Guest Jiminy Posted November 17, 2004 Share Posted November 17, 2004 Air Canada ready to mix it up, Milton says Key is 'to beat the low-cost carriers at their own game' Peter Brieger Financial Post November 16, 2004 Air Canada is ready to inflict the same kind of damage on low-cost rivals that discount carriers laid on the so-called legacy airlines, says Air Canada's chief executive. Competing with WestJet Airlines Ltd. and Jetsgo can be achieved with a simpler pricing model and flying smaller aircraft, a strategy the newly restructured airline must lean on to survive, Robert Milton told industry executives yesterday during a speech in Toronto. "Simply put, we have to beat the low-cost carriers at their own game," he said. "Air Canada will do to the low-cost carriers what they have done to legacy carriers." Mr. Milton's tough talk comes less than a week after Air Canada reported an operating profit of $243-million in the third quarter, the last period during which the airline was sheltered under bankruptcy protection. Those earnings compare with a $17-million operating profit in the same three months one year earlier. Including restructuring charges, Air Canada reported an $81-million third-quarter loss. Investors pushed Air Canada shares up 5.3% to close at $27.85 on the Toronto Stock Exchange yesterday, their highest level since the company emerged from creditor protection on Sept. 30 with new stock listed under the name ACE Aviation Holdings Inc. Despite the improved results and a 12% increase in operating revenue, high oil prices slapped almost $120-million on to the carrier's costs during the quarter. "We are pleased with everything we see, with the obvious exception of fuel," Mr. Milton told analysts during a conference call before he spoke at the Accenture Speakers Forum. "Fuel remains a concern." Mr. Milton also said Air Canada is hearing proposals from banks concerning the future of its Aeroplan loyalty points program, though there are no plans at the moment to sell it or take it public. The restructured airline is shopping for six large jets to take advantage of the "extremely strong profitability" in its international business to Asia and Latin America, Mr. Milton said. Now that the airline has chopped operating costs and labour expenses, it must "do something bold with this cost structure," Mr. Milton said. "We have to apply it to the marketplace in a way that makes money." One strategy is to sell more tickets over the Internet, a cheaper way to reach customers that now accounts for more than 60% of Air Canada's domestic flight sales, he said. Making it easier for passengers to buy the cheapest fare and pay more if they want "premiums" such as priority seating or Aeroplan points is another strategy for luring more traffic, he added. "We are no longer in the business of preventing customers from buying down," he said. "We are in the business of incenting customers to buy up. "This is a big gamble, and Air Canada has become a test bed for others in the North American industry." But he warned that a lower cost structure and new business model will only fly if the federal government loosens regulations on the airline industry, an idea pitched last month by Jean Lapierre, the Transport Minister. Those changes could include lifting foreign ownership limits on Canadian airlines and giving U.S. carriers more access to the Canadian market. Mr. Milton cheered the idea -- as long as Canadian airlines are given the same access to the U.S. market. "There can be no basis on which this is not done on a fully reciprocal basis," he said. "It must be reciprocal or it's totally illogical and will defeat the Canadian industry." © National Post 2004 Link to comment Share on other sites More sharing options...
Spinnaker Posted November 18, 2004 Share Posted November 18, 2004 Well Zip didn't work, nor did Tango, I guess we'll see how this goes. Link to comment Share on other sites More sharing options...
Fido Posted November 18, 2004 Share Posted November 18, 2004 Well Zip didn't work, nor did Tango, I guess we'll see how this goes. What makes you think that??? Tango and then Zip were the pre-cursors to what the mainline has changed into. Link to comment Share on other sites More sharing options...
Seeker Posted November 18, 2004 Share Posted November 18, 2004 Well Zip didn't work, nor did Tango, I guess we'll see how this goes. Zip did work according to Hill! Tango worked too...just evolved into a fare structure rather than individual aircraft. Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 Well Zip didn't work, nor did Tango, I guess we'll see how this goes. I don't believe that Milton's remark suggests the creation of an all-economy product. I presume he means AC now can compete with its existing products in a much more aggressive way. Link to comment Share on other sites More sharing options...
Guest Zebigboss Posted November 18, 2004 Share Posted November 18, 2004 Zip and Tango were in fact experiments in order to test the feasability of venturing into the lowcost market. Each had a purpose, and valuable knowledge was gathered for the duration of their existence. In that respect both Zip and Tango were great successes! Link to comment Share on other sites More sharing options...
AME Posted November 18, 2004 Share Posted November 18, 2004 Well Zip didn't work, nor did Tango I would argue they worked extremely well, Zip succeeded in reducing mainline costs to a level that made it's existence redundant, and Tango was successful in so far as there are now Tango fares on most AC flights and people actually search them out. Having said that, they were successful in that they gave AC a platform, with which it could compete in the domestic market until it could restructure. It's all in how you look at it Link to comment Share on other sites More sharing options...
Spinnaker Posted November 18, 2004 Share Posted November 18, 2004 How ever you all want to spin it. I guess it wasn't THAT expensive when it was all just wiped clean at the expense of others getting fleeced via CCAA. Link to comment Share on other sites More sharing options...
Seeker Posted November 18, 2004 Share Posted November 18, 2004 How ever you all want to spin it. I guess it wasn't THAT expensive when it was all just wiped clean at the expense of others getting fleeced via CCAA. Who got fleeced, you? Link to comment Share on other sites More sharing options...
Spinnaker Posted November 18, 2004 Share Posted November 18, 2004 Who got fleeced, you? Of course Milton's will say Zip was a success, what's he going to say... 'whoops! it failed'? My opinion of Zip, and Tango, just another thing that walked AC in to CCAA trying to kill LCC's. Sounds like the RJ's are AC's latest ploy, we'll see how this idea works... it's only money. Link to comment Share on other sites More sharing options...
Ex 9A Guy Posted November 18, 2004 Share Posted November 18, 2004 Good to see the business plan hasn't changed despite a trip into CCAA. Before CCAA it was kill the competition at all costs using international revenues to prop up the domestic operation seems it is the same now. The more things change the more they stay the same. Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 Good to see the business plan hasn't changed despite a trip into CCAA. Before CCAA it was kill the competition at all costs using international revenues to prop up the domestic operation seems it is the same now. The more things change the more they stay the same. So in other words, if there is something profitable out there, the only reason AC goes after it is to make enough money to kill off a competitor? Even by the standard of some of the stupidity I read here, your comment is a barn-burner. Air Canada has to make money. If in making money it is an aggressive competitor, so be it. Westjet should be the last entity to complain about competition. It never held back from Day 1. It never apologized for contributing to Canadian's demise, or from targetting Jetsgo by moving to YYZ. Now, it must gall you that AC survived, and there isn't a lot of low hanging fruit around to sustain a $30 stock price for WJ, and that your profit sharing cheques may not grow as much as you had hoped. All I can tell you is that these kinds of things happen in life. The good times don't necessarily last forever. Link to comment Share on other sites More sharing options...
wizard Posted November 18, 2004 Share Posted November 18, 2004 What goes around comes around. when Jetsgo and Jazz start hiting the west there will be no profits for Westjet because the F100's and RJ's will hit westjet in the west just like 8 years ago when the 737-200's from westjet started hiting CP and AC. Link to comment Share on other sites More sharing options...
Flightlevels Posted November 18, 2004 Share Posted November 18, 2004 so you are saying they will make a profit...then in the east AC/canjet/jetsgo and WJ will all be fighting...who has the lowest cost again? sustainability will win. something will give and the rest will be bruised. don't think that WJ will only feel the pain. Do you always talk and then think later Wizard?...lol Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 so you are saying they will make a profit...then in the east AC/canjet/jetsgo and WJ will all be fighting...who has the lowest cost again? sustainability will win. something will give and the rest will be bruised. don't think that WJ will only feel the pain. Do you always talk and then think later Wizard?...lol I assume Jetsgo has the lowest costs, and AC has the highest yields. So who is going to give and where are you going to fly all of those new aircraft? YYZ-LAX? Link to comment Share on other sites More sharing options...
newgirl Posted November 18, 2004 Share Posted November 18, 2004 This summer we operated a Zip 737 daily nonstop YQR- YVR at 0930 with a return departing Yvr at 1430 or so. By the time it was discontinued late Aug. after a two month run , its loads were averageing 75-85% full. No advertising was done , it was strictly thru sales on the Web . If given another month , we would have been running at 98% as this flight connects to all Asian flts. It also took the heat off the service to YYC as it freed up many seats of those connecting on to YVR. Using Tango fares and a A319 once a day for the winter skd , this could be a money maker for us. Unfortunately the Schedulers in the Ivory Tower overlook these opportunities and thats when WJ etc take a lead. Pity they just don't have the sense to ask the base what type of schedule we can support!!!! I suggested it to Giguere when he made a visit but he just replied "No , we've nerver thought of that" Enough said as its not like we haven't tried to tell them what the public wants for service! Link to comment Share on other sites More sharing options...
flybye Posted November 18, 2004 Share Posted November 18, 2004 Westjet should be the last entity to complain about competition. It never held back from Day 1. It never apologized for contributing to Canadian's demise, or from targetting Jetsgo by moving to YYZ. Dagger, you won't hear WJ complain about AC and JG as competitors, according to the Air Traveller Complaints Commision, it's the general public, THE CUSTOMER, who complains, but that tends to escape you and the people running these establishments! Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 Dagger, you won't hear WJ complain about AC and JG as competitors, according to the Air Traveller Complaints Commision, it's the general public, THE CUSTOMER, who complains, but that tends to escape you and the people running these establishments! Yes, it's the lack of complaints that explains why of the three airlines you mention WJ has the lowest load factor Link to comment Share on other sites More sharing options...
beaverboy Posted November 18, 2004 Share Posted November 18, 2004 Yes, it's the lack of complaints that explains why of the three airlines you mention WJ has the lowest load factor You must be right, I am sure JG would not lie about their load factor. Did anyone ever tell you never to ass/u/me, as it makes an A$$ of you and me? Keep up the good work. Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 You must be right, I am sure JG would not lie about their load factor. Did anyone ever tell you never to ass/u/me, as it makes an A$$ of you and me? Keep up the good work. But you assume Clive always tell you the full and unvarnished truth... Never ass/u/me Link to comment Share on other sites More sharing options...
flybye Posted November 18, 2004 Share Posted November 18, 2004 But you assume Clive always tell you the full and unvarnished truth... Never ass/u/me Just as I never ass/u/me anything you, or your "sources", say are true either. Link to comment Share on other sites More sharing options...
beaverboy Posted November 18, 2004 Share Posted November 18, 2004 But you assume Clive always tell you the full and unvarnished truth... Never ass/u/me All I am saying is that for the 8 and 1/2 years, upper management has not let us down. They tell us the way it is, good or bad. Maybe that is why moral is still so high. Link to comment Share on other sites More sharing options...
dagger Posted November 18, 2004 Share Posted November 18, 2004 Just as I never ass/u/me anything you, or your "sources", say are true either. But I don't ask you to believe me, do I. And I don't give a rat's heinie whether you do. Link to comment Share on other sites More sharing options...
Flightlevels Posted November 18, 2004 Share Posted November 18, 2004 Dagger, why would u even care where the a/c fly...after all u do work for the other guys. I guess when the huls start arriving we will see. Based on yr over yr growth keeping the planes as full as they are means nothing to you. I think WJ may have to slow down..rejig the market and keep with the roots and low fares and all along scrape a few more pax away from the beloved AC. After all isn't that what has been happening all along. Leases are coming due on SG,low moral,divided pilot group and unions.AC is raising the bar on them too along with canjet. WJ is attractive for alot of capital and it will better be debated in a yr when the rj shows up. After all Canadian Regional bet on the fokker tooo...did it work? Link to comment Share on other sites More sharing options...
FA@AC Posted November 18, 2004 Share Posted November 18, 2004 I think WJ may have to slow down..rejig the market and keep with the roots and low fares and all along scrape a few more pax away from the beloved AC. After all isn't that what has been happening all along. Not if load factors are an indication. Link to comment Share on other sites More sharing options...
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