Westjet CEO Ed Sims: JVs, not alliances, in post-COVID plans

Summary

• WestJet CEO outlines international growth through profit-share JVs.
• Believes there is a future in "deeper and fewer partnerships", but not "conventional alliance model".
• Beyond Delta transborder partnership, WestJet is exploring trans Atlantic and "eventually", trans Pacific deals.
• As well as expanding passenger fleet, WestJet is adding four Boeing 737-800BCF freighters.

For WestJet, cultural and commercial alignments rather than conventional alliance partnerships

Mr Sims said COVID-19 could provide a restructuring opportunity "because it changes the landscape, and I think it fast-tracks the concept of moving into a less-aligned world at a much faster rate than perhaps might otherwise have been the case.

"I see tremendous upside in working with culturally and commercially-aligned carriers on full profit share JVs", he said.

"For us, that's the future, rather than thinking that we need to rush into an alliance where a lot of our carefully-earned dollars could go into creating 'centres of excellence' or into creating head offices for the alliances, rather than channelling that value into a really deep, suitable, long-lasting joint venture."

Beyond US transborder deal, WestJet eyes trans Atlantic and trans Pacific joint ventures

Although WestJet's emerging partner Delta is a leading member of the SkyTeam Alliance, Mr Sims does not see this relationship as relevant to any agreement with WestJet.

"We code and interline with around 55 carriers", he said. "Some are in SkyTeam. Some are in oneworld, or non-aligned, and, dare I say it, some are in Star Alliance (among them major competitor Air Canada). We've got good relationships with carriers like JAL in Japan, and Qantas, and I don't see anything that compromises those relationships."

While WestJet is not talking to US-based Delta about the trans Atlantic, Mr Sims said his airline was talking to other carriers, specifically listing Air France, KLM and Virgin Atlantic, which align with WestJet's daily operations to Paris-Charles De Gaulle, Amsterdam's Schiphol, and into the UK.

"For us to remain unaligned and independent gives carriers, whether or not they're in an alliance, the opportunity to work with us", said Mr Sims.

"And notwithstanding the Delta variant of COVID, I'm feeling pretty confident about projections."

Business travel: "a long, long time to recover"

Domestically, he said the airline was experiencing good growth, with significant pent-up demand, propelled by Canada's high vaccination rates driving up leisure travel.

Business travel, however, "is going to take a long, long time to recover, if it ever recovers," he said.

"People will no longer be travelling for internal meetings. They'll no longer be travelling to address large numbers of staff or simply to attend meetings, particularly in a geography as vast as Canada, where people like myself were travelling, often for five or six hours, changing two or three time zones, just for a one-hour meeting, then coming back."

However, where face-to-face dealings are critical to sealing business deals, he is confident of a recovery, albeit well below 2019 levels.

While domestic passenger traffic gradually recovers, freight offers significant growth

But it's not only passenger transport upon which WestJet is relying.

Mr Sims said the pandemic had shown up airlines' overdependence on commercial passenger traffic, and he highlighted other opportunities, particularly in air freight.

He said the surging growth in e-commerce during the pandemic had created an opening for same-day deliveries to smaller markets beyond major hubs.

To meet this demand, WestJet will introduce four Boeing 737-800BCF (Boeing Converted Freighters) from 2022.

Before the COVID-19 pandemic, said Mr Sims, cargo accounted for approximately one per cent of WestJet's total group revenue. The airline now sees an opportunity to grow this segment to between three and five per cent of group revenue.

Robust emissions targets, realistic time frames

With the regrowth of operations, Mr Sims acknowledged that carbon emissions also would increase. With the operation of a young fleet - 40 per cent younger, he said, than that of rival Air Canada - WestJet's emissions growth would be partly contained, particularly with the deployment of Boeing 737 MAX aircraft, which have higher capacity but lower fuel burn than the airline's previous generation of 737s.

But he was unwilling to detail specific long term decarbonisation initiatives.

"I'm wary of making commitments on too long a time scale. When we declare what steps we'll take to achieve net zero emissions, I want to do that within a realistic time frame. I think these targets that have been pushed out to 2050 tend to wash over peoples' heads. So we want to have really robust, realistic targets that we can deliver on by 2030."

Watch the full interview with WestJet CEO Ed Sims here: