New tour company could transform Jazz

[Go Guns]

New tour company could transform Jazz
Last Updated: Thursday, November 26, 2009 | 08:02 PM EST
Financial Post
Story courtesy of
Jazz Air Income Fund is in discussion with Canadian travel tour veteran Robbie Goldberg about potentially partnering with him on his latest venture, Direct Save Holidays, a new competitor in the packaged tour market he intends to launch next winter.

Not only would the move allow Jazz to expand its business outside of its existing partnership with Air Canada, which currently accounts for 99% of its sales, but it could potentially see the regional carrier begin flying a new fleet of five Boeing 737-800s. The aircraft is larger than its current fleet of regional jets and turboprops, and is the same as the newest and largest aircraft operated by its rival WestJet Airlines Ltd., opening up dozens of sun destinations to its network.

Debra Williams, Jazz spokeswoman, said while nothing has been finalized, the airline has been in discussions with Mr. Goldberg about partnering with him on Direct Save Holidays. Mr. Goldberg intends to finance the company himself and launch it in November 2010.

Mr. Goldberg is a veteran in the Canadian travel tour industry, having started up Conquest Vacations in 1972. He ran the company until 2007, at which time he severed all ties with it and sold it. Conquest held about 7% of the domestic packaged tour market before its collapse last April.

Conquest was one of the casualties of an ongoing price war in the Canadian packaged tour industry. The market has been plagued by excess capacity in recent years as players like Transat A.T., Sunwing Vacations, as well as the travel tour arms of WestJet and Air Canada, fight for market share.

In addition to Conquest folding, the fierce competition also led to a merger between Sunwing Vacations and Signature Vacations this year, and has led to speculation that there may be further consolidation in the travel tour market after this winter, with Sunquest Vacations and TMR likely targeted.

However, despite these issues persisting, Mr. Goldberg said in an interview Thursday that he sees an opportunity for “a direct-sale, web-based, low cost, highly reactive operator” like Direct Save Holidays, especially as the economy starts to recover and people begin to travel again.

“By the end of this season, there may or may not be another consolidation. In any case, as they are fighting it out, and the bottom lines of those companies are effected, they’ve all stated they need to start making money,” Mr. Goldberg said. “I think we’ll see a different picture next winter.”

Mr. Goldberg said he intends to offer packaged tours next winter from Toronto, Calgary, Edmonton and Vancouver to popular sun destinations in Mexico, Cuba and the Dominican Republic with Direct Save Holidays.

Instead of establishing a costly distribution network like its competitors, Mr. Goldberg said he intends to cut out the middleman and keep the company lean by having consumer book their vacations directly on the company’s website.

“Things have changed in the Canadian market in the past couple years,” Mr. Goldberg said. “The consumer is more and more booking direct, and a lot of the people that travel are comfortable with a computer.”

Chris Murray, CIBC World Markets analyst, said the launch of Direct Save Holidays will add capacity to an already overcrowded market next winter. But he acknowledged that Mr. Goldberg has extensive experience in the market and could put considerable pressure the current incumbents.

He also said that benefits to Jazz would be considerable, and would be a positive in the company’s ongoing efforts to diversify its business.

Mr. Goldberg said the plan currently does call for Jazz to be a partner, though nothing has been finalized, and he has held talks with other players.

Nevertheless, he said all decisions will be finalized by February 2010.

Financial Post

scdeveau@nationalpost.com

[genetic jack hammer]

Sounds promising but we've all been down this road before. Finalized by Feb 2010? I persume that would take into account the crew planning and quite possibly, the reinstatement of all those who were forced to a new base or new a/c.

Can't believe it's taken Jazz THIS long to figure out that a revenue source outside of AC was needed. Then again, look who's running that Dept...'nuff said.

Keep the positive news coming.

[whiteguy]

Sounds promising but we've all been down this road before. Finalized by Feb 2010? I persume that would take into account the crew planning and quite possibly, the reinstatement of all those who were forced to a new base or new a/c.

Can't believe it's taken Jazz THIS long to figure out that a revenue source outside of AC was needed. Then again, look who's running that Dept...'nuff said.

Keep the positive news coming.

As part of their CPA with AC, I don't think Jazz could go outside of AC. I think 2 Dash 8 on the charter side needed an agreement with AC to operate. Now there are changes to the agreement to free up Jazz a little.

Correct me if I'm wrong please....

[Go Guns]

Jazz has been trying for a few years now to secure some flying outside the CPA. Short of starting their own airline and competing with Air Canada, they can do whatever they like.

[ACAV8R]

Would that not be competing directly with Air Canada Vacations?

[JazzJetDriver]

Direct Save Holidays is the competitor to ACV, not Jazz. Under our CPA with AC we are allowed to do exactly what is being proposed.

[flyinhigh]

This is awesome but I will believe it when I see it. Next fall, probably not. By the time we get trained crews, maintenance, let alone the aircraft I will be alittle more that next fall. Did that article say finalized by february. Well if that is the case that leaves 10 months to select the pilots, and train them, and get everything else going.

Maybe I am a optamist but that november date maybe pushing it.

As for the CPA, we can do anything outside of sked flying.

Next yes, they can't say anything but man if we do get a couple 37's in our colours ACPA is going to have a field day over it and there is nothing they can do. hahahha I can't wait

[Go Guns]

New travel tour operator a risky venture - for Jazz Air too
Posted: November 27, 2009, 1:15 PM by Scott Deveau
Market Call, Air Canada, Jazz Air Income Fund, Transat, Robbie Goldberg, Direct Save Holidays
Robbie Goldberg’s plans to launch a new travel tour operator, Direct Save Holidays, in Canada next winter is a risky venture, not only the for the veteran of the packaged-tour market, but for his planned partner, Jazz Air Income Fund, as well, according to David Newman, National Bank Financial analyst.

As reported in Friday's Financial Post, Mr. Goldberg, who started Conquest Vacations in 1972 before selling it in 2007, plans to launch Direct Save Holidays in November 2010. At this point, Mr. Goldberg said he plans to partner with Jazz Air Income Fund in the venture, which will operate five 737-800s on behalf of Direct Save, although no deal has been finalized

If Direct Save were to launch, it would be a negative for the industry as a whole, including for Transat A.T. and scheduled carriers, like Air Canada and WestJet Airlines Ltd., who also compete in the packaged tour business, Mr. Newman said.

“Every time the industry shows any signs of prospective improvement, a new player arises out of ashes of those that have gone before,” he said. “While Mr. Goldberg is a veteran of the industry, which provides some assurance that he knows how to play the game, it does not help the collective and the industry may continue to suffer.”

For Jazz, while the move could be “quite positive” in diversifying its business, there are also some concerns as well.

Namely, what would happen with the new aircraft if Direct Save failed to gain traction; whether Air Canada’s agents would react poorly to its direct-purchase web model; and how Air Canada would react to Jazz partnering with a competitor to its vacation product.

“While diversifying its revenue streams makes sense, and we believe Jazz previously pursued a charter arrangement with Transat, which was ultimately won by CanJet, we believe the venture could be risky, especially with a new entrant versus an established player,” he said.

“Jazz partnering with one of Air Canada Vacation’s competitors might cause some concern, but we would note it did not appear to be an issue before when Jazz was in the running for the Transat charter arrangement."

Scott Deveau

[Inverted2]

Don't forget S.T. is still in charge of getting new contracts I believe, so don't hold your breath on this one!

[genetic jack hammer]

Just imagine the chaos/shit-storm, should ST happen to secure outside-CPA flying.

[prop2jet]

Direct Save Holidays is the competitor to ACV, not Jazz. Under our CPA with AC we are allowed to do exactly what is being proposed.

True, under the CPA Jazz can get work outside of work for AC, however, given that Direct Save is a competitor, AC reserves the right to cut the aircraft covered under the CPA 1 for 1. Therefore, if JZA were to operate 5 aircraft for DSH, AC reserves the right to reduce the aircraft covered under the CPA from 125 to 120.

[PC12flyer]

Hey Prop2jet where does it say that? I can't find any literature to back up your statement. Doesn't mean its not true though and it wouldn't suprise me at all.

Just my 2 cents, Jazz is nothing more than a contract carrier. We fly other peoples planes where they want. I would think that if DSH wanted to contract Jazz to provide crews, maintenance ect.. to his airplanes then we, Jazz, aren't competing against AC, only he is. Now I agree that if we become a financial partner in this then there's a case for us competing against them. It will be very interesting if this were to come to fruition how the law would look at it and whether or not Air Canada can claim damages from Jazz.

Time will tell, but I'm not holding my breath that his will ever happen.

[JazzJetDriver]

Contrary to what many may think, Jazz management is not stupid. They would not jeopardise their bread and butter CPA with AC so that they can operate a measley 5 B737's. This deal will not have any effect on the CPA with AC and there will be no reduction in protected hulls.

[altiplano]

-

[WJ200]

Say goodbye to your passes at Air Canada if this goes through.......you want to be considered a seperate company for work but remain part of Air Canada when it comes to passes. I am guessing that it doesn't flow both ways.

[genetic jack hammer]

Jazz isn't giving up all AC flying, just doing some flying outside the CPA.

[WF9F]

Love to see the wages Jazz guys are going to accept in order to get this up and runnning.

[JazzJetDriver]

There will be no loss of passes and our wages are already set.

Why is it people think that because Jazz is embarking on a new business venture drastic things are going to happen? Oooh, you guys are going to lose your passes, Oooh, you guys are going to have to take wage cuts, Oooh, you guys are going to lose AC flying.

Oooh, I'm so scared...not!

Everything that is being proposed in this deal to fly 737's in the vacation market is perfectly kosher with regards to our CPA with AC. We [pilots] have an agreement that sets out the pay-scales, and you can ever bet that if these are going to change, it will be for more and not less

[prop2jet]

PC12... I stand corrected on the matter of a reduction of covered aircraft (as it applies in the current discussion) however there are other constraints as well. From the "Risk Factors" Section as outlined in the Fund's 2009 Annual Information form:

Constraints on Jazz's ability to establish new operations

Subject to regulatory restrictions, the CPA does not preclude Jazz from entering into capacity purchase
agreements with, or providing airline services to, other carriers as long as Jazz's ability to perform its
obligations under the CPA is not impaired as a result. However, if Jazz enters into an agreement with
another carrier to provide regional airline services (other than charter flights), whether on a capacity
purchase or other economic basis, Air Canada will have the right to reduce the number of Covered
Aircraft, on a one-for-one basis, by the number of aircraft to be operated under such other agreement,
thereby reducing Jazz's ability to earn revenue from Air Canada.
Jazz does not directly benefit from any order of, or option to purchase, regional jet aircraft. As a result, in
the event that Jazz desires to enter into capacity purchase agreements with, or provide airline services to,
carriers other than Air Canada, Jazz may not be able to obtain in a timely manner the aircraft required to
provide such services, unless Jazz is able to lease such aircraft or to obtain financing for such acquisition.
There can be no assurance that Jazz's credit ratings will enable it to lease, or finance the acquisition of
such aircraft, or do so at reasonable borrowing rates, which could prevent Jazz from entering into capacity
purchase agreements with, or providing airline services to, carriers other than Air Canada, which could
have a material adverse effect on Jazz's business, results from operations and financial condition.

[PC12flyer]

Hey prop2jet,

Thanks for the reply and added information. I had never read that section of the financials before. I will bet our leaders will do nothing to hurt the gravy train they are currently on with the CPA. I am very skeptical this will happen. We can always hope though. Thanks again for the info.

[like2fly]

prop2jet,

From what you have posted, one has to only look at the wording in that paragraph. Jazz has been performing charters for quite a while now and AC has had no problems with the company doing so. By adding 737's, Jazz IS NOT providing regional airline services to a "competitor" but introducing additional charter flights to sun destinations. The key I believe is the term "charter".

[BMR]

Even though I am skeptical about this coming to pass, why does everyone believe jazz is going behind AC to obtain this deal. I'm positive that the two companies have been in discussion about the matter.

Lose AC passes? I don't think that's gonna happen. As much as we depend on AC, AC also depends on jazz quite heavily whether you see it or not.

[Sasktel]

Say goodbye to your passes at Air Canada if this goes through.......you want to be considered a seperate company for work but remain part of Air Canada when it comes to passes. I am guessing that it doesn't flow both ways.

Jazz is a seperate company. A lot of AC employees commute to work, some on Jazz, so I would be suprised if the pass system was taken away.

[ACAV8R]

I doubt Jazz would lose the passes having said that I think the priorities might go back to the way it use to with pressure from mainline employees. I would think that is fair. If Jazz was to start doing work for other companies then Air Canada should treat them the same as say "Georgian" with regards to passes.

[Localizer]

I doubt Jazz would lose the passes having said that I think the priorities might go back to the way it use to with pressure from mainline employees. I would think that is fair. If Jazz was to start doing work for other companies then Air Canada should treat them the same as say "Georgian" with regards to passes.

I have to wonder what you've been smoking ... Sounds like you have troubles with your commute. Maybe you should consider moving closer to your base if your travel seniority can't get you to work on time.

The passes are what they are .... get over it and dry the tears ....