Stage 2: WestJet vs. Air Canada Report
Clint Peter (1172439), Nicholas Williams (1212079), Colin Brenneis (1204852), Kaitlyn Kastelic (1174375)
Company Synopses.................................................................................................. Page 1
SWOT Analyses........................................................................................................ Page 2
Issues facing WestJet and Air Canada
a) Public Perception and Customer Satisfaction................................................. Page 4
b) Corporate Culture and Employee Relations................................................... Page 5
b) Growth Strategy............................................................................................ Page 6
c) Technological Advancement.......................................................................... Page 7
Investment Recommendation……………………………………………………………………………….. Page 8
Team Assessment…………………………………………………………………………………………………. Page 10
1
Company Synopses
WestJet Airlines Ltd. is a Canadian airline company that currently provides air travel
between 69 destinations throughout Canada, the USA, Mexico, and the Caribbean 1. Founded in
19962, WestJet prides itself in offering a travel experience with high quality guest relations. The
organization offers scheduled services for personal, business, and group travel, as well as
operating charter and cargo services. WestJet employs 7,641 people as of December 31, 2009,
with $2.28 billion in revenue and a fleet of 86 airplanes3. Their mission is “to enrich the lives of
everyone in WestJet's world by providing safe, friendly and affordable air travel”, with the
vision that “by 2016, WestJet will be one of the five most successful international airlines in the
world providing [their] guests with a friendly and caring experience that will change air travel
forever.” 4
Air Canada is also a Canadian-based airline that provides an average of 1331 scheduled
flights daily to 167 destinations on five continents.5 The company was founded in 1936, and has
grown to $9.739 billion of sales in 2009.6 Air Canada offers flights for personal, business, charter
and cargo services, and boasts 22,500 full-time or equivalent employees.7 Under the leadership
of President and CEO, Calin Rovinescu, Air Canada’s mission is to “connect Canada and the
world” with a vision of “building loyalty through passion and innovation”. 8 The organization’s
main values are to provide safety 100% of the time, value every customer, work together, act
with integrity in every situation, and to relentlessly strive for excellence.9
1
WestJet Airlines Ltd., “Annual Information Form”: Mar 23, 2010.
2
http://www.WestJet.com/guest/en/aboutUs/corporateProfile/corporateProfile.shtml
3
WestJet Airlines Ltd., “Annual Information Form.”
4
http://www.WestJet.com/guest/en/aboutUs/corporateProfile/WestJetCulture.shtml
5
Air Canada Ltd. “Management Discussion and Analysis and Financial Conditions”: Mar 27, 2010.
6
Ibid.
7
Ibid.
8
http://www.aircanada.com/en/about/career/about_mission.html
9
Ibid.
2
SWOT (Strengths, Weaknesses, Opportunities, Threats) Analyses
a) WestJet
Strengths
Corporate culture: ranked in Canada’s 10 most admired corporate cultures four
times, being one of only five companies to do so10
Able to provide less expensive fares by keeping costs low
New airplanes, equipment
Strong safety record11
Strong employee relations: #6 on Canada’s Best 50 Employers 201012
Weaknesses
Only one type of aircraft: Boeing 73713
No business class
Small international presence
Dependency on Boeing as their sole supplier of many parts
Opportunities
Could expand market with different plane sizes, or offer business class seating
Could offer more routes and flights, including increased international service
Expand market share in Canada (try to reach #1) vs. struggling Air Canada14
New loyalty program, if implemented properly, can bring in more business 15
Threats
Fuel price volatility16
Intense airline competition in domestic and foreign markets
Resignation of President and CEO Sean Durfy, effective April 1, 201017
10
http://www.waterstonehc.com/cmac/hall-fame
11
http://www.tc.gc.ca/eng/mediaroom/releases-nat-1996-96_h154e-3403.htm
12
http://was2.hewitt.com/bestemployers/canada/pages/the_list_2010.htm
13
http://www.thestar.com/business/article/784895--to-go-big-westjet-may-have-to-shrink
14
Air Canada Ltd., “Financial Statements”: Feb 10, 2010.
15
http://www.thestar.com/travel/article/777272--westjet-loyalty-plan-takes-off
16
WestJet Ltd., “Management Discussion and Analysis”: Feb 17, 2010.
17
http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b153329225
3
b) Air Canada
Strengths
Technology development: created Smartphone applications, and was
awarded “Best Mobile Application” at the 2009 Canadian New Media Awards18
Able to renew agreement with all of its Canadian-based unions19
Member of the Star Alliance, which expanded in 200920
Large market share; served over 32 million customers last year21
Strong on-time flight performance22
Availability of in-flight entertainment centers
Strong reviews for business class travel23
Weaknesses
Poor customer service reviews from the economy class24
Negative public perception
$316 million operating loss in 200925
Poor liquidity
Opportunities
International expansion, Air Canada already has a strong international presence
Build an entrepreneurial and international culture
Upgrade the frequent flyer program
Improve in-flight services such as meals and complementary newspapers
Threats
Increasing fuel prices
18
Air Canada Ltd., “Management Discussion and Analysis”: Feb 10, 2010.
19
Ibid.
20
Ibid.
21
http://www.aircanada.com/en/about/index.html
22
http://www.aircanada.com/en/about/otp/index.html
23
http://www.airlinequality.com/Airlines/AC.htm
24
Ibid.
25
Air Canada Ltd., “Management Discussion and Analysis”: Feb 10, 2010.
4
Sensitive to foreign exchange rate between the US and Canada: A one-cent
change in the exchange rate translates to a swing in operating income by $23
million26
Increase in interest rates, as Air Canada is heavily financed by debt
Increase in domestic and cross-border competitors
Issues facing WestJet and Air Canada
a) Public Perception and Customer Satisfaction
One critical issue that influences the success of an airline is the public perception of the
company and customer satisfaction. WestJet is a smaller company and thus is commonly
viewed as more personal than “Canada’s Airline”, Air Canada. Though the two companies are
not excessively different in terms of online reviews, the public’s opinion is slightly lower of Air
Canada’s service. In terms of demonstrating social responsibility, the airlines match in effort.
The first measure we used to compare these two companies in terms of public
perception and customer satisfaction, was their ratings provided by Skytrax, a company that
reviews over 620 airlines each year.27 On this site, Air Canada was given 4 out of 5 stars for its
business class, and an overall rating of 3 stars.28 Skytrax did not recognize any particular
category as an extreme weakness of Air Canada, though all of its reviews were average. As for
WestJet, it was also awarded 3 out of 5 stars overall, though it was noted as a “low-cost”
airline.29 The majority of the complaints about WestJet were in regards to their international
flights. Complaints suggested that the company may be trying too hard to cut costs and as a
result, WestJet does not feel like a luxury airline. Business class is not offered on WestJet flights,
so this rating could not be compared.
We assessed the customer reviews of the airlines through rateitall.com, which is a
homepage for customer reviews of many different types of products. Though WestJet was
awarded a score of 3.22 out of 5,30 there were only nine reviews of which one was very low,
26
Air Canada Ltd., “Management Discussion and Analysis”: Feb 10, 2010.
27
http://www.airlinequality.com/
28
http://www.airlinequality.com/Airlines/AC.htm
29
http://www.airlinequality.com/Airlines/WestJet.htm
30
http://www.rateitall.com/i-29580-WestJet.aspx
5
which may have negatively swayed the overall score. Air Canada only received 2.95 out of 5
from a total of 56 reviews31, mainly due to stories of rude employees and experiences with
hidden costs for service.
The management teams of both companies have taken initiatives to embrace social
responsibility as they recognize that a positive public perception is essential to their success. Air
Canada and WestJet have both taken strides to reduce their environmental impact, and each
also has a children’s program. Additionally, the two companies have assisted with the airlift and
transport of supplies and workers for the Haiti earthquake relief program.
b) Corporate Culture and Employee Relations
Another essential factor for the success of a company is the corporate culture and its
employee relations. Both WestJet and Air Canada are reputable when it comes to maintaining
this invaluable aspect of their organizations.
WestJet is rated sixth on Canada’s Best 50 Employers list for 2010 and has been selected
as one of Canada’s 10 most admired corporate cultures four times. The award-winning culture
can be greatly attributed to the idea that employees “own” the company. Employees have a
vested interest and are motivated to put forth their best effort because they are given shares in
the company. This motivational technique used by management appears to be very successful.
It provides an extrinsic motivation in the form of a profit if company share value increases but
also a powerful intrinsic motivation that the employees feeling from “owning” an admired
company and maintaining that image. WestJet personnel can also feel safe, as the company
has an extremely strong safety record, as reported by Transport Canada. Although there is
some ambiguity surrounding the resignation of CEO Sean Durfy, effective April 1 st, 2010, there
is reason to believe that the corporate culture will not be adversely affected. Despite this
award-winning culture, WestJet has seen high turnover each year, which is common in the
industry.
Air Canada promotes an entrepreneurial culture among their employees by simplifying
processes and encouraging employee empowerment, which is an attempt by management to
meet higher-level needs of their employees such as Maslow’s esteem and self-actualization. Air
31
http://www.rateitall.com/i-7470-air-canada.aspx
6
Canada also has a “Sharing our Success” profit-sharing program which rewards and motivates
employees to exert their best efforts when on the job. A negative factor in Air Canada’s culture
includes a high turnover rate. Along with this, there is increasing conflict between management
and the employees of Jazz Airlines, a subsidiary of Air Canada. There is speculation that there
may be a lock out in the near future which would impact the organization as a whole.
We have concluded that WestJet has a more favourable corporate culture as well as
better employee relations, especially considering the potential lock out facing Air Canada. The
corporate culture of WestJet gives the company a competitive advantage, which is necessary
when operating in an industry with much larger competitors.
c) Growth Strategy
Management teams of WestJet and Air Canada are constantly faced by the issue of how
to plan and implement growth strategies. Air Canada has adopted a strategy based on reducing
per unit costs of flights, increasing international operations, and promoting premium flight
service32. WestJet continues to emphasize itself as a discount airline, and maintaining their
excellent cost-consciousness. WestJet’s future growth strategy is predominantly based on
increasing service in the domestic market, but also aims to identify and develop new markets in
near-by international destinations33.
WestJet’s strategy is practical; management recognizes that aggressively pursuing
international growth is risky due to the intensely competitive nature of the airline industry and
the current unstable economy. WestJet holds 38% of the domestic market compared to Air
Canada’s 56%34. With Air Canada focused on international expansion, there is room for
WestJet to strengthen their domestic position. New CEO Greg Saretsky has a goal of achieving
a 50% domestic market share, but realizes it will be more difficult than their growth in the past.
They now fly to the major Canadian centers, and flying to smaller centers economically will
require an investment in smaller aircraft that WestJet does not possess. WestJet’s current
financial obligations may hinder them from making this investment in the near future necessary
to reach more markets, but top management is considering all possibilities.
32
Air Canada Ltd., “Management Discussion and Analysis”: Feb 10, 2010.
33
WestJet Airlines Ltd., “Management’s Discussion and Analysis of Financial Results”: Feb 17 2010.
34
7
Air Canada’s strategy to cut costs is a necessity. Their recent operating losses have been
large and they need get out of the red. However, cost cutting may seem contradictory to their
strategy of promoting premium air travel. They have new investment on seats for their planes
with screens, outlets, and personal entertainment features, which do not seem like cost cutting
measures. They are also focusing their efforts internationally in a very competitive market.
This may be difficult considering airlines based out of countries that have been less affected by
the economic recession are in a stronger financial position than Air Canada is. Air Canada’s
management doesn’t appear to have a strong plan for growth. This could be part of the reason
that The Globe and Mail’s online investor analyst ratings for Air Canada have its’ stock rated as
hold or underperforming for the last year35 while WestJet has been rated as a buy or strong buy
stock over the same time period36.
d) Technological Advancement
Ever-evolving information technology (IT) places competitive pressure on organizations
to constantly adapt. Both WestJet and Air Canada have taken various initiatives to keep up with
technology in 2009: WestJet adopted a new reservation system while Air Canada launched
smartphone applications. These examples are two distinct areas of IT, but affirm that both of
the airline giants have management teams that are concerned with taking action to develop
and adopt new technology and recognize that failing to do so could be extremely harmful.
WestJet invoked a new reservation system, SabreSonic, in October of 2009 37. The
advanced system will improve WestJet’s ability to partner with other airlines, providing new
revenue opportunities. However, the shock associated with implementation of the new
technology led to operational issues that threatened WestJet’s reputation of impeccable guest
service. Due to technical problems and the widespread need to learn about the new system,
WestJet’s call centre experienced traffic that surpassed its expectations. As a result, ancillary
revenues decreased by 4.2% from 2008 to 200938 (because of waived cancellation and change
fees), and the fourth quarter saw a slight decline in on time performance39. This initiative
35
http://www.theglobeandmail.com/globe-investor/markets/stocks/summary/?q=AC.A-T
36
http://www.theglobeandmail.com/globe-investor/markets/stocks/summary/?q=WJA-T
37
WestJet Airlines Ltd., “Management’s Discussion and Analysis of Financial Results”: Feb 17, 2010.
38
Ibid.
39
Ibid.
8
tarnished WestJet’s impeccable service record and created speculation that the associated
turbulence contributed to Sean Durfy’s resignation as CEO on April 1 st, 201040. However despite
the initial setbacks, WestJet expects a full recovery and that SabreSonic will support their
evolving business model and lead to opportunities for growth41.
In 2009, Air Canada acknowledged the growing popularity of smartphones, and
developed applications for both iPhone and Blackberry42. The applications allow self-service
rebooking, which has facilitated and improved the communication between Air Canada and its
customers. Thus far, the smartphone applications received excellent reviews and have proved
to be a valuable technological addition for the company. Although the smartphone application
was adopted with fewer speed bumps than WestJet’s SabreSonic, both Air Canada and WestJet
have recognized the growing impact of technology and demonstrated a contingency approach
to management in implementing new tech projects in 2009.
Investment Recommendation
After completing analysis on WestJet and Air Canada and reviewing their management
styles, we have come to the conclusion that investing in WestJet would be the best decision.
From the financial statements of last year, WestJet appears to be in a better situation, as they
were able to record a positive operating income while Air Canada operated at a substantial loss.
We believe that this drastic difference is largely due to the dissimilarity of the two company’s
managerial practices and their ability to adapt with their environment.
Both companies have taken strides in making technological changes to the way they
operate, and both should benefit as a result. The contrast in the companies is evident in the
enviable corporate culture and employee relations that WestJet has been able to uphold
throughout its existence and will continue to maintain into the future, while Air Canada had
done little to establish a positive corporate culture.. The overall environments of these
companies are contrasting in that WestJet is growing while it appears Air Canada is comfortable
40
http://www.theglobeandmail.com/report-on-business/shakeup-at-WestJet-as-ceo-sean-durfy-
quits/article1501575/
41
WestJet Airlines Ltd., “Management’s Discussion and Analysis of Financial Results”: Feb 17, 2010.
42
Air Canada Ltd., “Annual Report 2009”: Mar 30, 2010.
9
with maintaining the status quo and possibly downsizing. Although Air Canada does not have a
negative public perception, the view of WestJet is extremely favourable, which will allow them
to possibly gain market share over Air Canada.
The resignation of CEO Sean Durfy is a bit of a concern for anyone looking to invest in
WestJet. However, his replacement Gregg Saretsky is extremely qualified and has experience in
the airline industry. Lauren Krugel sees the transition as a seamless one and still recommends
WestJet stock; predicting that it will be “business as usual” for the company and noting the
stability and strength of the company through the recent turbulent economic times43.
In conclusion, we think that WestJet is a stronger investment choice over Air Canada.
WestJet is neutral to or has an advantage over Air Canada in all of our areas of research. The
WestJet management appears to be adept at reading the environment they operate in and can
also match their business practices to that environment. If they can continue to do so, and we
think that they will, they will be an excellent investment choice.
43
http://ca.news.finance.yahoo.com/s/16032010/2/biz-finance-analyst-says-saretsky-good-choice-westjet-ceo-
doubts.html
10
Team Assessment
When our team first gathered to work on this project, it was evident that we would
function as a small, self-directed team. Rather than electing a member to supervise, we decided
to share leadership and to hold everyone accountable for the outcome of the project.
Fortunately, all of our group members already knew each other going into the project, which
created a comfortable work setting, and strong team cohesion evolved from the mutual goal of
achieving a very high grade. We maintained high productivity throughout the project because
of the strong work ethic of our members, both individually and when interacting at group
meetings.
However, the pre-existing familiarity among members led to the potential risk of
groupthink. To counter-act this risk in order to produce the best project possible, we
encouraged one another to speak one’s mind. In case someone was not comfortable in sharing
their uninhibited views, we had an anonymous suggestion box so that members could feel free
to disagree with the group consensus. Though we did not often require the suggestion box, we
found it to be a very useful tool when utilized.
The majority of the issues that our team encountered were commitment conflicts. All of
our team members have other commitments and full course loads, many of which involve
group projects for multiple classes. This led to frequent switching between the storming and
norming stages, but we were still able to perform at a high level. Using a collaboration conflict
resolution style, we were able to avoid most of our conflicts. All of our team members are very
assertive, but also very cooperative, which allowed us to negotiate deadlines with one another
and find time to accomplish our tasks.
Our team members also performed dual roles of both high social behaviour and high
task behaviour. The key attribute to our success in dual roles was by setting super-ordinate
goals. Our main super-ordinate goal was to have the written document completed by Monday
April 5th, so that we would have ample time to edit before turning in the assignment. We
divided the work at the beginning of the project, which allowed members to work at their own
pace and on their own schedules. This greatly reduced the stress associated with this product,
resulting in a much better end result.
11
Another mediation strategy that we used was to use Skype, a video-conferencing
software, to have some of our group meetings. This allowed us to open up our communication
channels, while also working remotely. By using video, it is less likely that members will
misinterpret or misunderstand other members, as you can observe tone and facial expressions
which are two things that are difficult to pick up from written communications. None of our
group members live on campus, so using Skype also relieved tension, as we were able to meet
from the comforts of our homes and avoid any travel time.
Finally, the use of our online wiki ended up being a great asset to our team. Not only did
it facilitate our communication with one another and allow us to edit one another’s work, but it
also allowed us to avoid re-writing work that had already been completed. Using the track-
changes feature of Microsoft Word also allowed us to view four different ways that we could
write the project; we did not have to agree on just one person’s perspective or writing style.
We strongly believe that our use of technology allowed us to avoid many potential conflicts and
produce work of the highest quality possible.
Signatures
Colin Brenneis Kaitlyn Kastelic
Clint Peter Nick Williams