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Malcolm

WestJet to defer four 737 MAX 8 deliveries

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‎Today, ‎November ‎4, ‎2018, ‏‎29 minutes ago
 

Canada’s WestJet to defer four 737 MAX 8 deliveries on domestic overcapacity

 
‎Today, ‎November ‎4, ‎2018, ‏‎2 hours ago | Peter Muir

31 October 2018 – Air Transport World
Sean Broderick sean.broderick@aviationweek.com

Overcapacity in the increasingly competitive Canadian domestic market has led WestJet to defer four Boeing 737 MAX 8s scheduled for delivery next year. However, the Calgary-based carrier continues to see opportunities internationally and announced it would redeploy one of its Boeing 767s on a new transatlantic route after taking its first 787s.

“It is clear, we were long on domestic capacity,” WestJet president Ed Sims said. “I think the industry is long on domestic capacity across the length and breadth of Canada. We’ve looked at our domestic footprint; we’ve taken that opportunity to really concentrate our capacity into our hubs and our most profitable feeders and spokes of that hub.”

The 737-8 deliveries will now be split between 2020 and 2021, WestJet revealed Oct. 30. The carrier also extended leases on two 737-700s and two 737-800s set to expire next year and agreed to lease two 737-8s that will arrive next year.

“The [deferral] decision was based on our assessment of both the economic and competitive environment for next year,” CFO Harry Taylor said. “Obviously, this year has not turned out the way we expected or wanted it to, and we wanted to be proactive to support unit revenues and margin expansion and reduce our capacity growth to much lower levels in order to improve unit revenues and margin.”

WestJet is aggressive about mixing leased and owned aircraft to maintain capacity flexibility. The airline ended the third quarter with 174 aircraft, and is set up to have between 193 and 223 at the end of 2027, depending on what it does with expiring leases.

WestJet, which saw earnings from operations fall 70% year-over-year through the first three quarters, is slowing growth and aggressively cutting costs. The carrier pulled about 6% out of its planned fourth-quarter growth and will end the year with a 5.5%-6.5% increase in available seat miles, including 4%-5% domestically.

Next year’s growth will be 6.5%-8.5%, but almost all of this is its new international flying on three new 787-9s and the ramp-up of ULCC subsidiary Swoop. WestJet will launch international 787 services on April 28 with a fleet of three aircraft. ULCC Swoop, which operates six aircraft, will be up to 10 by year-end. Domestic capacity is projected to be up only 1%-3% next year.

Canada’s domestic market has benefited from the ramp-up of several carriers. Swoop, fast-growing ULCC Flair Airlines, and to a lesser extent, Air Canada’s leisure-market-focused rouge subsidiary have all added domestic routes.

While the domestic market is getting crowded, the carriers still see opportunities abroad. WestJet will launch service between Toronto and Barcelona on May 24 using one of the 767s that the new 787s—which will fly a mix of both new routes and existing 767 routes—will free up. The route is flown by rouge, which also uses 767s.

“We’ve been regularly reminded that we have not had the benefit of international revenue streams, which our competition has taken advantage [of],” Sims said. “If I look at a multi-layered strategy of a full-network carrier underpinned by a carrier like rouge, I think it is fair to say that the 767 is a very effective competitive weapon against that rouge product.”

WestJet said use of the 767s beyond the summer schedule remains up in the air. It will likely use some as long-haul spares, but may deploy others on winter routes. At the moment, there are no plans to retire them, Sims said.

Sean Broderick, sean.broderick@aviationweek.com

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If used for IROPs, I imagine winterizing them could be an interesting exercise if based out of YYC. Would WestJet have enough hanger space for them or ?

Re winterizing, I imagine our AMEs may be able to advise what that would entail but still leave them able to quickly perform an IROP. 

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25 minutes ago, Malcolm said:

If used for IROPs, I imagine winterizing them could be an interesting exercise if based out of YYC. Would WestJet have enough hanger space for them or ?

Re winterizing, I imagine our AMEs may be able to advise what that would entail but still leave them able to quickly perform an IROP. 

There are certainly operation costs (summer and winter seasons) to keep spare aircraft in a standby mode but much cheaper than protecting hundreds of pax on other flights or airlines. 

In another life we had to overnight Boeing’s in sub zero Saskatoon. After arriving to a frozen (cargo doors, aft galley) aircraft one morning the maintenance SOP changed to keeping lots of ground heat connected and a periodic engine run up throughout the night. Problem solved with a toasty plane ready to head south. 

Edited by blues deville

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17 minutes ago, blues deville said:

There are certainly operation costs (summer and winter seasons) to keep spare aircraft in a standby mode but much cheaper than protecting hundreds of pax on other flights or airlines. 

In another life we had to overnight Boeing’s in sub zero Saskatoon. After arriving to a frozen (cargo doors, aft galley) aircraft one morning the maintenance SOP changed to keeping lots of ground heat connected and a periodic engine run up throughout the night. Problem solved with a toasty plane ready to head south. 

Reading into your post, it appears, if based in YYC, keeping the aircraft ready during the winter could be an interesting exercise.

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8 minutes ago, Malcolm said:

Reading into your post, it appears, if based in YYC, keeping the aircraft ready during the winter could be an interesting exercise.

Interesting yes but not something any Canadian air carrier wouldn’t know how to do. Our winters are rough on all machinery (and people) but if you prepare for the worst it can all be managed safely. Tours of duty in Rankin Inlet (YRT) during the winter required all ground vehicles to run 24/7 and you could never lose any heat on the DHC6 Pratt’s. Bundled up and heated all night long. 

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1 hour ago, blues deville said:

Interesting yes but not something any Canadian air carrier wouldn’t know how to do. Our winters are rough on all machinery (and people) but if you prepare for the worst it can all be managed safely. Tours of duty in Rankin Inlet (YRT) during the winter required all ground vehicles to run 24/7 and you could never lose any heat on the DHC6 Pratt’s. Bundled up and heated all night long. 

I know the capability would be there but keeping the aircraft warm and toasty just in case for an IROPS  could be quite expensive.  But I am sure that WestJet Mtce. is already running those numbers  along with base options (crewing) etc.

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Why on earth would you park assets to use just-in-case? 

My guess is they remain based out of YYZ and fly routes to the USA and Caribbean. I don't know where Rouge flies 767's out of YYZ in the winter but my guess is you'll see WJ  fly the 767 there as well. Maybe YYZ-CUN? YYZ-MBJ? YYZ-PUJ? YYZ-MCO? Just a few destinations off the top of my head. 

Edit to add: Actually that probably makes a lot of sense. The 767's are based in YYZ during the summer and I see no reason to move them elsewhere. The 787's are based out of YYC so I wonder if they get used for Hawaii routes out of Alberta (that were previously flown by 767)? That also makes sense. 

Edited by CanadaEH

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I doubt very much that WestJet will waste its resources by using them only as back-ups. In all likelihood, depending on the outcome of their first contract and the level of cooperation of its pilot group, B767s could very likely become part of a larger fleet in Swoop as a response to Rouge, while the deliveries of B787s could possibly be expedited, stay the same, or slowed, all depending on the cost of the contract. Hopefully history will not repeat itself when the pilot group prices itself out of the market!

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5 minutes ago, MD2 said:

I doubt very much that WestJet will waste its resources by using them only as back-ups. In all likelihood, depending on the outcome of their first contract and the level of cooperation of its pilot group, B767s could very likely become part of a larger fleet in Swoop as a response to Rouge, while the deliveries of B787s could possibly be expedited, stay the same, or slowed, all depending on the cost of the contract. Hopefully history will not repeat itself when the pilot group prices itself out of the market!

Just curious, how do you propose to "expedite" deliveries of the B787 ????

The deliveries list is pretty long and planned out a fair ways from what I have seen.

 

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Do any of those slots belong to leasing companies? Plus airlines, as this discussion entails, sometimes cancel, delay, defer deliveries, not to mention sell slots, all of which would create opportunities for expediting.

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18 hours ago, CanadaEH said:

Why on earth would you park assets to use just-in-case? 

My guess is they remain based out of YYZ and fly routes to the USA and Caribbean. I don't know where Rouge flies 767's out of YYZ in the winter but my guess is you'll see WJ  fly the 767 there as well. Maybe YYZ-CUN? YYZ-MBJ? YYZ-PUJ? YYZ-MCO? Just a few destinations off the top of my head. Oh  

Having a spare aircraft on standby during high season flying is common practice for many carriers when it comes to sun destination operations. It might operate a light schedule leaving it free during peak times or Fri-Mon. The torched but fully repaired 737 left Sunwing without a spare tail for the balance of their 2017/18 winter season. 

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32 minutes ago, MD2 said:

Do any of those slots belong to leasing companies? Plus airlines, as this discussion entails, sometimes cancel, delay, defer deliveries, not to mention sell slots, all of which would create opportunities for expediting.

For many other types, but I doubt it for the B787, especially with rising fuel prices (generally).

Airlines love the 787, cant get there hands on them fast enough it seems.

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I just want to circle back to this 'pricing themselves out of the market' comment.  Things like that get slid into conversations and flow forward as though they were fact.

When I look at CEO compensation, for example, it doesn't appear to me as though 'pricing out of the market' really is what this is about.  It's about power and setting a tone of who's calling the shots.  Compared to so many other costs, paying and crewing pilots appropriately is not the tipping point the ATACs of the world would like to promote it as.  But it is part of a larger business model.

The overpowering of the pilot community in Canada has been so inbred for so long that, in 2018,  we still have young pilots flying to their deaths, exhausted, flying broken aircraft into places they have no business going, because they think it will get them that next rung on the ladder.  For those that survive and hit the 'big leagues' - surprise!  You're expected to remain unconcious until the phone rings and be ready to go, fully awake, wherever crew sked wants to send you.  Or get drafted to operate just one more leg 'to protect the operation' having been up all night working a redeye.  Or do other things that it takes a foreign government to call BS on.

And the Minister of TC thinks this is science.  It's not.  It's just business.  And that business model isn't really about a pilot's paycheck, it is about maintaining a compliant workforce who will get the mission done and continue to 'take one for the team' so we can buy that aircraft and pay that CEO. 

Bottom line:  if the economics of an aircraft hinge on pilots sacrificing pay or working conditions, then the company needs to hire someone better at math, not someone who can squeeze more juice out of its pilots.

Rant over.

Vs

fixed a couple of typos (sadly never all of them)

Edited by Vsplat

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VS, there is also one very disturbing fact, the new low pay contracts and working conditions were voted for by the more senior longer employed pilots to place on the newbie's.  Talk about eating your young. Mind you that seems to be people in general who vote for money wasting governments with no regard or concern with who(young folks of course)  will be left to pay the bills.

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It's called getting "Rouged". Now the customers and the pilots have something in common. They all got "Rouged".

Calin deserves every penny. Air Canada had a complete monopoly after buying Canadian and bled red for over a decade non-stop with uncle Milty. 

I'd love to say it was the pilots but what version of pension does the newbie get, C scale now at best? Only 10 years ago everyone was on a DB. Sorry pilots are terrible at this **bleep** big picture. It requires something outside of "its all about me". 

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On 11/5/2018 at 2:12 PM, blues deville said:

Having a spare aircraft on standby during high season flying is common practice for many carriers when it comes to sun destination operations. It might operate a light schedule leaving it free during peak times or Fri-Mon. The torched but fully repaired 737 left Sunwing without a spare tail for the balance of their 2017/18 winter season. 

I get spare planes being a necessity (and agree) but I don't see why parking a FLEET of 4 planes makes sense. Maybe knock the utilization down a bit if it's too aggressive but I think we already have since Year 1. 

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On 11/5/2018 at 6:46 PM, Vsplat said:

I just want to circle back to this 'pricing themselves out of the market' comment.  Things like that get slid into conversations and flow forward as though they were fact.

When I look at CEO compensation, for example, it doesn't appear to me as though 'pricing out of the market' really is what this is about.  It's about power and setting a tone of who's calling the shots.  Compared to so many other costs, paying and crewing pilots appropriately is not the tipping point the ATACs of the world would like to promote it as.  But it is part of a larger business model.

The overpowering of the pilot community in Canada has been so inbred for so long that, in 2018,  we still have young pilots flying to their deaths, exhausted, flying broken aircraft into places they have no business going, because they think it will get them that next rung on the ladder.  For those that survive and hit the 'big leagues' - surprise!  You're expected to remain unconcious until the phone rings and be ready to go, fully awake, wherever crew sked wants to send you.  Or get drafted to operate just one more leg 'to protect the operation' having been up all night working a redeye.  Or do other things that it takes a foreign government to call BS on.

And the Minister of TC thinks this is science.  It's not.  It's just business.  And that business model isn't really about a pilot's paycheck, it is about maintaining a compliant workforce who will get the mission done and continue to 'take one for the team' so we can buy that aircraft and pay that CEO. 

Bottom line:  if the economics of an aircraft hinge on pilots sacrificing pay or working conditions, then the company needs to hire someone better at math, not someone who can squeeze more juice out of its pilots.

Rant over.

Vs

fixed a couple of typos (sadly never all of them)

I'm not looking to pick a fight or take sides - please do not misinterpret what I'm about to say. 

Overpay a CEO and you're only overpaying for one person. Overpay a workforce - pilots, office workers, maintenance, CSA's, whoever - and you're overpaying for a lot more than one person. Has anyone looked at airline CEO wages and compared them? Honest question - people complain about CEO's making too much but compared to market median - are they? (this isn't about what you think they should make, by the way - topic for another day). When it comes to costs, you can't argue that salaries and benefits are at or near the top of the expenses of an airline. Fuel has typically been the highest closely followed by salaries. It's a natural target from a visibility standpoint. 

It's easy to look at a workforce of 10,000 and say "no raises for you" or "you're pay is in line with the market". Might shave a couple million off your payroll in savings but the millions saved are wasted by bad decisions at the Executive level or higher Management levels. All well intentioned decisions but that doesn't mean they were "right" or "smart" or "well executed". That, to me, is where good-will has and is lost - "taking one for the team" (to use your phrase) only to see that **bleep** away elsewhere. Especially when executives leave and get compensated very handsomely to do so. I think there are lot of employees that sacrificed something over the years for the betterment of the company. Some do it for the financial benefit and some do it because they're good, well-intentioned people.  When the times are good - bonuses, profit share, share growth, etc. all make up for it. When the times are bad -- well. Attitudes change. 

Back to your initial response about pricing out of the market. It's not about hiring someone better at math, it's about changing an entire global industry. Do you really see that changing? I keep hearing about global pilots shortages so maybe the movement is already happening. I don't know. I also don't see a diminishing appetite for rock bottom pay-nothing airfares. In fact, I see the opposite. I was in line at Best Buy the other day and this guy in front of me was complaining to his buddy about how he is paying $350 to fly round trip from Vancouver to Calgary at Christmas. So hard done by, the guy was considering not even going to Calgary for Christmas ("I can't afford to visit the family for 4 days at that price"). The guy who was spending $600 on video games was complaining about paying $350 to fly round trip at the busiest time of the year. Let that sink in for a minute. 

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9 hours ago, CanadaEH said:

I get spare planes being a necessity (and agree) but I don't see why parking a FLEET of 4 planes makes sense. Maybe knock the utilization down a bit if it's too aggressive but I think we already have since Year 1. 

Operational Spares are a necessary evil in order to maintain a stable operation when the SHTF. One of the major issues with smaller operaors and charter only airlines is that they operate at 100% utilization.  So when the plane destined for CUN goes mechanical they are at the mercy of the mechanics to get the plane airborne ASAP or people start having to wait LONG periods.  That can cost Hotel and meals for not 1 and not just 2 but possible more downline, plane loads of people.  Now we are hitting an expense.

Operational spare is insurance and no one likes paying insurance until they need it.

 

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20 hours ago, CanadaEH said:

I get spare planes being a necessity (and agree) but I don't see why parking a FLEET of 4 planes makes sense. Maybe knock the utilization down a bit if it's too aggressive but I think we already have since Year 1. 

Was thinking it was only two B767s. Four airframes waiting for IROPs might be excessive. 

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