Westjet might never fully recover
CEO confident to survive COVID-19, unsure of fleet’s size in years ahead
The effect of COVID -19 on Westjet has been so devastating that the company may never return to its pre-pandemic size, CEO Ed Sims said Tuesday.
In an exclusive interview with Postmedia, the head of the Calgary-based airline said the unprecedented collapse in demand for air travel as a result of the virus means
Westjet must decide what size of fleet will be commercially viable for the next several years.
“We might not be our previous size for a long time, if ever,” Sims said. “We just might not get back there.”
Still, Sims said he has “unequivocal” confidence that Westjet — which prior to the pandemic had 14,000 employees and flew to more than 100 destinations in 24 countries — will survive COVID -19 and be a part of Alberta’s eventual economic recovery. He said the airline has a capable team, the solid backing of its owners (Toronto-based Onex Corp.), and the assurances of the federal government.
“In one conversation I had with Prime Minister Justin Trudeau, he said to me that the federal government is committed to Westjet flying Canadians for many, many years to come, and I take a lot of comfort and solace from that statement,” Sims said.
Before the pandemic, Westjet had been a bright spot in the Alberta
economy. While many of the province’s other major employers contracted as the price of oil declined, Westjet has spent much of the past five years in aggressive expansion mode, building out its network in preparation for the launch of its Boeing Dreamliner program last year. Before COVID -19 hit, Westjet was using those state-of-the-art planes to fly its first transatlantic routes to London-gatwick, Paris and Dublin — and had planned to launch a direct flight from Calgary to Rome this month.
But COVID-19 has severely clipped Westjet’s wings, forcing it to suspend all commercial transborder and international flights. Of the company’s 185 aircraft, 131 have been parked. More than half of its employees have been temporarily furloughed. And Sims said Westjet is considering whether it will have to defer or cancel future scheduled deliveries of the Dreamliner.
“It’s utterly disheartening and dispiriting,” he said. “It’s very hard to see something that you’ve built so carefully and thoughtfully over the last four or five years dismantled.”
As a private company, Westjet has not made public the extent of the financial losses it has taken. (Competitor Air Canada, which is publicly traded, said its own losses topped $1 billion last quarter.)
However, Westjet has been operating in crisis mode since March 1, when bookings began to “fall through the floor” with the increasingly dire news reports out of China and Italy. Sims said in the worst days of early March, when cancellations were outstripping new bookings and before the airline made the decision to temporarily furlough half its staff, Westjet was burning through cash at a rate of about $25 million per day.
Westjet has been able to access the Canada Emergency Wage Subsidy program, which provides a 75 per cent wage top-up for eligible employers, to keep many of its furloughed employees on the payroll — even though there is no work for them to do. But that program expires in early June, making its renewal Sims’ first priority in what he says are “daily” conversations he is having with the federal government.
Westjet is also seeking federally backed credit support to help the airline maintain liquidity until the worst of the crisis is over.
“We are not looking for taxpayer cash,” Sims said. “We are looking for a facility … that would essentially give us the peace of mind to know that if this goes on for another three months, six months, 12 months, that we can continue to operate.”
Sims said he doesn’t expect a recovery in air travel demand until the fourth quarter of 2020, in time for the critical holiday season. But even then, he doesn’t anticipate business to return to normal. While domestic air travel will likely recover first, followed by transborder travel, international travel to Europe and beyond will take longer, he said.
The uncertainty around when exactly Canadians will feel comfortable travelling to Europe is why the company’s Dreamliner expansion plans are now up in the air, Sims said. (Westjet originally planned to take possession of a total of 10 Dreamliners by 2021, with an option to buy 10 more).
“We have to be very conscious that these are very, very expensive pieces of equipment and no one is served by having expensive equipment sitting on runway aprons instead of operating,” Sims said. “It’s a consideration, not just for the 787 but for broader aspects of our fleet.”
Still, Sims said at the very least, he wants to resume flying to Westjet’s original four European destinations — London, Paris, Dublin and Rome — as soon as it is safe to do so.
“As soon as I see positive signs of demand, and signs of encouragement in Europe that they are now actively containing the spread of the virus, then I want to get back to a position of operating those 787s out of Calgary,” he said. “I firmly believe that we will be a critical part of Alberta’s recovery.”