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Monday,  February 26, 2024 1:42 AM 

“We are just getting started”: WestJet returns to profit sharing after record-breaking quarter

“We are just getting started”: WestJet returns to profit sharing after record-breaking quarter
Alexis von Hoensbroech, CEO of the WestJet Group. (File photo/WestJet)
Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

WestJet’s CEO Alexis von Hoensbroech announced on Friday (Nov. 24) that the airline will return to profit sharing after three successful quarters that outpaced pre-pandemic 2019 earnings.

WestJet’s profit-sharing plan has been “synonymous with the WestJet culture” for 27 years, von Hoensbroech wrote in a statement posted to the airline’s website.

How it works is that a portion of profit gets distributed among WestJetters in recognition of their contributions.

von Hoensbroech said WestJet’s success this year is owed to having a “strong and sustainable business model, fine-tuned to meet the needs of Canadian travellers.”

WestJet CEO Alexis von Hoensbroech celebrates the return of profit share to WestJet for the first time since the pandemic, alongside WestJetters. (WestJet)

“Canadians are embracing our investments in the communities we serve, and we intend to build on this momentum, leveraging our strategy to expand affordable and accessible air connectivity from coast-to-coast,” the CEO wrote.

This year was also “uniquely positive” in that WestJet had market momentum on its side, he said.

“Coming out of the pandemic, Canadians were ready to travel, and this pent-up demand resulted in one of the best economic environments for airlines that I have ever seen,” von Hoensbroech wrote.

Building momentum

While 2023 was a favourable environment that paved the way to a return to profitability, WestJet remained “cautiously optimistic on our outlook for 2024,” von Hoensbroech said.

WestJet CEO Alexis von Hoensbroech (left) alongside Chris Burley, Chairman of the WestJet Group's Board of Directors and Mike Scott, WestJet Group EVP & CFO announce the airline's return to profit sharing. (WestJet)

“The same uniquely Canadian cost challenges will continue, while the economy is weakening and higher interest rates are catching up to all of us, but we built considerable momentum as we head into the new year,” von Hoensbroech wrote, saying that WestJet will continue to grow, both in aircraft and in talent.

READ MORE: WestJet to densify cabins, serve “broader spectrum of guests” following Swoop closure

WestJet, in addition to hiring more than 2,000 people in 2023 across all areas, has also “turned an important corner” with full pilot training classes and “more applicants than we can hire,” von Hoensbroech shared.

The airline is also seeing success in other teams that support operations, such as mechanics, cabin crew, contact centre and airport support teams.

“Highest ever” revenue in history

“Our strategy to be Canada's western leader and national leisure champion is working,” von Hoensbroech continued.

He said revenue in the most recent quarter was the “highest ever in our history.”

“We have a robust balance sheet and enjoy a comfortable cushion of liquidity,” he said. “This should come as no surprise for those who watched how we managed our finances during COVID, as we are perhaps the only airline of scale globally that did not accept government loans, or issue any equity or debt of any kind, during the pandemic.”

WestJet CEO Alexis von Hoensbroech photographed at the Toronto Region Board of Trade in October. (Pax Global Media/file photo)

von Hoensbroech reiterated WestJet’s commitment to being an affordable and reliable airline.

“We will work hard to stay lean, improve our cost advantage over our competitors, and accelerate our growth,” he wrote. “…we have worked to design our business model to keep us profitable in all four quarters."

“Business models that make money in some months and lose money in others will find it tougher to survive and we saw the harsh reality of this during the pandemic.”

More choice & affordability

The CEO also addressed WestJet’s ultra-low-cost carrier (ULCC) strategy.

As previously reported, the airline, last month, folded its budget carrier Swoop, integrating it into WestJet’s mainline.

With the integration now complete, the airline’s 180-strong fleet will transition to offer ultra-affordable options through to premium experiences on each of its aircraft, densifying cabins to serve a broader spectrum of guests.

“I am firm in my belief that the pure play ULCC model is heavily challenged in Canada, given its vast geography, small population and high cost of air travel infrastructure,” von Hoensbroech said Friday.

READ MORE: WestJet CEO addresses closure of agent booking channel, APPR, Iceland & future strategy

“We have tried and learned a lot from Swoop. Once you grow beyond 10 ULCC aircraft you are forced to tap into smaller markets that don't support a whole airplane full of ULCC capacity. Others have tried and failed, and some are still trying and challenging us.”

von Hoensbroech shared a link to a previous LinkedIn post he wrote about the topic.

WestJet's revenue last quarter was the “highest ever in our history," says CEO Alexis von Hoensbroech. (File photo/Pax Global Media)

The strategy of adding ULCC-style fares and products within the mainline is “designed to give us flexibility to serve all Canadians, even the ultra-price sensitive ones, and to do so profitably,” von Hoensbroech wrote.

Once introduced in the new year, WestJet will have a ULCC-type product onboard its existing fleet of aircraft.

“This allows us to easily offer an equivalent ULCC capacity of 50 Boeing 737 sized aircraft, while providing each market with an appropriately sized offering,” he said.

“As we receive deliveries of our MAX10 aircraft, starting next year, we will gain an unbeatable seat-cost advantage, as these aircraft provide the most seating of any narrow-body aircraft in Canada with 212 seats.”

The final piece

The final piece to WestJet’s strategy is integrating Sunwing Airlines and “the perfect complement of Sunwing Vacations Group” as the company’s tour operator.

von Hoensbroech pointed out that one out of every two trips from Canada to the Latin Caribbean market will be on a WestJet Group aircraft.

And equally on the tour operator side, one in two vacation packages sold in Canada will be sold through the brands that make up the Sunwing Vacations Group, he added.

“This gives us the scale and market presence to provide the most attractive vacation offerings to Canadians,” von Hoensbroech wrote. “This acquisition is of utmost importance to our strategy. I know integration is a heavy lift for our people. Fortunately, as of now, we have no more need or appetite for further acquisitions.”

WestJet still hasn't made any official announcements about the return of its trade booking channel, WestJet Agent, which shut down on Oct. 24. 

PAX had an opportunity last month to ask WestJet's CEO about the platform, and while von Hoensbroech didn’t know specifics, he said he was aware of the issue and that his team was “working very intensely to create a solution.”

In a statement on Oct. 13, WestJet’s Director of Sales, Amanda Ierfino said WestJet Agent was shutting down for “technical reasons,” noting that a new booking option could be in place by Q1 of 2024.

“Eye on the prize”

Meanwhile, at WestJet’s most recent leadership summit, von Hoensbroech presented the many elements that are coming together to return WestJet to profitability.

“I could not be more excited to see this come to fruition,” he said. “The acquisition of Sunwing was the one missing piece required to deliver on our strategy to be the leader in the markets we serve."

While there is “a lot of heavy lifting still ahead” as WestJet integrates Sunwing Airlines, “the course is set," he said. 

“We know where we are going, we are maintaining our focus to keep our costs down, we have the order book required to deliver our growth and we have the most capable airline and tour operator team in the country,” von Hoensbroech said.

“Today was an exceptional celebration of success for the WestJet Group. We have our eye on the prize and we are just getting started.”

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