WestJet Airlines Ltd. is red-faced about its lagging market share in the lucrative Toronto-Ottawa-Montreal corridor and is vowing to strike back against upstart Porter Airlines Inc. with a new emphasis on the business traveller.
After 14 years of playing the role of underdog against much larger Air Canada, WestJet finds itself in the unusual position of trying to win back market share in Eastern Canada against a small, feisty competitor that has yet to celebrate its fourth birthday.
"I'm almost embarrassed to say that in the Toronto market, we have lower brand awareness than does Porter, a company with 20 small planes versus a company with almost 90 large planes," WestJet chief executive officer Gregg Saretsky said Wednesday during an investment webcast from New York, organized by Merrill Lynch.
Calgary-based WestJet, founded in 1996, is "very much a Western Canada-focused company and so we have a much stronger presence there. We do suffer in Eastern Canada from a low top-of-mind awareness," Mr. Saretsky said. He is counting on a new frequent-flier program, bundled fares and a loyalty credit card co-branded with RBC MasterCard to help woo key corporate customers.
Porter, with a fleet of 20 Bombardier Q400 turboprops, has surprised industry observers with its rapid expansion since it launched in October, 2006. It quickly became a pest to its larger rivals.
The airline's strength is attracting business travellers at Billy Bishop Toronto City Centre Airport, located on an island near the city's downtown core. In contrast, WestJet operates from Toronto's Pearson International Airport, much further from the downtown business district.
Porter CEO Robert Deluce said in an interview that the regional carrier intends to defend its hard-won No. 2 position in the Eastern Triangle by offering frequent flights daily. "We have the right-sized aircraft for the time-sensitive business traveller, and frequency is largely the name of the game," he said.
Porter's turboprops have 70 seats each, compared with WestJet's fleet of 88 Boeing 737 jets, which carry from 119 to 166 passengers.
Based on Official Airline Guide data, Porter estimates that on the Toronto-Ottawa route, Air Canada's market share averaged 58 per cent last year, ahead of Porter's 23 per cent and WestJet's 19 per cent. On the Toronto-Montreal route, Air Canada's share averaged 66 per cent last year, well ahead of Porter and WestJet, both of which held 17 per cent.
Porter has stepped up its seat capacity in the Eastern Triangle, with 23 round trips each weekday between Toronto and Montreal this year, compared with 14 last year. As well, Porter now offers 19 round trips each weekday between Toronto and Ottawa, up from 17 last year.
Although Mr. Saretsky said it's "hard for us to really measure" Porter's overall impact, he acknowledged that "we clearly have some work to be done in Eastern Canada."
He noted that WestJet's frequent-flier program, launched in March, is targeting passengers who typically take four to 20 trips annually, while the RBC MasterCard is helping to raise WestJet's profile among business customers.
By the end of this year, a new computer reservations system will allow WestJet to introduce "fare bundling," including refundable tickets, pre-reserved seating and access to common-use airport lounges, Mr. Saretsky said.
Robert Kokonis, president of airline consulting firm AirTrav Inc., said Porter has been aggressively marketing its service in the Eastern Triangle with full-page newspaper advertisements.
Porter's expenses for sales, marketing and other items such as administration exceeded $34.6-million last year, or 22.9 per cent of its revenue. By contrast, WestJet's comparable expenses rang in at $380.6-million, or 16.7 per cent of its 2009 revenue, underscoring the gap between the two carriers' publicity budgets, Mr. Kokonis said.
Earlier this month, Toronto-based Porter delayed plans for its $120-million initial public offering, saying volatile stock markets forced it to reconsider its options. It may attempt an IPO late this year instead.
Competition for air travellers in Eastern Canada is likely to grow even more intense. Air Canada Jazz plans to offer flights late this year to break Porter's Toronto Island monopoly.
Michael Rousseau, Air Canada's chief financial officer, said the airline's regional affiliate Jazz plans to re-enter Billy Bishop airport, more than four years after a company controlled by Mr. Deluce ousted Jazz from the island terminal in early 2006.
Jazz is keen to compete directly against Porter at Billy Bishop airport, subject to a court ruling this summer on how many takeoff and landing slots should be made available to Jazz, Mr. Rousseau said.