MicroeconomicsI only monitor the press and business shows to be left in wonder about the volumes of bafflegab hosts and columnists can keep regurgitating about the airline industry in Canada. It is the sound of a herd.
The introductory course to University economics is Microeconomics.
It describes how a bigger company has incredible cost advantages per unit cost just because basic costs (particularly the price of facilities and machinery) are spread over far more customers. In an airlines case, the costs are spread over ASMs. It also applies to staff. In airlines especially, the big airline has tremendous efficiencies because the airplane spends a much higher percentage of the time in the air. When an airplane is in the air full of passengers it is making money much more efficiently than a bunch of lawn darts flying passengers on short domestic flights.
When an airplane is a stretched version of an earlier model of airplane, the designers went to the challenge of stretching it because it is much more efficient per ASM than the smaller versions of airplanes.
Add the loyalty program to that efficiency. It is more efficient than compound interest.
I do not see one commentator on any media address either of these facets of the airline industry in Canada.
Instead of any analysis that includes a good discussion of these dynamics we get to listen to the age old media saw of passenger complaints that are a very small percentage of all airline interactions for any airline. It is so tiring to listen to that nonsense repeated over and over again.
The only thing I can say in the medias defence is that airlines won't tell them about any of these dyanmics. Especially the numbers around loyalty programs.
Just for fun I converted $17.13 to aeroplan points on a par of $.01 per point so 1713 points per share. It would cost $610 billion points to buy all of Air Canada's shares. They have enough cash free that they could pay the $6 billion in market cap off and go private. Watch out as this may happen you fools.
I don't know if there are that many points out there but it might be an interesting addition to Aeroplan's offerings...If there is some frequent flyer may be putting a bid in before Christmas.
The other pearl I will leave you with is that there is something structurally wrong with the Canadian Airline framework. The stake holders in this network have managed to bankrupt every airline ever created in Canada. And they just keep complaining. It is just sad.