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WestJet’s plans for a ULCC subsidiary do not have a clear goal

Canada’s first LCC WestJet has always been vocal about competing with potential startup ULCCs ever since the current crop of aspiring ultra low cost airlines made their ambitions known, starting in late 2013. Since that time, only one of three would be ULCC competitors, NewLeaf Travel, has actually launched operations, and represents a fraction of Canada’s domestic market.

WestJet has pledged to match the pricing levels of the new ULCC competition, and in 2017 has driven NewLeaf from proposed transborder markets even before the startup launched services. The move illustrated WestJet’s ability to leverage its scale to create significant pressure on the new crop of competitors.

But now WestJet is going one step further by opting to create its own distinct ULCC at a time when it is still digesting long haul international growth and continued expansion by its regional subsidiary, Encore. The airline is also working to restore ROIC to historical levels and faces a unionisation vote by its pilots for the second time in two years. All those factors make WestJet’s decision to add more complexity to its operations somewhat puzzling.

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