Be Ready

[Fanblade]

Aerobod,

Your analysis is assuming the parties involved in the labour impasse take the labour dispute to mutually assured destruction. How often have you seen this happen? Realistically speaking do you really think Onex and ALPA are that stupid? ALPA has one of the largest and respected Financial Data & Analysis department in North America. They know what WJ can and can not afford. We can do all the speculative napkin math we want, but it won’t tell us anything we can hang our hat on. The only thing that is relevant is that the Union and company know exactly where the red lines are. And they do. It would be irresponsible as a union not to know.

http://nowaydpa.alpa.org/ALPAADVANTAGES ... fault.aspx

Maybe you are not used to normal positional bargaining.

It untimely is adversarial. Unfortunately most positional bargaining just ceases to continue progressing without starting the clock ticking toward work stoppage. The only way for a union to start that clock in Canada is to request conciliation. It is rare for bargaining to proceed any differently. What is going on is completely normal. I get many people at WJ may not be used to this normal.

You have to understand I’m reading your posts and seeing someone, articulated and educated at that, take what is normal for early stage bargaining in Canada, and making a massive leap to a three month strike ending in Mutual Assured Destruction.

I’m thinking WTF? Chill bro.

There is a lot more water yet to go under the bridge. It absolutely is stressful. May I suggest if you care about your friends at WJ that you don’t make it worse by taking your napkin math down a rabbit hole toward Armageddon. If your concern is that ALPA will push too far? I can assure you they won’t. I can also assure you they will push further than WJ wants them to.

Unfortunately our system is set up in an adversarial manor. A system where it isn’t resolved until both parties put a gun to each other’s head. This isn’t just the union choosing this route. It is also WJ. Nevertheless normal.

[Curiousflyer]

You obviously missed or didn't read the CASM/RASM analysis and if you did either didn't understand it, or are not willing to present a counter-point based on alternative figures or interpretation of the figure I presented (which I provided the info to where that public info was from). The snipets of other parts of the thread that you have just posted in this reply are meaningless without the context of the analysis parts.

It is certainly speculative, but based on analysis and reality, not fear mongering. Investment companies such as Onex are in the business of levering assets, not subsidising businesses that have become loss makers.

Try presenting a financially based analysis of why you think Onex should continue to keep WS in the portfolio, if not who do you think would buy WS in a state where assets have been exhausted in a protracted labour dispute (bearing in mind foreign airline ownership rules pretty well restricting the buyer to being majority Canadian)?

I know you are very pro-union and anti-management in your comments across various forums besides WS, but financial analysis should be possible without any assumed starting bias, the figures should be a basis for discussion that opinions of what they mean can be formed from. I don't see where you have made any attempt to provide a quantitative or even qualitative analysis that in any way backs up your position or gives you any reason to give a reasoned counterpoint to my analysis that leads to my conclusions (that you have quoted and criticised because you don't like them).

You’re analysis failed to account for cumulative inflation. 50% over the next 4 years could only be a real gain of 20%. The overall increase to CASM you calculated at 8.8% doesn’t include inflation and also includes profit share, which in your predictions there wouldn’t be any.
Trying to guess a private corporations finances from the outside like this is somewhat ridiculous. We have no concept of the CASM, and likely ONEX doesn’t either, as it’s primarily used by publicly traded airlines to compare to one another. What we do know is that WestJets compensation package is not enough to retain or attract experienced pilots. We also know that ALPA has WAY more financial data on WestJet than any other entity, so ALPa will now be making their case to a federal conciliator on why they think they should get what they want, and with way better financial information than we do.

From Onex’s quarterly report “ The net gain from Onex Partners V was primarily due to the underlying fair value increases of Acacium Group, Convex, Imagine Learning and WestJet.”

[aerobod]

Aerobod,

Your analysis is assuming the parties involved in the labour impasse take the labour dispute to mutually assured destruction. How often have you seen this happen? Realistically speaking do you really think Onex and ALPA are that stupid? ALPA has one of the largest and respected Financial Data & Analysis department in North America. They know what WJ can and can not afford. We can do all the speculative napkin math we want, but it won’t tell us anything we can hang our hat on. The only thing that is relevant is that the Union and company know exactly where the red lines are. And they do.

http://nowaydpa.alpa.org/ALPAADVANTAGES ... fault.aspx

Maybe you are not used to normal positional bargaining.

It untimely is adversarial. Unfortunately most positional bargaining just ceases to continue progressing without starting the clock ticking toward work stoppage. The only way for a union to start that clock in Canada is to request conciliation. It is rare for bargaining to proceed any differently. What is going on is completely normal. I get many people at WJ may not be used to this normal.

You have to understand I’m reading your posts and seeing someone, articulated and educated at that, take what is normal for early stage bargaining in Canada, and making a massive leap to a three month strike ending in Mutual Assured Destruction.

I’m thinking WTF? Chill bro.

There is a lot more water yet to go under the bridge. It absolutely is stressful. May I suggest if you care about your friends at WJ that you don’t make it worse by taking your napkin math down a rabbit hole toward Armageddon. If your concern is that ALPA will push too far? I can assure you they won’t.

Unfortunately our system is set up in an adversarial manor. A system where it isn’t resolved until both parties put a gun to each other’s head. This isn’t just the union choosing this route. It is also WJ. Nevertheless normal.

I agree we are still in mutual posturing, I’m hoping there is a mutual position that both sides can agree on, as I have said a short strike wouldn’t be much of an issue. Hopefully you are right that ALPA won’t push too far.

I still worry that Onex is too much driven by the finances of the decision (which they have demonstrated in the past, they have no skin in the game of WS brand or any remaining “culture”), as GS is now in more of an advisory role for his “vendetta” against AC to likely have much sway, but things should still have them in the long term game if there isn’t too much further impairment to their WS asset.

[aerobod]

You obviously missed or didn't read the CASM/RASM analysis and if you did either didn't understand it, or are not willing to present a counter-point based on alternative figures or interpretation of the figure I presented (which I provided the info to where that public info was from). The snipets of other parts of the thread that you have just posted in this reply are meaningless without the context of the analysis parts.

It is certainly speculative, but based on analysis and reality, not fear mongering. Investment companies such as Onex are in the business of levering assets, not subsidising businesses that have become loss makers.

Try presenting a financially based analysis of why you think Onex should continue to keep WS in the portfolio, if not who do you think would buy WS in a state where assets have been exhausted in a protracted labour dispute (bearing in mind foreign airline ownership rules pretty well restricting the buyer to being majority Canadian)?

I know you are very pro-union and anti-management in your comments across various forums besides WS, but financial analysis should be possible without any assumed starting bias, the figures should be a basis for discussion that opinions of what they mean can be formed from. I don't see where you have made any attempt to provide a quantitative or even qualitative analysis that in any way backs up your position or gives you any reason to give a reasoned counterpoint to my analysis that leads to my conclusions (that you have quoted and criticised because you don't like them).

You’re analysis failed to account for cumulative inflation. 50% over the next 4 years could only be a real gain of 20%. The overall increase to CASM you calculated at 8.8% doesn’t include inflation and also includes profit share, which in your predictions there wouldn’t be any.
Trying to guess a private corporations finances from the outside like this is somewhat ridiculous. We have no concept of the CASM, and likely ONEX doesn’t either, as it’s primarily used by publicly traded airlines to compare to one another. What we do know is that WestJets compensation package is not enough to retain or attract experienced pilots. We also know that ALPA has WAY more financial data on WestJet than any other entity, so ALPa will now be making their case to a federal conciliator on why they think they should get what they want, and with way better financial information than we do.

From Onex’s quarterly report “ The net gain from Onex Partners V was primarily due to the underlying fair value increases of Acacium Group, Convex, Imagine Learning and WestJet.”

Yes, all valid points, but I think I stated earlier that inflation would be on top of that 20%, if not that is what I based assumptions on. CASM in this case has all been based on published 2019 figures before Onex, they won’t have shifted by much without a major change in internal processes, the non WS factors such as fuel can be obtained from similar airlines, but private obscurity of the WS figures will mean some drift.

I would argue that Onex is very aware of the CASM figures, as I was still at WS in the early days of the negotiations and had to provide my very specific contribution to it relative to my IT teams. They seem to be very much a cost vs value (benefit) organisation, CASM gives them a somewhat standardized benchmark, although from a standard metric perspective we actually tracked 4 CASM specific metrics in the Data Analytics team on behalf of The Business, as there are some CASM subtleties that have to be taken into account in certain analyses.

[lostaviator]

I do believe Onex is actively evaluating their holdings. All investors should.

That being said, if they decide to close this shop down, it will be because of the horrible mismanagement and lack of direction over the last few years and NOT because of any employee group. ES was perfectly happy carrying on down this path of making WJ an AC competitor. even though it was clearly costing us. Now we AVH who has pretty much said ES and his vision were wrong. Yes I know GS started the WB program but ES was vital to the growth of the 787 product as chief commercial officer and then the 787. It was his baby.

They used to talk about the need to balance the needs of our three pillars - our customers, our people, and our business. I don't think we are focusing on any of those three pillars anymore. We are off course and that will be the reason for the wreck.

WJ closing down will be unfortunate and I will miss the people I work with. With all the new market entrants, someone is bound to fail eventually. I'd rather get this over with at a young age when I have the ability to start over.

I think I am going to refrain from contributing further to this thread. We all know these forums are frequented by management and we are feeding them things that make us nervous. We can expect "we will shut down" as a threat going forward based on the 8 pages of comments dedicated to the subject here. I'll trust the economic advisors at ATPL - they've all been in their positions longer than any of our current executives (combined).

[Conflicting Traffic]

- WS was originally worth about $4bn when purchased by Onex, with most of that value being in owned aircraft and WestJet brand goodwill

- Covid hammered the asset value, difficult to say exactly from the Onex corporate statements, but going by the increased lease-back amount to provide capital and approximate halving of owned assets, I would say that the value of the company dropped by $1.5bn due to physical owned asset reduction and about $0.5bn in the brand value loss if the company was to be sold for it's name due to negative press and decline in customer service

- Therefore post Covid I would put the company value at $2bn.

- In a protracted labour dispute (I stated 3 months), the initial cost before staff layoffs across the workforce is about 50% of normal operating cost, with fuel, airport and nav fees being reduced to close to zero, but employee cost besides the pilots and other aircraft related costs not reducing by much, as an approximately a $13m per day revenue company and costs and revenue being close to equal at the moment, 3 months would cost about $593m in keeping the operations ticking over and ready to resume, if other staff are laid off, then restart will take a lot longer.

- APPR refunds or re-accom on other airlines would remove most of the forward bookings, typically between 2 and 3 months for most airlines, so lets take 50% refund for 2.5 months of bookings and a cost of re-accom of 50% more than operating by WS itself, leading to 0.5x2.5 + 1.5x0.5x2.5 = 3.125 months of revenue to be returned or used for re-accom, about $1,235m

- on operations re-start, the booking curve has to be rebuilt again, but most flights will have to be flown with low load factors as opposed to much in the way of flight cancellations. This will lead to costs on average about twice revenues for the 2 month period to build the booking curve from 0 to 100%, about $6m per day loss on average, so another $365m charge.

- total capital needed from the beginning of a strike to 100% restoration of service would therefore be about $2.2bn.

So WS could dip to somewhere between a negative and $1bn asset value based on the above (as the forward booking refund amount is not an asset, but still affects immediate capital needs and goodwill value is difficult to pin down), if capital is financed through remaining owned aircraft sale and the brand still has some value left in it. On resumption of service, once the forward booking curve is rebuilt, there would be more working capital again, perhaps WS would just delay APPR refunds and paying suppliers until the strike was over? This would likely put even more pressure to strengthen APPR enforcement across the industry.

At this point, this is where I believe Onex has the hard decision to fold or continue, as they will likely have to provide some working capital to WS if they continue and the brand value is diminished, as is the value of physical assets owned. They would have to see good profits ahead to continue, in my opinion.

What is your interpretation of the above?

My interpretation is the WestJet management should try really hard to avoid a strike. I wonder how they could do that?

[cdnavater]

You obviously missed or didn't read the CASM/RASM analysis and if you did either didn't understand it, or are not willing to present a counter-point based on alternative figures or interpretation of the figure I presented (which I provided the info to where that public info was from). The snipets of other parts of the thread that you have just posted in this reply are meaningless without the context of the analysis parts.

It is certainly speculative, but based on analysis and reality, not fear mongering. Investment companies such as Onex are in the business of levering assets, not subsidising businesses that have become loss makers.

Try presenting a financially based analysis of why you think Onex should continue to keep WS in the portfolio, if not who do you think would buy WS in a state where assets have been exhausted in a protracted labour dispute (bearing in mind foreign airline ownership rules pretty well restricting the buyer to being majority Canadian)?

I know you are very pro-union and anti-management in your comments across various forums besides WS, but financial analysis should be possible without any assumed starting bias, the figures should be a basis for discussion that opinions of what they mean can be formed from. I don't see where you have made any attempt to provide a quantitative or even qualitative analysis that in any way backs up your position or gives you any reason to give a reasoned counterpoint to my analysis that leads to my conclusions (that you have quoted and criticised because you don't like them).

You’re analysis failed to account for cumulative inflation. 50% over the next 4 years could only be a real gain of 20%. The overall increase to CASM you calculated at 8.8% doesn’t include inflation and also includes profit share, which in your predictions there wouldn’t be any.
Trying to guess a private corporations finances from the outside like this is somewhat ridiculous. We have no concept of the CASM, and likely ONEX doesn’t either, as it’s primarily used by publicly traded airlines to compare to one another. What we do know is that WestJets compensation package is not enough to retain or attract experienced pilots. We also know that ALPA has WAY more financial data on WestJet than any other entity, so ALPa will now be making their case to a federal conciliator on why they think they should get what they want, and with way better financial information than we do.

From Onex’s quarterly report “ The net gain from Onex Partners V was primarily due to the underlying fair value increases of Acacium Group, Convex, Imagine Learning and WestJet.”

Yes, all valid points, but I think I stated earlier that inflation would be on top of that 20%, if not that is what I based assumptions on. CASM in this case has all been based on published 2019 figures before Onex, they won’t have shifted by much without a major change in internal processes, the non WS factors such as fuel can be obtained from similar airlines, but private obscurity of the WS figures will mean some drift.

I would argue that Onex is very aware of the CASM figures, as I was still at WS in the early days of the negotiations and had to provide my very specific contribution to it relative to my IT teams. They seem to be very much a cost vs value (benefit) organisation, CASM gives them a somewhat standardized benchmark, although from a standard metric perspective we actually tracked 4 CASM specific metrics in the Data Analytics team on behalf of The Business, as there are some CASM subtleties that have to be taken into account in certain analyses.

This quote from another post,
“I agree we are still in mutual posturing”

Sometime words can mean more than just the literal. Was this a slip, perhaps but if you combine some things you’ve said, I would not be surprised if you gain somehow for all your posts on this subject.
You have been using inside information to make your assumptions, albeit slightly outdated but I would think you need permission to make these types of posts public.
If not, you seem to be walking a fine line of confidentiality, and again you come across as someone with more to lose than retirement passes.
Question for the WJ pilots, have you already voted for the strike mandate?

[aerobod]

You’re analysis failed to account for cumulative inflation. 50% over the next 4 years could only be a real gain of 20%. The overall increase to CASM you calculated at 8.8% doesn’t include inflation and also includes profit share, which in your predictions there wouldn’t be any.
Trying to guess a private corporations finances from the outside like this is somewhat ridiculous. We have no concept of the CASM, and likely ONEX doesn’t either, as it’s primarily used by publicly traded airlines to compare to one another. What we do know is that WestJets compensation package is not enough to retain or attract experienced pilots. We also know that ALPA has WAY more financial data on WestJet than any other entity, so ALPa will now be making their case to a federal conciliator on why they think they should get what they want, and with way better financial information than we do.

From Onex’s quarterly report “ The net gain from Onex Partners V was primarily due to the underlying fair value increases of Acacium Group, Convex, Imagine Learning and WestJet.”

Yes, all valid points, but I think I stated earlier that inflation would be on top of that 20%, if not that is what I based assumptions on. CASM in this case has all been based on published 2019 figures before Onex, they won’t have shifted by much without a major change in internal processes, the non WS factors such as fuel can be obtained from similar airlines, but private obscurity of the WS figures will mean some drift.

I would argue that Onex is very aware of the CASM figures, as I was still at WS in the early days of the negotiations and had to provide my very specific contribution to it relative to my IT teams. They seem to be very much a cost vs value (benefit) organisation, CASM gives them a somewhat standardized benchmark, although from a standard metric perspective we actually tracked 4 CASM specific metrics in the Data Analytics team on behalf of The Business, as there are some CASM subtleties that have to be taken into account in certain analyses.

This quote from another post,
“I agree we are still in mutual posturing”

Sometime words can mean more than just the literal. Was this a slip, perhaps but if you combine some things you’ve said, I would not be surprised if you gain somehow for all your posts on this subject.
You have been using inside information to make your assumptions, albeit slightly outdated but I would think you need permission to make these types of posts public.
If not, you seem to be walking a fine line of confidentiality, and again you come across as someone with more to lose than retirement passes.
Question for the WJ pilots, have you already voted for the strike mandate?

“I agree we are still in mutual postering” refers to the time frame things are in in the negotiations “mutual posturing” being that phase, no different than the statement “I agree we are still in the last phase of the moon”, nothing to do with me or anyone else in this thread actually being involved in the negotiations.

I have no net gain from my posts other than an interest in WS surviving for me to still have retiree benefits, but it wouldn’t be the end of the world if they no longer existed from my travel planning perspective. I have an intellectual interest in continuing to understand airline operation subtleties, although I’m currently consulting in a different industry.

Any info I have used is always from publicly available data from things such as annual reports and Investor Days presentations, that’s why I include links to the data sources, I’m very careful of that. Other than that my quoted expertise and team involvement at WS in the past is nothing other than would be included in a job resume.

[Mostly Harmless]

Issues with the economic analysis presented here:

Information is dated. 3, and now pushing 4, years out of date.

Assumptions based on growing uncertainty in the absence of real time data.

Changes in corporate structure and costs since you left/covid. IE: There are a lot less office staff, no ground handlers, etc.

The assets "sold" by the company remain within control of the Onex operation. So, those lease payments from one division go to another division but remain within the organization... great tax avoidance potential and income stream.

Forward ticket sales used by Onex to fund other operations and investments... again, the great accounting shell game of money flowing around the same organization but remaining within the overarching corporate structure.

The eventual return of the company to Public status, a company that will be beholden to Onex for Leases, Services and Financing for decades after the company goes Public once again.

WJ is a cash machine for Onex. One that would be difficult to shut down because they have a flow of income combined with a tax write-off.

[cdnavater]

Yes, all valid points, but I think I stated earlier that inflation would be on top of that 20%, if not that is what I based assumptions on. CASM in this case has all been based on published 2019 figures before Onex, they won’t have shifted by much without a major change in internal processes, the non WS factors such as fuel can be obtained from similar airlines, but private obscurity of the WS figures will mean some drift.

I would argue that Onex is very aware of the CASM figures, as I was still at WS in the early days of the negotiations and had to provide my very specific contribution to it relative to my IT teams. They seem to be very much a cost vs value (benefit) organisation, CASM gives them a somewhat standardized benchmark, although from a standard metric perspective we actually tracked 4 CASM specific metrics in the Data Analytics team on behalf of The Business, as there are some CASM subtleties that have to be taken into account in certain analyses.

This quote from another post,
“I agree we are still in mutual posturing”

Sometime words can mean more than just the literal. Was this a slip, perhaps but if you combine some things you’ve said, I would not be surprised if you gain somehow for all your posts on this subject.
You have been using inside information to make your assumptions, albeit slightly outdated but I would think you need permission to make these types of posts public.
If not, you seem to be walking a fine line of confidentiality, and again you come across as someone with more to lose than retirement passes.
Question for the WJ pilots, have you already voted for the strike mandate?

“I agree we are still in mutual postering” refers to the time frame things are in in the negotiations “mutual posturing” being that phase, no different than the statement “I agree we are still in the last phase of the moon”, nothing to do with me or anyone else in this thread actually being involved in the negotiations.

I have no net gain from my posts other than an interest in WS surviving for me to still have retiree benefits, but it wouldn’t be the end of the world if they no longer existed from my travel planning perspective. I have an intellectual interest in continuing to understand airline operation subtleties, although I’m currently consulting in a different industry.

Any info I have used is always from publicly available data from things such as annual reports and Investor Days presentations, that’s why I include links to the data sources, I’m very careful of that. Other than that my quoted expertise and team involvement at WS in the past is nothing other than would be included in a job resume.

Ok, fair, like I said sometimes words can mean something other than. I would’ve said, “they” are still in mutual posturing but maybe that’s because I’ve never been part of the WJ group.
I do hope WJ survives this as I can’t stand the thought of Flair being the new WJ, that’ll set us back a decade or so.

[aerobod]

Issues with the economic analysis presented here:

Information is dated. 3, and now pushing 4, years out of date.

Assumptions based on growing uncertainty in the absence of real time data.

Changes in corporate structure and costs since you left/covid. IE: There are a lot less office staff, no ground handlers, etc.

The assets "sold" by the company remain within control of the Onex operation. So, those lease payments from one division go to another division but remain within the organization... great tax avoidance potential and income stream.

Forward ticket sales used by Onex to fund other operations and investments... again, the great accounting shell game of money flowing around the same organization but remaining within the overarching corporate structure.

The eventual return of the company to Public status, a company that will be beholden to Onex for Leases, Services and Financing for decades after the company goes Public once again.

WJ is a cash machine for Onex. One that would be difficult to shut down because they have a flow of income combined with a tax write-off.

All valid points, but what is the data you would use to put forward an alternative interpretation and outcome and what is that alternative? Don’t overestimate the effect of WS on Onex in general it is only about 8% of their portfolio holding at it’s pre-Covid valuation, probably about 4% now and one that isn’t generating any of their profits by the looks of it at the moment.

BTW, the video is interesting, but the frequent flyer program at WS is not strong enough or broad enough to have the sort of impact that it has at legacy carriers, one of the impacts of having a quite limited business offering overall.

[aerobod]

Ok, fair, like I said sometimes words can mean something other than. I would’ve said, “they” are still in mutual posturing but maybe that’s because I’ve never been part of the WJ group.
I do hope WJ survives this as I can’t stand the thought of Flair being the new WJ, that’ll set us back a decade or so.

I agree with you there, although I do wish success on all airlines in general, as it is a close industry and the competition always contains many friends, too. I think from my time at WS and contracting to AC, I now know people in over 100 airlines around the world.

[GeoffPilot]

Aerobod

It is true that Southwest have had some recent bumps in the road but compared to the toxic legacy of employee carnage we have seen over the last 10 years at the legacy carriers, they still have an enviable record.

In any case this thread is about the potential of Westjet going Union. I stand by my contention this does not automatically constitute a retrograde step for Westjet

I don't think introducing an intermediary such as a union necessarily provides any benefits, either. In Southwests' case there may need to be many concessions in any future TA for the company to remain viable compared with the much more aggressive competition they now face, this will have to happen regardlous of the union.

Aerobod,

You wrote this in 2015

How does Southwest remain in business when their pilots make litetally multiple factors more than WJ pilots?

Southwest's management incompetence cost the company $800 million during their Christmas holiday travel disaster.

Do their pilots now need to take concessions for the airline to survive?

[aerobod]

Aerobod

It is true that Southwest have had some recent bumps in the road but compared to the toxic legacy of employee carnage we have seen over the last 10 years at the legacy carriers, they still have an enviable record.

In any case this thread is about the potential of Westjet going Union. I stand by my contention this does not automatically constitute a retrograde step for Westjet

I don't think introducing an intermediary such as a union necessarily provides any benefits, either. In Southwests' case there may need to be many concessions in any future TA for the company to remain viable compared with the much more aggressive competition they now face, this will have to happen regardlous of the union.

Aerobod,

You wrote this in 2015

How does Southwest remain in business when their pilots make litetally multiple factors more than WJ pilots?

Southwest's management incompetence cost the company $800 million during their Christmas holiday travel disaster.

Do their pilots now need to take concessions for the airline to survive?

No idea, they have had a looming IT disaster for many years now and building competitive pressures from a number of areas. I don’t have enough insight into their internal ops to know what they need to do or who needs to do it to fix what seem to be significant structural problems. The funny thing about IT and ops at SWA was that it used to be a joke between people of other airlines that “2 bags fly for free” was touted as a differentiator, whereas before Amadeus it was a limitation that they had no way of integrating bag charges into their PSS.

SWA also is in a completely different market than WS, so their employee compensation and other costs are quite different. Comparing airlines in a given country is valid, between countries is much more problematic. You may as well ask why airlines have to pay so much for airport services in Canada compared with the US, too - different factors and cost models across the board. In IT I have the same variance, I can pay 5 times as much for the same resource with the same level of skill depending on which country is their home base.

BTW my opinion is that airline growth and evolution generally requires a union to be in place at somepoint, once growth has reached the point of more than one degree of separation between the employees and leaders. I don’t see it being a problem at WS.

[Alkasultzer]

Aerobod,

You didn't answer the question

You clearly stated in 2015 that Southwest pilots need to take concessions for the airline to survive

The pilots did not. In fact, their contract is eons ahead of anything in Canada with more gains on the horizon

Their company lost nearly a billion dollars in a holiday season.

How is this company able to survive all this with losses and a vastly superior pilot contract?

Or is it that you just drivel the same old management excuses of why they can't properly compensate an airline's most important asset: their pilots

[aerobod]

Aerobod,

You didn't answer the question

You clearly stated in 2015 that Southwest pilots need to take concessions for the airline to survive

The pilots did not. In fact, their contract is eons ahead of anything in Canada with more gains on the horizon

Their company lost nearly a billion dollars in a holiday season.

How is this company able to survive all this with losses and a vastly superior pilot contract?

Or is it that you just drivel the same old management excuses of why they can't properly compensate an airline's most important asset: their pilots

Yes I did state “there MAY need to be many concessions….” I didn’t say “need to take concessions…” some difference in certainty there.

They obviously have skimped on investing in key operational systems and have had a number of maintenance compliance issues over the years, so obviously some choices that were a bit short sighted that are now causing some financial pain and likely won’t be easy to solve. Also going back to closer to that time (in 2018), I did some analysis just after I left WS comparing airline revenues from the published annual reports, all adjusted to USD RPM, bear in mind the stage length is similar for the LCC line, but the legacy airline line has a different and significantly higher stage length, but it is similar between those legacy airlines:
_____________________
2018 revenue per passenger mile (including ancillaries) for comparable stage lengths and comparable product offerings, $0.75 USD to CAD exchange rate:

Southwest $0.165; JetBlue $0.151; Alaska Air $0.151; WestJet $0.129.

American $0.176; Delta $0.176; United $0.164; Air Canada $0.132.

The Canadian airlines have lower ticket charges before government taxes and fees per mile flown.
______________________

I was surprised SWA was bringing in so much higher revenue than WS, bearing in mind a similar stage length at that time, but operating in an environment with lower fixed charges than we have in Canada. This is probably the main reason why the competition hasn’t hammered them on costs. In a way the market is big enough in the US that there is really a bit of an LCC/ULCC cartel where SWA takes the mid-South, Spirit the South East, JetBlue the North East and Frontier the mid-North. They overlap a bit, but generally have hub/focus airports and operating areas where they are much bigger than the competition and can drive higher revenues and good profitability. Back in 2015 I expected the ULCCs to expand a lot more rapidly than they did, putting pressure on SWA, but that hasn’t happened to any degree so far.

If you can find a way to get the public to pay 28% more for tickets (based on USD$0.165 RPM for SWA vs USD$0.129 for WS when I did the comparison), I’m sure there would be a lot more slack in what the company can pay. SWA also operates in a lot of airports in very low minimum wage states when it comes to cost of service workers, further allowing cost flexibility in where they spend money and what they pay certain workers.

[Fanblade]

Aerobod,

You didn't answer the question

You clearly stated in 2015 that Southwest pilots need to take concessions for the airline to survive

The pilots did not. In fact, their contract is eons ahead of anything in Canada with more gains on the horizon

Their company lost nearly a billion dollars in a holiday season.

How is this company able to survive all this with losses and a vastly superior pilot contract?

Or is it that you just drivel the same old management excuses of why they can't properly compensate an airline's most important asset: their pilots

Yes I did state “there MAY need to be many concessions….” I didn’t say “need to take concessions…” some difference in certainty there.

In Southwests' case there may need to be many concessions in any future TA for the company to remain viable compared with the much more aggressive competition they now face, this will have to happen regardlous of the union.

I underlined for you the part I think other posters are getting at. It does appear you were stating SW pilots will have to take concessions in the future.

By the way SWAPA, even though they are an independent union, have an incredible Financial Data and Analysis department. Quite remarkable considering their size. That department has been putting out data well prior to 2015 showing SW could afford to pay more.

The union FD&A department appears to have been correct.

This is modern day negotiations with a union. FD&A departments costing proposals on the fly. Gone is the day of posting metrics and declaring death is around the corner. Leaving the union to have no idea if it is true or a manipulation. In today’s environment that kind of ploy can be costed and rebutted within a very short period.

When it comes to negotiations modern day unions are on an equal footing to corporations when it comes to financial analysis. It’s actually a relatively new challenge for companies to deal with. In the past the union was almost always at a disadvantage in this area.

This is a good news bad news situation for Airlines. The good news is the union is unlikely to push beyond a red line. The bad news is the unions confidence in their financial analysis allows them to push further than they have in the past.

[aerobod]

Aerobod,

You didn't answer the question

You clearly stated in 2015 that Southwest pilots need to take concessions for the airline to survive

The pilots did not. In fact, their contract is eons ahead of anything in Canada with more gains on the horizon

Their company lost nearly a billion dollars in a holiday season.

How is this company able to survive all this with losses and a vastly superior pilot contract?

Or is it that you just drivel the same old management excuses of why they can't properly compensate an airline's most important asset: their pilots

Yes I did state “there MAY need to be many concessions….” I didn’t say “need to take concessions…” some difference in certainty there.

In Southwests' case there may need to be many concessions in any future TA for the company to remain viable compared with the much more aggressive competition they now face, this will have to happen regardlous of the union.

I underlined for you the part I think other posters are getting at. It does appear you were stating SW pilots will have to take concessions in the future.

By the way SWAPA, even though they are an independent union, have an incredible Financial Data and Analysis department. Quite remarkable considering their size. That department has been putting out data well prior to 2015 showing SW could afford to pay more.

The union FD&A department appears to have been correct.

As I mentioned in the next post, the ULCC pressure on SWA revenues had not arrived in 2018 (as I thought would have happened from the initial expansion rates in 2015, that later dropped off a lot). SWA likely still has a major revenue advantage per RPM than WS.

Bearing in mind similar fuel costs (although still a cost advantage to US airlines] and similar aircraft leasing cost (although a bit cheaper if owned and SWA can drive a bigger discount), of a ticket at the moment we can take about 50% of that for the fuel and aircraft lease cost. In the case of SWA with a 28% revenue advantage over WS (still based on 2018 data, but pre-Covid is still probably best for like-to-like comparison), then SWA has 56% additional money for other costs than WS, out of ticket revenue,

This is also a similar pattern for AC to US Legacy carriers, too. In Canada we have very significant revenue challenges that put pressure on cost flexibility. If I have some time over the next week or so I will try and do another up-to-date RPM analysis to compare AC with it’s US peers, especially as the 2022 AC results are published on Fri. Anything for WS is conjecture now with no published data, but I don’t think the metrics have become any better than when Onex acquired them, or that they have changed their metrics relative to AC (i.e. their differences remain essentially the same) since then.

[averageatbest]

[aerobod]

[Aspiredtofly]

What was this thread about? What happened?

[Mostly Harmless]

All valid points, but what is the data you would use to put forward an alternative interpretation and outcome and what is that alternative? Don’t overestimate the effect of WS on Onex in general it is only about 8% of their portfolio holding at it’s pre-Covid valuation, probably about 4% now and one that isn’t generating any of their profits by the looks of it at the moment.

BTW, the video is interesting, but the frequent flyer program at WS is not strong enough or broad enough to have the sort of impact that it has at legacy carriers, one of the impacts of having a quite limited business offering overall.

Since Onex took WJ private I, like you, have no access to the actual numbers. Only the company and the union have those numbers and they are neck deep in NDA's. So, were I privy to the data, I could not openly discuss it on a public forum or anywhere else for that matter. The point I am making is that you are taking a 'best guess' approach and unless you have current numbers your best guess could be wildly inaccurate. It is questionable behaviour to announce the impending death of the company based on 4 year old numbers and assumptions, unless you have access to more current information.

The video was merely an example of one of the multitude of ways companies extract profit from apparently unprofitable enterprises. This has a direct effect on the compensation of the employees you care so much about as profit sharing is worth roughly 10% of the wages of those employees. The company can easily shift money and assets around to never show a profit giving the employees a defacto pay reduction without having to negotiate that pay reduction.

Shutting down an entire multi-billion dollar business to show those pilots who is in charge, while not beyond the realm of the possible, would be one of the dumbest decisions in the history of Canadian business. I prefer to think that the emotional maturity of those in charge exceed that of the average 4 year old in the height of a temper tantrum at not getting their way. Using your own assumptions, if you were in charge of the company, would you take a $2.2 billion charge on your books and close the company just to make sure no one ever got a raise? Remember, we are operating on what is effectively an 8 year old pay structure at this point. Would you take that loss and a 3 month strike to prove you are "the boss"? Or would it make more sense to offer a fair deal at a fraction of that cost? What would a reasonable person do?

I think I shall just depart with a quote from one of the greatest business minds of the last 100 years. Warren Buffett, "Beware of geeks bearing formulas."

[aerobod]

All valid points, but what is the data you would use to put forward an alternative interpretation and outcome and what is that alternative? Don’t overestimate the effect of WS on Onex in general it is only about 8% of their portfolio holding at it’s pre-Covid valuation, probably about 4% now and one that isn’t generating any of their profits by the looks of it at the moment.

BTW, the video is interesting, but the frequent flyer program at WS is not strong enough or broad enough to have the sort of impact that it has at legacy carriers, one of the impacts of having a quite limited business offering overall.

Since Onex took WJ private I, like you, have no access to the actual numbers. Only the company and the union have those numbers and they are neck deep in NDA's. So, were I privy to the data, I could not openly discuss it on a public forum or anywhere else for that matter. The point I am making is that you are taking a 'best guess' approach and unless you have current numbers your best guess could be wildly inaccurate. It is questionable behaviour to announce the impending death of the company based on 4 year old numbers and assumptions, unless you have access to more current information.

The video was merely an example of one of the multitude of ways companies extract profit from apparently unprofitable enterprises. This has a direct effect on the compensation of the employees you care so much about as profit sharing is worth roughly 10% of the wages of those employees. The company can easily shift money and assets around to never show a profit giving the employees a defacto pay reduction without having to negotiate that pay reduction.

Shutting down an entire multi-billion dollar business to show those pilots who is in charge, while not beyond the realm of the possible, would be one of the dumbest decisions in the history of Canadian business. I prefer to think that the emotional maturity of those in charge exceed that of the average 4 year old in the height of a temper tantrum at not getting their way. Using your own assumptions, if you were in charge of the company, would you take a $2.2 billion charge on your books and close the company just to make sure no one ever got a raise? Remember, we are operating on what is effectively an 8 year old pay structure at this point. Would you take that loss and a 3 month strike to prove you are "the boss"? Or would it make more sense to offer a fair deal at a fraction of that cost? What would a reasonable person do?

I think I shall just depart with a quote from one of the greatest business minds of the last 100 years. Warren Buffett, "Beware of geeks bearing formulas."

Just to be clear, going back to some of my original points:

- I only state I think company windup would be a 50/50 probability after a prolonged strike (3 months or more), mainly due to the difficulty of retaining key staff after full layoffs and loss of employees in difficult to fill positions in a currently tight market for many positions.

- I believe the company would probably go to about 35% over 4 years. Who knows whether it would require a strike to get to this or if a higher number is possible.

- I think a settlement will be reached without a prolonged strike, so windup is not a high probability overall.

Warren has always been (in terms of airline investments) a bit schizophrenic and has had poor luck/judgement with airlines, with his famous quote “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright…..”. His timing has been off again in his latest invest and sell move during Covid: https://ca.news.yahoo.com/how-warren-bu ... djP84IraDf

Hopefully everything works out for all people involved. I actually showed confidence that will be the case last night, by booking a couple of WS flights in Aug between YYC/DUB and LHR/YYC.

[Mac08]

This argument you’re making Aerobod is garbage.

Asking employees to “stay in your pay bracket” when management is making millions plus and trying to imply a raise would bankrupt the company is stupid. Management doesn’t need the pilots help destroying it, they are doing it themselves.

[Bede]

I actually tend to Aerobod, but I think his opinion overestimates the percentage of CASM that pilots cost. (At WJ it's around 7%, so pilot wages won't make/break the company, but they will influence the outcome.)

Don't get me wrong- the supply/demand curve has shifted and the price of pilots has drastically increased. No different than the price of fuel, aircraft leases, etc. However, a rational corporation will always seek to maximize it's return on investment. If Onex can make more money selling/leasing the aircraft to another airline than they can running their own airline, that's what they'll do.