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WestJet Encore prepares its march east

June 27, 2014, Calgary - Just days after celebrating its first anniversary, WestJet’s regional airline Encore will hit another milestone Friday when it makes its first foray into Eastern Canada.


June 27, 2014
By The Calgary Herald

The airline — which took to the skies June 24, 2013 — started with
six destinations and two Bombardier Q400 turboprop planes. Twelve months
later, it has expanded to include 13 planes and 18 destinations in
Western Canada. The four daily, non-stop flights beginning Friday
between Thunder Bay and Toronto mark Encore’s first service in Eastern
Canada.

 

“We always anticipated that we’d be penetrating into the
east within a year of our startup. When we planned this, our plan was to
build up a solid network in the west, and then launch our service in
the East,” said WestJet Encore president Ferio Pugliese.

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While
WestJet already serves both Thunder Bay and Toronto with its main line
737 service, Pugliese said it will be announcing in July the addition of
a brand-new, previously unserved destination. In Western Canada, the
rollout of Encore has so far included the all-new destinations of
Terrace, B.C., Fort St. John, B.C., Nanaimo, B.C., Penticton, B.C., and
Brandon, Manitoba.

 

In addition to its eastern expansion, Encore is in the process of getting its Q400s certified to fly in the United States.

 

“We
hope to have that process completed by the end of this year, and that
will put us in a position in 2015 to be looking at trans-border flying,”
Pugliese said.

 

WestJet ultimately envisions a 45-aircraft fleet
for Encore. In addition to the 13 Q400s the airline already has, it has
firm orders for another 12 and options to purchase 20 more. Pugliese
said the rollout so far has gone “better than expected,” though he
acknowledged there have been difficulties — in particular, a brutally
cold winter that took a toll on on-time performance.

 

“I won’t lie
to you, we had a challenging winter,” he said. “But we managed to work
through that, and we’ve turned our on-time arrivals and on-time
performance into a very positive story. Year-to-date, we’re trending
well over 80 per cent in terms of arrivals within 25 minutes, which is
very good, especially for a new operation.”

 

Pugliese is also
encouraged by the number of people who are connecting from Encore to
WestJet’s main-line service. The regional airline was always viewed as a
way to get more customers into the WestJet network — a year in, he says
50 per cent of the travellers who board a Q400 end up getting onto a
WestJet 737 for a connecting flight.

 

“We’re in the business of
making connections — we’re selling a network here,” he said. “So it’s
nice to see that, because it’s what the business plan is really built
on.”

 

Pugliese acknowledged that Eastern Canada is a more competitive market for airlines than Western Canada.

 

“It
is more challenging, absolutely. We’re going to meet more competition,
more company, in some of the markets we’re going to be serving,” he
said.

 

But in a note to clients in May, Raymond Jones analyst Ben
Cherniavsky said it is Encore’s competitors who should be worried —
particularly Toronto-based regional carrier Porter Airlines. Cherniavsky
said Encore has already proven in Western Canada that it has the
ability to drive down fares — and he added the smaller, more vulnerable
Porter may not be able to compete.

 

“We estimate its potential
revenue loss at $65 million (annually) from Encore in the east,”
Cherniavsky said. “If Encore eventually sweeps Porter into the dustbin
of Canada’s ignominious airline failures, then the two survivors —
namely, WestJet and Air Canada — will surely benefit by picking up some
of the pieces.”

 

Independent aviation analyst Robert Kokonis said
some observers still have concerns about the pace of WestJet’s growth
and whether it can fill all the new seats it is pushing onto the market.
But he said he believes Encore’s expansion into Eastern Canada is
positive — both for WestJet and for the travelling public seeking lower
fares.

 

“Air Canada and Porter aren’t going to take this sitting
down. So you’re going to see great things for the consumers in the
markets Encore goes into,” Kokonis said.