Let’s imagine that Air Canada dies – it very nearly happened last week.
Such a positive event for WestJet Airlines Ltd. may give the Calgary-based air carrier an identity crisis.
It is increasingly likely that WestJet will eventually become Canada’s dominant domestic airline, even if Air Canada survives its current travails. WestJet’s growth – from zero to 30 per cent domestic market share in eight years – must be scary for Air Canada. It’s hard not to conclude that Air Canada’s days as the dominant domestic airline are numbered.
Apart from the growth curve of competitors such as WestJet and Jetsgo, the recent federal air travel complaints commissioner’s report, in which there were only six complaints against WestJet versus 310 against Air Canada, suggests customers are not going to be very loyal to Canada’s flag-carrying flyer.
Last week, hard-nosed Canadian Autoworkers’ Union boss Buzz Hargrove was confident that Air Canada would survive, saying the airline still controls 90 per cent of Canada’s international freight and passenger traffic.
Hargrove and Air Canada eventually managed to hammer out an 11th-hour deal to help stave off liquidation – for now.
But the cross-border routes are the ones foreign competitors would be happy (and are legally entitled) to pick up. Hargrove’s people better start looking for work.
So WestJet might soon find itself as the dominant air carrier in Canada. Is this a good thing? Naturally. But it might bring some dramatic changes to WestJet’s business model.
For one, if WestJet’s prices are the benchmark rates, and everyone else is either matching or beating them, could WestJet still call itself a low-cost, low-fare airline? Obviously not.
And isn’t the classic WestJet style based on short-haul trips? Well, this is becoming harder to say, as average stage length increased by 18 per cent to 731 miles in the first quarter of 2004 against the same period last year. WestJet even announced that it will soon start providing service to relatively distant holiday destinations such as Florida and California.
Even WestJet’s no-frills style is fading. The airline has wisely recognized that flyers on long trips want legroom and distractions from the boredom, so WestJet recently announced it is adding seat space and satellite TV to planes taking the longer journeys. WestJet’s business model is morphing into something that looks a lot more like Air Canada’s, but with superior service and prices. WestJet has even introduced Air Miles recently.
The air carrier is becoming so big that it doesn’t seem far-fetched that its 95-per-cent rule will become impossible to maintain. WestJet’s top executive, Clive Beddoe, is fond of saying that his employees are paid 95 per cent of the industry median in base salary, plus profit sharing, as an incentive to contribute to the good of the company as a whole.
This practice works wonderfully until those same people are the ones in the median category, as any dominant carrier would likely be. Keeping up the 95-per-cent rule may entail a five-per-cent cut in pay every year, as base salaries for flight attendants and pilots would be based on WestJet’s own salaries. It won’t be long before other airlines follow WestJet’s payscale. So the 95-per-cent rule may well die.
A WestJet identity crisis may even arise as, like other dominant companies, it becomes a natural target. It’s tough being No. 1.
McDonald’s, the largest fast-food chain, is the name everyone attacks when they are talking about the fast-food business as a whole. The recent anti-fast-food film, Super-Size Me, or the common “Mc” preface before anything that’s cheap, must be a nightmare for McDonald’s public relations.
Wal-Mart is another prime example of how a public darling can face harsh media scrutiny when it rises to the top. Wal-Mart is now the world’s largest company, and a favourite case-study in business classes.
But it is also a sitting duck. The New York Times has written many scathing articles about the retailer’s rabid anti-union stance and its troubles getting building permits in large urban centres, where it is having difficulty establishing stores. The recent, highly publicized cases of illegal contractors being used to clean Wal-Mart stores provide another prime example of this same phenomenon.
WestJet is not immune.
What might once have been a frivolous, unsubstantiated accusation from Air Canada about WestJet stealing load data from Air Canada’s website is now front-page news. In fact, it’s conceivable that Air Canada would have thought little of the possibility, even if the alleged corporate espionage were taking place a few years ago. With WestJet the real threat that it is today, the lawsuits have bite.
Managing public relations, and even an entire business model, is a nightmare at the top. It won’t be long before accusations of predatory pricing begin. It’s time for WestJet to load up on some public relations people who are worth more than 95 per cent of the median. That’s one department where they soon may need the best people money can buy.
