Air Canada Tango II 'postponed'

[PaperTiger]

Startup of AC's western LCC delayed again, pending a viability study in light of government market share concerns. http://micro.newswire.ca/releases/December2001/14/c7190.html/13213-0

[27driver]

Westjet 6, Air Canada "ZIP"

[penguin]

27 driver:

ROTFLMAO! :D :D :D Milty, go home.

[Willie Everlearn]

http://www.stopstart.fsnet.co.uk/aircraft/Planeattitude.gif

So...
Air Canada won't be allowed to compete.
Where's the competition then?

I was under the impression the Government wanted 'increased competition'. Maybe it's simply the fact that West Jet doesn't want competition in any way, shape, or form.

If a new entrant can't afford to enter the game in the first place, what's he doing in the game? Hoping for government 'protection'?

There is definitely something I'm missing in this picture.

:confused:

[Squawk 8888]

Willie, it all becomes clear when you understand the three fundamentals of "competition law" :rolleyes:

1. If you charge more than the other guy then you're gouging, therefore thoroughly evil and must be punished.

2. If you charge less than the other guy then you're engaging in predatory pricing, therefore you are thoroughly evil and must be punished.

3. If you charge the same as the other guy you're involved in collusion, therefore you are thoroughly evil and must be punished.

The only way to escape punishment is through a duly executed penance in the form of a cheque payable to the Liberal Party of Canada.

[penguin]

I Work Hard Because Millions On Welfare Depend on Me!
:D :D :D

[Willie Everlearn]

8888


Sooooooooooo true!!!
I'm tellin' ya. It's embarassing being Canadian, eh???

[PaperTiger]

An article in Saturday's Globe and Mail blasted AC management past and present, but didn't say anything about CP who were little better IMO.

Seems to me both sets fell into the 'market share' trap. This sacred cow has been in vogue for about a decade, a fallout from the Management by Objectives (MBO) cult. The methodology (ugh !) dictates that everything revolves around setting and achieving quantifiable objectives. It does not contain any recipe for ensuring the objectives are valid in the first place, only that performance is rigourously and continually measured against them.

A market share paradigm (ugh again) is by definition viciously competitive. In order for one company to make gains, another must lose the same amount. The result is very often that both lose revenue and/or profit.

Looking at the history - Wardair, CP, PWA, CP etc. it seems clear to me that the market share god has been worshipped to the detriment of other more sensible and sounder principles. Read greed.

Westjet and arguably Canjet, created a largely new market - people who did not fly before due to costs or routings. Other than the 'me too' mentality, there is no business case for AC to be interested in this market. There was ample opportunity to do so for years, but they chose not to for the very good reason that given AC's costs they rightly concluded they couldn't make money doing it. And indeed had dropped service to some of Westjet's current stations not too long prior.

If the carriers can't settle into their respective niches by themselves, accepting that each has particular strengths and weaknesses, then it should be no surprise that the government takes notice. A small- population, large-geography country like Canada needs a stable, reliable air transportation system. We simply cannot endure a continual boom-bust cycle and corresponding management mentality. I am against regulation in principle, but absent a large injection of sound business sense into the airlines, I fear it may be inevitable in some form or another.

End ramble.

[ 16 December 2001: Message edited by: PaperTiger ]

[Dockjock]

Very interesting Paper Tiger. I agree with you fully.

[Squawk 8888]

I am against regulation in principle, but absent a large injection of sound business sense into the airlines, I fear it may be inevitable in some form or another. Problem is, business sense never gets injected into an industry when it's regulated. Airlines have been heavily regulated almost from the day the first aeroplane took flight and it's gotten us nowhere. The biggest problem is that instead of trying to please customers, heavily-regulated businesses focus on pleasing the regulators. Look at the cable TV industry- they spend a third of their revenues to produce films that nobody watches because a regulator thinks we need a movie industry, they force viewers to pay for TV channels that don't interest them, etc. They're wonderful at keeping Ottawa happy but still haven't figured out that answering the phone might be a good way to keep a customer. Do we really want this kind of nonsense in the airline biz?

[PaperTiger]

8888:
Agree absolutely, which is why I said I fear regulation might be imposed. I don't know what it is about the airline business that causes sound economic practices to be overridden by emotions. Perhaps it's the glamour, although there's not much of that left nowadays.

[ 17 December 2001: Message edited by: PaperTiger ]

[Orca strait]

Paper Tiger.

You've hit the nail on the head, define your market niche and then concentrate on being efficient and profitable.

Unfortunately, our vast country relies heavily on air transportation at all levels but has the population of the state of California to support it.

Part of our dilemma stems from a few "I want to be on the front page of Fortune Magazine" Canadian airline CEO's, regardless of the real term costs to the airline. Rather than identify what they are good at in terms of market share, they continue to believe that the only successful model to pursue is capturing all market share, regardless of their particular suitability to these varied market structures.

To achieve this total market capture we cry “free enterprise”, let the market forces sort it out. When the banker starts knocking on the door (as they inevitably always do), we cry “Mr. Minister, can you spare a dime (read billion)”.

Air Canada, stick to what you are good at, if you can remember what that was.

;)