WestJet says its pioneering spirit is perfect experience for new Canadian ULCC

Canadian carrier WestJet Airlines believes its success in the low-cost sector over the past 20 years is the perfect experience for it to attempt to repeat history and bring ultra-low-cost operations into the country. The airline intends to launch a new, ultra-low-cost carrier (ULCC) in Canada and hopes to get the business up and running before the end of this year.

The launch of the as yet unnamed business remains subject to agreement with its pilots and any required regulatory approvals. Details of its plans also remain vague but WestJet confirms it will aim to “provide Canadians with no-frills, lower-cost travel options” and will operate with an initial fleet of ten high-density Boeing 737-800s.

"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," says Clive Beddoe, co-founder of WestJet and chair of its board of the directors. "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."

The air travel industry has changed remarkably since the launch of WestJet in 1996. The concept of a low-cost airline was still relatively new when WestJet took to the skies on February 29 1996, serving five destinations in Western Canada with three aircraft and 200 employees.

Fast forward to where we find ourselves today – there are more than 100 low-cost airlines around the world and there is a clear sub-category dubbed ULCCs where airlines offer much lower fares with a completely unbundled product offering and increased seat density. This has allowed the traveling public to select what they would like to add onto their ticket, keeping the overall cost of travel lower.

“As the price-sensitive consumer seeks out alternatives to what is presently available, we believe there is no better airline suited to bring ULCCs to Canada than WestJet; after all WestJet pioneered low-cost travel in Canada in 1996,” says Greg Saretsky, president and chief executive officer, WestJet.

"The complete unbundling of services and products in order to lower fares for the price-sensitive traveller has created the ULCC category and our new airline will provide Canadians a pro-competitive, cheap and cheerful flying experience from a company with a proven track record," he adds.

WestJet has now clearly grown beyond its low-cost roots and feels it can develop a new operation with a significant incremental cost saving to complement its existing offering. Air Canada has shown through the formation of its rouge leisure business that separate brands serving the most-suited marketplaces can help facilitate profitable growth.

WestJet’s Saretsky acknowledges “there is much work to be done” from now until the start-up’s planned launch at the end of 2017. There are also others seeking to adopt ULCC strategies such as Canada Jetlines and EnerJet and all will be well aware of the numerous low-cost and leisure failures of recent years in Canada.

Over its 20 years of operation, WestJet has become firmly positioned as Canada’s number two carrier after national airline Air Canada in both the domestic and international markets.

It has grown its share of the domestic market to 32.6 per cent, a number that will rise one full percentage point to 33.6 per cent in 2017, based on published schedules. Its domestic offering grew at an average rate of 3.3% per cent between 2007 and 2016 and is forecasted to grow 6.5 per cent in 2017 and exceed 20 million seats.

In the international market, WestJet grew to become the second largest operator in 2010 and has grown from an 8.4 per cent capacity share that year to a 12.1 per cent share in 2016. Its international offering grew at an average rate of 21.9% per cent between 2007 and 2016 after a rapid international expansion in the late 2000s and is forecasted to grow 0.9 per cent in 2017, based on current published schedules.