WestJet eyes smaller planes
BRENT JANG
Globe and Mail Update
April 14, 2009 at 7:24 AM EDT
TRANSPORTATION REPORTER
After faithfully ordering workhorse Boeing 737s over the past 13 years, WestJet Airlines Ltd. WJA-T is studying the merits of adding smaller planes, envisaging a bold departure from its single-fleet strategy.
The Calgary-based carrier, founded in 1996 with just three Boeing 737s, is pondering using smaller aircraft for regional routes as it develops contingency plans in case Air Canada and its Jazz affiliate scale back service.
WestJet has 78 Boeing 737s in its fleet, and by 2013, it expects to take delivery of 43 more of the jets, which seat between 119 and 166 passengers, depending on the series.
But as WestJet evolves, it needs to consider taking the step of ordering smaller planes, said Bob Cummings, WestJet's executive vice-president of guest experience and marketing.
"We would be remiss if we weren't looking at certain scenarios," said Mr. Cummings, declining to say whether WestJet is interested in planes built by Montreal-based Bombardier Inc., Brazil's Embraer SA or other firms.
He said WestJet is revisiting its single-fleet strategy, but he played down any direct links between the carrier's study of a second fleet and speculation from some industry analysts that Montreal-based Air Canada's financial woes could force it to further shrink its network and also disrupt Jazz Air Income Fund.
National Bank Financial Inc. analyst David Newman said yesterday that Jazz may slash its monthly distribution of 8.38 cents a unit by half for the next nine months, as the Halifax-based regional airline tries to conserve cash to help refinance a $115-million borrowing deal maturing next February. He said Jazz, which flies on behalf of Air Canada, could potentially offer its services to WestJet.
Mr. Cummings declined to comment about Jazz, but in general, he emphasized that WestJet prefers internal growth over mergers and acquisitions.
WestJet has plenty of growth opportunities to deploy Boeing 737s in Canada, Mexico and the Caribbean, without even factoring in Jazz's turbulence and the possibility of debt-ridden Air Canada filing for bankruptcy protection, he said.
"We don't feel any time pressure to go to a second fleet," he said in an interview from Calgary. "But there is definitely a tipping point where this organization needs to seriously consider going to a second fleet. It just makes sense that in the life cycle of this organization, we would move beyond the consideration phase."
Devoting itself to one aircraft model, WestJet has been able to keep maintenance costs in check, and pilots can also be rescheduled on shifts without worrying about retraining.
But WestJet's strength is its corporate culture, and the competitive advantage of friendly service would be "transferable to a second fleet," Mr. Cummings said. "We believe we would do well in shorter-haul markets."
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