WestJet Rewards - WestJet reveals plan to boost traffic and cut costs

http://www.theglobeandmail.com/servlet/story/LAC.20060427.RWESTJET27/TPStory/?query=westjet

Beddoe outlines new vision for WestJet: Sees competition with Air Canada on overseas routes

Source: NATIONAL POST Section: Financial Post Page: FP1 / Front Byline: Chris Sorensen Date: 04/27/2006

WestJet Airlines Ltd. was conceived as a cheap, no-frills alternative to Air Canada, but chief executive Clive Beddoe is among the first to admit it's becoming increasingly difficult to distinguish between the two airlines' business models.
In recent months, WestJet has been busy adding such amenities as leather seats and live television to its once-Spartan fleet of Boeing 737s while Air Canada has been fixated on finding new ways to slash costs by ditching free meals, pillows and blankets from its jets in a bid to compete with lower domestic air fares.

Mr. Beddoe said in an interview yesterday that he now foresees a day when carriers like WestJet compete side-by-side with Air Canada on lucrative overseas routes to far-flung destinations in Europe and Asia.
"I don't think that's all that far away," Mr. Beddoe said. "In sense, we've already started down that road. We're already flying halfway across the Pacific [to Hawaii], although to go any further would require a bigger aircraft."

WestJet, which will release its first-quarter results today and hold its annual meeting in Calgary, is not alone in its slow departure from what many have dubbed the "low-cost airline model" -- flying one type of airplane on point-to-point domestic routes -- which was pioneered by Southwest Airlines more than 30 years ago.
But today just about every low-cost airline in North America, including Southwest, is tinkering with the blueprint they seek new markets and face tougher competition from traditional airlines, many of whom have drastically pared down their operations in recent years.

While WestJet still has room to grow within Canada, particularly in the East, it's becoming increasingly clear that future growth lies beyond the country's borders.
Mr. Beddoe said WestJet has identified three significant avenues for future growth: More cross-border flying into the U.S., partnerships with foreign carriers and, eventually, a "full-blown" membership in a global airline alliance such as One World.

That's why WestJet is currently spending millions on a new computerized reservation system that will allow it to "talk" to other carriers. While technical glitches have pushed back the implementation of the new system to early 2007, Mr. Beddoe said he is hopeful the airline will be in a position to negotiate partnerships with other air carriers within 18 months.
If it works, the new system promises to catapult WestJet to its next level of growth by allowing it to easily patch into U.S. travel Web sites such Expedia.com while allowing airlines in the U.S. and abroad to connect seamlessly with WestJet's Canadian network.

David Newman, an analyst at National Bank Financial, said the new system will be a "critical milestone" for WestJet since it will not only give the airline access to new customers, but also allow them to target a different kind of customer -- namely business travellers. "You will have a more equal product offering, in my view, to Air Canada," he said.
Mr. Beddoe added that WestJet has already held discussions with numerous airlines and has rudimentary agreements in place with China Airlines and Japan Airlines (JAL).

One airline that has expressed serious interest in forming a relationship is Cathay Pacific Airways Ltd. Cathay, a member of the One World Alliance, once enjoyed a close partnership with the former Canadian Airlines until it merged with Air Canada, a Star Alliance partner, in 2000.
Philippe Lecamp, Cathay's vice-president of Canadian operations, said WestJet stands to benefit significantly from recent efforts by Air Canada to trim its list of partner airlines in order to focus more closely on Star Alliance members.
"Air Canada is actively pushing people away," he said. "And there's a whole host of carriers out there -- El Al, British Airways and Air France -- who need an interline relationship in Canada.

"I have tremendous respect for Clive and his team, but WestJet is at a real transition point right now," Mr. Lecamp said. "They either remain as a domestic and transborder carrier, or they work out how to [form these partnerships]."
The opportunity for strategic alliances isn't lost on Mr. Beddoe, although he was coy about which airlines were at the top of his list.
"It will depend entirely on the demands these carriers put on us. We will probably go for the easiest ones first."

csorensen@nationalpost.com

In recent months, WestJet has been busy adding such amenities as leather seats and live television to its once-Spartan fleet of Boeing 737s while Air Canada has been fixated on finding new ways to slash costs by ditching free meals, pillows and blankets from its jets in a bid to compete with lower domestic air fares.

Let's not point out it has also been "fixated" on rolling out new planes with AVOD at every seat, new interiors, flight passes, etc.


"I don't think that's all that far away," Mr. Beddoe said. "In sense, we've already started down that road. We're already flying halfway across the Pacific [to Hawaii], although to go any further would require a bigger aircraft."


Gee, ya think? No doubt this will need to be a 737-2000, as the CASM on any other equipment would not make sense, and these are the best planes in the whole wide world.


David Newman, an analyst at National Bank Financial, said the new system will be a "critical milestone" for WestJet since it will not only give the airline access to new customers, but also allow them to target a different kind of customer -- namely business travellers. "You will have a more equal product offering, in my view, to Air Canada," he said.

Except for the things frequent business travellers flock to, such as lounges, J class, no middle seats on many flights, frequency, etc.

And before anyone comes back with "blah, blah, WS has lower fares", we all know this is a misnomer. On most flights, Tango matches or underprices WS fares.

Simon

Not to mention the never ending saga of the upgraded res system...

But looks like WS may be following the AerLingus and BD models: LCC on "domestic" routes and a few longhauls. B757s would be the WS likely choice for a longer haul aircraft...probably a few could be had quickly on the resale market.

If and when WJ goes long haul I would see them getting something larger since the 757 can only effectively reach Europe from Eastern Canada. From the West it would require a tech stop in KEF like Canada 3000 did and to provide the best service I don't think WJ would want to do this (even though it happens on occassion for the Hawaii flights).
Chances are WJ would launch European flights from the Calgary/Edmonton/Winnipeg region as these routes have the least scheduled flights on them for competition

Except for the things frequent business travellers flock to, such as lounges, J class, no middle seats on many flights, frequency, etc.



The key word in your comment being "frequent" business travellers. You'd apparently be surprised at how many occasional and semi-frequent business/academic travellers there are in the back of the bus who have little or no access to the 1st 3 items you list. There is a massive business travel market that is open to competition with little concern for the top-level frequent flyer perks.

Not really. First two, maybe.

No middle seats is not a FF perk, it is a perk of the particular aircraft type.

Simon

Not to mention the never ending saga of the upgraded res system...


Which today WS finally wrote down and admitted total defeat!

Which today WS finally wrote down and admitted total defeat!

http://ca.today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2007-07-19T130131Z_01_WNA3940_RTRIDST_0_BUSINESS-WESTJET-WRITEDOWN-COL.XML

TORONTO (Reuters) - WestJet (WJA.TO: Quote) said on Thursday it would take a non-cash write-down of C$31.9 million in the quarter to June 30 after it stopped negotiating a switch to the aiRES reservation system.

Canada's second-biggest airline said its reservation system has been upgraded and it would continue to rely on the current system in 2007 and 2008.

Which today WS finally wrote down and admitted total defeat!

Not surprising. A significant percentage of these integrated IT systems never are completed or work as specified.

We shall see if AC has any better luck with their reservation system upgrade. A friend of mine works for the company that did their old system and has done consulting with the new guys. Some of the questions he's received indicate that there will be rough patches for AC too.