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WestJet to take on the wide-body market

July 8, 2014, Calgary - WestJet will put its own wide-body planes in the air as early as fall 2015, a move that brings the airline closer to its long-term goal of competing head-to-head with Air Canada for overseas travellers.


July 8, 2014
By The Calgary Herald

The Calgary-based company said Monday it is in the
“advanced stages” of sourcing its own wide-body aircraft. Bob Cummings —
WestJet’s executive vice-president of sales, marketing, and guest
experience — would not reveal the type of plane or whether it will be a
purchase or lease arrangement, saying only that it will be a “quality,
used” aircraft.

 

“We will be able to announce the specific aircraft by the end of the month,” Cummings said.

 

Adding
wide-body aircraft to WestJet’s existing fleet of single-aisle Boeing
737s and Bombardier Q400 turboprops will give the carrier long-haul,
trans-ocean capacity. Initially, WestJet expects to operate four
wide-body planes, deploying them on their Alberta to Hawaii winter
routes beginning in late 2015. WestJet currently uses Thomas Cook pilots
and Thomas Cook Boeing 757s to operate its Hawaii flights, but that
service agreement expires this spring.

 

Cummings
said the airline will be announcing additional destinations for its
wide-body fleet in time for summer 2016, adding that “Europe and other
opportunities” are being considered. Already, WestJet uses its
single-aisle 737s to fly the four-hour distance from St. John’s
Newfoundland to Dublin, Ireland — a route the airline is using as a test
case to familiarize itself with the European market.

 

Cummings
said fuel represents about 50 per cent of operating costs for a
wide-body aircraft, compared to about 30 per cent for a 737 — making it
harder to achieve cost advantages on the larger planes. Still, he said

WestJet has been laying the groundwork for an international expansion
for some time. It has a well-developed web of code shares and interline
agreements and last year it launched a regional airline, Encore. Both
strategies serve to feed more passengers onto the mainline WestJet
network and will likely feed passengers onto future WestJet trans-ocean
flights as well.

 

Over the past 12 months,
WestJet CEO Gregg Saretsky has been increasingly open about WestJet’s
ambition to one day compete directly with Air Canada on international
routes in Europe, South America, and even Asia.

 

On
Monday, Cummings declined to say how quickly WestJet could ramp up its
wide-body fleet, saying only that it will likely grow “beyond what is
being announced today.”

 

“This is a prudent, measured approach for us,” Cummings said. “We’ll get into the market and see how well we do.”

 

The announcement is a big deal both for WestJet and for Calgary, said Calgary-based independent aviation analyst Rick Erickson.

 

“My
guess is we’re going to see a WestJet wide-body hangar go into Calgary
and that this whole operation is going to be based here,” Erickson said.
“It’s a magnificent, massive plus for Calgary as a whole.”

 

Erickson
said the move to wide-body aircraft could also ease some of the tension
that may exist between WestJet and its pilots. There have been signs of
strife in recent months — including a unionization effort under way as
well as the rejection by pilots of the airline’s latest contract
offering. But the pilots voted 70 per cent in favour of WestJet’s
wide-body plans, and Erickson said that’s not surprising.

 

“It’s
precisely what pilots want to do. They want to fly bigger airplanes,
and they want to fly to exotic, exciting locations,” he said. “I think
this is a lever the carrier can use in some way. They’re not doing this
just to appease the pilots, of course, but they can play on this, if you
will.”

AltaCorp Capital Inc. analyst Chris Murray said in
the long-term, WestJet might go after the same type of European
destinations that Air Canada currently flies to with its Leisure
airline, Rouge. These include places like Manchester, Nice, Barcelona,
Milan, and Lisbon.

 

“But keep in mind they’re
also going to be competing with a lot of the destinations that Air
Transat flies to in the Atlantic, as well as a number of other
international carriers,” Murray said.

 

Murray
added that WestJet has done very well with the creation of Encore and
the addition of its turboprop fleet. But he cautioned moving to
wide-body aircraft adds an “increasing level of complexity” that takes
WestJet farther away from its roots as a low-cost carrier with a simple
business model.

 

“One of the arguments against
wide-body, and has been for some time, is just how much more challenging
it can be,” Murray said. “A really massive expansion to try to become a
full-service, network carrier? That certainly would change a lot of the
dynamics around who or what WestJet is, and would certainly be
interesting to follow over the next few years.”