Resurrection

Because the US government gave their airlines billions in aid. Canada didn't.

Adam Smith

A note on the Advance Ticket Sales: per the conference call, apparently about 2/3 of the current amount ($2.3B) is from cancelled, non-refundable bookings, another 20% is cancelled refundable bookings, and the remainder (~15%) is future bookings.

That's about $1.5 billion of non-refundable bookings that AC is not refunding. That being said, we don't know how much of that comes from bookings where customers chose to cancel despite flights still operating, in which case they wouldn't ordinarily have been entitled to a refund.

And the refundable bookings include tickets that are refundable subject to penalties that may be onerous. I suspect that most people who were holding fully refundable tickets have refunded them and that the remainder are mostly people who didn't want to pay the $200, $600, whatever, to get the rest of their cash back.

They said they expect about 3 years to get back to 2019 levels. Heavily dependent on travel restrictions. Most bookings recently have been leisure, but they would expand business travel to rebound more quickly if travel restrictions were loosened and more predictable.

acysb87

…..and the Canadian government will nudge Canadian carriers to refund tickets using taxpayer funds if the carriers get a bailout.

Resurrection

There's an article behind the Globe & Mail's paywall that explains the need for aid to Canada's airlines. Canadian carriers usually have 60% of the international market to Canada but that has shrunk to 45% as they're having to compete against international airlines that have received billions in state aid already (Cathay, Lufthansa, KLM, United etc)

https://www.theglobeandmail.com/busi...iders-bailout/

yulred

Don’t have a G&M account so don’t know what the argument is, but can’t see “state aid” changing AC market share for two reasons:

- some of those carriers benefit from much larger 6th freedom markets by virtue of geography.

- AC relies on CA pax, and with current restrictions, there’s not many of them. It’s not a particularly competitive or well-regarded airline outside Canada - it’s not going to pull ex-HK traffic off CX or ex-EU traffic off KL or LH unless it discounts significantly.

My own suspicion is that with biz travel all but dead, the rouge-ification of AC Y has made it hard to retain market share now that demand isn’t outstripping supply like it normally does. Simply put, there are better regarded products out there at the same price that aren’t selling out as quickly as they normally would. State aid isn’t going to change that, unless it’s used to subsidize airfares. Hardly a sensible use of taxpayer money.

rankourabu

Dont forget that transit traffic is unaffected via Canada - so AC - can in theory, pull US->EU, or US-Caribbean, or US-Asia traffic.
But like you say, apart from severely discounting tickets (as we've seem before and during covid ex-usa with Y and J), how do you sell an inferior product in hard times?

Biscuittin

Are KL and LH with their joke of a business class product in Europe and their usually denser than AC J cabins on long hauls better regarded than AC is? Depends who you ask. Comparisons of service pre-pandemic no longer hold up. Last time I flew on the previously loved Delta in F you couldn't even get a soft drink or a cup of coffee on board and the only "food" available was shelf stable snack boxes of garbage. With schedules having been slashed so drastically I think that most of the few people who are travelling today are buying based on schedule rather than on supposition of how sumptuous a given carrier's service will be.

yulred

Market share is a numbers game. Most people don’t fly J these days. If AC’s market share is tanking as a percentage, all it tells us is that AC isn’t getting the numbers of to/from Canada traffic to make those flights worthwhile. AC has plenty of aircraft and airport slots available to make any schedule viable. If market share is now going to foreign carriers, it’s hard to draw any conclusion other than the existing market is choosing other airlines.

This could be for any number of reasons - geography, makeup of traffic(ex-CA or ex-EU etc), reputation whatever. - I don’t particularly care. My own view is that having a great J class is meaningless for passengers stuck in a bog standard Y class. AC has spent the last few years mimicking ULCCs in Y, which IMHO hasn’t gone unnoticed and is contributing to the decline in market share.

On the broader issue of linking declining market share to inadequate state aid, its plainly obvious that there is sufficient capacity serving Canada these days, so boosting state aid to enable AC to increase its market share by discounting fares, simply isn’t a good use of taxpayer money. We have bigger economic fish to fry.

Biscuittin

It's just as easy to draw the conclusion that foreign carriers that are being heavily subsidized are more able to schedule flights without regard to whether they'll be profitable, thus increasing their market share.

Adam Smith

So, looking at the cash situation... AC's operations burned through a little under $600MM of cash in the quarter. There's about $300MM of capex on top of that. As of the end of the quarter, AC had about $7.8 billion of cash and cash equivalents. They also raised nearly $500MM just after the end of the quarter through sale-leasebacks.on nine 7M8s The rationale that AC can't afford to refund customers whose flights were cancelled because they're about to run out of money looks thinner and thinner all the time.

yulred

Sure, but it falls a bit flat when you consider:

- no airlines are getting unlimited money. They need to pick and choose routes that make economic sense. Unless they want to bleed subsidies in record time to maintain schedules to Canada, which would be odd, given:

- Canada has consistently had some of the most stringent restrictions. There’s only so much traffic going in and out of Canada, and it would be strange if foreign airlines decided to expend their silver bullets on that.

At some point simple demand and supply come into play. If the traveller mix is majority Canadian expats and PRs, which I suspect it is given the restrictions, then you’re dealing with a market that is familiar with multiple route offerings, and acting accordingly. Make of that what you will. AC FF requirements notwithstanding, would you choose an AC 787/777 in Y over an LH 330/350 in Y?

Either way, maintaining market share is not a compelling case for state aid right now. If other governments want to subsidize our international air links while our government has more pressing spending requirements, more power to them.

Biscuittin

Right now given that I’d expect to be able to get a row to myself on either carrier I wouldn’t care, especially since there are fares to Europe of less than $300 one way at the moment. An airline isn’t going to provide luxury at that price. Under normal circumstances I’d choose based on schedule, price, and what seats were available.

Resurrection

Yes, that was implied in the article.