Hypothetical Question about AC - CCAA again or Liquidate

[Old fella]

Yeah right... like the Government would let AC implode with already soaring un-employment and 11.5 months to the 2010 Olympics. Can't see it... you guys are going to get attacked, and I think every pilot in Canada has something to lose when that happens. I wish AC pilots the best and hope they bode well in the upcoming year.

Quite right. Look at Nav Canada as it collects the majority of it's domestic service charges from Air Canada. If that source of revenue was lost to NC, the Government of Canada would be forced to inject money into Nav Canada to keep operations moving as the Air Navigation System is, in essence the security of the country. Not to mention airports like LBPIA, CYVR, CYWG, CYUL etc etc., their operations would be adversely affected as well.

Point is the Federal Government would have to pony up money regardless to NC and the airport operations so it would seem the best course of action would be to provide assistance(loan) to AC like is currently comtemplated for the auto sector.

Also Air Canada still has it's headquarters in Montreal, right!!!!. Did not AC help out the west when CAI was floundering, but that is for another argument.

[Squid]

It's all staging for the union. We really do have lots of money. Monty says we're still getting the a/c. Pensions are fine. Frontline staff will now smile. I also have a bridge to sell.
What a sorry ass place we work in. It will never disappear but I bet the reality of downsizing significantly is real. I can't believe the OAC still complaining about the merge and the guy still screws with the cost index and trips the brakes. nice.

oh ya it's the mantra by the leadership, or so I'm told. pretty embarrasing as is the likes of some on the board whom we all know professing that we are the best. Thems just the facts. sorry about being negative, but what else is it? Now should I go buy a tim's or a share of ace B? I think Tims.

[A330]

Isn't it much like the auto industry, it's just a matter of time before some type of major restructuring into union contracts. I would hope ACPA could negotiate some type of smart deal making before they impose serious pay and pension cuts. Better to lose a few trees than the whole forrest....

[picwally]

Don't you all worry... AC is there to stay. As long as there are airplanes to lease, AC will fly. Westjet the national carrier, please people let's stay realistic.
I just want to know what happened with that Air China deal.

[bmc]

Define "National Carrier".

I think that notion is very dated and leans back on a time when Air Canada and the national air policy were one and the same. Breakdown the route structures between domestic/transborder and international and Westjet does a great job of serving domestic/transborder. Long haul international would be a challenge in the short term for lack of suitable equipment, assuming they would be interested as it would deviate substantially from their successful business model.

I don't understand why Canada would need to designate one airline as a national carrier. What other country has an airline designated as the national carrier?

Routes are allocated between countries with provisions for 1, 2 or more designated carriers on routes. Route allocation in bilateral air service agreements are archaic and will die out as more countries embrace open skies which is the trend. Until then, these agreements have provisions for Canada to appoint or designate a carrier to take up one of those allocations.

I think the bigger political issue is 30,000 jobs, and the spin off ramifications on other industries: NavCan, catering, etc.

[tonysoprano]

bmc.
I agree that the term national carrier is a bit outdated. However I think joe traveler still uses that term very often and convincingly and so does our government unfortunately. So let's have a quick look. I might start by reminding you that the government of Canada has not severed it's hold on AC entirely. The national air policy aside, I remind you of the Air Canada Act which is still in place and has a profound effect on how AC operates. Also, a breakdown of the route structure will prove to you that although WJ is doing "a great job of serving domestic/transborder", arguably the hub and spoke, feeder system can serve a country's smallest to largest communities much better than point to point. Wether AC can provide this service while being viable is another question but after some eighty years of up and down life span, who am I to argue? WJ is doing a fine job of gaining ground, but to what point still remains to be seen. It's model for success may also be it's limit. For now, I think the numbers speak for themselves. Also, let's have a look at your own backyard. So tell me, would you not consider Swiss the national air carrier of Switzerland? What kind of model does Swiss use? Air France, Lufthansa, Alitalia, KLM??
Canada had two national carriers at one time. Canadian Airlines provided the exact same service with the same model of business that AC did. So I guess the question now is does the model of operations, ie point to point or feeder hub and spoke, decide who is the "national carrier"? No, I personally don't think so. But I do think the latter (AC) has the country covered much better and therefore is known to joe public and to our politicians as our national carrier, aka flag carrier. Lastly, I think there is also a historical value. As Trans Canada Airlines some 80 years ago or so, this airline served the country very well with the transportation of mail and cargo. Don't think that stigma will ever go away, especially with politicians. May not mean much to you and I.

[WJ700]

AC has only designated itself as the National carrier through their own marketing... and you guys are right, you can have it! National Carrier title, invented or not, It's still the largest international feed, and domestic feed, in to Canada and would cripple commerce in the event of a strike, then severely hurt tourism -not what a country in recession needs.

It's not even in my thoughts that it would ever liquidate. As a tax payer its just bad, and as a competitor its just bad. It would then severely bog every other carrier down and would certainly make for very bad press at WestJet to be caught up try to accommodate more than 50% of Canada's domestic capacity. Even at 80% load factor... it's 30% of the traveling public stranded overnight, and that's just in Canada, there is the rest of the world too.

[bmc]

Good points Tony. As for Switzerland, Swiss as the national carrier is long gone. I, for one, look at it as Lufthansa owned entity. Within Switzerland, we have Geneva based Easyjet, Baboo and Darwin. The notion of flag carrier is gone in Europe. Sure there are carriers with dominant hubs, but we've got something like 65 low cost carriers in Europe.

Canada can't support two full service airlines of the same magnitude of AC. Tried it with CP and it failed. If AC is hurting as bad as we're being told, yet is essential in providing service to/from and within Canada, perhaps government subsidies need to be seriously considered. The downside to that, obviously, is an unbalanced playing field. At what point do you deny other carriers financial assistance?

Airlines need to be run as a business first and airlines second. If it's unprofitable to fly to certain destinations, stop it. If the market can't sustain it and the cost structure can't make a go of it, tough decisions need to be made. Does the Canadian govt, Canadian voter and AC have an appetite for further cuts? We'll see.

[mattedfred]

The downside to that, obviously, is an unbalanced playing field. At what point do you deny other carriers financial assistance?

the playing field is already unbalanced. the federal government is currently denying WJ the ability to participate in the Air Canada Participation Act.

[tonysoprano]

bmc.
Well, call me old fashioned but I still think of some airlines as being flag carriers. That is having the ability to serve a vast amount of communities domestically, the greater market share that is, while also carrying our Canada "brand", if not the flag itself, to other countries around the world. ownership does not interfere with that in my mind. Swiss is still a Swiss airline, no matter who owns it. It's employees, style, language etc. still carry the flag of Switzerland. As for what will become of AC, I have written somewhere else on here that, unless better management takes over, taxpayers and government might have to decide whether or not it is need at all. If it is, the next step would be to find a management group that can make it viable and healthy for the long term. Funny isn't it? I mean for so many years we resisted deregulation. Well, here it is. A fine mess? That's a whole other thread.
Cheers. Time to go sample some juice.

[bmc]

Don't get me wrong, there are lots of countries that have what they consider flag or national carriers. Let's face it, after a country's flag and currency, the next highly visible symbol of a country is the national airline, right? LH, KL, AF. Some would consider BA to be the UK;s national airline. I'm sure BMI and Virgin would have an opinion on that.

There are all kinds of airlines considered flag carriers, regardless of ownership. Privatization may be the cause of blurring the image. It's an interesting thing to think about and it challenges the notion of if a state can step in at any point and direct, invest, whatever to ensure its survival.

May 1986, Freedom to Move. I remember it VERY well. It was a huge breath of fresh air, but it set us on a roller coaster that hasn't returned to the station.

I've said it before and I'll say it again. I should have gone into hair dressing. Much more stable career.

[picwally]

http://en.wikipedia.org/wiki/Flag_carrier

[bmc]

http://en.wikipedia.org/wiki/Flag_carrier

Excellent link. Thank you.

I guess the discussion should turn to national carrier as AC is not a designated flag carrier.

Thanks picwally

[. .]

http://en.wikipedia.org/wiki/Flag_carrier

Excellent link. Thank you.

I guess the discussion should turn to national carrier as AC is not a designated flag carrier.

Thanks picwally

the list of countries at the bottom has Air Canada listed as the flag carrier for Canada.

[tonysoprano]

bmc. You're starting to worry me. read the link again. it almost quotes me word for word. sorry, maybe I quote IT.

[bmc]

bmc. You're starting to worry me. read the link again. it almost quotes me word for word. sorry, maybe I quote IT.

It's late.

I'm skyping a daughter in Oslo

Burning CD's for band rehearsal tomorrow.

Nursing sick wife.

I'm pooped.

a demain

[picwally]

no harm done

[WetJet]

Can someone please answer this: Why does AC lose money? AC flights are always full. Jazz flights are full. GGN flights are full. Where are the costs so out of whack?

[bmc]

It's not hard to fill an airplane. The challenge is to fill it with good yield.

[tonysoprano]

in 2007 AC made money. maybe we should be asking how we did that. what was different? There were some interesting reasons for the loss in '08. One was money exchange loss. I can only assume that as the Canadian dollar became weaker, the Euro, Pound and US$ became stronger and our ability to pay for expenses in those currencies became more difficult. The other reason was the price of fuel and fuel hedging. After noticing that this was a world epidemic I can't really put too much blame on the company. The pension was cited as the next one and on that point I don't see their reasoning. They have taken out more than they put it. Their ability to replenish it may be in question but again I think it's been more of a source of income for them rather than an expense. Profits come and go. Consistency seems to be a difficult thing.

[Jaques Strappe]

There were some interesting reasons for the loss in '08. One was money exchange loss, I can only assume that as the Canadian dollar became weaker

Tony, you actually believe that crap Monte is doling out? In 2008 the Canadian dollar actually hit its' highest value in 30 years. The dollar was either at par or better than the greenback. Check the historical Canadian U.S exchange rates for 2008 at this Bank of Canada website

http://www.bankofcanada.ca/en/rates/exchform.html

The other reason was the price of fuel and fuel hedging. After noticing that this was a world epidemic I can't really put too much blame on the company.

Who hedges at the top of the market?

This is yet just another management blunder. No different than giving Mark Hill the keys to the holy grail and then wondering how Westjet got all of Air Canada's load info. I mean come on....how stupid and naive can one be? You don't fire someone and then give them access to your most sacred company info. Another blunder they accepted no responsibility for and that hurt all of us.


In my opinion, these are pretty lame excuses for the company performance of 2008 and I am extremely frustrated that our current management does not seem willing to accept any responsibility for their poor financial performance. In fact, historically, they have never accepted responsibility for anything. I think it is about time they start and employees need to start holding them accountable to that.

As for the pension, I firmly believe that they never had any intention of paying back the deficit.

[tonysoprano]

No Jacques, never did really believe it from the day Monty came out with it. Just reporting what they tell us about why we lost money. The real answers are not disclosed. I say we don't sign anything for a couple of years when this thing gets turned around and we show profits again.

[ivanhoe]

There were some interesting reasons for the loss in '08. One was money exchange loss, I can only assume that as the Canadian dollar became weaker

Tony, you actually believe that crap Monte is doling out? In 2008 the Canadian dollar actually hit its' highest value in 30 years. The dollar was either at par or better than the greenback. Check the historical Canadian U.S exchange rates for 2008 at this Bank of Canada website

http://www.bankofcanada.ca/en/rates/exchform.html

The other reason was the price of fuel and fuel hedging. After noticing that this was a world epidemic I can't really put too much blame on the company.

Who hedges at the top of the market?

Just about everyone , including WestJet. It was panic , pure and simple. Projections of $200/bbl oil by those who are supposed to know. What a joke.
Any Canadian airline that did'nt hedge US dollars when they were par or better need their asses kicked. All those US dollar expenses. It was a gift and opportunity of a lifetime. Hell , even I opened a US account and put 100K in it. I know I will eventually use it. The dollar has been at par twice in my life...last year and sometime in the early seventies. What a no brainer...

[WetJet]

You guys must have some idea. Where is AC being fleeced?
Overpaying executives?
Overpaying office staff or HR?
Overpaying ACTS?
Overpaying Jazz?
Overpaying aircraft leasing companies?
Overpaying ACGHS?
Overpaying FA's? Training Department costs? Accountants? Gate Agents? Debt service? Tax? Cargo department?

I don't think it's a question of revenue comming in, I haven't seen any good price wars in a long time. Even when there is a seat sale these days, it still costs a lot fly. Cargo revenue should be good too.

I don't believe it is pilot salaries that are too high - EMJ pay is low, the 320 pay is similar to WJ, the widebody pay is similar to what the Americans or Transat pays.

Any ideas?

[ivanhoe]

You guys must have some idea. Where is AC being fleeced?
Overpaying executives?
Overpaying office staff or HR?
Overpaying ACTS?
Overpaying Jazz?
Overpaying aircraft leasing companies?
Overpaying ACGHS?
Overpaying FA's? Training Department costs? Accountants? Gate Agents? Debt service? Tax? Cargo department?

I don't think it's a question of revenue comming in, I haven't seen any good price wars in a long time. Even when there is a seat sale these days, it still costs a lot fly. Cargo revenue should be good too.

I don't believe it is pilot salaries that are too high - EMJ pay is low, the 320 pay is similar to WJ, the widebody pay is similar to what the Americans or Transat pays.

Any ideas?

I don't think it is a matter of people being overpaid (in most cases). The problem here is simply that AC is charging too little. The fares have to go up.

Easier said than done. WestJet is able to make money at the current fare structure. There are a lot of reasons for this but the bottom line is that AC feels it must match fares to compete. AC is cutting capacity which actually causes them to lose less money.

If AC raised fares to the point they were profitable , would WestJet raise too and make even more money? Doubtful.

Talk about a coffin corner...