One thing WestJet doesn’t want is its new ‘ultra-low-cost’ subsidiary swooping in and poaching parsimonious passengers away from the mainline.
But after watching data “by the hour,” for the six days Swoop tickets have been on sale, WS execs says they don’t see any cannibalization.
“We’re not seeing an impact on WestJet,” said EVP Commercial Ed Sims yesterday during a Q4 and full-year 2017 conference call. “Swoop’s role is stimulating incremental traffic, not impacting WestJet volume.”
What WestJet is calling “Canada’s first true ULCC” had high visibility in the past week, promoting its go-live date with thousands of ‘no-fare’ tickets (pay only taxes and fees) and some one-way fares of less than $10. The goal, says Sims, is to generally price unbundled fares about 40% lower than those in the market today.
To make that possible, WS will drive down costs by using high-density 737-800s in high utilization. Pilots and crew will be on a lower pay scale. Bookings will be direct-only. “He with the lowest cost wins,” said CEO Gregg Saretsky. “Swoop will be great in the segment it’s pursuing.”
WestJet sees that segment topping out at 30-40 planes. Swoop will launch domestic flying in JUN with three, get to six by SEPT and 10 by next spring. Swoop is also expected to begin flying south of the border by late this year.
The conference call discussing Q4 and full-year results that generally met investment analyst expectations didn’t just focus on the lower-end of WestJet’s offerings. Saretsky says WestJet’s ongoing initiatives to attract business and premium travellers is paying off.
Saretsky pointed to encouraging Q4 stats: WestJet RBC cardholders up 34%; WestJet Rewards members up 19%; managed corporate business revenues up 14%; and premium economy or plus revenue up 19% year-over-year.
“As evidenced by these metrics, our initiatives to win new business travellers have great traction and are driving the positive trend in yield we are experiencing both this quarter and in our forward bookings,” Saretsky said.
While continuing near-record load factors show no shortage of demand, the WestJet executives acknowledged cost pressures, especially in the area of fuel, which represents 24% of operational costs. In Q4 2017 fuel costs were up 15% year-over-year.
“We will be as relentless as possible in trying to prevent cost expansion,” said Saretsky. “We are committed to margin expansion.”
WestJet is also committed to network expansion, beginning with contracted domestic feeder flights on small planes in the WestJet Link initiative. Sims says a similar arrangement is likely on the east coast. Then there’s the proposed trans-border joint venture with Delta and potential transatlantic and transpacific JVs once WestJet begins receiving its 10 wide-body Boeing 787-9s and expands its network into Asia, South America and further into Europe.
With a healthy balance sheet and solid forward bookings, Saretsky says WestJet expects strong traffic and revenue growth to continue. “Our 2018 plans position us well for continued profitability,” he said.
Harry Taylor, EVP Finance and CFO, reminded the investment analysts on the call: “This is our 51st-consecutive quarter of profit, our 13th consecutive profitable year,” said. “Not many airlines can claim that.”
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.