By GREG KEENAN
Tuesday, April 17, 2018
WestJet Airlines Ltd. must get its Swoop discount airline launched on time and tackle its cost structure to get ready for an onslaught of low-cost competition from new rivals, new WestJet chief executive officer Ed Sims says.
A move by Kelowna, B.C.-based Flair Airlines to increase its schedule to 208 flights in June - as well as the potential takeover of Norwegian Air Shuttle ASA - have "redoubled my enthusiasm and appetite for Swoop," said Mr. Sims, who replaced Gregg Saretsky as WestJet's CEO last month.
International Airlines Group (IAG), the owner of British Airways, Spain's Vueling and other carriers, is already planning to fly to Canada later this year under its own long-haul discount carrier, known as Level. IAG recently bought 4.6 per cent of Norwegian, fuelling speculation about a takeover that would give the latter airline a financially strong parent to backstop its expansion plans.
Norwegian has delayed plans to fly to Canada from Europe - originally scheduled to begin in July by a year, but other discount European carriers have targeted Canada. Meanwhile Flair's expansion, a new economy-fare regime at Air Canada and an expansion of its low-cost Rouge network are increasing the competitive pressure.
Flair's announcement is a shot across the bow at WestJet, Mr. Sims said. "That to me is a strong call to action for WestJetters to make sure we redouble our efforts both to make sure we operate on the lowestpossible cost base and have the opportunity to grow," he said on Monday as he gave his first media interviews since being appointed on March 8.
In the transatlantic market, Norwegian's flights to Canada, if they go ahead next year, will coincide with the arrival of the first of 10 Boeing 787 wide-bodied planes that WestJet will deploy to international markets. Destinations in Europe are on the list.
"I fully expect to see deeper and broader transatlantic competition coming out of Ireland in Norwegian's colours," Mr. Sims said.
Domestically, however, what was expected to be a full-scale battle between two ultralow-cost carriers - so-called because they offer rock-bottom fares, but charge for baggage, seat selection and all food and drinks - has been delayed with Vancouverbased Canada Jetlines Ltd. pushing back its original July launch to an unspecified date.
Demand for seats on Swoop is ahead of expectations, but the ultralow-cost unit is also at the centre of a labour dispute between WestJet and its pilots, who became the first of the company's employee groups to be unionized when they joined the Air Line Pilots Association last year.
The WestJet unit of ALPA has won a favourable Canadian Industrial Relations Board ruling that prevents Swoop from offering pilot jobs directly to existing WestJet pilots without going through the union.
The pilots union and WestJet are in conciliation talks on a first contract. The conciliation period is to conclude at the end of April.
A strike can begin 21 days later.
The Swoop planes and the routes they fly have traditionally been flown by WestJet pilots, said Rob McFadyen, chairman of ALPA's WestJet unit.
"When you start taking routes and aircraft away, it has a significant impact on our pilot group," Mr. McFadyen said in an interview. "That is one of the paramount issues to our pilots."
Mr. Sims confirmed Swoop has already begun hiring pilots and training them for the June 20 startup.
Swoop flights will not cannibalize WestJet's existing network, he said. If the planes had stayed within WestJet's mainline operations, the airline would have had too much capacity, he said.
Reaching agreement with the pilots is a high priority, Mr. Sims said and he expects a deal to be reached this year.
Mr. Saretksy said during WestJet's investor day presentation in December that it could take five years to reach a deal. He said in February that Swoop would start flying in June with or without an agreement with ALPA.
Fitch Ratings Inc., a credit-rating service that examines Air Canada's debt, said it is not concerned about the immediate impact ultralow-cost carriers might have.
Air Canada can compete with its Rouge brand, Fitch said. "We also believe that new entrants may have a difficult time in Canada, since both incumbent airlines are financially healthy and are expected to compete vigorously with any new airlines," the agency said.
Mr. Sims joined WestJet last May as executive vice-president of commercial operations.
He had spent 10 years at Air New Zealand, where he was in charge of the airline's international wide-bodied aircraft operations, before becoming CEO of New Zealand's air-navigation service provider.
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WestJet CEO Ed Sims