WestJet, on Its Own, Is Ready to Expand

WestJet Ed Sims Executive Vice-President, Commercial
Ed Sims, WestJet's Executive Vice-President, Commercial

Ed Sims wants to make one thing very clear about WestJet.

“We’re pretty comfortable swimming against the tide,” said the airline’s executive vice president –commercial during a recent telephone interview from his office in Calgary, Alberta, Canada.

“I think it’s one of the ways that WestJet has grown,” he said. “We’ve been able to record 49 consecutive quarters of profitability despite challenges by swimming the other way.”

WestJet, founded in 1996, has grown from a small, low-cost regional carrier serving several cities in western Canada with two used 737-200 aircraft to Canada’s second largest airline with more than 20 million passengers annually.

In addition to its Canadian service, WestJet, and its subsidiary, WestJet Encore, offers flights to 26 cities in the United States, including Hawaii, Mexico, the Caribbean and Western Europe.

And, according to Sims, greater changes and challenges lie ahead.

“The first words that come to mind are opportunity, options and the degree of complexity,” said Sims when asked how he would best describe his airline today.

“I think we’re always going to be a low-fare airline,” he added. “That’s what made us famous, what’s differentiated us. We know that our overall cost base is lower than our leading competitor.”

Sims, who joined WestJet in May of this year after stints with Air New Zealand and the Virgin Group, credits president and chief executive officer Gregg Saretsky with having “consciously reached out to attract capability from around the world with people who have a track record of dealing with complexity.” That includes bringing executives who previously worked at Southwest Airlines and United Airlines to join the executive team.

WestJet will likely need that executive experience as it enters a new, more complex period of development.

Those complexities include launching a new, ultra low-fare airline named Swoop in the middle of 2018.

Sims made it clear that Swoop is intended to deter ultra low-fare carriers, like Spirit and Frontier from the United States, from poaching Canadian customers, as well as battling Canadian airlines seeking to emulate the American ultra low-fare model.

“Swoop is a fighter brand,” Sims said. “We have a whole bunch of low-cost carriers looking to add their names to the 300 or so carriers who have gone bust in Canada over the past few decades. But Swoop is quite consciously an effort to continue to provide fares at whatever level we think is appropriate for very budget conscious travelers.”

Sims said the airline is working on a network “right now,” with routes likely to be announced in the first quarter of 2018 and flights beginning about three months later. But don’t expect an especially extensive network. “When we do aspire to do competitive pricing, we do it on a limited basis,” Sims said.

Sims pointed to smaller airports near the border with the United States like Hamilton which charger lower fees than major hubs like Toronto or Vancouver as potential destinations for Swoop service.

WestJet Q400

WestJet Encore operates a fleet of Bombardier Q400 NextGen turboprops (Photo: Aviation Tribune)

Meanwhile, WestJet will face an equally challenging and complex opportunity early in 2019 when it takes delivery of the first of up to 20 Boeing 787-9 aircraft to its fleet, replacing its current fleet of four Boeing 767-300s.

Sims said the additional aircraft gives WestJet “some wonderful growth opportunities.” He added, however, that costs will go up as WestJet moves into full network space.

Sims said the airline is looking at both European and Pacific markets for possible expansion with its new fleet of 787s.

“If I look out across the Asia Pacific market, I’ve got a growth rates of six to eight percent. If I look across the Atlantic, I see growth rates of two to four percent. We’ve got to do both,” he said.

But, he added, “We’ll make sure that our market rate and our market shares will retain a competitive advantage because that’s what we’re known for.”

That “advantage” is unlikely to be based on price alone, however. WestJet won’t be following the lead of Norwegian Air or WOW by offering ultra low fares on transatlantic or transpacific flights.

“We’re watching Norwegian and WOW very carefully,” Sims said. WestJet is also keeping tabs on Pacific-based carriers as well, he said, as a new generation of Chinese carriers revs up to compete in the international low-fare market.

According to Sims, however, WestJet’s long-haul model is likely to be quite different.

“We’ll have market prices that will be genuinely competitive,” he said, but WestJet’s international flights will include such amenities as a lie-flat business class bed and premium economy service, not offered by ultra low-cost carriers.

“So, I think our product proposition and fee proposition will be quite different than long haul, low cost point-to-point carriers like Norwegian,” he said.

Instead of competing on price, Sims expects WestJet to stand apart by with innovative product offerings.

He pointed to the automotive industry as a place where exciting things are happening and said, “I want WestJet’s product to look strongly differentiated in the way that we always have done with our service offerings

“I don’t think it’s true that the aircraft has to look like everybody else’s when actually the seat selection, the interior fit-out selection, the entertainment selection, the service flow selection, the food and wine offerings are entirely down to the carrier, not down to the manufacturer,” he said. “You’ve got plenty of opportunities to differentiate, so that’s what we’re trying to do between now and when we accept the first aircraft in 2019.”

Sims said his previous experience has made his passionate about differentiating the in-flight experience for passengers.

“Coming from New Zealand, I learned one thing,” he said. “We flew the longest routes of any airline around the world. So you start off with the proposition that customers don’t necessarily look forward to a long-haul flight. They’re looking at it with some trepidation, with some sense of potential boredom. Don’t assume that passengers inherently enjoy the process.”

That awareness “forces you to almost reinvent the critical trigger points, whether it is around food and beverage selection whether it is around movies on board, or whether it’s around the personnel space, legroom, and you use whatever time and imagination you’ve got” to improve the passenger’s experience, Sims explained.

One thing WestJet is unlikely to do anytime soon is join an international airline alliance.

Although it does have code share agreements with a long list of other airlines, including Delta, American and Emirates, Sims said there are good reasons for WestJet not to join such established alliances as Star or Skyteam.

“WestJet is in a superb position to choose our partners rather than have our partners choose us,” Sims said. “We’re nonaligned in terms of conventional alliances, and I would suggest that we would remain nonaligned. We’re not encumbered by complex loyalty schemes based on miles flown; ours is a spend-based transparent loyalty scheme.

“I think Canada remains a very attractive proposition for external airlines looking in, seeing one legacy carrier [Air Canada] firmly locked into established routes and staff. As a nonaligned airline we remain a very attractive partner.”

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