November 29, 2018
Business 100 – AB9 Investors
University of the Fraser Valley
33844 King Road
Abbotsford, BC V2S 7M8
Dear Business 100 – AB9 Investors,
This report was created in response to a request from you, the investors, to analyze the investment
potential for WestJet Airlines Ltd. Aviation Consulting Company upon your request, has completed a full
analysis of WestJet and we are confident that our findings will help guide you to make an appropriate decision
into whether or not you will invest in the company.
Our consulting team has gathered key information from the company, and industry sources, to allow us
to provide you with a full understanding of the company’s current position in the market place now, and in the
future. This document provides a current overview of the company and its present situation, including the use of
SWOT and PESTEL analyses to determine factors affecting the company both internally and externally. These
analyses helped us to determine the critical issues that WestJet is currently facing.
This document also provides an analysis of WestJet’s corporate structure and how it relates to the
successful operation of the company. Our team has also researched the effectiveness of the company’s
marketing strategy in relation to its ability to both gain new customers and maintain its current customers.
As a result of our findings we have provided our outlook on where we believe WestJet will be in 3 years
from now. This outlook provides a view into WestJet’s predicted future as a result of our analysis in respect to
both its potential growth and its future financial performance.
Our findings throughout our analysis of WestJet have allowed us to provide you with a well-rounded
report that summarizes all key areas of relevance to your investment decision. Based on the research and
analysis conducted by our team we have provided a recommendation in concern to the future of WestJet,
and its investment potential. This recommendation summarizes areas of key concern to your investment
decision as found throughout our analysis as to help guide you to make a well guided investment decision.
Aviation Consulting company strives to provide a thorough, and well analyzed recommendation for
your investment decision in the airline industry. We hope this report provides you with all information relevant to
investment decision, if you have further questions, or require further clarification, do not hesitate to contact our
consultants.
Sincerely,
Aviation Consulting Company
Michael
Dias
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Shimei
Villanueva
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Guneev
Aulakh
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Aaron
Jiang
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WestJet Company Analysis
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Michael
Dias
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Shimei
Villanueva
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Aaron
Jiang
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Guneev
Aulakh
November 29th, 2018
Executive Summary
WestJet Airlines is a Canadian airline that is current in the process of growing its operations to become a
global airline. The company is currently on track to begin operating 10 Boeing 787’s by 2021 that will fly to new
international destinations, as well as introduce a new business class to the company.
Our SWOT and PESTEL analyses allowed us to understand the current factors, both internal and
externally, that are affecting the company’s current situation. Some of these factors included positives for the
company, including advances in technologies that allow for more fuel-efficient planes that the company is
working on adding to their fleet, as well as some negatives including the unionization and strike threats by the
company’s employees. Further, these points formed the critical issues for the company which may have serious
effects on the company’s ability to perform well, such as growing customer dissatisfaction when threats of
strikes loom over the company.
Our findings when researching the company’s mission, vision, and values produced conflicting results.
The company claims they are striving to improve the lives of everyone at WestJet, including their employees,
yet statements and actions from employees and their unions would say otherwise.
WestJet also outlined their current objectives, including increasing load factors, as well as becoming a
global airline by 2022. The company claims that its order of 10 Boeing 787’s will help it achieve its latter
objective, yet 10 planes only allows the company to fly to select global locations, which wouldn’t necessarily
be a global airline. This slow expansion is of concern as WestJet’s competition is already flying to these
destinations, which is revenue WestJet is missing out on.
The way WestJet organizes their executive team is similar to most companies in the majority of
executives are organized by the function they perform for the company such as finances or strategy. There are
a few exceptions, including the President of Swoop, which manages a brand rather than a function. This
structure is fairly useful as it allows the CEO, Ed Sims, to oversee all the functions of the company.
Although this structure works well on the executive level, it can create a culture of disconnect between
executives and lower level employees. As an airline, WestJet has the lower level employees, such as flight
attendants and pilots, flying all around the world at any time, and because the executives don’t make an
effort to work with employees on their issues, this can cause upset that leads to, and has previously nearly lead
to strike action by employees. This is an issue of importance as it leads to bad publicity and loss of sales for the
company.
The board of directors for WestJet contains a mix of both those who have worked for WestJet, as well as
members that have worked in other industries, such as the banking and oil industries. Having a diverse board of
directors allows for a good representation of all of the company’s stockholders.
In March 2018, the company’s former CEO, Gregg Saretsky, retired from WestJet, which resulted in Ed
Sims being promoted to CEO after only being hired to the company less than a year prior. A change in CEO
can lead to significant changes for a company; these changes can be good or bad so it’s still too early to tell
how this CEO performs, or how his promotion will affect WestJet as a company.
WestJet’s finances are significantly concerning, especially consider the company’s profits have
continuously decreased over the past 3 years. The company has taken many issues to increase revenues which
have been successful, as revenue has increased year over year, yet because it hasn’t put in as much effort to
decrease expenses, their expenses have increased at a faster rate than revenues, resulting in decreasing
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profits. This issue along with the fact that the company’s reported earnings-per-share has decreased each year
for the past 3 years, are highly concerning, especially when making an investment decision.
In comparison to Air Canada’s finances, WestJet did much worse in most areas in 2017. While WestJet’s
debt-to-equity is still well below Air Canada’s, WestJet’s has increased over the past 3 years, while Air Canada’s
has significantly decreased. WestJet’s returns are also far behind the competition, with Air Canada’s returns on
both sales and equity being significantly higher than WestJet’s. Our comparative analysis clearly outlines that in
2017, WestJet’s financial results were far behind the competition.
One strength WestJet has is its marketing, the company is fairly successful in identifying new target
markets and tailoring their new products towards them. The company offers many different fares and
packages so that every traveller possible has an option that they can pick based on their wants. Further the
company prices these products in a way that captures budget travellers, as well as having options for those
willing to spend more for increased services and experiences. WestJet has also been successful in its promotion,
using social media, and its own seatbacks fully to their advantage. Again, the company has been successful in
not only finding ways to distribute many tickets through different sources, it also has been successful in choosing
destinations customers will want or need to travel to.
Our outlook for WestJet is both positive and negative, given the company’s current financial and the
risk taken with the new planes we do anticipate a continued decrease in financial performance for at least the
next year. It is possible that sometime within the next 3 years the new planes will prove significantly profitable for
the company as well as bringing new and returning the customers. Overall, we expect performance to
decrease as the company heads into a potentially turbulent transition period, before its performance can
increase again.
After our analysis we recommend that you do not invest in WestJet Airlines at the current moment. The
company is currently in a rough patch in relation to its employee satisfaction, its financials, and other areas.
WestJet is taking a big risk by introducing these new planes that have higher transition costs, including the
training all employees that will be operating these planes as well as the initial investment that may continue to
hinder the company in the immediate future. This company may be a potentially successful investment in a few
years, after its transition period, and if they can prove to be able to mitigate their current issues with their
employees, as well as if these new planes are able to produce significant profits for the company. As of now
WestJet would not be a sound investment as there is significant chance your investment will be lost in the
coming years if the company is unable to overcome its current issues.
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Table of Contents
INTRODUCTION .................................................................................................................................................................... 1
COMPANY OVERVIEW ........................................................................................................................................................ 1
COMPANY SITUATION ......................................................................................................................................................... 2
SWOT ANALYSIS .................................................................................................................................................................... 2
PESTEL ANALYSIS ................................................................................................................................................................... 3
CRITICAL ISSUES ...................................................................................................................................................................... 4
STRATEGIC DIRECTION ........................................................................................................................................................ 5
MISSION, VISION, AND VALUES ................................................................................................................................................ 5
OBJECTIVES ........................................................................................................................................................................... 6
ORGANIZATIONAL STRUCTURE............................................................................................................................................ 7
COMPANY CULTURE ............................................................................................................................................................... 8
BOARD OF DIRECTORS ............................................................................................................................................................ 8
CEO .................................................................................................................................................................................... 9
FINANCIAL PERFORMANCE ................................................................................................................................................ 9
COMPARATIVE ANALYSIS....................................................................................................................................................... 12
MARKETING STRATEGY ...................................................................................................................................................... 13
TARGET MARKET ................................................................................................................................................................... 13
PRODUCT STRATEGY ............................................................................................................................................................. 14
PRICING STRATEGY ............................................................................................................................................................... 15
PROMOTION STRATEGY ......................................................................................................................................................... 15
DISTRIBUTION STRATEGY ......................................................................................................................................................... 16
COMPANY POSITION ............................................................................................................................................................ 17
COMPANY OUTLOOK ........................................................................................................................................................ 17
RECOMMENDATION .......................................................................................................................................................... 18
APPENDIX ........................................................................................................................................................................... 19
APPENDIX A: BOARD OF DIRECTORS ...................................................................................................................................... 19
APPENDIX B: PRODUCT LIST ................................................................................................................................................... 20
REFERENCES ....................................................................................................................................................................... 20
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List of Figures
Figure 1: SWOT Chart ........................................................................................................................................................... 2
Figure 2: PESTEL Chart .......................................................................................................................................................... 3
Figure 3: WestJet Organizational Structure ....................................................................................................................... 7
Figure 4: CEO Compensation in 2017 ................................................................................................................................ 9
Figure 5: WestJet 3-Year Financial Performance ............................................................................................................ 10
Figure 6: WestJet & Air Canada 2017 Financial Performance ...................................................................................... 12
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Introduction
As requested from you, the investors, Aviation Consulting Company has composed the following report
to outline the positives and negatives of WestJet as a company, and its investment potential. This document is
meant to provide you with all the necessary information that is of importance to you before you make your
investment decision, as well as provide you with our recommendation on whether or not to invest in WestJet
Airlines.
Our analysis was created using a variety of sources including the company’s website and financial
documents, as well as sources that have an outside view of the company. These sources allowed us to not only
analyze how the company sees itself and how they believe they are performing, but it also allowed us to follow
critical industry trends to see how WestJet is performing in comparison to other companies in the aviation
industry.
For each section that this report covers our consulting team outlined all information associated with that
section of the report, followed by an analysis of each section to determine how the found information affects,
or has affected the company. Our analyses provided the crucial information needed to form our
recommendation for your investment decision.
This report contains information from many areas of the company, including who the company is, how
their company culture affects the company, as well as areas that cover the company’s financial performance
and their marketing strategies. Our analysis will not however, provide a long history of WestJet as a company as
the report only covers the information that is relevant to your investment decision today. The following section
provides a brief overview of WestJet as a company, as well as key information of importance to your
investment decision.
Company Overview
The company overview provides key information as to how WestJet is currently operating and how their
operations may affect an investment decision. This section provides an overview of who WestJet is, how they
are performing financial, events that are affecting now, and in the future, and their position in the marketplace
in comparison to their competition.
WestJet is a Canadian-based airline who started operating in February of 1996 as a company that
would create an affordable, customer-oriented flight experience for Canadians (WestJet, n.d.-j). Ever since its
start, WestJet has continued to grow and is now beginning its transition into becoming a global airline (WestJet,
2018f, p. 2).
WestJet, as with most airlines, can tend to fluctuate in terms of its economic standing, ranging from
economic highs, to economic lows as quickly as overnight. This volatility just recently caused WestJet to have its
first negative quarter in 13 years (Olive, 2018, para. 3); however, annually WestJet continues to increase
revenue yearly, with total revenue for 2017 reaching $4.5 billion (WestJet, 2018f, p. 1). One such negative
quarter is WestJet’s second quarter of 2018, where they saw a net earnings loss of $20.8 million (WestJet, 2018g,
p. 4). Many external factors have affected this quarter, such as the heavily publicized intent to strike by the
company’s pilots union which created a sense of uncertainty among customers, which lost WestJet many
customers during the first half of the year (WestJet, 2018g, p. 5).
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WestJet is constantly striving to maintain their customer satisfaction, and to continuously adapt to their
customer’s needs; for example, the introduction of the Boeing 787 in early 2019 will be the first WestJet planes to
offer a business class cabin (WestJet, 2018h). These new planes will not only allow WestJet to access a new
market of business travellers, they will also allow WestJet to carry passengers further than ever before, opening
themselves up to markets flying to and from these brand-new destinations.
Along with the new planes, WestJet has also recently announced a partnership with Delta Air Lines that
will allow its passengers to have an easier experience flying through the US and it will also allow WestJet to fly
customers to new destinations with an expanded shared flight network (WestJet, 2018a). All of these upcoming
additions will allow WestJet to access many new customers around the world, with a significant increase in
revenue over the upcoming year.
The biggest competition to WestJet is Air Canada, who are currently much further ahead economically
than WestJet, bringing in over $16.2 billion in revenue for 2017 (Air Canada, 2018b, p. 4). Although WestJet is
clearly far behind Air Canada in terms of revenue per year it is important to remember that WestJet’s revenue
per year has continually increased, and they are also currently pushing to rapidly expand as shown by their
order of 10 Boeing 787 Dreamliners (Boeing, 2018).
The company has also recently started their fully owned subsidiary airline Swoop which allows WestJet to
offer less expensive tickets to its customers. This is possible due to a substantial decrease in expenses and
stripped-down services that will only be offered for a cost (Swoop, 2018). By not only reducing costs, but also
making profit off of pay-per-use services. The decision to start the Swoop airline this year is definitely a risk for
WestJet as airlines are often expensive to run and maintain, even when you strip down the expenses. As this is
the first year of Swoop being an airline there is currently no financial information to help us predict how this risk
will pay off for WestJet and subsequently its investors in the future.
WestJet as with any airline comes with significant risk as there are many factors affecting how it performs
each quarter. At any given time, WestJet could instantly face increased expenses and/or decreased sales that
could very likely cause a deficit at the time. WestJet’s financial history has shown that it does sometimes run a
deficit during some quarters, though it has persistently increased annual revenue yearly (WestJet, 2018f, p. 1).
The airline’s expansion plans going into 2019 seem to point to a continued increase in revenue in the future.
Company Situation
WestJet is constantly facing many factors, both internal and external, that affect how the company
functions within the Canadian, and global, airline markets. The use of both SWOT and PESTEL analyses allow us
to fully comprehend the environment and factors that affect WestJet’s position in the market.
SWOT Analysis
Strengths
-
-
Weaknesses
Growing Annual Financial Performance
Great Relationship Among Canadian
Consumers
Opportunities
-
Additional International Destinations
Business Class/Premium Services
-
Limited Types of Planes
No Business Class
Threats
Strong Competition
Employee Unionization
Figure 1: SWOT Chart
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One of the strengths that helps WestJet to maintain its position in the market is its customer relations.
When ranked on reported customer satisfaction, WestJet placed fifth in North America (Skytrax World Airline
Awards, 2018). By maintaining these relations WestJet is able to retain customers and exudes a good reputation
that may attract potential new customers.
WestJet’s (2018d) annual report helps us to identify one of the company’s biggest weaknesses, which is
a limited range in types of planes. WestJet almost exclusively flies the narrow body Boeing 737 aircrafts which
don’t have as much range, or passenger capacity, as wide-bodied planes. This means WestJet is limited to
closer destinations and cannot carry as many passengers per flight. Additionally, WestJet does not currently
offer a business class meaning the airline is potentially losing many high paying customers to its competitors.
WestJet does however appear to be approaching many of the opportunities it sees available and
obtainable. WestJet will be addressing the issue of a lack of long-haul destinations with their order of 10 Boeing
787’s (Boeing, 2018); though this still only allows them to do 10-20 long haul flights a day meaning many
international destinations will still remain unfulfilled after the delivery of these planes. By ordering even more of
these long-distance planes WestJet could serve even more of these customers. Also, the airline currently
doesn’t offer a business class, which could push business travellers to other airlines; this is being addressed on
the new Boeing 787’s, though this could be put into other planes as well allowing access to business travellers
on even more routes.
One of WestJet’s biggest threats is their competition with Air Canada; Air Canada is a much more
established airline, which has been operating in Canada for 80 years (Air Canada, 2018a, p. 1). Having only
been an airline since 1996, WestJet does not have the same level of reputation as Air Canada, and as such
they may lose potential customers who don’t know much about WestJet due to their short history. (WestJet,
n.d.-j). WestJet also faces threats such as employee unionization that allows their employees to leverage for
higher wages and benefits, increasing WestJet’s expenses (WestJet, 2018g, p. 5). When these unions threaten
to strike, such as when the union representing the airlines pilots threatened action earlier this year, it causes
customers to become uncertain of the airline in the immediate future, which loses customers and sales of
tickets. (CBC News, 2018a).
PESTEL Analysis
Political
-
Bill C-49
Taxes and Fees
Economical
-
Social
-
Low Cost Carriers
Consumers Wanting to Travel to More
International Destinations
Technological
-
Environmental
-
Burn Lots of Fuel Per Year
Planes are Becoming More Fuel Efficient
Employee Unionization
Budget Tourists
Fuel Efficient Engines
360° View Marketing
Legal
-
Canadian Aviation Regulations
Requirements of Government
Figure 2: PESTEL Chart
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Some political policies affect WestJet both positively and negatively. Bill C-49 gave many foreign
investors who plan to invest in WestJet a bigger chance in foreign ownership since it was passed by the Senate
and House of Commons; the limit of foreign ownership has risen from 25% up to 49% (Allen, 2018). Also, almost
every airport and country worldwide have taxes and fees that have to be paid; ultimately these have to be
paid per consumer which increases expenses; because WestJet includes most of these fees in the price on the
ticket, the airline either has to increase ticket prices, reducing sales, or reduce its prices (WestJet, n.d.-g).
WestJet’s economical standing is dependent on the factors it faces and how it deals with them.
Employee unionization is a big issue WestJet has faced in recent years, and as seen in Q2 of 2018 it does
severely affect WestJet economically (WestJet, 2018g). Also, many people don’t have the expendable income
it takes to travel often, so WestJet must always ensure a balance of an attractive price for customers, while
retaining profit.
Euromonitor (2018) mentioned some social changes that currently affect Canadian airlines. One such
change is that many Canadian travellers are beginning to show growing interest in international travel. They
indicated that WestJet is changing along with this interest by expanding to offer more international
destinations. Additionally, Euromonitor also refers to the growing business for ultra-low-cost carriers in Canada,
to which WestJet’s introduction of their subsidiary airline Swoop is helping to grow.
Technology in the airline industry is constantly evolving to help reduce costs, and better the passenger
experience. An example of this is the new winglets and engines being introduced to the Boeing 737 MAX that
not only are more fuel efficient, but engines are also much quieter than on previous planes, which saves money
while improving the flight experience for everyone (WestJet, n.d.-b). Another new technology is that WestJet is
taking advantage of is 360° videos, which it is currently using to market their new Boeing 787 planes (WestJet,
2018d).
As with any airline, WestJet does have a significant impact on carbon emissions, burning nearly 1.5
billion litres of fuel in 2017 (WestJet, 2018f). WestJet is however working hard to fight this environmental impact
by constantly looking to make its planes more fuel efficient as seen with the Boeing 737 max (WestJet, n.d.-b).
As an airline, WestJet has many regulations it must follow, most notably the Canadian Aviation
Regulations which outline the federal laws that airlines must follow within Canada (Government of Canada,
2014). Another set of laws that WestJet is bound by is that they are legally required to disclose customers
personal information to governments and authorities when requested or required (WestJet, 2018c). The many
laws WestJet faces may be costly but are in place for security and safety.
Critical Issues
These SWOT and PESTEL analyses allow us to identify some of the critical issues facing WestJet as a
company. There are some unique issues that WestJet is facing, such as a lack of intercontinental flights which
hinders WestJet’s growth, caused by lack of a diverse fleet of planes (WestJet, 2018f, p. 34). WestJet’s ability to
expand is mainly reliant on the delivery of 10 Boeing 787 planes; however, these planes are slow to be
delivered and WestJet won’t have all 10 until 2021 (WestJet, 2018f). The slow delivery of these planes means
WestJet is slow to expand in a time where their competition is already flying to global destinations.
Customer satisfaction is the very important for an organization and customer dissatisfaction can cause
distrust which can emerge as a threat for WestJet and cause loss of interest of customers to fly with WestJet, as
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seen with this year’s pilot’s strike threat (CBC News, 2018a). If situations such as this continue to occur customers
may become less likely to fly with WestJet as they become unsure of the company’s ability to operate in the
short term.
To combat these issues WestJet should begin by rethinking their strategy on employee compensation to
rebuild relations with these employees who feel like they are being paid an unfair wage; this will help to restore
WestJet’s public image and will create a better experience for customers from employees that are more
satisfied in their jobs.
WestJet likely cannot control the speed at which Boeing delivers its planes; however, it should continue
to expand its new brand Swoop in the North American market to help gain new customers in North American
market while it waits for the delivery of these new Boeing 787’s to begin its global expansion.
Strategic Direction
The strategic direction of WestJet allows us to see who the company is, what they strive to be, and what
the company’s plans are for the future. By analyzing WestJet’s mission, vision, and values we can begin to
understand how the company sees itself and if it is truly living up to what they outline in these statements. We
can also look at the company’s key objectives to see where the company wants to be in the future, and what
it is currently doing to obtain those objectives.
WestJet’s current strategy is to push to become a more global airline; the company is planning to
achieve this with its delivery of its first Boeing 787 Dreamliners in 2019 (WestJet, 2018f). This move will require
increased effort on all that work for WestJet to make this expansion successful. WestJet will have to ensure
employees are motivated and willing to take on the extra responsibility these planes require; it is up to everyone
at WestJet to ensure they stay true to their core mission, vision, and values throughout this transition.
Mission, Vision, and Values
WestJet’s mission is “to enrich the lives of everyone in WestJet’s world. We believe that focusing on
metrics such as safety, on-time performance, profitability, guest satisfaction and employee engagement will
lead us toward this goal” (WestJet, 2018f, p. 7). This mission statement outlines exactly what WestJet wants the
company to be and it gives an outline on how it plans to achieve this mission.
WestJet’s mission focuses on enriching not just the lives of the consumers but everyone around the
WestJet world including the employees. However, over the past year discontent with the WestJet crew
members has seemed to be growing such as with the pilots in May (CBC News, 2018b). Another issue arose
when cabin crew were found to be only receiving pay for time in the air and not receiving pay for any work
done on the ground (Bakx, 2018). With their mission to enrich the lives of everyone, they are certainly not
enriching employee lives if they are not even compensating them fairly. Moreover, their goal is to achieve
guest satisfaction; not just in the air but also on land. WestJet employees play a huge role in the company’s
ability to achieve that goal which is why WestJet needs to maintain better employee relations if they want to
achieve their mission.
In 2017 WestJet set its vision for 2022 with the following statement “we are team WestJet, we are caring
at our core, and we are a global airline” (WestJet, 2018f, p. 7). This vision statement outlines the company’s
want to remain the company that they are today as they begin their expansion to the world through to 2022.
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To achieve this vision, WestJet needs to maintain its mission, and repair employee relations as it is the front-line
employees that show who the company is.
WestJet outlines the following as its core values; “a commitment to safety; positive and passionate in
everything we do; appreciative of our people and guests; fun, friendly, and caring; aligning the interests of
WestJetters with the interests of the company; and honest, open, and keeping our commitments” (WestJet,
2018f, p. 7). WestJet is currently keeping up with most of their values such as being caring and passionate by
teaming up with programs such as Make-A-Wish to help give back to the community (WestJet, n.d.-e).
Although WestJet does meet most of its values it again fails when it comes to the employees; when cabin crew
work a 4-hour shift, but are only paid for 1-hour flight time, they presumably don’t feel appreciated, and it
makes for difficulty in maintaining a positive environment (Bakx, 2018).
Objectives
The company’s key objective is to become a more global airline by 2022. To achieve this, WestJet’s
strategy was to order 10 Boeing 787 to be delivered before the end of 2021 (WestJet, 2018f, p. 2). These planes
will allow for destinations further than anywhere WestJet currently flies. It seems that WestJet may be unable to
meet this goal with just 10 planes, but it is a good way to start it’s expansion as 10 planes seems to be an
obtainable number over 3 years and there shouldn’t be any issues long as there is no production delays at
Boeing. After delivery of these planes, WestJet will be able to see which routes make the most sense for
WestJet. These planes are designed specifically for long range flights, reaching a range of approximately
14,000km, this makes these planes a good strategic choice for WestJet to begin its globalization ventures
(Boeing, n.d.).
Another objective WestJet has is to increase its load factors, which indicate how full each flight is. This
objective of concern to WestJet as each seat that isn’t filled is potentially hundreds of dollars of income that
the company is missing out on (WestJet, 2018f, p. 2). WestJet has been consistently working to increase load
factors and in 2017 the obtained a record high load factor for the company at 83.6% (WestJet, 2018f, p. 2). As
they continue to maximize load factors this allows the company to increase its revenues while barely increasing
their expenses as those expenses would have already been spent for the flight anyways.
WestJet (2018f, p.13) is also aiming to increase its revenues while keeping its costs down; its plans to do
this by first attracting premium travellers to WestJet. These travellers bring far more revenue to the company
than a single economy traveller which will help increase the company’s revenues. At the same time to reduce
costs, the company is wanting to increase digital self-service, which reduces costs of employees doing the
work, and optimizing maintenance to keep costs down while still maintaining safe airplanes. WestJet estimates
premium travellers offer a potential $300-$500 million in extra revenue by 2022, while its cost saving procedures
could save the airline a potential $140-$200 million by 2022.
WestJet’s current objectives, if met, will allow the company to increase its currently shrinking profit
margins. These objectives rely on the ability of the company to attract new premium customers, as well as
optimize its route planning and fare calculations to ensure load factors are increased to keep up revenues. The
company’s plans to decrease expenses are especially critical during a time when the expenses only seem to
be increasing.
One of the company’s biggest hurdles towards globalization is the speed of which they receive their
Boeing 787’s; with the delivery of these planes being so slow WestJet can’t meet its goal of becoming a truly
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global airline in a reasonable time. This may mean that WestJet might not make its goal of becoming a global
airline because even with the full 10 orders, they will only be able to serve select locations which is hardly a
global airline which is already far behind where their competitors are already flying to. However, if WestJet
does begin to treat their employees, and unions, with respect and listen to their concerns, they will help the
company through this transition to offer more global locations and allow them to create a better customer
experience, helping to achieve the company’s goal of attracting and maintaining premium customers.
Organizational Structure
The way a company is structured is critical to its success, as such it is important for a company to choose
the best structure for their business. WestJet’s corporate structure is set up in a way that the CEO oversees all
different functions of the company from operations, to finances, to people and services (WestJet, n.d.-h). Figure
3 outlines WestJet’s current corporate structure.
Edward Sims
President & CEO
Craig
Maccubbin
Charles Duncan
Executive Vice
President, Chief
Strategic Officer
Executive Vice
President, Chief
Information
Officer
Barbara Munroe
Executive Vice
President,
Corporate
Services &
General Counsil
Richard Bartrem
Vice President,
Marketing
Communications
Mark Porter
Harry Taylor
Executive Vice
President,
People &
Services
Executive Vice
President,
Finance & Chief
Financial Officer
Steven
Greenway
Executive Vice
President &
President of
Swoop
Jeffrey Martin
Chief Operating
Officer
John Weatherill
John Aaron
Vice President,
Pricing and
Revenue
Management
Vice President,
General
Manager of
WestJet Encore
Brian Znotins
Vice President,
Network
Planning,
Alliiances, and
Corporate
Development
Scott Wilson
Vice President,
Flight Operations
Figure 3: WestJet Organizational Structure
Source: (WestJet, n.d.-h)
The executive team at WestJet is mostly organized by the function they perform for the company, with
a few exceptions being some who are designated by product, such as John Aaron who is the manager of
WestJet Encore, or by operations, such as Scott Wilson who is the Vice President of Flight Operations. (WestJet,
n.d.-h). This structure is set up in a way that allows for all functions of the company to be overseen by the CEO,
as well as a few of their major products; it also allows for the company to maintain a consistent experience
company wide.
7
As WestJet is currently pushing towards becoming a global airline the company could eventually
benefit from a company structure based on each location they plan on operating in. Divisions such as
domestic, European, Asian, US, Mexico, and South American would allow WestJet to better focus on issues and
challenges specific to each of these locations, and to better allocate resources to locations that need them.
The current structure at WestJet seems to work well on a domestic scale as it allows for uniformity of its
services and marketing to best fit Canadian customers, but as WestJet grows globally it will be facing different
customers, countries, and airports all of which have their own expectations and needs that a location-based
structure would better allow WestJet to conform to.
Company Culture
One issue with the current structure is that there seems to be a disconnect between executive
employees and lower level employees; this is seen most recently with WestJet’s pilots’ union threating to strike
earlier this year (CBC News, 2018b). These pilots felt that their concerns weren’t being heard by the executive
employees, especially with concern to compensation, as well as their job security and working conditions (CBC
News, 2018b).
This lack of communication can lead to a negative culture throughout the company and may
eventually cause employees to stop caring about the company and their jobs. This can cause a loss of
customers due to lack of attention, possible mistakes, and high employee turnover, all of which add additional
costs to the company. This can affect WestJet’s ability to grow globally as if employees continue to remain
displeased with the company, they will begin to strike again, and many may eventually leave the company
during a time that WestJet needs many lower level employees as it begins to ramp up global operations.
WestJet (n.d.-i) outlines the benefits that WestJet offers to help attract potential employees to the
company. These benefits include a base salary which is reviewed each year to remain competitive, a flexible
benefits plan that allows employees to choose their benefits that best suit their needs, company share
purchase matching, profit sharing, performance rewards, and travel benefits. These benefits help to encourage
employees to do a great job for the company as the amount they receive as a yearly performance reward
depends on their personal performance as well as by being shareholders they should also be concerned with
the performance of the company as a whole.
These benefits also help to retain employees such as how the company matches employee share
purchases which encourages employees to stay with the company as the gain more shares in the company.
Also, a benefit almost exclusive to the airline industry is travel benefits which allow employees to fly anywhere
on the company’s network with a companion or their family.
Board of Directors
The board of directors for WestJet currently has 13 members all of which have backgrounds in many
different industries, such as banking, oil, accounting, and aviation (WestJet, n.d.-a). These backgrounds allow
for each of the board members to each bring a different set of skills and knowledge to the WestJet board, and
it also allows for a broader representation of the company’s stakeholders. Many of the board members do not
work for WestJet and as such are in a better position to evaluate the company. The only visible conflict of
interest is that the few people who have worked for WestJet on the board may be biased to believe that the
company is performing better than it actually is (see Appendix A for a list of the members of WestJet’s board of
directors).
8
CEO
WestJet’s current CEO, Ed Sims, joined WestJet in 2017 as Executive Vice-President, Commercial, who
has worked in the tourism and aviation industries for over 30 years (WestJet, n.d.-h). Sims became the new CEO
of WestJet in March 2018 when the previous CEO, Gregg Saretsky, retired (Siekierska, 2018b). Having 30 years of
experience in transportation should allow Sims to effectively lead WestJet through its upcoming global
expansion. It seems too early to tell Ed’s leadership style, but his experience makes him a good fit for WestJet’s
new CEO. Figure 4 outlines Gregg Sartesky’s total compensation in the year 2017 in comparison to WestJet’s
main competitor, Air Canada’s CEO Calin Rovinescu.
Total Compensation
Gregg Saretsky
(Former WestJet CEO)
4.4 million
Calin Rovinescu
(Air Canada CEO)
9 million
Company’s Net Income
283 million
2 billion
Percentage of Company Income
2%
0.5%
Figure 4: CEO Compensation in 2017
Sources: (WestJet, 2018f) (Air Canada, 2018a) (Air Canada, 2018c)
In 2017 Gregg Saretsky, WestJet’s CEO at the time, made a total of 2% of the company’s profits
(WestJet, 2018b, p. 47). In comparison for 2017 Air Canada’s CEO Calin Rovinescu received a total of 0.5% of
the company’s profits (Air Canada, 2018c, p. 67). Both CEO’s compensations seem reasonable as the CEO of
Air Canada, being a more profitable company typically makes more, and the CEO of WestJet makes a higher
percentage of the company’s income to keep the position competitive with others in the industry. With
Saretsky receiving a total of 2% of the WestJet’s income, it could be seen that he was actually overpaid for the
position, which could potentially cause issues within the industry and the company itself.
If either company attempted to underpay the CEO position, they would likely find it difficult to replace
them with someone that was fully qualified for the position, as those with the proper qualifications would work
elsewhere. Oppositely if either company started to overpay the CEO, the company may gain a negative
culture by those who believe the money should go elsewhere, such as the stakeholders, and it may become
difficult for the company to find someone with the right qualifications and leadership skills to deserve such a
high level of compensation, and as such may see a higher turnover rate as the board may find each CEO
unqualified and decide to put someone else in the position.
Financial Performance
One of the key pieces of information for any investment decision is the company’s finances. By
analyzing WestJet’s financial performance over the past 3 years, we will be able to see emerging trends that
may influence an investment decision. This information will allow us to compare the finances with those of their
main competitor Air Canada, to see how WestJet is performing financially in the Canadian aviation industry.
Figure 2 outlines WestJet’s financial performance for the previous 3 years, along with some key ratios that help
to compare the financial performance with others in the industry.
9
2017
2016
2015
Total Revenue
4.5 billion
4.1 billion
4 billion
Total Expenses
4 billion
3.6 billion
3.5 billion
Net Income
283,578,000
295,458,000
367,530,000
Current Assets
1.8 billion
2 billion
1.5 billion
Total Assets
6.5 billion
6.2 billion
5.1 billion
Current Liabilities
1.7 billion
1.6 billion
1.6 billion
Total Liabilities
4.3 billion
4.1 billion
3.2 billion
Total Number of
Common Stock
Outstanding
77 million
94 million
109 million
Stockholders’ Equity
2.2 billion
2.1 billion
2 billion
Return on Sales
6.3%
7.2%
9.1%
Current Ratio
1.03
1.21
0.97
Return on Equity
12.8%
14.3%
18.8%
Debt-to-Equity
193%
199%
162%
Reported Earnings Per
Share
(Basic)
2.44
2.46
2.94
Year-End Stock Price
26.36
23.04
20.36
Market Cap
2 billion
2.2 billion
2.2 billion
Figure 5: WestJet 3-Year Financial Performance
Sources: (WestJet, 2017a) (WestJet, 2018f)
Throughout the past 3 years WestJet has continued to increase total revenue yearly, yet it has failed to
minimize expenses along with the increase in total revenue resulting in its decreasing annual income. One
reason for the increase in revenue is WestJet keeps working towards its goal of achieving higher load factors,
resulting in a record high 83.6% for the company in 2017 (WestJet, 2018f, p. 2). WestJet’s increasing expenses
are a result of the company’s growing fleet which grew by 15 planes in 2017, as well as aging planes, with an
average age of 7.5 years, which require increasing maintenance costs (WestJet, 2018f, p. 34). Another reason
the company’s expenses continue to increase is the unionization of WestJet’s pilots and cabin crew which
results in not only higher wages, but increased costs of settling union demands, such as WestJet pilots wanting
to pilot Swoop flights, which results in higher flight crew costs for this new company when WestJet was originally
planning to higher new, non-unionized pilots on lower wages to keep the budget airlines’ costs down (CBC
News, 2018a).
The highest WestJet’s stock was over the past 3 years was at the very beginning of 2015 when the stock
price was at $33.05/share (MarketWatch, 2018); however, WestJet’s stock price fell heavily throughout this year
and ended 2015 with a stock price of $18.38/share. The lowest point in WestJet’s stock price over the last 3
years was on February 15th, 2016, when its reached $14.76/share (MarketWatch, 2018). This is likely due to a
10
combination of an already falling stock price as well as an incident earlier in that month in Vancouver when a
WestJet flight had to abort takeoff due to a blown tire, causing all passengers to have to leave the plane on
the runway (Brown, 2016).
Since the fall in 2016, WestJet’s stock price steadily grew to a high of $27.67/share in October of 2017;
however this price has begun to fall throughout most of 2018 due to underwhelming quarterly reports, and
threats of union action, and other issues all of which have resulted in WestJet’s stock price, as of November 11th,
2018 hitting $18.43/ share (MarketWatch, 2018).
Since 2010, WestJet has paid quarterly dividends to its shareholders; originally these dividends resulted in
$0.05/share, but ever since March of 2015 WestJet has consistently paid a dividend of $0.14/share every quarter
to its shareholders (WestJet, n.d.-n). WestJet also offers a share buy-back program which gives money back to
shareholders and also explains the company’s decreasing market cap (WestJet, 2018f, p. 9). The slightly
decreasing market cap is concerning due to the fact that less shares typically makes stock prices increase,
which would usually increase the company’s value, yet this did not happen as stock prices did not rise in line
with the decreased number of shares.
The current ratio, comparing the company’s current assets to current liabilities, allows us to determine
how likely the company will be able to pay off its short-term liabilities. With a current ratio around 1 for all years,
WestJet is seemingly able to just keep up with its liabilities in the short term. This means that the company’s
liquidity is not ideal as the low ratio means they will have to use most of their current assets to pay off their
current liability; in 2015 the company did not even have the current assets to be able to pay off its current
liabilities at the time, resulting in a ratio below 1. The resulting 0.97 current ratio in 2015 was likely a result of the
company increasing its investments into its property and equipment, as well as an increase in advanced ticket
sales in comparison to 2014 (WestJet, 2016, p. 64).
WestJet’s declining return on sales is caused by decreased profit margins due to increased expenses.
The decreasing ratio indicates that the company isn’t able to increase its revenues at the same rate that its
expenses are increasing, which is concerning for an expanding company looking to spend more on expansion.
The decreased income also affects the company’s return on equity; as the shareholders equity in the company
continues to increase, the company should be able to do more with their assets, not less.
The company’s earnings per share have dropped by $0.50/share since 2015, this again is caused by
decreasing profits; however this issue is softened due to the share buy-back program which has reduced the
overall number of shares meaning the income is divided by fewer shares than before (WestJet, 2018f, p. 9).
WestJet seems to be relying too much on its debt as seen by the company’s debt-to-equity ratio. The
company has nearly twice the amount of debt than they have shareholder equity. This causes a greater risk
that WestJet will be unable to pay its liabilities.
All these ratios are seeing a decrease due to the company’s overall decrease in profits, caused by the
company’s inability to keep up revenue with expenses. Throughout the past few years WestJet has begun to
face an aging fleet which need more maintenance, unionized employees which come at a higher cost, as
well as a push for expansion all of which increase the company’s expenses (WestJet, 2018f, p. 34) (WestJet,
2018g, p. 5). At the same time the company isn’t increasing ticket sales enough to meet these increased
expenses resulting in a smaller profit margin.
11
Comparative Analysis
Being one of the two largest companies in the Canadian aviation industry, it is important to compare
WestJet’s financials to that of their biggest competitor Air Canada. Figure 6 compares the two companies’
financial information for 2017.
WestJet
Air Canada
Total Revenue
4.5 billion
16.3 billion
Total Expenses
4 billion
14.9 billion
Net Income
283 million
2 billion
Current Assets
1.8 billion
5.3 billion
Total Assets
6.5 billion
17.7 billion
Current Liabilities
1.7 billion
5 billion
Total Liabilities
4.3 billion
14.3 billion
Total Number of Common Stock
Outstanding
77 million
273 million
Stockholders’ Equity
2.2 billion
3.4 billion
Return on Sales
6.3%
12.5%
Current Ratio
1.03
1.05
Return on Equity
12.8%
60.3%
Debt-to-Equity
193%
424%
Reported Earnings Per Share
(Basic)
2.44
7.48
Year-End Stock Price
26.36
25.88
Market Cap
2 billion
7.1 billion
Figure 6: WestJet & Air Canada 2017 Financial Performance
Sources: (WestJet, 2018f) (Air Canada, 2018a)
WestJet’s financial performance is drastically different in comparison to their main competitor Air
Canada. Over the past 3 years Air Canada has faced significant financial improvement leading to a very
successful 2017, while WestJet’s financial performance has started to decline (Air Canada, 2018a) (WestJet,
2018f).
Air Canada’s excellent financial year in 2017 lead to the company being significantly better than
WestJet in areas such as return on equity and return on sales (Air Canada, 2018a). This signifies that WestJet is
producing returns that are far below that of their competition; this is likely due to the many increased costs
WestJet has seen recently, which have reduced the company’s total income (WestJet, 2018f).
Both companies having similar current ratios, both of which are around 1:1. These lower ratios typically
would indicate issues pay current liabilities but after comparing both companies over 3 years this seems to be a
12
more of a common occurrence in the airline than an issue with either companies’ finances (Air Canada,
2018a) (WestJet, 2018f).
WestJet’s debt-to-equity has increased slightly since 2015, likely due to additional plane orders, however
when compared to Air Canada, WestJet is much better at balancing its debt than their competition. WestJet’s
debt-to-equity ratio, in comparison to Air Canada, allows us to see that the company is much better at
controlling their liabilities in comparison to its stockholders’ equity.
By the end of 2017 both companies’ stock prices were about equal, with WestJet stock being worth
slightly more than Air Canada’s, yet as Air Canada has sold significantly more shares its market cap is much
larger than WestJet’s. Air Canada is much better with returns to investors seeing earnings per share that are
three times larger than WestJet. This again indicates that the company is much better with its return on equity
than WestJet.
In comparison to Air Canada in 2017, WestJet fell far behind in many areas, including its returns on sales
and equity. While still far below Air Canada’s debt-to-equity, WestJet’s is still increasing which is worrying.
Overall in 2017 WestJet performed much worse financially in relation to its size than its main competitor Air
Canada.
Marketing Strategy
WestJet’s marketing strategy is essential to its success as an airline; the company’s product, place,
pricing, and promotion can be the difference between profits or losses. The analysis of these four areas of
WestJet’s marketing strategy will allow for us to see the current strengths and weaknesses of their marketing
strategy, as well as how WestJet is attempting to portray themselves in the minds of their target market.
Target Market
The identification of a particular target market is important in any industry, including aviation. With
WestJet’s multiple brands Swoop, WestJet, and WestJet Encore, the company is able to target different
markets with each of its separate brands.
With WestJet’s main brand beginning to go through expansion the company is looking to target
business class travellers with its 10 new Boeing 787 Dreamliners (WestJet, 2018h). These new planes include
brand new business class accommodations, such as lay flat seating, as well as increased levels of service and
privacy, to attract these travellers, all of which have never been offered previously on any of WestJet’s brands
(WestJet, 2018d). However, these planes will only be flying to destinations beyond North America so the target
market for these planes is like international business travellers (WestJet, 2018h).
Since WestJet was founded, the main WestJet brand has mostly targeted low cost passengers looking
to fly within North America; WestJet is looking to maintain this with their current and future Boeing 737 aircraft
while they begin to offer more premium offerings with the Boeing 787 (WestJet, 2017b, p. 12). The Boeing 787’s
will however, still offer increased economy offerings, while still available at the high-value price WestJet’s
current customers are used to (WestJet, 2018d).
WestJet’s second brand, WestJet Encore, was created in 2017 for the purpose of connecting smaller
communities with WestJet’s main hubs (WestJet, 2017b, p. 27-28). This allows WestJet to target customers in
smaller communities that may otherwise have no other means of getting to their destinations, while also
13
allowing the company to further connect these customers to flights being flown by its main WestJet brand
(WestJet, 2017b, p. 27-28).
Lastly, WestJet’s newest brand, Swoop, is an ultra-low-cost carrier that plans to target those looking for
the cheapest option, who don’t neccesarliy care about extra services, baggage, or food included in their
ticket (WestJet, 2017b, p. 55). Mainly this airline is targeted at millenials, young families, and those who are on a
limited budget, who are travelling for leisure or visiting friends and family (WestJet, 2017b, p. 55).
Product Strategy
Indicating WestJet’s product strategy allows us to understand how each product is tailored towards
each of the company’s target markets. WestJet has a wide range of products and packages as to attract
many different types of customers (see Appendix B for a list of WestJet’s products).
Starting with WestJet’s fare structure for both its main brand and WestJet Encore; the company offers
many different options for customers looking for different levels of service and comfort (WestJet, n.d.-i). In
economy class, WestJet offers 3 different fare options, basic, economy, and economy flex, all of which having
varying levels of ability to change and cancel flights, as well as the baggage that is included (WestJet, n.d.-i).
These options also available with both premium and business classes with each having 2 available fare options
(WestJet, n.d.-i). These fare options are an excellent way for WestJet to sell their product because not only does
it attract the most budget-conscious customers with the basic fare, it also attracts customers who are willing to
pay more for tickets that flex with their schedules.
By offering premium services on most of their planes, WestJet is able to provide increased services for an
additional fee (WestJet, n.d.-m). These services include increased seat space and menu options, as well as
priority boarding and security screenings available to the customer (WestJet, n.d.-m). By offering these extra
services with the premium ticket, the company is able to attract premium travellers, and encourage them to
return to the company in the future.
WestJet’s newest product, the business class on their Boeing 787’s is highly likely to encourage new
business class passengers to fly with WestJet. This new class includes lie-flat seating, increased privacy, and
higher levels of service, such as champagne served upon boarding of the plane (WestJet, n.d.-c). This new
product may be a significant source of revenue for WestJet as these new customers the company is hoping to
attract are willing to pay a high price for these services.
WestJet’s newly introduced subsidiary Swoop is aimed to target a completely different market than
WestJet’s main brand (WestJet, 2017b). By creating an ultra-low-cost carrier, the company is able to capture
the market of the many people who choose not to fly due to it being to cost prohibitive. Swoop offers low cost
tickets by only offering minimum service, while offering extra services for an additional cost (Swoop, 2018). As
Swoop only began flying in June of 2018 it is still too early to tell if this airline will be a success for WestJet as
several other ultra-low-cost carriers who have attempted to start operations in Canada, such as Zoom Airlines,
have failed due to high costs in the Canadian aviation industry, with decreased ticket revenue due to the ultralow-cost structure (Siekierska, 2018a).
Beyond just the flight, WestJet offers many products, all of which help to either attract or maintain
WestJet customers. One of these products is the company’s WestJet Rewards program which allows customers
to earn rewards points which are redeemable for future WestJet flights (WestJet, n.d.-o). To further expand on
the rewards program, WestJet has partnered with RBC to offer a WestJet Rewards Mastercard which allows the
credit card user to earn WestJet dollars on everyday purchases, which encourages the customer to fly with
14
WestJet since they have the available dollars (WestJet, n.d.-o). As with any company a rewards program is
typically an easy way to attract and maintain customers as the customer is saving on their flight, while also
bringing revenues to the company by choosing them over their competition.
WestJet bundles its flights with partnered hotels in a program it calls WestJet Vacations (WestJet, n.d.-p).
This bundling not only saves customers time instead of searching for their own hotel, but it also allows WestJet to
bundle the hotel booking with its own flights (WestJet, n.d.-p). The tickets themselves also act as a bundle;
bundling together different services depending on how much the customer pays (WestJet, 2017b, p. 43).
Overall WestJet seems to be creating new products for target markets it isn’t reaching at the time. As
seen by the introductions of WestJet Encore, Swoop, and the new business class, these were all created for
markets WestJet wasn’t reaching before their introduction. WestJet’s product strategy is seemingly very strong
as they are proficient in detecting new target markets and planning out new products to penetrate those
markets.
Pricing Strategy
As an airline, WestJet’s costs change based on many variables, such as changes in the cost of fuel, and
amount of fuel burned per flight, and as such prices of tickets have to change with these costs. By offering
multiple different fares for each class the company is not only able to provide certain services to customers that
want them, but it is also able to charge more for these services (WestJet, n.d.-i).
WestJet is currently focused on a low-cost structure that encourages customers to book at the time they
want to, rather than having to wait for a seat to go on sale before having to book; these prices are also
typically below their competition as to help attract new customers to WestJet (WestJet, 2018e, p. 16). This
combined with changing fares depending on flight demand allows WestJet to maximize its revenues (WestJet,
2018e, p. 16).
WestJet is planning on transitioning their brand from the current low-cost structure to a high-valued
structure, meaning prices won’t be as low as they are today, but they will still remain lower than their
competition with a higher valued service (WestJet, 2017b, p. 12). WestJet is planning this transition due to the
introduction of Swoop which will allow for a truly low-cost, no frills experience, while allowing the main brand to
become the superior experience (WestJet, 2017b, p. 12). This variety in services allows the company to
compete on both ends of the pricing spectrum, competing with low-cost carriers such as Flair Airlines, while at
the same time competing with premium airlines such as Air Canada.
WestJet’s increasing broad pricing strategy seems like a successful strategy for the company as WestJet
is a larger airline than its ultra-low-cost competitors, it has the resources necessary to capture the ultra-low-cost
market away from the competition. WestJet has also proven to be successful in offering lower priced tickets
than its premium competitors, and if this pricing continues with the increased high value services, the company
should be able to continue to attract customers away from its competitors.
Promotion Strategy
Promotion is a crucial part for any company to able to attract new customers and maintain past
customers. WestJet uses many different promotion strategies to attract as many customers as possible.
One of WestJet’s current promotion strategies is to advertise their new Boeing 787 (WestJet, 2018d).
WestJet has a section of their website dedicated to this new plane describing each new feature and service in
detail, with pictures of both the exterior of the plane and its interior (WestJet, 2018d). This section of the website
15
also takes advantage of newer technologies such as 360° videos that allow customers to explore a 360° view of
each class on the plane to see which class best suits their wants and needs (WestJet, 2018d).
WestJet also uses various forms of social media to not only promote its products, but also provide 24/7
customer support to help maintain customer relations, and deal with issues as soon as possible (WestJet, n.d.-f).
With social media, WestJet is able to post pictures and videos that encourage people to want to fly with
WestJet, such as images of their planes, or images of the destinations they fly to (WestJet, n.d.-f). Social media is
one of the easiest ways for a company to promote themselves, giving access to the millions of people who use
these services, and WestJet uses these services efficiently to allow them to attract guests and mitigate issues as
soon as possible.
WestJet also uses its seatbacks to advertise its products, including menus that display purchasable items
including meal and ear buds that are available onboard the flight; each seatback also includes WestJet’s
magazine that promotes activities at the destinations WestJet flies to, as to attract customers back to WestJet
again to fly to these highlighted destinations (WestJet, n.d.-f). This is possibly one of WestJet’s best promotion
strategies for current customers as they have many customers for hours without much to do beyond their own
entertainment, which will encourage them to read through the seatback promotion material.
Distribution Strategy
The places an airline chooses to make their services available is an important decision that can
significantly impact the company’s profits. Not only does WestJet have to calculate which destinations are a
good decision to fly to, it also must determine the best ways to get tickets and its other products to its
customers.
The way WestJet sells tickets is different between its WestJet and Swoop brands; WestJet sells both
through its own website and a global distribution system that allows travel agents, and online travel sites to
book WestJet flights, while Swoop only allows individual customers to book directly from the Swoop website
(WestJet, 2017b, p. 60). This difference in distribution systems is likely to help sell many WestJet tickets, as well as
being able to receive direct revenue from Swoop customers.
WestJet currently has chosen many locations across North America that allow the company to move as
many customers as possible to the destinations they want or need to go to. By flying planes more often on
popular routes, and less often on less popular routes, the company is still able to effectively serve their
customers, while maximizing revenues (WestJet, 2018f).
As WestJet begins to expand it is important for the company to choose the best destinations that make
sense both economically, and for WestJet’s target markets; this process is especially crucial considering the
limited amount of Boeing 787’s WestJet is receiving (WestJet, 2018h).
How WestJet represents itself at each airport is very important as it is the first impression the customer has
of the company beyond ordering their ticket. By offering self-serve booths, customers are able to print their own
tickets and tag their own baggage, this not only saves the customer time, but saves the company money by
not having to provide as many ground staff (WestJet, 2017b, p. 21). Beyond this the company also uses their
mobile app to check-in and distribute tickets to customers saving on distribution and printing costs, as well as
speeding up processes at the airport (WestJet, 2017b, p. 21).
16
Company Position
The amount of products WestJet has available is likely put in place to make every customer, in every
target market feel as though they can purchase the best option for themselves. Many of WestJet’s competitors
don’t diversify their product lines and mixes to the extent that WestJet does, leading to the company remaining
the more consumer friendly airline in the target market in comparison to the competition.
WestJet offers such a wide range of products that it is able to make each consumer in every target feel
like WestJet is the best company to go with. While offering high-value and low-cost flights, consumers may find
that WestJet is the best option for the services they are looking for; and this is how WestJet wants consumers to
see their company (WestJet, 2017b, p. 43). WestJet wants its customers to see that the company’s fare are
segmented in way that keeps the fare low so that the customer is only paying for what they want (WestJet,
2017b, p. 43).
The company also wants customers to see that flying on their new Boeing 787 is the most premium
product the company offers. Beyond business class the company has also made changes to its premium and
economy classes that increase the comfort and experience that customers should expect. The company is
heavily promoting this plane and its features to help attract these customers of which it is targeting with this
plane (WestJet, 2018d). By using this plane, the company seems to be pushing for a more mature image with
the main brand, as it tries to separate the brands image from the image it is trying to portray with Swoop
(WestJet, 2017b, p. 19). The company wants Swoop to maintain a thrifty image to keep up the demand of
budget customers (WestJet, 2017b, p. 12).
The company’s marketing mix strategies seem to be very successful as they have continuously pulled in
customers with increasing revenues. The company has shown itself to be able to efficiently detect new target
markets, and to be able to create new products and marketing strategies to try to appeal to every type of
customer WestJet is targeting. The company has also proven to make full use of many different types of
promotion that allow the brand to appeal to everyone.
WestJet’s marketing has very few weaknesses, the only major weakness possibly being its pricing
strategy. If the company prices tickets too low, it may lose more money than they gain from the additional
demand due to the decreased costs. The pricing strategy is definitely an area the company should be
consistently monitoring to ensure that profits are being maximized.
Company Outlook
The company outlook lets us predict the future of WestJet and how they will be performing in the next 3
years. WestJet’s weakening financial performance is just one are of concern as we look into the company’s
future.
WestJet’s revenues have continued to increase over the past 3 years, yet their expenses have
increased at an even faster rate, causing a decrease in revenue (WestJet, 2018f). As the Boeing 787’s are
introduced, expenses will increase because of initial start-up costs, such as training, but as these planes are very
fuel efficient and offer increased revenue possibilities due to the business and premium classes, the planes
should cause the company’s profits to begin to increase again within a few years (WestJet, 2018h). However,
WestJet’s current declining income is still of concern for the immediate future, especially with the costs of
ordering 10 new planes.
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A company is much more than its finances, and WestJet will be seeing many changes throughout the
company in the next few years. Beginning with the company’s partnership with Delta, the company will
continue to expand its operating network, creating more revenue opportunities. WestJet’s marketing strategies
have already proven successful, which increases the possibility of the company’s new Boeing 787’s becoming
profitable sooner than they would otherwise.
Market analysts also don’t have high hopes for WestJet’s performance for the coming years. Many
analysts are predicting the company’s earnings-per-share to decrease significantly for 2018 as a result of
negative financial performance throughout the year, with earnings-per-share remaining below their current
point past 2020 (Wall Street Journal, 2018). However, at the same time analysts are also predicting continued
increases in revenue, predicting WestJet will reach 5 billion in sales in 2019 (Reuters, 2018).
When it comes to purchasing or buying shares there is a general consensus from analysts for investors to
hold their current shares, with some saying to sell (Wall Street Journal, 2018). This is further echoed by BNN
Bloomberg whose analysts gave the company’s shares, on a sliding scale between buy and sell, an average
rating leaning towards a soft sell recommendation (BNN Bloomberg, 2018).
These market analyses are similar to our outlook in that WestJet’s financial performance definitely isn’t
great and is going to fall significantly before it begins to get better. Over the next 3 years we can predict that
the company’s finances are going to do poorly, especially in the short term. WestJet has many other attributes
that may allow it to become a more stable company in the future, but as of now the company is beginning to
look as though it will be facing a rough few years.
Recommendation
After the full analysis of WestJet as a company, our consulting group is recommending that you do not
invest in WestJet. We considered every aspect of the company in making this decision and found that there
were too many negative variables for you to be able to make a sound investment.
Starting with the company culture, WestJet has proven that it isn’t staying true to its mission of enriching
the lives of everyone in the company by making employees feel the only way to be heard is by unionizing and
striking. These employees are the main interaction the company’s guests have with WestJet, and if the
company continues to frustrate these employees it will tarnish the reputation of the company and customers
may choose to fly with another company that treats employees fairly.
Another aspect that went into our decision is the company’s slow transition period. By only receiving 10
planes over 3 years during a global expansion, the company is not only missing out on potential revenue with
quicker expansion, they are also leaving themselves exposed to increased costs related to any transition
period. This also leads to the concern that 10 Boeing 787’s is still not enough to offer the amount of global
locations offered by WestJet’s main competitors.
WestJet is also in the face of uncertainty with a brand-new CEO who just joined the company earlier this
year. A change in the highest level of a business can have significant consequences on the company, as well
as its performance. WestJet’s CEO Ed Sims has only been with the company for a short time, and has been CEO
for an even shorter time, so it is still too early to tell whether his impact on the company will be positive or
negative.
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One of the biggest areas of concern was WestJet’s finances. The company’s finances have been falling
in many areas over the past 3 years and have continued to struggle throughout 2018. WestJet’s increasing
expenses and decreasing income are a significant issue in determining an investment decision, as decreasing
profits often relates to decreasing returns, which WestJet has also been seeing. In comparison to their main
competitor, WestJet had a much worse financial year and is showing signs of continued financial issues
throughout the next 3 years. This issue is worsened by the fact that their main competitor, Air Canada has been
performing very well during the same time period.
Overall, while WestJet may be able to help itself during these rough financial times with its superior
marketing strategies, the company is facing too many issues for an investor to predictably make a successful
investment in the company. An investment in WestJet at the moment would likely lead to diminished returns
over the next few years as the company copes with its Boeing 787 start-up costs, along with other issues.
However, if you do still plan on investing in WestJet despite our recommendation there are still some
things that you should consider during your investment process. Firstly, you will need to be prepared for the fact
that WestJet will be a significantly long-term investment; the company’s finances are showing no signs of
significant improvement over the next few years, which would likely mean you won’t be seeing significant
returns on your investment until possibly sometime after 2021. You also need to be prepared for the fact that
the company’s earnings-per-share likely won’t be anywhere near their current price for the next few years as
well.
WestJet presently has many issues it’s facing that are concerning when choosing whether or not to
invest in the company. These issues are the most prevalent concerns in our recommendation decision.
Although WestJet may possibly become a better investment several years from now, after the company has
settled with their expansion, as well as improved their finances and other issues, Aviation Consulting Company
cannot currently recommend that you invest in WestJet.
Appendix
Appendix A: Board of Directors
Board Member
Occupation/Industry
Edward Sims
President & CEO of WestJet
Clive J. Beddoe
Hugh Bolton
Founding Shareholder / Former President & CEO of
WestJet
Chartered Accountant / Fellow of the Alberta Institute
of Chartered Accountants
Ron Brenneman
Former President & CEO of Petro-Canada
Christopher Burley
Investment Banking Industry
Brett Godfrey
Allan Jackson
Barry Jackson
Co-Founder / Former CEO of Virgin Blue (now Virgin
Australia Airlines)
President & CEO of Jackson Enterprises Inc.
(a Holding and Consulting Company)
Former President & CEO of Crestar Energy Inc.
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Colleen Johnston
Previous Special Advisor to the CEO of TD Bank Group
Jacques Ménard
President of BMO Financial Group, Quebec
Janice Rennie
Former Senior Vice-President of Human Resources &
Organizational Effectiveness at EPCOR Utilities
Karen Sheriff
Former President & CEO of Q9 Networks Inc.
Brad Armitage
Chair of the WestJet Employee Association
Source: (WestJet, n.d.-a)
Appendix B: Product List
Product
Description
WestJet Flights
Economy, Premium, and Business Classes
WestJet Encore Flights
Economy, and Premium Classes
Swoop Flights
No Frills Ticket with Available Add-ons for a Fee
WestJet Vacations
Books Hotel and Flight Together through WestJet
WestJet Rewards
WestJet Rewards Mastercard
Gift Cards
WestJet Connect
Inflight Food and Beverages
WestJet Cargo
WestJet Mobile App
Rewards Program, Customers Receive Points for
Booking Flights
Allows Customers to Receive WestJet Rewards for
Everyday Purchases
Redeemable for any WestJet Flight or Vacations
Package
An Inflight Entertainment System, Includes Movies, Tv
Shows, and Games, with Internet Available for An
Additional Fee
Drinks and Snacks included on Most Flights;
Depending on Flight Duration and Seat Class, Meals
may be Included or Available for an Additional Fee
Ships Unaccompanied Pets, Supplies, and Other
Goods for Customers and Businesses
Allows Customers to Book and Manage Flights, as
well as the ability to Connect to WestJet Connect
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