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WestJet CEO plots bigger (or smaller?) fleet


CanadaEH

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Over the past year, Gregg Saretsky has kept analysts and aviation buffs guessing over the details of WestJet Airlines Ltd.(WJA-T11.760.131.12%)next major move.

But over lunch in Toronto, the WestJet chief executive officer tells me that the carrier is getting set to take one of the biggest steps in the company’s history. His plan calls for the Calgary-based airline to move beyond its fleet of Boeing 737s, the planes that have served as the airline’s workhorse since it launched operations in 1996, reliably transporting travellers across Canada, the United States, Mexico and the Caribbean.

Seating anywhere between 119 and 166 passengers depending on the model, the 737s are too big to profitably service smaller destinations in Canada and lack the range needed for transpacific and transatlantic routes.

“We’ve built out almost as much as we can the 737 footprint in Canada, serving all the markets within the mission range and capability of the 737,” he says, after settling into a booth at Alice Fazooli’s, an Italian restaurant in downtown Toronto. “We see the end of our ability to grow with the single-fleet type. We’re pretty much done with the 737s in Canada.”

Mr. Saretsky favours first acquiring smaller jets to expand WestJet’s domestic network, which in turn will pave the way in the long term for larger aircraft for overseas flights.

But for now, his priority is to transform the way Canadians fly to and from smaller centres, with potential non-stop service to “Middle Canada” – markets that are underserved or neglected. Air Canada and its affiliates already fly to some of the centres targeted by WestJet, but in many cases, travellers have to change planes to get to their final destination or board an 18-seat turboprop in their hometown.

“We need to fly into small communities, and if we bring airfares down, we can get a lot of travellers. You have to build out the home market first. I think of it as 737s, then some smaller planes and then ultimately something bigger,” he says.

The strategy is important to WestJet because, despite its name, it doesn’t even fly non-stop between the provincial capitals of Regina and Winnipeg. Travelling between those two cities requires a stopover in Calgary. With smaller planes, WestJet would be positioned to profitably do Regina-Winnipeg non-stop, and also spread its wings to new Canadian destinations such as Fort St. John, B.C., and Sarnia, Ont.

Although he has a slight case of jet lag after an overnight flight from Calgary, Mr. Saretsky is animated as he speaks about WestJet’s future and the sector in general. His past may have something to do with his enthusiasm. He fell in love with the industry while working as an Air Canada flight attendant for three summers in the early 1980s, and then joined CP Air, the predecessor to Canadian Airlines International, in 1985.

It’s safe to say, then, that Mr. Saretsky’s passion for planes – and the economics behind them – is the real deal. And it might explain why, if you shared his overnighter from Calgary to Toronto, you would have found him picking garbage out of the seat-back pockets of his flight after landing. “We all pitch in to clean the plane, and that saves us $12-million a year,” he says. “When everybody sees everybody else pitching in, it’s a pretty cool thing. I can’t begin to tell you how powerful that is.”

He talks about corporate culture during his light lunch of mixed salad, with balsamic dressing and pieces of Parmesan chicken. He explains that valuing employees is much more than a marketing ploy. Not only does it connect to consumers, he says, it encourages cost-saving ideas – even if it means having a cabinet full of pens unabashedly collected by employees from hotel rooms. WestJet is profitable enough to afford its own pens, but that thrifty attitude has persisted throughout its history.

more: http://www.theglobeandmail.com/report-on-business/careers/careers-leadership/the-lunch/westjet-ceo-gregg-saretsky-plots-a-bigger-fleet/article2287680/

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Come on CE, you can tell us the real, inside, scoop. We won't tell anyone. You guys gonna be the launch customer for the C-Series? Or maybe it's those Russian Embraer knock-offs? They'd be good in the cold at least. :wacko: I wouldn't recommend the Chinese version though - they're cheap to buy but you lose it all on the language classes for the pilots. :lol:

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Come on CE, you can tell us the real, inside, scoop. We won't tell anyone. You guys gonna be the launch customer for the C-Series? Or maybe it's those Russian Embraer knock-offs? They'd be good in the cold at least. :wacko: I wouldn't recommend the Chinese version though - they're cheap to buy but you lose it all on the language classes for the pilots. :lol:

I'm waiting to see the escalation of the Interjet train wreck as they take the delivery of their Russian RJ's......

:cool:

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If the mission is sub 500nm sectors between large cities and secondary/tertiary destinations (sub 100,000 population) then a jet of any size would be a mistake. The only reasonable jet choice would be the EMB170/175/190/195 line and the reality is that the smaller the EMB platform the higher the unit costs. You get range but range is not what WJ is looking for (unless they want to try a hub bypass strategy). It will be the Q400.

PD has proved that people will fly on them and the old Clive quotes disparaging turboprops were misguided, particularly in an era of $100 oil and new generation equipment. The only lingering question is whether to insource or outsource. My bet is insource due to culture and quality control.

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WestJet sets sights on Air Canada’s title

WestJet Airlines Ltd. (WJA-T11.760.131.12%)’s plan to add smaller planes to its fleet will position the carrier to challenge Air Canada (AC.B-T0.99-0.01-1.00%) for the top spot in carrying domestic traffic within five years.

WestJet

chief

executive

officer

Gregg Saretsky said in a year-end interview that WestJet will focus on acquiring smaller aircraft for neglected domestic markets before considering larger planes for routes to Europe and Asia in the long term. Plans call for Calgary-based WestJet to move beyond its single-fleet configuration of Boeing 737s – workhorses for the carrier since it launched in 1996.

On Sunday, industry experts said they were surprised by Mr. Saretsky’s comments and expressed optimism that WestJet will be able to tap into Canadian destinations neglected or underserved by Air Canada and its regional affiliate, Jazz Air.

WestJet’s

domestic

market

share could grow to 45 per cent by 2017 from its current 36 per cent if it carefully launches short-haul service within Canada with new aircraft, observers say.

“WestJet would have to chip away at Air Canada,” said Rick Erickson, an aviation consultant who heads Calgary-based RP Erickson & Associates.

In 2000, Air Canada had 77 per cent of the domestic market, while WestJet held just 7 per cent. But Air Canada decided to devote greater attention to its routes to the United States and overseas. By early 2011, the competitive gap had narrowed to a point where Air Canada’s domestic market share slid to 56 per cent and WestJet’s grew to 36 per cent. Porter Airlines Inc. and others had the remaining 8 per cent.

Air Canada declined to comment on WestJet’s plans.

If WestJet decides to order smaller planes by late 2012, the aircraft will likely start arriving by early 2014, positioning the airline to introduce service to smaller Canadian cities. The carrier has 97 Boeing 737s in its fleet, with another three of the jets to be added this year. The planes seat 119, 136 or 166 passengers, depending on the Boeing model.

On WestJet’s shortlist for smaller aircraft is the 70-seat Bombardier Q400 turboprop, a Canadian-built plane used by Toronto-based Porter. The Q400 is also flown on portions of Air Canada’s regional service through Jazz Air and Sky Regional Airlines Inc. at Billy Bishop Toronto City Airport.

Industry observers say WestJet will have an advantage over Air Canada-affiliated regional operators that don’t have the fuel-efficient Q400, such as Central Mountain Air, which flies older turboprops configured to seat 18 or 30 passengers. Also on WestJet’s shortlist is the French-Italian ATR 72 turboprop.

“The Q400 would be ideal as a regional airplane,” Mr. Erickson said. “But I still think the end play will be WestJet’s entry into the international arena in the longer term. That would be transatlantic routes for starters, and at some point, transpacific, and the connecting passengers from smaller Canadian cities could assist with that.”

Mr. Saretsky emphasized that no corporate decision has been finalized on whether to order larger or smaller planes, but he favours nurturing the home market first. He cited examples of new destinations that could benefit from a WestJet expansion: Cranbrook, Prince Rupert, Fort St. John and Dawson Creek in British Columbia; Lethbridge, Alta.; Saguenay, Que.; and Sudbury, Sarnia and Timmins in Ontario.

Karl Moore, a professor at McGill University’s Desautels Faculty of Management, said Mr. Saretsky understands the challenges because he worked at Seattle-based Alaska Airlines Inc. It flies Boeing 737s, but its affiliate, Horizon Air, operates Q400 turboprops.

“Certainly, you can see the success of the Q400 for thinner routes,” Prof. Moore said. “If you can have a plane that better matches the volume of passengers, it would be a winner.”

For WestJet, the key will be to selectively add domestic routes while overcoming the complexity of training pilots and having new aircraft parts on hand for the smaller aircraft, he said. WestJet will be able expand with new planes, but “it’s getting away from the business model of simplicity with the Boeing 737.”

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I'm waiting to see the escalation of the Interjet train wreck as they take the delivery of their Russian RJ's......

:cool:

Since neither Interjet nor Volaris is publicly held, nobody on the street knows how either carrier is making out. Rumor in Mexico has it that Volaris isn't doing all that well. That could well be nonsense, but if you're still a Volaris insider, can you comment? Either way, Volaris' reputation down there isn't as good as it used to be.

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Industry observers say WestJet will have an advantage over Air Canada-affiliated regional operators that don’t have the fuel-efficient Q400, such as Central Mountain Air, which flies older turboprops configured to seat 18 or 30 passengers. Also on WestJet’s shortlist is the French-Italian ATR 72 turboprop.

“The Q400 would be ideal as a regional airplane,”

I love industry insider comments like that one. An advantage will be gained from operating newer Q400 aircraft against older 18-30 seat aircraft. Somehow the idea of the larger dash 8 aircraft operating on flights where the right aircraft for the route has been a 18-30 seater seems somewhat optimistic in this sort of economy. Stimulating demand through lower fares is likely to be much harder then this comment points out.

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Industry observers say WestJet will have an advantage over Air Canada-affiliated regional operators that don’t have the fuel-efficient Q400, such as Central Mountain Air, which flies older turboprops configured to seat 18 or 30 passengers. Also on WestJet’s shortlist is the French-Italian ATR 72 turboprop.

Yup, nice "spin". I'm sure that Air Canada's marketing is getting ready to announce that their "right-sized" aircraft is actually more efficient or maybe they'll go with the "We Gots More Frequency than the other guy!" angle. Which is true? Well. I sure don't know. :huh:

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I'll be happy when the news organizations stop wasting their money quoting two people who have the most generic and uninformative statements in Canada. There must be smarter people out there than Erickson and Moore.

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I'll be happy when the news organizations stop wasting their money quoting two people who have the most generic and uninformative statements in Canada. There must be smarter people out there than Erickson and Moore.

This times a million. Erickson especially is a self promoting blow hard.

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Since neither Interjet nor Volaris is publicly held, nobody on the street knows how either carrier is making out. Rumor in Mexico has it that Volaris isn't doing all that well. That could well be nonsense, but if you're still a Volaris insider, can you comment? Either way, Volaris' reputation down there isn't as good as it used to be.

Can't comment for that very reason, other than to say that I'd far rather be involved with Volaris than interJet.....

B)

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Can't comment for that very reason, other than to say that I'd far rather be involved with Volaris than interJet.....

B)

Np, and thanks all the same.

What I have heard a few times is that Volaris is finding its routes to the US to be a hard slog since AM offers a higher level of service, the US carriers offer FF bennies, and Volaris' fares are usually no less expensive. Interjet, watching this, has thus far held off on expansion to the US (though I hear they're going to try their luck on one or two routes), and has instead decided to focus on Mexico, Guatemala and Cuba. Are you able to comment on that? Pardon my curiosity, but since neither company publishes financial data there's almost nothing to read about commercial aviation in Mexico, and things there have gotten interesting since MX's demise.

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I am flying LAX-YYC on Air Canada very frequently these days which almost without fail boards next to Volaris in T2 and those A319's appear to be going out full.

Concentrating on Guatemala and Cuba would be a bit like WJ concentrating on Red Deer, Penticton and Brandon.There are bigger fish to fry.

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The other great thing about sitting there is watching the Americans mutter about the affluent Mexicans with mountains of iThings and coach bags who seem well represented at the gate. "Well that's where I jobs went, I tell you what!"

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Is this the point at which conventional airline style troubles begin for WJ?

That trouble might be described as; the apparent institutionalized need for perpetual corporate ‘growth’?

WJ does a very good job doing what it does today. Why mess with that success? Wouldn’t a fresh start with a separated, single type operation under a common umbrella keep the complicating issues out and the combined operations simple and profitable?

I offer the above knowing, there are those that cling to the belief that positive synergies will be identified and realized through a ‘larger’ operation.

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Is this the point at which conventional airline style troubles begin for WJ?

That trouble might be described as; the apparent institutionalized need for perpetual corporate ‘growth’?

WJ does a very good job doing what it does today. Why mess with that success? Wouldn’t a fresh start with a separated, single type operation under a common umbrella keep the complicating issues out and the combined operations simple and profitable?

I offer the above knowing, there are those that cling to the belief that positive synergies will be identified and realized through a ‘larger’ operation.

In most case I'd say that you would be right about this being the "start of the troubles" but in Westjet's case I think the corporate and employee culture is strong enough to make it work. I really hope that Westjet keeps the expansion inhouse and that it's successful. Maybe they can show some other companies (mine included) how to make it work - I hate the sub-contract, farm-it-out, CPA, commercial agreement direction the industry seems to be stuck with.

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Guatemala, Cuba, and the Mexican domestic market.

Volaris is doing very nicely in the domestic market.

You will note a recent purchase of Airbus jets, announced shortly after Spirit's order. It's not difficult to join the dots here.

B)

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My Nephew flies for West Jet. Over Christmas he told me they were looking at Q400's but the company wanted to set it up as a separate identity, not sure if the West Jet pilots association is too keen on the idea.

I've heard WJ has a plan for an internal structure but that WJPA was cold on the idea and wanted it as a separate entity if it moved forward. I'm having a hard time thinking that those who came from Regional / Jazz and spent plenty of time fighting for common employer status would want it that way, but that's some of the chatter going around.

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Welcome to the jungle. WJ cannot stand still and this type of growth through fleet and business diversification is going to attract all sorts of new issues that the competition has had to deal with for years. Good luck :biggrin1:

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"What sort of "issues"? If things are done in-house and/or from the ground up instead of through mergers and acquisitions I think a lot of those "issues" can be avoided."

Although a significant isssue; pilot labour concerns aren't the only source of tribulation that corporate growth will produce.

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