WestJet charts bold new path

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At a town hall meeting at WestJet's Calgary headquarters last week, the official business at hand was the transition in the CEO's office, from Sean Durfy to Gregg Saretsky.

The surprise news about the company's top job would stun the airline industry and dent WestJet's stock price.

Yet at the town hall, Mr. Durfy couldn't resist injecting a note of levity. He joked that the CEO's job would be "a complete cakewalk" for his successor, since he wouldn't have to contend with the recession or get blamed for the botched introduction of the SabreSonic computer reservation system last October, which left WestJet's customers fuming in airport lineups and on lengthy holds with the company's call centre.

"You're going to have nothing to do," Mr. Durfy ribbed Mr. Saretsky.

The reality is that the incoming CEO will have a busy agenda indeed.

"We all had a good laugh, but we all recognize that this business is never easy," Mr. Saretsky said in an interview. He spoke from experience, having been vice-president of marketing at the now-defunct Canadian Airlines International Ltd., which made the mistake of trying to match Air Canada route for route.

WestJet, by contrast, was founded with almost religious devotion to doing one thing well - serve major routes in Western Canada as a no-frills carrier.

With that model successfully realized, the question hanging over Mr. Saretsky's appointment is whether he can grow WestJet without making the classic over-reach that has filled up the boneyard of Canadian aviation.

Citing the reservation crisis, Raymond James Ltd. analyst Ben Cherniavsky notes WestJet has already endured some bumps as it transforms itself.

"They are so far away from their original business model that you hardly recognize the airline," Mr. Cherniavsky said. "The complexity of WestJet is going up exponentially, and you need an airline guy like Gregg to see the initiatives through. He has the experience and he brings a lot to the table on executing on necessary ideas."

Mr. Saretsky is buckling up. "Inasmuch as this company has been teed up for success, it's going to continue to require a lot of hard work by all WestJetters," said Mr. Saretsky, who joined WestJet last June as vice-president of its vacations division, after a dozen years at Seattle-based Alaska Airlines Inc.

UP IN THE AIR

Born in the Montreal suburb of Châteauguay, Mr. Saretsky, who is now 50, seems to have been destined for an airline career. His father was director of flight services at Air Canada. After the family moved in 1970 to Richmond, B.C., his mother landed a position at CP Air, a forerunner to Canadian Airlines International. His two older brothers are pilots.

While an undergraduate student at the University of British Columbia, Mr. Saretsky worked for three summers as an Air Canada flight attendant, and another two as a customer service agent with Wardair Inc. He not only paid his way through school, but also caught the travel bug - over the decades, he has managed to visit more than 250 cities in 34 countries.

At UBC, he thought about becoming a doctor after graduating in 1982 with a bachelor of science degree. Instead, he obtained his MBA from UBC in 1984, and then signed on as a commercial account manager at Bank of Montreal for two years.

The lure of aviation, however, proved to be irresistible. In 1985, Mr. Saretsky joined CP Air, even though it meant taking a pay cut.

Mr. Saretsky was still with the company - by now renamed Canadian Airlines International - when an upstart carrier named WestJet launched in 1996. Mr. Saretsky remembers meeting Clive Beddoe, the company's brash founding CEO, during discussions in 1997 on a potential collaboration.

Mr. Beddoe told Kevin Benson, the CEO of CAI, about WestJet's rapid growth, and raised the prospect of a partnership, perhaps on popular routes such as Vancouver-Calgary and Vancouver-Edmonton.

"There was no common ground found at the time. Clive and Kevin decided that they couldn't find a way to work together and they dismissed further discussions," Mr. Saretsky recalls.

Canadian Airlines ended up in dire financial straits two years later and would merge with Air Canada, while WestJet steadily grew.

LAID-BACK APPROACH

While WestJet's geographic range has expanded from its original mandate, an unpretentious, tongue-in-cheek corporate culture has consistently helped define the company, even as the staff head count has grown from 220 to 7,600.

At WestJet, executives are known as Big Shots, human resources is the People Department, accountants work in Beanland and receptionists are on the Welcoming Team.

Before WestJet expanded with flights into the United States in 2004, it made light of its own limitations. "Are you hoping to book a flight to the U.S. of A.?" asked a taped message on WestJet's reservation line. "Sorry, WestJet doesn't fly there."

But there was a lot less joking after the reservation-system fiasco. Consumers clicking on WestJet's website last fall saw a nine-sentence apology from Mr. Durfy. The laid-back corporate culture turned tense, and the frustration among customers eroded the goodwill built up since Mr. Beddoe, who is now chairman, co-founded the company in 1996.

The computer woes had a ripple effect, damaging employee morale and delaying both the introduction of WestJet's frequent flier program and the unveiling of a loyalty credit card issued by Royal Bank of Canada. Passengers are just now starting to receive their cards, nearly one year behind the original schedule.

If Mr. Saretsky takes office free of any public association with the reservation meltdown, he has plenty of strategic work ahead of him.

Mr. Saretsky, who becomes WestJet's president and chief executive officer on Thursday, said he will be respectful of WestJet's roots as a low-cost carrier. But he insists he won't shy away from making bold decisions.

"I've learned that over 25 years in this industry, survivors are those who are quick to move. There's the fast and there's the dead," Mr. Saretsky said.

Motivating WestJet's work force will prove to be more challenging in the years ahead, since the company's stock price is no longer soaring like it did after its initial public offering in 1999. With 84 per cent of employees owning shares, it's no small matter, but Mr. Saretsky said compensation isn't the only motivator.

"You have to have fun and feel you can make contribution and drive a difference. WestJetters have that in spades."

Over the next three to four years, WestJet intends to stick with its single-fleet strategy of operating narrow-body Boeing 737s, which seat between 119 and 166 passengers.

But to set itself up for the long term, WestJet needs to begin plotting now what it might look like in 2020. For Mr. Saretsky, that means re-examining the sacred cow of running a single-fleet of planes with single-class cabins.

Mr. Saretsky vows to tread carefully with the idea of introducing a business-class section. "Remember that WestJet has been built on a whole culture of egalitarianism," he said. "The minute you have perks for some and not for others, it rubs against what has been part of our culture."

For now, WestJet will go after corporate customers by sending a sales force out to market its new frequent flier program and co-branded WestJet RBC MasterCards.

The new computer reservations system, meanwhile, is designed to start reaping dividends by the end of this year. The new software will make it possible for WestJet to abandon its 14-year-old system of offering only one ticket price at any given time for a particular flight.

In its place will be fare "buckets" that are tiered, similarly to Air Canada, so customers who pay the lowest price face more restrictions and cancellation penalties than those who pay more.

Another major initiative will be signing partnerships with foreign carriers, feeding travellers into Canadian hub airports where WestJet in turn could fly visitors to smaller centres.

"My experience at Alaska Airlines taught me that it's best, if you can, to be able to pick and choose freely without the handcuffs of being tied to a single global alliance relationship, to ensure you get the best partner for the particular geography of the world that you're wanting to cover," Mr. Saretsky said.

Air Canada belongs to the Star Alliance of global carriers, and WestJet feels that it can mix and match partners from the other two, the Oneworld alliance and SkyTeam.

WestJet's fleet of 88 Boeing 737s don't have the range for transatlantic or transpacific routes, but Mr. Saretsky said he wants to build a "virtual network" through partnerships and "code-sharing" - pacts that allow for co-operation on connecting flights, baggage handling and electronic ticketing.

WestJet already has partnership deals in place with China Airlines and Air France-KLM, and it hopes to implement a co-operation agreement with Dallas-based Southwest Airlines Co. in 2011.

Domestically, WestJet has a strategic planning group that's examining the market for smaller aircraft such as Bombardier Q400 turboprops, the same type of plane used by Toronto-based Porter Airlines Inc.

"We always want to be smart about where the next best opportunity is, and measure that up against the next best opportunity for the narrow-body Boeing 737s," Mr. Saretsky said, emphasizing that WestJet still has another 47 Boeing 737s on order over the next six years, so there isn't any rush to diversify into small planes to capture consumers in smaller Canadian cities.

Entering new markets in the United States, Mexico and the Caribbean should keep WestJet busy for another four years. "We have a lot of runway ahead of us in terms of lots of places where those 737s can fly."

Mr. Saretsky bristles at suggestions that WestJet is gradually morphing into Canadian Airlines International, or heaven forbid, Air Canada.

The trouble with Canadian Airlines International was that it was saddled with a cost structure that couldn't support low fares as it slugged it out with Air Canada in 1990s, he said. WestJet, helped by its non-union work force, has operating costs that are 30 per cent lower than Air Canada.

"It wouldn't be the airline business if we didn't have our challenges," Mr. Saretsky said. "We're at an inflection point in our evolution. I get to be at the helm. I've learned to adapt to the environment in the airline business and that's perhaps the greatest strength that I bring to WestJet."