WestJet teams up with some oneworld alliance members


WestJet Airlines announced plans to expand its international and commercial scope, reaching an agreement to team up with some members of the oneworld alliance. However, the LCC stated it has no plans to join oneworld.

Strategically, the agreement enables WestJet to more aggressively compete network-wise with its larger Canadian rival, Air Canada, which has an extensive international network and is part of the Star Alliance group. The agreement is also aimed at luring higher-yielding business passengers away from Air Canada, and into WestJet's domestic network.

Participating oneworld airlines in the programme include American Airlines, British Airways, Cathay Pacific, Japan Airlines, LAN, Qantas and Royal Jordanian. Other members of the group may join in the future.

It is an interesting development since WestJet's disastrous airRes distribution project was suspended in Jul-07, as it failed to deliver the platform WestJet was seeking to enable it to better access corporate travel markets. The carrier has since upgraded its Navitaire Open Skies reservation system, with the new system allowing WestJet to transfer inbound passengers on international carriers across its domestic Canadian network. It will also allow WestJet, and its interlining partners, to market in unison online.

Making product more attractive to the corporate market

According to WestJet, while the agreement is not as extensive as a codeshare agreement, the programme would "level the playing field" with Air Canada.

CEO, Sean Durfy, previously stated WestJet could attract more passengers (specifically business travellers) through such an agreement with oneworld members, stating, "there's a lot of opportunity with oneworld partners. There's a tremendous amount of opportunity left there to flow traffic onto our system in Canada".

WestJet stated the new travel programme was developed in response to requests from corporate customers, who expressed concerned that travelling more with WestJet on domestic sectors would limit their access to Air Canada's international corporate rates. According to WestJet, Air Canada requires its corporate customers to commit 80% of domestic travel to its network in order to gain access to the discounted Star Alliance rates. WestJet stated it would impose no restrictions with its programme.

WestJet has previously estimated approximately 40% of its traffic is comprised of business travellers, having experienced "significant" growth in business relationships in the past 12-24 months. However, the airline still has a small market share of the total Canadian corporate travel market, estimated at CAD1 billion p/a.

Expanding international reach through commercial agreements

WestJet and the oneworld carriers will form a new 'canadaconnect' corporate travel programme, operating to 600 destinations in almost 130 countries with more than 900 international weekly departures. canadaconnect will offer departures from more than 25 cities across the country.

WestJet previously stated a strategic partnership with international carriers would occupy up to five aircraft alone by transferring partner airlines' passengers across its network. Cities in Canada with service covered by the canadaconnect programme include Abbotsford, Charlottetown, Calgary, Comox, Deer Lake/Corner Brook, Edmonton, Fort McMurray, Grand Prairie, Halifax, Hamilton, Kamloops, Kelowna, Kitchener-Waterloo, London, Moncton, Montreal, Ottawa, Prince George, Quebec City, Regina, Saint John, St John's, Saskatoon, Thunder Bay, Toronto, Vancouver, Victoria and Winnipeg.

WestJet currently also has an interline agreement with Taiwan's China Airlines and in Jul-08 signed an MoU to build a distribution and codeshare agreement with Southwest Airlines. The MoU is the first step that will see both airlines, by late-09, have the ability to codeshare across both networks, with the distribution component of the MoU to provide the airline with a significant point of sale presence in the US. Other potential opportunities within the agreement include purchasing, ground handling, marketing and selling to corporate accounts.

WestJet, which operates a fleet of short-haul B737 aircraft, currently deploys 90.7% of its capacity (seats) domestically, with the remaining 9.3% allocated for international operations. WestJet's largest international market is currently the US, with the carrier also operating to Mexico, The Bahamas, Jamaica, the Dominican Republic, Barbados and Saint Lucia.

WestJet international capacity share (seats) by country: Week commencing 03-Nov-08

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Expects to be "dominant" domestic carrier in Canada by 2011

Currently, WestJet has approximately a 38% share of the Canadian market and is growing that share by 3-4% p/a, and expects to be the "dominant" domestic carrier in Canada by 2011. The airline also plans to increase its share of the Mexican and Caribbean markets from Canada, from an existing 1% to 10-20% by 2013, and to increase its share of capacity between Canada and the US from 7% currently to up to 20% by 2013.

Most recently, WestJet announced plans to increase capacity from Canada to Hawaii from the current 18 weekly services to 23 by the end of 2008. According to WestJet, "the (Canadian) economy is robust, people (Canadians) have money and the dollar will strengthen against the US dollar. That will allow more people to spend more money in the Hawaiian Islands as the Canadian Dollar is worth much more. It's a great time to visit Hawaii".

WestJet also launched four times weekly Toronto-Barbados service on 03-Nov-08. Air Canada currently operates daily on the route.

Background Information:

  • Currently operates to 51 destinations in North America and the Caribbean;
  • Operates a fleet of 76 B737s, with plans to grow its fleet to 121 B737NG aircraft by FY2013;
  • Plans to operate to over 60 destinations by 2013;
  • Plans to increase its capacity by 16% in 2008;
  • Currently has around a 38% share of the Canadian market and is growing that share by 3-4% p/a, and expects to be the "dominant" domestic carrier in Canada by 2011;
  • Plans to increase its share of the Mexican and Caribbean markets from Canada, from an existing 1% to 10-20% by 2013.

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