5T/7F Merger called off

[thirdtimecharm]

http://www.newswire.ca/en/story/1433320 ... iscussions

[YYZSaabGuy]

This really isn't terribly surprising. The merger was originally announced in April 2014; by late September, management was making statements around how complex the deal was, that they were hoping to wrap up due diligence by the end of 2014, indicating that the merger might take another two years to conclude, and indicating that the delays were attributable to a need to make sure they were "doing the right thing". I'm not privy to what the specific issues were, but there's just no way a deal like this works with a background like that.

[dhc#]

What happens now ?

[tbaylx]

Nothing, back to ops normal I guess.

[Donald]

It'll be interesting to see if any of the rumours being thrown around will come true, at various times I've heard one or both are either close to bankruptcy or close to a major expansion.

[dhc#]

Recently, 7F has given up their 767, reduced or stopped service to at least one community in the Keewatin, laid off cargo staff in YFB and Sakku Investments bailed on them too. Has 5T scaled back in any capacity ?

http://www.nunatsiaqonline.ca/stories/a ... first_air/

[FICU]

Scaled back the service between YZF and YFB.

The following is for 2014:

-Three additional Boeing 737-300 aircraft were acquired;
-Canadian North's first 737-300 combi aircraft will enter service this year;
-Several new charter contracts were secured such as Celebrity Cruise Lines and others;
-The Aurora Rewards program was launched, aimed at the Northern traveller;
-Long-term partnerships, such as the CFL, have been secured.

Still waiting on official notice of re-securing the long term CNRL contract.

Hiring continues for both pilots and F/As.

[bmc]

Getting rid of the 767 made sense. The new arrangement is more profitable for them. 7F has been bleeding for some time. Changes had to happen.

[thirdtimecharm]

Getting rid of the 767 made sense. The new arrangement is more profitable for them. 7F has been bleeding for some time. Changes had to happen.

What is the new arrangement?

[thirdtimecharm]

Recently, 7F has given up their 767, reduced or stopped service to at least one community in the Keewatin, laid off cargo staff in YFB and Sakku Investments bailed on them too. Has 5T scaled back in any capacity ?

http://www.nunatsiaqonline.ca/stories/a ... first_air/

They cut one of their east/west jet frequencies.

The biggest change at 5T was Nunasi bailing just prior to the merger announcement. By all accounts, Norterra is a gong show with the minimal profits at Canadian North going to feed the bleed at NTCL. If you're a northern supplier to 5T, you know that they are very slow to pay their bills. I don't understand why people think they are in such good shape financially. History shows that most failed Canadian airlines were expanding right up until the end.

[thirdtimecharm]

Scaled back the service between YZF and YFB.

The following is for 2014:

-Three additional Boeing 737-300 aircraft were acquired;
-Canadian North's first 737-300 combi aircraft will enter service this year;
-Several new charter contracts were secured such as Celebrity Cruise Lines and others;
-The Aurora Rewards program was launched, aimed at the Northern traveller;
-Long-term partnerships, such as the CFL, have been secured.

Still waiting on official notice of re-securing the long term CNRL contract.

Hiring continues for both pilots and F/As.

-Your leases are in US dollars and are getting more expensive as the Canadian dollar slides.
-Cargo is being flown by both 5T and 7F at a loss- the more you fly the more you lose
-How much profit are you really making when you win contracts bidding against companies with more efficient and higher utilized fleets than yours?
-80% of the Nunavut market is set by medical travel contract which covers both medical patients and government travel- Aurora Rewards doesn't influence that and you are locked into a 50-50 arrangement with 7F. The remaining market is being flown based on lowest ticket price.
-How much revenue does the CFL bring you?
-I understand that you bid CNRL using part of 7F's fleet. Is that bid impacted by the breakdown of merger talks?

I think that the merger idea didn't come out of the ether. Two companies that corporately hate each other don't merge because they want to.... they merge because they need to.

[FICU]

-Your leases are in US dollars and are getting more expensive as the Canadian dollar slides.

They are?

-Cargo is being flown by both 5T and 7F at a loss- the more you fly the more you lose

Really?

-How much profit are you really making when you win contracts bidding against companies with more efficient and higher utilized fleets than yours?

And who would you be talking about that could take over moving well over 30,000 workers a month across the country? "Higher utilized"? You have no idea how much utilization we get out of the -300s.

-80% of the Nunavut market is set by medical travel contract which covers both medical patients and government travel- Aurora Rewards doesn't influence that and you are locked into a 50-50 arrangement with 7F. The remaining market is being flown based on lowest ticket price.

Really?

-How much revenue does the CFL bring you?

You tell me. You seem to know a lot.

-I understand that you bid CNRL using part of 7F's fleet. Is that bid impacted by the breakdown of merger talks?

With 7F equipment like the ATRs, 400 combis or Hercs since CNRL won't use -200s anymore... are you sure about that? Time will only tell when the contract is officially awarded will it not?

I think that the merger idea didn't come out of the ether. Two companies that corporately hate each other don't merge because they want to.... they merge because they need to.

Really?

Wow, for a rampie in Rankin you seem to know more about the inner financials of 5T and 7F than most of the respective employees!

[thirdtimecharm]

-Your leases are in US dollars and are getting more expensive as the Canadian dollar slides.

They are?

-Cargo is being flown by both 5T and 7F at a loss- the more you fly the more you lose

Really?

-How much profit are you really making when you win contracts bidding against companies with more efficient and higher utilized fleets than yours?

And who would you be talking about that could take over moving well over 30,000 workers a month across the country? "Higher utilized"? You have no idea how much utilization we get out of the -300s.

-80% of the Nunavut market is set by medical travel contract which covers both medical patients and government travel- Aurora Rewards doesn't influence that and you are locked into a 50-50 arrangement with 7F. The remaining market is being flown based on lowest ticket price.

Really?

-How much revenue does the CFL bring you?

You tell me. You seem to know a lot.

-I understand that you bid CNRL using part of 7F's fleet. Is that bid impacted by the breakdown of merger talks?

With 7F equipment like the ATRs, 400 combis or Hercs since CNRL won't use -200s anymore... are you sure about that? Time will only tell when the contract is officially awarded will it not?

I think that the merger idea didn't come out of the ether. Two companies that corporately hate each other don't merge because they want to.... they merge because they need to.

Really?

Wow, for a rampie in Rankin you seem to know more about the inner financials of 5T and 7F than most of the respective employees!

Hehehehe I may have taken a couple of wrong turns on the employment ladder

All aircraft leases are in US dollars so when the Canadian dollar goes down, you end up paying more Canadian dollars per month for the lease. Since all of your fleet is leased, this has an impact on your operation. You are paying 12% more for your leases today than you were in 2011, which isn't an insignificant amount.

I don't think that its a secret that cargo in Baffin is being flown at a loss. I have seen 5T quotes for cargo for a medium sized customer at $2.10/kg from YOW to YFB which is about $0.95/lb. If you figure you have 2500 lbs per position then your revenue per position is $2375 which is roughly equivalent to 2.5 one way passengers. In order to move that cargo you have huge overhead costs which basically make it not very worthwhile. How profitable is it moving cargo on a Dash 8-100?

You're right- I don't know your utilization and I take that back. I just find it interesting that when you are bidding against Enerjet and Canjet's -700 and winning, then there can't be a huge amount of fat left over.

Yes. 80% of the Nunavut market is paid for by the GN- that isn't a secret either and the last contract was basically split 50-50. The remaining passengers are smaller businesses or individuals who are extremely price sensitive- people like my sister will choose a ticket if it is $5 cheaper, regardless of a loyalty program. It is a southern idea that doesn't translate very well into the northern market.

You are a sponsor of the CFL- and that usually implies that you are giving more than you are getting. Is someone going to choose to go from Igloolik to Ottawa on 5T as opposed to 7F because you sponsor the Edmonton Eskimos? I don't think so.

Agreed on CNRL- just heard that the bid includes the -400 all pax and that the bid went in before the merger was called off so was wondering what the impacts of this are.

Why would 5T want the merger? Why would 7F want the merger? They are both hurting and needed it. The amount 5T is hurting is always underestimated for some reason. How many CNRL hours will need to be flown to go rescue the barge in the Beaufort or move that last sealift into Cambay?

No need to be defensive- you are the all knowing driver and I am just a rampie. Fly safe and see ya passing through here!

[FICU]

You're right- I don't know your utilization and I take that back. I just find it interesting that when you are bidding against Enerjet and Canjet's -700 and winning, then there can't be a huge amount of fat left over.

What you don't realize is that 5T offers more to the industrial clients than just lift. Do you know that Canjet even bid on Kearl Lake or CNRL? Do you know what the bids were if they did? You are assuming a lot.

Yes. 80% of the Nunavut market is paid for by the GN- that isn't a secret either and the last contract was basically split 50-50. The remaining passengers are smaller businesses or individuals who are extremely price sensitive- people like my sister will choose a ticket if it is $5 cheaper, regardless of a loyalty program. It is a southern idea that doesn't translate very well into the northern market.

So you know the details of the awarded contracts by the Government of Nunavut in respect to medical travel?

You are a sponsor of the CFL- and that usually implies that you are giving more than you are getting. Is someone going to choose to go from Igloolik to Ottawa on 5T as opposed to 7F because you sponsor the Edmonton Eskimos? I don't think so.

A bit more than a sponsor seeing we fly the teams including the Eskimo's, Stampeders, Roughriders, Blue Bombers, and Alouettes. And we will be flying all teams for the Eastern and Western Championships and the Grey Cup.

Agreed on CNRL- just heard that the bid includes the -400 all pax and that the bid went in before the merger was called off so was wondering what the impacts of this are.

Are you sure about your sources? Why would you take a combi best suited to northern operations and dedicate it to cross country charters? If 5T could get it's hands on a -400 combi it would be running to YFB or YEV. BTW... we are flying CNRL workers across the country with 300s with no problems. The delay in awarding the contract is due to the fact it was initially written with no out of province flying and since we are now flying CNRL workers out of province it has to be amended.

Why would 5T want the merger? Why would 7F want the merger? They are both hurting and needed it. The amount 5T is hurting is always underestimated for some reason.

So you know for a fact 5T is in financial difficulties. Care to name a source or is this just speculation and assumption on your part?

Why the hate on for northern airlines?

[thirdtimecharm]

Why the hate on for northern airlines?

I don't have a hate on for northern airlines at all. In theory, until last spring I was one of your owners and I used to be a rainbow warrior. You are assuming 5T is financially sound- your assumption isn't any more or less valid than mine as I am guessing you haven't seen Norterra's financials.

The 7F component of the CNRL bid wasn't a combi but the -400 all pax from what I have heard from reliable sources. Again I agree this is an assumption and you are likely right- I just don't automatically believe that something is profitable when signs are pointing to it not being profitable.

And yes, I do know the details of the medical travel contract- the split between Canadian and First Air was 50%-50%- there won't be a change of GN marketshare for the life of the contract. No matter how many football teams you sponsor, you won't get any more market share in Nunavut.

As for your overall financial situation, why did one of your owners sell their shares in the spring if they were making so much money off you? When I worked for one of your former parent companies, all we saw was cash calls and never any dividends. Nothing of substance has changed since then.

[FICU]

I don't have a hate on for northern airlines at all. In theory, until last spring I was one of your owners and I used to be a rainbow warrior. You are assuming 5T is financially sound- your assumption isn't any more or less valid than mine as I am guessing you haven't seen Norterra's financials.

It's becoming more clear. You are a former beneficiary who is now disgruntled because 5T is no longer part owned by Nunasi. I have no idea why Nunasi wanted out but can only speculate they were in financial difficulty and needed some cash.

What does 5T's involvement with the CFL have to do with flying skeds in the north?

As you can clearly see 5T has diversified it's operations into the industrial charter segment and sports and leisure charter market because with Westjet and Air Canada cherry picking the easy northern routes it makes it's much tougher on a northern owned airline to to provide proper service to it's customers and remain financially healthy.

I have no idea what a rainbow warrior is other than someone affiliated with Greenpeace.

This could go on and on but it's the weekend... enjoy yours!

[tailgunner]

Thirdtimecharm,
I do not really have a dog in this fight, but i see it as irelevant what type of Boeing 5T named in their bid. They seemingly do not need 7F. One can buy/lease a -400 Boeing this afternoon if one really needs it. There are literally hundreds available....
You raise the point of the exchange rate on 5T lease payments. You are probably a little correct in assuming an increase in AC rent, however, do not forget that right now the leasing business is highly competitve and 5T can negotiate from a relative position of strength vis a vis exchange rate/rent. It is far more profitable for the leasee to have their AC on contract than sitting idle on their ramp/ in the desert gathering dust.

[thirdtimecharm]

Thirdtimecharm,
I do not really have a dog in this fight, but i see it as irelevant what type of Boeing 5T named in their bid. They seemingly do not need 7F. One can buy/lease a -400 Boeing this afternoon if one really needs it. There are literally hundreds available....
You raise the point of the exchange rate on 5T lease payments. You are probably a little correct in assuming an increase in AC rent, however, do not forget that right now the leasing business is highly competitve and 5T can negotiate from a relative position of strength vis a vis exchange rate/rent. It is far more profitable for the leasee to have their AC on contract than sitting idle on their ramp/ in the desert gathering dust.

Good points... my intent didn't translate very well when I was writing. Must have been the 45kt winds yesterday

[bmc]

Getting rid of the 767 made sense. The new arrangement is more profitable for them. 7F has been bleeding for some time. Changes had to happen.

What is the new arrangement?

http://www.cargojet.com/pressReleases/2014/2014-19.htm

[Donald]

bmc: you have some insight with the players involved. Correct me if I'm wrong, but isn't this the second failed attempt by a new 7F president at either selling or merging the airline? What's next?