Airline Profits - Vol II - Issue 12 - Jan-Feb 2017

Volume II—Issue 12

A Magazine for Aviation Leaders & Influencers

www.airlineprofits.com

FEATURED

Are Airlines Engaged in a Profitable Business?

More articles inside...

Could Ryanair Remain Profitable Flying Passengers for Free?

Edition: January-February 2017

What Is New About Airline Is the African Airline Industry Profits in 2017?

Ready for Market Recovery?

Volume II—Issue 12

January-February 2017

Airline Profits

Contents 6

Editorial: W hat Is New Abou t Airline Profits in 2017?

10

Profile: W estJet: W hat Did the Air lin e Pr ofits Sustainability Index Reveal?

16

Perspective: Cou ld Ryanair Rem ain Pr ofitable Flying Passengers for Free?

20

Performance: Is the Afr ican Air line Indu str y Ready for Market Recovery?

26

Paradigm: Ar e Air lines Engaged in

A Profitable Business?

32

Platform: Did B om bar dier Really Under Sell the CSeries?

www.airlineprofits.com

3

HEAD OF PROGRAMS: Kofi Sonokpon kofi.sonokpon@airlineprofits.com PUBLISHED BY: Airline Profits Publications CP 53506 CSP Norgate Saint-Laurent, QC, Canada H4L 5J9 magazine@airlineprofits.com

All rights reserved. No part of this publication may be reproduced, duplicated, stored in any retrieval system or transmitted in any form by any means without prior written permission of the Publishers.

Airline Profits is the fir st a v ia tion m a g a zin e dev oted to im p r ov ing airline effectiveness and profitability. It is a bi-monthly publication.

Airline Profits is a v a ila ble in m u ltiple for m a ts: on line, m ob ile, digital, Kindle and print. The online and mobile versions are free to all aviation and non-aviation subscribers.

The digital, Kindle and print formats can be ordered via www.airlineprofits.com from the magazine page. A Kindle version can also be acquired through Amazon worldwide.

Airline Profits is a tr a dem a r k of M a ck so n Av ia tion. Š2015-2017 Airline Profits ISSN 2368-7800 (Print)

www.airlineprofits.com www.airlineprofits.co.network SPECIAL CREDITS:

ISSN 2368-7819 (Online)

Airline Profits

January-February 2017

Volume II—Issue 12

Editorial What Is New About Airline Profits in 2017?

Kofi Sonokpon editor@airlineprofits.com

Welcome to the 12th edition of Airline Profits; it is amazing how fast time has flown by. As usual, this is a packed release with new and thought-provoking articles. Yet, before you discover what is included in this edition, here are some interesting announcements first.

A New Website We are very excited about the

launch of our new website, matching our official colour: blue. As you know, the blue is the preferred colour of aviation to match that of the sky.

We have gone from black to blue;

We are very excited about the launch of our new website, matching our official colour: blue. We are also adding some new content via daily and weekly newsletters.

symbolically speaking, Airline Profits has left the black runway and has taken off towards the blue

will take you to the new site so you Digest when we discontinued

sky.

can continue enjoying your reading them.

We have a new URL which is

seamlessly.

www.airlineprofits.co.network

Some New Content

for the site in addition to the one you are used to www.airlineprofits.com; either one

6

Some of you may have gotten used to our Airline Profits Headlines Today and Airline Profits Regional

www.airlineprofits.com

Now, we are glad to announce that we are restoring that respectively via daily and weekly newsletters, which you can subscribe to at your earliest convenience.

Moreover, in addition to the daily aviation news that you have come to like, we will be posting aviationrelated videos as frequently as possible.

Airline Profits Ranking (APR) Since the introduction of the airline profitability assessment and benchmarking tool, the Airline Profits Sustainability Index (APSI), we have shared the analysis of nearly twenty different airlines from around the globe. Those reports were based on a 10-year period ending either in 2014 or 2015.

The first APR, which will be released in the second quarter of 2017, will be based on airline financial results from the decade ending in 2016.

Airline Profits

January-February 2017

Volume II—Issue 12

“ Swim upstream. Go the other way. Ignore the conventional wisdom. ―Sam Walton

Airline Profits

www.airlineprofits.com

@AirlineProfits

Airline Profits

January-February 2017

Volume II—Issue 12

Profile WestJet: What Did the Airline Profits Sustainability Index Reveal?

In the 11th edition of Airline Profits, we presented our first review of Alaska Airlines based the Airline Profits Sustainability Index (APSI). This is an integrated metric, which takes into account three dimensions: People, Performance and Agility.

In this edition, we are presenting another airline review on the basis of the APSI: that of WestJet. Our analysis covered a period of 10 years, starting 2006 through 2015.

We have also considered pieces of information available on WestJet’s website and other reputable sources at the time our review was conducted.

Based on the data available as of

Based on the data available as of December 2016, our analysis revealed that on a scale of 1 to 10, WestJet has an Airline Profits Sustainability Index of 9.0.

December 2016, our analysis revealed that on a scale of 1 to 10, WestJet has an Airline Profits Sustainability Index of 9.0.

Creation and History

Hill, Tim Morgan and Donald

Bell. Initially focused on the Wes-

In the next few lines, we are going

WestJet, which celebrated its 20 to offer a breakdown of this rating. anniversary in February 2016, was However, let’s begin with a brief founded in February 1996 by Clive

tern Canadian market, WestJet

overview of the company by

Beddoe and business partners in-

years later, the airline started ad-

highlighting some key facts.

cluding David Neeleman who later ding international destinations, founded JetBlue Airways, Mark

10

th

www.airlineprofits.com

quickly expanded to Eastern Canada in the early 2000s. About five

A Disney Magic-themed WestJet Boeing 737 Aircraft. Photo Credit: WestJet

mainly in the USA and then to

WestJet remains one of the most

destinations across the Americas

Mexico and the Caribbean. Further- profitable airlines in the world, per- and Europe, of which North Amemore, 2016 was a year of internatio- forming consistently above the innal expansion. WestJet added a non dustry average operating and net -stop service to Hawaii in January,

profit margins, and belongs to the

followed by the expansion of its

select few, which have posted pro-

intercontinental network in May

fits for several consecutive years.

with the addition of direct flights between several Canadian cities

of 119 aircraft in-service composed of 115 Boeing 737 and four newly acquired Boeing 767, which serve intercontinental routes. The current

Fleet

in-service fleet has an average age

Another low-cost carrier inspired declined substantially over the past

WestJet operates an all-Boeing fleet

Business Model, Network and

and London Gatwick.

Although passenger revenues have

rica accounts for nearly 70 percent.

by Southwest Airlines business

of 8.2 years. The airline also has 67 aircraft on order.

model, WestJet currently serves 92

couple of years (a near 20% drop),

Airline Profits

January-February 2017

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Profile Ownership and Subsidiaries WestJet currently has a simple

10-year period ranging from 2006 to 2015.

ownership structure: 100 percent of the equity is publicly traded.

At the present time, the airline fully owns WestJet Encore, which operates an exclusive fleet of 33 Bombardier Q400 and serves 35 destinations within Canada and the USA.

People Index

Saretsky, in the role of President and Chief Executive Officer. And as of 2015, the airline employed more than ten thousand people.

driven by the Performance Index, which in this case happens to be

The Airline Profits People Index is based on a scale of 1 to 10. WestJet has a high People Index of 8.7.

Five factors were considered in our calculation. The People Index has a

very high. This is mainly due to the fact that over the past decade (2006 -2015), WestJet was profitable ten years out of ten. In addition to that, the airline has posted above average operating and net profit margins.

Leadership, People and Opera-

WestJet is currently led by Gregg

WestJet’s Airline Profits Sustainability Index of 9.0 is primarily

45% weight in the overall APSI.

tions

Summary

Performance Index

With a high People and Agility in-

The Airline Profits Performance

dices and very high Performance

Index is based on a scale of 1 to 10.

index, our primary recommenda-

WestJet has a very high Perfor-

tion is that WestJet would do well

mance Index of 9.4. Five factors

to maintain the financial discipline

were considered in our calculation. acquired over time.

Headquartered in Calgary, Alberta, The Performance Index has a 40% WestJet uses Calgary and Toronto

weight in the overall APSI.

Pearson international airports as its main operational hubs. They also focus on Edmonton, Vancouver, and Winnipeg in Western Canada.

Agility Index The Airline Profits Agility Index is

based on a scale of 1 to 10. WestJet has a high Agility Index of 8.9.

Airline Profits Sustainability Profile

Seventeen factors were considered in our calculation. The Agility In-

As mentioned at the beginning of

dex has a 15% weight in the overall

Gregg Saretsky

this review, our analysis covered a

APSI.

President & CEO, WestJet

12

www.airlineprofits.com

Talent

“Talent is always conscious of its own abundance, and does not object to sharing.”

— Aleksandr Solzhenitsyn

Airline Profits

January-February 2017

Volume II—Issue 12

“ Don't find fault, find a remedy.

― Henry Ford

Airline Profits

www.airlineprofits.com

@AirlineProfits

Click on button or visit http://bit.ly/vol-travel-app

Airline Profits

January-February 2017

Volume II—Issue 12

Perspective Could Ryanair Remain Profitable Flying Passengers for Free?

In our 9th edition, we stressed upon the need for airlines to reconsider how they generate revenues. In this edition of Airline Profits, we are sharing our perspective about a revelation, Michael O’Leary, CEO of Ryanair recently made.

In a November 2016 article published by the Guardian, Ryanair’s

CEO was reported to be considering the possibility of carrying passengers for free in the next decade, meaning by 2026.

Knowing the current frenzy in the airline industry about finding ways to maximize ancillary fees per pas-

Michael O’ Leary, Ryanair’s CEO was reported to be considering the possibility of carrying passengers for free in the next decade, meaning by 2026.

senger, this revelation must have sent some shockwaves to not only Ryanair’s direct competitors but also to other airlines worldwide.

be: is this feasible? Can an airline

carry passengers free of charge?

And the second even more vital

Beyond the speculations that Mr. O’Leary’s statement may raise now and in the future, there are at least two important questions worth

Can an airline carry passengers free of charge?

question may be: will it be profitable? Can an airline be profitable while flying passengers for free?

Let’s examine these two questions

considering. The first question may

16

in the next few lines.

www.airlineprofits.com

Taken from the perspective of the current airline business model, the idea may sound crazy. Some may even suggest that Mr. O’Leary has

Ryanair cabin crew with Boeing 737 in the background. Photo Credit: Ryanair

clue what he was talking about or

its revenues from its airport affilia-

sengers. Being the first to make

that his idea is not realistic or simp- tions. It is important to highlight

such a revolutionary offer is likely

ly impossible to implement. How-

that a similar business model al-

to increase Ryanair’s goodwill sub-

ever, taken from a fresh perspec-

ready exists in other industries.

stantially, provided they are able to

tive, far from being a marketing

maintain a high level of customer

buzz, the idea is not only sound

satisfaction on a consistent basis.

theoretically but also feasible, prac- Can Ryanair Be Profitable Flying tically speaking.

In fact, carrying passengers for free is just an extreme application of the ultra-low-cost model, which already exists in the airline industry.

The only thing new about Ryanair’s future proposition is the fact that the airline wants to generate

Passengers for Free?

Ryanair’s idea equates to eliminat-

ing active revenues entirely and instead rely essentially on collaborative revenues through their partnership with airports that they

That, in turn, will potentially attract more customers to Ryanair

and ultimately sustain a critical mass of passengers necessary to maintain or exceed their current level of profitability.

serve. Given the price elasticity of air travel demand, the airline will

CONTINUED.

likely attract larger numbers of pasAirline Profits

January-February 2017

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Perspective

Tracking of Passenger Transactions at the Airport One may wonder how exactly passenger expenses at

flight with “a bunch of passengers who paid nothing for their ride”.

the airport could be recorded and accounted for.

Summary

And that is a valid concern. However, tracking each

The idea Ryanair is exploring about flying passengers

passenger’s transactions at the airport may not be

for free is not only sound but also feasible. It is only a

that difficult to accomplish. Each transaction can be

further extension of the ultra-low-cost airline model.

accounted for in the same manner as duty-free purchases.

Potential Risks for Low Revenues and Brand Dilution With that said, however, there are some risk elements inherent with this approach.

On one hand, it may well be that the type of customers, which Ryanair or any airline for that matter, would

Taken from a fresh perspective, far from being a marketing buzz, the idea is not only sound theoretically but also feasible, practically speaking.

attract with a “zero fare” offer may not necessarily be inclined to spend This type of business model is being applied success-

enough money at the airports.

As a result, the collaborative revenues generated per flight may not be substantial to cover the airline’s total operating costs let alone to make decent airline profits.

fully in other industries. There are, however, a few risks associated with this approach, which need to be carefully considered and mitigated in order to attract the right type of customers who can guarantee a min-

imum degree of profitability. Another critical factor

On the other hand, a “zero fare” offer won’t appeal to to take into account is the natural human inclination everyone. As some customers would still be willing

to devalue things we get for free. So, although very

to pay a fair amount in exchange for a higher level of

sound and practical, the idea should be tested gradu-

air service. An amount of money, which they may not ally, thoroughly and probably locally on a small scale before a network-wide implementation. necessarily spend at the airport. Besides, this group of passengers may well be reluctant to share their

18

www.airlineprofits.com

Making Decisions

“When your values are clear to you, making decisions becomes easier. ” — Roy E. Disney

Airline Profits

January-February 2017

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Performance Is the African Airline Industry Ready for Market Recovery?

In past editions of Airline Profits we covered some specific issues pertaining to the African airline industry. In this article, we are revisiting these issues and also highlighting additional challenges which African air carriers will have to deal with effectively in order to sustain their existence over the long run.

Just a few months ago, in November 2016, the African Airlines Asso-

ciation (AFRAA) held its 48th Annual General Assembly and Summit in Victoria Falls, Zimbabwe.

The focus of the three-day event was the survival and recovery of African airlines.

With very few exceptions, African airlines have been posting huge losses over the past 12 years.

This theme was right to the point, considering that the African airline industry faces many challenges.

For instance, with very few exceptions, African airlines have been posting huge losses over the past 12 years. What is more troubling is the fact that on one hand, Africa has not only posted the weakest airline financial performance year

20

in and year out. On the other hand, expect in terms of future financial

African airlines have not been able performance, especially now that to take advantage of the lower oil oil prices are rising again? Based prices which have boosted airline on the recent report released by profits to record levels for the past IATA, it appears that while the glothree years. Thus, as pointed out in bal airline industry has been posa previous edition, what can one ting higher and higher profits,

www.airlineprofits.com

A South African Boeing 747. Photo Credit: Aceebee – Creative Commons CC-BY-SA 2.0

the African region alone has been

The recent forecast posted by IATA Furthermore, demand for air travel

reporting bigger and bigger losses.

indicated that operating costs have is also expected to increase subs-

In fact, the last time the African air- skyrocketed since 2011. In terms of tantially over the next few decades. line industry reported any profits

operating margins, African air car-

Besides, when one considers trans-

was in 2010 with a meager 100 mil- riers are well below the break-even portation infrastructure in Africa, lion US dollars representing only

point. Similar to net profits, opera-

one cannot but conclude that avia-

0,5% of the collective 17,3 billion,

ting margins have been declining

tion is by far the most needed

which the global airline industry

for the last 5 years.

means of transportation to tap the

posted that year. Since then African air carriers have collectively lost a 5 -year US$2.3 billion. That does not

Beyond the factual look, at Africa’s

huge potential of the continent.

airline financial performance, one Unfortunately, it clearly appears cannot but look also at the poten- that the African airline industry is

include the anticipated 1.7 billion

tial of the African region interns of financially and structurally weak to combined for 2016 and 2017 nor the air transport. Different economic run as the powerful economic encumulative 1.3 billion lost between indicators point to Africa as a gine it ought to be.

2004 and 2009. growing market.

CONTINUED.

Airline Profits

January-February 2017

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Performance

Moreover, the industry is also not well prepared to

against well-funded, mega international airlines,

take advantage of opportunities either locally, regio-

which are already carrying some 70% of the interna-

nally or globally.

tional traffic originating from Africa. After nearly 60 years of independence, it is high time to acknowledge the fact that the so-called national pride has stifled

The last AFRAA AGA was another wake-up call.

Well beyond the much needed African Open skies,

and harmed in many ways the development of a sustainable African aviation industry.

there should also be a much stronger tie between African airlines themselves. Survival and market recovery are possible but not until all key stakeholders reach a basic understanding and a true commitment to building a more united, stronger and thriving African airline industry.

Until such a time, one can expect the following. On one hand, foreign and better-funded air carriers will continue to milk the African skies, while

Survival and market recovery are possible but not until all key stakeholders reach a basic understanding and a true commitment to building a more united, stronger and thriving African airline industry.

African airlines themselves will continue their financial struggles and grow weaker and

Perhaps, it is high time to cast out that harmful “national pride� and to try something else. It may be

weaker.

worth it to pursue true and genuine African unity and pride, instead.

In summary, we do hope that African aviation in-

dustry stakeholders will clearly see that current times and circumstances would not tolerate the status quo of isolation and mutual exclusion for lon-

Finally, we hope that African airlines will understand that some type of consolidation or a pan-African airline alliance is the key to their effective survival and market recovery.

ger. We also hope that African governments will come to the realization sooner than later that their national air carriers are just too small to compete

22

www.airlineprofits.com

Possibility

“There is nothing impossible to him who will try. ” — Alexander the Great

Airline Profits

January-February 2017

Volume II—Issue 12

“ Education is the key to unlock the golden door of freedom. ―George Washington Carver

Airline Profits

www.airlineprofits.com

@AirlineProfits

Airline Profits

January-February 2017

Volume II—Issue 12

Paradigm Are Airlines Engaged in a Profitable Business?

Before you get away with a wrong notion, let us establish that the business of transporting people and goods is a very good and necessary business to be engaged in.

Our question is more about the need for airlines to become more profitable and sustainable; certainly not at the expense of their customers, but rather at their service.

We all understand the critical contribution airlines have made to the

global economy either directly, indirectly or inductively over the past century of existence. Therefore, it is only normal to support the idea of a more financially viable and sustainable air transport industry. Unfortunately, commercial avi-

The question is more about the need for airlines to become more profitable and sustainable; certainly not at the expense of their customers, but rather at their service.

ation is heavily dependent on oil.

In fact, not only is jet fuel price a major cost-driver, it is also a major

US$70 over the last couple of years, before economic reality catches up

airline profits driver.

airlines have posted record profits

The recent financial outlook released by IATA for the end of 2016 and for the first part of 2017 supports that statement. As a matter of fact, when jet fuel price fell below

collectively. And now that oil price very low compared to other less is rising again the airline industry

vital industries. In general or rather

is anticipated to report lower

in normal business circumstances,

profits. The only consolation is that demand drives revenues, thus some airlines will continue to post higher profits, at least for a while

26

again. Yet, the profits margins are

www.airlineprofits.com

profits.

Airplane wingtip at sunset. Photo Credit: Creative Commons CC0

For airlines, however, it is rather jet fuel that drives both costs and profits, even though demand for air travel is constantly on the rise. There are two ways to look at this.

grab a bigger share of the air travel pie.

From the hub-and-spoke, the low-cost, the ultra-lowcost models, overbooking, fuel surcharges, reservation and cancellation fees, checked bag fees, other an-

Firstly as a fatality, in which case one can say that air- cillary fees, and more recently the “basic economy" lines are stuck in the wrong business. Certainly, not

class, airlines have tried different avenues to maxim-

everyone will agree with that.

ize revenues and increase profits.

Secondly, as a choice each and every airline, either

Yet, despite all that the airline industry average net

old or new, has made on its own: to play the game as

profit per passenger has never reached US$10. And

it has always been played since 1914. And to that, we

the net profit margin has never reached 6% over the

can at least agree that this is a simplistic way of look-

last twelve years; not even in the best of times.

ing at one of the greatest challenges airlines have faced since the beginning.

CONTINUED. For instance, many recipes have been introduced in an attempt to make it work, to make more profits and Airline Profits

January-February 2017

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Paradigm

So, this begs the question: is there something wrong about the airline business or are airlines engaged in a wrong business? Having established earlier that the airline business in itself is not wrong, then we can safely say that there is

Innovation does not come as a result of improving old habits of thinking, it rather comes as a result of thinking differently.

at least something fundamentally wrong about the airline business.

This is why at Airline Profits, we are convinced that the time is right for airline CEOs and their teams to rethink the airline business from the ground up. In the process of doing this necessary collective soul

28

searching, nothing should be taken as a result of thinking differently. for granted, every underlying busi- And to paraphrase Stephen R. ness assumption should be ques-

Covey, there is no need to climb

tioned to establish its validity and

faster on a ladder that is leaning

soundness. Innovation does not

against the wrong wall. It is far

come as a result of improving old

better to find the right wall first.

habits of thinking, it rather comes

www.airlineprofits.com

Genius

“What is called genius is the abundance of life and health.”

— Henry David Thoreau

Airline Profits

January-February 2017

Volume II—Issue 12

“ People may hear your words, but they feel your attitude. ― John C. Maxwell

Airline Profits

www.airlineprofits.com

@AirlineProfits

Airline Profits

January-February 2017

Volume II—Issue 12

Platform Did Bombardier Really Under Sell the CSeries?

In a previous article “Is Bombardier Fully Sold on the Merit of the CSeries”, we questioned the soundness of the failed attempt by the Montreal-based aircraft manufacturer to sell a major stake of the CSeries to their European and most hostile rival, Airbus. In this edition, we are back with yet another critical and necessary question: Did Bombardier really undersell the CSeries?

If you are a regular reader of Airline Profits, you know that we have given much space to the CSeries.

Especially when most publications were negatively reporting about the program delays and cost overrun.

The reasons why we have taken such a firm stand for the CSeries are many folds.

Firstly, like it or not, the Bombardier CSeries is the best aircraft in its category. This is not some sort of bias, but a plain and simple fact. And one of our core value as a publication is to report on facts, not fables nor fictions.

Secondly, the bitterness expressed against Bombardier and the CSeries by its competitors through caustic comments is a clear indica-

32

We understand through the stories of past inventions that the road to significant innovation is often bumpy, challenging and difficult to navigate, especially in the aviation and aerospace industry. tion that they were caught off guard by the value proposition of the CSeries.

Thirdly, we understand through the stories of past inventions that the road to significant innovation is often bumpy, challenging and difficult to navigate, especially in the aviation and aerospace industry.

www.airlineprofits.com

Finally, through Bombardier’s past history and founding vision, one can read a story of resilience, a capacity to bounce back from difficulties and make things happen.

A Bombardier CS300 with airBaltic colours. Photo Credit: Bombardier

And as you probably know, Bombardier did catch up and succeeded in turning things around. Consequently, both the CS100 and CS300 have been type-certified

by Transport Canada, and validated by the FAA, and EASA. By the end of 2016, a fleet of CSeries airplanes has been delivered to the European launch customers, namely Swiss International for the CS100 and airBaltic for the CS300. Both aircraft variants have successfully entered revenue service.

The launch customers have each reported that their respective all-new aircraft are exceeding their performance expectations in-service.

All that should be fully credited to the Bombardier teams who have worked relentlessly to bring about some positive outcome from the state of chaos, of doom and gloom, which many media reports have suggested over the past few years.

Airline Profits

With that said, the highlight of this article is about the continuous allegations of deep discounts that Bombardier was reported to have offered not only to Air Canada but more importantly to Delta Air Lines on their CSeries orders.

You may recall that before these two deals, Bombardier had not been able to land any deals for their all-new aircraft for nearly two years. Then following the appointment of CEO Alain Bellemare and the forming of a new sales leadership team, a perceivable turnaround was initiated.

The accusations were made by Airbus and Embraer shortly after Bombardier announced the conclusion of the Delta deal.

January-February 2017

CONTINUED.

Volume II—Issue 12

Airline Profits

January-February 2017

Volume II—Issue 12

Platform On one hand, Airbus’s chief salesman, John Leahy told reporters that “Bombardier had sold the CSeries to Delta for a song.”

On the other hand, Embraer’s top executives have stated that “Bombardier was distorting the commercial aircraft market by offering deep discounts thanks to government subsidies.” And since then have threatened to file a case with the World Trade Organization (WTO) against Bombardier for unfair competition.

Now, a first reaction may have been to dismiss those allegations or at least downplay their impacts on future deals, considering that airline executives know better than to make aircraft buying decisions based on hearsay evidence. Especially, now that the CSeries is in service and has reportedly been performing beyond expectations.

For if in fact, Delta Air Lines did order their CSeries fleet at a deep discount, every other airline, regardless of their size and market position, would expect to get a similar deal from Bombardier.

For if in fact, “the CSeries was really offered to Delta for a song” as Airbus’s Mr. Leahy suggested, while Embraer is preparing a WTO case to denounce that deal, one might ask the following questions.

Firstly, has Bombardier really undersold the CSeries?

Secondly, given the perceived value and quality of the CSeries aircraft, was the Delta deal worth it after all? According to prominent industry analysts, the market was expecting some marquee customerendorsement of the CSeries. Yet, was that meant to

Firstly, has Bombardier really undersold the CSeries?

Secondally, given the perceived value and quality of the CSeries aircraft, was the Delta deal worth it after all?

However, from a more critical and strategic viewpoint, if these allegations were true, then Bombardier may have checkmated itself into a bargaining corner, where it would be very difficult to get out of.

The reason is simple. The Delta order, which came as a powerful endorsement for the CSeries could or should have been a robust leverage to unlock more sales.

However, it appears that more than eight months after that momentous and historic deal, Bombardier has yet to announce any other significant CSeries orders, apart from firming up the deal with Air Canada and reporting a much smaller order from Air Tanzania.

34

have come at all costs?

And finally, if in fact, the CSeries was undersold to Air Canada and Delta, then our previous question would remain valid: Is Bombardier fully sold on the merit and value of the CSeries?

www.airlineprofits.com

“ My favorite things in life don't cost any money. It's really clear that the most precious resource we all have is time. ―Steve Jobs

Airline Profits

www.airlineprofits.com

@AirlineProfits

Life & Love

“Life in abundance comes only through great love.”

— Elbert Hubbard

Airline Profits

January-February 2017

Volume II—Issue 12

“ When I think about creating abundance, it's not about creating a life of luxury for everybody on this planet; it's about creating a life of possibility. It is about taking that which was scarce and making it abundant. ― Peter Diamandis

Airline Profits

www.airlineprofits.com

@AirlineProfits

“ Many a man curses the rain that falls upon his head, and knows not that it brings abundance to drive away the hunger. ―Saint Basil

Airline Profits

www.airlineprofits.com

@AirlineProfits

www.airlineprofits.com