david nicholson says
Air Canada profit takes off WebPosted Wed Feb 2 09:31:03 2000 see AC chart
WEDNESDAY-NIGHT
#937
February 16, 2000
CALLING ALL ECONOMISTS, ECOLOGISTS, OPINIONISTS
This Wednesday we will have an eco-nomic discussion, spreading oil on troubled waters, or perhaps, water on troubled oil?
The topic will be oil prices, their impact on the economy - personal and international,- the liklihood that there will be relief on the horizon, the renewability of this resource through new exploration and discoveries, development of viable and sustainable alternatives ....
Fortunately we have the world's 10th largest airline well represented by Robin. Our Central Banker will have comments; our favorite geologist has thoughts on the subject, as certainly you will.
Just think -if oil were to disappear, there would be no oil drums for steel bands and then there would be little excuse for Mayor Bourque to go to Trinidad.... He would have to stay here and enjoy snow removal discussions.
We trust that by tomorrow evening the large impediment blocking the entrance of 33 will have somehow been removed; should this not be the case, please use the back entrance at 444 Mount Pleasant.
Diana and David Nicholson
Robin Wohnsigl has been recienly made a senior Vice President with an aproiat raise in pay.
Wednesday February 16th 2000 #937
Despite the heavy snowfall and large deposit of snow engendered by the collapse of the awning over the front door of 33, Wednesday Night was a lively occasion, attended by a hardy band of intellects attracted by the promise of the Voice of Air Canada.
AIR CANADA
Air Canada has survived and is doing well.
The latest news is the company's investment of $23 M in the heavy maintenance facility, creating some 200 new jobs. Of these, approximately 20 have gone to former InterCanadian employees. (While Air Canada has no intention of bailing out that airline, it is happy to hire QUALIFIED former employees and looks forward to hiring a number of flight attendants from among their ranks).
Regarding the Technical Operations side of Air Canada, today there are 3-4 applicants per airplane mechanic position. Today's candidates generally come from CEGEPs and/or apprenticeships with regional carriers or FBOs, but may also come from other fields such as teaching.
Despite good pay ($50-55K base pay and up to $100K with overtime), these are blue collar jobs that do not have a high profile and unless some way is found to make these positions glamorous, by 2010 it is expected that there will be a severe shortage of trained young technical people.
It was suggested that Air Canada should invest in the development of a weekly TV series with an airplane mechanic hero as a role model. For those of us who remember "Airport", it is the George Kennedy character, not Charlton Heston.
Attention as called to Joe Singerman's report on Air Canada - "Evolution not revolution".
Rationalization is the key to all of the actions taken. Direct flights to Calgary and Vancouver are being added from Montreal, 30 new routes/destinations are being added (2% of seat miles) and there will be 380 new transborder flights. The replication of schedules with Canadian is being eliminated, there were too many planes flying 5-10 minutes apart and each half-filled. Eight DC-10s have been taken out of service and returned to the Leasing company as they are very uneconomical.
The issue of Customer satisfaction is being addressed seriously. They are now down to a backlog of 350 complaints with a 10-day turnaround, a considerable improvement over the previous (4 months ago) 5000 that remained unresolved for up to 30 days.
BUT, DON'T LOOK FOR ANY GREAT CHANGES IN SEATING!
(Editor's note: The Canadian Government legislation designed to protect the consumer from the monopoly situation was introduced on Thursday the 17th and was therefore not discussed, however, we understand that Air Canada was consulted and is not unhappy with most of the provisions).
OIL PRICES
The notice that oil prices would be under scrutiny generated a number of calls and email messages from those who could not be with us. Opinions ranged from the urgent need for governments to pay attention to developing alternative sources because reserves will be depleted and new finds will only fill the gap left. On the other side, Professor Tony's comment that "OPEC is currently more effective than usual in restricting output…. Proven oil reserves rise when interest rates fall (it pays to explore) and fall when interest rates rise."
Clinton will not release strategic oil reserves. Washington talks a lot, but there will be no action, other than pressure on the friendlies to increase production. Meantime, the impact is harsh and airlines are among the hardest hit - a 2 cent increase per gallon means a $20M increase in costs for Air Canada. AC has hedged jet fuel, but is forced to add a surcharge of $27 on transborder passenger tickets to reflect the increase - FEDEX has added a similar surcharge for freight. Costs of manufactured goods, transportation will rise; consumers are already upset about a doubling in heating costs.
The central bankers expected oil production to increase significantly when the price reached $20bbl. Thiessen has increased inflation projections from 2% to 3%. There will be further tightening by the Fed. The CPI will show rising inflation this Friday.
The market is discounting oil prices to $18-$19.
Iraq is producing at capacity. They simply are limited in how they can be paid. In our Swiss banker's opinion, there simply isn't a lot of extra capacity.
Will research into alternative sources increase? What about alternative modes of transport?
Government Windfall
Meantime - what are the governments doing about the tax windfall they are receiving thanks to the rise in energy costs? There is an almost obscene quality to the public deploring of the cost increases by public officials while at the same time the governments are raking in all the extra tax money. Why not give everyone a break - and, coincidentally, encourage consumer spending? Would it not be politically smart to give back the GST and PST that is in excess of the budget projections?
THE MARKET
The stock market is in a brutal bear market for the "old economy" stocks - investors are only interested in speculative stocks. Buffet is right, there are some great buys in traditional stocks.
Banks have taken huge losses. There will be a hard landing in the future in Chil Heward's view. $.5% growth in the future; Heward is factoring 5% for the U.S. and predicts a resource boom in Canada.
Growth is close to 4%; to offset tax cut there will be further tightening i.e. ½ % March 26th and ¼ % May 16th to slow the economy and inflation.
Trade surplus is running at $ 2.5 - 3.5 B monthly
Strong employment, consumer spending, housing starts,
The Canadian dollar will rise to 70 cents and it would be higher now if it were not for the HRD scandal.
Only one more Wednesday to go before the Canadian federal budget. Some predictions:
WHAT WILL BE IN THE BUDGET
- Tax cuts, mainly personal, of $40-$50B over 5 years;
- corporate tax cut;
- large sums for health and post-secondary education; (a political solution with increased transfer payments to meet local desires for health and education payments)
- investment in infrasctructure programns - 12.B over 5 years
- increase in foreign ownership quotas for RRSPs;
- cuts in employment insurance premiums;
- elimination of 3% surtax on middle income earners;
- $20-$25B debt repayment
In summary, The Budget will likely be designed to make people forget about HRD.
Stocks to watch
Bank stocks (look at AC, BoM and TD - very cheap) ; oil stocks; energy (Talisman, West Coast Energy, PetroCan) ; metals (Cominoco, Falconbridge) Biotech companies (Biochem?) Industrials (Bombardier), technology.
Monday 21 February 2000 Analysts hike targets for Air Canada & Seagram JAMES FERRABEE ... Takeover or no takeover, Montreal-based analyst Ron Meisels looked at his charts last
week and declared Seagram still in "buy"
territory. He pointed out that in 1999, the
stock price hit $98 and then sank to the
mid-$50s on negative sentiment.
"It has reversed whatever negative trend
there was and resumed its upward trend," he
said in an interview. The upside targets he
put at $98 and $118. That is a considerable
jump, considering it closed at $62.70 on Dec. 1".
Air Canada, in its beefy new shape as Canada's near-monopoly domestic
carrier and only international airline. When Canadian Airlines collapsed
last fall and Air Canada bought it, most analysts believed it would take a
year or more for Air Canada to begin to perform well financially.
Now there is a mini-rush to revise target and earnings estimates
because Air Canada has moved more smartly to integrate the two
airlines than anyone anticipated. The result is that the stock price could
break out of the range it has traded in for most of the 1990s, analysts
say. It closed Friday at a new 52-week high of $16. its low for the last
12 months is $5.70.
One longtime Air Canada watcher, Jacques Kavafian of Yorkton
Securities, recently jacked his 12-to 18-month target price from $13.50
to $22 because of higher earnings estimates.
"We are establishing earnings estimates of $2.70 per share in 2001, to
reflect a projected 10-per-cent revenue growth from Air Canada's
international expansion," he said. The 2000 earnings estimate is $1.65,
although he said it could be higher.
"The projected international expansion will have several positive
impacts, the main one being a dramatic reduction in unit cost as
long-haul flights tend to be lower cost," he said. While there is usually a
corresponding reduction in yields, he said that the expansion into
primarily business markets like Japan and the U.S. will result in higher
margins.
Kavafian said in the forthcoming reshuffling of the flight schedules of
the two airlines, Air Canada is shifting up to 20 per cent of its capacity
into transborder and international routes. "Canadian and regionals are
expected to fill the void. In our view, this will result in a huge expansion
of Air Canada's margin," he added.
Nick Morton of RBC Dominion Securities is also boosting his target to $21
from $12.
"It appears likely that Air Canada and Canadian will merge successfully
and our working estimate is that the combined airline could earn $3 a
share next year," he said.
Then he joked: "Buy Air Canada and upgrade to business."
He maintained his rating of "2(outperform)."
Meanwhile, Air Canada's only visible and serious competitor in Canada,
Calgary-based WestJet Airlines Ltd., received a rave notice from Ted
Larkin of HSBC Securities on the basis of encouraging statistics for
January that show traffic up by a hefty 35 per cent and a capacity leap
of 45 per cent. At the same time, Larkin pointed out, the only new
competitor on the horizon, CanJet, is scrapping plans to start up a
low-cost operation from Hamilton.
WestJet's high for the last 12 months is $18.70 and its low is $10.80; it
closed on the TSE Friday at $17.30. Larkin rates it as a "buy" and he
added: "We remain very excited about WestJet's future, given the
restructuring of the Canadian airline industry. From the current level,
the shares offer a potential return of 44 per cent over the next year,
based on our $23 target price."
It is encouraging to see "buy" recommendations on stocks of companies
that aren't related to the Internet and that have the prospect of big
earnings increases. Does this mean a partial return to value investing?
Monday, February 21, 2000 Mr. Collenette brandished threats of
multi-million-dollar fines and five-year prison sentences against Air
Canada's top managers were they to stray too far from the principles of
free competition.
Yet this is the same minister who suspended competition law in Canada
last year, giving Liberal Party friend Gerald Schwartz a temporary
advantage in pursuing an airline monopoly.
Mr. Collenette says air fares can't be too high to gouge customers and
can't be too low to put competitors out of business. But in introducing
new legislation which he says will prevent both price-gouging and
predatory pricing, Mr. Collenette is trying to return to the days of
heavy-handed regulation of an industry that is and should stay
deregulated.
THE REST OF THE WORLD
The Euro is not well. It has dropped from 118 to 98. The Chairman of the CDU has resigned. The Austrian situation has caused major rifts in the community. The rest of the world is short of Euro reserves.
Asia is booming. China is booming. Japan and Southeast Asia are reviving and India is showing new energy.
CANADIAN POLITICAL SCENE
Unlike other situations, it seems unlikely that the HRD scandal will be easy to sweep under the rug. People are angry with the way their tax dollars have been squandered by two of Jean Chrétien's favorite ministers, Jane Stewart and Pierre Pettigrew. Pettigrew's star will no doubt be eclipsed. Pettigrew grinning, bearing enforced silence?
On that happy note Wednesday Night disbanded.
Written by Diana Thébaud Nicholson
Thursday 3 February 2000 Air Canada earnings hit record
But its troubled Canadian unit declares a debt moratorium see AC chart
Dear David/Diana,
thanks for the Wednesday Night note. My car is
imprisoned under a growing pile of snow, thus I am unlikely to
make it tonight. On the oil subject, there is no real shortage, OPEC
is currently more effective in restricting output than usual.The
hoary chestnut about there being only twenty-odd years of proven
reserves, and what will we do next(?) has been around since the
twenties.Proven oil reserves rise when interest rates fall (it pays
off to explore) and fall when interest rates rise.
Tony
Monday, February 14, 2000 Windows 2000 is mission-critical for Microsoft Simon Avery Financial Post ..30 million lines of code. It is years behind
schedule a consumed $1-billion. Its authenticity certificates are harder to counterfeit than a $100 bill
MS 2000 arives 17 Feb 2000 it great but please don't line up to buy. It may be some time for your best programs to get a version that will work with MS Windows 2000 [DTN]
Wednesday 16 February 2000 BCE to buy Teleglobe
We'll become a global telecom power, Monty says of $9.65-billion deal Where is BCE going? > .."I don't know if I would have traded Teleglobe for Nortel," he said. "Teleglobe is really yesterday's business, whereas Nortel is, at least, supposedly, tomorrow's, so I have a little problem with that." and BCE's Monty a world-beater
With his takeover of Teleglobe Inc., BCE Inc. CEO Jean Monty will gain access to an international transmission network with fantastic growth potential. ANDY RIGA
Topics?
Rogers taking over Videotron
WebPosted Mon Feb 7 15:06:05 2000
MONTREAL - Rogers Communications Inc.,
Canada's largest cable company, is acquiring
Videotron Group Ltd., Canada's No. 3 cable
company, in a stock swap that will create a
$25-billion company.
Canadians on top in online use
WebPosted Sat Feb 5 18:02:00 2000 NEW YORK - After getting a reputation as hewers of wood and drawers of water, it now appears Canadians are clickers of mice. We
spend more time surfing the Web than anyone
else in the world, according to a U.S. study.
Paul Martin's non-campaign to succeed Jean Chretien turned Ottawa into a cauldron of backstabbing, rumour-mongering, and outright lying.
Even more so than usual BY GUY LAWSON Saturdaynight
Robin Wohnsigl Sr. VP AC
Please phone (514 934-0023
or e-mail us your thoughts. 
Jacques is in Cuba! now!
Susan E-J
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