Stranger

Too good to be true perhaps?

yulred

On the one hand, you'd be hard-pressed to think of a major airline that has such favorable market conditions.

On the other hand, you have to give credit where its due for finally taking advantage of these conditions. After all, one can only take the water to the horse; one can't make it drink.

There has been much uproar about the FF program, but these figures just go to prove that they based their decisions on sound logic. There was always a bit of risk inherent in it. Whether they underestimated that risk or got it just right remains to be seen. I think they got it just right.

ylwae

Maybe this will encourage them to make even more cuts to the FFP.

Stranger

I suspect it is simply way too early to tell.

Perhaps more to the point, given the way they do accounting, what they did makes the accounting look good in the near term, which is really the only thing they (and the financial system) cares about.

So let's play the game, grab the money and run. When the s*h*i... hits the fan, we can always bail out and run. Hopefully the bonuses will have been fat and nice up to that point. Or the stock options.

Like the military, make things look good and who cares if after you get promoted to a new job, reality sinks in and it's a total disaster. As long as the looking good lasted long enough to get the promotion. I suspect it's the same too with the Chinese (and formerly the soviet) communist party.

How do you think these vulture capitalists work BTW?

One does not make money by working hard, just too slow compared with your lifetime. One makes money by making sure the suckers lose what one wins.

KenHamer

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No, just surprising - for Air Canada.

KenHamer

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So gutbacks announced in the past several weeks some if which don't take effect until next year influenced a fiscal quarter that was all but over at the time of the announcements?

They should eliminate both J class and FF benefits immediately. Costs would nose dive.

yulred

Is it though? Its been over a year since Tango made its entry to TPAC. And its been a while since Tango came onto TATL. Prices didn't exactly go down with their appearance - the cheapest booking classes were simply relabelled Tango, and the miles were cut. The end result: 86% load factor a year later (to put it in context, BA and LH don't even hit the 80% mark). Travel habits didn't change. Nothing changed. We all travel enough to know that airfares certainly didn't bottom out system wide. If anything, they're higher than last year. Complete with Tango.

One does indeed make money by making sure the suckers lose what one wins. However, in this case, a vocal minority aside, most of the suckers are happy to be suckers. In such cases, it would be criminal not to oblige them by taking everything they have to offer. This is Canada, where people may not like the system, but they're comfortable enough with it to not do anything about it. Look at the Telecom's farce: everybody and their dog wants more competition to come in because they hate the incumbents. And yet 90% have stayed with the incumbents. All bark. No bite. Its going to be the same with AC: at the most, people will express a profound hatred for AC. While flying AC. If I was AC, my attitude would be not unlike AC's: "pity you hate us, but we'll take your money all the same. Thank you for sticking with us, even if its only because you have nowhere else to go".

And its not just the general masses that are responsible for this mess. There are many here who applaud the Government's restrictive policies. The same people who have taken umbrage at AC's changes were the most vocal in AC's support when it was fighting to keep competition out (and create the situation that would be conducive to these cuts). What exactly did they think was coming next? A more competitive FFP in a less competitive market? AC doesn't need loyal customers. Its needs customers. And they're in no short supply.

Vulture capitalists / short-termism - I thought the golden rule was to make hay while the sun shines. The sun is shining. AC and its executives are entitled to make hay. Will the sun stop shining tomorrow? Next week? Next year? Many here think so. I obviously don't. Unless our aviation policies change dramatically, between high taxes and artificial barriers to entry, the sun is going to keep shining, and it certainly isn't going to trigger any major reversals on the FFP.

Besides, an airline that can survive Milton can surely survive Calin. Ottawa will make sure.

yulred

The real shocks to the system came with Tango Intl fares and the E35, E50, E75 implementation. Those didn't exactly put a dent in AC. This latest shock is really just an extension of the first shock.

As for eliminating J and FF benefits immediately, they're already in the process of doing that on some routes: AC Rouge.

yulred

delete - repost - accidentally hit quote instead of edit.

yulred

If I were a betting man, I would bet that they will continue till the program is identical to Lufthansa Miles and More.

Swarez

I disagree about the market condition comment, I know the government helps AC as much as possible, and tries to restrict many foreign carriers but they still have many disadvantages operating in Canada.

Our privatized airports are some of the most expensive in the world, jet fuel has excessive taxes on it, airports charge improvement fee's, higher borrowing rate for AC vs international competition, high security charges relative to other countries just to name a few all drive up airline costs, which are passed to us. This makes it difficult to compete with the new carriers in Canada, plus the international carries most of which have lower costs because of all this.

Proximity to the border from many Canadian cities also pushes many people to fly from the US, about 5 million in 2012, AC losing out on many potential customers and growth because of the Canada's high cost structure.

They also have a lot of competition, especially for a small country. Porter going after the short haul bay street/business crowed by offering cheaper last minute fares plus proximity in there two biggest markets,

West Jet has done good job growing and out west (that is where this countries growth is) does very well, much better cost structure for the leisure destinations as well.

Transat does Europe well, and flies more people there over the summer than AC, lower cost structure they and targeting Y passengers means they can. Many canadians do the all inclusive get away deals, again AC can't compete with the lower cost guys at this level so missing out on huge part of the market.

Internally created there pensions hurt them, something none of there Canadian or newer internationally competitors have to deal with.

CloudsBelow

Or maybe, on the whole, AC's FFP is still the best option for many flyers ... Not as good as it was before, but still better than the rest, all things considered

CloudsBelow

That's not entirely true.
IF the RASM directly related to the reduction in FF benefits decreases more than the savings, than, obviously AC has missed the boat.

There are many inputs to the CASM reduction beyond stripping elite benefits

Stranger

But then, they did not really survive Milton.

Arguably a good deal of the issues that push them down now are still part of the Milton legacy.

Stranger

If the RASM directly related to the various "inputs to the CASM reduction" decreases more than the savings, than, obviously AC has missed the boat.

However, I suspect they know that and they don't really care. In the short run, makes them look good, which is really the only thing that matters to them.

They'll only care about longer run when it becomes "short run."