Originally Posted by
CloudsBelow
TS is filling jets at junk yields and are getting lapped by Rouge. TS can't dare increase the price a penny, so they cram more seats in. Dilute yields a little further but less than incremental seats/anciliary rev from same.
Lots of persistent talk (rumour) AC mainline are nearing deal for additional A330s. Growth is out of control. Are AC (possibly) doing this for more mainline lift? OR to expedite the final 767 transfers to Rouge to drive the nail deeper into TS?
Transat is in deep trouble and likely to shrink further rather than expand. In my opinion.
I keep hearing of more 330s too (beyond all of the surprise extra 321s and 767s that they actually announced in the fleet plan)
3 things happening here:
1.) they want to put transat to bed. 767s even at rouge are like 18 inch seats, so they're a much nicer ride than 9X333s.
2.) Canada has a lot of demand to a lot of these places, its mostly economy traffic. Rouge allows AC to operate it profitably + AC can do something Transat can't it can steal junk business traffic from the US and put it in Premium rouge. The whole thing works well. At the end of the day people do prefer nonstop flights if available, with the lower costs many of these cities are profitable to return to or start(Lisbon, Manchester, Nice, Venice, Athens, Montreal-Rome, Barcelona, montreal Barcelona, Dublin) And all are being hugely boosted this year. (Tangential: But the core infrastructure doesn't change in size no matter how much AC flies, so these fixed costs are spread over more flights, more rouge even makes ML more cost competitive.)
3.) AC costs compared to US carries is dropping because it pays its staff in Canadian Dollars. Staff is the biggest Airline cost. Meaning they can sell their tickets in US dollars for less, buy most of their fuel with the fares from these passengers and pay the staff with the fares from the Canadians... But the CAD is also down against the RMB and many others. Quite significantly. Like we're talking 8-10%. That plus AC's cost cutting... Think of the demand they can stimulate/traffic they can steal.
Additionally they'll pay 62 CAD cents for fuel this year. Vs 90 in the 4th quarter. They have a perfect storm, and a once in a decade opportunity to grab a huge share of the trans atlantic and transpacific market from US and European Carriers.
And the strategy behind all of this is working. They want to have 50%+ marketshare on all major routes they're running. Just look how fast they took control of the YVR->LAX market. AS (market leader) and WS couldn't cut capacity fast enough.YVR->HKG they're back to 50% too. (CATH has a lot of transit traffic) And YUL->CDG is another target that Means taking on Weak Air France (And they are weak), and Transat. The HD put the pressure on, so they're ratcheting it up by adding an 767 extra for high season to Montreal and Toronto + Nice last year. It'll be interesting to see the Canada Vegas passenger numbers too for this season - as they're going after WS with a rather large capacity bump...
Also they'll have 8 7879s by next March. So all of that capacity is coming to a theatre near you summer 2016 + the 777W refit.
I for one hope it works. Do you know how many people they'll have to hire to work all of those flights? 000's