WestJet‘s journey started more than twenty years old. The airline is now the second biggest airline in Canada and has established itself as a key player for domestic, transborder / U.S., and Caribbean passenger traffic. The airline has ambitious plans to expand further with a new ultra low cost airline and a bigger international footprint. This multi-part series showcases the airline, its goals, competition and opportunities.
Part 1 of the series provides an overview of the company, its latest financials and current route network.
WestJet was founded by Clive Beddoe, David Neeleman, Mark Hill, Tim Morgan and Donald Bell based on the low cost business model successfully executed by Southwest Airlines. The airline started operations in February 1996. It avoided direct competition with the Montreal based Air Canada by serving western Canadian destinations initially with Boeing 737-200 aircrafts.
Its main revenue streams are sourced from a combination of flying and non-flying activities. WestJet and and its subsidiary airline WestJet Encore reported carrying almost 22 million passengers in 2016. This translated into CDN$3.557 billion in revenue (essentially even from 2015). In addition, non-flying activities from its vacation, cargo and credit card units contributed another CDN$0.566 billion (up a robust 19.9%). In total, total revenue hit a record high at CDN$4.133 billion (up a modest 2.3%).
As a company, expenses amounted to CDN$3.683 billion (increase of 6.5% and outpaced revenue growth). This contributed to a net adjusted earnings of CDN$0.295 billion (down 24.3%) and an adjusted net earnings margin of 10.1% (down 2.8%).
What is a Low Cost Carrier?
WestJet operated as a low cost carrier from its inception. Some key differentiation between a full service carrier (e.g. Air Canada) and a low cost carrier include:
- Common fleet type to reduce maintenance and operating costs – WestJet and WestJet Encore only operate 3 types of aircrafts – Boeing 737 (domestic, transborder/U.S., international), Boeing 767 (Canada – London) and Bombardier Q400 (domestic and U.S.).
- One seat type – up until the introduction of international service to London’s Gatwick International Airport (LGW), the airline only has economy seats on board. The London service introduced a premium economy type service which includes free meals.
- More ancillary service options (e.g. passengers pay more for advanced seat selection, additional baggage allowance, and flight changes)
- Limited complimentary food options (e.g. passengers are provided with complimentary beverages on most flights but most food options are not included in the ticket prices)
- Fares are calculated per one way basis (i.e. passengers are not required to buy a roundtrip ticket)
Current Route Network / Fleet
WestJet operates flights (mainline and Encore) to over 100 destinations in 19 countries in North America, Central America and Europe. It has hubs at the following key Canadian airports with the biggest operation in Calgary:
- Toronto Pearson International Airport (YYZ) – ranks 1st in Canada
- Calgary International Airport (YYC) – ranks 3rd in Canada
- Montreal Pierre Trudeau International Airport (YUL) – ranks 4th in Canada
WestJet entered its first interline partnership (i.e. baggage handling) with China Airlines in 2005. Since then, the airline followed with more extensive codeshare agreements with the following 17 airlines. They are split mostly between the SkyTeam and oneworld airline alliances which expanded WestJet route network further into the United States and Western Europe. Additional destinations in Asia/Pacific, South America and the Middle East filled out the airline’s route map. There are no announced plans for the airline to join any alliances currently.
|Cathay Pacific Airways||oneworld|
|China Eastern Airlines||SkyTeam|
|China Southern Airlines||SkyTeam|
|Delta Air Lines||SkyTeam|
|Hainan Airlines||No affiliation|
|Korean Air Lines||SkyTeam|
|Philippine Airlines||No affiliation|
In 2016, WestJet operated a mix of 153 aircrafts narrowbody and widebody aircrafts (Boeing 737, 767 and Q-400). In its annual report, the airline has plans to expand this fleet further to 190 by 2027 (up 24%). Additionally, it announced plans in May 2017 to buy 20 widebody Boeing 787 aircrafts with delivery between 2019 to 2024 for international expansion which will create a fleet of 210 aircrafts overall.
Part 1 provided an overview of WestJet’s general operations, its latest annual financials, the low cost business model and the airline’s route network/fleet. The next part of the series will focus competitive analysis and the idea of forming a ultra low cost carrier.