The Airline Industry: Westjet's Business Model

Clive Beddoe and three other entrepreneurs founded Westjet on February 29th 1996. They had only three airplanes and five destinations and 220 employees, Beddoe believes that “Just because you pay less for your flight, doesn’t mean you should get less”. With this motto, Westjet becomes one of the lowest operating costs and the most successful airline company nowadays.
In the early 1990s, the airline industry suffered a serious threat, caused by high fuel costs and a decline in air travel. At that time, only few airlines with low price of fare, such as Southwest airline, were able to make profit.(Hoover, 2010) Thus, the executives of Westjet decided to follow Southwest airline’s business model, which featured a low cost, high efficiency structure. To be highly efficient, Westjet limits itself to have less frequency of flight and services, compared to other competitors so it can pass the lower cost benefit to its users. Westjet used various methods to reduce costs. For instance, the company specialized in the Boeing 737 for the purpose of
lowering the training and maintenance costs. After the adapting of the new business model, Westjet’s ticket price is considered inexpensive, which is merely one-sixth of other airline’s price. As a result, Westjet defeated the threat to the airline industry and became the most successful low cost operator in the market (Bernadette, Dorothee, & Grace. 2005). Today, Westjet is one of the most profitable airlines in the North America, with 7,800 employees, 88 airplanes and 71 destinations in Canada, America, Caribbean and Mexico.
Westjet has kept focusing on niche markets and expanding slowly and carefully. Instead of providing luxury airplanes, Westjet pays attention to customer relationships. It uses customer experience system to collect information from every passenger’s experience in order to evaluate its current performance and to seek the rooms for further improvements. (ResponseTek) However, it is not an easy job to change the stereotype that the public generally believes low price service often comes with low quality. Therefore, it becomes the major weakness of Westjet when it plans to expand its international routes and attracts more business travelers. Making balance between the expansion and continued provide low price flight will be the main issues of Westjet in the
future. From the founder, Clive Beddoe, to the current CEO, Gregg Saretsky, they all focus on the core culture of Westjet “Owners Care”. They all give the promise of providing a world-class experience to their customers and it is also the main goal of every employee in the company. To do so, Westjet has an employee stock ownership and profit sharing plan, which is available for every employee. It encourages employees to contribute more efforts to the company and to achieve the goal – providing a world class experience to customers. Also, Westjet uses empowerment strategy to provide the first line employees with the decision making power to react quickly to customers. Consequently, the culture and power strategy of Westjet are the main advantages in Westjet organization.