WestJet has a radical — and risky — plan to get you on its planes
Bloomberg News
Out in western Canada, the airline world is about to watch a unique business experiment. If it goes as planned, in a few years there will be a new favourite carrier battling for your airfare dollars, regardless of whether you’re a penny pincher or a rich banker.
WestJet Airlines Ltd., which flies Boeing Co. 737s in Canada much the same way Southwest Airlines Co. does in the U.S., is embarking on a radical shift to become a global-network airline, replete with fancy foods, plush beds up front and nine new, spiffier airport lounges and many more top-dollar business customers. Simultaneously, it’s launching an ultra-low-cost airline called Swoop to pursue those with the smallest budgets.
This “high-end, low-end” strategy comes as airlines the world over struggle to combat the grand ambitions of lower-cost rivals. The response has largely been defensive, with new fare classes or new airlines that have lower cost structures.
WestJet had a different idea. Next June, the carrier will debut no-frills Swoop, which is modeled on ultra-low-cost carrier Ryanair Holdings Plc. Swoop is squeezing 189 seats onto its 10 Boeing 737-800s, which is 21 more seats than WestJet flies on the same airplane. It’s simultaneously preparing for the first of 10 new Boeing 787-9 Dreamliners, which arrive in January 2019, to fly to Europe and Asia, with options for 10 more of the large planes.
WestJet’s attempt to strengthen its position comes amid a collective bargaining push by employees. In May, its pilots voted to unionize, as did pilots at its regional carrier, Encore, five months later. Multiple unions are looking to organize other groups at WestJet, including flight attendants and mechanics. These efforts are likely to mean higher labour costs. With that threat hanging over its bottom line, not to mention the cost of long-haul flights, the planned expansion with Swoop and long-haul jets could endanger what is currently a profitable franchise.
WestJet executives, who are quick to boast of 50 consecutive quarters of profit, said they’re not worried.
“We just got to the point where the single brand can no longer fulfill all of the missions,” Chief Executive Officer Gregg Saretsky said Wednesday, during an investor presentation. He acknowledged the skeptical feedback his airline has received over Swoop: “Many people are scratching their heads and wondering if that will work.”
“We’ve heard concerns about execution and our ability to successfully move upmarket and downmarket at the same time,” he said.
Categorised in: Canadian News