Updated logo and 767 preview

[brooks]

We start Calgary-Nanaimo. AC starts Calgary-Nanaimo.
We start Calgary-Terrace.
We start Winnipeg-Gatwick (this spring)
The list goes on...

Maybe the term "eating ACs lunch" is a little outdated but I think that is still the case on many of our routes that we both serve. A good example is every single person I have talked to about their experience with Rouge has NOTHING good to say about it. Nothing..

A traveler flying YYC to YYJ for example buys a ticket on AC for $10 less (what a deal!) then gets on the plane and finds out its a Q400. Back in the 90's some still remember that this was served with a BAC146 by AirBC. The traveller then deeply regrets their decision and next time books WJ and fly's on B737. Customer/Guest is happy. I am not trying to hand out glasses of KoolAid but you guys are making out like we are making some bad choices and I would have to disagree. We do pretty good considering we only fly 3 types of aircraft, more so if you consider the variants of 737's.

Now with keeping on the thread topic, the 2nd 767 has arrived at the campus.

[The Raven]

Curious as to why the delivery flight was flown at 28,000 feet (non RVSM).

[DH772]

A traveler flying YYC to YYJ for example buys a ticket on AC for $10 less (what a deal!) then gets on the plane and finds out its a Q400. Back in the 90's some still remember that this was served with a BAC146 by AirBC. The traveller then deeply regrets their decision and next time books WJ and fly's on B737. Customer/Guest is happy. I am not trying to hand out glasses of KoolAid but you guys are making out like we are making some bad choices and I would have to disagree. We do pretty good considering we only fly 3 types of aircraft, more so if you consider the variants of 737's.

You do understand why WJ started Encore right? Because it's more viable to fly a Q400 to YYJ, YLW, YKA etc. WJ isn't flying the 37 to YYJ because they want to attract customer...Provide them with best customer experience... As Encore grows you'll see all the same routes that AC's regional serves be transferred from the 37 to the Q.

[brooks]

DH772
YYC-YYJ served by a dash8. That will never happen, and about as likely as YYC-YVR being served by Dash8. Encore was started to grow the company. Some routes will get dash service but bases such as YLW and YQQ will always need a 737 at peak periods.

[DH772]

Well you're dillusional then if you think YYJ won't be operated by a Q400 sooner than later. Comparing YYJ to YVR route? Really? Sigh....
And yes congrats on making a point that certain destinations are served by a bigger aircraft during peak season. Pretty sure every other airline in the world does that too.
Regional and widebody is a first in WJ history. However, they are not reinventing the wheel here. They will have similar route structure with similar AC sizes serving particular markets.

[brooks]

It never will. I could see us taking the 737 into YCD if the runway and services were upgraded. Only a matter of time.

[cjet]

DH772
YYC-YYJ served by a dash8. That will never happen, and about as likely as YYC-YVR being served by Dash8. Encore was started to grow the company. Some routes will get dash service but bases such as YLW and YQQ will always need a 737 at peak periods.

Brooks sorry to burst your bubble but Encore starts YVR-YYC return on Saturday's in December. BTW Air Canada has been kicking our ass for a while now.

Cjet

[plhought]

We start Calgary-Nanaimo. AC starts Calgary-Nanaimo.
We start Calgary-Terrace.
We start Winnipeg-Gatwick (this spring)
The list goes on...

I was looking at an 1988 paper schedule from Canadian last night - They were flying Calgary - Terrace 6 times a week back then. With a 737 too. Routes come and go (especially into smaller communities) as places/economy/population changes. You guys aren't special.

A traveler flying YYC to YYJ for example buys a ticket on AC for $10 less (what a deal!) then gets on the plane and finds out its a Q400. Back in the 90's some still remember that this was served with a BAC146 by AirBC.

The Q400 is likely faster gate-to-gate than the 146 -

The traveller then deeply regrets their decision and next time books WJ and fly's on B737. Customer/Guest is happy. I am not trying to hand out glasses of KoolAid but you guys are making out like we are making some bad choices and I would have to disagree.

I highly doubt WestJet places passenger 'comfort' over economics. They aren't stupid. Look how normal economy seat pitch has reduced to accommodate the 'plus' economy rows. It's about makin' moolah. Flying a Boeing on a leg that averages less than 70ish people doesn't make sense.

[brooks]

DH772
YYC-YYJ served by a dash8. That will never happen, and about as likely as YYC-YVR being served by Dash8. Encore was started to grow the company. Some routes will get dash service but bases such as YLW and YQQ will always need a 737 at peak periods.

Brooks sorry to burst your bubble but Encore starts YVR-YYC return on Saturday's in December. BTW Air Canada has been kicking our ass for a while now.

Cjet

Please elaborate why you think Air Canada is kicking our ass? If your answer is Rouge I'm going to

[cjet]

DH772
YYC-YYJ served by a dash8. That will never happen, and about as likely as YYC-YVR being served by Dash8. Encore was started to grow the company. Some routes will get dash service but bases such as YLW and YQQ will always need a 737 at peak periods.

Brooks sorry to burst your bubble but Encore starts YVR-YYC return on Saturday's in December. BTW Air Canada has been kicking our ass for a while now.

Cjet

Please elaborate why you think Air Canada is kicking our ass? If your answer is Rouge I'm going to

All you need to look at is the 2015 financials. AC added nearly 10 percent capacity this year and maintained their 85 percent load factor. Westjet on the other hand only grew 6 percent and our load factor is falling. That tells me people are choosing AC over Westjet. You should go for a ride onboard and see why people are choosing AC. Better service, better food,more frequency much better in flight entertainment over Direct tv. Next time you fly with a commuter ask him who they prefer to fly with. Most if not all prefer AC.

Cjet

[True North]

Please elaborate why you think Air Canada is kicking our ass? If your answer is Rouge I'm going to

The two that should really concern you are; customer service and customer satisfaction.

[privateer]

So...
I see we are comparing oranges to melons. This thread has really gotten off topic.

[PostmasterGeneral]

So...
I see we are comparing oranges to melons. This thread has really gotten off topic.

So, it's another thread typical of AvCanada?

[True North]

So...
I see we are comparing oranges to melons. This thread has really gotten off topic.

You lost me. Which are the oranges and which are the melons?

[leftoftrack]

What happened to the apples

[privateer]

Your mom used them to make me a pie.

[AirMail]

I also had his mom's pie

[Realitychex]

Please elaborate why you think Air Canada is kicking our ass? If your answer is Rouge I'm going to [/quote]

All you need to look at is the 2015 financials. AC added nearly 10 percent capacity this year and maintained their 85 percent load factor. Westjet on the other hand only grew 6 percent and our load factor is falling. That tells me people are choosing AC over Westjet. You should go for a ride onboard and see why people are choosing AC. Better service, better food,more frequency much better in flight entertainment over Direct tv. Next time you fly with a commuter ask him who they prefer to fly with. Most if not all prefer AC.

Cjet[/quote]

Here are a few thoughts to be considered.

Air Canada has built a church for Easter Sunday. Everything is tickety-boo on "Easter", which, in Canada is from June 1 to roughly September 20th, and then through the obvious holiday and vacation periods in the late fall, winter and early spring. After that, the "Church" is far too large for the market.

This shows up in AC's seasonal CASM numbers year after year after year. When the "Church" is full, ie in the 3rd quarter, AC generates gazillions of ASM's and RPM's and profitability is pretty good, especially when fuel is at its lowest cost in years.

In August 2015, AC generated 8.165b asm's. Two months later, in another 31 day month, they generated 6.687b asm's, or just 81.9% of peak production. Compare that to the same months in 2014, (7.398b vs 6,159b) or 83.3% of peak summer capacity. Lest anyone forget, AC does not shed any fixed costs or lay off anyone on a seasonal basis.

For this reason, AC's unit costs experience dramatic seasonal fluctuations year after year which result in dramatic seasonal profitability swings. The collection plate is full on Easter Sunday, but the picture isn't quite as rosy in November....

Even with ASM's maximized in peak summer, by it's own data, AC reported a consolidated casm, including interest expense, of C$14.08 cents in 3Q, generated over a system asl of 1,634 miles.

This is after having densed up a very significant proportion of their fleet, including the 777 slaveships, a more efficient contract with Chorus Aviation for Jazz flying, the introduction of SkyService doing the Toronto Island flying as well as the E170 flying, largely from Toronto to the US eastern seaboard, as well as the addition of the much hyped "low cost" Rouge brand, now up to about 40 tails and all kinds of other cost savings "initiatives".

WJ, whose expansion has been focused on much higher cost, short haul growth with close to 30 Q400's added in the last recent 3 years, reported a CASM including interest of C$13.02 cents, but generated over a consolidated asl of....and this is important, just 881 miles.

Stage length adjust WJ's casm to 1,634 miles, almost exactly the distance between Toronto, and both Calgary and Edmonton, where both airlines compete and as any one with even basic knowledge of the industry understands, the cost gap is huge. Or conversely, stage length adjust AC's casm to WJ's 881 mile asl.

It shouldn't be a surprise to anyone that as WJ has focused on strengthening it's feed network in smaller Canadian markets that it's l/f's are flat. Show me a regional carrier, either owned by, or flying for a network carrier that operates with the same or higher loads than the mother ship. It rarely, if ever occurs. This is why Jazz, Skyservice and even Porter no longer provide l/f data. Their loads would spook the investment community out of their shorts.

WJ is adding 4 767-300ER's over the next 8 months or so, with. as can be imagined, very low capital costs and, for now, cheap fuel.

The winter 767 flying will largely be Alberta to Hawaii, about 3,200 miles, close to 4 times it's current ASL. In the summer of 2016, they'll be flying to LGW from various locations in Canada, with the shortest sector being about 3,600 miles.

WJ's casm on this flying will be delightfully lower than it's current consolidated casm, which, even in the summer months, is significantly lower than Air Canada's casm. Needless to say, that casm gap swells significantly in the winter as AC iron goes through heavy maintenance and then sits in the weeds for a good part of the winter, looking for something to do that is compensatory. You will note that most route announcements are all about filing the church on Easter Sunday, not how to fill the church in January, other than by discounting, then discounting the discounting.

Here's another important thought: Air Canada has been in the unique situation of being the ONLY Canadian domiciled network airline operating to Europe, Asia, South America and beyond since late 1999 when Canadian Airlines collapsed. There are few, if any other examples of so called "flag carriers" who have that sort cosy arrangement.

Outside what amounts to scheduled charter ops by Transat, (and a couple others who have come and gone), only Air Canada could offer a network that could get passengers to and from secondary and tertiary markets in Canada. Transat's international flying is from a handful of key gateways, and outside Toronto, Montreal and, to a certain extent, Vancouver, the sched is of the "several flights weekly" nature, and only from Calgary, Edmonton and maybe a couple other gateways. All of it is transatlantic and they have no domestic feed of any consequence.

That changes in the summer of 2016. For the first time in 17, count 'em, 17 years, Air Canada will have a Canadian domiciled network competitor to it's key international destination, London. There is no other international destination in Air Canada's world that has anything close to the demand of Canada to the UK, and specifically, London. Star Alliance doesn't offer a lot of good onward connections from London to places most Canadian's want to go. Besides, outside Africa, Air Canada flies to most of those destinations non-stop from Canada anyway. Few are traveling on AC for from Toronto to London to Copenhagen when there are Toronto to Copenhagen non stops available.

WestJet has a fleet of 140 or so aircraft feeding it's wide body network, as well as code share partners such as Delta and AA feeding key gateways.

Stunningly, a recent search on Kayak for dozens of London destined itineraries from various US cities. large and small, for travel in June 2016 showed WestJet often being the cheapest alternative. Dallas to London, for example, next June 15-29th, is $1,089 on WJA with connections under 3 hrs in Toronto. Air Canada's cheapest one stop from Dallas over Toronto is over $1,800. That's one heck of a premium for LHR, especially as Air Canada's Rouge will operate a parallel Toronto to London service to LGW with, presumably, matched fares to WJ. There are going to be all kinds of people who are going to get indigestion from the $800 difference in fares between the two airports.

One has to assume AA and Delta are complicit in WJ's USA to Canada to London pricing as it undercuts even their non-stop or one stop pricing. That tells me those two behemoth carriers, both of which are now consistently highly profitable, and not just on "Easter Sunday", are comfortable using low cost WJ as a proxy against AC. This is a strategic signal that has yet to be understood by the analyst community. It has enormous implications given AC's plan to divert US originating traffic over their hubs to Europe and Asia.

LGW has enough LCC connections that allow web savvy travelers, which, in this day and age, are pretty much everybody, to be able to buy a Canada to LGW ticket, (or US to Canada to LGW ticket), then buy a ticket on, say, EasyJet to their final destination and still save a boat load off Air Canada or even Air Canada Rouge's non-stop fares to the continent.

Most observers have seen the movie before and know precisely what's going to happen.

Demand is going to shift to LGW as a result of the pricing differential, at all fare levels, and ultimately, fares to LHR are going to implode, neutering a very key source of Air Canada's profitability during the critical 3Q.

The ability to buy to LGW, then add on an EasyJet or other LCC fare beyond is going to cause ALL Canada to Europe fares to see serious weakness next summer. It doesn't take a genius to figure out who is going to be impacted by this sea change. As is always the case in the airline business, it's death by a thousand scalpel cuts.

So, for all the hand wringing about WJ's TATL plans, there's very little risk involved. The numbers make it clear that WJ continues to enjoy a healthy cost advantage over Air Canada, even in the summer months.

There are those that constantly suggest that Air Canada has "fixed" their problem and that they are "competitive" with WJ on any and each of the individual subsets of flying, be it regional with Jazz, short haul with AC, Rouge, trans-border and international.

It's a nice story, but the numbers don't lie. Something in AC's world is not competitive and causing that casm to be 14.08 cents over a consolidated 1,634 mile asl, dramatically higher than WJ's, even though the claim is that in each sector, they are competitive.

As has been the case since WestJet's launch on Feb 29th, 1996 with a couple of old Southwest 737-200's, that casm gap is going to be mercilessly exploited.

It will be fun to watch this all unfold in 2016. You'll see a fender bender in early Aug when 2Q numbers are announced, but the head on collision will be hard to ignore when 3Q numbers, traditionally underwritten by windfall TATL numbers fueled by 17 years of having London and most of Europe all to itself from everything outside a few Canadian cities are unveiled in early November 2016.

Just keepin' it real.....

[TheStig]

Thanks for keeping it real. I hope Easyjet is going add enough capacity to keep up with all the connecting traffic from Texas that is going to codeshare on AA to YVR/YYC/YYZ thanks to these low fares... You really think Westjet is going to 'stimulate' the busiest market in Canadian aviation? Air Canada is going to have all of its Boeing 777's updated to the Dreamliner standard (including the HD's) by next summer and offer 787 service out of YVR (x2 daily) and YYC while BA is bringing their A380 to YVR.

Air Canada does a fine job filling its aircraft and it's nice to see they're commanding a sizeable premium. I think the 2016 Q2-Q3 results will demonstrate that the only thing WJ was able to achieve with their overseas operation was industry low yields.

https://www.youtube.com/watch?v=X8u1jvjk_3w

[rudder]

WJ add a couple of used 767's and some believe that they will meaningfully impact the transatlantic marketplace? Priceless. Talk about hubris.

Take a look at airline share prices and you will see where the bets for success are being placed and where they are not.