Competitive Strategy for WestJet Airlines

The assignment requires analyzing WestJet's expansion strategies, community involvement, business class services, technology investments, and code-share agreements as effective competitive strategies. It also includes a comparison with Air Canada's operational highlights, demonstrating WestJet's lower departures but higher fuel consumption. The analysis is based on Porter's Five Forces model, highlighting the low threat of new entrants, medium buyer power, medium competitive rivalry, and high threat of substitutes in the airline industry.

ENG SCI 9501 - Business and Management: A Global Perspective
COMPETITIVE STRATEGY REPORT – WestJet Airlines Ltd.
Chaitanya Joshi
251118635

WestJet Airlines is an air travel company founded in Canada in 1996 and was started as a low
cost airline competing with the major airlines in Canada. WestJet caters to almost 65000
passengers daily with an average of 775 flights operating every day. It is Canada’s second
largest air carrier only after Air Canada and the ninth largest in North America. Initially the air
carrier catered to 5 cities in Canada but currently it offers travel to 55 destinations in Canada,
USA, Mexico, Caribbean and Europe. WestJet holds approximately 35% of the domestic market
share in Canada following Air Canada at 55% [1]. It operates an all Boeing fleet and usually
targets the middle class and upper middle class passenger market.
This report covers the competitive strategy that WestJet implements to stay in the market and
its many aspects. More information on the organizations strategies, segmentation, Internal
operations is reported as follows:-
SWOT Analysis
The 4 aspects of an organizations competitive strategy are Strengths, Weaknesses,
Opportunities & Threats (S,W,O & T respectively). Strengths and Weaknesses are usually
considered the Internal factors while Opportunities and Threats are External factors. As for
WestJet, the analysis is reported below –
STRENGTHS
 Low cost – The low cost of the air fare is one of the main competitive advantages that
WestJet possesses over other carriers.
 Brand Reputation – WestJet is a well known reputed air carrier and carries a certain
brand image and presence
 Safe travel – The primary focus of WestJet is on the passenger and safety of the
passengers is one of the strong points of the organization.
 Non unionized labour force – The absence of a labour union keeps costs at a check and
generally leads to fewer disputes.
 Recipient of multiple awards – WestJet has received numerous awards including the
Canadian Airline of the Year, Travellers choice awards, most reputable company among
others which not only helps with the reputation of the brand but also keeps the morale
of the employees high.
WEAKNESS
 Sacrificing amenities – Being a low cost air carrier, in-flight entertainment and food
specially snacks are compromised.
 Lack of high class travel – As it caters mainly to the middle class passengers, it does not
provide travel in first class or luxury travel which can hinder high class passengers from
flying.

 Lack of international travel – WestJet offers domestic travel in Canada and
internationally to USA, Mexico, Caribbean and Europe but compared to Air Canada
which offers travel to almost 190 destinations in over six continents, it lacks several
Trans-Continental travel opportunities.
 Seating – To make room for more passengers, seats were usually more in number but
smaller which certain passengers do not like.
OPPORTUNITIES
 New ultra low cost travel – WestJet has operated WestJet Encore and WestJet Link since
2013, and with the advent of Swoop, opportunities arise to dominate the regional travel
and also offers travel to some cities in the USA and Mexico.
 Plane modifications – Some of the newer aircrafts in the fleet are wide-body aircrafts
which can provide comfort as well as longer air travel which can be used to further
expand operations.
 Growing passengers – Domestic population and tourism both have increased in the past
few years and this will lead to more people flying and can be considered as an
opportunity.
 Codeshare agreements with over 15 airlines could help assess the prospect of
expanding.

THREATS
 Air Canada Rouge is a low cost airline operated by Air Canada, and is a serious threat.
 Expanding operations internationally will need competing with international
competitors, who are generally well known and experienced.
 Increasing fuel and commodity costs will make it difficult for the organization to
maintain the low prices.
 With the pandemic affecting air travel and with the corporation planning to increase the
fleet size, it will be difficult to fill up the seats to full capacity which could lead to losses.
The Transport Authority of Canada (Transport Canada) regulates air travel while local
governments own and control the local airport regulations particular to the region.
Some company values that WestJet follows are as given below –
 Aligning the interests of the corporation with that of the passenger
 Positive and passionate in every task and rising to any challenges
 Appreciative of guests and employees
 Committed to safety
 Honest and open communication

The WestJet corporation culture is fun and friendly and they provide training and rewards to
their employees. They use strategic hiring procedures to achieve efficiency and combined with
reduced maintenance cost results in a high Return on Investment. Employees are shareholders
and the employee and the guest experience is similar. [2]
MARKET SEGMENTATION
WestJet operates with two direct subsidiaries – WestJet Link and WestJet Encore, both
operating regionally. WestJet Link was started in 2018 in areas of Alberta and British Columbia
to connect it with bigger cities like Calgary and Vancouver and operates as a brand name under
the Pacific Coastal Airlines. As it operates in small cities and uses a smaller aircraft which is the
Saab 340, the maintenance costs are low. The average age of the 3 aircrafts is 23 years and the
plane can seat 34 people at maximum capacity, so it can be inferred that compared to other
segments the passengers and the revenue is less. WestJet Encore is the other regional airline
that operates a fleet size of 45 aircrafts focused mainly on cities like Edmonton, Halifax,
Vancouver. WestJet, once sought competitive advantage by having only one type of airline
which was the Boeing 737 which would lead to lower maintenance costs and better
standardization but increasing air travel, changing demographics and better technology in
aircrafts lead to using different aircraft types. WestJet Encore uses the Bombardier Q400 for its
operations and operates over 200 flights. Claims are that WestJet Encore has dropped air travel
costs by over 50% and increased air travel by almost 90% year by year. Lower fares have
encouraged the passengers to travel more thereby bringing competition in the market. In 2018,
WestJet Encore employed close to 1700 employees and has claimed to create over 13000 jobs,
so a considerable amount of resources is spent on this segment [1]. Swoop airlines is another
airline owned by WestJet that provides ultra-cost travel, both domestic and international to
almost 25 cities. It has claims to cut travel cost by atleast 40% by implementing a different
business model. Swoop has been a major competitor and operates Boeing 737-800 and filling
up to the full capacity of 185 passengers majority of the time.
The extent to which they focus on the segment is estimated based on the fleet size and
operations in the previous years. The information about segments is tabulated below –
Airline Starting Fare Hub of Destinations Fleet Size Focus

Operation
WestJet
Link
$100-$200 Calgary
International
Airport
7, including
Calgary,
Vancouver
3 Low-Moderate
WestJet
Encore
$100-$500 Calgary
International
Airport, Toronto
Pearson Airport
37, including
Europe, USA,
Mexico
47 High
Swoop $30-$200 Hamilton,
Abbotsford,
Edmonton,
Winnipeg,
Richardson
International
Airports
23, including
USA, Mexico,
Jamaica
9 High
As it is a travel corporation, promotional activities usually involve providing a travel package,
excursions, and other related benefits. Places of visiting include Costa Rica, Cuba include
vacation combinations curated for the passenger. Marketing activities include social media
marketing and other internet marketing techniques. The corporation post actively on Twitter
and their blog of their several travel packages, enticing a larger number of people to travel.
WestJet Encore also has a WestJet Rewards program that are earned by participants which can
be redeemed as WestJet Dollars and this is a good way of marketing the airline to its loyal
customers. [3]
WestJet believes in the effectiveness and efficiency of its tactics to create value for the
customer and provide required customer service. Offering a lower price when compared to
other flights to the same destination is certainly an effective method to increase air load in
addition to the customer service provided and only goes to prove the effectiveness of their
techniques. The corporations working culture is fun and friendly and the employees are treated
like a family, so that they are encouraged to create services of value to the customers. This is
done by providing benefits, incentives based on who fulfils the needs of the organization
among other methods.
WestJet is an airline that has targeted low cost air travel since its inception. Their service
creation revolves around the customers getting cheaper fares compared to other air carriers
and to maintain it. They focus on the essential aspects that are required for air travel and
mostly do away with unnecessary facilities, thereby providing cheaper fares. WestJet Encore
and WestJet Link are air travel providers that are targeted towards the regional market and due
to fewer facilities available, WestJet has created a regional target audience for itself. An
increase in the facilities provided and recent upgrades of their fleet of aircrafts has plans to
create value for the customers as they will be provided with better services.

Suppliers
(S)
Inputs (I) Process (P) Output (O) Customer (C)
-Boeing
-
Bombardier
-Saab
-Rolls
Royce
-Aircraft
-Engines
-Crew (in case of
a “wet” lease)
-Parts of the
aircraft
-Introduction of bigger
wider body aircrafts to
increase comfort.
-Targeting passengers
from small sized
communities.
-Bought by a private
equity firm in an all-
cash deal.
-Increase in customer
travel and comfort.
-Smaller communities
preferring WestJet
over other carriers.
-Expansion of
operations
internationally.
-Middle and
Upper-middle
class population.
-Regional small &
medium sized
communities.
-International
travelling
customers
The supply chain mainly consists of the manufacturer either selling the aircrafts to WestJet or
leasing them. The composite fabrication plant in Winnipeg provides composite material needs
and assembly procedures. The parts are sourced from the USA where most of the
manufacturing takes place and most airlines buy the finished product (aircraft with all the
fittings and registration). Rigorous standards and procurement policies are set up which ensures
that the products received from suppliers conform with the prescribed standards and negating
any effect on the global supply chain [4] . WestJet shares a good rapport with its suppliers and
has ensured procurement in a more streamlined manner. This results in better vendor
turnaround times and better contract management policies. It also ensures that the time for
unplanned maintenance is reduced, resulting in a lean inventory combined with regular
replenishing of stock.
The competition in the air travel industry is fierce as almost every other airlines provides flights
to the same destinations and not having a better plan of attracting customers will lead to grave
losses as it is an expensive area to venture into. Consider the following factors that affect the
corporation’s performance –
 The expansion of operations internationally and the pandemic situation will lead to
greater unemployment and lay off rates as it will be difficult to acquire staff for fewer
operations. (Political)
 WestJet has been a regular donor to charities and involved in communities such as
Make-A-Wish Canada, Hope air, The David Foster Foundation among few. The low cost
of the air fare combined with comparable quality of travel has increased passenger
travel, and even though the revenue is low it is compromised by the number of
customers that use the service. (Economic)

 WestJet is a corporation which focuses its operations based on the customer demand
and take care of the services they provide. Most customers of WestJet are repeat
customers and loyalty of the customers also helps with the operations. (Social)
 WestJet has been investing a good amount of their funds into making technological
applications a staple in the experience and focusses on the effectiveness and efficiency
of these applications to make air travel as comfortable and safe as possible.
(Technological)
 As environmental concerns have risen drastically in the past few years, the corporation
plans to invest a considerable amount into making the travel more environment
conscious. With the newer fleet using the more fuel-efficient variants, this is an
important aspect to consider. (Environmental)
 Transport Canada regulates the air travel and it is subjected to multiple safety
regulations. International travel will require following the respective national or
international regulations. (Legal)
Considering all the external and internal factors, if my corporation is in competition with
WestJet, the following steps would be ideal –
 Monitor and regulate the expansion ideas and rapid expansion would lead to
infrastructure and staffing problems, so not jumping into it at a rapid pace will be
beneficial. Expanding at a slow rate will lead to other competitors tapping into the
market and that is not ideal.
 Community involvement also plays a major factor in the success of the business, so
having a good relationship with the community and prospective passengers will be
another way of competing.
 Expanding service to Business class/ First class areas combined with inflight
entertainment and food which will bring in customers who are financially well off,
resulting in higher revenues.
 Investing in technology to create more fuel efficient and comfortable aircrafts, which are
low in emissions and reduce the fuel consumption to garner greater profits.
 Pre/post flight travel options for customers to travel to their destinations or reach their
respective airports, to create value for customers.
 Implementing Code-share agreements with international air carriers and venturing into
private air travel or charters could be an effective competitive strategy.

REFERENCES
[1]https://www.statista.com/topics/5154/westjet/#:~:text=WestJet%20is%20the%20second
%20largest,offering%20limited%20services%20to%20Europe.
[2]https://www.westjet.com/en-ca/about-us/jobs/roles/total-compensation
[3]http://www.boeing.com/services/government/supply-chain-logistics.page#:~:text=and
%20venture%20partnerships.-,Supply%20Chain%20Management,%2C%20part%2C%20and
%20service%20performance.
[4]https://www.westjet.com/en-ca/rewards/index
https://en.wikipedia.org/wiki/WestJet
https://centreforaviation.com/analysis/reports/westjet-swot-underlying-financial-strength-
serves-to-diminish-formidable-short-term-challenges-219198
https://www.aviationpros.com/airlines/article/12419680/driven-by-competition-the-airline-
industry-is-taking-off
APPENDIX
2014 2015 2016 2017 2018
3400
3600
3800
4000
4200
4400
4600
4800
3977 4029
4123
4507
4733
Westjet Revenue
Year
Revenue ( in million $)

2014 2015 2016 2017 2018
0
5000
10000
15000
20000
25000
30000
35000
25584 26902
29298 30998
32939
Seating capacity
Year
Seating capacity ( in millions)
2014 2015 2016 2017 2018
0
5000
10000
15000
20000
25000
30000
19652 20281
21951
24137 25491
Segment Guests
Year
Number of passengers ( in thousands)

WestJet and Air Canada hold a sort of duopoly in the Canadian air travel market and the
statistics are tabulated below –
Airline WestJet Air Canada
Passengers 25 M 51 M
Available Seat
Miles ( in
millions)
32,939 110,866
Fleet Size 177 400
Staff 11624 29900
Departures 268232 520000
Fuel
Consumption
(L)
1,523,700,982 at 0.81/L 1,349,573 at 0.75/L
Passenger
Load Factor
84% 80%
WestJet is on the negative side by having lesser departures but using a considerable amount of
fuel more than what air Canada uses, which can be one area of improvement.
Porters 5 forces for Competitive Analysis
 Threat of new entrants – Low, as the airline industry requires a large capital investment
and difficult to get into and capture the market.
 Supplier Power – Low, as the cost of switching suppliers in expensive and can be
considered both an opportunity and a threat.
 Buyer power – Medium, as passengers are always looking for deals from third party
sites but the fixed costs of the flights must be covered no matter what, so not much
room for bargaining.
 Competitive Rivalry – Medium, as there are several airlines internationally while there is
not a lot of competition in the domestic market.
 Threat of substitutes – High, as smaller distances could be easily covered by either
private or public transport at a very low price and loyalty issues arising when expanded
internationally.

Operational highlights
Westjet
Source : https://www.westjet.com/assets/wj-web/documents/en/investorMedia/WestJet-2018-Annual-Report.pdf

Air Canada
Source : http://www.annualreports.com/Click/11162