How Low Will You Go-Part 2

[tonysoprano]

b.
I know you're not going to like this but despite your constant "I'm for all airlines in Canada", your blue past keeps showing its bias. Sorry. Just an observation of the subtle hints that you're exposing lately.

[Jastapilot]

Stick.
AC has had to slash fares because someone else (wink wink) started it first. There isn't much of a choice. When passengers stop flying, you guys choose to lower your fares. The whole deal with Canadian North is the smaller scale of the WJ/AC competition. Because of your lower costs, you can afford to slash prices a la Walmart. Careful though. If someone who provides a more complete, better service than you goes under because of your price tactics, the boys in Ottawa might wrap your knuckles. But hey, who cares right? Lower prices were the aim of politicians when they deregulated our industry. I personally think there will come a day when we will revisit all this.

Here we go again. How about offering a product the average consumer wants? I don't know about the rest of you, but I don't return to a business who tells me what "I" want, and expect me to pay the premium price. That model works great in a monopoly situation, but not when there's real competition. Suck it up, adapt, overcome.

[truedude]

Why the need to be jerk?

Your right, I was harsh. Just get so tired of hearing how Air Canada has taken money from the government in that past and all the other nonsense alike.

[bmc]

T
The blue experience ended for me more than a decade ago. There were two airlines after that. I am long past it and blame blue for its problems. No one else.
If you ask the folk around here (and you know where here is), they'll tell you that I often praise two carriers for taking dramatic steps to change and innovate: Aer Lingus and Air Canada. Just bought tickets on AC last month to get kids to uni.

Aside from my defence, thanks for pointing it out.

[tonysoprano]

b.
Thanks for vote of confidence. For a moment there I thought you too had been struck by the new way.

[bmc]

I've been gone for a long time, T. It took a long time to shake the feeling of allegiance. The of the best discussions I had was eight years ago with JJB from AC. Filled me on the AC side of argument that made so much sense. But...it's history. Long ago and far away.

Apologies for thread hijack.

[tonysoprano]

ok....it's just that I see it still today within the company. Some will never shake it. Nothing too wrong with it though.

[KAG]

[Donald]

So $55 is the new low???????

Good job Jetsgo...er, I mean Westjet.

[stickontheice]

Okay, I bite...why did you drag this old dinosaur up Tony...er I mean Donald???

[FICU]

$55... that's a real money maker!

$75 still seems to be the norm on the website. Maybe they think $55 will fill more seats because they sure aren't filling them at $75.

[Realitychex]

$55 refers to the low fares currently on offer between Edmonton and Yellowknife.

There is obviously a degree of desperation in the post, comparing WJ, with a string of 17 profitable quarters, and, if I recall correctly, 49 out of a possible 54 over its first 13+ years of existence, with jetsGo, who as far as anyone knows, never made a nickel.

I'm not sure what the poster is worried about. If folks who have used First Air / Air North in the past, with their $300++ one way fares, (but delicious meals), want to see low fares go away, they can continue to fly the Northern Airlines. Easy peasy.

If Northerners want to enjoy the same low fares their southern cousins in the west have enjoyed over the past 13 years, and want to continue to enjoy the freedom and enhanced quality of life low fares bring to their community, they can choose the competition.

It was an act of purest naivity to assume that WJ wouldn't eventually carve out the exceedingly obvious 650 mile spoke from Edmonton at some point after 13 years of operations. What's even more absurd is the northern operators didn't do a thing to plan for its eventuality. They still operate -200's on the route. Is there a more expensive aircraft flying in the western world today in passenger operations? There was never any thought given to leaving the -200's up North, or running all cargo to the south and bringing in something that was more efficient for passenger ops on the southern routes.

Besides, both the southern-based airlines have given the Northern based airlines a huge advantage. Only Canadian North and First Air can offer same day round-trips. If they can't figure out how to parlay that into a huge advantage, there isn't much point in their whining about competition.

WJ had the second lowest belf in 2Q amongst independent, non cpa - controlled airlines in North America, dropping to about 73%, even in it's worst seasonal quarter, in one of the worst economic meltdowns in 50 years. With a casm of 11.4 cents, and operating from YEG with the lowest aviation fuel in the network, it's not surprising to see WJ use it's low costs to offer low fares in the market.

If WJ sees greener pastures, they'll move along and reallocate the equipment elsewhere.

It's called free enterprise. If you don't like it, I suggest you stop shopping at Canadian Tire or Wal Mart in Yellowknife whose presence has also caused the cost of living to significantly drop in the North.

[FICU]

They still operate -200's on the route. Is there a more expensive aircraft flying in the western world today in passenger operations?

Besides, both the southern-based airlines have given the Northern based airlines a huge advantage. Only Canadian North and First Air can offer same day round-trips. If they can't figure out how to parlay that into a huge advantage, there isn't much point in their whining about competition.

Seeing that the -200s are paid for and parts are aplenty and cheap they are pretty cost efficient. The fact that a lot of freight also moves north allows them the flexibility to run combi configs of varying pallet/seat numbers. Any newer Boeing's in combi config have a fixed bulkhead. Add in hedging fuel when it was at the bottom and I don't think your lease payments combined with operating costs is much cheaper if at all. Canadian North has been running consistently close to, if not, full loads all year. Summer season is almost over and Westjet is still barely filling half a plane.

[FICU]

Here's a quote from RealityChex from an earlier post in this thread... funny how things have changed and according to his math Westjet is losing money on this route and are continuing to lower the fares!

Canadian North has had 13 years to prepare for WJ's expansion into YZF. They knew exactly what WJ's costs are and could easily have predicted where fares were headed. It is simple math. About 14 cents a mile over 640 miles = $90 cost per seat each way. Average $180 one way fare and break-even is 68 seats.

I think Tony mentioned earlier that When Westjet isn't filling seats they lower the fares... but how low will you go?

PS: Canadian North wasn't around 13 years ago.

[Donald]

Realitychex: The jetsgo reference was about predatory pricing, attempting to price out competitors on one route (losing money) while subsidizing the loss with profits from another route. I believe another example of this occurred in Hawaii last year between Aloha and Go! express? Of course Jetsgo wasn't making money anywhere, so maybe not a perfect example.

So how much do the owners lose when 60 people are on board at 55-99 bucks for 1.5 hours? For YZF'ers that take a cab from downtown Yellowknife to the airport, then get on the Sky Shuttle in YEG to go to the city, the airfare is the cheapest part now! Maybe caring and considerate owners could run a taxi service, since obviously those guys are screwing the locals too!

[Realitychex]

If WJ is losing money hand over fist, then what are you worried about?

They'll eventually tire of the route and take their airplane and go elsewhere. Then the good folks up north can get back to enjoying their delicious meals and $800 round trips south.

If that were the case, I doubt they'd have changed it from seasonal to year-round service.

With the drop in fuel prices resulting in an 11.4 cent casm over 908 miles in 2Q, they'll be at about 13 cents on YEG-YZF. And remember, amortization and depreciation is non-cash. Take that out of the equation and the cash casm drops to about 10.7 cents a mile.

I can think of a couple of routes WJ operated that rarely had loads above 50%, but had route break-evens in the low 40% range.....

Recall that WJ had a large fleet of owned -200's and got rid of them as fast as they could when fuel looked like it was going to stay north of $40. Add at least us$1,400 per hour maintenance to those birds, (that's what it was 5+ years ago....), and I think you may be the only person in Canada who readily agrees that the -200 is a viable aircraft for passenger operations.

The $59 is a plane shrinker fare. Everyone knows that only a portion of the aircraft will be sold at that price. I see lots of $189 / $259 / $359 fares on offer.

And then there's the question as to what WJ is carrying in the belly of the aircraft.

WJ has had a monopoly in Abbotford for about 3 years now. For flights tomorrow, WJ's YYC-YXX fares range from $155-$234. For YYC-YVR, they range from $159-$304. That pretty much discredits the thought that WJ abuses it's monopoly position in the rare occurances where they actually have a monopoly.

WJ has consistently shown it's ability to be one of the most profitable airlines in North American. I highly doubt they are going to flex their muscles to beat up incumbents to prove some kind of a point on the 91st largest route in Canada, (ranking slightly ahead of Goose Bay - St. Johns).

If it makes money, it'll stay, if it doesn't it will be discontinued. Pretty simple, really.

[Jastapilot]

Last time I checked, predatory pricing was illegal. I am also aware WJ won a predatory pricing lawsuit against AC a few years back when AC was caught doing exactly that. I would hope to think WJ is well aware of the rules and laws regarding predatory pricing and are careful not to give anyone any ammo on the matter.

[Realitychex]

The predatory case launched by WJ back 10+ years ago clearly established what is and what isn't predatory pricing.

It's extremely complicated but basically, it boils down to to not pricing below your variable costs on a route, and the case pretty much resolved how to define variable costs. I wouldn't define the result as a win or loss for anyone, but more of a clarification of the rules.

Given that variable costs are about 20%-25% of an airlines total costs, it's pretty obvious to all that these fares do not even remotely meet the criteria of being predatory.

If the route does not make money, it will be discontinued fairly quickly. It's as simple as that. The economics will look after themselves. Edmonton - Yellowknife barely cracks the top 100 O & D markets in Canada.

I highly doubt WJ has staked it's future on the success of this route, nor do I think for a nano-second that WJ or anyone else's management team woke up one morning and decided it was high time to put any or all of the Northern airlines into CCAA. Frankly, they all have bigger fish to fry.

It is notable that when WJ had the perfect excuse to back away from this market due to its seasonality, they chose not to. This suggests the route is holding its own, and therefore profitable.

If it's profitable, by definition, it can't be predatory.

In a deregulated environment, WJ can't be responsible for losses other airlines incur because their unit costs are too high for the unit revenues earned.

Like countless businesses in Yellowknife who have had to rethink their MO with the arrival of Wal Mart, so too will the Northern Airlines potentially have to redefine their business as it pertains to YZF-YEG.

I haven't heard too many consumers in Southern Canada complaining about the widespread availability of low, one way fares over the last 13 years. Have you?

[whiteguy]

Last time I checked, predatory pricing was illegal. I am also aware WJ won a predatory pricing lawsuit against AC a few years back when AC was caught doing exactly that. I would hope to think WJ is well aware of the rules and laws regarding predatory pricing and are careful not to give anyone any ammo on the matter.

So who makes the call on predatory pricing? WS only made $9 million for the second quarter and blames (partly) competitions low pricing. In the Calgary Herald on Sat or Sun was an AC ad, $125 one way YYC-YWG & $95 YYC-YVR. On Tues was a WS ad for $95 to YWG & $65 to YVR. The next day AC matched the seat sale. Big Bad AC eh! Keep blaming them!

[Donald]

So correct my math if I am wrong....

13CASM * 136 seats * 632 stat miles = $11 173.76

Lets's say an average yield of $100 (generous considering everyday is usually available at $75)

You need 111 seats full every leg, yet it's rarely above 60.

What have I done wrong (serious question as I do not deal with casm on a daily basis)?


Also, since most people defend advertising seats at $55 if they usually sell for higher, why not advertise $25 seats? $10 seats? $1 seats? Assuming of course that there was only a few seats sold at that price. It reminds me of the hotel across from the YEG airport with the big neon sign "Rooms for $59/night", looked into it and there is only 1 room sold at that price every night.

[complexintentions]

If Northerners want to enjoy the same low fares their southern cousins in the west have enjoyed over the past 13 years, and want to continue to enjoy the freedom and enhanced quality of life low fares bring to their community, they can choose the competition.

Dear god, this sounds like a speech by George W. Bush. Reminds me of Team America: "Freedom isn't free...and if you don't throw in your 55 bucks with WestJet, who will? Oooh 55 bucks...Freedom costs 55 bucks..."

I haven't heard too many consumers in Southern Canada complaining about the widespread availability of low, one way fares over the last 13 years. Have you?

About all this proves is that consumers prefer lower prices over high. Brilliantly spotted! Here's hoping for a slightly more enlightened age where people take the time to educate themselves about what is behind lower prices instead of fixating on a number on a website. But hey shopping at WalMart is cheap, who cares about the consequences...

I too used to sneer at such ideas of considering such things holistically, dismissing it as nostalgia. But the fact is we are racing to the bottom in ALL areas of consumerism with this idea that the price is the only thing that matters...

[Realitychex]

There's a very good reason why communities line up to pitch their airport to Southwest Airlines.

Low fares get people traveling and people that travel spend money and that causes growth in the communities that are lucky enough to have a low fare option. Spent anytime in Comox/Courtenay recently? How about Kelowna? Abbotsford? Ever wonder what might have happened if WJ decided to go to Campbell River or Penticton instead?

Freedom to fly? Southwest used that one for years.

WJ's YEG-YZF fare on Sunday, (tomorrow) is $399. Canadian North's are
$143.50 and $280. First Air's are both $143.50. Air Canada's is $254.

What's the complaint now? That WJ is being TOO responsible or is gouging and charging $399?

I note that the seat sale is over and lead-in fares are now $75. Add the $18 contribution for Nav Fees and Insurance, both expenses that are paid regardless of load, and that takes it to $93.

I don't see a big issue with that fare, anymore than I see a big issue with the $59 fares we've seen from Calgary to Vancouver over the past thirteen years.

[FICU]

Low fares get people traveling and people that travel spend money and that causes growth in the communities that are lucky enough to have a low fare option. Spent anytime in Comox/Courtenay recently? How about Kelowna? Abbotsford? Ever wonder what might have happened if WJ decided to go to Campbell River or Penticton instead?

So you are crediting Westjet for the growth of Courtney/Comox?

Have you ever been there? It is an amazing 4 season location that is a great place to live and retire. You have the ocean, Mount Washington, close proximity to great golfing, a nice 4 lane divided highway south. It has been very affordable and only since the economic boom has the cost to live there gone up as it has everywhere else. Westjet did nothing other than offer more airplane seats and force the airport to put a real terminal in. Courtney would/will grow regardless of Westjet.

Have another drink!

WJ's YEG-YZF fare on Sunday, (tomorrow) is $399. Canadian North's are
$143.50 and $280. First Air's are both $143.50. Air Canada's is $254.

What's the complaint now? That WJ is being TOO responsible or is gouging and charging $399?

Canadian North has 2 flights on Sunday and one, the AM flight is at 87/114 seats and the other in the evening is at 107 of 112. Canadian North goes as high as $522 BTW(different fare rules) and I'm guessing Westjet is gouging since it is a Sunday. Do you think the fares to travel further north on Canadian North and First Air have gone up since Westjet came into the picture?

I note that the seat sale is over and lead-in fares are now $75. Add the $18 contribution for Nav Fees and Insurance, both expenses that are paid regardless of load, and that takes it to $93.

Didn't you state previously you needed a one way fare of $180 and 68 seats filled to break even? Why is $75 ok now?

[bmc]

Didn't you state previously you needed a one way fare of $180 and 68 seats filled to break even? Why is $75 ok now?

How many seats is Westjet offering per flight at this price?

This is a really childish thread by the way.

[FICU]

Didn't you state previously you needed a one way fare of $180 and 68 seats filled to break even? Why is $75 ok now?

How many seats is Westjet offering per flight at this price?

Through the end of the month they have all but 4 days at $75. Right now in September 27 of 31 days are still at $75 so the majority of their flights are running at a fare average of well below $180/seat. Westjet has been bleeding on this route all summer and the drop to $55 was a tell tale sign.

Canadian North's 2nd flight is now at 111 of 114. Do travelers prefer the hot meals and service over TVs and cookies?