COO Jeff Martin talks with Lee Ann Shay about how the Canadian carrier has weathered COVID-19, hail and the 737 MAX grounding.
How have you handled crisis management?
We had decided pre-COVID that we were going to invest in our OCC (operations control center) and set up an ICC (incident command center) for business continuity. That’s something that a lot of airlines talk about but few ever model: Could we run the airline remotely if we had to? So fortunately, we had gotten ahead of this, and our previous CIO Craig Maccubbin had placed the whole airline on Microsoft Teams, which was fortuitous. As our new OCC and ICC were nearing completion, we saw what was happening in Asia, so we activated our ICC probably earlier than others.
Our business continuity meetings involved all of the major airline stakeholders, led by myself. What would we need to do if the airlines should come down to a much smaller size? What grew out of that, thankfully, was our early engagement in procuring personal protection equipment (PPE) for our employees and guests. And then we started setting protocols in place, in advance of COVID, and then the waves started to occur.
Then the available seat-mile reductions started to hit like they did everywhere else, and we soft-landed the airline. Our quick reaction allowed us to put the airline in a stabilized fashion probably right on target of where we hoped it would be.
How did you handle parking the aircraft?
My ops planning team did a phenomenal job as we parked every airplane. They managed it so that we didn’t have to relocate the aircraft again. So we knew when that airplane landed, we were going into our COVID stabilization mode: The aircraft would not have to be relocated. That saved us millions of dollars of fuel. I have to hand huge accolades to the fleet-planning team in combination with the network and commercial team to do that. Because we knew, like everyone else, that liquidity was going to be ultra important. And every dime that we didn’t spend on fuel was going into the bank.
How have the OCC and ICC worked?
The operations control center has many names throughout the airline industry. It’s where dispatch resides. The model here is that the OCC manages day-of operations. Embedded in the OCC is a standalone ICC, which is there for emergency command or business disruption. So the two sit side-by-side. The goal is that the OCC will run day-of, and if at any point the OCC is faced with a lot of challenges, like in the case of COVID, we’d bring the day-of into the ICC.
Since COVID, we quite honestly managed the airline from there. We started out having two calls a day that included myself, the CEO and all of the executive leadership team. It was a readout that would consist of 30 sec. to 2 min. from every business entity on: How are you functioning today? What do you need to make sure that the airline can operate? Are you ready to take us into the next phase? We started on March 13 and kept that cadence for almost 60 days. And as we successfully brought the airline down, parked the aircraft and stabilized the network to where we are now, we went to once a day and now we’re down to twice a week. It was so important to be talking twice a day across the entire enterprise, because it’s not just operations; it was the network, it was commercial, it was sales, it was marketing. It gave us the ability to have the airline on the same page.
While we were doing this remotely, the new OCC-ICC construction was complete. So we moved into the brand-new OCC ICC on June 1. Although most of us are still working remotely and working on Microsoft Teams, we do now have an industry-leading, phenomenal facility. So that’s in place for us when we start to bring the network back. Because of this investment, we’re going to do it in a better state than we did before from an operations efficiency standpoint. We were the No. 1 airline for on-time performance for April and May for North America.
For May alone, we ran 98.1% on-time. And even though the network is smaller, that tells me the teams are still executing to the strategies and theories that we put in place. So the new facility will only make that even better as we start bringing our schedule back. Guests want an airline that’s on time. And that usually mirrors itself in high Net Promoter Scores (NPS), which we’ve seen a huge increase in this year. Changes to Net Promoter Scores almost identically parallel on-time performance.
Speaking of the fleet, what’s parked, and what models are coming back?
Instead of saying what models are coming back, we look at what markets are coming back. Given our network, the Q400s are very important for us. Those 47 aircraft feed our major hubs and tie into the 737s and 787s. So we’re slowly bringing back, proportionately, the fleet, and it will change monthly based on where we’re finding the demand. It’s safe to say we’re flying the 787s only transcontinental right now while we await relief from border controls. Pre-COVID, I can tell you we were extremely pleased with the 787s. They have exceeded our analysis and predictions of margins, and our predictions for reliability and our predictions for guest satisfaction and NPS. And I have to attribute that to the really good work that went into the entry-into-service teams.
We took a unique approach. When you procure an asset of that size, you need to make sure that your team is really ready to deploy it. That was a huge step for us, because even though we had the 767, we were increasing the level of service that we were going to introduce with a business class prior to our previous premium offerings. Before we started revenue service, we made practice flights. We did practice pushes and turns because the aircraft has industry-leading technology. We want to know how to interface with that.
When we went into that first revenue flight, our WestJetters—from inflight to maintenance to tech ops to ground ops—were comfortable with the aircraft. We far exceeded our expectations for the 787. Boeing said our entry into service was one of the best it had seen.
My tech ops team talked to Boeing and every 787 operator that looked similar to WestJet. So we knew the challenges. We knew the uniqueness of the aircraft. We knew the things that we needed to do to make sure the reliability was high. We have 10 firm orders.
How did WestJet come up with the puck-board idea to protect aircraft from summer hailstorms?
Canadians are the hardest-working people in the world, and they’re very resilient. They have figured out how to de-ice probably better than anyone in the world. They figured out how to keep a fleet warm. But we’ve also learned here in Calgary that we’re highly prone to hail, especially at this time of year. So when we knew that we were going to park roughly 150 of the 181 aircraft, the team designed the protection for the spoilers, which are highly susceptible to hail on the 737 fleet.
They designed and cut the protection from hockey puck boards—attached to the top of every spoiler across the entire fleet. On June 13, we had one of the worst hailstorms that anyone can recall. The hockey puck boards on the 737 spoilers resulted in zero damage. Other aircraft had some surface damage. The puck board shows how creative this tech ops team can be. They did it with little fanfare and quite honestly protected the whole 737 fleet that was parked here by doing this.
Did the ownership change of WestJet change your aftermarket strategy?
I don’t think it has changed our after-market strategy. The transition went really well because we had been working in advance of legal close, so we were comfortable with Onex and the managing directors and the team. What we found was another team of partners who are analytically astute and who know the industry well. They’re letting us run the airline. We understand the lines—they are the owners—but we operate the airline and we make the strategic decisions.
But that partnership is a testament to how well we landed in COVID and how quickly we made the decisions we did around liquidity, the fleet, the network. It shows that Onex and the leadership team were very much in synch.
How much did WestJet invest in the OCC ICC that opened on June 1?
We were able to do this for under $5 million. We took an existing floor and completely rebuilt it and included new IT. It was a very economical way of doing that. We also retained a secondary OCC because you have to be able to operate and have flight control at all times. So we now have a primary and a secondary OCC. I just walked through it today, and the WestJetters couldn’t be more pleased. It’s new, it’s fresh, and it has large screens depicting all of our metrics. It’s a good representative of our brand. We more than doubled our footprint from a square-footage standpoint. I don’t foresee having to replace it because it far exceeds our growth models, probably for the next 10-15 years.
What’s the status of the 737 Premium Economy cabin upgrades?
When we first took the 737-800s, they had not been configured. We wanted the 737 Premium product to duplicate the experience that you’re going to find on the 787.
We had contracted a Canadian MRO we had used to convert the 737-700 fleet. When COVID came around, we decided to see if our own technicians could do those mods. So we offered that work to them. We were able to bring back 40 employees who we were going to have to furlough and their sole purpose in Calgary and Toronto was to do these interior mods.
They’ve got it down to a five-day mod, which is absolutely phenomenal. We’ve completed 18 of our 43 -700 aircraft. We’ve done the STC on one -600 and we’ve completed 38 of the 39 -800s. We also put in ovens, class dividers, curtains, and in the -600 and -700 fleets there’s an additional lavatory in the Economy cabin. So it’s a fresh-up for the entire -700 fleet and portions of the -600s to follow. I took this opportunity of downtime to, one, retain employees, and two, to finish the fleet reconfiguration. So when we come out of COVID, my goal is to have fast-tracked our interior jobs. It’s a good capital expenditure. We had already purchased the equipment—the seats were in storage. So all we really had to do was invest in labor. The employees are excited because, again, it sends the message that we’re investing in the airline and preparing for growth mode once COVID passes.
Are there any other kinds of innovations underway?
It’s easy to be consumed by the COVID crisis, but you do have to continue to be able to look around the corner. Look at the investment we’ve made in the facility and IT. Now how do you lean the airline out even more using IT to reduce your costs and come out leaner? The thing I’m looking around the corner for now is what is the next item or product that’s going to come out that’s going to assist the airlines with carbon emissions and fuel savings. The airframe has come only so far and we have two new engines out there, but at some point I think carbon becomes a topic again. Right now, it’s not, because of COVID, but once a vaccine is found, much like in the EU and Europe, I think North America will be forced to find some solutions around carbon offsets and find even more efficiencies. And that’s a thing that my teams are looking at—how do we find new ways of reducing fuel use? Fuel won’t always stay at the price it’s at now. So how do you get as much efficiency as you can out of the airframe, out of your flight crews? You can’t let your guard down right now just because you’re in the middle of a crisis, because eventually we will be back in full competition mode, and low costs will win the day.
What is your level of engagement with Transport Canada, and do you expect Transport Canada to approve the MAX’s return to service at the same time as the FAA?
We have three operators in Canada, and we work closely with them in partnership with Transport Canada. So we didn’t allow the MAX to become a point of competition or contention. We wanted to make sure that we could bring the aircraft back into service and that we would all agree how we were going to do that. I don’t see variations between Transport Canada, the European Union Aviation Safety Agency, ANAC and FAA, but out of respect for Transport Canada, they will have their say after the Joint Operations Evaluation Board (JOEB) to make sure that we can do entry into service. I think the regulators are holding hands quite well and I don’t see any surprises. The JOEB will figure out what the final determination is for simulator training, and we’re waiting for the service bulletin for the wire separation, which should be right on top of us.
We’re still planning for entry into service late fourth-quarter 2020. We have full confidence in the aircraft, and we’re prepared for it. We’re ready to bring those 13 aircraft back. They dovetail perfectly into the 787 level of service and product, and the reconfiguration of the interiors. So it helps us from a fleet-age standpoint. And quite honestly, it helps us reevaluate our fleet plan over the long term. So we’re eager, we’re anxious and we’re optimistic.
What’s your take on the rest of 2020 and 2021?
We’re all seeing the same degradation of revenue per available seat-mile, and it becomes even more important as we get back to full service. We’re planning on doubling July over what we did in June, even though we are struggling with borders and not being able to get away from quarantines. Cancellation rates are remaining stable. This is going to be a month-by-month exercise that we will go through until we get back to some resemblance of what we were pre-COVID. I think many are targeting 12-18 months from now, somewhere around 80% of what pre-COVID was. Our speculation is much in line with that.
So WestJet is not planning on parting out any aircraft?
No. I will tell you what we did from a liquidity and cost-savings standpoint. My tech ops team immediately went in and we footprinted what aircraft would need for heavy maintenance. We predicted how many aircraft were going to be hard-parked and what we would need to fly our schedule through the summer. And then we started moving those heavy checks around to avoid costs. The team did the same thing with green time on engines. The last thing I wanted to be doing was sending engines off for overhauls and incurring LLP costs and then to go park aircraft. We were quick to do that. What we don’t want to do is get caught, because at some point, from an operator standpoint, I need to be able to keep up with what I think is pent-up demand. And as we continue to publish more aggressive schedules, the operations team can’t be the impediment to growth, right? So we will slowly start trickling some aircraft back into heavy maintenance, and we will slowly start sending aircraft engines off to overhaul.
Which MRO vendors do you use? Are most in Canada?
A huge partner is Kelowna Flightcraft, but we have contracts with all of the major MROs, and we have the ability to go to and from, but the Canadian-U.S. exchange rate does affect us, so we tend to use Canadian providers if we can. If the exchange rate should change, we would have to look at that.
