CAPA Live: WestJet CEO Ed Sims, "sector relief" needed
WestJet CEO Ed Sims, speaking at CAPA Live October 2020 argues the lack of funding by the Canadian government has left the Canadian aviation industry 'very exposed', with foreign airlines now taking between 15-20% of the market share.
Rapid PCR testing, together with the removal of quarantines and the US-Canada border closure, is required to get travel moving, although those milestones are likely to remain in place until after the US election.
The low cost carrier Swoop has been seeing higher load factors than WestJet, with different demographic. Business travel is likely to lag behind, with restrictive corporate travel policies and the use of Zoom hindering recovery.
Boeing 737 MAX is likely to be back in WestJet's fleet by Christmas 2020.
- Lack of funding by the Canadian government has left the Canadian aviation industry exposed, with foreign airlines capturing 15-20% of the market share.
- Rapid PCR testing and the removal of quarantines are necessary to restart travel, but these milestones are unlikely to be achieved until after the US election.
- Swoop, a low-cost subsidiary of WestJet, has been experiencing higher load factors compared to WestJet, catering to a different demographic.
- WestJet plans to reintroduce the Boeing 737 MAX into its fleet by Christmas 2020.
- WestJet CEO emphasizes the need for financial flexibility to reduce cash burn and mentions the significant reduction in staff due to the pandemic.
- The recovery of the aviation industry is dependent on widespread and affordable rapid COVID-19 testing and the availability of a vaccine.
WestJet CEO Ed Sims, speaking at CAPA Live October 2020, which took place on 14-Oct-2020, stated that Canadian aviation is at a "major structural disadvantage", following the "lack of specific sector relief [and] lack of any particular funding" from the Canadian government.
Mr Sims said he believes he understands "why the government took the position that they took early on, from a social welfare perspective", but noted that such actions had "left the Canadian aviation very exposed".
According to WestJet's estimations, between 15% and 20% of the market share held by domiciled Canadian airlines has now moved to foreign airlines "over the course of the last seven months". Mr Sims explained: "That... is an invidious and frankly, unsustainable position".
WestJet CEO Ed Sims, speaking at CAPA Live, 14-Oct-2020
Talking about the current border closure between the US and Canada and the quarantine restrictions, Mr Sims stated that he considered rapid PCR testing three days before travel, at the point of travel and post travel, was the "best remedy to remove" the quarantine barrier.
It is also believed improbable that the "firm border closure" between the US and Canada will be reviewed until the end of 2020 or after the US election. "Both of those milestones are going to prove to be very significant", Mr Sims said.
Mr Sims stated that the airline was having to consider "even more new and creative ways of generating financial flexibility to reduce that cash burn", if there is no uptake in demand during the stabilisation phase.
"We find ourselves in a position where realistically you're burning the furniture to keep the house warm, and that's okay until you've run out of furniture", he observed. The airline employed 14,000 staff in the middle of Feb-2020, and now employs 4000 active staff, with 4000 others made permanently redundant and another 6000 stood down, furloughed or awaiting recall.
Boeing 737 MAX
Regarding the Boeing 737 MAX aircraft, Mr Sims said that he believes Canadian airspace will effectively "be open to the MAX at some stage in 4Q2020", from a technical point of view, with WestJet looking to "start operating that aircraft over our Christmas peak".
Mr Sims stated that the airline would be retraining all pilots on 737 MAX simulators "in the course of the next three months", with pilots otherwise managing to "stay current" on the aircraft type via WestJet's 737NGs.
"I do think it is going to be an exceptionally safe aircraft. I have every confidence in our ability to operate that aircraft", he said. As regards the potential name change for the MAX, Mr Sims said he does not agree with the suggestion, explaining: "We've got nothing to hide...We need to take every opportunity we possibly can to remind people that they're flying on a MAX".
Swoop load factors higher than WestJet's
Load factors have been down, but Mr Sims stated that the low cost subsidiary Swoop had been operating at "considerably higher load factors" during the peak summer 2020, demonstrating that "lower fares genuinely do create demand elasticity".
He observed a "quite different" demographic between WestJet and Swoop as well, with Swoop carrying passengers who are "either under 25 or over 70".
Through Jul-2020 and Aug-2020 Swoop operated an approximately 95% load factor, "albeit on significantly reduced capacity". Mr Sims anticipates an initial recovery in demand from the VFR market first, followed by leisure, both of which are "perfectly positioned for a ULCC". Meanwhile, corporate travel is expected to "take longer to recover", due to factors such as "very restrictive corporate travel policies" and access to technology such as Zoom.
No recovery until PCR testing and vaccine
Mr Sims stated that there would be "no real signs of recovery" until there was both ubiquitous and low cost, rapid COVID-19 response testing, ideally at every Canadian airport, plus a commercially available and widespread distribution of a COVID-19 vaccine.
Mr Sims noted that testing could "possibly" come into full effect across all points of WestJet's network by 1Q2021, whereas the availability of the vaccine was "much harder" to determine.
"But until and unless both of those provide adequate levels of guest reassurance for our travellers, it's hard to see demand coming back in a way that could be constituted as that third all-recovery phase", he stated.
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