AC low cost carrier closer to becoming a reality

[aerodude]

I think this should be a reality check for us pilots of where this company is going in terms of labor management. Creating a separate entity low cost airline would be the beginning of a disastrous route for future employees and the Canadian aviation industry.

http://www.ctv.ca/CTVNews/TopStories/20 ... or-111107/

Air Canada union disappointed with arbitrator ruling

Air Canada said it was pleased with the decision to use the contract reached by the "democratically elected" union leadership in September.

"The implementation of a new collective agreement with our flight attendants ends a period of uncertainty for our customers and will allow Air Canada and its employees to move forward together," chief operating officer Duncan Dee said in a statement.

Air Canada's intention to create a low-cost carrier, wages, working conditions and pensions were among the main issues that the arbitrator was ruling on.

[CanadianEh]

I think I just threw up a little. When will those management boneheads realize that the LCC will fail.... LIKE IT DID THE LAST 2 F$%#ing times!!!

[mbav8r]

The whole world is eaten this crap up, there will never be a shortage of pilots because all the legacy carriers will be replaced with LCC's. What a bunch of S@*T. Rovinescu will be getting an even bigger bonus once he succeeds in shoving the LCC down your throats.

Singapore Airlines bets travellers will 'Scoot' to its new long haul budget carrier. Singapore Airlines is hoping travellers will ”Scoot'' to its new long-haul budget carrier as one of the world's leading airline brands seeks to muscle in on Asia's burgeoning no-frills market. Scoot, as the new carrier is known, will begin service by June 2012 with four Boeing 777-200 jets flying by the end of that year, chief executive Campbell Wilson told reporters. The airline plans to eventually buy several Boeing 777-200ER planes, which can travel up to 13 hours, allowing Scoot to fly to Europe and Africa. Scoot also plans next year to hire about 52 pilots, 250 flight attendants and 40 ground staff with what Wilson called ”Scootitude.''
-Anyone see what I see, is this Wilson guy ex WestJetitude?

Scoot hopes to ride the low-cost wave that has made budget flights about 25 per cent of Changi's traffic this year from almost nothing a decade ago. The best earners among Asian airlines this year have been short-haul budget carriers Indonesia's Lion Air, AirAsia and Cebu Air in the Philippines, Standard & Poor's aviation analyst Shukor Yusof said. “Budget airlines are not a fad. They're here to stay,'' he said.

”This new market segment is growing fast,'' Wilson said. “We aim to bring new business to the SIA group.'' Scoot plans to initially focus on destinations that are five to 10 hours from its base at Singapore's Changi International Airport and fly to four or more cities in Australia and China.

[vic777]

I think I just threw up a little. When will those management boneheads realize that the LCC will fail.... LIKE IT DID THE LAST 2 F$%#ing times!!!

All the way back from Lorenzo at Eastern Airlines, it makes no difference wether it fails or not, the only purpose is to line the pockets of the upper management. They don't know how to run a business, just steal wealth.

[teacher]

A perfect example of why a nation wide pilot association or college is needed to set country wide wages (better than what we have now) and take pilot wages OUT of negotiations. Our pay as professional pilots should not be negotiable, you want to hire a pilot to fly your plane, it costs "this" much, period.

[cgzro]

it makes no difference wether it fails or not, the only purpose is to line the pockets of the upper management.

Senior managment are large shareholders and therefore would not want it to fail lest they loose tons of money.

[CanadianEh]

I think I just threw up a little. When will those management boneheads realize that the LCC will fail.... LIKE IT DID THE LAST 2 F$%#ing times!!!

All the way back from Lorenzo at Eastern Airlines, it makes no difference wether it fails or not, the only purpose is to line the pockets of the upper management. They don't know how to run a business, just steal wealth.

+1. Well said Vic777

[ahramin]

it makes no difference wether it fails or not, the only purpose is to line the pockets of the upper management.

Senior managment are large shareholders and therefore would not want it to fail lest they loose tons of money.

How much did they pay for those shares? What are those shares worth to them vs cash in the bank?

[ratherbee]

Oh please! How are those Eastern Airlines employees coping compared to those at SouthWest? Low Cost does not mean low salary.

[teacher]

Oh please! How are those Eastern Airlines employees coping compared to those at SouthWest? Low Cost does not mean low salary.

It shouldn't but these days it does in the eyes of managers.

[vic777]

Senior managment are large shareholders and therefore would not want it to fail lest they loose tons of money.

They give themselves millions of shares for free, cazro, then then try to find ways to blow them off to Doctors and Dentists and other suckers at a huge profit, all the while paying themselves Million Dollar Salaries. The main challenge is to do it legally. Any thief/fraud artist can do it.

[Panama Jack]

I tend to be sceptical about these sorts of announcements because on deeper analysis a subsidiary doesn't fit the traditional Low Cost paradigm. I think that what Air Canada is really doing is signaling to its shareholders, employees, suppliers and unions that in the future costs will be cut.

[Big Pistons Forever]

Some inconvenient facts AC management don't want to talk about.

1) Flight crew costs are around 7% of total costs. Even if the flight crew worked for free the AC cost per seat mile would still be more than WestJet.

2) Even if the "B" scale were in place today the savings would not come close to off setting the losses from some bone headed fuel hedging moves

3) Airlines are high cost low margin businesses. Success involves sweating the operational basics. Open warfare against your own employees means they will have no motivation to do the little extras that individually represent small savings but collectively reduce operational costs across the board and are a large part of generating that positive margin. It is an ultimately self defeating strategy. To further alienate the work force AC increased the compensation of the execs by 227% over the last 5 years, and enrichened their defined benefit plan with unearned extra years of deemed service while at the same time trying to wipe out the employees pension plan and cut wages.

4) The LOCO proposal is a classic sign of failing management because it is change presented as progress. Demonstrably failed business strategies are again being dusted off and recycled, with the managements promise that "this time it will be different"

5) The US has 6 major airlines. The consistently most profitable airline, SouthWest, consistently pays the highest narrow body mainline jet wages in the Industry. The consistently least profitable airline, US Airways, consistently has paid the lowest industry wages. Southwest is always at or near the top in airline customer surveys and US Airways is always at or near the bottom of customer surveys.

The bottom line is simple. In any line of business, being an industry leader is highly correlated with a policy of having fairly compensated, empowered and well treated employees.

[mbav8r]

Big Pistons forever for CEO, you'd have my vote. If only we could vote for CEO's like politicians, with 1 or 2 year terms. 4 years would be too long cause they could do so much damage the 1st year, do some good the 4th and hope people forget about the 1st, much like the PC party now.

[Mig29]

5) The US has 6 major airlines. The consistently most profitable airline, SouthWest, consistently pays the highest narrow body mainline jet wages in the Industry. The consistently least profitable airline, US Airways, consistently has paid the lowest industry wages. Southwest is always at or near the top in airline customer surveys and US Airways is always at or near the bottom of customer surveys.

Very good point BPF

The bottom line is simple. In any line of business, being an industry leader is highly correlated with a policy of having fairly compensated, empowered and well treated employees.

You know those plaques on the wall in the crew rooms you see at every base we fly to... where they proudly state what the Company stands for and how every employee has a right to be treated fairly and respected, with out being harassed and put in an unsafe situation....bla bla bla...well, I think Big Piston's point here in the end should be put in the bold, gold letters and framed on every door of these managers running the 'show' so that every time they go to work in the morning they are reminded what their job should be!

[Rockie]

BPF

In the fighter world they call that a "shack".

It means you just put it right between the eyes from two miles away.

[Captain S itmagnet]

OK I'm a layman as far as financial stuff goes, all I bring to the table is being paid to fly for 25 years...

What exactly is cheaper to operate if you are a "LCC", apart from this myth that lower labour costs will save the day?

By my reckoning, these costs will be the same:
fuel
landing fees
training - pilots FA's and AME's
hull and liability insurance
uniforms
Jep chart services
NAVCAN and FAA fees
parts
advertising
rent and lease of counters, offices, hangar space, etc

I'm sure there are many others.
All of which are for naught once you hire on a bunch of additional managers and non-production types, many of whom will be performing a duplicate role to someone at the mainline. HUH?

And ZIP and Tango were how successful? (and Song, Ted, etc.) At least when my dog pees on the floor as a puppy he soon learns how to ask to be let outside, and he doesn't even have an MBA!

[BingBong]

At least when my dog pees on the floor as a puppy he soon learns how to ask to be let outside, and he doesn't even have an MBA!

I vote this the quote of the decade....lol.

[cgzro]

fuel fees, training - pilots FA's and AME's

one interesting little bit of data is that the Low Cost airlines average something like 11 hours of use per day for each aicraft v.s. about 10 hours per day for the others.

http://web.mit.edu/airlinedata/www/2010 ... 0Fleet.htm

I imagine that keeping your assets in the air earning money 10% longer has to translate into more profit.

I suppose that keeping things in the air longer is strongly related to turn around times so presumably the low cost airlines have better turn around times.

[hopper]

With globalization, an increase in middle class incomes throughout asia and middle east, constant oil price pressures, and demand for cheaper flights perpetuated by stiff competition, I see domination of low cost carriers as inevitable. Air Canada will never give this up. I absolutely believe that over the next several years there will be a large shift from AC's current structure as the public supports the discount airfares. There is no way they can continue paying all employees current salaries. There are too many inefficiencies in their current structure.

It's just supply and demand...it's already happening throughout asia and the middle east and quickly. Even look no further than the commuters and regional carriers in the U.S. The profession and glory days, is changing rapidly. We are fighting it here in Canada, but it's scary.

I am not optimistic that the next 25 years will be even close to what I signed up for 15 years ago.

My hope is that there actually is a global shortage of qualified pilots because demand will be high and wages will not deteriorate. However, the cadet programs could easily be ramped up and keep pilot seats filled very cheaply, satisfying both problems.

Perhaps my view is simplistic and forgive me for insulting your intelligence if this is a common belief. It just seems so obvious when you look outside Canada.

[Big Pistons Forever]

With globalization, an increase in middle class incomes throughout asia and middle east, constant oil price pressures, and demand for cheaper flights perpetuated by stiff competition, I see domination of low cost carriers as inevitable. Air Canada will never give this up. I absolutely believe that over the next several years there will be a large shift from AC's current structure as the public supports the discount airfares. There is no way they can continue paying all employees current salaries. There are too many inefficiencies in their current structure.

It's just supply and demand...it's already happening throughout asia and the middle east and quickly. Even look no further than the commuters and regional carriers in the U.S. The profession and glory days, is changing rapidly. We are fighting it here in Canada, but it's scary.

I am not optimistic that the next 25 years will be even close to what I signed up for 15 years ago.

My hope is that there actually is a global shortage of qualified pilots because demand will be high and wages will not deteriorate. However, the cadet programs could easily be ramped up and keep pilot seats filled very cheaply, satisfying both problems.

Perhaps my view is simplistic and forgive me for insulting your intelligence if this is a common belief. It just seems so obvious when you look outside Canada.

I hope for the future of our profession you are correct with respect to the Asia driven demand. However it is airline management that are the simpletons. The idea that all you have to do to go from a legacy carrier to a LOCO is to cut wages is simply stupid. The successful LOCO's are operationally low cost. Every part of their business is optimized to be efficient and the collective result of many thousands of small and individually insignificant better operational practices, is true low cost. Unfortunately to run an operation like this takes competent commited and engaged management, not just at the top, but at all levels. This means a lot of heavy lifting by the guys/gals running the joint......but it is so much easier to just go and beat up on your employees and then cash the 7 figure bonus cheque you awarded yourself for a job well done

[SilentMajority]

With globalization, an increase in middle class incomes throughout asia and middle east, constant oil price pressures, and demand for cheaper flights perpetuated by stiff competition, I see domination of low cost carriers as inevitable. Air Canada will never give this up. I absolutely believe that over the next several years there will be a large shift from AC's current structure as the public supports the discount airfares. There is no way they can continue paying all employees current salaries. There are too many inefficiencies in their current structure.

It's just supply and demand...it's already happening throughout asia and the middle east and quickly. Even look no further than the commuters and regional carriers in the U.S. The profession and glory days, is changing rapidly. We are fighting it here in Canada, but it's scary.

Hopper......a well written post and bang on from this writer's point of view.
Comparisons to ZIP and TANGO and TED and SONG are not representative of today's aviation world and as well do not reflect the "Walmartization wave" that we are experiencing in our everyday living. Even Sears is in trouble and appears to be unable to compete.

A look at AC's latest 3rd QTR. net loss (9 months now at $189M net loss) and you can see that something has got to change. If we factor in the pension payment changes starting in 2014 and the large capital repayments ($1.5 B) due in 2015 and beyond, you can see that a return to a CCAA court restructuring is a definite possibility in the not too distant future.

Here is the Catch 22. How do we, as an Association, structure the introduction of a new Low Cost Carrier to Air Canada without the wages and working conditions associated with this new entity eventually becoming the template for wages and working conditions at the mainline on our next trip through CCAA?

Very carefully would be my suggestion.

[TheSuit]

The idea that all you have to do to go from a legacy carrier to a LOCO is to cut wages is simply stupid. The successful LOCO's are operationally low cost. Every part of their business is optimized to be efficient and the collective result of many thousands of small and individually insignificant better operational practices, is true low cost.

Yep.

Unfortunately to run an operation like this takes competent commited and engaged management, not just at the top, but at all levels.

Nope. Network carriers cannot be run like a low cost carrier - the network model is intrinsically expensive and difficult to manage. Efficiency for a hub-and-spoke model can never be as high as they are on point-to-point operations. If Air Canada wanted to go truly low cost, it would have to simplify it's business and that would mean shrinking drastically.

[CANAM]

The word on the street is that SkyRegional will be asked to run the low-cost carrier. SkyRegional already has a vast amount of knowledge of the A320 from their SkyService days. This would circumvent a lot of Air Canada's unions. In short, there may be nothing anybody can do about it.

[teacher]

................and the door was opened when the tier 2 flying was "diversified" to save AC money and stick it to Jazz. Only a blind person wouldn't see this one coming. I hope it's not true, for ACPAs sake.