Recently there have been many claims that Air Canada's rapidly escalating stock price was due to the skill (nay, brilliance) of their executive management team. I think that's utter nonsense.
More nonsensical still were the claims last summer that their increasing profits† were due to the recently announced yet not yet implemented rouge program. Apparently rouge was so brilliant it had the ability to retroactively affect profits.
Likewise with claims that increasing profits were due to the massive cutbacks and the alleged cost savings supposedly associated with those cutbacks.
Contrary to fabricated claims about what I've stated in the past about their share price, I've always maintained that more than anything their share price is due to market conditions. That is, the recent rapid increase in share price was simply the result of market forces, which AC management had very little to do with.
On the upside (for AC management) that means the recent precipitous drop in share prices were probably not due to the vast hordes of frequent flyers/FTers abandoning Air Canada for greener pastures. Nor was it due to scandalous incompetence on the part of those very same managers.
Rather, the weather that hammered all airlines starting in early December (and continues even today), possibly combined with currency fluctuations, are the real cause. You know -- market forces, which AC management had very little to do with.
(Of course, given that the weather in the first quarter of this year has already been worse than anything last year, things can only get better, er, worse.)
My take is that Air Canada can now implement these cutbacks and increase capacity unchecked, even if many FFers are in fact leaving, 'cause currently there's a line up around the block of people waiting to take their place. In today's market, it appears no matter what you do, you can survive and maybe even prosper.
But once the economy turns, as it inevitably always does, then Air Canada will be stuck with lots of excess capacity and a substandard product. That's where it will make the difference.
Now it's possible that argument could be made against any airline these days. But when that time comes, they'll be fighting each other tooth and nail to keep, recover and/or poach customers, primarily by dangling more and more benefits in front of those FFers. And then the picture won't look so pretty.
Don't believe me that Air Canada's stock price is primarily (if not solely) due to market conditions? Then have a look at the chart below. It shows the share price of 10, count 'em, 10, different North American airlines. And to highlight the best of Air Canada's "performance" I've trimmed the chart to only include the period from mid-August (when the price started its rapid increase) to mid-January (just prior to the big "crash.")
Which one of those lines is different from the rest?
†
And by "profits" I mean losses restated through the use of not generally accepted accounting principles.