New Air Canada LCC- Vancouver Based

[Panama Jack]

Sounds Interesting:

Air Canada's New Cheapie Airline May Fly From Vancouver Next Year

[moocow]

So paid for meals and lav? Rent iPad instead of full blown IFE? No free check-in bags?

[Expat]

They want to start their own competition, in one of their lucrative markets?

[Beefitarian]

Paid lav? The people of Walmart buying those tickets are just going to whizz in the garbage chute of the galley.

[bmc]

They want to start their own competition, in one of their lucrative markets?

My guess is it is one of two scenarios:

1. There's a bit of yield dilution going on in the market these days with so much lift and competition, that their current cost structure doesn't make it profitable to continue operating.

2. They realize that there could grow the market if they dropped the fare to a certain price point. The current operation could remain in tact appealing to the current market, and the low costs actually growing the market, which is a feature of the low cost model.

[skymarc]

Paid lav? The people of Walmart buying those tickets are just going to whizz in the garbage chute of the galley.

[Panama Jack]

Good observations, bmc. A significant question will be whether it will actually happen and how will it be structured. Obstacles towards creating a truly Low-Cost structure are the existing Air Canada unions and the sway they have, which are some reasons on why Tango and Zip didn't pan out in the end.

[vortac]

I think they have learned more than a few lessons since then.

The last time was a dumb knee-jerk panic marketing department reaction, a.k.a. neon paint investment against Westjet.

[Panama Jack]

Looks that way, vortac. Also, after Googling some articles on this topic, it seems that it won't be an A320-modeled domestic/trans-border operation, but rather a franchising agreement with a foreign carrier for Canada-Asia traffic.

Rightly or wrongly, it seems that management's approach this time around will be that if they can't work with the unions, then they will work their way around them.

[bmc]

Here are two stories on the wire today about the growth of low cost in Asia:

CHINESE LCC INTERNATIONAL EXPANSION GATHERS PACE AS JUNEYAO AND SPRING AIRLINES OPEN NEW ROUTESCenterforaviation.com, 26 June 2012

Asia Pacific: The nascent international LCC footprint of Chinese low-cost carriers will grow as Juneyao Airlines in Aug-2012 opens routes to Japan, becoming the second Chinese LCC to have services beyond China. The first was Spring Airlines with services to the Tokyo area, and Spring intends to open new Japanese cities but first will reportedly bring new countries – South Korea and Thailand – to its route map.

Both carriers are based at Shanghai, are privately owned and are preparing for IPOs. Their operation alongside the three big state-owned carriers does not enjoy a transparent framework, and as the state-owned carriers use the short-term future to bolster domestic performance, Juneyao and Spring may find more favourable support for international services, which in turn balance the international LCCs that serve China. Juneyao's international network is in its early days, but so far it appears to be targeting more leisure destinations whereas Spring is pursuing service to populous cities.

Juneyao to enter Japan's Okinawa, its first non-Chinese route

While Juneyao Airlines technically has international services via flights to Hong Kong, its first regularly scheduled international service outside of greater China will be to Okinawa, Japan's semi-tropical leisure centre. It plans to launch four weekly services in Aug-2012 from its base at Shanghai.

Between Shanghai and Okinawa, China Eastern now offers 12 weekly flights during the peak season. Juneyao's schedule has not been finalised, but assuming it operates its A320s to Okinawa (the carrier also has two A319s), Juneyao will offer 632 weekly one-way seats, trending below the capacity provided by China Eastern. Juneyao's launch will come at the tail end of the summer high season.

And this one:

SINGAPORE AIRLINES CLINGS TO LUXURY AS BUDGET CARRIERS THRIVEReuters, 26 June 2012

Tony Fernandes, the flamboyant chief executive of budget airline AirAsia, joked last month that he could buy Singapore Airlines and even displayed an artist's impression of his competitor's plane painted in AirAsia colours.

It was a tongue-in-cheek jab, but one that struck at a painful truth for Singapore Airlines. The company has stuck to its luxury image even as low-cost carriers picked off passengers in a weak global economy, and profits have suffered.

The airline reported an unexpected loss in the January-March quarter, it’s first since the tail end of the global financial crisis in 2009 which crushed global air travel. Its shares are down 29 percent in the past 12 months, while AirAsia's are up 10 percent.

While AirAsia pecks away at the low end, Dubai's flagship carrier Emirates is challenging Singapore for the title of top luxury carrier. Emirates does not have publicly traded shares, but its operating margins over the past six years have outpaced Singapore's, 8.6 percent to 6.5 percent.

That poses a dilemma for Singapore Airlines Chief Executive Goh Choon Phong: stick with luxury to protect a prestigious brand or pare back on the perks to prop up profits.

Goh "assumed the mantle at a time when the industry is making a paradigm shift from the extravagance of the past to the economic realities of today," said Shukor Yusof, a Singapore-based aviation analyst for Standard & Poor's.

"The strategy or model that SIA has long held needs to be redefined, but to what?" Yusof said.

Goh's approach has been somewhat of a hedge. The company launched long-haul budget carrier Scoot this year, and is expanding the capacity of its regional carrier SilkAir by more than a fifth by early next year.

The hope is that this will insulate profits from a decline in long-haul business travel as Europe slides into a recession and the U.S. economy struggles to gain momentum.

But the strategy depends on premium trans-ocean travel bouncing back. Although international passenger traffic has increased so far in 2012, growth in economy class far outpaced premium traffic in April, the most recent month for which data is available.

If that pattern persists, SIA would be hit hard because of its focus on first- and business-class customers. It is the only major airline to operate all business-class flights - including a 19-hour, nonstop service connecting New York and Singapore, the longest scheduled route in the world.


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Long haul low cost is accepted in Asia and it's a matter of time before that model expands to North America. It might be prudent for AC to start talking about getting into the game before others. Airlines have to respond to the market.

[yycflyguy]

Long haul low cost is accepted in Asia and it's a matter of time before that model expands to North America. It might be prudent for AC to start talking about getting into the game before others. Airlines have to respond to the market.

About 15 months ago Air Canada management had convinced ACPA's first NC that we were losing the battle on the North Atlantic to discount carriers like Air Transat. In that short period of time, Europe's economy has floundered and traffic demand has subsided. European service is no longer a focal point. We also had Westjet and Sunwing "eating our lunch" on sun spot destinations and that's why a LCC division was needed.

Competing with discount Asian carriers is just the flavour of the week. Another knee jerk reaction with no actual planning.

[Panama Jack]

2012 will be a year of pain for the Euro-airlines.

What an incredibly fickle industry. What is really needed is for Government to rationalize regulation and taxation. This is something which significantly disadvantages Canadian carriers.

However, I agree that Air Canada management (in spite of what may be cloudy vision) in that they need to change the way the company operates and keep an eye on its costs. Otherwise we are talking about death by a thousand paper cuts 杀千刀.

[bmc]

What is really needed is for Government to rationalize regulation and taxation. This is something which significantly disadvantages Canadian carriers.

bingo

[yycflyguy]

What an incredibly fickle industry. What is really needed is for Government to rationalize regulation and taxation. This is something which significantly disadvantages Canadian carriers.

What? And not collect millions in tax revenue? The Feds are only interested in sustaining their taxation streams while using the BS mantra of "protecting of the fragile economy". What really is needed is for this government to stop infringing on workers rights to negotiate a collective agreement and cease their collusion with Air Canada....

[Expat]

2012 will be a year of pain for the Euro-airlines.

.

Right on! We should really have a look at what is happening in Europe. The big airlines have lost the domestic market to the LCCs. And because of that, they had to re-focus on trans-atlantic flights to survive. But half of their trans-atlantic passengers were transiting from Asia and Africa.
Now these passengers are transiting through Dubai and Qatar, on the three fastest growing airlines in the world. So airlines in Europe are losing steam. They simply forgot to focus on the developping markets, before it was too late.

Back to Canada. The battle for passengers within Canada is really though against WJ. AC, with its cost structure has no chance there. The atlantic market is eroding fast, because of competition from US and European companies bleeding and dropping prices, to keep market share.
The last profitable markets are accross the pond to Asia. Japan, Korea, and Australia were not threatening, because of similar cost structures, and business models.
But now, if China, especially their LCCs get in the game, it will be slaughter.

[Panama Jack]

According to a CAPA (Centre for Asia Pacific Aviation) newsletter for 9 May 2011, Air Canada seems to have little future without a dramatic change in direction. The earning of $107 million profit on $11 Billion in revenues (2010) which is a dismal 0.9% rate of return is, according to CAPA, "as good as it is ever going to get for the carrier."

I worry about Air Canada's future. Governments, as well as the unions have largely failed to grasp the worldwide trends in aviation and unless something changes drastically, I believe that Air Canada will be joining airline history books. It will be unfortunate.