Air Canada's Calin Rovinescu

[Guest Airmail]

Dagger/Labtec:

The bottom line for b52er and many other WJers: competition on their terms = legal; competition they can't handle = illegal.

The true question is are WJers winners or whiners?

[Guest Airmail]

Let's see which airline is focused on marketshare:

AC has reduced its share of domestic capacity by 20 points from 2000 to 2003 (remember reduced pilot hours?).

WJ has increased its capacity in the same (stagnant) domestic market by 50 percent each year.

Which airline seems to be pursuing a strategy of increasing marketshare?

It seems to be that the whole marketshare rhetoric out of WJers is simply a ruse intended to fool the vast majority of Canadians who are uninformed about what is taking place in the industry.

As someone posted above, the race to the bottom was started by WJ now it seems WJers are nervous that others have come in the game. Just wait until AC emerges with a dramatically lower cost structure.

[Guest Airmail]

Maverick:

Read Milton's letter and it does not say anything about running out of cash. It's one reporter's wildly hyped spin to create a headline. If AC had truly run out of cash, the monitor would have had to issue a report to the court. Another wonderful fairytale brought to you by the good people at the Montreal Gazette.

[Guest Airmail]

Look B52er, if you're so cocksure about your strategy why fear AC?

Bottom line is that you and your ilk can't really handle competition. Unlike other low fare carriers which, even last quarter, made oodles of money -- look at JetBlue's profitability -- you eeked out what many consider to be an accounting profit.

You've been pounding away at and thrived against inefficient, bloated monoliths and irrelevant imitators ever since your inception. That all changes in about 8 months!

Have fun!

[Guest Airmail]

Actually, Virtual, it's only one small part of the double standard that is imposed on AC. Don't count on WJ ever being required to comply with the same obligations that AC is required to provide or to advertise is such obscure newspapers such as Le Soleil de Colombie or L'Eau Vive de Saskatchewan where AC is being gouged because the publishers know full well that AC is supposed to support minority language media across the country.

[Guest Airmail]

HAHAHAHAHA!!!!

Just for that, we'll make sure we're around even just to be right on top of you on every route you operate!

[Mitch Cronin]

Another real question that's being asked, and not only by WJ'ers:

Is Air Canada going to take some lessons from the past many years of madness and avoid the troubles that ensue from going for the kill, or is this same old game of going for the competitors throat still being played? If the latter, I'm afraid Canadians aren't going to want to see AC survive.

I watched my daughter playing monopoly recently and she was rolling in cash but wouldn't put hotels on her properties. When I asked her why, she said she was having fun playing and didn't want to put the others out of the game.

I wonder if Clive and Robert could agree to play like that?

[Mitch Cronin]

...err... ahhh... While we're counting who's wrong here, I thought maybe I'd just offer to straighten one little matter up before it becomes a fact in peoples minds just because they read it:

YYZ is NOT one of AC's "heavy maintenance" bases.

And while we're at it, if someone can tell me how it makes any sense that YWG is, I'd appreciate that.? I know the history behind why it is, but I think I just heard someone say it makes sense, and now I'm wondering if someone might have moved YWG while I wasn't looking?

[CAT3DUAL]

They will have to find a way to co-exist. Lets face it WJ isn't alot different then AC in that regards. Their worst fears is a leaner more cost effective AC, and it's not because they won't be able to compete with the new AC, they will. The problem is that it will have a negative impact on their quarterly profits which in turn will lower their stock value. And so much of the hype about working at WJ is the stock and the profit sharing.

That is why people like b52er and others are so concerned about all this. Clive is really concerned, eventually he will have a maturing work force that will expect a continuation of strong returns to make up for the less then standard industry wages. He may not be able to deliver on the WJ dream of good profits and stock value

[Guest Airmail]

Stop deluding yourself Mitch. This is NOT about some sort of tacit agreement between Clive and Robert with Clive being the good guy. Clive wants it all!

This guy started out by saying that he was Canada's low fare, short haul airline...until he started long haul in the past year so he's now Canada's low fare airline period...and now he's saying he'll be on the transborder within a year...so exactly what kind of truce are you looking for? WJ in domestic and transborder and AC on the international? How about the domestic and transborder feed when WJ does not interline? How many aircraft will an international-only to Canada market require (remember, no transborder means no U.S. feed to our international either so bye-bye TLV and many others)?

This is free enterprise and business and its about competing by getting our cost structure right not some pathetic, please let's share path to mediocrity.

Finally, if you take a look at the facts, how has AC been going for the kill when it is AC that is the established carrier in every domestic market (except Abbotsford) and WJ simply entered these markets and slashed the heck out of yields? Who really went for the kill? Remember, AC has shrank capacity in each of the past three years while WJ has grown at the rate of 50% per year with plans for 50% annual growth for the next few years. One carrier is shrinking capacity, another is massively growing capacity ergo which of the two is chasing marketshare?

As an AC employee, if you've fallen into the WJ-inspired propaganda about your own company and think that they are somehow just the good guys wanting their fair share, you'd better give your head a shake because that's not the case.

WJ in 1999 was a short haul, domestic carrier.

WJ in 2003 is a domestic carrier.

WJ in 2004/2005 will be a domestic and transborder carrier.

Exactly what do you want Clive and Robert to agree to play like? Do you expect Clive to curtail his plans to go on the transborder just because Robert is already in that sandbox? What happens when Clive decides he wants to go international? Don't forget he's already doing charters to the Caribbean.

Wake up! Defend yourself and remember, the enemy is not your own management, it's WJ!

[Guest M. McRae]

Of course with the evolution of AC and depending on what emerges, the Westjet wages may become the norm in Canada and therefore any wage concerns at Westjet will not be a factor.

[Mitch Cronin]

I evidently hit a nerve there... sorry, I didn't mean it to hurt.

First, I don't consider AC management my enemy! Please stick that in your pipe and smoke it. Just because I don't agree with some of their behaviour does not mean I'm a moronic stooge.

Second, the "game" I'd like to see played out would be one where all competitors understood from the outset that their own long term fortunes would suffer severely if they put the other out of business. Who wins, other than aircraft painters, with the game as it's been played for the last umpteen years? Certainly not Air Canada.

As I told someone else recently, I fix airplanes, I don't run an airline, so I don't have all the answers... but from my perch, like many of us, I've sure been able to get a good look at the mistakes that have been made over the years.

Some people seem to love to say that there's no such thing as brand loyalty in this business, but it would seem that there is such a thing as brand disloyalty. Every time AC has taken another competitor out a number of new reasons to despise us is created. And it sure seems evident to me that the same old garbage that's created the hatred that half the country feels toward AC isn't going to win the day in the future either.

I think our new plan ought to include a revamp of all the crusty old methods!

[Guest Toron1]

The race to the bottom? Air Canada initiated the band wagon by trying to eliminate everyone else and sustained it with Tango and Zip. They didn't have to stay on the band wagon by being all things to all people. Air Canada did/does have an excellent executive class and I think that what is worrying the politians is the fact that they do not like to travel in 'coach' and are losing their perks, which must be giving Collinette a headache.

WestJet got more than Canadians passengers they also got top notch Canadian mechanics right when WestJet was starting up.

later

[Guest Simcoe]

There is much talk of Air Canada emerging with costs as low as Air Canada. That is a laugh. Can you think of any airlines that went Chapter 11 in the US, that even with the far more draconian measures allowed in the US, emerged with costs even remotely close to SWA? Even US Airways managed to drop from 12 cents to 10 cents, and Southwest is 7.5 cents.

AC is starting from a cost base of 17 cents a mile with an average flight length of 1,200 miles. WJA reports it's costs at 1,200 miles are about 9 cents, (with an average of 11.2 cents in Q1 over 630 miles).

To shave a penny of the cost per mile, AC has to cut $600m, (1 cent x 60 billion ASM's per year), off annual expenses of about $10b.

To get down to WJA's costs, try 8 cents, or $4.8 billion a year.

Dream on.

As for first quarter profits for other low fare carriers, look at the margins, not the quantum. SWA's margin was about .8% pts higher than WJA's. AirTran wasn't a lot better. jetBlue did very well, but check out those maintenance costs, well under $100 per hour.

They compete in a market where 40% of domestic traffic is being sold by carriers in bankruptcy protection. Other than upstate NY, where US air is strong, jetblue has little exposure to UAL and US Air.

WJA operates in an environment where AC, with 70% ASM share is in bankruptcy pricing mode, then there's jetsgo and CanJet, who, you can bet the farm, are very, very close behind, (unless you believe that Leblanc has costs below those of SWA, as he defacto claims).

I'm surprised that WJA made anything in 1Q, but imagine how stupid AC must feel for throwing the farm at WJA for six months, bankrupting itself in doing it, (combined with SARS, Iraq, $35 bbl oil etc etc), and WJ STILL makes money.

I'm sure Milton's man of the forum, David Ger,....oops, DAGGER, will respond along company lines.......

http://www.eye.net/eye/issue/issue_07.18.02/news/airport.html

[Guest ECB]

Good post!

The Airmails & Labtecs do Air Canada a disservice with the comical ranting about "you'll get yours" "just wait" and "enjoy the Kraft Dinner". Especially coming from a paralysed money bleeding company towards one making an actual profit.

Their thinking falls into the lack of reality realm not to mention that they feed into the public venom towards AC, as a group that can quite happily throw thousands out of work (so can dish it out but can't take it). Fact is most AC folks had nothing to do with that policy but the public preception tars the whole corp.

With some common sense Air Canada can emerge as a viable airline that does not require the destruction of all competition as a prerequisite for success.

[Guest Virtual]

Heck. If I could find a good mechanic...I'd

follow him anywhere!! (I'm sure you did/would do that, too, for the (future?) mother of your children.)

[E-HANDLE]

Well, then I guess we'll have to wait and see how it all shakes out. But, I'd like to make a few points, if I may.

WJ started under the "market stimulation" model. The idea was to find people who were not flying because of cost, and to a lesser extent, by developing new city pairs that were not recieving non-stop jet service (YLW-YEG, YEG-YQR, YEG-YYJ). I was at WJ from the start, and sure enough, I met large numbers of people who had never been on an airplane, or flew very rarely.

But the market has changed. IMO, the idea behind Tango and Zip was to over-stimulate the markets WJ entered, and dilute yields to the point where WJ could not make profit. That's an expensive way to accomplish the goal of removing a competitors profit. IMO it has a lot to do with the position AC finds itself in today.

Perhaps it's time for WJ to rethink how it competes. I have noticed a larger proportion of business travelers on the flights I operate. If AC did WJ any favour, it was to force business travelers to try no-frills flying in some markets (YYC-YWG for example). WJ has done very little, that I can see, to try and grab up the lions share of business travelers in the markets we serve.

I know, from the general theme of your posts, that you are hoping that I and my co-workers will "get whats coming to you" when AC emerges from CCAA. Perhaps I will (Lord knows I deserve it, I've been very naughty:)).

After nearly 20 years of the airline wars, one thing is for sure. There is never a dull moment.

[dagger]

Really, wake up and smell the coffee. Westjet has orders for dozens and dozens of new jets pending. Canjet and Jetsgo intend to grow. HMY Airlines is flying transcon now. The competition is going to expand not contract. And it is going to be fierce. The notion that cats are going to lie with dogs and everyone is going to make oodles of money by not being overly aggressive is about as realistic as expecting George Bush to invite Jacques Chirac to help run Iraq. It doesn't matter whether Air Canada is in the picture or not.

[Mitch Cronin]

Then I guess now would be a good time to be an aircraft paint supplier.

Geez Dagger, we hear the "old model is broken" but then you tell us it's going to be the same old nonsense. I'd suggest there are a few of you who should look in the mirror as you spout the "you just don't get it" line.

[Guest JakeYYZ]

Mitch,

Business is (most often) a zero some game……unless the Government becomes

involved. Business’s strive to differentiate themselves, but in the end we’re all

after the same consumer. A gentlemen’s agreement not to poach one another’s

business, is not what free enterprise and competition are all about.

I don’t think we’re in CCAA completely by accident. I believe it’s a combination of circumstance (9/11, Iraq, SARS…..) and design. Or Should I say serendipity.

The fact is that we are an old, established company that has evolved pay and benefits over time that are in the top 5 per cent of corporate Canada and our results are in the bottom 1 per cent. To get our costs to where they need to be, would never be accomplished through negotiations.

The stage has been set for AC to re-invent itself with gutted labor contracts and much

of its debt converted. Many union leaders thought their agreements to be protected

under the Canadian version of Chapter 11. The appointment of Winkler to oversee

negotiations is a shocker to the unions and a welcomed development by AC. I wouldn’t

place the blame on Ms. Sach’s. This is exactly the way AC wanted it to play out. (IMHO)

Check…and Mate.

Like or not, I think we’re about to see some huge changes in pay packets. If you’re

part of the group, Kip describes as ‘living from pay cheque to pay cheque’, start making

adjustments now. And after the dust settles, it will start all over again.

[Guest Airmail]

AC doesn't require the destruction of competition to succeed and I've never even made such a suggestion. Beddoe's the one who has said that AC should get out of short haul and soon out of domestic Canada. Is that acceptable?

I just would like to see the competition actually compete without the constant whining about AC.

This is business, not some kids party where every gets to go home with a loot bag.

[Guest Airmail]

Hey Mitch, if you don't think that WJ's growth has impacted your job and they their continued growth won't continue to have an impact on your job then you should consider courses at the CNIB because your blindness if far more advanced than anyone previously considered.

If you think that the market somehow absorbs every bit of capacity that is thrown at it then you should consider the basic theory of supply and demand and what happens in a situation where there is an oversupply.

So WJ keeps growing at 50% per year every year, do you expect AC to shrink in the same proportion? If AC shrank in proportion, how many AME's will it need to run that fleet of one?

If you think Beddoe is some charity case that will stop because he's had enough growth, you're in for a massive surprise. Beddoe's wealth is inextricably linked to WJ's growth which is inextricably linked to AC's contraction. It's as simple as that.

[Guest Airmail]

E-handle: I'm more interested in those WJers who have been so cocksure of themselves getting what they deserve which is unfettered competition from a lean and competitive AC. As for the balance of WJers, I don't wish them an ill will and hope that they continue to get paid to do things they enjoy doing.

[dagger]

When one says the model is broken, it refers to product and pricing, which is dependent on cost. Air Canada's business model is going to have to change, and its costs along with it. That doesn't mean that hard competition won't be profitable for all some of the time, but it doesn't mean a return to some form of regulation, or division of the world, as some imply. It means a different product, different market focus, different way of selling tickets, etc. But so long as most travellers are price-sensitive and see little value in paying double for the same flight just to get a meal, there is obviously going to be overlap, and hence competition.

The hope should be that if the industry is cost-competitive, and airports and governments roll back a bit of fee/tax hit on tickets, that the overall air travel market will grow significantly so that most airlines are profitable most of the time.

[Mitch Cronin]

I understand, and completely sympathise with Clive's predicament. I wish him and his employees well.

Our predicament, however, is going to be worse if we wage a war to destroy competitors, as in the past. That's the simplest way to put that. I'm hoping Air Canada's fate is dependant, not on growth, but stability.