WestJet CEO Ed Sims says that when faced with strategic decisions around operating capabilities, airlines must keep thinking positively despite the challenges ahead
The Boeing MAX 737-8 disruption has been well-documented, but for an airline like WestJet—which relies solely on the manufacturer—the impact has been keenly felt. Despite the challenges that those production issues have caused, Ed Sims remains positive that the airline can continue on an upward curve.
What difference will the acquisition by Onex make to the airline and its strategy?
The acquisition has reaffirmed the strategic path we are on to build a long-term sustainable business model. It is more of the same but at a faster rate. Being well-funded enables the airline to be nimble and adapt quickly to market conditions. We will continue to invest in our ultra-low-cost product in Swoop and our premium service in WestJet as we evolve to become a global network carrier including the introduction of our Dreamliners and business cabins. The strategies are interdependent. Onex understood that from day one, and it is why they were prepared to pay a 67% premium for the airline. We will also continue to invest in a regional capacity purchase model in WestJet Link, pursue joint ventures and look to establish a strong presence on the transatlantic market.
How damaging has the loss of the MAX 737-8 been to your plans?
It is impossible to overstate the negative impact this has had on the traveling public, the industry, and WestJet. It represented 7% of our capacity. That’s a lot of available seat kilometers to lose. For us the frustration is losing our newest, most fuel efficient and quietest aircraft—I think of it as a narrow body 787. And, of course, there are many destinations that we have had to suspend announcing or put on ice until the MAX 737-8s are back in service.
We also need to resolve discussions with Boeing on quantifying the loss. There is a financial impact that has to be addressed.
But perhaps most importantly, our guests (customers) are questioning the safety framework of the industry as a whole. I still come back to saying that 2017 was the safest year in history, the top three years were all in this decade; the industry is extremely safe and getting safer. But the exposure of the MAX 737-8 has been enormous and in an era of social media and armchair quarterbacks people have access to information that lacks context and it has led guests to doubt the industry. So, there has been a threefold impact. There are lost opportunities, financial implications, and anxious guests leading to a potential decrease in demand.
“The industry can grow but we need to connect with the traveling public on all levels—let’s remain ambitious”
What’s the latest on the joint venture with Delta and why do you think the JV is a good idea?
We are waiting to hear from the United States Department of Transportation (US DoT) for Anti-Trust Immunity (ATI). We have undergone a very robust, rigorous and transparent process and other airlines have articulated their views.
We have replied to the US DoT’s questions in full. Now it is a matter of waiting for the outcome on their deliberations. This deal has been two years in the making and we are confident of a decision in the first half of 2020. From our point of view, of course, the sooner the better.
How is the airline tackling diversity?
Alongside our commercial objectives, there are four strategic pillars in the way we will build our relationships with communities we fly into but also with our WestJetters. Diversity is one of the central pillars along with sustainability, mental health and our relationships with indigenous peoples in Canada.
Overall, 56% of WestJet employees are female yet at the senior management level that drops to just 25%. We have to close the gap, and we have been taking a number of steps to do that. You must provide suitably-qualified candidates with a level playing field. We are working through our People team internally and recruiting to close that gap and reviewing on an annual basis.
Interestingly, WestJet continues to exceed the global average (5%) of female pilots and we are proud to be one of the top airlines in North America for female pilot representation. At WestJet, females currently comprise 7% of our pilots—including 10% of pilots at WestJet Encore. We continue though to work to improve diversity across the board.
“Overall, 66% of WestJet employees are female yet at the senior management level that drops to just 25%. We have to close the gap”
1996- WestJet was founded in 1996 by a consortium, beginning life with just three aircraft and five destinations. 22 years later, the airline flies to more than 100 destinations across the world using a 124-strong all-Boeing fleet.
Are you happy with the national infrastructure, particularly regarding airport charges and fees?
I was encouraged to see Canada’s Prime Minister prioritize airport reforms following his re-election last October and the federal government is looking to implement measures to strengthen the transparency, accountability and efficiency of Canadian airports.
This not about ownership—it doesn’t matter whether it is private or public. What matters is establishing a joint strategy so that airlines can feed into the governance of a facility.
In Canada, we have had years of unregulated solutions to infrastructural challenges. Now we are stuck with airside and landside facilities that we cannot afford to maintain.It is possible for a guest to pay up to C$50 in airport improvement fees before they even step on an aircraft. That places a huge strain on airlines that must stimulate demand through pricing. As an airline driving growth in all segments, including our ULLC Swoop, all elements of improving Canada’s aviation cost structure are of interest.
In your experience as a former air navigation service provider (ANSP) CEO, how can airlines and ANSPs improve their working relationship to achieve greater efficiency in the skies?
In a recent presentation to NAV CANADA I reminded them that I was happy to see investment in concepts like performance-based navigation, which are proven to have clear benefits. Being able to minimize fuel burn, reduce emissions and noise are a priority for us.
But the benefits of longer-term concepts like space-based automatic dependent surveillance—broadcast (ADS-B) are less tangible in the short term and yet airlines are expected to pay the cost now. I would prefer to get the procedural improvements first and then we can get to the question of how much we should pay for them. Navigational efficiency must be balanced with cost efficiency, just as it is in our own business when every invested dollar has to be found within airfares.
Is aviation doing enough to convince the public that it is taking environmental responsibility seriously?
No. Though it is true to say that we are only 2% of the climate change problem, the industry cannot hide behind that figure.
A few years back, the spike in fuel prices to well over $100 a barrel got airlines thinking seriously about fuel efficiency and happily fuel efficiency made environmental sense.
But it is different now. Unless the industry can convince the public that is thinking about the environment first and foremost then we will see decreasing demand. There is no point in greenwashing—talking about the environment without making positive, visible changes. The targets set must be credible, and the action we take must mean something to a concerned person buying a ticket.
We will also continue to pursue joint ventures and look to establish a strong presence on the transatlantic market.
In general, what other challenges and opportunities do you see for the industry in the near future?
Technology is central to the airline industry and its future. From analytics and insights to marketing to guest experience, there is so much opportunity but also challenge. I have often talked of WestJet as a digital company with an airline behind it. But don’t think in terms of going from paper to desktop PC to laptop to tablet to app. It’s not that linear. Most people now are using their smartphones as part of their everyday life. So, let’s start with that. Start with designing an app and understanding how that is used and its potential. Don’t migrate existing thinking and processes to it.
If you could change one thing about the industry tomorrow, what would it be and why?
I think the industry is guilty of putting constraints on itself and its ability to grow. We need to connect with the traveling public on all levels. They are demanding air travel, but they also want transparency in the travel process and meaningful environmental responsibility.
Canadian air traffic has doubled in the past 20 years and we can do that again with the proper strategies in place. Let’s remain ambitious!