WestJet Continues To Grow International Services

Calgary based carrier low cost carrier WestJet continues to expand its international services with the addition of several new city pairs this year. The Hub analyses WestJet's international expansion.

WestJet has been busy adding new international market in recent weeks. In December, it will launch a new weekly Quebec City to Cancun with services also to the sunshine US state of Florida, with a weekly Quebec to Fort Lauderdale and a weekly Edmonton to Orlando. In November, the carrier will add several new services to Montego Bay, Varadero and Grand Cayman Islands. WestJet operates these leisure markets with low frequency flying with some overnight flying and early morning departures ideal for the sunbird market.

WestJet currently operates a fleet of B737-600,-700 and -800 aircraft with its largest operating bases in Calgary and Toronto with other major operations in Vancouver, Edmonton and Winnipeg. The table below illustrates the composition of its five largest bases in terms of scheduled weekly seat capacity.

Source Flightbase 14- 20 November 2010

According to IATA BSP data, WestJet now has a 34% share of the Canadian domestic market, where between June 2009 and 2010 over 29 million passengers flew. Air Canada is still the largest operator with 45% of the market. However WestJet has shifted its focus to the International markets with a particular emphasis on the Caribbean and Central America.

INTERNATIONAL FOCUS

WestJet's international network now spans 36 international destinations and accounts for 15% of its network. In terms of scheduled seat capacity, WestJet now has 13% of the total international market from Canada, with Air Canada not surprisingly the leader with a 35% share.

WestJet has certainly grown its international network. Comparing its existing international schedule with that of 2005, the growth is apparent. In the week of November 14-20 in 2005, WestJet operated to just 9 destinations outside of Canada which accounted for 3% of its total network.

In order to grow the airline, WestJet is keenly aware that it has to expand out of the Canadian domestic market and its current leading international destinations in the Caribbean and Central America. These currently consist of;

Source Flightbase 14-20 November 2010

CANADIAN REGIONAL AIRPORT FOCUS

WestJet's international focus in Canada is based upon widespread service from Canadian regional airports as well as major airports such as Vancouver and Toronto. Air Canada serves the international markets from seven markets in Canada, with 89% of its international traffic from Toronto and Montreal as well as its Calgary base. WestJet , however, operates international flights from 17 Canadian Airports with Vancouver its largest international market, followed by Calgary, both accounting for 35% of all international flights.

It has grown its regional flying from Canada from points such as Ontario, Regina and Thunder Bay from where it faces little or no competition and has taken on Air Canada in its strongholds. From Montreal they compete on seven International sectors, six from Vancouver, six from Calgary and 25 from Toronto.

WestJet serves Caribbean and Central American markets from regional points that it already serves from its larger bases, establishing the market from larger conurbations before adding these markets from thinner regional points. WestJet has the right aircraft to operate regional points with its B737-700 equipment, whereas Air Transat operates A310 and A330 jets too large for these markets.

COMPETITION

WestJet has benefitted from being the only low- cost international operator in Canada, battling with Star Alliance member Air Canada and charter operator Air Transat which, as a vertically integrated operator, has operated a successful international operations for a number of years.

Westjet had entered an agreement with Air Transat to fly for Transat Holidays which was discontinued as Westjet created its own tour operator, WestJet holidays, which will help the carrier focus its growth on the Caribbean and Central America. The termination took effect May 10th, 2009. The agreement previsouly allowed tour operator Transat Tours Canada, to charter WestJet aircraft to sun destinations. WestJet, although a low-cost operator by name has managed to create a strong brand with comparable product and seat pitch to the Air Canada product.

The Caribbean is a traditional tour operator market, however tour operator competition has receeded in recent years with tour operators such as Conquest and Sunquest having disappeared and leisure carrier Skyservice recently entering bankruptcy on the back of Thomas Cook pulling their capacity. Air Canada is focusing on growing leisure markets but is not able to compete with Westjet on a cost basis, leaving the path relatively clear for increased international growth.

WESTJET'S US NETWORK

Its position in the US has been aided by the lack of low cost competition. WestJet serves thirteen markets in the US, including Honolulu and Kahului in Hawaii. The major US based low cost operators, Southwest Airlines, JetBlue Airways and Spirit Airlines do not currently operate transborder services to Canada. WestJet now has a 14% share of the total O+D market from Canada to the US according to IATA BSP data (Airport IS) June 2009-2010.

WestJet had entered a codeshare agreement with Southwest Airlines which was never implemented and hence cancelled by WestJet. It has since been linked with a strategic partnership with Delta Airlines and has signed a formal codeshare agreement with oneworld member Cathay Pacific, perhaps signalling the possibility of a future alliance membership. Airline cooperation would help support its international ambitions.