WestJet bullish about Swoop, global strategy
CEO touts new ultra-low-cost carrier as ‘competitive weapon’ for airline
WestJet Airlines’s chief executive said Tuesday he is confident in the airline’s ambitious strategy to expand internationally while launching an ultra-low-cost carrier despite some analysts’ concerns.
The airline announced Tuesday it expects its total fleet capacity to increase between 6.5 and 8.5 per cent next year, a jump from the six-per-cent capacity growth it expects for 2017.
The fleet expansion will largely be driven by new Boeing 737-MAX jets, reconfigurations that will add more seats to existing planes, as well as the launch of Swoop, Westjet’s new ultra-low-cost carrier scheduled to start flying next summer.
“We are reconfiguring our airplanes, we are spending money on product, we’re going after business travellers and having great success,” CEO Gregg Saretsky said in a quarterly conference call with analysts on Tuesday.
He also said the company is “generally supportive” of joint ventures and is in regular talks with its U.S. partners, Delta Air Lines and American Airlines, about how to add more value to their partnerships.
“Is there a point in time where favouring one partner over the other becomes something that we want to pursue? Those are all things that are in the hopper for discussion,” Saretsky said.
WestJet posted a 20-per-cent profit increase in the three month period ending Sept. 30, with net earnings jumping to $138.4 million in the quarter from $116 million last year, after flying a record number of passengers.
Diluted earnings per share increased to $1.18 from 97 cents previously, up nearly 22 per cent. Revenues also grew eight per cent to $1.2 billion this year compared to the same period last year.
While the company plans on announcing further details about Swoop in early 2018, including which destinations the ULCC will fly to, Saretsky said ancillary fees on Swoop will be similar to that of American ULCC’s.
“We’re about $19 a guest on mainline operations and I would expect we should be able to get (twice) that on Swoop,” he said.
WestJet’s vice-president of commercial operations Ed Sims said the carrier will be a “competitive weapon” for the airline.
“The advantage we have clearly through Swoop’s low fares is that it will be the weapon we will use for the competitive discount, and limit the impact that (competitive activity) has on WestJet.”
The airline reiterated that Swoop will remain distinct from WestJet’s mainline operations, with separate employees and check-in counters at airports. Saretsky also said there will be no interline connectivity between Swoop and WestJet, meaning that passengers hoping to catch a WestJet flight after flying on the ultra-low-cost carrier will have to pick up their luggage and re-check it before boarding.
Some analysts remain concerned about WestJet’s risk, given the multi-pronged strategy.
“With the launch of new ULCC Swoop, a major wide-body international expansion (and associated capex) starting in 2019, and WestJet’s ongoing growth in its core operations, we are concerned the airline has too many new strategic initiatives underway simultaneously, which could impair successful execution,” National Bank analyst Cameron Doerksen wrote in a note to clients.