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You mean if AC did as you want it to do, and withdrew from every route WS flies? I wonder where AC would have ended up on the scorecard had it shrank to nothing rather than address its cost disadvantage with Rouge and other measures.

The market seemed to be ok with AC's results. How did WS shares do today?

No idea. Checking ones stocks daily is for day traders.

I invest long term with blue chip investment grade stocks, you know, the ones that typically have metrics that are in the top third of their peer group.

It's sorta like consistently betting on Detroit making the NHL playoffs rather than the Leafs that, in spite of all the talk, spin and hoopla, consistently suck year after year. May be they improve a bit, but so too does everyone else in the league.

I want to see what things look like when oil rebounds. It's pretty easy math.

For some, the picture is not pretty.

That's when the short sellers are going to make a ton of dough. Shorting goes against every grain of my body, but in this instance the bottom line impact is pretty obvious. When oil goes through $75, the shorts are going to be all over it and a ton of dough will be made.

It is very tempting.

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Based on the metrics bean posts, AC results are despite being "best ever" seemingly unimpressive. His analysis is if nothing else, consistent. So why then is the broader sentiment, though I hesitate to even succumb to using that term because sentiment connotes feelings, and feelings have no place in analysis, but why is market sentiment generally positive if AC is so clearly a dog of a company?

A week ago:

http://seekingalpha.com/article/3142256-air-canada-significantly-undervalued-with-catalysts-to-double-possibly-triple

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I want to see what things look like when oil rebounds. It's pretty easy math.

For some, the picture is not pretty.

That's when the short sellers are going to make a ton of dough. Shorting goes against every grain of my body, but in this instance the bottom line impact is pretty obvious. When oil goes through $75, the shorts are going to be all over it and a ton of dough will be made.

It is very tempting.

Timing Oil prices is just about as risky as day trading... Don't hold your breath, for 75$ oil. At this point, I doubt the market would support that.

OPEC expects oil prices to be about $76 a barrel in 2025 - WSJ

http://in.reuters.com/article/2015/05/11/oil-opec-idINKBN0NW1B320150511

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No idea. Checking ones stocks daily is for day traders.

I invest long term with blue chip investment grade stocks, you know, the ones that typically have metrics that are in the top third of their peer group.

Yes, and you have also mentioned investing in a crap airline here and there. Like Volaris, which makes Rouge look like the last word in luxury travel.

No interest at all in WestJet's stock price, huh? I wonder if the WestJet employees you advised on a different thread to put 100% of their profit sharing into WestJet stock are similarly uninterested.

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I haven't looked at WJ's stock rice in a couple of weeks. It's probably around $25 or so. I look at the steak not the sizzle.

I take it you have further insight into Volaris and the Mexican market than I do?

And you bought in at what price pre IPO?

This should be good. Do tell.

This is where you might want to quit digging and toss the shovel.

Or better yet, amuse me with your knowledge of the market and the various strategies the various airlines have in the marketplace.

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I take it you have further insight into Volaris and the Mexican market than I do?

Good heavens, no! I have no knowledge of anything. I didn't know, for example, that there's a simple calculation one could perform that would determine, to the penny, what an airline's financial results would be given fuel costs of USD $75 per barrel. I thought there'd be many factors to consider, such as fare level changes and resulting changes to LFs, different foreign exchange rates given the likely strengthening of the CAD$, etc etc etc, but I learned from you that none of that will make any difference. "it's just math". Who knew?

Insight into Volaris? Well, I do know from experience that they're a crap airline. A cup of water? That will be the equivalent of $2.50 CAD, please. Oh, you're travelling with one piece of cabin baggage? That will cost you $40 at the gate--surprise!! Or maybe it won't. Some of their passengers get charged, and others don't. This, however, seems to have nothing to do with the fare level on which one is travelling. It's random. Maybe you could provide some insight. You really should, because a lot of the folks who fly Volaris come away with the impression that there's something hooky going on.

I only mention the above because I learned from you about the importance of "branding" (whatever the hell that is, exactly). I'm concerned about the Volaris brand. What was it that you recently had to say about Ryanair when you wanted to make a point about Rouge? "Fool me once......?". The same was to apply to Rouge. How about Volaris then? And there's no legroom. Gosh, complaints of uncomfortable seating are as common of Volaris as they are of WestJet nowadays. It's a good thing WestJet plans to increase guest comfort by cramming even more seats into its cabins. How many folks does the new Volaris A-321 seat? Is it about 600? Or was it 200+? I can't remember. May I draw on your knowledge of Volaris and of the Mexican travel market for the answer?

I'm tempted, of course, just to defer to the great wisdom of David Tait who trashes Rouge for charging differing fares from YVR and YXX since he's unaware that the carrier he ran for years charges differing fares from LHR and LGW, who heaps further scorn on AC and/or Rouge for charging three times as much for a refundable fare as it does for a non-refundable one since he doesn't even know that his (and your) precious Virgin Atlantic and indeed most other carriers do the same thing, and who finds it hilarious that a VP of AC would suggest that those who want roomier seats are welcome to pay for them since he seems to think that when he ran Virgin Atlantic it gave away its Upper Class seats for the same price as economy seats. I know that his mind is a brilliant one. I know this because Beardie esteems him highly and you have met Beardie at his estate, and you know what is underneath his study there and the rest of us do not. I haven't heard the assclown--umm, err, I mean the Great Mr Tait--comment on Volaris, though, so I'll need to rely on you.

Have you been all over WestJet like white on rice yet? You were going to get right to that, I seem to remember, as soon as you saw them charging less to fly AAA-BBB-CCC than they charge to fly only AAA-BBB. I'll be happy to supply further examples anytime you'd like me to take a few minutes. I think it's most unfortunate that WS fritters yields away chasing market share hither and yon. Maybe the market thinks so too.

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There are some on this forum who interpret (in my opinion) that Bean is anti-AC. They spend an enormous amount of energy trying to defend, deflect and obscure any points he makes - without actually hearing what Bean is saying.

But this is what I take from Bean's posts: AC lags its North American peers on the only measure that matters - profitability. He brings to this forum numerous examples of AC's differing strategies when compared to its North American peers. And since AC's profitability is far lower than its peers, maybe those differing strategies are not working.

I don't believe Bean wants bad things to come to AC or those that work there. He just points out that the airline's performance does not match what other North American Airlines are doing.

PanAm 1966 is dead - Don't shoot the messenger.

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Cash reserves are as necessary to an airlines survival as fat might be to a pre-hibernation bear.

Soon to come negative interest rates will become a new tax like drag on airline reserve accounts.

What a win for the banks; with 3.8B in the bank, AC will be paying interest on loans and their savings at the same time.

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Good heavens, no! I have no knowledge of anything. I didn't know, for example, that there's a simple calculation one could perform that would determine, to the penny, what an airline's financial results would be given fuel costs of USD $75 per barrel. I thought there'd be many factors to consider, such as fare level changes and resulting changes to LFs, different foreign exchange rates given the likely strengthening of the CAD$, etc etc etc, but I learned from you that none of that will make any difference. "it's just math". Who knew?

Insight into Volaris? Well, I do know from experience that they're a crap airline. A cup of water? That will be the equivalent of $2.50 CAD, please. Oh, you're travelling with one piece of cabin baggage? That will cost you $40 at the gate--surprise!! Or maybe it won't. Some of their passengers get charged, and others don't. This, however, seems to have nothing to do with the fare level on which one is travelling. It's random. Maybe you could provide some insight. You really should, because a lot of the folks who fly Volaris come away with the impression that there's something hooky going on.

I only mention the above because I learned from you about the importance of "branding" (whatever the hell that is, exactly). I'm concerned about the Volaris brand. What was it that you recently had to say about Ryanair when you wanted to make a point about Rouge? "Fool me once......?". The same was to apply to Rouge. How about Volaris then? And there's no legroom. Gosh, complaints of uncomfortable seating are as common of Volaris as they are of WestJet nowadays. It's a good thing WestJet plans to increase guest comfort by cramming even more seats into its cabins. How many folks does the new Volaris A-321 seat? Is it about 600? Or was it 200+? I can't remember. May I draw on your knowledge of Volaris and of the Mexican travel market for the answer?

I'm tempted, of course, just to defer to the great wisdom of David Tait who trashes Rouge for charging differing fares from YVR and YXX since he's unaware that the carrier he ran for years charges differing fares from LHR and LGW, who heaps further scorn on AC and/or Rouge for charging three times as much for a refundable fare as it does for a non-refundable one since he doesn't even know that his (and your) precious Virgin Atlantic and indeed most other carriers do the same thing, and who finds it hilarious that a VP of AC would suggest that those who want roomier seats are welcome to pay for them since he seems to think that when he ran Virgin Atlantic it gave away its Upper Class seats for the same price as economy seats. I know that his mind is a brilliant one. I know this because Beardie esteems him highly and you have met Beardie at his estate, and you know what is underneath his study there and the rest of us do not. I haven't heard the assclown--umm, err, I mean the Great Mr Tait--comment on Volaris, though, so I'll need to rely on you.

Have you been all over WestJet like white on rice yet? You were going to get right to that, I seem to remember, as soon as you saw them charging less to fly AAA-BBB-CCC than they charge to fly only AAA-BBB. I'll be happy to supply further examples anytime you'd like me to take a few minutes. I think it's most unfortunate that WS fritters yields away chasing market share hither and yon. Maybe the market thinks so too.

Wow. Something's really pi$$ing off FA@AC today. It's probably this:

1Q 2015 Operating margin with interest as an expense - with 1Q 2014's margin and ranking in brackets

1. Allegiant 30.8% (17.9%, 1)

2. Spirit 21.6% (13.7%, 2)

3. Alaska 17.9% (10.6%, 4)

4. Southwest 16.95% (4.4%, 7)

5. WestJet 16.91% (11.3%, 3)

6. jetBlue 14.4% (.3%, 10)

7. Delta 13.5% (5.1%, 5)

8. Industry Avg 11.0% (1.7%, 8)

9. Hawaiian 10.3% (-1.0%, 11)

10. AAG 10.2% (4.9%, 6)

11. UAL 6.6% (-6.2%, 15)

12. Virgin America 4.4% (-5.6%, 14)

13. Air Canada 3.4% (-4.3%, 12)

14. Republic 3.3% (1.3%, 9)

15. SkyWest 2.0% (-5.6%, 13)

Break-even Load Factor

1. Allegiant 60.1% (71.2%, 1)

2. Southwest 66.5% (75.8%, 6)

3. Spirit 66.6% (75%, 3)

4. WestJet 67.8% (73.6%, 2)

5. Alaska 68.8% (75.8%, 5)

6. Delta 70.7% (79%, 8)

7. Hawaiian 71.0% (80.7%, 10)

8. Industry Avg 72.1% (79.9%, 9)

9. AAG 71.8% (76.4%, 7)

10. jetBlue 72.2% (82.9%, 11)

11. Republic 72.6% (75.2%, 4)

12. UAL 75.8% (86.1%, 15)

13. Virgin America 76.6% (83.6%, 12)

14. SkyWest 78.5% (85.5%, 14)

15. Air Canada 78.7% (83.9%,13)

All that work, all that talk, all those initiatives and yet the rankings of key, bottomline metrics sank backwards on the roster of publicly traded airlines in North America, and for this quarter are at or precariously near the bottom.

It'd probably drive me nuts too.

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There are some on this forum who interpret (in my opinion) that Bean is anti-AC. They spend an enormous amount of energy trying to defend, deflect and obscure any points he makes - without actually hearing what Bean is saying.

Nah, it is the pomposity with which he presents his argument.

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I don't believe Bean wants bad things to come to AC or those that work there.

If you're aware of what a certain former WestJet executive did to make himself famous and why WestJet canned him, I don't know how you can come to that conclusion. Let's agree to disagree.

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Wow. Something's really pi$$ing off FA@AC today.

Gosh no! You asked me to post what I knew about Volaris, and I did. I tried to make reference to some of the stuff that you and others you have suggested we should listen to have taught us. If I got any of it wrong, feel free to refute the facts, but don't shoot the messenger.

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No one is going to bother addressing unmeasurable qualitative issues. "I heard this, I saw that" means nothing, unless collectively it boils down to some sort of measurable metric.

I'd suggest the scorecard is pretty strong evidence of what's really going on and how various airlines stack up against each other.

I'm sure AMC looked great compared to Lada, but AMC might still be around if they'd measured themselves against Honda and done what needed to be done to get their metrics to Honda-type levels.

When all else fails, try the personal attacks. Oh how predictable.

Did it ever strike you as odd that a senior WJ exec and company founder worked from his permanent home 450 miles from head office for all but about a day a week for the last 3 years of his time there?

Does that suggest that person was keen on sticking around full time, or even part time, or that just perhaps he'd already decided it was time to move on and accomplish other goals in life?

How many people at AC do you know were fired and have lifetime flight benefits? That kinda messes with your argument, eh?

You might be surprised at the various people from both red and teal who periodically call me to discuss various concepts and ideas. Sometimes we agree on ideas, sometimes we don't. They are all good people I respect them all.

Is that shovel getting heavy?

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If labour related costs were to be set to the side, a question arises; what is Allegiant doing that makes it's operations so fundamentally different and more efficient than everyone else and consistently places it so far ahead of every other carrier in both metrics? By extension, why hasn't the pack altered its course and implemented the Allegiant model of business?

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Ah...

When all else fails, try the personal attacks. Oh how predictable.

Personal attack? Did I post something inaccurate? I can't imagine where you grew up if you could do anything you wanted and be so special that nobody was ever allowed to speak of your actions.

Don't shoot the messenger, now.

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the following articles may be dated but nevertheless interesting:

FAST COMPANY | SEPTEMBER 2009

Heard of Allegiant Air? Why It’s the Nation’s Most Profitable Airline

Why Allegiant Air is the nation’s most profitable airline, soaring amid the slump in travel.

You’ve probably never heard of the most successful airline in America. That’s because Allegiant Air is not for you. It eschews business travelers, daily flights, even service between major cities. Allegiant is the anti-airline, or as CEO Maurice Gallagher calls it, the “accidental airline.”

But it’s no accident that Allegiant’s planes are full, profits soared 200% in the first quarter to $28.2 million, and the number of passengers is up 18% through May during the worst recession in recent memory. While competitors furiously cut back, Allegiant has boosted capacity 30%. The more intriguing question, though, is whether its rock-bottom fares, bootstrap approach, and focus on the places abandoned by the hubs and spokes are the new blueprint for building an airline in tough times.

Gallagher thought he had survived those already. When he took over Allegiant in July 2001, two months before 9/11 terrified passengers and froze credit markets, the JetBlue model—tons of cash, a single hub, and brand-new planes—was the way to go. The onetime ValuJet cofounder (who left the airline after its horrific Everglades crash in 1996 and subsequent merger with AirTran) moved his single plane to Las Vegas and set out to reinvent the business. Certified to fly MD-80s, aging warhorses of the skies, Allegiant could acquire used ones for as little as $4 million, one-tenth of what it costs Southwest to buy a new 737. With no access to capital, Gallagher didn’t have much choice. But the plane is a gas-guzzler—fuel costs can be as much as half of expenses—so Allegiant couldn’t afford an empty seat; keeping the planes full spread the cost across more passengers. “We needed a strategy that was low cost and could make money from day one,” Gallagher says. “Slowly, we figured it out: Go where they ain’t.”

That meant connecting Vegas—and later other tourist destinations such as L.A., Orlando, and Phoenix—to dozens of otherwise empty airports in third-string cities such as Peoria, Fresno, and Toledo. Allegiant faces competition on only 6 of its 134 routes. It doesn’t try to steal other carriers’ passengers; it stimulates new ones with cheap fares. “There’s little the airlines can do [to compete] without cannibalizing their route structures,” says Helane Becker, an aviation analyst at Jesup & Lamont Securities.

Because, except for the fuel, the MD-80 is cheap to operate, Allegiant doesn’t need to fly its aircraft every minute of the day, unlike its competitors with new, rapidly depreciating planes. It can afford to serve smaller airports infrequently—as few as three or four flights a week—making more efficient use of its fleet. It serves 40 destinations from Las Vegas with just 14 planes. Its average flight is 90% full.

While major carriers have turned to charging for amenities out of desperation, Allegiant has always seen flying as an à la carte experience and has raised billing to an art form. Allegiant charges $13.50 just to book (like Ticketmaster); $15 for the first checked bag; between $5 and $25 for a seat assignment. (No surprise, then, that the Ryan family behind Ireland’s discount carrier Ryanair feels a kinship with Allegiant and invested in an early financing round.)

And although it’s usually possible to buy a vacation package from your airline’s Web site, Allegiant actually woos its customers to do so, enabling it to position itself as a vertically integrated travel company. It sold 400,000 hotel rooms last year, along with extras such as beach towels and suntan oil for the trip. Financial catastrophe has been a boon, as oil’s drop from its summer 2008 highs translated to lower fuel costs, and deserted hotels meant more discounted inventory to sell to passengers lured onboard by $9 teaser fares.

At that price, or even at Allegiant’s average one-way fare in 2008 of $84.97, Americans are still willing to fly. Meanwhile, ancillary revenue per passenger rose 52% in the first quarter, to $34, comprising nearly a third of the company’s business.

The advantage of this pricing structure is psychological. “We collect $110 from you at the end of your trip,” Gallagher says. “If I tried to charge you $110 up front, you wouldn’t pay it. But if I sell you a $75 ticket and you self-select the rest, you will.”

Allegiant has room to grow. “There’s still a lot of small markets it could tap into,” says Forrester Research analyst Henry Harteveldt. “It just started flights into Los Angeles, and a third of its passengers are buying tickets in L.A.” Gallagher presumes those travelers are commuting to second homes outside Billings, Montana, and the like. In Europe, this phenomenon is known as the “Ryanair effect.”

Gallagher concedes there’s not much more to squeeze from passengers in flight, but suggests Allegiant’s destiny may be digital. Having built an integrated travel company, he can see a day when Allegiant is as much a portal as it is an airline. “We think there will be 100 million people who will have flown us, and they could eventually turn to us to put them on a plane” flown by a nominal competitor, “and put them in a Hyatt,” he says. “We joke we’re an Expedia with wings.”

llegiant Air: The Tardy, Gas-Guzzling, Most Profitable Airline in America Allegiant's Airplanes Guzzle Gas and Are Often Tardy; But Its Strategy Is Working
Allegiant's strategy has led to profits in 39 of its last 41 quarters, and its stock price has surged. REUTERS
By
JACK NICAS
Updated June 4, 2013 7:24 p.m. ET

LAS VEGAS—While much of the airline industry retreats from small cities across the U.S., one scrappy carrier has been finding big profits in their wake.

TARGETING TOURISTS

See Allegiant's destinations over time and compare departures in select cities.

FROM THE ARCHIVES

Allegiant Travel Co., a 16-year-old carrier that flies just 64 jets, has achieved the lowest costs, fullest planes and highest margins in the U.S. airline industry by flying where its competitors aren't. Over the past five years, amid bankruptcies, consolidation and soaring fuel prices, U.S. airlines have scaled back domestic air service by 14%, particularly in smaller cities, according to the Massachusetts Institute of Technology. Allegiant, meanwhile, increased its departures by 87%, adding service to third- and fourth-tier cities abandoned by other airlines, like Toledo, Ohio, and Stockton, Calif.

"We want to be considered the hometown airline of all the little cities around the country," Allegiant President Andrew Levysaid in an interview here, sitting in shorts and a teal polo in the company's glass headquarters in the desert.

Allegiant's strategy has led to profits in 39 of its last 41 quarters. In the first quarter this year, its pretax profit margin was 18.5% on revenue of $909 million, compared with 13.4% at Spirit Airlines Inc. and 5.2% at Alaska Air Group Inc. No other publicly traded U.S. airline surpassed 2.3%. Over the past five years, Allegiant's stock has risen 361%, closing at $96.38 Tuesday.

Allegiant also had the worst on-time rating of any U.S. carrier in 2012, with more than 30% of its flights late, according to FlightStats.com, which tracks airline data.

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If labour related costs were to be set to the side, a question arises; what is Allegiant doing that makes it's operations so fundamentally different and more efficient than everyone else and consistently places it so far ahead of every other carrier in both metrics? By extension, why hasn't the pack altered its course and implemented the Allegiant model of business?

Allegiant's fleet has a lot to do with it.

When oil is cheap, the MD80's look like genius. When oil was pushing $140 a bbl, well, not so much.

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Personal attack? Did I post something inaccurate? I can't imagine where you grew up if you could do anything you wanted and be so special that nobody was ever allowed to speak of your actions.

Don't shoot the messenger, now.

Who me?

You know precisely what you were trying to say. Now you're just playing dumb.

But let's get back on track.

What's your analysis on these numbers? Are you concerned that AC is slipping in the rankings compared to all the other publicly traded airlines in North America?

1Q 2015 Operating margin with interest as an expense - with 1Q 2014's margin and ranking in brackets

1. Allegiant 30.8% (17.9%, 1)

2. Spirit 21.6% (13.7%, 2)

3. Alaska 17.9% (10.6%, 4)

4. Southwest 16.95% (4.4%, 7)

5. WestJet 16.91% (11.3%, 3)

6. jetBlue 14.4% (.3%, 10)

7. Delta 13.5% (5.1%, 5)

8. Industry Avg 11.0% (1.7%, 8)

9. Hawaiian 10.3% (-1.0%, 11)

10. AAG 10.2% (4.9%, 6)

11. UAL 6.6% (-6.2%, 15)

12. Virgin America 4.4% (-5.6%, 14)

13. Air Canada 3.4% (-4.3%, 12)

14. Republic 3.3% (1.3%, 9)

15. SkyWest 2.0% (-5.6%, 13)

Break-even Load Factor

1. Allegiant 60.1% (71.2%, 1)

2. Southwest 66.5% (75.8%, 6)

3. Spirit 66.6% (75%, 3)

4. WestJet 67.8% (73.6%, 2)

5. Alaska 68.8% (75.8%, 5)

6. Delta 70.7% (79%, 8)

7. Hawaiian 71.0% (80.7%, 10)

8. Industry Avg 72.1% (79.9%, 9)

9. AAG 71.8% (76.4%, 7)

10. jetBlue 72.2% (82.9%, 11)

11. Republic 72.6% (75.2%, 4)

12. UAL 75.8% (86.1%, 15)

13. Virgin America 76.6% (83.6%, 12)

14. SkyWest 78.5% (85.5%, 14)

15. Air Canada 78.7% (83.9%,13)

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Rankings are immaterial to me. For one, if every airline had a negative ranking, would being first or second on the list really matter? Conversely, if everyone has a positive ranking, and sufficiently positive for investors, would it really matter if an airline is #1 or #12. Obviously, the higher the better from an investment standpoint, you'll get a better stock price, but good is in the eye of the beholder.

Secondly, directional improvement matters. Is it really an issue that WS, despite a record quarter, has fallen in your lists? Unless you're compiling an airline ETF, I suggest relative rankings mean less than qualitative performance on an individual basis, and directional improvement. Directional improvement means who is showing a greater degree of sustained improvement.

Using non-GATT numbers for example, AC had a $61 million improvement in Q1 operating income excluding fuel savings.

Using Westjet's non-GATT numbers, WS operating income would have been down if the YOY fuel savings are excluded. (a $65m improvement in operating income with a $73 million lower fuel bill).

If fuel costs revert to year-ago levels, whose operating income improves and whose deteriorates?

So it's not only a matter of rankings, which are a snapshot in time - and you know in general terms what will happen in the second and third quarters with your rankings - but also what each carrier is doing to improve its position over the long term.

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You know precisely what you were trying to say. Now you're just playing dumb.

But let's get back on track.

What's your analysis on these numbers? Are you concerned that AC is slipping in the rankings compared to all the other publicly traded airlines in North America?

I do know precisely what I was saying, yes. And I stand by it.

I'm not particularly concerned about AC's slip in the rankings. I can't think of much to add to what I have already posted on the subject, though. I expect the gap in CASM between AC and at its competitors to narrow. I'd be concerned if I thought AC likely to end up in bankruptcy again, but barring any crazy geopolitical events I see no sign of a CCAA filing on the horizon.

I appreciate that AC's CASM being high relative to other NA carriers etc has much to do with the fact that AC generally provides better employment than other carriers and that it provides employment at all where many of its peers outsource.

I recognize that AC operates in a very different environment than US carriers do. AC had a much shorter chain on restructuring than the US airlines did if my understanding of bankruptcy laws is correct. AC wasn't handed the gazillions of dollars after 9/11 that the US carriers were given by their government. The US airlines operate in a huge market with only 3 (4 if you count Southwest) major players in many markets. AC operates in a much smaller market with 2 players.

AC was forced by government meddling into a costly acquisition of Canadian Airlines, and was then severely hampered in its competitive efforts by further government meddling while WestJet and other carriers could do whatever they liked. Then there was 9/11 which affected AC severely, and WestJet hardly at all. Same with SARS. And then there was that thing that a certain WestJet executive was up to during AC's restructuring which was likely an attempt by him to finish AC off.

So no, I don't think that AC has ended up in a bad place given industry history, and the market seems to agree with my take currently. I don't deny that there's still work to do.

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Bean,

So with your numbers above, I have a question for you and it's an honest one - not being flippant.

If you read the analysis done by both the media and the financial sector, they all seem to be saying that AC is a "good news" story.

Why is it that you seemingly are the only one to be saying something different? Is it for short term investor bumps? I'm assuming that given your previous history, you probably have relationships with some or many of the same people writing these analysis summaries - both in the media and the trading/investment houses. Have you called any of them and shown them the numbers as you see them? And if no, why not? If yes, why do they differ from you?

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I do know precisely what I was saying, yes. And I stand by it.

I'm not particularly concerned about AC's slip in the rankings. I can't think of much to add to what I have already posted on the subject, though. I expect the gap in CASM between AC and at its competitors to narrow. I'd be concerned if I thought AC likely to end up in bankruptcy again, but barring any crazy geopolitical events I see no sign of a CCAA filing on the horizon.

I appreciate that AC's CASM being high relative to other NA carriers etc has much to do with the fact that AC generally provides better employment than other carriers and that it provides employment at all where many of its peers outsource.

I recognize that AC operates in a very different environment than US carriers do. AC had a much shorter chain on restructuring than the US airlines did if my understanding of bankruptcy laws is correct. AC wasn't handed the gazillions of dollars after 9/11 that the US carriers were given by their government. The US airlines operate in a huge market with only 3 (4 if you count Southwest) major players in many markets. AC operates in a much smaller market with 2 players.

AC was forced by government meddling into a costly acquisition of Canadian Airlines, and was then severely hampered in its competitive efforts by further government meddling while WestJet and other carriers could do whatever they liked. Then there was 9/11 which affected AC severely, and WestJet hardly at all. Same with SARS. And then there was that thing that a certain WestJet executive was up to during AC's restructuring which was likely an attempt by him to finish AC off.

So no, I don't think that AC has ended up in a bad place given industry history, and the market seems to agree with my take currently. I don't deny that there's still work to do.

What meddling by the govt interfered with AC's ability to do what they wanted? Lest anyone forget, WJ was already in Hamilton and the decision to move over to YYZ had been a foregone conclusion within certain key circles at WJ.

As given the CCAA filing in 2003, which was pretty much a function of high costs and low fares, one could make a pretty strong argument that the gov't saved AC from itself. Tango was so successful it was wound down, as was Zip.

There is no doubt that had fuel been at 1Q 2014 levels, other variables would have changed. It's reasonably safe to assume the c$ would have been at q1 2014 levels. As for loads and yields, well, that is a little more difficult to ascertain. The decline in the c$ is ultimately reflected in the fuel price as fuel is a U.S. $ expense. Airlines provide guidance on the impact of the c$ so that can be taken into account as well.

I'll agree that comps to US carriers are a little harder to make given their minuscule exposure to the c$. But the comps to Cdn domiciled competition is a pretty good indication of how things would look under those circumstances.

Without taking into account a lower profit sharing expense at WJ, as that expense is based on achieved operating margin, WJ would have produced an operating margin of about 10% and a BELF of 73.9% with 1Q 2014 fuel. Both numbers would be in the top 3 on the continent.

AC would have had a margin in the -5.5% range, (taking into account the variable nature of profit sharing), with a stratospherically high BELF of 86.1%. Both metrics would be at or near the bottom of the rankings.

After a couple of quarters like that losing $2m a day, when one studies airline history, one often sees press releases being issued with various terms and plans being implemented that aren't exactly indicative of status quo being maintained.

The best thing for everyone is fuel to stay where it is, or lower. Call me a skeptic, but I have serious doubts that will continue to be the case.

When it moves north, I can see a couple of airlines that will be in danger of heading south.

If you understand how investment bankers afford their lifestyles, it is not difficult to figure out why their " analysts" write what they do. Have you ever wondered what the fees are on a bank led financing and the degree of schmoozing they are prepared to do to be the lead on the deal or even part of a 3 or 4 bank consortium to ensure the widest distribution? Think in terms of s $500m deal when there is 4-5% points on the table, and a nice chunk of that goes to straight into their bank account, and subsequently to the Aston Martin dealer when it's bonus time.

Is it right or wrong? Who knows. It occurs in every sector. It's a good reason to avoid the markets altogether for some. Call it what you like. Some would call it "manipulation". Others would simply call it "the stock market". Decide for yourself.

As for the media, well, let's just say that collectively, they aren't particularly prone to spending a couple of days, or perhaps 20 years getting to know the details of any particular sector. They are quite happy to be spoon fed stories and when that's the case, who can blame those doing the spoon feeding from piling on the sugar?

I get a kick out of periodically posting stories from various media outlets that are absurdly wrong but are deemed the truth because a 22 year old kid who graduated from Ryerson a couple of years ago said it was. We all see those sorts of stories whenever there's any aviation related incident.

These folks simply see what's coming off the wire, make a couple of phone calls to the same sources who will feed them the same lines, write it up, submit it to their editor in time for the deadline, and then do the same on the next story.

Widgets one day, wankel rotary engines the next. It doesn't matter. They are deemed experts and their knowledge is all encompassing. Few, if any, would dare rock the boat, especially if that meant the editor had to field calls from an irate heavy advertiser threatening to pull business because the tone of the story wasn't exactly what was desired.

It's always best to do a little DD on your own. Fortunately, public companies issue audited statements, so the info is there for those who choose to make use of it rather than simply following the herd.

Ever been to Head Smashed In Buffalo Jump?

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