KARL MOORE: This is Karl Moore of the Desautels Faculty of Management at McGill University, Talking Management for the Globe & Mail. Today I am in Calgary at WestJet’s gleaming new head office to talk to their new CEO Gregg Saretsky.
Good afternoon, Gregg.
GREGG SARETSKY: Hi, Karl.
KM: When you look at it, Air Canada and other competitors have business class, and you certainly have a lot of tourists, but increasingly you have business clients as well. What is the attraction to WestJet to a business traveller compared to having the big seats and the service you get on a lot of traditional air carriers?
GS: I think, largely flights under three hours, the value added from a big seat versus the fare you have to pay to access it – there is a real question to whether or not that’s a good trade-off. Increasingly, with business being very focused on reducing costs, we are finding a lot of Canadian corporations saying, “We aren’t going to allow access to business class on flights under five hours.” Well, that is just about every point – every point we serve is a point under five hours. So more and more of our network is opening up to these types of travellers.
Now, if you are a very frequent traveller and you are flying to Asia and Europe, and your company will pay the business class fare, and you like sitting in an airport lounge – you are probably not a customer that is going to find your way to WestJet and that’s ok! We are very focused on a segment of the market that is flying somewhere between four and forty flights a year and we can give them special treatment, at a very low price, that they don’t get by being a non-status member on somebody elses frequent-flier program. So we think that is the sweet spot for us.
KM: When you look at it, Air Canada has the advantage of the Star Alliance, business class long haul, but it seems as if WestJet is chipping away at some of those advantages. What are some of the ways you are chipping away at some of Air Canada’s, at least former, advantages if not current?
GS: We have done a lot of focus group research and what we heard was there were two barriers. One is scheduled utility. So, fly where I need to go and fly often enough so that if my business meeting runs late or finishes early, I am not waiting around for a flight. So we have been very busy building out utility in our Canadian/Domestic network. We launched a brand new service between Toronto-Ottawa, Toronto-Montreal, just last May with ten flights a day in Toronto-Montreal market which gives us 7,8,9 in the morning and 4,5,6,7 at night with flights during the day. That was really important in terms of creating that utility.
Second problem was, “Hey, I’d love to fly you but you don’t have a frequent guest program. So the rewards I get by flying other airlines I can’t get on WestJet.” We launched a new frequent guest program and we launched it in a very different way. It is not inventory controlled, there are no black-outs or seat restrictions, it is a money back – so we give you WestJet dollars, a percentage back on the fare that you pay. If you buy an expensive fare at the last minute, you get more credits then if you buy a cheap fare three weeks out. When you fly on our competition, you get the same number of credits whether you are paying a thousand bucks or paying $29. So we think there is a value proposition there that helps really crack the nut on frequent guest programs and the combination of scheduled utilities and the frequent guest program is earning us a lot of business travel.
KM: I guess the third point is, being part of the Star Alliance; you offer increasingly those international partnerships as well?
GS: Yes, so we are not in any global alliance – it is a bit tougher to plan our program. If you are flying to Asia you might be flying on our partner Cathay Pacific or Japan Airlines and they are both part of One World. If you are flying to continental Europe you might be on Air France or KLM and they are part of Sky Team. So it is a little more difficult in our program to get status because those carriers plan different programs. Now if you take all of your flying and put them in the WestJet travel rewards program, then you can accumulate a currency in our program that applies to all of these other airlines. So there is a way to skin the cat, it’s a little more difficult or more complicated to play, but I think that people who like the WestJet experience, and like the partners that we have chosen to play with (Emirates Airlines, El Al Airlines, top drawer carriers from around the world, British Airways) they will figure out pretty quickly how to play that game and win.