Sunday reader: Swoop learns lessons from first year of service
This article is the first of three examining Swoop’s first year of service
- Today: Success and failure, lessons learned in the first year of service
- Tomorrow: Swoop’s future includes building on what it already has
- Tuesday: What are Swoop’s plans for Abbotsford?
Swoop airlines is promising more sun, but no new destinations within Canada next winter, as the carrier recalibrates its capacity and implements lessons learned from its first year of operations.
Created as a backstop against competition on the lower end of the market, Westjet’s ultra low-cost subsidiary has spent a year emerging from its parent company’s shadow, and finding its own identity in an increasingly crowded market.
“Lots of learning, lots of being humble,” said Swoop chief executive Steven Greenway in an exclusive interview with Western Aviation News, reflecting on his airline’s first year of service.
“We never thought we would just blow the market away within a year. We had to learn, we had to adapt, and we got through our first year, you’re starting to see the benefits of that as we tweak the model and optimize it for Canada.”
It marked a steep learning curve for Greenway, for whom Swoop was his sixth airline startup, but his first time working in Canada, which has its own peculiarities, not least of which is the weather – thunderstorms in the summer and deep freeze in the winter. However, in many ways, he was following a path Westjet had blazed almost 20 years earlier.
To know Swoop’s present, it’s helpful to know a little bit about Westjet’s past.
Westjet was born of frustration at Air Canada and Canadian Airlines International having a national duopoly, Air Canada concentrated in the East, and Canadian in the West, and charging a premium for short-haul travel. So Westjet was born in 1996 with three used Boeing 737-200s, charging lower fares between British Columbia and Alberta. It offered a free checked bag, snacks, and friendly service by crews who owned shares in the company.
Oh, and it was a low-cost, no frills carrier, with one class of service, vowing to keep costs low and pass the savings on to passengers.
Westjet didn’t arrive in Eastern Canada until 2000, when it launched service from Hamilton to Thunder Bay. In those early years, its Ontario hub was in Hamilton, helping propel the airport to passenger numbers that seem like a dream today.
But over time, Westjet saw bigger opportunities moving upmarket. In 2004, it moved its Eastern hub to Toronto, to better compete with Air Canada. The years since have seen the introduction of a Premium economy class, bigger planes, and overseas service featuring a true business class cabin. In other words, an airline that looks a lot like Air Canada, only smaller.
While the move has opened up plenty of opportunities, it also created the risk that someone would essentially replicate the old Westjet and take over the no-frills market. Hence, the need for Swoop, and in 2017, Westjet announced plans for its “airline within an airline.”
The morning of June 20, 2018 was cloudy and pleasant as a full load of 189 passengers plus crew prepared to depart Hamilton’s John C. Munro airport bound for Abbotsford, British Columbia on Swoop’s inaugural flight. Passengers had paid an average of $103 for the privilege, a steal, really, to fly almost 3,300 km.
In those early days, Swoop started just like Westjet, that is to say small. There were only two Boeing 737-800NGs in the fleet, and five Canadian destinations. Swoop’s Eastern base would be in Hamilton, as Westjet’s had been 18 years before, and its Western base would be in Edmonton, to go with a heavy focus on Abbotsford, a market Westjet essentially created in 1997.
Swoop grew at a torrid pace through the fall, adding destinations, on average, every week and a half. By winter, it was serving 16 destinations in four countries, with 25 different routes linking them. It now has seven planes in the fleet, with plans to introduce another three by year’s end.
By May, Swoop had flown its 1,000,000th passenger.
“We really put pressure on the system to get the network expanded quite dramatically,” said Greenway, joking the airline was opening routes and new destinations at a suicidal rate. “And now what you’re seeing is a period of consolidation.”
Consolidation means concentrating on fewer cities in the summer – 11 – most of them in Canada, and learning the lessons from the year that was.
BELOW: Swoop’s summer 2019 route map.
This summer, Swoop’s network is highly concentrated on its three focus cities. Indeed, flights between Hamilton, Edmonton, and Abbotsford account for almost 38% of the airline’s traffic.
Hamilton is Swoop’s hub, with 55 flights departing every week, it operates a Western base in Edmonton, from which there are 49 departures every week, and a focus in Abbotsford, where it operates 41 weekly departures. Edmonton-Abbotsford is the busiest route, with 16 flights a week, followed by Edmonton-Hamilton (14), and Hamilton-Halifax (13).
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While in Europe and elsewhere passengers have gotten used to the likes of Ryanair offering a cheap base fare and charging for every little extra, the ultra low-cost model is still novel in Canada, which was the last G7 country to have a ULCC. Even Westjet, Swoop’s predecessor, offered low fares, but didn’t go as far as Swoop in charging for the extras.
“The market itself is a different market from many other parts of the world,” said Greenway, pointing to Canada’s sparse population spread over a huge territory. “You look at a stage length of more than 1,200 miles, that’s typically double most LCCs.”
As a result of those unknowns, Swoop learned some valuable lessons during their first year.
Lesson one: during the winter, Canadians don’t fly for pleasure within Canada, no matter how cheap the flight might be.
“We believe we were overexposed domestically,” said Greenway, after executives expressed disappointment with Swoop’s load factors during the winter. “No one wants to go from a cold place to a cold place, and that’s true of domestic travel within Canada over the winter period.”
Swoop has to fill a high percentage of its 189 seats on each plane to make a route profitable, and having made the decision to avoid Westjet hubs in Calgary, Vancouver, and Toronto, there are only a limited number of destinations that can fill their planes day after day.
“We probably had too much capacity domestically and not enough international/transborder, and next winter we’ll see a rectification of that.”
Lesson two: Canadians love their all-inclusives.
This was a lesson that led Westjet executives to express disappointment with Swoop’s performance during the shoulder season – essentially from early November until Easter, excluding the Christmas holidays.
“Swoop was weaker than we expected and would have liked,” Westjet Chief Financial Officer Harry Taylor told investors during a conference call in May. “These shoulder seasons have proven to be more variable. In the peak seasons, it’s great.”
“In the summer months, you can sell everything online, it’s not an issue,” said Greenway, shedding some light on the challenges he faced. “In the winter months, one of the peculiarities of Canada is that, unlike other parts of the world, Canadians love their package holidays. They love the $500 all-in, flight, accommodations, don’t have to worry about anything.”
That was a particularly hard lesson for Swoop, whose business plan initially called for flights to be sold only on its website. By March, the airline was forced to switch course, partnering with Google flights to have its prices advertised to more people. Greenway says this winter, Swoop will be even more aggressive, meaning flights will be marketed as part of hotel and tour packages.
“We’ve got to make sure we have our distribution correct this year going into winter because our exposure to international and transborder flying will be greater, and therefore we need the capability to move seats in packaged products.”
Swoop had issues getting the proper approvals in place when it launched service to the United States, a delay that still stings. But it has otherwise avoided many of the pitfalls that have befallen rival low-cost carrier Flair, such as misjudging demand to Florida, which led it to drop flights just days notice, a decision that infuriated passengers.
“Flair seems a bit flighty to me,” said Greenway. They go in, they leave, and go somewhere else. I don’t know what their strategy is. But for us, we’ve stuck with our network. The selection of our network has been solid.”
In fact, though Swoop has scaled back destinations in its summer schedule, that was planned and orderly. The airline dropped only one announced route, from Edmonton to Oakland.
“We were very disappointed with Oakland,” said Greenway. “The name just doesn’t resonate. When people say ‘hey, I want to go to San Francisco,’ they only think San Francisco and Oakland they think is a different country.
“And so we just saw poor bookings, to be frank. We weren’t happy with that, and before we started to fly, we started to close the route down.”
Greenway says Swoop is implementing the lessons from that retreat to ensure other launches don’t suffer the same fate.
For instance, Greenway says Canadians are comfortable using secondary airports close to home – such as Hamilton or even driving across the border to Buffalo – but if the airline is going to fly into secondary airports in farther afield, it will have to do a much better job explaining why.
“I’ll give you an example which has always interested me: you have a huge amount of traffic, people going down to let’s say Universal Studios in L.A. Yet they think that they have to fly into LAX rather than Orange County. Orange County would be perfect because because it’s right on the doorstep of Universal Studios and all of the fun parts and theme parks there, but no recognition by Canadians of that airport.
“But when you’re talking about people going to a destination, they want to know they’re going to Cancun, not an airport down the road they’ve never heard of.”
With those lessons in hand, Swoop is well on its way to preparing its routes for the coming winter season. What do those plans hold? More on that tomorrow.