Blue skies for WestJet
It was all blue skies for Westjet in 2012, with a soaring share price and load factor, and a regional carrier waiting in the wings
CALGARY – When asked to choose one word that best sums up the past year for his company, WestJet CEO Gregg Saretsky replied promptly. “Momentum,” he said. It’s a fitting choice, considering the ride WestJet has been on for the last 12 months. When the airline wasn’t basking in the glow of climbing profits and record-setting load factors, it was making one headline-grabbing announcement after another. From its move to introduce a new “premium economy” seating category to the decision to launch regional carrier WestJet Encore, it’s been a year of growth for the Calgary-based airline.
And Saretsky believes 2013 will be just as interesting.
“There’s been a lot of building … A lot of it, as it comes toward the end of the year, is really a precursor to a lot of good things we’ll roll out in the first quarter,” he says.
Most significant is the launch of Encore, expected to come in the second half of 2013. The regional carrier will compete with Air Canada in smaller domestic markets and will start small. WestJet is taking delivery of only seven Q400 Bombardier turboprop planes in 2013. But communities across the country have been lobbying WestJet to consider them as regional destinations, and Saretsky says Encore will eventually have a coast-tocoast presence.
While Saretsky says he is confident Encore will be good for WestJet’s bottom line even in its first year of operation, he never underestimated the magnitude of the decision. That was part of the reason the company chose to take it to an employee vote.
“Our whole history, we’ve talked about WestJet being built on a simple business model — a single fleet, a single training program, a single maintenance program, a single set of parts,” he says. “Now all of a sudden we’re talking about having a second aircraft and it’s kind of, ‘whoa, hold on.’ … We took it to a vote, because I wanted to make sure we had a fairly strong following from WestJetters that this was a good idea.”
The sales pitch Saretsky made must have been effective, because 91 per cent of employees voted in favour of the regional airline plan. The company has committed to making Calgary the headquarters for its Encore operation and is expected to hire up to 1,800 people Canada-wide by the time the regional carrier reaches full deployment.
Another significant move made by WestJet in 2012 was the decision to retrofit its existing fleet to allow for “premium economy seating.” Passengers interested in paying extra for the seating category will get extra legroom, priority boarding and other amenities.
Since its founding nearly 17 years ago, WestJet has had a single, economy-class cabin. Saretsky says he understands why some people might see the creation of “premium economy” as a departure from the airline’s traditional, budget-friendly roots, but adds that’s not really the truth.
“We started in 1996 bringing affordable travel (to the masses) and revolutionized a friendly guest experience. When we launch premium economy next year, it will be the same friendly service from nose to tail and the same affordable fares in a different category — in business fares,” he says. “Other airlines that have a business class cabin, their fares are very high … We’re going to provide some amenities that we think business travellers will find very attractive and we hope to become the airline of choice for business travellers who are looking for something a little different.”
In 2012, WestJet flew with the lowest percentage of empty seats in the airline’s history, recording five consecutive months of record load factors. It also topped 9,000 employees for the first time and saw healthy gains in profits. For example, in the third quarter, WestJet profits were $70.6 million, up 80 per cent from the same period in 2011.
Saretsky says part of this success is due to the airline’s pursuit of code-share agreements, which give international carriers the ability to sell seats on WestJet flights. WestJet now has eight of these agreements, plus 22 interline partnerships, which allow guests to travel across multiple airlines with a single reservation.
“We saw revenues really skyrocket from people who are boarding WestJet planes with foreign passports — which is something we’ve never seen in the history of WestJet.”
So with such an eventful year in the books, where is WestJet headed? If “momentum” was the theme for 2012, what’s in store for 2013?
“We see continued growth,” Saretsky says. “We grew this year at about four per cent; next year … our growth will be closer to seven or eight per cent.”
With the launch of Encore, WestJet will begin connecting a network of smaller communities to its established hubs. That increased connectivity and the related revenues will allow the airline to look around for future growth opportunities. Saretsky won’t rule out the possibility of someday flying wide-body aircraft internationally.
“There’s no reason we shouldn’t be looking at all geographies …” he says. “It’s a potential, we haven’t made any decisions. But several years ago, we hadn’t made a decision to start flying the Q400 either. In our business, you’re always out there looking.”
All this means the WestJet of the future may look different from the upstart discount airline that began in Calgary 17 years ago.
“The airlines that don’t evolve die — the boneyard is filled with airlines that didn’t make it, and they were all, at one time, great carriers,” Saretsky says. “I think we can look at history and take hints from airlines that didn’t evolve and ended up in a bad place.”