CloudsBelow

Rreally? Cause I'm curious who doesn't have choice when it comes to booking flights??

The FFs in SSM and Kingston, ON etc?

Who else?

yulred

A lot of the problems that AC faces are problems made by Transport Canada (and I think you'll find in my posts that I hold them more responsible than anyone for what's going on right now). You mention the high cost of operating (taxes, rents etc). These same things that are 'hurting' AC are also protecting it. Time and again, we hear US LCCs say that they would fly to Canada if it wasn't so expensive to operate from. If those costs were lowered, EU carriers might expand their services. What do you think the ramifications for AC would have been then?

The current setup is not ideal for AC - it pays heavy taxes. But in return it benefits from the Transport Canada Barriers to entry, which include everything from outright protectionism to a deliberate choice to keep taxes higher. When your load factor is 86%, the taxes...they aren't doing much damage, are they? And in this context, AC is right to take advantage of these barriers to entry. The net effect, of course, is that Canada is not a very competitive market, but that's the consumers problem, and I don't think Transport Canada or Air Canada are particularly concerned by that. The only time anyone in Ottawa acknowledges how important air travel is for the economy (and there are many folk here who think its a "choice") is when AC staff threaten to take to the picket lines. Otherwise, they're happy to slap near punitive taxes on aviation.

The proximity to the US border is a red herring. AC and WS are not interested in serving all Canadians. They are interested in serving high-yielding Canadians. They couldn't care less about the 5 million folk wandering across the border, because they know as well as most of us do that given the choice of paying AC fares, or not flying at all, the vast majority of these folk would almost definitely choose the latter. This may change with Rouge (depending on the pricing), but I harbour many doubts. I think that was more a cost-cutting exercise than an attempt to keep travellers in Canada (ie focus more on increasing the profit margin than catering to a low-yield crowd). That said, it may take pax from TS, but we have yet to see what the pricing will be like.

As for competition, even the Telecoms claim that Canada has a highly competitive telecom industry. Yet, the vast majority of the public appear to disagree. Why? High prices and easily substitutable products - ie they charge more or less the same high (relative to the RoW) prices for the same mediocre products (the same applies to banking). I don't think its any great secret that Canada has some of the highest airfares in the world. I don't think its any great secret either that Canada's own competition bureau has actually floated the idea of cabotage as a mechanism for making Canada more competitive. Ultimately, however, the truth is in the prices. When you have a market with high load factors and high prices, you are almost definitely dealing with a market that is not very competitive. Its partially competitive (as are telecoms and banking), but its not competitive enough for the consumer to benefit automatically (Which is what these FF programs are all about).

CloudsBelow

Assume you mean the blocking of EK etc?
There's a misconception that all these airlines want access to Cda but our govt blocks them to protect AC .... I'm no expert on the subject but govt didn't tell KLM to downguage YYC, and BA to downguage YYZ, LX to reduce YUL, US, DL, UA to each abandon YOW-USA routes etc.
The tax and bilingual burden on AC is far from favourable.

Can you explain the favourable market conditions AC enjoys?

Stranger

Who else? Anyone with varied flying needs if trying to put all his flying in a single FF pot.

Sure for the occasional flyer there are choices. But it's time to put the myth that there are real choices to death.

yulred

Yes. Undersupply.

Not just EK. EY, QR and TK have all been around for a while. None of them have reached daily frequencies years later. And then there was ET, which was told to compete with AC/LH and AF/KL with two (yes, two) weekly frequencies. Theres a tendency to distill it down to EK because they've been the most vocal, but theres a long standing trend of Canadian stalling on providing additional frequencies.

KL and BA are downguaging because they can use their scarce resources better. That doesn't change the fact that they have scarce resources - ie they have X amount of capacity and they have to use it as best they can. Canada's high operating costs - which come almost exclusively due to Transport Canada tinkering (rents, taxes etc) - are a hurdle they might have been able to overcome if they had lower cost bases or better finances, but they don't. They send what they can, and that's unlikely to change in the future. The airlines that can - the ones that have low cost bases and ample resources - are being deliberately kept out. EK is the obvious example, but EY, TK, QR, ET all want more capacity. Problem is - it isn't coming. None of them can fly daily to Canada. I read that this also applies to Hainan, which is limited to 3 weekly frequencies. Or SQ's one stop via Korea, which it quit in 2009. So yes, it is, in fact, government policy to restrict entry.

Between you and me, I can't think of any European countries (+US/NZ/AUS) that only hand 3 weekly frequencies and don't increase it to daily even 3 years later (TK has added all of 2 frequencies since it started here).

That's some very interesting market conditions for you right there. The airlines that have the capacity (the obvious new entrants) aren't allowed in. And the one's that are, don't have the resources or interest to stick around. The end result: the consumer is screwed. A point that AC is proving with some relish these days. Loyalty? For what? You're replaceable by the many others who'll pay the same price for less.

Chiro1979

I thought I had read somewhere that TK was just granted access for 9 weekly flights to Canada, and also the rights to fly to YUL. Was this incorrect? (I'm not passing judgement on what you said, I was just asking about the traffic rights. )

CloudsBelow

What are you talking about? Repeating it doesn't make it right.

UA (the 2nd largest carrier on the planet and partner of AC) serve the 19 biggest destinations in Canada. 19 destinations in tiny Canada.

So that takes care of USA and the world.

Give concrete examples of significant flying patterns where there are no choices.

yulred

I would be thrilled if its true - what with being a TK FF. The last time I checked TK's website for flights to India, they only had 5 frequencies loaded. No idea when the new agreement kicks in, but the current bilateral restricts TK to 5.

yulred

Try YOW. UA charges more than AC. I was looking for a ticket to LHR recently. Here's what the numbers looked like:

AC: $1303 via YYZ
UA: $1350 via EWR

To put that in context, I decided to see how much EWR-LHR cost (same day, same flights)

AC: $950 via YYZ
UA: $980 direct (the very same flight I would have been connecting onto from YOW).

$370 dollar difference. Identical taxes. Brilliant choice. OTOH, US did give me a one stop option for $998 provided I stayed in CLT for 25 hours. Some choice, that.

I can't give you a better example of competition.

As an aside, here's an excerpt from a rather long report submitted to the BC government in 2008 (that would be around a year before AC and EK declared war on each other). It still holds as true today as it would have in 2006 (Transport Canada's polciies haven't changed since then).

In the meantime, here are some excerpts from a 2008 (ie before the EK mess started) submission to the BC Government.

Observations from Transport Canada Interview:
 Transport Canada considers bilateral benefits in terms of ―risk management‖, and measure the ―risk‖ of liberalization vs. the status quo. Their primary economic concern is about impact on carriers and entries/exits from market, rather than letting market forces determine level of capacity over time (more protectionist in approach than free-market). TC considers the fairness of foreign tax and other economic regimes, and if Canadian carriers are operating on a ―level playing field‖ within that
regime. One of the potential problems with the ―level playing field‖ is that Canadian carriers may be able to play this card when it is in their self-interest to stall negotiations, but disregard the same issues when they see an opportunity for themselves in those markets.
 They appear to be reluctant to accept the full potential of an open marketplace, which provides opportunities for great success of carriers, but also runs a risk of failure by those airlines who cannot respond to market demands. The result is a negotiation stance that favors carriers (and, by extension, their shareholders) rather than the greater good for Canada and Canadian economy.
 The Canadian and United States‘ stances are in stark contrast in dealing with national flag carriers. The United States favors an ―opt out‖ approach; the default position is YES, unless the airlines can make a convincing argument that it is in the United States‘ interest NOT to liberalize. In Canada, the default is to defer to carriers at a conceptual level, and requires ―proof‖ from other stakeholders that 1) the current market is being underserved because of restrictions imposed on the ASA and 2) the ―risk‖ is manageable.
 Once concerns about safety and security are assuaged, we believe that TC proceeds with liberalization when they can determine that a more open regime will have, at worst, no effect on Canadian carriers‘ market position, or at best, a clear benefit to Canadian carriers.
 We speculate that negotiation for new services may be intentionally slowed, waiting to see if Canadian carriers could evolve to fill a larger role in some way first and establish a Canadian presence before opening the market to foreign competition. This may be the case in developing routes to the Middle East (UAE have been lobbying for access to Canada) or even waiting for WestJet to evolve to a point that it can handle interlining and other cooperative carrier services, to serve the Canadian constituency directly. However, there may be merit in this cautious approach, from their point of view. In the past, demands for increased access by foreign carriers – and the promise of increased service – tended to be vague, and have sometimes over-promised, under-delivered. The unfortunate result was that TC was convinced that a cautious, incremental approach was best, because it appeared that the initial, restrictive agreement had indeed provided for sufficient capacity and that promised improvements through liberalization had not materialized.
8 2
 We believe that the TC officials believe that they are still representing the best interests of Canada (in our view erroneously), both in terms of Canadian carriers and in terms of overall approach to trade/market liberalization, by balancing needs, risks and opportunities.
 Despite this government‘s direction as seen in Blue Sky and in larger trade policy, changes at TC have been at best, evolutionary, not revolutionary.
 TC misunderstands marketplace dynamics, and sees the failure of any carrier as a sign that liberalization has ―gone too far‖ or ―hasn‘t worked‖, rather than as a consequence of corporate business practices, and short term market forces. Studies have proven beyond a reasonable doubt that corporate (including airline) failures occur both in free market competition situation and under regulatory protections.
 We do not agree with TC in the view that charter can be a substitute for scheduled service. The development of seasonal, leisure-based travel cannot by itself, evolve into scheduled service, as the operations, strategies, costs, business practices. between charter and schedule are not the same. Furthermore, when a foreign carrier has an option of coming to Canada tolerating this type of restricted charter environment versus launching a service to an open skies country, say US, their choice is obvious if business conditions for the two markets are similar. They will increase flight services to the other country (US) instead of coming to Canada.

Chiro1979

This was the link on the other site. It's not in English but I did see Toronto and Montreal mentioned on there so figured it was true LOL. Would be great if it is


https://twitter.com/SHGM

CloudsBelow

C'mon. Don't use scarce resources.
Resources at KLM cant be too scarce as they just announced 2nd daily 747 to Houston.
The airlines have downgauged Canada (often) to the smallest aircraft that can complete the mission b/c yields are not strong.

I'm trying to get my head around your position that the same heavy tax burden placed on AC helps them by keeping competitors out?

CloudsBelow

LOL, I'm exYOW most of the time and fly 2-3 times per month.
And you're telling me I'm AC captive!? Ridiculous

UA doesn't charge more than AC. In fact, I'm looking at YOW-HKG in Feb, UA is less than AC with similar timings

Stranger

Repeating it doesn't make it right.

Surely I can't fly UA between YYC and YUL?

If I fly a mix of domestic, US, Europe, Asia, South America, and I want to put all my miles on a single FF program and I want to be able to upgrade, AC is the only game in town, period.

yulred

Which airlines are actively expanding? And which ones are simply replacing their current fleets? And If the yields aren't strong, why are airlines actively clamouring to come in? I note that you've ignored the relationship between yields, operating costs and low cost bases.

We both know which airlines are expanding the most, so do we have to continue this song and dance. PS - how much does it cost to land a 747 in Houston vs Toronto? Since you're in YOW, maybe you should drop by Transport Canada and ask them?

As for the rest:

JetBlue Airways Corp. and Denver-based Frontier Airlines will consider Toronto, Montreal and Vancouver as potential destinations if Ottawa were to scrap rent and chop other taxes to clear the way for airports to slash landing fees.

"The elimination of ground rent would make Canadian airports cheaper to fly to, and that would be helpful," said Daniel Shurz, Frontier's vice-president of planning and strategy and a former executive at Air Canada.

Scott Laurence, JetBlue's vice-president of network planning, said the New York-based carrier is turned off by the expensive nature of operating in Canada. "JetBlue would like to fly to Canada, but we rely on low costs in order to offer travellers low fares."

yulred

Depends on what your criteria is and where you're travelling to. I think one would have to be pretty damn stupid to exercise the choice provided by UA in my case - paying $50 more for the privilege of clearing US customs twice. I don't consider that a choice, but then, what do I know?