Gregg Saretsky, President and CEO of WestJet, tells Graham Newton how the carrier’s unique brand and culture are the foundation for continued profitability
How is the airline performing and what are the major challenges for WestJet?
The airline celebrated its 20th birthday in February 2016. At the operating level it has been profitable for each of those 20 years while it has had 45 consecutive quarters of bottom line profitability.
We are flying a record number of guests and we’re extending our reach all the time.
Closer to home, our regional affiliate, WestJet Encore, has three years of operation under its belt, flying Q400s. It is also growing rapidly.
The business is founded on two principles. First, there is a real desire to liberate our guests from the high cost of travel. And second, we want to do that on the back of a brand that is friendly and caring.
The major challenge is the Canadian economy, which is fueled by the energy sector and is struggling. When the oil price goes down, so does the Canadian dollar. That means many of our costs gets more expensive, such as new aircraft and overhauls, because we pay for those things in US dollars.
We’re trying to navigate away from the softness in the market by starting new nonstop services on routes that nobody else is flying.
Is your international expansion working as planned?
We are introducing low fares across the Atlantic. It’s a very different business model for this market. There is a low base fare and then our guests have the opportunity to purchase ancillary products to tailor their journey. None of the incumbents does it in quite the same way. We know that people like what we are doing because, for example, our London-Gatwick service is heavily subscribed.
The international routes are fl own on Boeing 767s. This fleet will probably be expanded before we eventually move into the next generation of Boeing or Airbus widebodies.
Can you continue to keep control of your costs as you expand?
WestJet is all about being as efficient and as productive as possible. The airline has invested heavily in self-service options. Guests book online, check-in online, self-tag their bags. We have put the power of travel into their hands. But, of course, we have staff ready and able to help should anyone require it.
We also concentrate on a single fleet type. So WestJet Encore has its own operating certificate and flies Q400s. WestJet flies 737s on short-haul and 767s across the Atlantic. Cost control is about becoming experts in very specific areas and it’s built into our DNA.
Will the brand and company culture also withstand your rapid expansion?
The WestJet culture and brand is absolutely critical. When it comes down to it, all airlines fl y the same aircraft and the business models are not really that different. So it is all about the brand. At WestJet, we CARE–which we say stands for “create a remarkable experience.”
There is an owner’s mindset at the company and we have a number of projects that promote that concept. Most importantly, there is a share purchase plan. Employees can invest up to 20% of their pay in company shares and the company matches their commitment. They have to hold on to the shares for at least 12 months and after that they can trade them as normal. Many of our early employees have been made millionaires through the scheme.
We are union-free because our staff view themselves as owners and don’t need a middleman to manage their relationship with our leaders. Our people are engaged and empowered and I’m fond of reminding them there is only one rule: use your best judgement.
When your people are completely invested in the company, it is very hard for your competitors to match your performance. Our guests know they are going to get a great experience.
How important will customer-facing technology be to your passenger experience?
Our focus now is on mobility. Some 80% of our guests fly with such mobile devices as smartphones and tablets. There is a high adoption rate for our mobile products and we actively encourage our guests to use them. They can make changes to their flights, book hotels and rental cars, and much else besides.
And the icing on the cake is WestJet Connect, which we are in the process of rolling out across our fleet. There is 500 hours of free content accessible via Wi-Fi nodes on our aircraft, including six live TV channels. So our guests were able to watch the Olympics inflight and can catch live broadcasts of their favourite sports and entertainment events. Broadband connectivity is available through this system for a fee.
Do you agree with the common perception that air traffic management in Canada is excellent while airports, though good, are too expensive?
That is correct. NAV CANADA is held up globally as a role model. There has been no increase in its fees for the better part of a decade and because it is a not-for-profit organization, we are actually going to get some money back.
Canadian airports are another story. The taxes and fees are among the highest in the world. Yes, we have some beautiful facilities but our guests are paying up to C$40 per person. In the United States, the passenger facility charge is $4.50. Canada is therefore nearly ten times more expensive. And because 80% of the Canadian population lives near the US border, many of them drive across the border and fly from US airports.
We have to fix this so we can grow in Canada. We want people to spend money on Canadian restaurants, Canadian taxis and Canadian hotels. So high taxes and fees hurt more than just air travel in Canada.
Will an agreement at the ICAO Assembly on a global scheme for managing emissions ensure carbon-neutral growth from 2020?
I’m optimistic that there will be an agreement at ICAO. It is important for the Assembly to come up with a holistic approach for aviation. As WestJet expands internationally, we are very aware of the damaging patchwork quilt of measures that currently exists to manage carbon emissions.
But the ICAO agreement is only the start. The industry must not stop doing everything it can to reduce carbon emissions. We are investing heavily in new aircraft and will take our first Boeing 737 MAX in summer 2017. In fact, since 2000, WestJet has spent $3.8 billion on new aircraft and our fuel burn per passenger has decreased significantly in that time.
With security necessarily becoming tighter, can the industry continue to process ever increasing passenger numbers at checkpoints?
The focus is understandably on the security checkpoint. But processing a growing number of passengers at checkpoints is only part of the challenge. Eliminating crowds at checkpoints also eliminates the security threat posed from terrorists who may be attracted to them.
So it is important to speed up the security checkpoint for two reasons. It will create a better experience for the passenger and it will minimize the risk associated with crowds.
I think we can achieve a balance between robust security and faster throughput. We are already seeing important steps forward in trusted traveler programs, new technology and industry initiatives, such as Smart Security and one-stop security.
If there is one thing you could change about the industry tomorrow, what would it be and why?
Taxes and fees! They make low fares look high. The best low-cost carriers (LCCs) in the United States don’t fly to Canada. Not because they can’t, but because high taxes and fees ruin their model. The US LCCs prefer to poach Canadian traffic at US border airports where Canadians can avoid these high taxes and fees.
Even globally, the cost of infrastructure and the way that cost is structured must change.
Why have you decided to join IATA and what are the association’s strengths and weaknesses?
IATA has a large membership of like-minded companies that are cooperating for the benefit of all.
As mentioned, WestJet is 20 years old and we are now in a position to look at the programs and initiatives IATA are bringing to the table. It is the right time for us to be part of the collective. Also, we subscribed to a number of IATA services and being a member will reduce the cost of using those services compared with ad-hoc purchases. So it was a straightforward business decision too.
If there is one thing IATA could improve on, it is giving voice to the low fare business model. There should be more LCC members. It is surprising that Southwest is not a member, for example. Globally, the business model may be relatively new but to be truly representative of the modern aviation industry, IATA must give greater voice to LCCs.
2013: Awarded Top New CEO by Canadian Business Magazine
2010: WestJet President and CEO
2009: Executive Vice President, Opera
2009: Joins WestJet as Vice President, WestJet Vacations
1998: Joined Alaska Airlines as Senior Vice President, Marketing and Planning
1985: Joined Canadian Airlines