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Bombardier is a global transportation company, headquartered in Montréal, Canada. It is present in more than 60 countries on five continents and is active in the manufacture of products, systems and the provision of services for the aviation (commercial and business jets) and rail transportation sectors. The division responsible for the company's aircraft manufacturing and related services is Bombardier Aerospace. The division is headquartered in Dorval, Quebec and ranks as the world’s third largest civil aircraft manufacturer, employing of 37,700 people. Its aircraft range includes:
- Business aircraft - Learjet, Challenger and Global aircraft families;
- Commercial aircraft - new C Series program, CRJ Series and Q-Series aircraft families;
- Amphibious aircraft - Bombardier 415 and Bombardier 415 MP aircraft;
- Jet travel solutions - Flexjet;
- Specialised aircraft solutions - Bombardier aircraft modified for special missions;
- Aircraft services and training - aircraft parts, maintenance, comprehensive training, technical support and publications, and online services.
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Air Canada plans to deploy the bulk of its 2016 capacity growth to international markets, after having cut some capacity in Western Canada during 2015. The airline is less exposed to that region than rival WestJet, which is headquartered in Western Canada and is projecting steep unit revenue declines in early 2016 due to weakness from lower demand in the oil and gas sector.
Air Canada embarked on the year 2016 by placing a letter of intent to purchase 45 Bombardier CSeries jets. In parallel, the Quebec government (which now has a stake in the CSeries) dropped a lawsuit against the airline related to aircraft maintenance performed in the province. However, Air Canada contends that it faced no political pressure to place an order for the beleaguered CSeries. Air Canada’s order gives the Canadian manufacturer a dependable national customer now that Porter’s order remains in doubt, and the aircraft's other North American customer, Republic Airways Holdings, has entered bankruptcy protection.
After trading at a discount for most of 2015 Air Canada has opted not to provide yield, unit revenue or capacity guidance on a quarterly or annual basis. The company’s rationale for the decision is a focus on its long-term strategy laid out to its investors in mid-2015, with specific ROIC, ratio and EBITAR margin targets. The company has emphatically stated that if short-term investors are not happy with the new policy, they are free to look elsewhere.
Alaska Air Group is making subtle changes to its business in 2016, which include the introduction of a premium economy product and a decision to enlarge its fleet of larger regional jets, as the airline positions itself to compete more effectively with its rivals.
There are also nuanced changes in Alaska’s competitive landscape in 2016. Although Delta Air Lines remains a fierce competitor in Alaska’s Seattle hub, most of the competitive capacity additions that Alaska faces in early 2016 stem from other airlines, including expanded competition with ULCCs. For now, Alaska does not foresee a need to segment fares to compete more effectively with ULCCs, but concludes that it would be an easy change to its business model, if necessary.
The company is sticking to its previous projections of 8% capacity growth in 2016 even as unit revenue pressure continues through the first half of the year. As a result, Alaska’s stock value compressed in early 2016, but regained some traction in late-Jan-2016. The fluctuations have not deterred Alaska’s inherent belief that it can post solid revenue growth with an annual expansion of ASMs between 4% and 8%.
Canada’s second largest airline WestJet is starting 2016 by battling undervaluation by the market while still enjoying its stature as one of the few airlines globally to hold investment grade status. The dive in WestJet’s stock price is driven by trepidation over the airline’s planned growth. During 2016, its capacity expansion could reach 11%, well above Canada’s projected GDP growth of 1.7%.
Investors also seem jittery about WestJet’s planned long haul expansion to London Gatwick with Boeing 767 widebodies given the existing capacity in the market. Rival Air Canada has responded by adding new service to Gatwick on its low cost subsidiary rouge. WestJet seems undeterred by the added competition, and stresses its long haul experiment with four widebody aircraft is a low risk proposition.
The airline is also touting flexibility to scale down its growth projections should conditions worsen. But for now WestJet believes its expansion in 2016 is warranted given its strong financial position and numerous quarters of profitability. For now, the company sees no reason to scale back its ambitions.
Porter Airlines' ambitions fade at Billy Bishop Airport. Time of the essence to deliver new strategy
Uncertainty over Porter Airlines’ growth path has developed now that the new Canadian government has essentially nixed the airline’s plans to operate Bombardier CSeries narrowbodies from Billy Bishop Toronto City airport.
Porter unveiled its ambitions to expand from Billy Bishop, and a conditional aircraft order from Bombardier roughly two years ago. From the onset, Porter faced strong political opposition for its plans to extend the runway and add jet operations from the airport, which is currently limited to turboprop flights. As political backlash against changing the airport’s operating profile continued to grow, Porter offered no real back-up plans for its business going forward if its plans failed to materialise.
After the new government’s dismissal of the plan, Porter still has not outlined its business strategy going forward. Its lack of clarity results in questions about the the state of its overall viability in the Canadian market place when its two largest competitors continue their expansion unabated. Both Air Canada and WestJet have an intense focus on properly serving all of Canada’s passenger segments, especially the high yielding traveller that serves as a foundation of Porter’s business model.
Canadian airline WestJet during 2H2015 marked the second anniversary of its regional subsidiary Encore, an airline designed to allow WestJet to tap new sources of revenue within the Canadian domestic market and flesh out its schedule to make it more desirable for the business passenger segment.
WestJet has stuck to its plans for Encore expansion, launching in Western Canada and then setting its sights on the Eastern region of the country culminating with a push from Halifax in 2015. Encore’s network composition is a mix of stand-alone stations and markets where it operates alongside mainline narrowbodies to improve schedule integrity.
Encore is fuelling at least half of WestJet’s capacity growth in 2015, and WestJet management has found itself defending Encore’s growth amid a shaky Canadian economy, stressing that the growth was justified given the regional operator’s stimulative effects. That growth continues in 2016 when Encore enters its first US transborder market, Boston.
Canadian airlines WestJet and Air Canada are busy preparing for upcoming aircraft deliveries as part of significant planned fleet changes at each company as they work to create the proper fleet profile for their respective business models.
WestJet recently marked a milestone with the delivery of its first Boeing 767 widebody, marking a time of rapid change at the airline during the last three years that also included the introduction of 70-seat Bombardier Q400 turboprops.
Air Canada in the short term is focussed on expanding its Boeing 787 widebody fleet, but is also preparing to add 737 Max narrowbodies beginning in 2017, the same year WestJet is adding the new next generation narrowbody to its fleet.
Each airline has also been working to line up financing for its upcoming deliveries, with WestJet tapping Export Development Canada and Air Canada capitalising on the EETC market that opened up to Canadian airlines in late 2012.