Sunday reader: Westjet launches a complex new era of global ambitions

When Westjet flight 1 leaves Calgary this evening for London-Gatwick, everything will change for the scrappy Alberta-based airline. It will enter the high-stakes world of global competition that has seen so many others fail where Westjet hopes to succeed.

WS1 is the first Boeing 787 Dreamliner flight the airline will operate between Canada and Europe, the first with a business class worthy of competing with global carriers, and the first in a complex new world of global alliances, code-shares, and passengers demanding only the very best.

“We know we have to earn the right to grow, particularly in our premium cabin,” said Westjet chief executive Ed Sims in February.

Sims calls Westjet’s evolution a “journey as a global network carrier.” Like any journey, Sims had best be sure his roadmap guides his company around the perils that await.

When it launched, Westjet’s business plan was simple: offer one class of seat, for a cheap price, fly one type of plane, and make people feel welcome.

And it worked. From three aircraft – all Boeing 737s – Westjet quickly grew from a regional airline serving a few destinations into a national carrier with destinations across the country. Through it all, Westjet’s model remained simple: keep costs low, use one plane type, fly point-to-point, and keep costs low. And it worked, passengers flocked to the Alberta upstart.

Good thing too. Westjet’s attitude about markets was “use it or lose it,” without passengers, routes would be abandoned.

But in Canada, with its smaller population spread over great distances, it doesn’t take long for the air market to become saturated. There are, after all, only a limited number of city-pairs that can fill a 737 day after day, hour after hour. And there are only a limited number of sun destinations where a 737 has the range, and Canadians have the desire, to visit.

So if it wanted to keep growing, Westjet’s strategy needed to evolve, and the simple model that led to so much growth, was kicked to the curb.

A Westjet Encore Q400 lands at Vancouver International Airport (photo: Brett Ballah).

Enter Westjet Encore. In 2013, Westjet launched its first truly “regional” flights, using a standard fleet of Q400 aircraft. Smaller than the smallest 737, the Q400 could support markets where jets simply weren’t an option.

As a result, Westjet was able to open a host of new markets to service, and substitute planes where jets weren’t being filled.

But Westjet was also starting to introduce growing complexity into its operations, moving away from a single type of aircraft with pilots and crews who could easily switch from one to the other.

Just how complex the operation was becoming would become apparent in the summer of 2016, when Westjet launched flights to London aboard used wide-body 767 aircraft. The airline ran into a whole host of problems with the aircraft, and had to cancel and shift flights as a result. It paid a price on social media, and the next year cut flight to Gatwick to allow more aircraft maintenance time.

The airline says it has learned from those mistakes. With three 787s, Westjet could fly 21 rotations to Europe each week, but will only fly 14, keeping one aircraft in Canada, just in case. Again, complexity makes these decisions conservative.

Still, Westjet was consistently profitable, so there was no need to deviate from the established course. Airlines use several key metrics to measure how they’re doing, and we’ll focus on two: cost per available seat-mile, and revenue per available seat-mile, both are a handy way to measure how an airline is doing from year to year.

From 1998 to 2018, Westjet’s cost per available seat mile remained relatively constant, especially when inflation is taken into account. It rose from 12.6 cents/mile to 13.9 cents/mile, a modest 10% increase.

Revenue per available seat mile, in that same time, went from 14.1 cents to 14.37 cents, an increase of only 2 per cent. It’s profitable, but just barely, and in 2018, Westjet posted financial results that executives called “well below well below where we could, and should, perform,” despite flying a record number of passengers.

At the same time, Westjet’s employee culture got more complex, with the pilot’s union flexing its muscle last summer, narrowly averting a strike, and cabin crews set to begin negotiating for a first contract.

“The old ‘all happy Westjetters’ culture seems to be fading fast with unions and different pilot groups and so forth,” said David Tait, head of rival Flair Airlines, in a recent interview with Western Aviation News. Tait narrowly avoided his own strike by flight attendants in 2018.

Westjet sees Western North America, and Western Canada in particular, as underserved to Europe, and there’s reason to believe they’re right. But the Dreamliner is a large aircraft that cost a lot to buy. While the opportunities to capture a higher-paying premium passenger are there, so are the associated risks.

It all adds up to an airline that isn’t as easy to run as it was in those early days of three aircraft serving Alberta and British Columbia. And competition across the Atlantic is a tough market. With great distances, particularly from Western Canada to Europe, it doesn’t take much for a profitable flight to turn into a money-loser.