The Raymond James comprehensive analysis published in Jan 2018, titled “The Scoop on Swoop”, concluded that fares at these levels would result in Swoop generating an operating margin of 10-11%, with load factors lower than those that have been achieved.
That analysis was done by a guy who knows his way around the industry and has modeled a number of highly successful startups, now collectively generating close to $3.5b in revenue a quarter and operating close to 500 jets.
WJ was profitable during the complaint period, (net of the huge revenue hit as a result of potential strike impact in 2Q). That, in of itself, makes Flairs claim very dubious.
It is exceedingly complex and brain numbing trying to sort out what precisely is the variable / incremental cost of a seat that would otherwise be empty were it not sold. Trust me. Harvard mathematicians and economists have struggled for years trying to figure that one out.
Anyone involved in the WJ vs AC complaint 18 years ago on both sides of the table. knows all about that.
That file kind of died a miserable death after about 3 years. Hearings in Ottawa on Sept 11 2001 were postponed for a long, long time.
The modelling also proved that Flairs fully allocated unit costs with those old low density -400’s, were considerably higher than Swoops costs.
It comes as no surprise to anyone in the business that Flair lost $10m in the peak summer season operating a high cost, ULCC operation. How much are they losing now in the dog days of winter? It must be ugly.
It will be exceedingly difficult for Flair to prove anything in this case.
More importantly, when one looks at this rather desperate move, (and recall WJ went after AC in 2000 when WJ was highly profitable and AC was obviously not), combined with CUPE backing off the Flair strike action when they got a peak at the books and realized that ANY work stoppage would guarantee a permanent Flair shutdown,(has CUPE ever done that before?) and it’s pretty obvious to even the most obtuse observer that Flair is struggling to survive.
I wouldn’t be making any travel plans on the basis of Flair being around in mid Jan, and perhaps even earlier.
The best defence against competition has always been low costs. Flair does not have them and that, together with a dumb business plan, is fundamentally why they are in the pickle they are in.