WJ vs. AC......performance
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Re: WJ vs. AC......performance
Virtually all WJ's new capacity is into LGW, and all that capacity is fed by a domestic and international network of about 130 narrow body aircraft. No one has had a domestic Canadian network to feed TATL traffic to compete with AC since Canadian Airlines in the summer of 1999. I'd call that a "game changer".
Unlike other airline long haul expansion, LGW doesn't canibalize ANY of WJ's existing operations. There were very few people who used GLA and DUB as the gateway to London.
How many people per flight flew via SYD to go to BNE last summer? How many flew through FRA to fly to PRA, WAW or BUD last summer? All that connecting traffic that has been diverted from connecting segments to the n/s has to be replaced. Is AC revenue sharing with LH on their n/s's to BUD, FRA and PRG, because they definitely were when that traffic went through FRA. I wonder how LH feels about this, given the reduction in connecting traffic obviously impacts LH's balance sheet too.
The biggest risk to WJ's TATL strategy is very clearly aircraft reliability. I'd be willing to bet there are more than a few people who wish they'd simply bitten the bullet and gone with 787's from the get go.
LGW is already having a marked impact on Canada to UK pricing. One can fly Toronto to LGW r/t tix over the last 10 days of May for well under $600, with LHR about $300 more. A lot of that price sensitive market, who were paying $1,200 or more r/t in the spring of 2015 are more than happy to pay $850 to LHR this spring, or $564 to LGW. Those sorts of prices have been floating around for months now and are a considerable part of the reason why airlines are making noises about "weak TATL market".
Sure, the premium cabin tops up the market, but those fares are down too.
With roughly 2,700 economy seats a day from Canada to LHR, operating at their reported 3Q 2015 TATL l/f of 88% l/f + another 256 seats to LGW, what happens if revenue from May 6 thru Sept 30, (147 days), drops a conservative average of $100 a seat each way?
2,700 x .88 = 2,376 economy seats x $100 a seat x 147 days = $34.9m each way x 2 = roughly $70m of revenue that may disappear on Canada to LHR alone over the spring / summer season. That excludes the revenues that disappear from PY and J discounting and lower revenues from belly cargo.
And because we're still a week away from WJ's launch, we still haven't seen what WJ is going to do to critical "last minute" pricing from Canada to the UK, where the real money is made. Will fares remain around $1,800 for Y walk up, $3,600 for PY and $6,700 for J?
AC generated a respectable 11.72% operating margin in 3Q 2015. To replace the $70m that is fairly easy to identify from Canada to LHR, and presumably contributes heavily to that 11.72% margin, AC will have to generate an additional $602m in revenues over that period at that margin.
That's no easy task, especially given a lot of the new flying is already canibalizing established, presumably profitable flying, (for example, adding BNE to SYD, adding BUD, PRG and WAW to FRA, adding LYS to GVA, adding DUB from YVR that takes traffic from YVR-LHR, adding n/s's to Asia from YYZ that remove traffic from the domestic trans-con and YVR-Asia flights.). Then there's the likes of Hainan's new YYC-PEK n/s that intercepts AC traffic and has caused peak summer fares to drop about $300 r/t from the mid $1,500 range to the mid $1,200 range.
In a business where it takes "pennies to make dollars", seeing those sorts of declines has a tendency to tighten the sphincters of route managers.
All of this adds up to a 2016 late spring / summer TATL environment that might be a little more frustrating for some than previously expected, a scenario that is already being strongly hinted at by a number of US carriers with long established TATL exposure.
Unlike other airline long haul expansion, LGW doesn't canibalize ANY of WJ's existing operations. There were very few people who used GLA and DUB as the gateway to London.
How many people per flight flew via SYD to go to BNE last summer? How many flew through FRA to fly to PRA, WAW or BUD last summer? All that connecting traffic that has been diverted from connecting segments to the n/s has to be replaced. Is AC revenue sharing with LH on their n/s's to BUD, FRA and PRG, because they definitely were when that traffic went through FRA. I wonder how LH feels about this, given the reduction in connecting traffic obviously impacts LH's balance sheet too.
The biggest risk to WJ's TATL strategy is very clearly aircraft reliability. I'd be willing to bet there are more than a few people who wish they'd simply bitten the bullet and gone with 787's from the get go.
LGW is already having a marked impact on Canada to UK pricing. One can fly Toronto to LGW r/t tix over the last 10 days of May for well under $600, with LHR about $300 more. A lot of that price sensitive market, who were paying $1,200 or more r/t in the spring of 2015 are more than happy to pay $850 to LHR this spring, or $564 to LGW. Those sorts of prices have been floating around for months now and are a considerable part of the reason why airlines are making noises about "weak TATL market".
Sure, the premium cabin tops up the market, but those fares are down too.
With roughly 2,700 economy seats a day from Canada to LHR, operating at their reported 3Q 2015 TATL l/f of 88% l/f + another 256 seats to LGW, what happens if revenue from May 6 thru Sept 30, (147 days), drops a conservative average of $100 a seat each way?
2,700 x .88 = 2,376 economy seats x $100 a seat x 147 days = $34.9m each way x 2 = roughly $70m of revenue that may disappear on Canada to LHR alone over the spring / summer season. That excludes the revenues that disappear from PY and J discounting and lower revenues from belly cargo.
And because we're still a week away from WJ's launch, we still haven't seen what WJ is going to do to critical "last minute" pricing from Canada to the UK, where the real money is made. Will fares remain around $1,800 for Y walk up, $3,600 for PY and $6,700 for J?
AC generated a respectable 11.72% operating margin in 3Q 2015. To replace the $70m that is fairly easy to identify from Canada to LHR, and presumably contributes heavily to that 11.72% margin, AC will have to generate an additional $602m in revenues over that period at that margin.
That's no easy task, especially given a lot of the new flying is already canibalizing established, presumably profitable flying, (for example, adding BNE to SYD, adding BUD, PRG and WAW to FRA, adding LYS to GVA, adding DUB from YVR that takes traffic from YVR-LHR, adding n/s's to Asia from YYZ that remove traffic from the domestic trans-con and YVR-Asia flights.). Then there's the likes of Hainan's new YYC-PEK n/s that intercepts AC traffic and has caused peak summer fares to drop about $300 r/t from the mid $1,500 range to the mid $1,200 range.
In a business where it takes "pennies to make dollars", seeing those sorts of declines has a tendency to tighten the sphincters of route managers.
All of this adds up to a 2016 late spring / summer TATL environment that might be a little more frustrating for some than previously expected, a scenario that is already being strongly hinted at by a number of US carriers with long established TATL exposure.
Re: WJ vs. AC......performance
Just bought 2 J (Plus) tickets LGW-YVR, $2200 all in. Better than $3600 per person for J on AC or the 11,000 per person for 1st class.
Re: WJ vs. AC......performance
Does WS have a J seat?
Air Canada premium (W) on the 787 YVR-LHR shows ~$1700 for a random date pair in June... They're doing a full service same as J and the seat is probably comparable to a plus seat.
But IMO the new business class (J) seats on the 787 and soon to be all the 777's are worth every penny at $3600... rode in it last month and it's terrific - private, comfortable, modern, far superior to the old AC J product.
Air Canada premium (W) on the 787 YVR-LHR shows ~$1700 for a random date pair in June... They're doing a full service same as J and the seat is probably comparable to a plus seat.
But IMO the new business class (J) seats on the 787 and soon to be all the 777's are worth every penny at $3600... rode in it last month and it's terrific - private, comfortable, modern, far superior to the old AC J product.
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Re: WJ vs. AC......performance
Its economy plus. Take a ride on any legacy airline's J class and you'll understand the vast difference.privateer wrote:I think it's fair to call it J class.
Re: WJ vs. AC......performance
You would be the only one thinking that. Take a ride in J. You'll see.privateer wrote:I think it's fair to call it J class.
Re: WJ vs. AC......performance
You don't know what you're missing if you are equating this:privateer wrote:I think it's fair to call it J class.
to this:
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Re: WJ vs. AC......performance
I don't think there are many who'd suggest WS Plus is in the same league as AC J. I certainly wouldn't.
However, it also doesn't take many passengers to be diverted from J to a PY product when it is priced at close to 1/3 the price of a J seat, to start to impact TATL revenues.
It often takes at least 4 r/t Y fares to replace the revenue of one J fare.
Business travel has always been the number one discretionary cost for business and it's usually the first budget to be cut when people are assessing the bottom line, which is every Monday morning in this day and age.
You can see where a problem emerges when the aircraft are already operating at an 88% load factor. There simply aren't enough seats left to replace the revenues that have disappeared, unless airlines can figure out how to run 120% l/f's.
This pattern is not unique to London or anywhere else for that matter. It's the same fundamental issue that has occurred in market after market since the day WS launched over 20 years ago.
However, it also doesn't take many passengers to be diverted from J to a PY product when it is priced at close to 1/3 the price of a J seat, to start to impact TATL revenues.
It often takes at least 4 r/t Y fares to replace the revenue of one J fare.
Business travel has always been the number one discretionary cost for business and it's usually the first budget to be cut when people are assessing the bottom line, which is every Monday morning in this day and age.
You can see where a problem emerges when the aircraft are already operating at an 88% load factor. There simply aren't enough seats left to replace the revenues that have disappeared, unless airlines can figure out how to run 120% l/f's.
This pattern is not unique to London or anywhere else for that matter. It's the same fundamental issue that has occurred in market after market since the day WS launched over 20 years ago.
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Re: WJ vs. AC......performance
Its already been stated, you can fly on AC'a Premium on the 787 for $500 less. It's a comparable seat with a full meal service with proper chinaware, not a boxed lunch from the airport foodcourt. If I was a business traveller who couldn't afford J, I know who I'd be flying with.Realitychex wrote:I don't think there are many who'd suggest WS Plus is in the same league as AC J. I certainly wouldn't.
However, it also doesn't take many passengers to be diverted from J to a PY product when it is priced at close to 1/3 the price of a J seat, to start to impact TATL revenues.
It often takes at least 4 r/t Y fares to replace the revenue of one J fare.
Business travel has always been the number one discretionary cost for business and it's usually the first budget to be cut when people are assessing the bottom line, which is every Monday morning in this day and age.
You can see where a problem emerges when the aircraft are already operating at an 88% load factor. There simply aren't enough seats left to replace the revenues that have disappeared, unless airlines can figure out how to run 120% l/f's.
This pattern is not unique to London or anywhere else for that matter. It's the same fundamental issue that has occurred in market after market since the day WS launched over 20 years ago.
Re: WJ vs. AC......performance
Is westjet calling the plus offering J-class? Privateer thought it was fairly stated as J.Realitychex wrote:I don't think there are many who'd suggest WS Plus is in the same league as AC J.
I guess airlines can call their seats what they want... But as you said it's a different league.
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Re: WJ vs. AC......performance
altiplano wrote:Is westjet calling the plus offering J-class? Privateer thought it was fairly stated as J.Realitychex wrote:I don't think there are many who'd suggest WS Plus is in the same league as AC J.
I guess airlines can call their seats what they want... But as you said it's a different league.
http://www.thisismoney.co.uk/money/mark ... backs.html
Re: WJ vs. AC......performance
altiplano wrote:Is westjet calling the plus offering J-class? Privateer thought it was fairly stated as J.Realitychex wrote:I don't think there are many who'd suggest WS Plus is in the same league as AC J.
I guess airlines can call their seats what they want... But as you said it's a different league.
Nobody at WJ is calling Plus a "J" class seat. Comparable to Premium Economy yes but not to first class "J". Privateer is clearly mistaken here.
Re: WJ vs. AC......performance
Maybe it was a stretch to call it J class. But I certainly believe you are getting your money's worth when it cost a 1/3 less than AC. You might want to check the prices PositiveRate27, it was $1100 bucks for Plus one way from LGW vs the $3600 for business class on AC in August. 1st class was $11,300. Last I checked they're putting the white linen and silverware out for the 767 service.
Re: WJ vs. AC......performance
WestJet rated investment grade by Moody's Investors Services.
https://ca.finance.yahoo.com/news/westj ... 00683.html
https://ca.finance.yahoo.com/news/westj ... 00683.html
Re: WJ vs. AC......performance
WestJet profit drops 38% on higher costs, lower revenues, Alberta weakness
http://www.bnn.ca/News/2016/5/3/WestJet ... kness.aspx
http://www.bnn.ca/News/2016/5/3/WestJet ... kness.aspx
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Re: WJ vs. AC......performance
First Quarter 2016 Operating Margin as defined by: (Revenue - (Operating expenses + Interest expense)) / Revenuealtiplano wrote:WestJet profit drops 38% on higher costs, lower revenues, Alberta weakness
http://www.bnn.ca/News/2016/5/3/WestJet ... kness.aspx
For example: R = $100
OE = $80
I = $10
Operating Margin = 10%
Allegiant: 32.7%
Alaska: 20.6%
jetBlue: 19.8%
Southwest: 18.9%
Spirit: 18.2%
Delta: 15.5%
Hawaiian: 14.7%
Average: 12.2%
American: 11.6%
WestJet: 11.5%
Virgin America: 7.7%
United: 6.0%
Skywest: 5.8%
Air Canada: 1.6%
Here's what it looks like had fuel been at 1Q 2015 prices with 2016 fuel burn.
Allegiant 25.1%
Southwest 16.8%
Alaska 14.8%
jetBlue 9.7%
Spirit 8.6%
Delta 7.6%
Industry 7.1%
Hawaiian 6.9%
WestJet 5.3%
American 4.8%
United -1.7%
Virgin America -2.7%
Air Canada -3.9%
Skywest didn't publish fuel unit costs.
Take that margin and multiply it by revenues and you get a general picture of what things would have looked like had fuel cost 65 cents a liter vs 48 cents last quarter at AC: an operating loss of about $130m a quarter vs a profit of $54.5m at WJ.
And then consider what things would have looked like had fuel cost 95 cents a liter as they did in 1Q 2014? Yes, yields would have been better, loads might have been marginally better, but not enough to offset a doubling in fuel prices.
So the question to be considered is: what would likely happen at an airline that incurred losses of $1.44m a day in a quarter? Business as usual? Full speed ahead? Or perhaps a fairly significant change in the plan?
I doubt it. Delta management are considered to be the best in the business these days. Consider the new CEO's recent comments.
“When you have oil prices rising, that takes a thin-margin route to a negative route pretty quickly,” Ed Bastian said in an interview on Bloomberg TV. “You start to ask yourself the question, ‘Is that the right decision, and do you need to be doing it now?”’
Jet-fuel prices have increased 59 percent since hitting a 12-year low on Jan. 20, according to data compiled by Bloomberg.
Doesn't anyone remember this sort of thing?
http://aircanada.mediaroom.com/index.php?s=43&item=101
Patience is a virtue and WJ is nothing but patient. That's the joy of not running an airplane who's profitability balances on the head of a pin.
Re: WJ vs. AC......performance
WestJet’s revenue per available seat mile (RASM), an indicator of an airline’s efficiency calculated by dividing operating income by available seat miles, fell 11 per cent to 14.14 cents.
The company’s net earnings fell to $87.6-million, or 71 cents per share, in the first quarter ended March 31, from $140.7-million, or $1.09 per share, a year earlier.
Revenue fell 4.8 per cent to $1.03-billion.
Up to Monday’s close, WestJet’s stock had fallen 22 per cent in the past 12 months.
With the start up of LGW, there will be additional downward pressure on RASM and a corresponding increase in CASM with the introduction of a new fleet type.
The company’s net earnings fell to $87.6-million, or 71 cents per share, in the first quarter ended March 31, from $140.7-million, or $1.09 per share, a year earlier.
Revenue fell 4.8 per cent to $1.03-billion.
Up to Monday’s close, WestJet’s stock had fallen 22 per cent in the past 12 months.
With the start up of LGW, there will be additional downward pressure on RASM and a corresponding increase in CASM with the introduction of a new fleet type.
Re: WJ vs. AC......performance
It's all about the spin. $88 million bucks and 2nd highest first quarter earnings ever. Sounds solid to me. Btw rumors around the investment community about Delta looking at a minority stake in WJ.
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Re: WJ vs. AC......performance
Huh?yycflyguy wrote:WestJet’s revenue per available seat mile (RASM), an indicator of an airline’s efficiency calculated by dividing operating income by available seat miles, fell 11 per cent to 14.14 cents.
The company’s net earnings fell to $87.6-million, or 71 cents per share, in the first quarter ended March 31, from $140.7-million, or $1.09 per share, a year earlier.
Revenue fell 4.8 per cent to $1.03-billion.
Up to Monday’s close, WestJet’s stock had fallen 22 per cent in the past 12 months.
With the start up of LGW, there will be additional downward pressure on RASM and a corresponding increase in CASM with the introduction of a new fleet type.
The 767 fleet is already in place and operating, to a greater or lesser degree. Tail 4 passed its flight test earlier this week. The 767 costs, including the Omni ACMI costs into early January, were incorporated in the 1Q numbers.
Did anyone notice the widening cost gap between WJ and AC in 1Q? Including interest expense, AC's costs were 16.59 cents on an asl of 1,505 miles, WJ's were 12.52 cents on an ASL of 938 miles. The gap was 29.7% last year and grew to 32.5% this year. Adjust for stage length, (ie, what are WJ's unit costs on an average 1,505 mile sector, roughly YYC-YYZ), and the cost gap further widens. I'd say it's probably not far off where it was when WJ launched in 1996.
WJ's ASL will increase this summer from the 938 miles it reported in Q1.
The longest flight operated thus far on the 767's, (YEG-HNL) is 300 miles shorter than the shortest flight the 767's will operate starting Friday, (YYZ-LGW - 3,576 miles). When stage length increases, casm, (ex fuel), will decrease.
If fuel holds steady, and that's unlikely, WJ's casm would be expected to drop.
The 767's will have the lowest casm in the fleet and the lowest rasm, the Q400's the highest casm and rasm.
If we're back to debating the impact of ASL on unit costs, may I suggest we also rekindle the debate as to whether or not the earth is round?
As for Delta's thoughts, it's at 14:00 of this video: http://www.bloomberg.com/news/articles/ ... ng-for-now
You can hear him start saying "joint venture", but he cuts himself short.
Stay tuned on that.
Re: WJ vs. AC......performance
If 2015 fuel prices were today... made up statistics... blah blah...
Grasping at straws... the trend is what it is - year over year improvements at one vs year over year declines at the other... I expect it will continue in those directions through the balance of this year and we will see the gap narrow.
Grasping at straws... the trend is what it is - year over year improvements at one vs year over year declines at the other... I expect it will continue in those directions through the balance of this year and we will see the gap narrow.