the Chorus strategy
The arbitrator came down with the benchmark agreement conclusions.There will be no change in the 12.5% markup over costs.This is used to derive ticket prices.So Chorus will not have to make retroactive payments over the life of the agreement to Air Canada .The benchmark sets controllable costs which are most of the costs.Some are controlled by Chorus and most of these are fixed by Chorus as they have their own maintenance facility in Halifax.
Chorus has the challenge of reducing it's costs to compete with WestJet's Encore service.This might also give them new routes but on a competetitve basis.Here efficiency would be important and margins would be low.There is also the threat that Air Canada will find an alternative carrier for the American routes.But Chorus can also piggyback on their regulated routes and pick up new destinations.It can be expected that margins on their new (competitive ) routes will be less than 12.5%
Strategies
Chorus can start lobbying for new routes from Air Canada both in Canada and U.S.A. The new routes will likely have a smaller markup than 12.5%.They can put new add-ons to regulated routes.For example, on an Ottawa to North Bay route, add on a couple of flights from Ottawa to Sudbury with a short stopover in North Bay each week.This will use the protection of regulated routes to increase traffic although at a lower overall margin.
Lastly they can try to increase charter business.Either on their own or buy a portion of an established carrier like Thomas Cook with probably a higher margin than 12.5%
Chorus has the challenge of reducing it's costs to compete with WestJet's Encore service.This might also give them new routes but on a competetitve basis.Here efficiency would be important and margins would be low.There is also the threat that Air Canada will find an alternative carrier for the American routes.But Chorus can also piggyback on their regulated routes and pick up new destinations.It can be expected that margins on their new (competitive ) routes will be less than 12.5%
Strategies
Chorus can start lobbying for new routes from Air Canada both in Canada and U.S.A. The new routes will likely have a smaller markup than 12.5%.They can put new add-ons to regulated routes.For example, on an Ottawa to North Bay route, add on a couple of flights from Ottawa to Sudbury with a short stopover in North Bay each week.This will use the protection of regulated routes to increase traffic although at a lower overall margin.
Lastly they can try to increase charter business.Either on their own or buy a portion of an established carrier like Thomas Cook with probably a higher margin than 12.5%
Comments
Post a Comment