YOWkid

In case you didn't bother doing your homework, these are OVERNIGHT visitors. Not day trippers or connectors to third countries. Those have already been taken out of the equation. I've made the assumption that 20% are coming in via third countries, which is very high for the Canada-Western Europe market, given the number of direct services. Also, yes, there are also a number of Canadians driving down to the U.S. to fly to Germany from there. These numbers would not capture that. But you can't reasonably capture absolutely everything, hence the reason why I made the conservative 20% estimation and later said the number is really closer to 10% (and frankly, probably less).

The agreement is between Canada and Germany (well, Canada and the EC and its Member States but that's a minor technicality). So we're talking Canada-Germany traffic, not YOW-FRA traffic. Don't forget also that YOW-FRA gets connecting traffic from within Canada too. In other words, this game is not about Canadian city to Germany city. It's about the sum of traffic from Canada the country to Germany the country and vice versa.

That's fine if you feel that way. But I was asked to do my homework and indirectly accused of misinformation, so I have shown my work and analysis using available data and reasonable assumptions.

Spounce

And of course you'll be heading right over to the BA and AA forums to lambaste those carriers for selling seats YYZ-LHR-DXB and YYZ-USA-LHR-DXB for less than they charge folks in their local markets of LHR-DXB and USA-LHR-DXB, won't you?

Jasper2009

The % of O&D traffic is pretty much irrelevant. The argument is that airlines such as LH/LX/OS benefit from NA pax connecting in FRA/MUC/DUS/ZRH/VIE and AC/UA benefit from European pax connecting at their hubs. On a broader scale airlines such as KL/BA may "steal" pax flying YYZ-FRA and AC may "steal" pax flying YYZ-AMS/LHR. It pretty much evens out.

However, there is very little O&D traffic from / to the Middle East (compared with thr capacity offered by EK/EY/QR/GF/SV etc.) which obviously changes the entire game. Now one may or may not support changing the market dynamics by allowing those carriers unrestricted access, but pretending that nothing would change makes little sense.

rankourabu

exactly. Lets not pretend there will not be a change, and let market forces decide.
Just like we let market forces decide on US-Europe routes where AC tries to poach traffic.

I am happy EK for trying to be creative and trying to use AS to feed traffic onto their ex-USA flights in light of the federal government subsidizing AC by restricting access. Only the consumer wins.

When EK started NYC-MXP flights - those base fares dropped to $10 RT. Consumers won.

Jasper2009

Even as an economic conservative I don´t believe that the market forces will create an efficient market environment - especially when the market is an oligopoly (since perfect competition isn´t a viable option in the airline industry).

No regulation of the airline industry could easily result in a market environment that´s much more harmful than the current environment. IMO AC could do with a little more competition, but I´m not convinced lifting all restrictions will benefit anyone (except the ME carriers).

imverge

Expect things to change in 2014....

The Harper government has put AC on notice regarding Gulf carriers wanting more access to Canadian airports. Harper knows he can spin this into votes in the next election. You can expect a passenger bill of rights announcement before the next election too

AC has asked for time to allow new aircraft to come online. The agreement is they have until August after which you can expect an announcement from the government on additional access to Canadian airports from Gulf carriers.

EK is expected to get YVR & YYC x3 flights weekly each

Spounce

I can hardly wait to see it. Knowing Harper, it will probably be as well thought out as his brilliant "tough on crime" legislation. In other words, expect it to result in higher fares by increasing costs to airlines, and in more cancelled flights such as we saw south of the border when tarmac delay fines were introduced.

If Harper's government wanted to do something useful it might lower the taxes and fees on airlines and airports. When he was in opposition his transport critic was highly critical of the previous government on the subject, but he hasn't yet found time to do anything about it.

yulred

80% is coming / going directly? I don't know if you travel to Europe often, but I (and many others, I suspect) routinely do round trips to one port and travel within Europe on a whole separate itinerary. If you expect me to believe that 80% of Canadians who visit both the Netherlands and Germany do so by flying to Germany/Netherlands, flying back, and then flying to Netherlands/Germany, then, well, you might want to reconsider. The majority would fly to one of those countries and take a train down to the other country. It doesn't hold.

I could give my own example - on one trip I flew in LHR, then took the Eurostar to Paris, then took Ryanair to Barcelona (Girona IIRC), then took the AVE from BCN to Madrid, then flew from MAD to the Paris Satellite and then took the Eurostar to London, all inside of a 14 day student vacation. I only flew one TATL flight, yet your logic would put an 80% probability that I flew to London, flew back, flew to France, flew back, and flew to Spain and flew back. It makes no sense.

First I'll point out the bleeding obvious - 60% O&D seats does not make a route sustainable. Its the "cream on top" that makes the route sustainable.

Back up.
LHWinter timetable
http://dl-oim.de/download/LH_Timetable_de.pdf

YYC-FRA - 7 X 330 (7*265) = 1855/week or 96,460/yr
YUL-FRA - 7 X 330 (7*265) = 1855/week or 96,460/yr
YUL-MUC - 5 X 330 (5*265) = 1325/wk or 68,900/yr
YOW-FRA - 5 X 763 (5*211) = 1055/wk or 54,860/yr
YYZ-FRA - 14 X 777, 7 X 340 = (349*14)+(7*266) or 4886/wk + 1862/wk = 254072 + 96824 = 350,896/yr
YYZ-MUC - 7 X 777 (349*7) = 2443/wk or 127,036/yr
YVR-FRA - 7 X 744 (7*352) = 2464/wk or 128,128/yr

You claim a total of 832,000 seats. The actual number in winter is 922,740

This does not include LH's announced summer seasonal additions including:
YUL-FRA 2 X 330, 3 X 340
YVR-MUC 7 X 330
In addition, YYZ will be upgauged to a 744 and AC will upgauge YYC to a 777 for approximately 7 months (29 March to 25 Oct). And, of course, there is the capacity (and overwhelmingly O&D traffic) carried by Condor to YHZ, YYZ, YYC, YVR and YXY, or the TS flights, for that matter.

In short, over the course of a year, you're probably looking at a 50-50 break. That's not strong enough to maintain most of those routes. They depend on that ..errr..."cream on top". And all of this is with the rather dubious assumption that much of the leisure traffic (which accounts for the bulk of the traffic), doesn't use Europes excellent - and affordable - rail and air networks, choosing instead to return to Canada and then go back to the other country.

So...no, not convinced.

I don't have the wherewithal to engage in the same exercise as I did above, so I'll just point out that Air Canada itself notes that:

– Focus is on sixth freedom flow traffic – 70% of KLM’s traffic is international flow traffic

http://www.aircanada.com/en/about/me...r_day_2013.pdf
Slide 8

Or I could use Calin:

"When you look at who travels on this flight, only 15% are people going between Ottawa and Frankfurt. The other 85% are connecting in Frankfurt to fly somewhere else. If another carrier siphons off even just the 15% headed for the Middle East, then the route is no longer viable."

http://www.flightglobal.com/news/art...e-east-349163/

Pretty dependent on that "cream on top", eh?

I don't see how its reasonable to assume that 90% of people visiting AMS will fly to AMS, as opposed to fly to another point of entry and then take the train to AMS, particularly the low-yield leisure market which would find it a lot more reasonable to hit multiple points in Europe with one TATL flight instead of flying back to Canada between each trip.

Furthermore, its a bit hard to rationalize your claim of 33% sixth freedom traffic with a system-wide average of 70%+ (CAPA estimates it at 80%+), but you're free to believe what you want to. I'm far from convinced.

They're declaring a high 80 load factor on YYZ-DXB (and anecdotal evidence/hordes at YYZ support it). Might be hard to fill those planes when they're practically full in Y.

I doubt SEA was added on its own merit. It was probably added with the goal of capturing some YVR traffic (supported by the push for Canadian traffic). YVR has a large number of South Asians, so it doesn't surprise me that EK is going after it. After all, EK's strength lies in South Asia, with India as its top destination in terms of number of points served, and Pakistan at no. 5.

YYZ-DXB 12 Feb- 19Feb

DL/KL via AMS - $868
AMS-DXB - $596

AA/BA via LHR - $1083
LHR-DXB - $672

AC/LH -$930
FRA-DXB - $852

Not sure why he would do that since he would be wrong.

That's not economic conservatism. That's 'Canadian economic conservatism', which is not economic conservatism at all; it places far too much power in the hands of the government. Witness the bizarre battle between Ottawa and the Telecoms companies, which don't feel the need to compete within Canada, and aren't good enough to compete outside Canada. The solution of economic conservatism in Canada? First protect industries to the point where they misbehave with impunity. Then try to remedy it with Band aid solutions such as legislating no-fee bank accounts into existence .

Economic conservatism (the real type, not the Canadian kind) is based on the belief that demand and supply should be allowed to interact without government intervention (hence the 'free market'). One can try to obfuscate it by throwing around terms like "perfect" or "imperfect" competition, but one of the key tenets of economic conservatism - the invisible hand - is not predicated on perfect or imperfect competition. It is simply predicated on the belief that if demand and supply are allowed to interact without ANY outside interference, the most efficient outcome will follow.

Now this outcome may not be to your liking - or indeed, to the Government's liking. But that does not make it an imperfect outcome, or even a dangerous one. It simply reflects the value that the consumers (who double as taxpayers, even if their contribution is limited solely to consumption taxes such as GST) attribute to a product. In other words, if KL's AMS-YYC fails on the back of unlimited EK frequencies across Canada, that does not amount to a failure of the system. If the majority of people flying YYC-AMS decide that they get better value out of flying YYC-DXB-AMS, then that is a reflection of the market and the value it places on the direct service. In other words, the market has decreed that this route is the most efficient outcome after taking into account any costs associated with, say, longer flight times, and the benefits of saving hard cash.

However, some here will argue that keeping YYC-AMS is necessary since it serves some greater - but undescribed - purpose. Sure, but it comes at a cost insofar as it requires keeping EK out...which impairs the ability of supply and demand to shape efficiencies. Not unlike the dairy supply management system, which seeks to keep prices steady and predictable, albeit by keeping them higher. Efficient? No. Filling some ideological desire? Yes. Best economic outcome? Not by a country mile.

Ultimately, economic conservatism would decree that no matter how imperfect the competition is or how uneven the playing field is, the ability of demand and supply to interact without any interference, particularly barriers to entry, would result in the most efficient outcome. If you take a look around at the aviation world, the most consumer-friendly countries with the most aviation options/high per capita air travel rates also boast some of liberal aviation policies. Canada is not on par with them, and this Canadian exceptionalism, which has created a rather odd brand of economic conservatism, is a bit tiresome. At some point, we're going to have to look abroad at best practices, rather than convince ourselves that we're so special that we have nothing to learn from others.

Spounce

AA/BA is selling YYZ-LHR-DXB at CAD670-ish on some dates, and YYZ-DFW/ORD-LHR-DXB at slightly more. Those fares are lower than the lowest LHR-DXB or ORD/DFW-DXB fares one tends to see.

That's fine as far as I'm concerned, but I found it a little odd that the poster who took a shot at AC for selling USA-Europe seats at lower fares than it charges for Canada-Europe seats in some cases would gleefully make mention of a YYZ-DXB fare war where at least 2 other carriers engage in similar practices in their home markets.

yulred

The fare war is a temporary phase; its not going to last forever. I fly to Europe (In particular LHR) often - typically from YOW/YUL, but occasionally through the US; I rarely find a Can-US-EU fare that is on par or lower than the US-EU direct fare (typically use BAEC points to get to NYC and then carry on from there in Y+ - with the combined amount spent on tickets/taxes at par or lower than Canada-LHR direct and even CAN-US-EU most of the time, especially if I don't want to spend 7hrs+ transit puttering around at a US Airways hub). In my experience, he has a point.

Speedbird84

EY has been reported as having similar loads as well. They also upguaged from a 346 (with F) to a 77W (no F, low J) relatively quickly after launching the nonstop. High Y loads sounds right.

Pretty much. They've been after serving YVR since before they got their A345s (pre-2001ish), and it was one of their planned destinations after they got them. Off the top of my head, the other potential destinations for the 340s were SFO, SYD, MEL, LHR, GRU, YYZ, and NRT. YVR is the only one they haven't been able to get to. Good on Gregoire and SEA for taking advantage of the situation.

Jasper2009

Yes, I very much support the concept of demand supply interacting with as little intervention as possible, and am generally extremely sceptical when it comes to government intervention.

However, you´ll find few economic conservatives who believe that zero government intervention always works best in a market that:
(1) is an oligopoly and has a declining number of suppliers
(2) has extremely high market entry barriers

Of course there´s an economic cost associated with any intervention, but that doesn´t mean that a duopoly where one supplier can kick out the other supplier is more efficient.

yulred

We can debate the theories underlying free market to the end of time, but if we focus it on the issue here - namely the ability of a willing supplier to enter what one might justifiably call an under-served market - I think you will find many economic conservatives who believe that there should be zero government intervention in the ability of firms to enter (or exit) markets, particularly when natural barriers to entry are already high.

I am not convinced by these assumptions. Market readjustments due to resource constraints do not automatically imply a market that "is an oligopoly and has a declining number of suppliers". The last few years have seen major market readjustments because of:

1) 9/11 and its immediate (and sometimes fatal) impact on legacy carriers
2) Oil prices
3) the seemingly never-ending financial crisis

In spite of that, outside Canada, which is a fairly obvious outlier when it comes to the first world (we can't even generate as much air traffic as Australia, despite having a population that is ~50% larger, and our average per capita air travel is half of that of the US, despite Canada being a larger landmass), we're seeing an upward trend in air travel numbers. Some airlines have ceased to exist. New ones have taken their place. The most obvious counterpoint to your assumptions is the reality that accessibility to air travel, which is directly related to affordability (which, in turn, is affected directly by competition) is increasing globally. That is not a hallmark of an oligopolic market and declining suppliers.

One need only take a look at the EU - AUS market, which AC and its cheerleaders call a market failure. Despite the claims that the entry of the ME3 would herald the end of competition, the so-called Kangaroo route via SEA, has now seen the addition of the Falcon and Canton routes. If anything, there is even more competition than ever before, and prices are excellent. Some will claim that that is because QF sold out to EK. I've never quite understood how its any different to the significantly older AC/LH relationship. Look at the capacity AC sends to Germany. Contrast that with the capacity that LH sends to Canada. Now take a wild guess about what would happen to AC if LH dropped AC and started sending its own metal. But that aside, EK, EY and QR are locked in healthy competition; SQ, CX, TG and MH don't seem too keen on giving up their extensive foothold in Australia; GA and TK are thinking of entering the party, and China 'Sudden' is positioning itself as an alternative. However, instead of focusing on that, AC and some Canadians bemoan the loss of some very mediocre airlines from the route.

All of this is taking place despite high barriers (typically cost) of entry. And all of it is possible because of limited to nonexistant government-imposed artificial barriers to entry. Its one thing advocating government intervention when a problem exists; its quite another to demand government intervention to resolve a hypothetical problem that does not exist (especially when the assumptions underlying it are questionable in light of developments around the world).

Where does this duopoly exist? On a route? On a network? Great soundbite, but I can think of many examples that refute it (Airbus v Boeing being an obvious one).

Jasper2009

I agree the entry of the ME carriers into the Europe - Australia/NZ market has benefited consumers.

As I mentioned above, I don´t necessarily disagree with reducing government intervention, I´d just choose a more conservative approach of "let´s reduce intervention and have a close look how the market dynamics change" vs. "let´s eliminate all intervention tomorrow and see what happens".

But I´m happy to agree to disagree.

DXBFlyer

Personally I disagree with the fact consumers have benefited from the ME3 carriers. If anything they are just big bully's. This is my personal opinion mind you and not based on any fact.
Point is they are far more able to bully than the EU or US carriers.

Think of a simple game of monopoly - whoever holds the most properties or the biggest amount of cash can bully everyone out of the rest of the game. Same principle as EK and I'm sure EY/QR wish to do the same.
EK loads on the SEA route with it being operated by 77L are not full. They're busy but not full. Premium cabins seeing upgrades most the time from Y class but not enough Y class bookings to justify 77W.

Don't get me wrong, certain things have improved for the customer i.e ICE etc However I personally think that EK at some time will be a victim of their own success but not down to passengers.