Global Solutions

Brick Head · Post by **Brick Head** » Fri Jul 20, 2007 8:35 am

piggy wrote:Fair enough. However given Jazz management style which involves very little imagination or incentive to acquire additional flying, I doubt they will ever fly for anyone else.

As an aside I think that is a little bit of an unfair comment about your management. And before you come through my computer screen and kick my ass let me explain.

In a way the CPA with Air Canada is a double edged sword for Jazz. On the one hand the very lucrative deal is providing good profitability and did provide for a successful IPO for investors. On the other hand it has tied the hands of management preventing them from going after other work.

The CPA says that if Jazz finds other CPA work Air Canada can remove aircraft from the present CPA on a one for one basis. Jazz as we speak is being paid the equivalent of about 27.4 cents CA per ASM. It is highly unlikely any other carrier will pay that kind of money for feed. So if Jazz goes after other work at say 19cents/ASM for example they risk loosing the 27 cents/ASM that AC pays. That would not be in the best interest of investors so management can not pursue it.

So this brings us back to CPA negotiations next year which are supposed to be rate renewal only. Both Jazz and AC need something from each other. Because of this I suspect there will be more on the table than just renewal rates.

Amazing how this was set up........no? IMO there are no coincidences taking place.

It is a well orchestrated musical. The conductor is ACE and we can't see the music sheet.

Brick Head · Post by **Brick Head** » Fri Jul 20, 2007 9:11 am

piggy wrote: I look at history with the growth of the regionals in Canada and USA, the fact that airline analysts say that AC 's costs are still too high, increased growth in passengers overall predicted for the future.

Piggy,

Check Jazz's quarterly and annual results.

You are correct Air Canada's consolidated cost are too high. One of those costs however is the Jazz CPA. The Jazz CPA is costing Air Canada the equivalent of 27.4 cents CA/ASM for 5.5 billion ASM's (approximately 16% of the North American lift.)

The cost of the CPA is not broken out of the Air Canada results. So when Air Canada pays approximately 10 cents/ASM more than the competition for 16% of its NA lift you are right. Air Canada's costs are too high.

tonysoprano · Post by **tonysoprano** » Fri Jul 20, 2007 11:22 am

This is like beating a dead horse. AC will not return to profit until the present arrangement, including the present management, is changed. The frustrating part is that it's making money but losing it to other interests.

piggy · Post by **piggy** » Sat Jul 21, 2007 1:52 am

OK . I do not follow the tech. bull sh*t becuase it is bull Sh*t, I simple follow the macro economic view point by anaylsts and figure evrything out from there. The reason, i am not an economist specializing in aviatiion. I just listen to what they have to say.

Jazz is set up as a n income trust and as such is tax friendly for now. This may be the reason the the setbup betweeen AC and Jazz. Never get fooled by the accountant...

Really you think I have an unfair view point of the mangement of jazz eh. Prove me wrong...where have they got more flying, more work for jazz other than AC------no where. When will they ..........?
I say a long time-why bother????

tonysoprano · Post by **tonysoprano** » Sat Jul 21, 2007 6:20 am

Here's a partial list:
yow-lga, yow-bos, yyz-yqr,yyz-yqt,yow-ywg.

Traf · Post by **Traf** » Sat Jul 21, 2007 6:54 am

Tony, that list is just flying that AC transfered to Jazz while at the same time is taking routes away. All AC is doing is putting the correct sized plane on the routes.

By extra flying, I think everyone is talking about outside of the AC regional/feeder routes. Stuff like Cargo and maybe delivery service for Bombardier etc...

Dark Helmet · Post by **Dark Helmet** » Sat Jul 21, 2007 7:38 am

All this global solution thread are the same it starts

with...........

.........................Then

.......................and

then ...........

.......follwed by...........

.......and then

some more...........

Followed by more

all because

of.........

.........and

.........I think we should all

just.......

...........beacuse I am

and:

and

.......I am going to

......because

if I read anymore of this I am going to

.........

tonysoprano · Post by **tonysoprano** » Sat Jul 21, 2007 8:17 am

Dh. Nice art work.

Traf.
All I know is those routes I mentioned were routes done by AC mainline when we had RJ's and some of those routes were even 320. The right plane on the right route is great in theory but still takes something away from one group and I have not seen any of those routes replaced with additional flying for the mainline. In fact as you know, we don't even do our own cargo. I am not aware of any route that mainline took away from Jazz. Can you recall any of those routes?. I'm not current on this stuff as good as you guys are. In the end it will all work itself out or at least that's what GS will attempt to resolve.Keep the faith.

piggy · Post by **piggy** » Sat Jul 21, 2007 8:45 am

route from jazz, yyz-iah- probably was AC originally. the routes will always be fluctuating between companies.
what i find interesting is global travel is forcast to increase. So is canadian travellers. this means that flights like yyc-ylw or yyz-yfc/yqm, etc currently served by 50 seat crj that are generally full will need more a/c. more likely a bigger crj to fit the larger amt of people flying. traded- in crj -100 to bombardier for crj705 is likely.
i have been told by chainsaw at jazz that the only reason more 705 are not at jazz yet is because of all the money went to the 777 order, but they are coming for sure.
crj1000 is available in 2009 as well(a further stretched cr900) with an undisclosed buyer . funny how the crj1000 is aviable in 2009

tonysoprano · Post by **tonysoprano** » Sat Jul 21, 2007 10:33 am

Traf · Post by **Traf** » Sat Jul 21, 2007 10:34 am

tony, I can't specifically quote what routes have gone to whom. I do know that we have had D8 service replaced by 1900s on several runs and some of the bigger runs (Houston maybe) have been replaced by EMB or 320s. Don't quote me on the destinations though.

The reality is, no group owns a route anymore. AC/ACE will put whomever they want on it. It could be GGN, CMA, JAzz or Mainline. It is hard to say that Jazz took a route from mainline when Jazz is not bidding on routes, we are simply told where to take off and land. Welcome to the post CCAA world.

I really don't think mainline guys have much to complain about because a couple of shitty routes have had RJs put on them. You guys are flying up the seniority list, guys are retiring in hoards and new planes are arriving weekly. What the hell else do you want tony? LOL!!! Pour yourself a nice cold drink, bid whatever suits your needs and let the small stuff roll! The world as we know it changed when we entered CCAA.

Cheers

tonysoprano · Post by **tonysoprano** » Sat Jul 21, 2007 11:59 am

Traf.
In some cases you're right, some of these routes keep bouncing back and forth between the two groups. The right plane on the right route was something Milton was ademant about from his first day on the job. I forgot about those pesky 1900s. Didn't realize they could have an impact too. In the end all there is to do is sit and wait for the next deal. Could be the Emb to Jazz and more widebodies for us. Who knows. My experience with this whole thing is someone always gets something. So now I'm going to take your advice and go pour that long drink and by the way, I suggest you take your own advice too.

Brick Head · Post by **Brick Head** » Sat Jul 21, 2007 5:13 pm

Piggy,

"OK . I do not follow the tech. bull sh*t becuase it is bull Sh*t, "

And that is exactly the responce that has seen GS go no where. Unwillingness to accept, and deal, with the present reality. Yes accountants can play games with numbers but it only goes so far. The Tax man and the OSC do have some rules. And yes we are naturally going to have a difference of opinion when it comes to where this is all going. But some things are definitive. How much AC is paying Jazz for the CPA is one of them. We can determine gross revenue and total ASM for Jazz. We already know 99%+ of that revenue comes from AC. This is not rocket science. It equals 27.4 cents CA/ASM. The exact same number that is in Jazz's financial results. Plugging your ears and going NA NA NA NA when the issue comes up won't change it. The question that needs answering is why, how, and where is the money going?. But if you can't even acknowledge what is in black and white.......

"Really you think I have an unfair view point of the mangement of jazz eh. Prove me wrong...where have they got more flying, more work for jazz other than AC------no where. When will they ..........?
I say a long time-why bother????"

I am not in anyway claiming you should love your management. What I was saying was that their hands are presently tied from seeking other work. Of course to understand what I was saying you have to accept that Air Canada is infact paying 27.4 cents CA/ASM to Jazz for the CPA.

Brick Head · Post by **Brick Head** » Sat Jul 21, 2007 6:06 pm

Piggy,

"i have been told by chainsaw at jazz that the only reason more 705 are not at jazz yet is because of all the money went to the 777 order, but they are coming for sure."

Why would Air Canada want to expand a CPA that is about 60% more expensive than the going rate? ACE set the present CPA up before Air Canada had its own BOD and so is stuck with it for now. I find it very very hard to believe that AC is interested in expanding the present deal. They might use more aircraft as a carrot to get a better deal overall. But just expand the present one?

"crj1000 is available in 2009 as well(a further stretched cr900) with an undisclosed buyer . funny how the crj1000 is aviable in 2009"

Jazz is now a seperate company. Jazz can operate any aircraft it wants on behalf of anyone it can strike a CPA with for those aircraft. Why are you limiting yourself to a crj? Maybe a foreign carrier would like some feed between say YYZ and YVR. Jazz is in transition.

Why is everyone worried about 2009? Nothing is going to happen. No strike. No bankruptcies. No raises. We will all be forced into mediation/arbitration and get peanuts. I guess it is fear of the unknown but the hoopla surrounding "2009" seems to have gotten way out of control.

Look. Both Jazz's numbers and Air Canada's numbers are bad at the present. Very bad in fact. But it is not that they are not profitable. Money is flowing out of these company in heaps.

At some point Jazz will have what ever is buried in their consolidated CASM removed. This in turn will allow Jazz to strike a market value CPA with Air Canada in exchange for things Jazz needs. Almost all equity will have been removed, however our numbers will magically improve and we will be profitable. Starting fresh from that point.

The worst thing we will have to endure is the business community calling Milton a genious for putting it all together.

Traf · Post by **Traf** » Sat Jul 21, 2007 8:20 pm

Bede · Post by **Bede** » Sun Jul 22, 2007 11:44 am

Just to clarify Brick Head,

From what I know our CPA has a clause that says Jazz can't get a CPA with another carrier and compete on AC routes. We can't do YYZ-BOS for AC and do the same route with a different aircraft for Delta.

Brick Head · Post by **Brick Head** » Sun Jul 22, 2007 12:43 pm

Bede wrote:Just to clarify Brick Head,

From what I know our CPA has a clause that says Jazz can't get a CPA with another carrier and compete on AC routes. We can't do YYZ-BOS for AC and do the same route with a different aircraft for Delta.

Nope. At least not that I have seen in the CPA. Got a reference? Obviously the CPA gives AC complete control over the 133 aircraft in their CPA with Jazz. So you would need different aircraft to operate for someone else.

This section of the Jazz CPA makes me believe Jazz can operate for another carrier. It is also the clause that explains why Jazz is reluctant to go after other work for the time being. Jazz needs this clause removed.

Basically it is not that Jazz can't go after other work. It is that they risk loosing lucrative AC work if they do so. This arrangement if unchanged will prevent Jazz from expanding.

There will be more on the table than just renewal rates next year. I suspect we will see a substantially different CPA as a result.

Cheers

Changes to Jazz’s Fleet
Jazz and Air Canada have agreed on a long range fleet plan which sets out the number of Covered Aircraft and
Active Aircraft, by aircraft type, on a monthly basis through December 2007 and the number of Covered Aircraft on an
annual basis through December 2015. The total number of Covered Aircraft cannot, at any time during the term of the
CPA expiring in December 2015, be reduced below the numbers set forth in the existing long range fleet plan without
the mutual agreement of Air Canada and Jazz, except 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, in which
case 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. See "Air Canada's Right to Reduce Covered Aircraft". All of Jazz's
fleet of 120 aircraft as of November 30, 2005 are Covered Aircraft under the CPA except for one Dash 8 aircraft
assigned to Jazz's charter operations. Of the 135 aircraft scheduled to make up Jazz's operating fleet by July 2006, 133
aircraft will be Covered Aircraft under the CPA and the remaining two aircraft (Dash 8s) are expected to be used for
Jazz's charter operations. See "The Jazz Business — Fleet".