UA and AC Joint venture for flights between US and Canada

Discussion in 'Air Canada | Aeroplan' started by guinnessxyz, Nov 19, 2012.  |  Print Topic

  1. This JV also includes all flights to from NA to Europe which they also share with LH.

    These JV's mean that all flights on routes approved by government will have full revenue sharing regardless of metal used.

    For instance UA is now operating all transborder flights between YEG and the US under this JV and the carriers share all revenue generated equally after operating costs are factored in. This is proving to be a boom for AC as they share revenues with carriers who have a lot more metal available tha they do which allows them to focus on their very profitable runs in Canada. It has enabled AC to increase flights to places like YMM from YYT and put bigger aircraft on those routes.
    So, if you don't like AC remember that when flying cross border or to Europe on either UA or AC and LH AC benefits in the revenue produced. In light of governments not approving foreign ownership of airlines this is the best way for legacy carriers to accomodate passengers and make money. even WJA has started doing this but as code shares only because they are not part of any alliance but appear to be willing to join the AA/BA alliance.

    See below for a description of the JV that has regulatory approval:

    The Competition Bureau said Wednesday it had reached an agreement with Air Canada and United Continental Holdings Inc. on how they could proceed with their controversial U.S. transborder joint venture.
    The bureau said the agreement would “protect and preserve competition” on the 14 key, high demand routes between Canada and the U.S. that, in part, led to the bureau challenging the partnership in June 2011.


    On those routes, the carriers will be prohibited from coordinating prices, the number of seats available at each price, pooling revenue or costs, or otherwise sharing commercially sensitive information, the bureau said.
    The contentious routes include flights from Toronto, Montreal, Calgary, Ottawa and Vancouver to several U.S. destinations, including Houston, Chicago, Washington, and others.
    The carriers will, however, be able proceed with their joint venture, which would, in effect, merge their flight operations, on other routes between the two countries, the bureau said.
    Air Canada already has a similar arrangement in place with Lufthansa and United across the Atlantic, its so-called A++ joint venture. British Airways, Iberia, and American Airlines also struck a similiar arrangement on those routes.



    “The consent agreement the bureau reached with Air Canada and United Continental will ensure that passengers do not face higher prices and less choice on high-demand routes between Canada and the U.S. resulting from the airlines’ proposed joint venture and coordination agreements,” said John Pecman, the interim commissioner at the bureau.
    Originally, the bureau had identified 19 routes between Canada and the U.S. that it felt the joint venture between the carriers would substantially reduce competition on, including 10 it said the venture would create a monopoly on. The move to block the joint venture was supported by submissions from other carriers, including WestJet Airlines Ltd.
    The bureau argued there was insufficient competition on those routes as well as sizeable barriers to entry, which, among other things, would result in higher fares for consumers if the tie-up between Air Canada and United Continental were to proceed.
    But Air Canada argued such joint ventures were actually pro-competitive because it allowed the airlines to make those routes more viable by reducing excess capacity on them.
    Calin Rovinescu, Air Canada chief executive, also argued it was the only way forward for legacy carriers in the face of foreign-ownership restrictions that limit consolidation of airlines across borders.
    “Following a thorough review of further information and analysis regarding the impact of the joint venture and coordination agreements on the 19 routes, the bureau determined that competition on five of the routes originally identified is unlikely to be substantially harmed as a result of the airlines’ coordination and, as a result, the consent agreement only applies to the 14 remaining routes,” the bureau said in a statement.
    The bureau said it would implement an independent monitor to ensure Air Canada and United Continental comply with the terms of the agreement, and added that as the market evolves, the agreement provides that specific prohibitions can be suspended or reinstated as appropriate.
     
  2. Another benefit to AC is all the feeder traffic that ends up in say YEG gets funnelled into the JV and the revenue stays with AC, although shared. YYZ benefits even more from that feeder traffic. These JV's are certainly a reason why AC is becoming more profitable which will enable them to keep buying new aircraft,etc and continue improving services on flights they operate themselves. Its all about focusing on your core business.

    This is by way of pointing out the much smarter operating moves AC has made under the competent management they now appear to have in place.
     
  3. Wandering Aramean
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    Wandering Aramean Gold Member

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    The partnership on TATL traffic is old. Like years old. The partnership on trans-border flights is also old, though only a few weeks.

    The JV allows them to cut operations and reduce service to customers while increasing profitability on the routes they keep. Whether that's competent management or not, it is hard to believe that it is great for customers in many scenarios.
     
    antirealist likes this.
    • Taunting toward off topic comments will not make you friends on Milepoint.
    Well as the self admitted bottom feeder that you are it must be bothersome that full flights, using capacity control software, will make flying more expensive. I see nothing wrong with JV's as opposed to one large airline taking over all the others. In my opinion service gets better when airlines are profitable.
     
  4. Wandering Aramean
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    Wandering Aramean Gold Member

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    I think there are very few customers who see rising airfares as a good thing for their travel budget. Even a business traveler on an expense account eventually has to answer for their travel budget. If the airfare component goes up 25% does no one in the organization notice? If so that's a business unlike any I've ever worked for.
    And it is much less likely that a single airline will succeed in taking over everyone else in a global market, even before foreign ownership rules are considered. Operationally there is a size at which things stop being so efficient.

    Let's talk about the big picture, not individual travel patterns.
     
    canucklehead and tcook052 like this.
  5. 1. I was only referring to the individual traveller. Corporate travel budgets move in line with overall corporate objectives and generally only get impacted when revenues and margins get squeezed.
    2. My point here was about airline code shares as opposed to takeovers.
    3. Individual travel patterns are worthy of discussion as long as it does not get personal.
     
  6. Wandering Aramean
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    Wandering Aramean Gold Member

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    As benefiting from these deals or not? I'm confused here. Are only individuals getting hosed by higher fares? I don't believe that is true at all.

    And if airfares go up appreciably then the margins get squeezed unless the travel is discretionary or the company can raise their revenues in parallel. There are very, very, very few industries where it is possible to simply increase the spend on travel and not have that impact the bottom line of the business.
     
    antirealist likes this.
  7. From what I see being on AC flights businesses are not slowing down at all yet airfares are rising somewhat more than inflation. AC's bottom line is much better as further proof people are paying up as are Companies. SE membership is up as are other tier levels.
    You live in the US and it maybe different there but I do think fares are rising there as well. They definitely are in Europe.
     
  8. Wandering Aramean
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    Wandering Aramean Gold Member

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    Yes, companies are paying the higher fares, at least for now. But does that mean it is good for them?

    And that was my point from the beginning: this sort of move has both good and bad aspects for customers. And the bad can outweigh the good in some cases. I think they might here.

    If the airlines push too far with the fare hikes then they will ultimately lose. As will passengers. It is a fine line to walk and the JVs make it even more challenging in many ways.
     
    Randy Petersen likes this.

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