WestJet Monopolizing Western Canadian Travel

[Shazam]

Originally Posted by bizaro86

Any time airline profits start getting high, someone starts a new airline. Every single time. It's an industry that people with money find romantic, so it keeps getting new capital.

If prices rise too much more, you'll start seeing new domestic entrants.

Can't remember exactly what Don Bell once said to me, but it was something like every new carrier that's started up since WJA has gone under.

There's a difference between starting up a new airline and having an existing airline have new routes.

[ken0042]

Originally Posted by bizaro86

??? I'm pretty sure if you started a new airline in Canada you could fly it to any airport you'd like.

I seem to recall when WestJet was new they were not allowed to fly into Toronto. They had to add Hamilton first. I don't recall the reasons; but at that time we had both Air Canada and Canadian Airlines.

[para transit fellow]

If I recall correctly, Westjet's barrier to Toronto was terminal slots -- an airport problem rather than a regulatory problem

[Shazam]

Nah, they just didn't want to pay the fees.

[Slava]

Originally Posted by Shazam

AC is bound (as in, they have to) to fly some routes due to legislation.


That's the part that protects them.

Right, but that legislation means that they have to have these unprofitable routes on the books, right? No such issues would apply to a foreign carrier flying direct routes. So they could fly the profitable ones, drive down the prices and force AC tomlower theirs, thereby making a corporation with limited profitability even worse.

I guess it's a domino effect and I hate to use that as a way to predict an outcome, but it doesn't seem like much of a stretch?

[Shazam]

Originally Posted by Slava

Right, but that legislation means that they have to have these unprofitable routes on the books, right? No such issues would apply to a foreign carrier flying direct routes. So they could fly the profitable ones, drive down the prices and force AC tomlower theirs, thereby making a corporation with limited profitability even worse.

I guess it's a domino effect and I hate to use that as a way to predict an outcome, but it doesn't seem like much of a stretch?

It helps WJA right now. For consumers it sucks because those unprofitable routes are propped up by higher fares elsewhere. Since WJA and AC exist in a duopoly, WJA also profits from those routes, because they can also charge more for other routes.

[Slava]

Originally Posted by Shazam

It helps WJA right now. For consumers it sucks because those unprofitable routes are propped up by higher fares elsewhere. Since WJA and AC exist in a duopoly, WJA also profits from those routes, because they can also charge more for other routes.

So is the solution more competition on the profitable routes only? No one wants to move into the unprofitable areas from a foreign carrier perspective...

[bizaro86]

Originally Posted by Shazam

Can't remember exactly what Don Bell once said to me, but it was something like every new carrier that's started up since WJA has gone under.

There's a difference between starting up a new airline and having an existing airline have new routes.

I didn't say a new airline would succeed. I said it would get started.

Then it would drive down fares for a couple of years, then someone would go bankrupt and go out of business, leaving Canada with 2 airlines.

The country is only sustainable for two large airlines, so anytime there is more than that prices drop too far and someone goes out of business.

[Shazam]

Originally Posted by bizaro86

I didn't say a new airline would succeed. I said it would get started.

Then it would drive down fares for a couple of years, then someone would go bankrupt and go out of business, leaving Canada with 2 airlines.

The country is only sustainable for two large airlines, so anytime there is more than that prices drop too far and someone goes out of business.

So you agree with me then:

It protects the airlines.

[Shazam]

Originally Posted by Slava

So is the solution more competition on the profitable routes only? No one wants to move into the unprofitable areas from a foreign carrier perspective...

I said that they need to deregulate.

Free AC from required routes.

Let any carrier fly anywhere.

[Slava]

Originally Posted by Shazam

I said that they need to deregulate.

Free AC from required routes.

Let any carrier fly anywhere.

Ok, but what do we do about the communities who lose service?

I have no idea, but for areas of the country that would be a nightmare.

[bizaro86]

Originally Posted by Shazam

So you agree with me then:

It protects the airlines.

I agree it protects those specific airlines, but I'm not convinced it has any negative consumer effects.

I do agree that forcing AC to fly unprofitable routes is pointless regulation that I disagree with, and that should be stopped ASAP.

Not letting foreign carriers into the market is the state of the world for airlines.

Even if they did allow foreign cariers in, I deeply suspect that most major routes would be flown by only two airlines after a couple of years, as competition would drive the others out. So instead of a Canadian duopoly we'd have an internation duopoly, and prices would be about the same.

AC/Westjet only have a duopoly on routes because nobody thinks it's worth spending a few million bucks to start an airline to compete with them in Western Canada. If they raise prices enough, that will change.

[Flacker]

As of 1992, in fact—though the picture would have improved since then—the money that had been made since the dawn of aviation by all of this country's airline companies was zero. Absolutely zero.

— Warren Buffett, billionaire investor, interview 1999.

Airlines are a terrible investiment I would avoid the industry all together.

[bizaro86]

Originally Posted by Slava

Ok, but what do we do about the communities who lose service?

I have no idea, but for areas of the country that would be a nightmare.

Airlines like: http://en.wikipedia.org/wiki/Pacific_Coastal_Airlines

would take over that service. Smaller operations with local labour and lower overhead costs would be able to effectively operate the vast majority of the routes.

[Slava]

Originally Posted by bizaro86

Airlines like: http://en.wikipedia.org/wiki/Pacific_Coastal_Airlines

would take over that service. Smaller operations with local labour and lower overhead costs would be able to effectively operate the vast majority of the routes.

If it could be shown that there would be no loss of service at all, then I'm all for removing that regulation. I do still worry about removing the barrier for foreign competition though...I just worry about the impact for a country as large as Canada and with transportation being such an enormous requirement.

[bizaro86]

Originally Posted by Slava

If it could be shown that there would be no loss of service at all, then I'm all for removing that regulation. I do still worry about removing the barrier for foreign competition though...I just worry about the impact for a country as large as Canada and with transportation being such an enormous requirement.

No loss of service is a pretty big ask. I think the loss of service would be compensated for by the increased efficiency in the economy.

[Slava]

Originally Posted by bizaro86

No loss of service is a pretty big ask. I think the loss of service would be compensated for by the increased efficiency in the economy.

That's why it's regulated....as a country we have these sparse populations in some areas that require air service.

[Super_Jason]

The thing I like about WestJet is their success in terms of breaking into the US Market.

They're able to fly into cities that Air Canada doesn't or failed to fly into, such as Palm Springs, Orange County, etc. They fly to Vegas more often than Air Canada. The funny thing is that Air Canada monopolized YYC-SFO for so long before WestJet started flying into SFO and bam, Air Canada had to discontinue their YYC-SFO route.

[Bigtime]

Originally Posted by Super_Jason

The thing I like about WestJet is their success in terms of breaking into the US Market.

They're able to fly into cities that Air Canada doesn't or failed to fly into, such as Palm Springs, Orange County, etc. They fly to Vegas more often than Air Canada. The funny thing is that Air Canada monopolized YYC-SFO for so long before WestJet started flying into SFO and bam, Air Canada had to discontinue their YYC-SFO route.

Yes and no, keep in mind AC can also use its membership in the Star Alliance to serve those destinations via United, Continental, US Airways etc.

Also keep in mind that YYC is the main Westjet hub. Calgary is a hub for Air Canada but we are very close to their other major hub, Vancouver.

[billybob123]

Originally Posted by Slava

That's why it's regulated....as a country we have these sparse populations in some areas that require air service.

In the US when the government deregulated air service, the markets that had traditional service but were going to lose it got what was called "Essential Air Subsidy" (EAS) service - the government subsidized every seat on every flight. Good for me since I flew out of an EAS airport in NY state that was an hour south - and US taxpayers paid for half of my fares!

I think this would never work in Canada - too many remote communities where an "EAS" subsidy would be required and where air travel is essential. Think of the far north routes - First Air and Canadian North wouldn't even run those routes without the federal subsidy - add about 50+ airports to that list, and it would be a financial disaster.