WetsJet gets prepared to challenge its archrival Air Canada
Calgary - WestJet develops a new business model to be at the forefront of the Canadian aviation market. The airline gets prepared to challenge Air Canada and wants to be the first address for the economy and business travelers.
A new premium concept provides long-hauls with a fancy fare, cuddly beds, nine new chic airport lounges and many other high-priced extras.
WestJet also prepares to launch an ultra-low-cost airline called "Swoop" in 2018 to win small-budget customers.
Offering the low-end and high-end product range at the same time for different customer profiles is the result of highly competitive market environment So far, traditional airlines remained more defensive and responded rivals with new tariff classes or new offshoots with cheaper cost structures. So what is different about WestJet?
In June 2018, WestJet will launch its low-cost subsidiary "Swoop." Swoop will squeeze 189 seats into its ten Boeing 737-800s - 21 more than those WestJet installs in the same aircraft of the parent fleet.
In October 2017, WestJet received its first Boeing 737 MAX. By 2027, a total of 50 737 MAX will complete the fleet. They are equipped with 174 seats.
At the same time, Westjet is preparing for the commissioning of the first of ten Boeing 787-9 ordered. The Dreamliner will fly to Europe and Asia from January 2019. The company has the option for another ten Dreamliner for Swoop.
WestJet's offensive market strategy coincides with the push of its workforce to position itself as a negotiating partner with the airline. In June 2017, WestJet pilots voted in favor of unionization.
Many unions are in the process of uniting the other employee groups at WestJet, including the flight attendants and the mechanics. WestJet has to budget rising labor costs.
These omens, along with the higher costs of long-haul flights, could seriously shake WestJet's current profitable model. But the executives are not scared of it. They point to 50 consecutive quarters in which WestJet has made the profit.
We have just reached the point where a single brand can no longer fulfill all our missions,said WestJet CEO Gregg Saretsky during a presentation to investors.
Saretsky knows the failures of large US airlines, who wanted to stop the advance of low-cost airlines with their own low-cost suppliers.
Back in 2000, Delta Air Lines founded "Song" to defy JetBlue. United Airlines had a low-cost airline called "Ted." No airline flew much cheaper than its parent company, and both retired after five years.
The WestJet managers are therefore taking another model as an example: Jetstar Airways of Melbourne, which founded by Qantas 13 years ago to compete against its low-cost rival Virgin Blue (now Virgin Australia).
Jetstar flies independently of Qantas in Australia and New Zealand and has helped Qantas serve the less lucrative travel destinations in the market.
WestJet plans "Swoop" mainly for domestic flights. The cost is said to be 40 percent lower than that of the parent company and only 0.1 cents above the average of 5.9 cents per mile seat cost that the three largest US budget airlines fly.
Swoop is designed to enrich the WestJet network and not destroy it,Executive President, Commercial for WestJet Edward Sims describes the vision.
In the US, the three large all round service airlines are also trying out the "high-low" strategy without founding new subsidiaries. They put all passengers on a plane, economy, economy premium and business.
Some airlines now divide passengers into five different fare classes in just one plane. The goal is to leave as few passengers as possible to the rivals such as Spirit Airlines and Frontier. This is a big U-turn because until recently, those companies declared that their target group is quite different from that of the budget airlines.
In Europe, the global giants have set themselves up with new cheaper airlines: Air France-KLM with "Joon," IAG started flights with "Level" across the Atlantic and Lufthansa to expand the network of Eurowings across the Atlantic - especially in the US.
This trio tries to attract budget-conscious travelers with new brands and not to lure them with adjustments to their proven brands.
Despite these attempts, many experts in the industry see great risks in the trend of willing to serve all segments. The proverbial "Everything for Everyone" strategy has a mixed track record.
Of course, the changes at WestJet are not coming from anywhere. The airline responds to the threats coming from the rivals such as Air Canada and its low-cost subsidiary "Rouge."
Analysts say that the plans of WestJet quite a chance despite the company believes "Swoop" to be profitable from the start.