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JetBlue vs. WestJet Case Study Reveals Potential Revenue Optimization Opportunities

JetBlue vs. Case Study Reveals Potential Revenue Optimization Opportunities

As per link, this is a case study executed few years ago to benchmark WestJet Airlines (“WS) strategy against JetBlue Airlines (“B6”). Airlines have similar average stage length, headcount and fleet size which are key metrics to conduct a peer-to-peer analysis. Few year ago, one can observe that WS offered 54 premium/seats p/departure or 83% less than B6 and did not offer (as JetBlue did) a premium product across route network.

Taking a number of assumptions including aircraft utilization, load factor, pricing, etc. and trying to identify ways for WS to increase its ancillary revenue potential, we observed that under phase 1 to 3 – PLUS seating rebranding could bring 136M CDN$ in additional ancillary revenue per year.

2-1 – Peer-to-Peer Ancillary Revenue Analysis

Moreover, phase 4 – A B737 reconf. business case could be executed to further explore 21M CDN$ in additional ancillary revenues per year and furthermore that a potential phase 1 to 5 – PLUS seating rebranding and B737 reconfiguration will add 217 premium seats per day.

Based on observed data and a number of assumptions such as daily aircraft utilization, load factors, pricing, etc., key PLUS seating and aircraft reconfiguration conclusions were:

A high margin quick win with few extra cost solution. Expand PLUS product offering taking advantage of existing cabin configuration. Potential revenue impact: Additional 136M CDN$ per yr.

2. Evaluate B737-700 reconfiguration case. Potential revenue impact: Additional 21M CDN$ per yr.

3. Evaluate Q400 rebranding: Potential revenue impact: Additional 7M CDN$ per yr.

Grand total potential revenue impact: 164M CDN$ per yr. or 100% ancillary revenue growth vis-à-vis WS Y2013 ancillary revenues reported).

Other recommendations, we could observe were:

a. Concerning future aircraft deliveries: Based on route network, consider larger aircraft with potential for extra PLUS seats in key markets (B737-800 fleet). Business markets will include Vancouver to Calgary, Calgary to Toronto and La Guardia to Toronto. Potential leisure markets: Orlando, Punta Cana, Puerto Vallarta and Cancun. Concerning larger aircraft deployment, WS had an option to convert any of its 13x B737 NG future commitments schedule for Y2015 to Y2017 to NG 800 and further flexibility was given by the aircraft manufacturer for B737 MAX 7 / MAX 8 aircraft orders to be substituted for larger variants such as Boeing MAX 9 as per options negotiated with the OEM few years ago.

b. Reassess future B737-700 aircraft seat configuration strategy to avoid post-delivery operational and reconfiguration costs

c. Evaluate larger aircraft additional costs (additional flight attendant, debt financing, lease rates, logistics, etc.) vis-à-vis revenue generation potential as revenue yield uptick must outweighs costs

d. Working side by side with pricing, RM and network planning are paramount to make sound fleet and seat configuration decisions that will maximize profitability

Finally and regarding WS ancillary revenue strategy in Y2014, conclusions were:

a. Charging extra for value, further push notifications to maximize ancillary revenue strategy, availability of low fares stock inventory and commercial partnerships were key to expand the business

b. Apply a friendly ancillary revenue strategy focus – Charging for what is perceived as added value products i.e. ID customer satisfaction drivers per segment and build bundling products, qualified and quantify valued P&S vs. revenue potential in order to implement those with the highest top line revenue potential, find perfect combo solutions i.e. high revenue generator offering that improves passenger satisfaction and look for mainstream add-on services with minimal establishment cost i.e. priority security screening and boarding

c. In addition, eagerly push an ancillary revenue strategy at different passenger touch points such as at booking, email notifications follow-up one week/3 days/ 24 hrs. before departure, at the airport, while standing in line at security check point, etc. In addition, focus on promotional campaigns for high margin unpopular P&S not purchased at booking i.e. meals/lounge access and build a focused/passenger segmented multi segment retail shopping mall experience that maximizes revenues (cobranded credit card).

And as of today, glad to observe that WS has implemented 10 premium PLUS seats on its Q400 fleet and offers a premium product across its network but still improvements are needed vis-à-vis its benchmarked peer concerning a more aggressive ancillary revenue strategy especially rebranding more PLUS seats such as in emergency exits as B6 does. In fact, today B6 offers 198 premium seats in its fleet per departure vs. only 70 for WS (65% fewer). But if we compare apples-to-apples and that’s only considering peers short and medium haul fleet types and therefore no wide body fleet, WS stands at 46 premium seats only or 77% fewer than B6. Furthermore and in the case that B6 enters the transatlantic market as it is planning to with A321neoLR, then the gap will be even wider further emphasizing that there is plenty of room to optimize WestJet ancillary revenue strategy and top line revenues.

2-1 – Peer-to-Peer Ancillary Revenue Analysis


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René Armas Maes

René Armas Maes

René is an international commercial and consulting executive with 15+ years of global revenue growth, strategic planning and restructuring experience. He has significant expertise in revenue and EBITDA margin improvement, leading global strategy, sales, NPD and profitability growth, asset productivity, lean management structure and processes, non-strategic asset spin-off, start-up operations and business competitiveness. Through his professional careers, he brings a key focus on propelling business forward through strategic positioning and brand repositioning, transforming business units and optimizing day-to-day operations and returns. He began his career as a Senior Analyst at Simat, Helliesen & Eichner (SH&E), an international consultancy firm based in New York City where he consulted global customers and traveled around the world. René earned an MBA from John Molson School of Business in Canada.