sunnyb
Posts: 231
Joined: Sun Aug 01, 2004 6:36 am

Unneeded Subsidiaries?

Thu Jul 21, 2005 9:34 am

This might sound stupid to you or I might be wrong...

As you all know Air Canada has a subsidiary -- Jazz. What exactly is the point of having a subsidiary if both the mainline and Jazz are serving many same routes? Doesn't the subsidiary affect the business of the mainline carrier? Why doesn't just Air Canada serve the routes on it's own with new Embraer aircraft?

There are also many US carriers that do this.
 
Tornado82
Posts: 4662
Joined: Thu May 26, 2005 10:19 am

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 9:39 am

Ready for a one word answer??

Unions!
 
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Starlionblue
Posts: 17053
Joined: Fri Feb 27, 2004 9:54 pm

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 9:42 am

Isolation of profit/loss and decision making.

I worked at a company that would create a new subsidiary as soon as a subsidiary became larger than around 60 employees. This allowed them to push decision making way down in the organization. It's pretty simple, if the CEO of the boss is closer to the business, he or she will feel more responsible and have more control.

The principle is applicable on a larger scale to an airline. If you isolate, say, the US Northeast regional operation from everything else, it's easier to make decisions within the unit that aplly to that specific business. One size does not fit all.

Same with Ted and Song, and so forth.

Whether all this is actually beneficial in the long run is another story Big grin
"There are no stupid questions, but there are a lot of inquisitive idiots." - John Ringo
 
sunnyb
Posts: 231
Joined: Sun Aug 01, 2004 6:36 am

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 9:46 am

Quoting Starlionblue (Reply 2):
If you isolate, say, the US Northeast regional operation from everything else

I agree, but what exactly is the point of both the parent company and the subsidiary serving the same routes? This is what mostly happens.
 
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Starlionblue
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Joined: Fri Feb 27, 2004 9:54 pm

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 10:36 am

Quoting Sunnyb (Reply 3):
Quoting Starlionblue (Reply 2):
If you isolate, say, the US Northeast regional operation from everything else

I agree, but what exactly is the point of both the parent company and the subsidiary serving the same routes? This is what mostly happens.

The stated reason tends to be market segmentation. So you take a certain set of fares on one carrier, and another on the other. But the model isn't perfect and may seem messy to the outside observer.

I'm sure someone elose can explain this better.
"There are no stupid questions, but there are a lot of inquisitive idiots." - John Ringo
 
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mariner
Posts: 18104
Joined: Fri Nov 23, 2001 7:29 am

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 10:50 am

Quoting Tornado82 (Reply 1):
Ready for a one word answer??

Unions!

Hmmm? Unions have absolutely nothing to do with the creation of Ted and Song.

cheers

mariner
aeternum nauta
 
Tornado82
Posts: 4662
Joined: Thu May 26, 2005 10:19 am

RE: Unneeded Subsidiaries?

Thu Jul 21, 2005 11:59 am

Quoting Mariner (Reply 5):
Hmmm? Unions have absolutely nothing to do with the creation of Ted and Song.

cheers

mariner

I misread the whole question as a matter of fact and I stand corrected. I was thinking Comair to Delta, Mid-Atlantic to US, etc. My apologies to all.