Jump to content

WestJet to launch ULCC???


internet

Recommended Posts

6 minutes ago, Super 80 said:

It makes perfect sense until you have squandered it.

What sorts of moves have you seen an airline make that they could realistically have avoided in order to preserve their "brand" if they wanted to remain profitable while RASM is declining all over the place?  

Link to comment
Share on other sites

  • Replies 113
  • Created
  • Last Reply
6 minutes ago, Super 80 said:

Ancillary revenue fetishism was invented on Wall Street. Airlines in North America haven't enjoyed greater pricing power or been protected by greater barriers to entry in a generation.

The concept of using ancillary revenue to generate profit looks to me as if it was invented by Ryanair and their ilk.  Their model works far better than Alitalia's does.

If airlines have all this pricing power, how is the drop in RASM explained?  I think that carriers like Spirit, WOW and Norwegian have a lot to do with it, and they seem to be able to expand wherever they want.  Legacy carriers would have pricing power if people were willing to pay more for a legacy product ("brand"?), but I don't think that many travellers are.

Link to comment
Share on other sites

If anyone invented it, it would have been the cable and telephone companies decades ago.

Deltaflot and Parkerflot are both growing their RASM. Unitedflot isn't and that is the very least of their problems.

RASM exists in a balance between demand and capacity, in the service of RASM the US carriers have been slowing the growth of capacity. Deltaflot won't shut-up to analysts about how disciplined they're being.

People aren't generally willing to pay more for a legacy's economy seat because they destroyed their brands decades ago and are offering a hard and soft product that is similar or inferior to Southwest or JetBlue. Hell I think I would rather stay home than experience Air Canada's economy offering on the 777 and 787.

I don't think the ULCCs in North America have a whole lot to do with anything, they go for the low-hanging fruit with a minimal effort.

Link to comment
Share on other sites

55 minutes ago, Super 80 said:

People aren't generally willing to pay more for a legacy's economy seat because they destroyed their brands decades ago and are offering a hard and soft product that is similar or inferior to Southwest or JetBlue. Hell I think I would rather stay home than experience Air Canada's economy offering on the 777 and 787.

And yet JetBlue is finding that offering a product that is arguably better than what one gets on a legacy carrier today isn't working since people aren't willing to pay a premium for it.  JetBlue recently started charging for checked baggage and is adding seats to its cabins.  They cited low RASM for Q1 2017 results that were poor compared to what they earned in Q1 2016.

I'm with you on the economy offerings of most airlines on their new or reconfigured fleets, but if the travelling public believes they have a God-given right to fly overseas today for considerably less than they'd have paid 30 years ago they aren't going to get luxury.  Preferred seating, premium economy and business class offerings are available on most carriers.  One can always pony up.

 

Link to comment
Share on other sites

I know a lot of people who will only fly AC.  I also know a lot of people that will only fly WJ.  I know some that will fly neither.  There is a lot of brand loyalty out there especially among the business class crowd.

 

Link to comment
Share on other sites

From the April 27th Calgary Herald

WestJet’s new plans may spike union drive: experts

No-frills airline announced as pilots and flight attendants ponder representation

There are concerns about deteriorating conditions for pilots. It’s not just about wages.

WestJet’s plan to launch an ultralow-cost carrier in Canada could stoke union sentiments among employees concerned about wages and working conditions, experts say.

AL CHAREST WestJet has announced plans to launch a discount airline just as two employee groups are in the throes of union drives.

The Calgary-based airline, which announced last week it would launch a no-frills carrier to serve “price sensitive” travellers before the end of the year, has been nonunionized since its first flight in 1996. However, two separate union drives targeting flight attendants and pilots are currently underway at the airline, with the pilots expected to formally vote on unionization in May.

The Air Line Pilots Association (ALPA) — the international union that represents pilots at 32 airlines across North America, including Air Transat and Jazz Aviation — is behind that vote, having announced last week that pilots at WestJet had formally filed membership cards with the Canada Industrial Relations Board.

ALPA did not respond to a request for comment about WestJet’s ultra-low-cost carrier plans, but the internal group seeking to unionize the company’s flight attendants said in a Facebook post that the prospect of a no-frills carrier highlights the “urgent need for unions and job security” at WestJet.

“WestJet’s announcement that it plans to start an ultra low-cost carrier (ULCC) shows how important it is for WestJet flight attendants to have an independent union negotiating job security, work rules and compensation,” the WestJet Professional Flight Attendants Association said. “By applying to join ALPA our pilots have taken the first step to protect their careers and economic interests — it’s time that flight attendants did the same.”

Though many passengers have embraced ultra-low-cost carriers like Europe’s Ryanair, leading to the proliferation of no-frills airlines around the globe in recent years, critics say the business model puts airlines in a race to the bottom.

In addition to squeezing more passengers onto the plane and charging extra for niceties like carry-ons and sodas, one of the secrets of success for ultra-low-cost carriers has typically involved implementing a lower wage structure.

David Camfield, associate professor of labour studies and sociology at the University of Manitoba, said WestJet pilots are probably concerned about what their employer’s latest venture means for them and their profession — and that could have repercussions for the company with a unionization vote looming.

“It might tip more pilots to vote yes,” Camfield said. “It all needs to be put in the context of what is happening in the broader industry ... And I think in general there are concerns about deteriorating conditions for pilots. It’s not just about wages; it’s about schedules and all kinds of other things.”

AltaCorp Capital analyst Chris Murray said he thinks there is a market for an ultra-low-cost carrier in Canada, but for WestJet to be successful, it won’t be able to stick to the status quo.

“I would expect a different wage scale, maybe not a lower wage scale, but probably very different work rules,” Murray said. “There’s probably a lot of confusion and concern (among employees) about the changes this may mean for WestJet. And that’s a very fair reaction you would expect. Having said that, I still think this is probably strategically one of WestJet’s better ideas.”

In an email, WestJet spokesperson Lauren Stewart said the airline would not speculate as to what factors could impact the upcoming pilot unionization vote. But she said the company’s plan to launch an ultra-low-cost carrier is dependent on getting the go-ahead from its pilots, who are currently represented by an employer-sanctioned, in-house employee group.

The upcoming vote marks the second formal unionization attempt in two years at WestJet. Pilots voted ‘no’ to union representation in 2015.

Link to comment
Share on other sites

16 hours ago, FA@AC said:

And yet JetBlue is finding that offering a product that is arguably better than what one gets on a legacy carrier today isn't working since people aren't willing to pay a premium for it.  JetBlue recently started charging for checked baggage and is adding seats to its cabins.  They cited low RASM for Q1 2017 results that were poor compared to what they earned in Q1 2016.

I'm with you on the economy offerings of most airlines on their new or reconfigured fleets, but if the travelling public believes they have a God-given right to fly overseas today for considerably less than they'd have paid 30 years ago they aren't going to get luxury.  Preferred seating, premium economy and business class offerings are available on most carriers.  One can always pony up.

Other than the fact JetBlue's NYC based customer facing staff are somewhat less belligerent than the norm they aren't really, unless you're going to pillage their self-serve snack bar. JetBlue announced bag fees in November 2014 along with increased density because Wall Street was demanding it.

JetBlue at the moment is embarking on the exact same strategy Delta is, tapering capacity growth to support RASM. They will be able to do that successfully at JFK but if they have truly decided they're going to take on Southwest and Alaska-Virgin on the west coast that will be difficult to impossible as they fly half empty Embraers up and down the west coast for the next five years.

That business class and premium economy exist doesn't really matter, the carriers that offer that can absolutely demand a premium for that. But the experience that roughly four hundred pax are going to have on Air Canada's Slaveships is not enhancing their brand or reputation and no better than what Air Transat offers. You can blame that on the pax, I don't really care either way, but don't get touchy when there are hundred and sixty five page diatribes on FlyerTalk.

Link to comment
Share on other sites

47 minutes ago, Super 80 said:

But the experience that roughly four hundred pax are going to have on Air Canada's Slaveships is not enhancing their brand or reputation and no better than what Air Transat offers.

That's more or less my point.  The travelling public are getting what they have voted for with their purchasing decisions.  Most travellers accept it for what it is or pay a bit extra for bigger seats or better service.  It can be amusing to read whining from people who paid USD $500 (probably only about half of which ended up in the airline's pocket) rt to fly from the USA to DXB about how they weren't treated like royalty or given a free upgrade, but beyond that I don't think airline managers much care about what is written on Flyertalk.

Why they pay consultants are marketing executives to lecture us endlessly about "brand" is beyond me.

Link to comment
Share on other sites

26 minutes ago, FA@AC said:

Why they pay consultants are marketing executives to lecture us endlessly about "brand" is beyond me.

And that is my point, once you have squandered "brand" it is quite natural to perceive no value in it. But what puzzles me is that WestJet retains an incomprehensible amount of irrational public goodwill doesn't seem terribly interested in retaining it. Yet the last time I was at the WestJet campus all anyone was talking about was the brand. And the ULCC boogie man, that too.

Although what I find really funny is the sheer amount Air Canada invested in the Rouge brand, which was to be a "trendsetting lifestyle brand" as they prepared to unleash the worst economy product yet seen in North America at that time.

Link to comment
Share on other sites

Rouge was about installing a B-scale. Any talk about the brand was and is a distraction from the real purpose of the concept. It also provided cover for the densification of the cabin, which could have happened without a new operating certificate and all the duplication that involved. Westjet's ULCC will be no different. Most of what is referred to as labour relations involves coming up with ways to divide the group such that they will fight amongst themselves rather than with management. 

Link to comment
Share on other sites

8 hours ago, Zan Vetter said:

Rouge was about installing a B-scale.

Just as Tango was about introducing buy on board food service to the masses who had only ever received free everything with their AC tickets. Buy on board has morphed into what we have today at AC, thanks to Tango. I don't think AC could have simply turned the taps off of the all-inclusive tickets without weening people of it first with Tango, then Tango fares...

Link to comment
Share on other sites

1 hour ago, moeman said:

I don't think AC could have simply turned the taps off of the all-inclusive tickets without weening people of it first with Tango, then Tango fares..

Tango was a bigger revelation to employees.

Even though Econair (memory might have failed me here for the correct name) had preceded Tango by a couple of decades, it demonstrated to the marketing and other head office types that people would accept less if there was a dollar savings to them.

The biggest revolution was showing that all of the good attributes of Tango could be garnered by Tango as a fare class and not required to be a separate aircraft. The discussions in headquarters were muted because Robert Milton was behind the venture but in the dark corners of the building the derision of Tango was loud and clear.

Link to comment
Share on other sites

Bob Cummings is moving over to the ULCC. Seems as if the launch date could slide into 2018.

 

Bob Cummings, to lead ultra-low-cost airline


 

Ed Sims joins WestJet as EVP, Commercial

CALGARY, April 28, 2017 /CNW/ - WestJet today announced the appointment of Bob Cummings as Executive Vice-President responsible for the yet-to-be-named ultra-low-cost carrier (ULCC) which will launch late in 2017 or early 2018. Bob will have accountability for all aspects of this new venture, including planning, branding, pricing, product development and operationalization. He will also continue to drive other key strategic initiatives for WestJet. Bob has been with WestJet since 2005, with almost 11 years at the EVP level with a variety of responsibilities. 

WestJet_Bob_Cummings__to_lead_ultra_low_cost_airline.jpg

"Bob has been an integral part of the successful transformation of WestJet," said Gregg Saretsky, WestJet President and CEO. "We are well positioned to continue our profitable growth and I look forward to Bob's strategic thinking, leadership and execution capability coming to bear in launching this exciting new airline.

"I am eager to bring our ULCC to market on behalf of Canadians looking for even lower fares," commented Bob Cummings. "I firmly believe that we have the necessary capabilities to launch another successful and exciting chapter in WestJet's history. Travellers can expect a very different approach from this new ULCC, yet one that will ultimately provide air travel accessibility to many more Canadians."

WestJet also announced today the appointment of Ed Sims as Executive Vice-President, Commercial, with responsibility for all aspects of the commercial function within WestJet including sales, marketing, product, network planning, revenue management, corporate development, airline partnerships and WestJet Vacations. Ed will join WestJet on May 29, 2017.

Ed's career spans more than 30 years in the tourism and aviation industries, encompassing airlines and tour operators, as well as air traffic control. He has worked in the European and Australasian markets, holding senior commercial and general leadership positions within: Tui, Thomas Cook, Virgin Groups and Air New Zealand where he headed up the international wide-body business. His most recent role was as CEO of Airways, New Zealand's air navigation service provider.

"Ed brings to WestJet extensive expertise in leadership, innovation, sales and marketing, operations and change management, and I am delighted to have someone with his experience and skills join our leadership team," continued Gregg Saretsky. "As we expand WestJet's horizons, I look forward to Ed's global perspective and contributions to our growth plans."

"WestJet has built a reputation that is globally recognized," said Ed Sims. "I have watched the WestJet success story from afar and now I am honoured to be given the opportunity to shape the next chapter in WestJet's history."

Link to comment
Share on other sites

Yes. Costs are a factor and guests don't want to pay more for tickets, therefore something has to give.

WJA is adding an extra row and changing that one row of 2 seats to 3, increasing the seat count by 4 for both the -700 & -800. The ULCC will be a totally new airline, high density seating, separate OC, avoiding Rouge issues of guests paying for AC ending up on Rouge. 

Interesting times ahead. 

Link to comment
Share on other sites

On 2017-04-27 at 9:26 PM, Fido said:

Tango was a bigger revelation to employees.

Even though Econair (memory might have failed me here for the correct name) had preceded Tango by a couple of decades, it demonstrated to the marketing and other head office types that people would accept less if there was a dollar savings to them.

The biggest revolution was showing that all of the good attributes of Tango could be garnered by Tango as a fare class and not required to be a separate aircraft. The discussions in headquarters were muted because Robert Milton was behind the venture but in the dark corners of the building the derision of Tango was loud and clear.

Econair: circa 1974 it seems...

http://publications.gc.ca/collections/collection_2014/tc/T22-30-1975-1-eng.pdf

Link to comment
Share on other sites

Here Comes Another Discount Airline, and Wall Street Isn’t Happy

Canada’s WestJet rolls out an ultra-low-cost carrier.

by

Justin Bachman

@justinbachmanMore stories by Justin Bachman

‎May‎ ‎3‎, ‎2017‎ ‎2‎:‎00‎ ‎AM

WestJet Airlines Ltd. began life 21 years ago as a low-cost airline in the Southwest Airlines vein: low fares and minimal frills. Over the years, as it sought to compete and grow, the frills, fares, and costs grew along with it. Now the Canadian-based carrier isn’t only headed back to its discount roots, it’s digging even deeper.

The airline is planning to tackle the cheapest segment of the air-travel market by launching an ultra low-cost carrier (ULCC) modeled on Ryanair.

WestJet describes the move as defensive, intended to fend off incursions from rivals and helping stem the flow of some 5.5 million Canadian leisure travelers who cross the border to fly bargain airlines such as Allegiant Travel Co. and Spirit Airlines Inc. This domestic leakage has spurred entrepreneurs to consider starting other ultra-low-cost airlines in Canada, a nation notorious for steep aviation operating costs and airfares.

For Calgary-based WestJet, there’s an additional ancillary benefit: revenue diversity, given that low oil prices have drained $1 billion in air travel spending from Alberta, where about 40 percent of the carrier’s capacity flies.

WestJet will move 10 of its 737-800s into the new, separate airline. With 189 seats, the planes will be the same as those flown by Ryanair Holdings Plc, which offers 30 inches of pitch between seats and no recline. WestJet flies that same model with only 168 seats today, including 12 “Plus” seats with additional legroom at the front of the cabin. The still-unnamed discount carrier’s first flights in leisure markets are expected late this year or in early 2018, WestJet executives said on Tuesday during a quarterly call with analysts.

Of course, every successful player in this part of the airline business has begun with the same core element: costs that are materially lower than those of rivals offering more amenities and far fewer fees. WestJet Chief Executive Officer Gregg Saretsky said on Tuesday that the new carrier “will have significantly lower cost on every line of that business” and will probably not fly “in markets where we have a nice business mix.”

“It’s the easiest thing in the world to offer low fares. The hard thing is how to make money with low fares.”

Yet some industry observers are deeply skeptical WestJet can succeed with an ultra-low-cost offshoot, just as it’s ordering up to 20 new Boeing 787-9 Dreamliners, which will offer a new business-class service to Europe, Asia, and South America. Those planes, which begin to arrive in 2019, may replace older 767s that WestJet flies to London and Hawaii.

“Faced with startup discount airlines on one end and a saturated Canadian market on the other, management is fighting a two-front battle, with all of the cost and complexity that comes with it,” Walter Spracklin, an analyst with RBC Capital Markets LLC, wrote in a client note.

WestJet’s new venture, and its new 787s, come as the company’s 1,500 pilots are seeking to join the Air Line Pilots Association, which could lead to higher wages and other costs. The pilots rejected a similar unionization effort two years ago. Voting is scheduled for May 5-12. “If WestJet pilots do unionize, we would think it likely that the other employee groups (flight attendants, etc.) would follow suit,” Spracklin wrote on April 20.

WestJet appears to be following the approach some U.S. legacy airlines adopted with their “airline within an airline” forays, said Ben Baldanza, an adviser to NewLeaf Travel Co. The Manitoba-based company operates as a “virtual airline” by selling flights aboard Flair Airlines Ltd. As it approaches its first anniversary, NewLeaf is merging with Flair, which also flies oilfield workers and other charter customers.

Continental Airlines began Continental Lite in 1993, while US Airways launched MetroJet a few years later. Delta Air Lines Inc. inaugurated a Boeing 757 fleet called Song to compete with JetBlue Airways Corp., and United Airlines started Ted, which flew Airbus A320s. None of the carriers flew for more than a few years before the parent company discontinued them, dissatisfied with financial results, given that the startups’ costs were typically not much lower than those of their parents.

“We’re not worried about WestJet at all because no airline-with-an-airline has ever worked,” said Baldanza, the former chief executive of Florida-based Spirit. “They’re just trying to scare competition out.”

WestJet executives consider the new carrier “more of a separate vehicle” that won’t be integrated, at least initially, and will have a network that is coordinated with WestJet routes to avoid “cannibalization” of existing profits, said Bob Cummings, a WestJet executive vice president who will run the new airline.

“We could see issues with their new ULCC cannibalizing yields of the mainline operator,” Cowen & Co. analyst Helane Becker wrote on Tuesday in a client note titled “Too Much Going On to Get Comfortable.”

Jim Scott, president and CEO of Vancouver-based Canada Jetlines Ltd., which hopes to begin flying as a ULCC next year, said WestJet’s effort won’t affect his startup because “the NewLeafs and the WestJets are are just playing around the edges.”

National Bank Financial cut its rating on WestJet shares on May 2 to underperform, citing heightened “execution risks” in launching service at opposite ends of the customer spectrum. WestJet shares slid 3.2 percent on Tuesday, part of a 4.1 percent decline this year.

“It’s the easiest thing in the world to offer low fares,” Baldanza said in an interview. “The hard thing is how to make money with low fares.”

Link to comment
Share on other sites

6 hours ago, PHXAV said:

Thank you for the link.

My career at Air Canada started in 1973 which was also the start of the Barbados 'villas' but even 7 years later there were still tinglings of this issue when there was an RCMP investigation of 'villas' in Portugal.  They interviewed me to investigate a link between the Portuguese villas and charter activity but when I didn't even know where the closest airport was to the villas they dropped that line. 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.




×
×
  • Create New...