Rai
Topic Author
Posts: 1697
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Air Canada Losing Market Share

Wed Jan 15, 2003 3:27 pm

I find this news to be somewhat encouraging in terms of competition for Canadian air travelers. Air Canada's passenger market share has fallen to 70% from its previous 83%. Analysts say discount carriers like Westjet and Jetsgo are taking a bigger piece of Air Canada’s pie.

Also, Air Canada posted a loss for the 4th Quarter and is expected to post a loss for 2002. An increase in domestic competitive capacity, particularly in transcontinental routes, is cited for this loss.

http://www.globeandmail.com/servlet/ArticleNews/PEstory/TGAM/20030114/RAIRC/Business/business/business_temp/3/3/5/

Though encouraging in the viewpoint of increased competition, I am still bewildered by Air Canada’s apparent growing inability to compete with Westjet despite the fact that they offer a similar product at a similar price with Tango. Is Westjet’s marketing strategy working? Why are people starting to herd to Westjet and Jetsgo in light of Air Canada’s Tango, Jazz and Zip products being available? Personally, I thought AC’s new strategy was a good one and quite viable to fend off the emerging low cost carriers, but I seem to stand corrected!

Your views?
 
MxCtrlr
Posts: 2312
Joined: Tue Nov 13, 2001 11:22 am

RE: Air Canada Losing Market Share

Wed Jan 15, 2003 3:36 pm

AC should have taken a long, hard look at their counterparts to the South and seen that airlines within airlines do not work. Look at USAir/Metrojet, United/Shuttle, Continental/Continental Lite, Delta/Delta Express, etc...

Multiple branding isn't the answer, smart business practices are...

MxCtrlr  Smile/happy/getting dizzy
Freight Dogs Anonymous - O.O.T.S.K.  Smokin cool
DAMN! This SUCKS! I just had to go to the next higher age bracket in my profile! :-(
 
lymanm
Posts: 1100
Joined: Tue Jan 23, 2001 2:30 pm

RE: Air Canada Losing Market Share

Wed Jan 15, 2003 3:51 pm

Tough industry. When WJ announced a fuel surcharge, you know things are bad.

http://www.globeandmail.com/servlet/GIS.Servlets.HTMLTemplate?current_row=5&tf=tgam/search/tgam/SearchFullStory.html&cf=tgam/search/tgam/SearchFullStory.cfg&configFileLoc=tgam/config&encoded_keywords=westjet&option=&start_row=5&start_row_offset1=&num_rows=1&search_results_start=1&query=westjet

AC's strategy is still excellent; their numbers are infinitely better than similarly structured carriers around the world. A 2002 loss would be far less than it could have been had AC remained in its 2000 incarnation (and it still gets the PR for the 2 profitable quarters this year). As far as market share is concerned, this time last year, there was no CJ and Jetsgo and Jazz has shrunk. It would be witchcraft if they remained at an 83% share.

The biggest, but most unnoticed event of the year for AC is implementing a secondary pay-scale to Zip employees. I theorize that this secondary pay scale will eventually take over the airline, starting with new hires. This will be similar to what AA did in the 1980s with Bob Crandall's B-scale (this B-scale enabled AA to expand from a medium US domestic to #1 in the world in terms of size). As for AC, this secondary pay scale will ensure reasonable labour costs for years to come.
buhh bye
 
lymanm
Posts: 1100
Joined: Tue Jan 23, 2001 2:30 pm

RE: Air Canada Losing Market Share

Wed Jan 15, 2003 3:57 pm

MxCtrlr, in fact AC HAS looked south. And saw BILLIONS in losses. While previous brands have failed, AC's brands have been successful; their expansion in the last 1.5 years proves that. Furthermore, several US airline execs have visted AC's HQ in Montreal in the past year, and are taking note of what they see. Notice that Delta is starting a LCC (rumoured to be named "Song"); notice UAL is discussing re-opening Shuttle by United. Now, it seems, the south is taking a long, hard look at the north and liking what they see!
buhh bye
 
MxCtrlr
Posts: 2312
Joined: Tue Nov 13, 2001 11:22 am

RE: Air Canada Losing Market Share

Wed Jan 15, 2003 8:49 pm

The problem with DL's "Song" (and Shuttle by United) is that it is nothing more than Delta Express with 752's (or Shuttle by United, Part Deux). If they are losing money with DLx, why would they think they could make money with Song? It just doesn't make sense - Rebrand it and people will like it? I think not!

MxCtrlr  Smile/happy/getting dizzy
Freight Dogs Anonymous - O.O.T.S.K.  Smokin cool
DAMN! This SUCKS! I just had to go to the next higher age bracket in my profile! :-(
 
gmonney
Posts: 2076
Joined: Fri Jan 12, 2001 2:59 pm

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 4:26 am

One thing that AC has going for them is that you can still ear Aeroplan Airmiles. That is very attractive to many people. Some i am sure will abandon them for just the fact that others are cheaper and offer a good sked as well. If and when the economy turn for the better, I am sure you will find all carriers busy again!

Grant
Drive it like you stole it!
 
slawko
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Joined: Tue May 25, 1999 7:40 am

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 9:09 am

MxCtrlr,

I dont think you quite understand what has gone on at AC in the last year and a half. In fact if AC hadn't gone ahead with the changes that it did they would be in the same boat as UAL right now. Q4 is a slow month for all airlines even when the economy is good, for the most part they have ened their summer program, but have not yet fully implemented their winter program, and as such flying is reduced, and travel over all is down, and thats a big factor in them posting a loss this quarter. By offering 2 different products, that is one Mainline (Air Canada/Jazz) and one Low fair (Tango/Zip) Air Canada is able to cater to a wider range of customers, and better utilize their existing fleet. It's worked wonders for them over the last year, and is NOT a factor in them posting a loss this quarter, no other major airline in the world has posted a profit since 9/11 in any quarter except Air Canada, now that has to say something to the credit of their latest business moves.
"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
 
captaingomes
Posts: 6251
Joined: Tue Feb 13, 2001 1:33 am

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 10:42 am

I wont do any searches, but I know that other major airlines have also posted profits in quarters since September 11th. KLM comes to mind, and I'm sure there are others. Also, nobody can say other than Air Canada management whether them trying to go after everybody actually lowers their costs or raises their costs and decreases their revenues. It's impossible for anybody to say with certainty that Air Canada has done well by implementing Tango, Zip et al in the last little while.

I could hazzard a guess and say that Air Canada would have thought they would have a higher market share at this point in time. I still feel that their fixation with market share at all costs is in fact ... costing them.

Needless to say, I do think Air Canada is doing reasonably well in this poor economy. But it's not enough, and Air Canada WILL be in the same position as UAL in the next few years if something doesn't happen. Their $11 Billion or so debt wont go away if they continue to lose money.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
slawko
Posts: 3742
Joined: Tue May 25, 1999 7:40 am

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 12:01 pm

Sorry should have read only major North American airline to post a profit...

IN any case, Nuno since you do not agree, what alternative would you rather see???
"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
 
captaingomes
Posts: 6251
Joined: Tue Feb 13, 2001 1:33 am

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 12:35 pm

Like I have said in the past, I am not here to say that for sure the low costs (Tango, Zip) are truly hurting Air Canada. I don't know the true costs of Tango and Zip, the revenue they are generating, the revenue they are taking away from mainline as opposed to the competition. What I really do believe is that the future of Air Canada does not and will not depend on these low cost subsidiaries/spinoffs, whatever you want to call them. All they show is that Air Canada is fixated on maintaining or increasing their market share. I really feel that Air Canada will incur more costs and do whatever it can to increase its market share, trying to eliminate competition, while only hurting themselves and everybody else in the process. It's like price wars. Nobody wins in price wars. Business lowers prices to insolvent levels, one or more go out of business, then the one(s) that survives increases prices. Businesses don't win, consumers don't win, it's just healthy for businesses to try to focus on improving their product and accept the fact that they can't maintain a monopoly forever.
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
MxCtrlr
Posts: 2312
Joined: Tue Nov 13, 2001 11:22 am

RE: Air Canada Losing Market Share

Thu Jan 16, 2003 12:49 pm

Slawko,

I think you are mistaken on AC being the only major world-wide to show a profit. Remember that SWA is also a major and they have been consistantly profitable. Also, Q4 is not a slow period due to the holidays.

MxCtrlr  Smile/happy/getting dizzy
Freight Dogs Anonymous - O.O.T.S.K.  Smokin cool
DAMN! This SUCKS! I just had to go to the next higher age bracket in my profile! :-(
 
slawko
Posts: 3742
Joined: Tue May 25, 1999 7:40 am

RE: Air Canada Losing Market Share

Fri Jan 17, 2003 4:07 am

MXCtrlr, not sure about WN being a major carrier, with their traffic being mostly domestic they are not affected by the massive drop off in international traffic that has occured. As for Q4 not being slow, there may be a couple of holidays plugged in there, but overall end of September and into October are slow, and have a big impact on Q4 performance. One or two days do not make up for 3 months of slow flying....I know of one AC pilot who did not fly one day in November...

Nuno, I guess we will have to agree to dissagree, I dont think AC is trying to increase their marketshare, rather they are responding to what the market is demanding of airlines, and that is low fairs, and good frequency, Tango/Zip are providing that, AC is maintaining its relationship with the business people who demand J class but reducing the number of flights that offer those mainline service. In Canada with really only one major carrier, it is easy to say that they are trying to increase their marketshare, because they are the only major player, BUT, I see it as AC maintaining what marketshare they have, and trying to prepare for attacks from the smaller carriers like Jetsgo, Westjet, and canjet. AC after all has to answer to the share holder now, and I think they are effectively responding to changes in the way that the world travels. We have examples of it all over the world, Australia, Asia, US, Europe, even Africa all have very large low-cost products that are growing to replace the old style mainline products every year, Air Canada is just one of the first large scale, major carriers to be able to achieve the low fair product succesfully, and it seems that the entire country/world is ready to scold them for adapting to a changing markety, while others still try to get by doing what they have been doing for the last 40-60 years....
"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
 
slashd0t
Posts: 214
Joined: Tue Dec 31, 2002 3:16 am

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 5:36 am

Well, I will always fly WestJet now on any flight they go to. Their service is much better then any Air Canada flight I have ever been on..
/.
 
captaingomes
Posts: 6251
Joined: Tue Feb 13, 2001 1:33 am

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 6:26 am

I wont comment on your personal experiences, and I will agree that Westjet has many great features. But please, let's not say Westjet has better service than Air Canada. You could say they are possibly friendlier, maybe they have been more on time for you, maybe you like the singing on the P.A. but Air Canada service is at a much higher level than Westjet. Of course, you pay for that!
"it's kind of like an Airbus, it's an engineering marvel, but there's no sense of passion" -- J. Clarkson re: Coxster
 
User avatar
yyz717
Posts: 15689
Joined: Mon Sep 10, 2001 12:26 pm

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 8:31 am

Depends how you define service Nuno. If punctuality & friendliness are more important than headsets & aeroplan miles, then WJ has better service.

I dumped at the gybe mark in strong winds when I looked up at a Porter Q400 on finals. Can't stop spotting.
 
Cessnapimp
Posts: 1245
Joined: Sun Oct 07, 2001 11:46 am

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 9:07 am

C'mon Yyz717,

You know you like those aeroplan miles... bitch...

 Laugh out loud

Grégoire
 
AC320
Posts: 2809
Joined: Fri Jan 05, 2001 11:29 pm

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 9:20 am

Bah, the service on my AC flights have always been fantastic. More than I could have asked for or expected.
fuddle duddle
 
lymanm
Posts: 1100
Joined: Tue Jan 23, 2001 2:30 pm

RE: Air Canada Losing Market Share

Sat Jan 18, 2003 10:20 am

MxCtrlr - remember that Canadians are not as travel crazy for thanksgiving as Americans are. The busiest week in aviation by far in the US is thanksgiving, not so in Canada.

Overall, capacity at AC will have to be cut - look for a continued shrinking of expensive Jazz...
buhh bye

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