THEN THERE WERE THREE WestJet looks to launch new no frills airline later this year
THEN THERE WERE THREE WestJet looks to launch new no frills airline later this year
First there was WestJet, then there was Encore now there is to be – well something else. WestJet announced yesterday it will launch a new discount carrier later this year in a bid to offer travellers a no-frills, low-cost option. But isn’t that what WestJet was supposed to be when it launched way back in 1996? Actually, it wasn’t even no-frills – it was the low cost, friendlyoption! Now it could be called AC too! What happened?
Chief executive Gregg Saretsky said the airline industry has changed since the company began.
Cheap, cheerful and un-named
“The complete unbundling of services and products in order to lower fares for the price-sensitive traveller has created the ULCC (ultra-low-cost carrier) category,” he said in a statement.
“Our new airline will provide Canadians a pro-competitive, cheap and cheerful flying experience from a company with a proven track record.” Sounds familiar.
Since WestJet started as a discount carrier with three aircraft in Western Canada, airlines have trimmed the extras and started charging for things like checked baggage and meals on flights.
The ULCC model
WestJet did not reveal details on where it plans to fly, but said the yet-to-be-named carrier is expected to start in late 2017 with an initial fleet of 10 high-density Boeing 737-800s.
What that likely means, is that for their cheap tickets, passengers will be crammed into narrow seats, with reduced legroom, and be charged extra for virtually everything, including baggage (to be expected) boarding passes printed at the airport, snacks and non-alcoholic drinks.
ULCCs have also charged credit card transaction fees, (hefty) change fees, charges for infants under two, priority boarding and seating (pretty standard) and various other add-ons. This is not to suggest that WestJet Light (a stand-in till we learn the real moniker) will be charging for all the above – but they will for some – bet on it.
The airline also said the new carrier is subject to agreement with its pilots and any required regulatory approvals. Don’t hold your breath on the pilots being happy with this development.
Will it work?
AltaCorp Capital analyst Chris Murray says the launch of a so-called flanker brand complicates the plans of others looking to start an ultra-low cost carrier in Canada and protects WestJet from market erosion.
A flanker brand is a new brand introduced into the market by a company that already has an established brand in the same product category. The new brand is designed to compete in the category without damaging the existing item’s market share by targeting a different group of consumers.
“Historically, other ULCC's including Spirit Airlines and Ryanair have generated above average returns in their markets and we believe WestJet could see similar returns,” Murray wrote in a report.
However, Murray noted that several details remain unknown including how the airline will be structured and its plans for growth.
National Bank analyst Cameron Doerksen said the new airline can only be successful if WestJet is able to negotiate separate lower labour costs with its flight crew who will work in the flights.
Doerksen said, “We also believe the ULCC may cannibalize some current traffic on WestJet's mainline.”
“Finally, we are concerned WestJet has too many new strategic initiatives underway simultaneously, including a major expansion of its widebody international routes.”
One has to believe that the ULCC would also draw from the Encore brand that would be a large concern.
So, the questions are ‘Why?’ and ‘Why now?’
Air Canada launched its discount brand Rouge with flights in 2013 servicing Europe and the Caribbean. The service has grown to add destinations within Canada, Mexico, the US, South America, Central America, Africa and Asia.
Last year, NewLeaf Travel started offering “no-frills” flights between smaller airports including Kelowna, Abbotsford, Edmonton, Calgary, Winnipeg, Hamilton, Moncton and Halifax.
WestJet’s Encore is also a regional airline that was launched in 2013 to compete with Air Canada in some of the smaller markets. A year later Encore president, Ferio Pugliese, boasted that it was, “liberating Canadians from the high cost of travel,” stimulating demand and had “woken the competition up absolutely.”
However, Encore flies Bombardier Q400 turboprops and presumably this is not the optimum fleet for a ULCC.
The model changed
WestJet famously began using the low-cost carrier business model pioneered by Southwest Airlines in the US. In fact, in 2008 WestJet announced it had signed a memorandum of understanding to build a distribution and codeshare agreement with Southwest – that deal was terminated two years later.
Since then it has wandered far afield till it is now a mainstream carrier with prices virtually indistinguishable from those of Air Canada.
Subsequently, WestJet has also partnered and code shares with 16 US and international airlines and operates a fleet of Boeing 767-300s, and the Boeing Next-Generation 737-600, 737-700 and 737-800 aircraft in addition to Encore’s Bombardier Q400 turboprops.
Meanwhile Southwest has stayed the course using only Boeing 737s, (except for a period in the eighties when it leased some Boeing 727-200s).
Clive Beddoe, co-founder of WestJet and chair of the Board of the Directors, said, "We have built WestJet from its low-cost, regional roots into a renowned, international airline with service to 21 countries and today it's all about disrupting at the price-sensitive end of the market.
"Launching a ULCC will broaden WestJet's growth opportunities and open new market segments by offering more choice to those Canadians looking for lower fares."
So, will Air Canada now be tempted to go Rouger?
You will visit the following 6 places:
Vancouver
Vancouver is a coastal city located in the Lower Mainland of British Columbia, Canada. It is one of the most ethnically and linguistically diverse cities in Canada; 52% of its residents have a first language other than English. Classed as a Beta global city, the city is well known for its majestic natural beauty, as it is nestled between the Coast Mountains and the Pacific Ocean. It is frequently ranked as one of the "best cities to live in" and is certainly a beautiful destination to visit.
New York City
New York City is the most populous city in the United States and the center of the New York metropolitan area. The city has a significant impact on global commerce, finance, media, culture, art, fashion, research, education, and entertainment. As host of the United Nations Headquarters, it is also an important center for international affairs. The city is often referred to as ''New York City'' or the ''City of New York'', to distinguish it from the state of New York, of which it is a part. Located on a large natural harbor on the Atlantic coast of the Northeastern United States, New York City consists of five boroughs: The Bronx, Brooklyn, Manhattan, Queens, and Staten Island.
Toronto
Toronto, a prominent centre for music, theatre, motion picture production, television production, is home to the headquarters of Canada's major national broadcast networks and media outlets. Its varied cultural institutions, which include numerous museums, festivals and public events, entertainment districts, national historic sites, and sports activities, are key attractions to the over 25 million tourists that visit the city every year. Toronto is well known for its skyscrapers and high-rise buildings, in particular the tallest free-standing structure in the Western Hemisphere, the CN Tower. As Canada's commercial capital, the city is home to the Toronto Stock Exchange, the headquarters of Canada's five largest banks, and the headquarters of many large Canadian and multinational corporations. Its economy is highly diversified with strengths in technology, design, financial services, life sciences, education, arts, fashion, business services, environmental innovation, food services, and tourism. Toronto is placed among the Global Leaders in the Global Financial Centres Index, and is also consistently rated as one of the world's most liveable cities by the Economist Intelligence Unit and the Mercer Quality of Living Survey.
Calgary
Calgary is a city in the Canadian province of Alberta. It is situated at the confluence of the Bow River and the Elbow River in the south of the province, in an area of foothills and prairie, about 80 km (50 mi) east of the front ranges of the Canadian Rockies. In the 2011 census, the City of Calgary had a population of 1,096,833 and a metropolitan population of 1,214,839, making it the largest city in Alberta, and the third-largest municipality and fifth-largest census metropolitan area (CMA) in Canada. The economy of Calgary includes activity in the energy, financial services, film and television, transportation and logistics, technology, manufacturing, aerospace, health and wellness, retail, and tourism sectors. The Calgary CMA is home to the second-highest number of corporate head offices in Canada among the country's 800 largest corporations.
Montreal
Montreal is the largest city in the province of Quebec and the second-largest city in Canada. Originally called Ville-Marie, or City of Mary, the city takes its present name from Mont Royal, the triple-peaked hill located in the heart of the city, whose name was also initially given to the island on which the city is located, or Mont Real as it was spelled in Middle French, Mont Royal in present french.
Miami
Miami is a major city located on the Atlantic coast in southeastern Florida and the county seat of Miami-Dade County, the most populous county in Florida and the eighth-most populous county in the United States with a population of 2,500,625. The 42nd largest city in the United States, with a population of 433,136, it is the principal, central, and most populous city of the South {Florida} metropolitan area, the most populous metropolis in the Southeastern United States. According to the US Census Bureau, Miami's metro area is the seventh most populous in the United States, with an estimated population of 5,547,051 in 2009.
