Chorus/Ggn/Sky merge

[rudder]

There are numerous fleet ratio limits that apply in the ACPA scope language, however, for the purpose of gauge for Express MJA (medium Jet Aircraft) the limit is seat based. Max certified hull size 90 seats but operated with not greater than 76 seats.

The US legacy operators have weight and seat scope limits (86,000 lbs).

[TheStig]

AC acquired the CS300/A220-300 for a per unit cost less than the list price for a CRJ900. Whether the math works for further CRJ900 aircraft at Express likely has to do with the willingness of BBD to offer a discount to AC/CHR.

Rudder, Air Canada has 30 A220 options with substation rights between the -300 and -100, at, as you've mentioned heavily discounted rates. How do you think this might impact Air Canada's intentions towards its regional fleet renewal plans? Does the price of the A220 have an impact on the airlines regional renewal strategy, do you think its possible to exercise those options (and have them flown at mainline) as opposed to buying more CRJ900's or E2's operated by express?

[Irony]

+1

[Rowdy]

The a220-300 won't be at express. I'm not sure what the configurations are like on the -100, but I'd assume it too would be outside of the scope language, unless AC decides to bully ACPA into allowing it and adding some more wide bodies. IIRC it was based on a fleet ratio with them was it not?

I could see the 175's at Jazz, as AC manipulates the now unionizing group at SKR and GGN.

[rudder]

AC acquired the CS300/A220-300 for a per unit cost less than the list price for a CRJ900. Whether the math works for further CRJ900 aircraft at Express likely has to do with the willingness of BBD to offer a discount to AC/CHR.

Rudder, Air Canada has 30 A220 options with substation rights between the -300 and -100, at, as you've mentioned heavily discounted rates. How do you think this might impact Air Canada's intentions towards its regional fleet renewal plans? Does the price of the A220 have an impact on the airlines regional renewal strategy, do you think its possible to exercise those options (and have them flown at mainline) as opposed to buying more CRJ900's or E2's operated by express?

I have no information as to whether AC has deeply discounted prices on its C series options. BBD needed a significant order for the C series from a credible North American carrier. AC was in the right place at the right time. If AC does have convertible options at the same rate as the firm orders (news reports infer a 67% discount) then AC certainly seems to be sitting in an enviable position. I cannot imagine that Airbus would be impressed with potential convertible options outstanding at below manufacturing cost pricing. But Airbus knew what they were buying (including assumed liabilities). Only time will tell.

There are more than a few 76 seat Express jets operating on flights with just 25-50 pax on board. Not sure how putting that same passenger load on a mainline 110-145 seat C series would be viewed as beneficial. There will always be a role for 76 seat/2 class jets at Express. In particular, the CRJ900 with its 4 hour range. The question is whether it will be a fleet of 46 (status quo), more, or less. Once again, only time will tell.

[Lightchop]

What flights have 50 or less pax? I don't think I've seen a load on any of my planes lower than 60 in a looong time and typically they hover around the 70 mark.

[rudder]

What flights have 50 or less pax? I don't think I've seen a load on any of my planes lower than 60 in a looong time and typically they hover around the 70 mark.

Ok. Let’s make it a pax load of 60-70 on a 110-145 seat aircraft. Does that make money? Or how about going from twice daily 76 seat jet service to once daily 145 seat jet service. Will that make all the overseas connections at the hub?

The CS300 is not an E190 with 48 more seats - it is an A319 with ETOPS capability that burns 20% less fuel. Time for people to stop viewing the CS100/300 as being regional jet substitutes. AC certainly does not view them that way. The A220-300’s at AC will create their own new routes, in many cases bypassing the hub. It is to the NB jet class what the 787 was to the WB jet class.

The CRJ900 has a capability to offer long range flights (by regional standards) with a 12 seat J class product. That creates meaningful revenue opportunities and extends city pair possibilities from the hub to 1500nm+. Well subscribed routes can be up gauged to mainline size aircraft. Less well subscribed routes can still be serviced using the 76 seat jet.

Somebody on the top floor at YUL HQ knows what the long range fleet plan is for Express. There are 24 older and fuel inefficient 50 seat CRJ’s in service. There are 25 first generation 175’s in service. Perhaps, much like the C-series order, minds can be influenced by attractive pricing from manufacturers. The E2 jet is expensive and has a multi-year wait list. The future of the CRJ program at BBD now has a big question mark on it. Negotiations for C series aircraft (beyond the existing contract) would take place with Airbus as opposed to BBD. Airbus is not known for the deep price discounting practices employed by Boeing and BBD on the C series.

Fleet renewal takes years of pre-planning. Factors such as aircraft availability, new vs used, own vs lease, fuel pricing, interest rates, commercial strategy, are all considered. Another factor is the availability of pilot labour at the Express level. Can Express sustain a pilot population of 2000+ pilots as pilot attrition rates continue at a hundreds per year rate? How will this affect the Express fleet size?

Returning to the original thread topic, one cannot help but think that partial or total Express consolidation would be under consideration in light of pilot supply considerations, potential Express fleet changes, recent labour developments, economies of scale, quality control, and elimination of organizational redundancy.

[FL-280]

What flights have 50 or less pax? I don't think I've seen a load on any of my planes lower than 60 in a looong time and typically they hover around the 70 mark.

Ok. Let’s make it a pax load of 60-70 on a 110-145 seat aircraft. Does that make money? Or how about going from twice daily 76 seat jet service to once daily 145 seat jet service. Will that make all the overseas connections at the hub?

The CS300 is not an E190 with 48 more seats - it is an A319 with ETOPS capability that burns 20% less fuel. Time for people to stop viewing the CS100/300 as being regional jet substitutes. AC certainly does not view them that way. The A220-300’s at AC will create their own new routes, in many cases bypassing the hub. It is to the NB jet class what the 787 was to the WB jet class.

The CRJ900 has a capability to offer long range flights (by regional standards) with a 12 seat J class product. That creates meaningful revenue opportunities and extends city pair possibilities from the hub to 1500nm+. Well subscribed routes can be up gauged to mainline size aircraft. Less well subscribed routes can still be serviced using the 76 seat jet.

Somebody on the top floor at YUL HQ knows what the long range fleet plan is for Express. There are 24 older and fuel inefficient 50 seat CRJ’s in service. There are 25 first generation 175’s in service. Perhaps, much like the C-series order, minds can be influenced by attractive pricing from manufacturers. The E2 jet is expensive and has a multi-year wait list. The future of the CRJ program at BBD now has a big question mark on it. Negotiations for C series aircraft (beyond the existing contract) would take place with Airbus as opposed to BBD. Airbus is not known for the deep price discounting practices employed by Boeing and BBD on the C series.

Fleet renewal takes years of pre-planning. Factors such as aircraft availability, new vs used, own vs lease, fuel pricing, interest rates, commercial strategy, are all considered. Another factor is the availability of pilot labour at the Express level. Can Express sustain a pilot population of 2000+ pilots as pilot attrition rates continue at a hundreds per year rate? How will this affect the Express fleet size?

Returning to the original thread topic, one cannot help but think that partial or total Express consolidation would be under consideration in light of pilot supply considerations, potential Express fleet changes, recent labour developments, economies of scale, quality control, and elimination of organizational redundancy.

+1, Kudos for a great post.

I do believe something in this since will happen. Once the seniority fight is over, it will be a great thing for all express pilots across the nation.

[Cavalier44]

What flights have 50 or less pax? I don't think I've seen a load on any of my planes lower than 60 in a looong time and typically they hover around the 70 mark.

Ok. Let’s make it a pax load of 60-70 on a 110-145 seat aircraft. Does that make money? Or how about going from twice daily 76 seat jet service to once daily 145 seat jet service. Will that make all the overseas connections at the hub?

The CS300 is not an E190 with 48 more seats - it is an A319 with ETOPS capability that burns 20% less fuel. Time for people to stop viewing the CS100/300 as being regional jet substitutes. AC certainly does not view them that way. The A220-300’s at AC will create their own new routes, in many cases bypassing the hub. It is to the NB jet class what the 787 was to the WB jet class.

The CRJ900 has a capability to offer long range flights (by regional standards) with a 12 seat J class product. That creates meaningful revenue opportunities and extends city pair possibilities from the hub to 1500nm+. Well subscribed routes can be up gauged to mainline size aircraft. Less well subscribed routes can still be serviced using the 76 seat jet.

Somebody on the top floor at YUL HQ knows what the long range fleet plan is for Express. There are 24 older and fuel inefficient 50 seat CRJ’s in service. There are 25 first generation 175’s in service. Perhaps, much like the C-series order, minds can be influenced by attractive pricing from manufacturers. The E2 jet is expensive and has a multi-year wait list. The future of the CRJ program at BBD now has a big question mark on it. Negotiations for C series aircraft (beyond the existing contract) would take place with Airbus as opposed to BBD. Airbus is not known for the deep price discounting practices employed by Boeing and BBD on the C series.

Fleet renewal takes years of pre-planning. Factors such as aircraft availability, new vs used, own vs lease, fuel pricing, interest rates, commercial strategy, are all considered. Another factor is the availability of pilot labour at the Express level. Can Express sustain a pilot population of 2000+ pilots as pilot attrition rates continue at a hundreds per year rate? How will this affect the Express fleet size?

Returning to the original thread topic, one cannot help but think that partial or total Express consolidation would be under consideration in light of pilot supply considerations, potential Express fleet changes, recent labour developments, economies of scale, quality control, and elimination of organizational redundancy.

I’m inclined to agree with you. I do believe that a consolidation in the Express carriers is inevitable, although my estimate would be not for at least another five years provided that the supply of pilots to the Express carriers doesn’t decrease much more than it is at present. Both Jazz and Sky Regional are locked in to 10-year, fixed-cost CPAs with Air Canada, expiring in 2025 and 2027 respectively. As long as this continues to be a profitable arrangement for Air Canada, there’s little incentive to change this in the short term. With that being said, there are a number of ways that Air Canada could cut costs by pushing for consolidation and fleet rationalization in the five to 10-year timeframe.

With regard to the Jazz CRJ900s and Sky Regional E175s, these are two very similar aircraft which fill almost identical niches in the Express market. The oldest Jazz CRJ900s date back to 2011, meaning there’s no imperative to replace these aircraft in the short term. The oldest Sky Regional E175s are the ex-Air Canada fins which were delivered in 2005. While they’re more than a decade old at this point, they remain relatively low-time and low-cycle aircraft. The fact that additional upgrades are being introduced for the E175 fleet such as FMS software updates (Epic Load 27.2) indicates these aircraft will be staying with us for a while yet. While the CRJ900 does beat the E175 in fuel burn, the advantage is not so great that it would make sense to replace an entire fleet of 25 relatively young aircraft at this stage.

In the longer term, it does make good financial sense to replace these aircraft with a common type. Each has its own advantages and disadvantages which I won’t discuss at length, but there are many factors to consider here. The first is the future of the CRJ programme - if Bombardier does indeed sell it off, will whatever company that takes over the programme have the resources and expertise to support the fleet over the 20+ years they can expect to remain in service at Express? As another poster has mentioned, Air Canada is not subjected to the weight limitations for regional aircraft that are in place south of the border, which means that the E175-E2 is a viable contender. However, the only Express carrier that is operating newly manufactured aircraft at this time is Jazz. Sky Regional has never operated new aircraft and has always sourced them from the used market. If we do see a new common type introduced to replace the CRJ900 and E175 in the post-2025 timeline, it would make sense for a merger to occur at this time with the new airline operating a single type of large regional aircraft. Prior to that happening, I don’t see any advantage to a potential Jazz/Sky Regional merger.

[rudder]

Couple of factual points:

- 15 of the 21 Jazz CRJ900’s are circa 2005/2006 factory deliveries
- CPA expiries for JAZZ/SKY/GGN are 2025/2027/2028 respectively (although there is a rumour out there that both the GGN and SKY CPA’s have 12 month notice cancelation provisions available to AC)
- in terms of mission and direct operating costs, the CRJ900NG outperforms the first generation E175’s. E2 is likely comparable or superior for mission. List price for CRJ900NG and second generation E175 are comparable (US46-48MM). List price for E2 is estimated 15% higher than second generation E175.

I agree that current 175 fleet will remain in service for foreseeable future. AC is likely benefiting from favourable lease rates for older first generation 175’s (10) and the balance of the SKY fleet (15) are owned outright by AC. Therefore cost of ownership quite reasonable. Operating costs however are high.

So in terms of Express fleet the questions are:

- will the Express 76 seat jet fleet remain static or grow?
- if the plan from AC is to grow the Express 76 seat jet fleet, will AC prefer older leased 175’s or new CRJ900NG’s?
- as the older CRJ900’s and first generation 175’s approach 20 years in service (circa 2025), what will be the preferred replacement?

So, some near term considerations. And some medium term considerations. Little doubt that price (whether purchase or lease) will be a significant determining factor in these Express fleet decisions made by AC. Best long term bet is is the most fuel efficient product that is reasonably priced.

AC is still focused on getting out costs (continued Cost Transformation Program). Part of potential cost reductions at Express could include fleet renewal. More cost savings could also be achieved through elimination of overhead resulting from duplication. And not to be minimized is the inevitability of increased labour costs and potential labour conflict at Express carriers that have recently unionized.

Remains to be seen whether consolidation becomes a strategy to manage all of the developing issues within the Express system.

[Alcoholism]

This isn't going to happen. This has been wet dream rumour from Jazz pilots since the day Sky was created. As long as CR is in charge all the regionals will be separate.

[Lightchop]

What flights have 50 or less pax? I don't think I've seen a load on any of my planes lower than 60 in a looong time and typically they hover around the 70 mark.

Ok. Let’s make it a pax load of 60-70 on a 110-145 seat aircraft. Does that make money? Or how about going from twice daily 76 seat jet service to once daily 145 seat jet service. Will that make all the overseas connections at the hub?

The CS300 is not an E190 with 48 more seats - it is an A319 with ETOPS capability that burns 20% less fuel. Time for people to stop viewing the CS100/300 as being regional jet substitutes. AC certainly does not view them that way. The A220-300’s at AC will create their own new routes, in many cases bypassing the hub. It is to the NB jet class what the 787 was to the WB jet class.

The CRJ900 has a capability to offer long range flights (by regional standards) with a 12 seat J class product. That creates meaningful revenue opportunities and extends city pair possibilities from the hub to 1500nm+. Well subscribed routes can be up gauged to mainline size aircraft. Less well subscribed routes can still be serviced using the 76 seat jet.

Somebody on the top floor at YUL HQ knows what the long range fleet plan is for Express. There are 24 older and fuel inefficient 50 seat CRJ’s in service. There are 25 first generation 175’s in service. Perhaps, much like the C-series order, minds can be influenced by attractive pricing from manufacturers. The E2 jet is expensive and has a multi-year wait list. The future of the CRJ program at BBD now has a big question mark on it. Negotiations for C series aircraft (beyond the existing contract) would take place with Airbus as opposed to BBD. Airbus is not known for the deep price discounting practices employed by Boeing and BBD on the C series.

Fleet renewal takes years of pre-planning. Factors such as aircraft availability, new vs used, own vs lease, fuel pricing, interest rates, commercial strategy, are all considered. Another factor is the availability of pilot labour at the Express level. Can Express sustain a pilot population of 2000+ pilots as pilot attrition rates continue at a hundreds per year rate? How will this affect the Express fleet size?

Returning to the original thread topic, one cannot help but think that partial or total Express consolidation would be under consideration in light of pilot supply considerations, potential Express fleet changes, recent labour developments, economies of scale, quality control, and elimination of organizational redundancy.

I %100 agree with you. The C is a mainline aircraft and I don't think we'll ever see it at Express.

[Cavalier44]

This isn't going to happen. This has been wet dream rumour from Jazz pilots since the day Sky was created. As long as CR is in charge all the regionals will be separate.

If you made the same statement five years ago I would’ve been inclined to agree with you. However I believe that the addition of Sky Regional and Air Georgian as AC Express carriers has achieved the desired end goal within Air Canada’s long term strategy; which was to reduce labour costs in the regional network, specifically from 2013-2015 as Jazz was negotiating its next 10-year CPA. Now this has been done, both Sky and Georgian pilot groups have unionized, and labour costs will inevitably increase going forward.

As we enter the 2020s, we have a medium-term consideration, as Rudder said, which is the replacement of the CRJ900/E175 fleets. My belief is that whatever aircraft, or mix of aircraft, is ultimately chosen will determine whether or not a Sky-Jazz merger takes place.

In the shorter term, we have the 17 Georgian CRJ100/200s, which will need to be replaced soonest. Jazz has been replacing their CRJ200s with additional Q400s, if Georgian follows the same path it only stands to reason that a merger should take place with a single Q400 fleet. As we saw from the example of Sky operating five Q400s, it doesn’t make sense long-term to have multiple airlines operating small niche fleets of the same type of aircraft; the overhead costs for training and maintenance are simply too high to justify it. I wouldn’t be surprised if, in the next five years I think we see a Jazz-Georgian merger, with the majority of the older-generation CRJs being replaced by Q400s

As for the A220/CSeries, as others have said, this is not a regional aircraft and I dont think we’ll ever see it at Express. I don’t see any market forces at present which could force the Air Canada pilot group into such a huge concession in scope. I think that the problem of public perception of the A220 as a regional aircraft comes from flawed Bombardier marketing - it should’ve been promoted from the outset as a 737-700/A319 competitor rather than a competitor to the CRJ900/E175, where it’s simply too much aircraft to replace RJs on most routes.

[fish4life]

I don’t think it will be a GGN/ jazz merger I think it would be a case of shutting down GGN and absorbing some more aircraft into Jazz. It does make sense from a reserve coverage / irrop recovery to just have one CPA carrier

[rudder]

This isn't going to happen. This has been wet dream rumour from Jazz pilots since the day Sky was created. As long as CR is in charge all the regionals will be separate.

I have no crystal ball that will reliably predict the future. But what I do know is that pilot wishful thinking has never been an effective strategy.

Regardless, a lot has changed since 2010. And I doubt the Express plan circa 2010 is any more valid than the AC plan circa 2010. In 2010 nobody at AC was talking about 737’s and C series aircraft. And look at AC now. Circumstances change. Plans change.

All of the Express pilots (EVAS excepted as the perpetuation of the EVAS commercial arrangement with AC is questionable) are now unionized. 2 Express pilot groups comprising approximately 500 pilots are looking to achieve their first collective agreements. Was that part of the Express 2010 plan? I doubt it. Circumstances change. Plans change.

My guess is that CR is no more wedded to the old Express plan than he is to any other outdated version of the AC plan. He wants a safe, reliable, cost effective Express network with zero risk of operational interruption. Whether that is comprised of one or two or three vendors is a detail.

So for now it is status quo. But 2019 portends to be an interesting year on the Express front. I would not be so quick to rule out the possibility that consolidation in some form will not become a feature of the updated Express plan.

[av8ts]

If there is a merger of the ALPA regionals I think shortly there after we will see the rise of another (possibility two) Express carriers to undercut them. Déjà vu all over again

[Radiocaster]

Rudder you are the best out here. Informed guess, like laying chess in the dark, you would have defenetveley made a good CIA agent. Maybe you are... I also heard from the Jazz MEC’s mouth, that “the classic is not the plane of the future for our pilot group”. Wich is pointing towards possible loss of that type in order to operate more jets. I think now is the time to buy more Q400 and CRJ900 before someone else takes over the after sale service for those types.

[rudder]

Is also heard from the Jazz MEC’s mouth, that “the classic is not the plane of the future for our pilot group”. Wich is pointing towards possible loss of that type in order to operate more jets.

That is an interesting comment considering the bet that was placed in 2010 by CHR (via the CPA) and the Jazz MEC (via the collective agreement) to maintain the Dash 8 in the fleet plan in substantial numbers out to 2025. The decision to extend the service life of the Dash 8 300’s likely netted CHR tens of millions in revenue on the MRO side. And in the years that followed that decision, Jazz watched 14 CRJ’s (and routes) be transferred to GGN and the 15 mainline E175’s moved to SKY with the subsequent addition of 10 175’s. Seems the bet that was placed on aging Dash 8’s may have come at the expense of the Jazz share of the jet side of the Express portfolio.

Once again - circumstances change. Plans change. If the Jazz fleet is to undergo yet another transformation, it will be at the request of AC. The leverage for CHR and the Jazz pilots is they both have signed deals out to 2025 regarding minimum fleet size. Any changes must be mutually agreed (notwithstanding the substitution provisions of the CPA).

[livenet001001]

Is also heard from the Jazz MEC’s mouth, that “the classic is not the plane of the future for our pilot group”. Wich is pointing towards possible loss of that type in order to operate more jets.

That is an interesting comment considering the bet that was placed in 2010 by CHR (via the CPA) and the Jazz MEC (via the collective agreement) to maintain the Dash 8 in the fleet plan in substantial numbers out to 2025. The decision to extend the service life of the Dash 8 300’s likely netted CHR tens of millions in revenue on the MRO side. And in the years that followed that decision, Jazz watched 14 CRJ’s (and routes) be transferred to GGN and the 15 mainline E175’s moved to SKY with the subsequent addition of 10 175’s. Seems the bet that was placed on aging Dash 8’s may have come at the expense of the Jazz share of the jet side of the Express portfolio.

Once again - circumstances change. Plans change. If the Jazz fleet is to undergo yet another transformation, it will be at the request of AC. The leverage for CHR and the Jazz pilots is they both have signed deals out to 2025 regarding minimum fleet size. Any changes must be mutually agreed (notwithstanding the substitution provisions of the CPA).

Can someone explain why AC would merge Express partners? Right now you have GGN and Sky both negotiating contracts in a few years Jazz is in negotiations. The entire diversification play was to ensure no one player in Express could cripple the entire feed into mainline. Add on to this the bonus of playing Express partners off of each other to drive costs down it is a win win for AC. Never in feed jeopardy and a competitive structure to bid for new work. I do see some admin savings etc if there was a merge but AC would be giving up 100% of the control they have in pricing pressure and put themselves at jeopardy for a feed shutoff in the case of labour disruption. Not to mention the millions they have pumped into GGN and Sky to build this flexibility.

To me the bigger question is how big is Express after the A220 and Rouge take their kicks at the work. How do ULCC's change the Express platform? I think these are more real issues to address than any change in structure.

[livenet001001]

Is also heard from the Jazz MEC’s mouth, that “the classic is not the plane of the future for our pilot group”. Wich is pointing towards possible loss of that type in order to operate more jets.

That is an interesting comment considering the bet that was placed in 2010 by CHR (via the CPA) and the Jazz MEC (via the collective agreement) to maintain the Dash 8 in the fleet plan in substantial numbers out to 2025. The decision to extend the service life of the Dash 8 300’s likely netted CHR tens of millions in revenue on the MRO side. And in the years that followed that decision, Jazz watched 14 CRJ’s (and routes) be transferred to GGN and the 15 mainline E175’s moved to SKY with the subsequent addition of 10 175’s. Seems the bet that was placed on aging Dash 8’s may have come at the expense of the Jazz share of the jet side of the Express portfolio.

Once again - circumstances change. Plans change. If the Jazz fleet is to undergo yet another transformation, it will be at the request of AC. The leverage for CHR and the Jazz pilots is they both have signed deals out to 2025 regarding minimum fleet size. Any changes must be mutually agreed (notwithstanding the substitution provisions of the CPA).

Actually, thinking about it - what if AC was to buy Sky, GGN or Jazz and have the other two, or one, or none stay in place to add competitive pressure? Isnt this what Delta has done with Envoy? They have Envoy but still sub out the majority of the regional lift under CPA's.