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Is this the future of Southwest???

johnsonrod

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I already posted this article on the foreign board but there are obvious parallels between WestJet and Southwest. It's an interesting article. I realize the US domestic market is far bigger than the Canadian market - but the CEO raises some good points about opportunities for further growth in smaller communities...

A lot of this is pure speculation... Are we realistically going to see SWA widebodies someday? Looks like the 717s will be phased out in a few years in favor of a singular fleet of 737s (including the new 737 MAX). Not sure about using 50-seat RJs - as everyone knows, the economics ain't that good...

So, what do you think? Will this be Southwest in a few years (have to make this decision)? Possibly or NEVER gonna happen????



WestJet CEO Gregg Saretsky plots a bigger fleet

brent jang — TRANSPORTATION REPORTER

From Saturday's Globe and Mail

Published Friday, Dec. 30, 2011 7:00PM EST

Last updated Friday, Dec. 30, 2011 7:41PM EST

Over the past year, Gregg Saretsky has kept analysts and aviation buffs guessing over the details of WestJet Airlines Ltd. (WJA-T11.760.131.12%)next major move.

But over lunch in Toronto, the WestJet chiefexecutiveofficer tells me that the carrier is getting set to take one of the biggest steps in the company’s history. His plan calls for the Calgary-based airline to move beyond its fleet of Boeing 737s, the planes that have served as the airline’s workhorse since it launched operations in 1996, reliably transporting travellers across Canada, the United States, Mexico and the Caribbean.

Seating anywhere between 119 and 166 passengers depending on the model, the 737s are too big to profitably service smaller destinations in Canada and lack the range needed for transpacific and transatlantic routes.
“We’ve built out almost as much as we can the 737 footprint in Canada, serving all the markets within the mission range and capability of the 737,” he says, after settling into a booth at Alice Fazooli’s, an Italian restaurant in downtown Toronto. “We see the end of our ability to grow with the single-fleet type. We’re pretty much done with the 737s in Canada.”
Mr. Saretsky favours first acquiring smaller jets to expand WestJet’s domestic network, which in turn will pave the way in the long term for larger aircraft for overseas flights.

But for now, his priority is to transform the way Canadians fly to and from smaller centres, with potential non-stop service to “Middle Canada” – markets that are underserved or neglected. Air Canada and its affiliates already fly to some of the centres targeted by WestJet, but in many cases, travellers have to change planes to get to their final destination or board an 18-seat turboprop in their hometown.

“We need to fly into small communities, and if we bring airfares down, we can get a lot of travellers. You have to build out the home market first. I think of it as 737s, then some smaller planes and then ultimately something bigger,” he says.

The strategy is important to WestJet because, despite its name, it doesn’t even fly non-stop between the provincial capitals of Regina and Winnipeg. Travelling between those two cities requires a stopover in Calgary. With smaller planes, WestJet would be positioned to profitably do Regina-Winnipeg non-stop, and also spread its wings to new Canadian destinations such as Fort St. John, B.C., and Sarnia, Ont.

Although he has a slight case of jet lag after an overnight flight from Calgary, Mr. Saretsky is animated as he speaks about WestJet’s future and the sector in general. His past may have something to do with his enthusiasm. He fell in love with the industry while working as an Air Canada flight attendant for three summers in the early 1980s, and then joined CP Air, the predecessor to Canadian Airlines International, in 1985.
It’s safe to say, then, that Mr. Saretsky’s passion for planes – and the economics behind them – is the real deal. And it might explain why, if you shared his overnighter from Calgary to Toronto, you would have found him picking garbage out of the seat-back pockets of his flight after landing. “We all pitch in to clean the plane, and that saves us $12-million a year,” he says. “When everybody sees everybody else pitching in, it’s a pretty cool thing. I can’t begin to tell you how powerful that is.”

He talks about corporate culture during his light lunch of mixed salad, with balsamic dressing and pieces of Parmesan chicken. He explains that valuing employees is much more than a marketing ploy. Not only does it connect to consumers, he says, it encourages cost-saving ideas – even if it means having a cabinet full of pens unabashedly collected by employees from hotel rooms. WestJet is profitable enough to afford its own pens, but that thrifty attitude has persisted throughout its history.

Mr. Saretsky shuns the idea that executives should receive preferential treatment, and says that even during harsh Prairie winters, he has to jockey for a parking spot just like anyone else at WestJet’s head office at Calgary International Airport. “A lot of companies would have reserved parking for their executives. We have no such privileges and no country club membership and no car allowance,” he says.

While Mr. Saretsky emphasizes that no corporate decision has been finalized yet on whether to order larger or smaller planes, he believes it makes sense for the company to first focus on neglected domestic markets before considering larger jets for routes to Asia and Europe.

“Domestically, if it’s a short-haul mission, then we would be leaning toward turboprops. If it’s medium to longer haul, then it’s regional jets, but jets have poorer economics on shorter stage lengths,” he says, pouring sparkling water into his glass.

The Canadian-built Bombardier Q400 turboprop, already being used by Toronto-based Porter Airlines Inc. and Air Canada’s regional service, is on WestJet’s shortlist. At 70 seats, the Q400 is more comfortable than older turboprops, configured to seat 18 or 30 passengers, and is used by Air Canada affiliates such as Central Mountain Air. Also on the shortlist is the French-Italian ATR 72 turboprop.

Mr. Saretsky rattles off examples of new destinations that could benefit from WestJet’s expansion, subject to further marketanalysis: Cranbrook, Prince Rupert, Fort St. John and Dawson Creek in British Columbia; Lethbridge, Alta.; Saguenay, Que.; and Sudbury, Sarnia and Timmins in Ontario.

He is also examining whether to fly non-stop between some of WestJet’s existing destinations to avoid Toronto’s Pearson International Airport. Travelling non-stop between Montreal and London, Ont., for instance, might be economical for a smaller plane.

If WestJet decides in 2012 to order new aircraft, it would take at least another 12 to 18 months for delivery.

“Think of it as building blocks. We want to make sure we’ve done a good job of locking up our home market first,” Mr. Saretsky says. “We have an opportunity here to start up WestJet, just like we did nearly 16 years ago, getting into new markets with lower fares.”
 
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Flyby1206

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In Canada the small communities are truly isolated and carriers flying B1900s into tiny strips have a monopoly on airfares. In the US, the 'isolated' communities are an hour or two drive from a Tier 1 hub airport and passengers are just too lazy to make the drive. Add in the incredible amount of competition in the small communities in the US today among regional carriers (being subsidized by the majors, perhaps at a loss) and I dont see how any standalone carrier can really compete.

If SWA wants to operate larger aircraft then they can do it. They are already the largest domestic passenger carrier in the USA, no need for more 'feed"
 

Mamma

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He talks about corporate culture during his light lunch of mixed salad, with balsamic dressing and pieces of Parmesan chicken. He explains that valuing employees is much more than a marketing ploy. only does it connect to consumers, he says, it encourages cost-saving ideas – even if it means having a cabinet full of pens unabashedly collected by employees from hotel rooms. WestJet is profitable enough to afford its own pens, but that thrifty attitude has persisted throughout its history.

Mr. Saretsky shuns the idea that executives should receive preferential treatment, and says that even during harsh Prairie winters, he has to jockey for a parking spot just like anyone else at WestJet’s head office at Calgary International Airport. “A lot of companies would have reserved parking for their executives. We have no such privileges and no country club membership and no car allowance,” he says.


Greg Saretsky is no friend of employees. He pretty much destroyed the culture at Alaska Airlines before they had to fire him for numerous unethical decisions and almost getting the airline sent to district court for bargaining in bad faith. A real piece of work.
 
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CesnaCaptn

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Greg Saretsky is no friend of employees. He pretty much destroyed the culture at Alaska Airlines before they had to fire him for numerous unethical decisions and almost getting the airline sent to district court for bargaining in bad faith. A real piece of work.

Apparently he was reborn when he headed home. I spoke to a Westjet pilot on a layover in Orlando and he couldn't say anything bad about GS.
 

CesnaCaptn

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I doubt it. He was a used car salesman. Ask your buddy again when contract negotiations start up.

My buddy? He was a guy I ran into at the crew hotel.

WestJet pilots are already drinking the Kool aid, like many other pilots at start ups.
 

humveedriver

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75 percent of the Canadien population resides within 100 miles of the US border. The rest of the country is a little bit like that Alaska flying show on Discovery.
 

texman

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Hum this is true. By the way I did get your pm. It will be interesting to see all the future bids. I can't wait to see the new base coming up. If den is a base, how many AT peeps want to move to den? Any talk of this?
 

humveedriver

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Hum this is true. By the way I did get your pm. It will be interesting to see all the future bids. I can't wait to see the new base coming up. If den is a base, how many AT peeps want to move to den? Any talk of this?

Based on current commutes and such, it will be a small number. The attraction would be if it went junior for you guys which i doubt it will. I can tell you that the highest seniority AT captain that bid SWA FO lives in Denver by coincidence. It certainly is a nice area and will get some looks for sure. Unless SWA has some change of heart it looks like they want to trickle us guys over to your side later rather than sooner. Cost effective? Unprepared? Doesn't really matter anymore. What's nice is having just finished some drinks with about 3 AT crews the convo is mostly back to normal with just a
cursory convo about the integration. Life on the line continues...
 

SWA Bubba

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Denver will be uber senior.

Well, that's a relative term. I think it will be the most senior NEW base opening ever, due to the number of people who live there presently or want to live there. But I think it will take a few years to really get "senior." My opinion, of course; who the hell really knows anything for sure....

Bubba
 
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johnsonrod

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Sounds like the death of WestJet.

People forget that if Westjet is a public company (not sure if it is or not), then there are growth expectations that impact stock price. Obviously revenue and profits are also important - but growth is a major factor scrutinized by Wall Street. If you can only go so far with the fleet type you operate (i.e., you have squeezed as much growth as possible given your markets, airport infrastructure, population density in certain parts of the country, airport gate availability, pricing, etc.), then you need to search for new growth to coincide with growth expectations. Looking for growth in smaller communities would make sense if they can manage costs in line with potential reveneues from those communities (and feed revenues).

As Canada's economy continues to improve, perhaps more international traffic will result. We all know how restrictive Canada is regarding international competition (i.e., limits Qatar, Emirates and Etihad to a small number of slots per week), perhaps selective international flights to popular destinations would make sense since the domestic 737 feed is already in place... Ordering 10 787s (maybe from a leasing company that has already secured the orders) or 10 used 767-300s might make sense if you could immediately place them on popular routes since the feed is already in place. I read that Westjet has to lease-in a NorthAmerican 757 to fly to Hawaii during the winter. You can't tell me Westjet could not fill a 767-300 on flights from Vancouver to Tokyo or Hong Kong - that would be easy money.

If you are a public company, growth expectations must be met to keep the stock level high...
 

Flyby1206

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I don't think Westjet has enough feed or demand for international widebody flying. Vancouver to Asia they would get slaughtered by JAL/ANA or CX to HKG. Canada in general doesn't have the massive pockets of population to support O&D traffic overseas in the same way NYC or LAX do. If we are talking larger a/c to places like Hawaii and the Caribbean then yes, Westjet has a shot at that.
 

scoreboardII

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DEN will take months to go uber senior, it takes that long for the uber senior to realize a new domicile has opened.
 

waveflyer

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By SWAs future JR- do you mean Q400's? Or Widebodies?

I think most of us believe a larger international aircraft is in our future- not really news that SWA will be looking for growth in that area- but smaller aircraft is an X factor- it's no secret that mgmt was a bit disappointed that the 717 didn't quite have the long term economics to fill that smaller aircraft role- but there are a LOt of communities that don't quite justify the 737, but we'd like to serve (or keep serving!)- just not sure that smaller aircraft exists with the economics SWA needs.

I for 1 would fly the hell out of a Q400- but strongly believe in one wage blended rates across all pilots whether its heavy jets coming on or smaller a/c.
("blended-ie: if we have 700 737/717's that pay $200/ trip and get 25 Q400's that pay $80/trip and get 25 787's that pay $300/trip- I want our pilot group to blend those rates and make $199.33 instead of those individual rates-( it gets more complicated than that- but that's the idea and I've noticed it is way more efficient and pilots are happier))
I do not want our union to be fractured by pay scales and size- and do not want inefficient training structures where pilots bounce between fleets chasing money- I want a system where pilots do the flying they want to do w/o financial pressures driving the decisions (which they usually do)
Gary is on the record as saying he sees BWI as a SWA intl hub- and as saying we can handle 2-3 fleet types, least amount is best- but need the right aircraft for the jobs we want to grow-

And ya JR- the primary motivation for a publicly traded company is called SWM- shareholder wealth maximization, vs profit motive for regular businesses- and it typically requires growth- ie: making consistent profits doesn't guarantee a performing stock, bc the price of the stock reflected those profits when bought- to increase the price of a stock that who's price already reflected $1xxx in annual profits, you must increase those profits-

We're very familiar with that here at SWA as we've been consistently profitable, but have had a very flat stock as we have not been more profitable than years past .
 

$$$4nothin

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Well when SW buys B6 you guys will have 75 190's on property to serve those smaller destinations you are talking about.
 

StopNTSing

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I for 1 would fly the hell out of a Q400- but strongly believe in one wage blended rates across all pilots whether its heavy jets coming on or smaller a/c.
("blended-ie: if we have 700 737/717's that pay $200/ trip and get 25 Q400's that pay $80/trip and get 25 787's that pay $300/trip- I want our pilot group to blend those rates and make $199.33 instead of those individual rates-( it gets more complicated than that- but that's the idea and I've noticed it is way more efficient and pilots are happier))
I do not want our union to be fractured by pay scales and size- and do not want inefficient training structures where pilots bounce between fleets chasing money- I want a system where pilots do the flying they want to do w/o financial pressures driving the decisions (which they usually do)
Gary is on the record as saying he sees BWI as a SWA intl hub- and as saying we can handle 2-3 fleet types, least amount is best- but need the right aircraft for the jobs we want to grow-

Agree completely, Wave. The lack of such language protecting a possible smaller aircraft purchase is the main reason I voted no on SL8. No pay raise for a 30% larger aircraft made no sense to me without some assurance we won't be asked to take a pay cut if the company decides 100-seaters are in our future.
 
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