WestJet sets steady course for supremacy

http://business.theglobeandmail.com/...

BRENT JANG, From Monday's Globe and Mail

February 16, 2009 at 9:14 AM EST article

Away from his WestJet Airlines Ltd. [WJA-T] office, Clive Beddoe has learned lessons in patience as an avid sailor, realizing that he's often able to catch up with yachts far ahead.

WestJet's track record of gaining market share from Air Canada [AC.A-T] has the chairman and co-founder now envisaging what was once unthinkable - moving within striking distance of being the No. 1 domestic carrier.

"It's rather like sailing," he said in an interview. "When you look out, you can see the horizon, and your ambition is to get as far as you can see.

"But once you get there, you see another horizon," adds Mr. Beddoe, who charts his course off Canada's west coast. "New horizons open up. Our obligation is to be ever aware of the changing environment and thereby the changing opportunities that come along for our company."

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Despite tough times, WestJet posted a $178-million profit in 2008, placing it among the best North American performers in an industry reeling from deep losses. Air Canada lost $1-billion last year.

"It wouldn't surprise me where we may be in five years," Mr. Beddoe said, predicting that WestJet will be closing in on the country's largest carrier to challenge for the lead in Canadian seat capacity in 2014. "Let's not jump the gun, but I have a long-standing confident view for the future of WestJet."

Nine years ago, Air Canada controlled 77 per cent of the domestic market while WestJet held just 7 per cent. But Montreal-based Air Canada decided to devote greater attention to routes into the United States and overseas flights - both deemed more profitable pursuits than domestic service.

At the same time, WestJet introduced new Canadian destinations, tapping into places neglected or underserved by Air Canada and its regional affiliate, Jazz. By last fall, the competitive gap had narrowed: Air Canada's domestic market share stood at 57 per cent while WestJet's had grown to 36 per cent.

Mr. Beddoe reckons Calgary-based WestJet's share could be 45 per cent or higher by 2014. "Although the economic downturn is negative in many respects, it will open up opportunities for WestJet. Those with a solid balance sheet and solid cost structure succeed and grow, and benefit even in adversity," he said.

Research Capital Corp. analyst Jacques Kavafian notes that Air Canada expects to further shrink domestic seat capacity by 3 per cent or 4 per cent this year while WestJet expands 5 per cent.

"Air Canada is making more room for WestJet to grow in Canada," Mr. Kavafian said.

Mr. Beddoe traces WestJet's strength to the original decision to launch service with three used Boeing 737s. The carrier flew to just five cities in Western Canada when it was founded 13 years ago this month.

Today, all 76 planes in WestJet's fleet are Boeing 737s, serving 55 destinations in North America and the Caribbean. Another nine of the workhorse planes will be delivered this year.

WestJet's original three Boeing 737s have been long retired, but Mr. Beddoe has insisted on placing orders for newer models of the single-aisle jets over the years. He points to the cost savings reaped by sticking with one type of plane.

"He who has the lowest costs wins," Mr. Beddoe said.

And while WestJet has made great efforts to promote itself as customer-friendly, Mr. Beddoe is no fan of a proposed passenger bill of rights, put forward by New Democratic Party MP Jim Maloway as a private member's bill.

"Unfortunately, weather delays on one side of Canada can affect the other side. It isn't right to penalize airlines for being caught by weather delays," Mr. Beddoe said.

Consumers freely choose their airline, based on service and each carrier's ability to deal with complaints, he said. "Let the market sort itself out. Let the flying public decide who they want to fly with."

Hg