air Transat, probably.

[Guest]

TheBean, you said "

There is NOTHING, other than aircraft livery, at this particular airport that refers to Rouge. Everything is branded Air Canada, even though 100% of the flights are Rouge.

A quick check of the YVR , YYJ and YYC sites (arrival/departure etc) information yields that there is no mention of Rouge or Encore. So why single out Rouge?

[Thebean]

Did you write the SAT's?

Here's one for you:

Encore is to WestJet as _______ is to Air Canada?

Choose one:

1) Via Rail

2) Greyhound bus lines

3) Rouge

4) Air Canada Express

Most high school kids would figure this one out.

Here's a hint: Do you recall any particular backlash vis a vis Air Canada vs Jazz/Air Canada Express when it came to the product offering? I don't. It was the same fundamental product, delivered in a smaller aircraft. Encore is no different.

When you receive an abbreviated 32 page edition of The Economist compared to a regular 60 page edition, it's still The Economist.

It's a little different to have paid for the Economist and receive a copy of Macleans.

In spite of all the "love to hate" Air Canada media coverage, I don't think many on this board would dispute the fact that Air Canada has a pretty strong brand. This is based on the product, service and delivery we've come to expect from the brand over the past ten, twenty or more years.

Is it a wise move to dilute that brand with a product that is clearly differentiated and inferior from the core brand, yet is priced at or near identically to the core brand?

Check out YYC-YHM and YYC-YYZ in and around July 14 2015.

YHM is priced between $280 and $298 on Rouge, YYZ is priced at $289.

The Rouge brand and value proposition as it related to Air Canada would probably make sense were it priced at a significant discount to the mainline product, let's say $229. But it can't be profitably offered at that price point due to its fundamental cost structure.

Meanwhile, as far as consumers are concerned, branding and service delivery is fulfilled by the Air Canada brand and employees in Air Canada uniform, until you actually board the aircraft.

Houston, we have a problem.

Slap a JW Marriott brand on a Fairfield Inn property and you are going to run into all kinds problems. Do that, AND charge near equivelent price points and you've exponentially increased the problem. That's why you will NEVER see a JW Marriott logo or colllateral materials within a country mile of a Fairfield Inn property.

Pricing at the same level will inevitably result in the same backlash as consumers would have paying for a Lexus and ending up with a Toyota. Or paying for an Intel i7 processor and getting a Celeron chip for the same price.

The bottom line here is that I would be loath to mess with my established brand that has taken decades to earn, build and ultimately leverage into the ability to achieve significantly higher yields. The US airlines figured this out a decade or more ago and walked away from the concept, even after having claimed the ventures were overwhelming successes. When it was all said and done, there was far more downside than upside having multiple brands and getting into fights with themselves.

If I were going to set up a sub brand, any effort to link it back to the larger brand or any brand expecations of the mothership would result in immediate and vigorous application electro shock therapy.

Sure, leveraging economies of scale behind the scenes is fine, but do nothing that would tweak or remind consumers that the sub brand is actually part of the larger, and far more important brand, thereby setting yourself up for endless cycles of over promising and under delivering.

How many people outside the travel trade have a clue Homewood Inn is a Hilton brand?

https://hbr.org/2009/10/should-you-launch-a-fighter-brand

[FA@AC]

The bottom line here is that I would be loath to mess with my established brand that has taken decades to earn, build and ultimately leverage into the ability to achieve significantly higher yields. The US airlines figured this out a decade or more ago and walked away from the concept, even after having claimed the ventures were overwhelming successes.

I keep wondering if it is lost on you that the US airlines were able to do many things in Chapter 11 that airlines in other parts of the world cannot do. Airlines outside the USA have, for the most part, had to seek ways other than outsourcing work, terminating employees' pension plans and stiffing creditors to lower their costs. Maybe that's why we see airlines all over the world launching LCCs.

You believe also that the US carriers walked away from their supposed LCC offshoots. They didn't. They adopted a model for their mainline carriers that offers fewer frills and often less comfort (high density cabins with slimline seats, nasty regional jets on sectors of nearly 4 hours) than their "discount" brands did. Many frequent fliers hurl at the idea of flying UA or AA, but you write as if they have stellar images that they're protecting. My own view is that the US carriers get a bad rap from a flying public that mostly gets what it pays for, but the fact remains that they generally have poor reputations.

[Guest]

MrBean, regarding your question:

Posted Today, 07:11 AM

Did you write the SAT's?

I didn't write them, I authored them.

[canadairguy]

WTF?

seeker: "airline fliers prefer to fly Air Canada."

others: "right on"

thebean: "brand confusion...dilution...value...magazines...hotels...Imagine the surprise, and annoyance, of having been sold on one product, and having the fulfillment being an inferior product compared to what the customer thought he/she paid for"

I am almost always favourably impressed by Air Canada flights. I've been on two rouge flights. They were good and they felt like Air Canada flights. I can't imagine why Air Canada would seek to differentiate between the two any more than they already do. Bean, would it kill you to acknowledge AC's successes?

[Thebean]

Ummm, not quite Mr. Bean. It actually goes like this: "Fool me once, shame on you. Fool me twice, shame on me."

Unless, of course, you're going for the GWB version which goes like this: "There's an old saying in Tennessee I know it's in Texas, probably in Tennessee that says, fool me once, shame on shame on you. Fool me you can't get fooled again.

Credibility is in the details!

I was curious how long it would take someone to catch this tidbit that was largely irrelevant to the post, and then focus on it rather than the message.

How predictable and amusing! Thanks for playing!

Sure. I'll acknowledge progress has been made. But in most cases, equal or better progress is being made by industry peers.

To repeat a post from Feb 24th....

This could be a bit of a bubble burster for some.

The rankings clearly illustrate the relative progress being made on a year over year basis.

4Q 2014 Operating Margin including interest as an expense, (with 4Q 2013 margin and rankings and % pt change year over year).

1. Spirit 18.6% (16.2%, 1) up 2.4% pts year over year

2. Alaska 17.6% (9.6%, 4) up 8.0% pts

3. Southwest 12.7% (8.0%, 5) up 4.7% pts

4. WestJet 12.6% (9.7%, 3) up 2.9% pts

5. Delta 11.6% (5.9%, 7) up 5.7% pts

6. Hawaiian 10.7% (3.8%, 10) up 6.9% pts

7. jetBlue 9.3% (5.6%, 8) up 3.7% pts

8. Average 7.92% (3.2%, 11) up 4.7% pts

9. AAG 6.3% (.1%. 14) up 6.2% pts

10. UAL 4.8% (.5%, 13) up 4.3% pts

11. Allegiant 2.7% (11.5%, 2) down 8.8% pts

12. Virgin 1.9% (5.2%, 9) down 3.3% pts

13. Air Canada .7% (-.7%, 15) up 1.4% pts

14. Republic -.6% (7.9%, 6) down 8.5% pts

15. SkyWest -4.6% (1.8%, 12) down 6.4% pts

4Q 2014 BELF, (with 4Q 2013 BELF and rankings). The lower the BELF, the better as it leaves more upside on the table.

1. Alaska 68.8% (76.3%, 7) Down 7.5% pts year over year.

2. Spirit 69.0% (72.2%, 2) Down 3.2% pts year over year.

3. WestJet 69.6% (72.5%, 3) Down 2.9% pts year over year.

4. Southwest 71.6% (74.0%, 4) Down 2.4% pts year over year.

5. Delta 73.1% (77.8%, 10) Down 4.7% pts year over year.

6. Hawaiian 73.5% (77.7%, 9) Down 4.2% pts year over year.

7. jetBlue 74.5% (76.4%, 8) Down 1.9% pts year over year.

8. Average 75.22% (79.3%, 11) Down 4.1% pts year over year.

9. AAG 75.4% (82.2%, 15) Down 6.8% pts year over year.

10. Republic 77.3% (70.6%, 1) Up 6.7% pts year over year.

11. UAL 77.8% (82.0%, 14) Down 4.2% pts year over year.

12. Virgin 79.7% (74.5%, 6) Up 5.2% pts year over year.

13. Air Canada 80.4% (80.9%, 13) Down .5% pts year over year.

14. Allegiant 82.8% (74.3%, 5) Up 8.5% pts year over year.

15. SkyWest 85.3% (80.3%, 12) Up 5% pts year over year.

[Guest]

I was curious how long it would take someone to catch this and then focus on it rather than the larger message. How predictable and amusing!

To repeat a post from Feb 24th....

This could be a bit of a bubble burster for some.

The rankings clearly illustrate the relative progress being made on a year over year basis.

4Q 2014 Operating Margin including interest as an expense, (with 4Q 2013 margin and rankings and % pt change year over year).

1. Spirit 18.6% (16.2%, 1) up 2.4% pts yoy

2. Alaska 17.6% (9.6%, 4) up 8.0% pts

3. Southwest 12.7% (8.0%, 5) up 4.7% pts

4. WestJet 12.6% (9.7%, 3) up 2.9% pts

5. Delta 11.6% (5.9%, 7) up 5.7% pts

6. Hawaiian 10.7% (3.8%, 10) up 6.9% pts

7. jetBlue 9.3% (5.6%, 8) up 3.7% pts

8. Average 7.92% (3.2%, 11) up 4.7% pts

9. AAG 6.3% (.1%. 14) up 6.2% pts

10. UAL 4.8% (.5%, 13) up 4.3% pts

11. Allegiant 2.7% (11.5%, 2) down 8.8% pts

12. Virgin 1.9% (5.2%, 9) down 3.3% pts

13. Air Canada .7% (-.7%, 15) up 1.4% pts

14. Republic -.6% (7.9%, 6) down 8.5% pts

15. SkyWest -4.6% (1.8%, 12) down 6.4% pts

4Q 2014 BELF, (with 4Q 2013 BELF and rankings).

1. Alaska 68.8% (76.3%, 7)

2. Spirit 69.0% (72.2%, 2)

3. WestJet 69.6% (72.5%, 3)

4. Southwest 71.6% (74.0%, 4)

5. Delta 73.1% (77.8%, 10)

6. Hawaiian 73.5% (77.7%, 9)

7. jetBlue 74.5% (76.4%, 8)

8. Average 75.22% (79.3%, 11)

9. AAG 75.4% (82.2%, 15)

10. Republic 77.3% (70.6%, 1)

11. UAL 77.8% (82.0%, 14)

12. Virgin 79.7% (74.5%, 6)

13. Air Canada 80.4% (80.9%, 13)

14. Allegiant 82.8% (74.3%, 5)

15. SkyWest 85.3% (80.3%, 12)

And this has what to do with your problem with Rouge not being identified?????

[FA@AC]

And this has what to do with your problem with Rouge not being identified?????

Whatever Bean's point there is, one could make the opposite case by posting 3Q rather than 4Q 2014 result rankings.

[Thebean]

"Bean, would it kill you to acknowledge AC's successes"?

You asked me to acknowledge success. I did with some quantitative analysis which clearly illustrates the successes. The analysis also happened to point out a number of other airlines equal and often better successes.

As for 3Q vs 4Q 2014, a quarter does not a year make. For all you math junkies, a quarter represents just 25% of the year. What happens in the other 75% of the year is sort of relevant to the equation, don't you think?

I guess we'll see if the rankings in 1Q 2015, which will be known by the 2nd week in May, look more like 3Q or 4Q's numbers and rankings in 2014.

Here are the other quarterly rankings for 2014 as a reminder that it's probably a good idea to focus on the big picture, and not just the historically best quarter of the year.

3Q 2014 Operating Margin

Alaska 20.8%

Spirit 19.1%

Hawaiian 13.7%

Southwest 12.2%

Air Canada 11.7%

Virgin America 11.7%

WestJet 11.0%

Industry Avg 9.6%

United 9.5%

AAG 9.4%

Republic 8.7%

jetBlue 8.3%

Allegiant 8.2%

Delta 6.2%

SkyWest 5.1%

BELF

Alaska 68.2%

Spirit 70.9%

Republic 72.0%

Hawaiian 73.3%

Virgin America 73.7%

WestJet 74.0%

Southwest 74.2%

AAG 75.5%

Air Canada 76.951%

Industry Avg 76.954%

United 77.6%

SkyWest 78.9%

jetBlue 79.0%

Delta 81.0%

Allegiant 81.4%

2nd Quarter 2014 Operating Margin

Last years 2Q ranking in ( ).

1. Spirit 21.0% (1)

2. Alaska 18.3% (3)

3. Allegiant 18.2% (2)

4. Southwest 14.8% (5)

5. Delta 13.4% (6)

6. Virgin America 10.6% (12)

7. Republic 9.7% (10)

8. Weighted Avg 9.6% (8) 6.9% avg last year.

9. WestJet 7.21% (9)

10. AAG 7.19% (13, US Airways was 4th)

11. UAL 7.0% (11)

12. jetBlue 6.8% (14)

13. Hawaiian 6.2% (7)

14. Air Canada 3.7% (16)

15. SkyWest -.35% (15)

Break-even load factor

1. Spirit 69.7%

2. Alaska 70.5%

3. Southwest 71.5%

4. Allegiant 72.6%

5. Republic 73.8%

6. WestJet 73.9%

7. Delta 74.200%

8. Hawaiian 74.203%

9. Virgin America 76.0%

10. Weighted Avg 76.7% (78.3% avg BELF last year).

11. AAG 78.2%

12. jetBlue 78.8%

13. UAL 79.3%

14. Air Canada 81.0%

15. SkyWest 84.2%

1Q 2014

1. Allegiant 17.9%

2. Spirit 13.7%

3. WestJet 11.5%

4. Alaska 10.6%

5. Delta 5.1%

6. AAG 4.9%

7. Southwest 4.4%

8. Industry Avg 1.8% (weighted)

9. Republic 1.3%

10. jetBlue .3%

11. Hawaiian -1.0%

12. Air Canada -4.5%

13. Skywest -5.6%

14. UAL -6.2%

Breakeven Load Factor

1. Allegiant 71.2%

2. WestJet 73.6%

3. Spirit 75.0%

4. Republic 75.2%

5. Alaska 75.800%

6. Southwest 75.801%

7. AAG 76.4%

8. Delta 79.0%

9. Industry Avg 79.9% (weighted)

10. Hawaiian 80.7%

11. jetBlue 82.9%

12. Air Canada 83.9%

13. United 86.1%

[boestar]

Compare Air Canada TODAY as opposed to 24 months ago. That is the success he means. AC is still on the mend, perhaps slower than some may like but on the mend nonetheless. Shares are up over $10 from where they were. That's a good measure of success. Sure progress is slower that its peers but there is a lot to be done.

Just admit that they have come back from the brink and are getting even better.

[Thebean]

4Q 2014 Operating Margin including interest as an expense, (with 4Q 2013 margin and rankings and % pt change year over year).

Oil ranged from $54-$79 per bbl in this period

1. Spirit 18.6% (16.2%, 1) up 2.4% pts year over year
2. Alaska 17.6% (9.6%, 4) up 8.0% pts
3. Southwest 12.7% (8.0%, 5) up 4.7% pts
4. WestJet 12.6% (9.7%, 3) up 2.9% pts
5. Delta 11.6% (5.9%, 7) up 5.7% pts
6. Hawaiian 10.7% (3.8%, 10) up 6.9% pts
7. jetBlue 9.3% (5.6%, 8) up 3.7% pts
8. Average 7.92% (3.2%, 11) up 4.7% pts
9. AAG 6.3% (.1%. 14) up 6.2% pts
10. UAL 4.8% (.5%, 13) up 4.3% pts
11. Allegiant 2.7% (11.5%, 2) down 8.8% pts
12. Virgin 1.9% (5.2%, 9) down 3.3% pts
13. Air Canada .7% (-.7%, 15) up 1.4% pts
14. Republic -.6% (7.9%, 6) down 8.5% pts
15. SkyWest -4.6% (1.8%, 12) down 6.4% pts

Below is the industry scorecard from 4Q 2010. Oil was between $85 and $95 a bbl at the time.

Operating Margin

Allegiant: 12.6%
Alaska: 9.6%
WestJet: 9.3%
Southwest: 5.6%
Hawaiian: 5.0%
jetBlue: 1.3%
US Airways: 1.0%
Delta: .9%
Pinnacle: .9%
Air Canada: .2%
Industry: .04%
AMR: -2.4%
Air Tran: -2.6%
UAL: -4.0%

4Q 2012 - Oil was between $93 and $98 a bbl at the time.


Allegiant 10.4%
Spirit 9.7%
WJ 9.3%
Alaska 5.2%
Republic 3.2%
SkyWest 3.1%
Delta 1.9%
Southwest 1.3%
US Airways 1.2%
Air Canada .8%
Hawaiian .1%
jetBlue .1%
Average -.1%
AMR -2.6%
UAL -7.7%

The dial has moved for a number of airlines, but not so much for others.

[sjsa]

Bean

Thanks for the numbers, when the emotion, rhetoric and nostalgia are pushed aside, the numbers don't lie...

[UpperDeck]

Actually numbers do lie and are easily susceptible to massage.

I am surprised and somewhat disheartened by the tolerance for rudeness and arrogance displayed on this thread

[Thebean]

How does one massage operating margins, (with all carriers interest expense included as an above the line expense), and break-even load factors?

Even if interest expense was left below the line, the relative rankings wouldn't change much.

All are calculated identically, and have been for at least 16 years.

[AvWatcher]

It's too bad that this thread, which started out recognizing Air Canada as the Number 1 preferred airline in the US as voted in the Brand Keys survey of 36,000 people in the US, and WestJet, who tied for 3rd, has been hijacked into a profitability, break even load factors and operating margin discussion. As a Canadian, I'm proud of both airlines, and kudos to them and all their employees.

[Guest]

It's too bad that this thread, which started out recognizing Air Canada as the Number 1 preferred airline in the US as voted in the Brand Keys survey of 36,000 people in the US, and WestJet, who tied for 3rd, has been hijacked into a profitability, break even load factors and operating margin discussion. As a Canadian, I'm proud of both airlines, and kudos to them and all their employees.

right on, numbers are only important to accountants, what is important to me is that we have some great airlines in Canada (yes including Porter despite their neigh-sayers ) and I hope / trust they will all continue to operate and provide us, the travelling Canadian Public with great service.

[Seeker]

It's too bad that this thread, which started out recognizing Air Canada as the Number 1 preferred airline in the US as voted in the Brand Keys survey of 36,000 people in the US, and WestJet, who tied for 3rd, has been hijacked into a profitability, break even load factors and operating margin discussion.

Standard M.O. - I expected no less.

[J.O.]

It too often feels like a serious case of small man syndrome that refuses to let any positive acknowledgement of the competition to go unchallenged. It's petty and pitiful, and if the shoe were on opposite feet it would be just as much so.