Get ready for the bailout - Air Transat merger with Air Canada cancelled

[Buster]

nationalize the airlines, then merge them into one airline. Then make flights free.

Works for healthcare.

[benyl]

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Would love to hear your analysis.

There are so many contributing costs and revenues.

For instance, YYJ may not have many direct flights to where residents want to go and they end up connecting at YVR or YYC. An airline will likely keep a feeder route from YYJ to YYC even if the flight is losing money because it fills the YYC to XXX flight.

The cost of the flight is dependent on the aircraft being operated. Airport fees are different for a Q400 vs a 787. Some airports have bridge fees, some don't.

You also need to spray out the costs of the back office, maintenance of aircraft and a myriad of other costs.

Airlines in Canada are a super low margin business. I think before WJ went private, they basically made $5 per passenger. So 150 passengers on a plane = $750 for that flight. When they give away a free bag, suddenly $720.

The problem with the airline business in Canada is that save for YVR to YYC, YYC to YYZ and maybe YVR to YYZ, there is no demand. Wanna know why it costs so much to go to the Maritimes? Cause no one really wants to go.

[Buster]

It's almost like there is a word for the thing that humans invented to handle supply, demand, and pricing.

[ExtraSlow]

I think there's a reasonable argument to be had for governments owning and operating airports and charging less than market rates to airlines as a clear subsidy to air travel. I also think that would be more clearly applicable to whatever government goals of encouraging economic activity in remote areas etc. Heck throw in discounted fuel or a per-seat subsidy for planes that land at "buttfucksomewhere NWT" or whatever particular destination you want to advantage. A reasonable person could write out the justification for that, and it may sounds mostly reasonable if the subsidy applied to every airline at that location. Don't bother subsidizing those "few profitable routes," or do, or whatever.

To me anyway, it's a lot less clear how subsidizing individual airlines is a real benefit to the citizenry, economy, or taxpayer, no matter what foliage they paint on the tail-fin.

[Tik-Tok]

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. Only in business to placate the shareholders.

Airports are not-for-profit. There are no shareholders.

[benyl]

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Airports are not-for-profit. There are no shareholders.

It's why they are perpetually under construction as they have to spend their profit.

The brutal piece is that construction at airports is a bit of a racket. So many middlemen taking a cut. It's why the AIF is so high.

[Buster]

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I think there's a reasonable argument to be had for governments owning and operating airports and charging less than market rates to airlines as a clear subsidy to air travel. I also think that would be more clearly applicable to whatever government goals of encouraging economic activity in remote areas etc. Heck throw in discounted fuel or a per-seat subsidy for planes that land at "buttfucksomewhere NWT" or whatever particular destination you want to advantage. A reasonable person could write out the justification for that, and it may sounds mostly reasonable if the subsidy applied to every airline at that location. Don't bother subsidizing those "few profitable routes," or do, or whatever.

To me anyway, it's a lot less clear how subsidizing individual airlines is a real benefit to the citizenry, economy, or taxpayer, no matter what foliage they paint on the tail-fin.

Subsidies and tax cuts are a redistribution of capital from productive parts of the economy to non-productive parts of the economy.

[ExtraSlow]

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Subsidies and tax cuts are a redistribution of capital from productive parts of the economy to non-productive parts of the economy.

That sounds like something our masters would consider "a social good".

[kertejud2]

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To me anyway, it's a lot less clear how subsidizing individual airlines is a real benefit to the citizenry, economy, or taxpayer, no matter what foliage they paint on the tail-fin.

It's a question of 'is the corporate side of an industry important to have in your country.'

Because being the country to open up to the market, that's what you lose. Whether it's Air Canada or WestJet or whoever, it becomes a hinderance to be based in that country. They could still operate here, the place the money goes just leaves. It'd be a great place to do business, just the worst place to set up shop. So with that goes executive salaries, support staff, that come with company headquarters, and the dedicated and stable jobs that such a setup provides.

People lose their jobs, the government and society has to deal with it anyway. They wouldn't get replaced by another airline coming in, because the positions wouldn't exist in Canada anymore. Not unless everybody gets rid of the protections and subsidies that tie a business model with the country they're based in. WestJet and Air Canada might still be the main airlines in Canada, they just wouldn't be based here.

So is it better for companies who make hundreds of millions/over a billion in net income to be based in Canada, or have them based somewhere else?

[ExtraSlow]

A valid an important question. The thing is, this thread shows how little agreement there is about the answer to it.

[dirtsniffer]

Probably not the case with Beyond, but with Canada in general people always talk saving jobs out east. When we talk O&G people are more than happen to out source our demand.

[Buster]

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It's a question of 'is the corporate side of an industry important to have in your country.'

Because being the country to open up to the market, that's what you lose. Whether it's Air Canada or WestJet or whoever, it becomes a hinderance to be based in that country. They could still operate here, the place the money goes just leaves. It'd be a great place to do business, just the worst place to set up shop. So with that goes executive salaries, support staff, that come with company headquarters, and the dedicated and stable jobs that such a setup provides.

People lose their jobs, the government and society has to deal with it anyway. They wouldn't get replaced by another airline coming in, because the positions wouldn't exist in Canada anymore. Not unless everybody gets rid of the protections and subsidies that tie a business model with the country they're based in. WestJet and Air Canada might still be the main airlines in Canada, they just wouldn't be based here.

So is it better for companies who make hundreds of millions/over a billion in net income to be based in Canada, or have them based somewhere else?

A billion dollars!

Whew, I thought these companies needed a bailout and subsidies!

[kertejud2]

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A billion dollars!

Whew, I thought these companies needed a bailout and subsidies!

Government restrictions resulting in a reduction in travel and increased operating costs seems prime justification for government subsidy to get a small margin business through said restrictions, particularly when that subsidy comes with equity and involves consumer relief.

Also why I feel restaurants and other businesses affected by mandated restrictions for Covid should have also gotten relief.

[Buster]

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Government restrictions resulting in a reduction in travel and increased operating costs seems prime justification for government subsidy to get a small margin business through said restrictions, particularly when that subsidy comes with equity and involves consumer relief.

Also why I feel restaurants and other businesses affected by mandated restrictions for Covid should have also gotten relief.

We have mechanisms to do this better.

An orderly bankruptcy wipes out the shareholders. The bondholders then decide if they want to raise more capital to operate the business or liquidate it for the asset value. If the assets aren't sold, then the company comes out the other side leaner and meaner. Bonus points if the labour unions get punched out in the process.

All your plan does is use the taxpayers to ensure the shareholders don't get wiped out. When you buy a share of AC, you shouldn't get a an Extended Pandemic Warranty (provided by the taxpayer) on that share.

[killramos]

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We have mechanisms to do this better.

An orderly bankruptcy wipes out the shareholders. The bondholders then decide if they want to raise more capital to operate the business or liquidate it for the asset value. If the assets aren't sold, then the company comes out the other side leaner and meaner. Bonus points if the labour unions get punched out in the process.

All your plan does is use the taxpayers to ensure the shareholders don't get wiped out. When you buy a share of AC, you shouldn't get a an Extended Pandemic Warranty (provided by the taxpayer) on that share.

Real facts

[kertejud2]

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We have mechanisms to do this better.

An orderly bankruptcy wipes out the shareholders. The bondholders then decide if they want to raise more capital to operate the business or liquidate it for the asset value. If the assets aren't sold, then the company comes out the other side leaner and meaner. Bonus points if the labour unions get punched out in the process.

All your plan does is use the taxpayers to ensure the shareholders don't get wiped out. When you buy a share of AC, you shouldn't get a an Extended Pandemic Warranty (provided by the taxpayer) on that share.

Taxpayers are shareholders, pension plans are shareholders, bankruptcy also means consumers (the ever important consumer) don't get relief. The government will deal with these problems anyway, so they're going to protect the companies. Let shareholder get wiped out, company comes out the other side in the same market, no difference to consumer, fewer jobs, taxpayers, pension funds, other shareholders worse off.

As usual, the world is more complex than you desire it to be.

[Kg810]

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It's almost like there is a word for the thing that humans invented to handle supply, demand, and pricing.

Oh! oh! I know this one. Is it Critical Theory? No wait. Is it Socioeconomics? Or was it Wokeconomics? Maybe it's Marth.

[Buster]

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Taxpayers are shareholders, pension plans are shareholders, bankruptcy also means consumers (the ever important consumer) don't get relief. The government will deal with these problems anyway, so they're going to protect the companies. Let shareholder get wiped out, company comes out the other side in the same market, no difference to consumer, fewer jobs, taxpayers, pension funds, other shareholders worse off.

As usual, the world is more complex than you desire it to be.

The world is FAR more complex than "the government is the solution to every problem".

Is "relief" the new euphemism for "taxpayers cover everyone's risk?"

The market should decide what premium should be placed on various sources of capital to account for black swan events. Pension funds should think very carefully before buying shares of airlines. And if they do, they ALSO shouldn't be given an implied default insurance by the gov't.

People like you, thinking like you do, is largely why the economy is full of misallocated capital and moral hazard.

[Kg810]

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Oh! oh! I know this one. Is it Critical Theory? No wait. Is it Socioeconomics? Or was it Wokeconomics? Maybe it's Marth.

Aw I hurt someone's feelings with this post.

[killramos]

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Aw I hurt someone's feelings with this post.

The title of this thread could be “Air Canada employees feelings are hurt”