WestJet Strategic Audit
Tanya Witherington #3136712
Abdullah Saleh #3157594
Tyler Ethridge #3084252
Natasha King #265841
Yao Yao #3111635
Jaiqi Lu #
March 21, 2005.
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.
• “To enrich the lives of everyone in WestJet’s world by providing safe, friendly, affordable air travel” (WestJet online).
• 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.
• 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
WestJet (2005). www.WestJet.com
2. 2003 Annual Report
4. 2003 Annual Information Form (AIF)
TSX SYMBOL: WJA
JUNE 2, 2003 - 09:15 ET
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