Thu May 30, 2019 3:40 pm
Onex had to save them from their own disorganization. My biggest laugh came when WS’ CEO complained on BNN about the market undervaluing their shares because they don’t understand their long-term plans. Nobody understood their long-term plans, whereas their largest competitor has been laser-focused on their plan. Guess what? The market responded, and today AC shares are close to their highest levels.
WS is a mess; they had no focus and Onex saw an opportunity. Complaining about the lack of competition in a market that WS retreated from is a little rich.[/quote]
I’d be hard pressed to conjure up a more unfocused business model than Air Canada. Air Canada’s focus is their lack of focus.
To be leading the chirping that WS, after 23 years, and having reported quarterly profits in all but half a dozen quarters in that period, is “unfocused” and “a mess” is more than a bit rich.
That being said, were I Air Canada, I’d be behind this sort of whisper campaign too, engaging any and all to spread any misinformation possible suggesting my competitors so called “lack of focus”, as they expand into areas that pressure my previously mega profitable sectors that underwrite other chronic loss making operations.
Let’s look at AC from FL37:
They focus on every market segment, from hyper premium (Jetz), through premium, to premium economy, to economy, to basic economy to ULCC type economy.
They operate, or pay to have operated aircraft from every airframer in service in the western world, ranging in size from 19 seats to 500 seats.
They operate in markets ranging from megacities down to markets with fewer than 7,500 people.
They operate from 4 hubs in a country of less than 35m people.
They operate both a hub and point to point network, with point to point flying regularly overflying their own hubs.
They operate, or directly pay to have operated Air Canada, Rouge, Jazz/Chorus Aviation, Skyservice, Air Georgian and Exploits Valley Aviation Service.
If one is to be critical of WS, and let’s be clear, they have made some mistakes in recent years, (the Qantas birds leap to mind), the larger strategy is sound. Implementing and spooling them all up near simultaneously is not an optimum scenario, but neither is doing them all individually with 5 years between every initiative. Then there’s the Labor changes that are occurring.
Anyone who looks at things a little more globally and long term would recognize that all these initiatives take time to mature, but mature they will with suitable rewards down the road. If AC can be rewarded in the market for attempting to be everything to everyone all the time, so too can a much, much leaner WS.
Although WS won’t likely release any metrics after the closing, that casm, in conjunction with that asl that is half of AC’s is key to the deal, esp in a commodity business like an airline. That those costs remained where they were last quarter, even with all the various expensive initiatives in various stages of deployment, and with 2 or more expensive 787’s contributing very little on the revenue side is, in my opinion, extraordinary.
I suspect Onex sees precisely that. By taking the company private, they can do all this with the luxury of not having to answer to, or make stupid short term decisions to keep fickle markets and analysts happy, knowing most of them couldn’t independently analyze their way out of a wet paper bag.
As for WS buying up the likes of Porter and TS, it makes for good copy and click bait, but strategically, neither acquisitions make much sense.