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WestJet to launch ultra low-cost carrier for Canadians

I wrote a blog yesterday on the WestJet ultra low-cost airline announcement. I’m updating it today with added information and some new thoughts.

This is monstrously big news in Canada; an announcement that could help travelling Canadians save some serious money.

WestJet today announced it will take on newcomers such as NewLeaf by launching its own ultra low-cost air carrier in Canada. The plan is to begin service later this year, they said, with 10 “high density” Boeing 737-800’s.

I assume high density refers to increasing passenger volumes and not the thickness of the metal on the outside of the plane. And you thought seats couldn’t get any more narrow or leg room any worse? Ha!

NewLeaf has begun flying Canadians from smaller airports such as Hamilton and Abbotsford, B.C. at very low prices, often advertised at half what the big boys sell tickets for. In at least one case, they accused WestJet of stealing their thunder by flying planes from Canada to Phoenix-Mesa, a smaller airport in the Phoenix area.

So everyone knew WestJet was concerned. And now they’re acting.

WestJet said it will need to reach a deal with its pilots, which I suspect they can manage. They also need regulatory approvals, which shouldn’t be difficult from the government in Ottawa.

Officials said the new airline (they haven’t said what they might call it,) will “provide Canadians with no-frills, lower-cost travel options,” likely along the lines of Ryanair or other airlines in Europe that charge insanely low prices but charge extra for everything from purses to pretzels. I read in the Globe and Mail today that Spirit Airlines in the U.S. has something like 60 or 70 “ancillary” charges it can toss at customers, so you can bet WestJet will charge for all sorts of things to make up for advertised low fares. And, hey, if you’re willing to fly with nothing but a toothbrush and a change of underwear, what do you care?

“The worldview on low-cost airlines has changed since the launch of WestJet in 1996 and we are responding,” commented Gregg Saretsky, WestJet President and CEO. “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.”

There weren’t any other details provided, but this already has the makings of a major airline war in Canada. We probably won’t love the flying conditions we find in the air, but I suspect Canadians will love the prices.

It’s likely the new WestJet airline will follow the same pattern as New Leaf and use lower-cost, smaller airports in Canada, such as Hamilton or maybe London or Kitchener-Waterloo in Ontario or Abbotsford in B.C. Prairie cities also could benefit.

You can bet they’ll be flying to places like Arizona and Florida. They weren’t saying, but Saretsky was quoted in the Globe and Mail today as saying the planes they’ll be using have a range of nearly 3,000 miles. “So it makes sense for us to look beyond domestic” routes, he said.

With WestJet’s experience in the biz, they can probably make a go of this.

Air Canada launched a family-friendly, lower-cost version of itself with Air Canada rouge a few years ago. But it’s not an ultra low-cost airline like Ryanair or New Leaf.

One also can make the point that WestJet started out as a low-cost airline. It still gets named in that category for some airline awards, but their prices are usually about the same as Air Canada, so what they really are is just a friendlier, folksier version of AC. (And also, to be fair, an airline that says it doesn’t overbook passengers. That they haven’t made a fuss about that speaks to their integrity, I believe.)

It’s interesting that WestJet created their WJ Encore class a while back as a smaller airline to serve smaller markets in Canada. Now they’re creating a third class of airline that’s following the ultra low-cost model. They’ve also expanded into Europe, which means they’re really quite the hybrid airline.

One observer was quoted in Travel Industry Today as saying they might be getting a little too ambitious.

National Bank analyst Cameron Doerksen said the new low-cost move could take business away from WestJet’s main routes. He also said he’s concerned WestJet “has too many new strategic initiatives underway simultaneously, including a major expansion of its widebody international routes.”

“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,” said Clive Beddoe, co-founder of WestJet and Chair of the 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.”

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