AC Seat Sale

[Guest]

Mitch,

West Jet is quite specific in who they wish to hire, I have applied a number of times, I went to a supervisor in YYZ and was informed that even though I have had an AME for numerous years and have many years of experience on the heavey metal, if I do not have a 737, I am S.O.L, there are a number of AME's out there with the 37 who will be hired before anyone with out one.So for any one who thinks that there is an abundance of opportunity currently available, you may wish to re-evaluate your thought process

[Guest M. McRae]

Department stores run a loss leader and there is no reason why airlines can not do the same. I guess the real question that none of us will ever find out the answer to is .... "what percentage of each flight is set aside to be sold at the lost-leader price"? I suspect the marketing groups at Jetsgo, Westjet, Ac etc. are fine tuning that inventroy on a daily basis.

As long as the mix results in a profit, I am not sure why anyone should feel uncomfortable. IMO as someone used to say.

[Guest M. McRae]

Department stores run a loss leader and there is no reason why airlines can not do the same. I guess the real question that none of us will ever find out the answer to is .... "what percentage of each flight is set aside to be sold at the lost-leader price"? I suspect the marketing groups at Jetsgo, Westjet, Ac etc. are fine tuning that inventory on a daily basis.

As long as the mix results in a profit, I am not sure why anyone should feel uncomfortable. IMO as someone used to say.

[dagger]

To busy to respond to all of your historical assertions, but as to the future, what's to stop AC yadda, yadda, perhaps you haven't noticed that Westjet will soon be a 50-jet airline and that Jetsgo must be coming up to 10 or so aircraft, plus Canjet is slightly smaller. Collectively, they represent more capacity in the domestic market than Canadian Airlines had on its mainline system in the mid-1990s.

It is an illusion to talk about dominance by AC in the domestic market. There now are two forces of relatively formidable size: AC and the discounters. The market has achieved a sort of balance and is now largely self-regulating.

[dagger]

It's not loss leader as in make them aware of Air Canada. It's just that if people are looking for the very cheapest fare, you have to have something to offer that's pretty close or they go elsewhere, immediately. As a popular flight fills up at Westjet, the fare goes up. Same now with AC adopting the same discount strategy. Ultimately, if AC and WJ are flying head to head on a route, and both flights fill up to say 75%, all tickets subsequently sold will be at much higher prices. So to focus on what you call the loss leader rather than the total yield results in a misunderstanding of the revenue pull of that flight, which can include business class revs as well. Taking out the lowest prices is more likely to result in a loss of passengers, although those that do buy will tend to produce a higher average fare for that flight. The question is whether that higher average results in higher overall revenues for that flight.

[Mitch Cronin]

Sure, but department stores do it to get people into the store, where they can spend more on other things... That wouldn't seem likely to me in this business, unless they plan on making a profit selling food?

I think it might make sense for an upstart airline, or even if we had a new product... but here at AC??? I reckon all it does is pull a few people away from the competitor. And then only for the duration of that sale. So what's accomplished? Seats are sold below cost, so money is lost. Is anyone who came for this "loss leader" going to spend any more money at AC just because of it? I'm no MBA, but I doubt it.

[GTFA]

Does anyone think we're doing this backwards???

What about the mosel where the advanced bookings are at a fixed price and the closer to flight day, the lower the price. The last few seats to be filled up by walk-up pax are immpossibly cheap. But, by waiting you run the risk of not getting a seat. Would this not put a more positive pressure on seat prices? Would'nt this allow the airlines to explore more realistically what the market will bare?

GTFA

[Mitch Cronin]

Ok, I can see that... If it's filling the seats that would otherwise go empty, hell, why not... Half of cost is better than none of cost... But is that what these seat sales do? Or does it depend on the wizardry at work in the merketing dept. to make it all timed right. ... or the rate the "seat sales" are scooped up and for which flights? In other words, if it's a matter of dumb luck sometimes making it worth doing, but generally not, would our marketers know enough to quit?

I think there might be more interest in taking people out of other carriers seats, regardless of immediate cost.

Someone at AC, certainly in the past, has decided that's a strategy worth persuing... If that's still going on, and I have no reason to believe it isn't, then I remain annoyed. ...

The burn-the-competitor approach to building aviation empires has been proven to be flawed in Canada. Not one single entity has survived it (without going into bankruptcy protection) and I know of no one who profited from it. Yet it doesn't seem as though that point is recognized here somedays.

[tsgas]

AC more than any other airline in Canada needs to mend fences with the travelling public.AC has become the carrier that the press and the public love to hate.

By stimulating the demand in air travel,AC has a chance to improving their tarnished reputation.

Just keep being negative ,its sure to bring positive results,not.

[Mitch Cronin]

That's a good point. ... all but your last sentence anyway.

I tell it like I see it. If I see it wrong, tell me. I'll listen.

[Guest neo]

On this issue you don't sound at all willing to be convinced.

I find Malcolm's and others' comments to be very reasonable. Selling a number of seats at or below cost makes emminent sense.

- unlike department stores, the main product we sell has no shelf life.

- people spend money on auxilliary items we sell.

- the public needs to see that we are competing with our adversaries, and our adversaries aren't shy about offering low prices.

- if a customer comes to us who would not have flown with us other than at the low fare, we have an opportunity to satisfy them and attract them to fly again, perhaps at a good yield for us.

- if a group or a family were travelling, we might sell them a couple of tickets at low cost and break-even or better on the rest.

There must be many more, and perhaps better reasons why airlines sell some seats in this manner. But if you have expertise in yield management to go along with your AME's license, why not take your ideas to the appropriate managers and present your case? Or if not, why not let them do the job the best way they know how? They're the people with the deep databases, the knowledge of how to use them, the experience and the marketing tools.

As far as I know, there's no one here from Yield Management telling us how to fix and fly airplanes. They seem to trust that we know how to do our jobs properly and leave us to it. I'm certainly willing to grant them the same respect.

Best wishes,

neo

[Mitch Cronin]

Neo, you make some good arguments, but this is not one of them:

"But if you have expertise in yield management to go along with your AME's license, why not take your ideas to the appropriate managers and present your case? Or if not, why not let them do the job the best way they know how? They're the people with the deep databases, the knowledge of how to use them, the experience and the marketing tools."

First, that's not called for... Second.. Haven't we already seen that their expertise is somewhat suspect? A one time 80% market share that went where?

It's change that needs to be seen... If we have a chance to gain a passenger's respect, shouldn't we show them a a changed product? A product worth respecting? That means things like on time performance, no useless, unexplained waiting for marshallers, lost bags, miserable CSA's, ...happy people showing pride in their uniforms and their jobs...etc.

I've admitted I'm not a marketing wiz, and perhaps these seat sales do in fact provide a little revenue for what would have been lost ...for some flights. So do you suggest I trust that to be the case, regardless of how much change I haven't yet seen, and don't question it? ... and further, I shouldn't comment on my doubts and my thoughts of what changes are needed, because my AME licence doesn't cover that?

[dagger]

I think, as well, that you have to consider that what was a loss leader or money losing fare with the former cost structure may lose less or make a bit of money with a lower cost structure. Only time will tell. However, I can say that AC's fare structure on the Internet - with those Internet only fares - is a lot more competitive today, from the cheapest no-frills offer in economy to J-class. If/when they put these fares in transborder markets as well, I think they will really win some fans.

[Guest FRO]

Very well put Arctic Ice. After working for a couple of Airlines in the South Pacific for a few years, and you see an aircraft come back from heavy from an offshore company you can see why it is cheaper to get it done there. They do the minimum amount of work required to get it out the door on time and make a profit. We ended up most times redoing certain tasks and in some instances having to do tasks that were obviously not done at all on the heavy.

People on the street don't realise how much preventative and scheduled maint is required on these aircraft to keep them flying safely. Compare them to a bus which is running 8 to 15 hrs a day, if it breaks down you can stop and fix it, try that in flight, yes there are backup systems designed into an a/c but that is no excuse for substandard work.

My two cents worth, i could carry on but whats the use.

PS...obviously not all offshore o/haul outfits are bad, there are many doing a great job but there are many that don't.

FRO

[dagger]

Mitch, get out of the seat sale mentality. Many, many people are now going on discounts which don't carry the restrictions of advertised seat sales. Advertised seat sales tend to focus on return air fares with minimum Saturday stayovers (one week minimum for intercon). More and more, people are using the discount type of fare like Tango, which has no minimum stay requirement. AC couldn't offer those in any profitable yield management concept under the old cost structure and not lose money.

Go look at aircanada.ca and check out domestic routes. Tango rates, and the Fun category which is simply Tango-plus, meaning you pay more when the base Tango fare is sold out but there are no major additional benefits, are available to almost any domestic point. These are evry day every flight fares, and they have been calculated on the basis of creating a profitable average revenue per flight if the flight sells well enough. Only time will tell if this works but Air Canada, out of necessity, has moved beyond "seat sales" in the domestic market to a modified form of the discount strategy used by its competitors.

[Guest neo]

Why isn't it called for, Mitch? You have vocally and publicly challenged the wisdom of what our marketing and yield people are doing. What's unreasonable about suggesting you take your ideas on how it should be done to the people who can make the necessary changes, according to you? Or, by implication, that if your expertise is in fixing aircraft rather than selling its seats, that you should let the marketing people do their job the best way they know how?

If, as you say, change is required in how the marketing people do their job in this respect, the only thing they can do is: stop offering seat sales. Will that be the suggestion you take to them?

As for the other changes to our product that you recommend: on-time performance, no waiting for marshallers, no lost bags, miserable CSA's... what do these have to do with seat sales? These are things that every Air Canada employee can and should contribute to, regardless of how the yield gurus apportion the seats in our aircraft.

And exactly how are our people supposed to show happiness and pride in our products and jobs if their fellow employees, especially those of us who don't understand the job they do, publicly criticize their efforts?

And yes, unless you think that the marketing and yield management people are largely responsible for Air Canada's current situation, I recommend that you trust their judgment when it comes to pricing seats.

[Mitch Cronin]

Neo,

Like the rest of us on this forum, I've asked questions, made some assumptions and posted my opinions on some of those assumptions and some of what I know.

I guess somewhere I crossed a line, in your mind. Sorry.

...for one more opinion... I suspect our "marketing and yield management people" have had their hands as tied as many others, so no, I don't blame them.

[dagger]

Who in their right mind would book in advance? Airlines would have no certainty, and no way of predicting who would show up. If the weather was a little off, there would be empty planes flying around. At least when you lock in at a low price, non-refundable to boot, the airline knows it can count on a certain base revenue. Think of Sept 11 or SARS. How much worse would those crises have been had a lot of travellers not been locked into tickets. Sure they were allowed to reschedule flights without penalty, but their money was still tied up at the airline, so the vast majority went ahead with their trips.

With most perishable items there is perceived loss of quality the closer you get to the quality expiry date. When fresh meat is no longer fresh and starting to look a bit brown on the shelves, it is discounted. But being able to book a flight closer to the departure date is a perceived benefit. If we lived in a world where airline passenger capacity and demand were perfectly matched, then such a concept of rewarding the latecomer might be somewhat more practical, but that is Utopian. Such a balance can never occur.

[Guest M. McRae]

I suspect Mitch that reduction of the 80% market share enjoyed by AC was a direct reflection of the public's desire to seek out and purchase travel on a carrier with lower fares. The move by AC to offer some of their product at a lower fare could then be viewed as a good decision by those Marketing Types. Imagine what AC's market share would be if they did not attempt to cater to growing percentage of the public who want cheap seats from A to B and don't really care about the frills!

[Guest neo]

We're all just posting our opinions, Mitch. Feel free to disregard mine completely, if you wish. You'll certainly be in good company if you do.

You crossed no line of mine, so you owe me no apology whatsoever, but thanks for offering one.

neo

[IFG]

Yeah, Dagger - I'd noticed that WJ is growing, and I guess I'd agree that any domestic dominance by AC may be diminished right now, but that means little if it's temporary, resulting as it may from its weakened financial state - it has recently lacked financial artillery. Your comment also only addresses the mainline domestic passenger arena. All the same, for all those here who don't work for AC, I'd also like to hope that it's now self-regulating, given the lack of real recourse against unfair practices in this country, but time will tell when we see what AC does after shedding many of the obligations that did restrain it over the last 3 years.

Re: "historical assertions"? Do you mean my reference to share-holders' transfer of wealth out of AC thru' the issuer bid in late '99, in response to your "Have you ever heard ..."? Didn't think I 'asserted' anything ...

Cheers, IFG

[dagger]

Now you just sound paranoid. Could the German empire rise again? Could bell bottoms make a comeback?

Sure Air Canada may become financially healthy, but since deregulation it has never had a large very profitable competitor with lower costs to contend with and now it does. How exactly is Air Canada going to regain this dominence? I suppose westjet could make a major error in how it prices its product, but more than likely it won't. Moreover, if AC does have more resources, they would be best spent internationally where there remains a great deal of potential.

So you can continue to walk past graveyards whistling, but I don't really think the ghost of 80% market share is going to leap out and bite you on the ass.

[Guest lupin]

Air canada's domestic market share is slowly going down,but we need not worry.Dagger tells us there is lots of oppertunity in the international market.

While I'm shure he is right on that point,I wonder what kind of business plan Air Canada has to make shure they dont lose international marketshare as well.How long do we have to wait until a serious discount competitor appears on the international scene in canada??And will AC be in a good position to compete?

Lupin

[IFG]

Oh well ... paranoid ... German Empire ... bell bottoms ... whistling past graveyards ... ghosts and bitten asses ...

I actually respect your postings, altho' that's clearly not reciprocated. Thanks for the rational, tho' not compelling 2nd paragraph, but the rest of your crap has drowned any inclination to reply, probably fine with you - so, please excuse my errantry.

IFG :S

[dagger]

The charter carriers have been offering price sensitive customers a good product in major markets for years.

But discount operators don't like international markets because they need domestic feed, they need route rights which may be rationned by foreign governments, fares are not fully deregulated - the Japanese, for example - keep a tight clamp on pricing - and if you are a scheduled operator as opposed to a charter, you may have to be in the market 12 months a year to retain credibility, corporate customers, etc.

It's not as easy as it sounds.