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WestJet: What Did the Airline Profits Sustainability Index Reveal?

WestJet: What Did the Airline Profits Sustainability Index Reveal?

In the 11th edition of Airline Profits, we presented our first review of Alaska Airlines based the Airline Profits Sustainability Index (APSI). This is an integrated metric, which takes into account three dimensions: People, Performance and Agility.

In this edition, we are presenting another airline review on the basis of the APSI: that of WestJet.

Our analysis covered a period of 10 years, starting 2006 through 2015. We have also considered pieces of information available on WestJet’s website and other reputable sources at the time our review was conducted.

Based on the data available as of December 2016, our analysis revealed that on a scale of 1 to 10, WestJet has an Airline Profits Sustainability Index of 9.0.

In the next few lines, we are going to offer a breakdown of this rating. However, let’s begin with a brief overview of the company by highlighting some key facts.

Creation and History

WestJet, which celebrated its 20th anniversary in February 2016, was founded in February 1996 by Clive Beddoe and business partners including David Neeleman who later founded JetBlue Airways, Mark Hill, Tim Morgan and Donald Bell.  Initially focused on the Western Canadian market, WestJet quickly expanded to Eastern Canada in the early 2000s. About five years later, the airline started adding international destinations, mainly in the USA and then to Mexico and the Caribbean. Furthermore, 2016 was a year of international expansion. WestJet added a non-stop service to Hawaii in January, followed by the expansion of its intercontinental network in May with the addition of direct flights between several Canadian cities and London Gatwick.

Although passenger revenues have declined substantially over the past couple of years (a near 20% drop), WestJet remains one of the most profitable airlines in the world, performing consistently above the industry average operating and net profit margins, and belongs to the select few, which have posted profits for several consecutive years.

Business Model, Network and Fleet

Another low-cost carrier inspired by Southwest Airlines business model, WestJet currently serves 92 destinations across the Americas and Europe, of which North America accounts for nearly 70 percent.

WestJet operates an all-Boeing fleet of 119 aircraft in-service composed of 115 Boeing 737 and four newly acquired Boeing 767, which serve intercontinental routes. The current in-service fleet has an average age of 8.2 years. The airline also has 67 aircraft on order.

Ownership and Subsidiaries

WestJet currently has a simple ownership structure: 100 percent of the equity is publicly traded.

At the present time, the airline fully owns WestJet Encore, which operates an exclusive fleet of 33 Bombardier Q400 and serves 35 destinations within Canada and the USA.

Gregg Saretsky
President & CEO, WestJet

Leadership, People and Operations

WestJet is currently led by Gregg Saretsky, in the role of President and Chief Executive Officer. And as of 2015, the airline employed more than ten thousand people.

Headquartered in Calgary, Alberta, WestJet uses Calgary and Toronto Pearson international airports as its main operational hubs. They also focus on Edmonton, Vancouver, and Winnipeg in Western Canada.

Airline Profits Sustainability Profile

As mentioned at the beginning of this review, our analysis covered a 10-year period ranging from 2006 to 2015.

People Index

The Airline Profits People Index is based on a scale of 1 to 10. WestJet has a high People Index of 8.7. Five factors were considered in our calculation. The People Index has a 45% weight in the overall APSI.

Performance Index

The Airline Profits Performance Index is based on a scale of 1 to 10. WestJet has a very high Performance Index of 9.4. Five factors were considered in our calculation. The Performance Index has a 40% weight in the overall APSI.

Agility Index

The Airline Profits Agility Index is based on a scale of 1 to 10. WestJet has a high Agility Index of 8.9. Seventeen factors were considered in our calculation. The Agility Index has a 15% weight in the overall APSI.

Summary

WestJet’s Airline Profits Sustainability Index of 9.0 is primarily driven by the Performance Index, which in this case happens to be very high. This is mainly due to the fact that over the past decade (2006-2015), WestJet was profitable ten years out of ten. In addition to that, the airline has posted above average operating and net profit margins.

With a high People and Agility indices and very high Performance index, our primary recommendation is that WestJet would do well to maintain the financial discipline acquired over time.

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Kofi Sonokpon

Kofi Sonokpon

Managing Editor of Airline Profits, the first aviation magazine devoted to improving airline effectiveness and profitability, Kofi Sonokpon has more than 20 years of international experience in aviation. Kofi holds an IATA sponsored Master of Business Administration (MBA) in Air Transport Management from the John Molson School of Business at Concordia University in Montreal. Kofi Sonokpon is also an author and speaker on the topics of leadership, effectiveness, and profitability.