WestJet delays launch of ultra-low cost carrier to next summer
WestJet Airlines says it is making progress on its plan to start Canada’s first ultra-low cost carrier (ULCC), but that it is pushing the targeted launch back from late 2017 to summer 2018.
“Since our initial announcement, we have undertaken numerous steps on our action plan to the prepare for the launch of the ULCC, including establishing the core leadership team, applying for an air operator’s certificate, and addressing initial regulatory requirements,” the company said in its second-quarter report released Tuesday.
“We expect to announce the initial flight schedule in early 2018 with service expected to commence in the summer of 2018 on a fleet of ten high-density Boeing 737-800s.”
The company initially announced in April that it planned on introducing a ULCC in Canada by the end of year, part of its expansion strategy that will see the company look for growth in both the ultra-low-cost and long-haul segments.
WestJet chief executive and president Gregg Saretsky said the delay was in part because the company wanted to avoid having to reconfigure the 10 Boeing 737-800 jets it will be using for the ULCC during the peak travelling season.
“Those aircrafts will now be reconfigured next spring …. They would have been done over the Christmas holiday period to be
Until you get the operating certificate, you’re sort of in limbo and it’s challenging to launch.
available for flying revenue service in January, and we’d rather not take that hit to capacity during a very strong time of year,” he said in a conference call with analysts and reporters Tuesday.
WestJet said it is hiring employees for the ULCC and plans on moving staff to a separate location during the first quarter of the following fiscal year. The airline also plans on using an older reservation system that Saretsky said is “perfectly suited for point-to-point low-cost travel and has significantly lower transaction costs.”
Saretsky said the company hopes to receive its air operators certificate for the ULCC in the first quarter of next year.
“Until you get the operating certificate, you’re sort of in limbo and it’s challenging to launch. It’s an extremely complicated, very technical process,” said AltaCorp Capital analyst Chris Murray.
In May, WestJet pilots voted to unionize, which some analysts said could create roadblocks in the company ’s growth plans. However, Saretsky said the ULCC service will be separate from the union efforts at WestJet.
Saretsky expects negotiations with the Air Line Pilots Association, an international pilots union representing WestJet pilots, to be a lengthy process that could take years. “We’re one of the largest non-organized enterprises in the country. We’re a very attractive target but ultimately it will be up to WestJetters to decide whether or not they prefer all the benefits and privileges they have as owners, or if they want a third party to get in the middle” he said.
While Canada has had its share of low-cost airlines — WestJet itself began as a discount airline and Air Canada has seen success with its Rouge brand — ULCCs, which offer extremely low fares but no frills, have struggled to get off the ground.
Part of the strategy in keeping airfares so low includes fees for things that are often part of ticket price — including carry-on luggage stored in overhead bins.