Westjet & American go to bed

[~Hollywood~]

http://www.businessweek.com/ap/financia ... V1R780.htm

[bmc]

Congrats Westjet.

Westjet stands to draw all kinds of interline feed that is currently unaccessible within Canada. AC makes their life easy.

Oneworld membership is just around the corner.

[Flightlevels]

win win for all and this will be a full codeshare before long. For years american and any other one world member has been paying AC through the nose for any connection service since the demise of Canadian. chip chip chip.

[bmc]

win win for all and this will be a full codeshare before long. For years american and any other one world member has been paying AC through the nose for any connection service since the demise of Canadian. chip chip chip.

Not only oneworld members. AC made interlining to domestic points expensive for any airline. That made it very easy for Canadian to capture traffic and get reciprocal access and prices from a lot of airlines. That demand never went away with Canadian's demise. Some of it has flown in via the USA. Some passengers bought double tickets to a Canadian entry point and then flew domestic sectors on other airlines.

AA is a rather strong brand. The flow opportunities from this, coupled with much better yield than Southwest could deliver, will be very good.

Congrats and good luck with a key strategic partner.

[yycflyguy]

Oneworld membership is just around the corner.

Don't you need a business class to be in oneworld?

[bmc]

Oneworld membership is just around the corner.

Don't you need a business class to be in oneworld?

That's a good question and you have to wonder if a premium cabin is not on the way for Westjet.

I would say that network reach is a stronger criteria than cabin service. Westjet, to many nonStar (or oneworld) airlines, pay dearly for access to Canadian markets. Volume wise, the bulk of the business is economy class. YVR-YEG/YYC/YWG/SEA/YYJ is a draw for transpacific carriers. JAL and Cathay would be interested. Out of Europe, YYZ-YOW/YWG/YXE, YVR-YYJ/YYC/YEG/, YYC-YEG/YQR/YXE would be of interest to BA. The accumulation of loayty points on Westjet services would be of interest to oneworld airlines.

This is just my opinion and I am in way affiliated with any of these airlines. In fact, I've never flown on Westjet.

[mikeecho]

OneWorld membership is not on the way.

This is one in a long line of Interline and codeshare relationships for WS.

Think more along the lines of Alaska Airlines and how they manage their partnerships.

[bmc]

I can't see the similarity with Alaska beyond GS and JM coming from there, although they are both former CP.

Alaska is one of many US carriers that doesn't offer anything unique to a global alliance. The domestic points they serve can be accessed from any US carrier. Alaska has as many interline agreements as any carrier. Interline agreements are nothing special in the airline world, although it's a fairly recent step for Westjet. The main hub of Seattle is currently a destination of many long haul carriers and it's size as a destination, is sufficient to stand on its own. Sure, the flow opportunities help and a good prorate agreement will facilitate access, although industry settlement is cheap these days.

To me, Westjet differs purely as the only alternative in Canada. To compare the two carriers in terms of offering to a global alliance, is apples and oranges. Canada is missing from Skyteam and oneworld. Canada offers considerable global traffic to Asia, Europe, South America and the South Asian Sub Continent. If I were oneworld, I would be very interested as Westjet plugs an obvious hole left by CP, which was incidentally, one of the founding carriers of oneworld.

Strategically, I see more value in an alliance for Westjet from a global partnership than tactical code shares here and there.

[mikeecho]

I can't see the similarity with Alaska beyond GS and JM coming from there, although they are both former CP.

Alaska is one of many US carriers that doesn't offer anything unique to a global alliance. The domestic points they serve can be accessed from any US carrier. Alaska has as many interline agreements as any carrier. Interline agreements are nothing special in the airline world, although it's a fairly recent step for Westjet. The main hub of Seattle is currently a destination of many long haul carriers and it's size as a destination, is sufficient to stand on its own. Sure, the flow opportunities help and a good prorate agreement will facilitate access, although industry settlement is cheap these days.

To me, Westjet differs purely as the only alternative in Canada. To compare the two carriers in terms of offering to a global alliance, is apples and oranges. Canada is missing from Skyteam and oneworld. Canada offers considerable global traffic to Asia, Europe, South America and the South Asian Sub Continent. If I were oneworld, I would be very interested as Westjet plugs an obvious hole left by CP, which was incidentally, one of the founding carriers of oneworld.

Strategically, I see more value in an alliance for Westjet from a global partnership than tactical code shares here and there.

The point is that WS will take the same interline/code share strategy as AS.

Partner with as many carriers as makes sense for specific geographical regions without any membership (or loyalty) to any specific alliance. That's been shown with the current list of partners which span across SkyTeam and OneWorld members.

[Flightlevels]

Just announced British Airways interline as well. All will be full codeshares in the future.

[bmc]

Launching a code share agreement is involved work. Launching two is ambitious.

Anyone want place bets on Cathay and/or JAL being next in line?

[CanadaEH]

KLM = interline
Cathay = interline & codeshare
American = interline (codeshare coming in December)
British Airways = interline

I hear there are more in the way at a rate of 1-2 per month.

[CanadaEH]

BMC, as per the YVR FIDS:

14:40 Cathay Pacific Airways CX839 Hong Kong (HKG) On Time D65
15:00 Cathay Pacific Airways CX7030 Calgary (YYC) On Time A1
16:00 Cathay Pacific Airways CX7032 Calgary (YYC) On Time A3
16:15 Cathay Pacific Airways CX7010 Montreal-Trudeau (YUL) On Time C52
16:30 Cathay Pacific Airways CX7040 Toronto (YYZ) On Time A1
17:00 Cathay Pacific Airways CX7000 Edmonton (YEG) On Time A2
18:20 Cathay Pacific Airways CX7020 Winnipeg (YWG) On Time A5
22:50 Cathay Pacific Airways CX888 New York Kennedy (JFK) On Time D71
23:00 Cathay Pacific Airways CX7042 Toronto (YYZ) On Time A1

[bmc]

In the airline business, interlining is commonplace. It's simply a ticket and baggage agreement where one carrier accepts the documents of another. Most carriers have dozens of interline agreements. At one time AC had over 150 agreements but brought that down considerably.

The next piece to follow is a special prorate agreement where carriers give each other reduced rates or preferential settlement terms beyond the industry standard. The industry standard, called the Multilateral Prorate Agreement, is signed by over 200 airlines. It is the standard. Whether signatory or not, all airlines that interline recognize this as the standard and all revenue accounting systems that process interline billings use this. In price sensitive longhaul markets, these are needed. In many cases, these can drive more traffic than a code share agreement. Price sensitive travelers make their purchase decision on price. If a prorate agreement gives you great access to beyond markets, you can undercut competitors and capture the business. There is a big market segment that doesn't care what colour the plane is.
To many long haul airlines, prorate agreements really help in low season when you're looking to fill flights by looking at markets beyond your network.

Code sharing takes it a step further by enabling another carrier to have easier access to your inventory. There are three forms of code share: Hard block, soft block and free sale. A hard block is a fixed number of seats offered to the other airline. The airline gives these fixed number of seats at a fixed price to the marketing airline. The marketing airline is at full risk for selling the seats. The marketing airline will display the flight as their own, and will manage the inventory by allocating different booking classes to it. If the marketing carrier doesn't sell any seats, they have to pay the operating carrier.

A soft block is much the same with the exception that the marketing carrier releases unsold capacity back to the operating airline on an agreed time line. For example, 50% of unsold seats are released back to the operating carrier two weeks out with all unsold capacity handed back 72 hours before departure.

Hard and soft blocks are labour intensive to manage. They're easier to manage if it's a daily or less that daily long haul. They are not as common or popular any more.

The third kind of code share is a free sale agreement. The operating carrier gives full access to the marketing carrier. A fare class alignment is needed, with the marketing carriers booking classes matched to appropriate classes on the operating carrier based on yield. When a booking for a B class seat comes in on the marketing flight, it goes into the operating carriers res system to see if there's a seat in the matched inventory. If the seat is available, the sale is made.

In all cases, a prorate agreement is put in place.

Going back to interlining, an interline agreement is a very common place thing of no special significance. Most sizeable airlines have dozens of them.

I'm still going to hold out for the oneworld scenario, though others disagree. I expect it and really hope for it for Westjet. Strategically it makes sense. If there are code shares being put in place with BA and AA, I would be very surprised to see a code share with KL or UA, DL. That's why I posted if CX or JL would be next in line.

If two of the biggest members of oneworld are moving that quickly to partner with Westjet, I believe it's because Westjet have made it known they are open to interlining, and BA/AA recognize the strategic value to accessing a huge gap left by the demise of CP.

Strategically, when positioning themselves against their biggest competitor, AC, joining a global alliance would strengthen their position. Big carriers putting their code on Westjet will drive business and it will drive business away from AC.

I'm just a guy sitting back with a beer and popcorn watching the show. I could be wrong in all of this. I have been wrong before.

Just ask my wife.

Anyhow...nobody asked for a lecture. Sorry for the boring long winded post.

Have a good weekend everybody.