Westjet

Topics: Low-cost carrier, Airline, Strategic management Pages: 24 (5231 words) Published: June 21, 2013
WestJet Strategic Audit

by:

Tanya Witherington #3136712
Abdullah Saleh #3157594
Tyler Ethridge #3084252
Natasha King #265841
Yao Yao #3111635
Jaiqi Lu #

BA 4101March 21, 2005.
Daniel DoironUNBSJ
West Jet

I. Current Situation

A. Current Performance

• WestJet owned 28% of the domestic air market share in 2004 vs. 25% in 2003. • For the year ended December 31, 2004, un-audited Revenue was $1.06 billion up by $196.4 million over 2003’s revenue of $863.6 million. However, the airline reported a Net Loss of $17.2 million, down from Net Earnings of $60.5 million in 2003. • In 2004, West Jet’s share prices fell 35% in value, due to record high fuel prices as well as charges of corporate espionage (Verberg, 2004). • WestJet flies to 33 North American cities, as well as 8 international countries. • Employs over 4,500 people who are non-unionized.

• As of December 31, 2003, WestJet’s Cost per Available Seat Mile (CASM) was 11.07 cents vs. Air Canada’s 16.87 per CASM • The company has elected to replace its fleet of 737-200 aircraft with state-of the art 737-700. By December, 2005, the company will operate 55 state-of-the-art 737s. o This replacement cost caused the company to incur a $47.6 million dollar write-down in assets in 2004. o 2004 Q4 net loss of $46.3 million compared with 2003 Q4 net earnings of $12.8 million. • Ranked the third most respected corporation in Canada in Ipsos-Reid’s 2004 survey. • UPDATE: Due to collapse of Jetsgo:

o In March 2005, WestJet stock increased from $9.36 to $16.14 per share – almost double the value in one week (March 17, 2005: TSX online). o To accommodate the increased market demand, WestJet plans to boost capacity by 35 per cent this year and delay the retirement of 18 older airplanes to meet demand. o WestJet has also increased fares since the collapse of Jetsgo.

B. Strategic Posture

WestJet’s mission, objectives, strategies and policies are all clearly stated.

1. Mission

• “To enrich the lives of everyone in WestJet’s world by providing safe, friendly, affordable air travel” (WestJet online).

2. Objectives

• Vision: WestJet aims to be the leading Canadian high-quality, low-fare airline that people want to work with, customers want to fly with, and shareholders want to invest with (WestJet online). • Growth through international expansion.

3. Strategies

• To achieve its vision, WestJet has designed a business model that focuses on its key strengths of corporate culture (satisfied employees) and customer service, low operating costs, product differentiation, and demand stimulation. • Over the next 12 months (2005), older model 737s will be replaced with five Next-Generation 737-600s, six Next-Generation 737-700s and five Next-Generations 737-800s. This new fleet will give WestJet the most modern and fuel-efficient fleet in Canada and allow the airline to grow by a further 17%. • This new fleet will save the airline approximately $30 million annually because these planes are 30% more fuel efficient than the older models and will incur much lower maintenance costs. This will more than offset the $47.6 million write-down loss. • Crewing efficiencies: Pilots can fly all variants of the 737s due to their common cockpit configuration. • Maintenance efficiencies: Maintenance will be simplified since all planes utilize the same parts and engines. • Simplified route structure and operations.

• Use of secondary airports where available.
• Growth strategy: Increase the number of markets served, as well as increasing the frequency of flights. Also focus is on long-term health of the airline, not merely on short-term profitability. • Customer...

References: Calvin, Leung (2005). Le Chateau and WestJet. Canadian Business, Vol. 78 (3), 1-2. Retrieved February 28, 2005 from Buisness Source Premier Database on UNBSJ Library website.
Toronto Stock Exchange (2005). www.tsx.com
Verberg, P
WestJet (2005). www.WestJet.com
1
2. 2003 Annual Report
3
4. 2003 Annual Information Form (AIF)
ABDULLAH’s references
TSX SYMBOL: WJA
JUNE 2, 2003 - 09:15 ET
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