WestJet’s plan to crush Air Canada

On March 31, WestJet announced a promotion that tapped into the uncertainty many struggling consumers feel today. Tickets bought over the ensuing week came with an innovative price guarantee. If the same seat later went on sale, customers could get a credit for the difference. It was a remarkable promise in an industry that constantly tweaks its prices, driving customers mad, and it was made all the more remarkable by its timing. A day earlier, Air Canada had fired its CEO and the papers were full of speculation that the national carrier would soon have to file for bankruptcy protection for the second time in less than five years. WestJet’s ad wasn’t just marketing. It was a message, part of a long-term strategy that’s quickly coming into focus. It said, none too subtly: WestJet is out to crush Air Canada.

The price guarantee was just one front in an expanding battlefield between these two companies, whose rivalry is as long as it is ferocious. WestJet has already seized a large swath of the Canadian airline business since its launch 13 years ago. By 2013 WestJet aims to control as much as half of the domestic market, up from 36 per cent today. Recently, it has taken aim at Air Canada’s lucrative transborder and international business, signing deals with Southwest, Air France and others to sell international tickets under its own name.

Now comes the culmination of the plan, a new campaign that emphasizes value and service, and takes aim squarely at the yawning gap between the two companies’ reputations. The full details of WestJet’s latest pitch weren’t finalized when Maclean’s spoke with the company last week, and in fact were being tweaked right up until the last minute for a planned announcement on April 21. But Bob Cummings, head of Guest Experience and Marketing, provided a sneak peak at some of the highlights behind WestJet’s aggressive strategy. An upcoming advertising blitz will spell out roughly 30 promises to customers and the consequences to the airline if it fails to meet them. Many are services WestJet has quietly offered all along, such as a promise never to overbook fiights. Others are new, ambitious, and reveal the lengths the company is willing to go to inflict damage on its rival. You won’t hear WestJet execs spell it out in such stark terms. But the company is seizing this moment to force Air Canada into a corner from which it will be nearly impossible to escape intact.

Consider WestJet’s brash new rules around cancellations. The company will now let customers cancel or change flights up to 24 hours after booking, complete with full refunds, at no extra charge. In an industry that lives and dies by confirmed bookings, allowing passengers the chance to back out is an astonishing display of mettle. WestJet will also tackle the thorny issue of passengers being trapped on delayed flights. Last Christmas, Air Canada faced scorn after a snowstorm led to massive cancellations and delays, with some customers left sitting on the tarmac for hours. From now on, if a WestJet flight sits at the terminal for more than 90 minutes and no departure is imminent, passengers will be given the option of getting off and waiting in the lounge until the flight is ready to depart. “We’re putting those promises and consequences out there in black and white for folks to see,” says Cummings. “We’re actually taking our service to another level as opposed to cutting it.”

Cynics will dismiss the latest move by the airline as marketing gimmickry, but that assessment overlooks one salient fact: it’s working. Cummings says the price guarantee sparked WestJet’s bestselling week of the year so far. What’s not clear yet is how many of those customers were stolen from Air Canada. In June, after the guarantee period expires, the company will decide whether to make it permanent. Either way, it has already served its purpose. “That price guarantee was a profound statement of strength on their part,” says Vaughn Cordle, an analyst at AirlineForecasts in Washington.

Last fall, when it became obvious the economy was in serious trouble, WestJet executives gathered in a series of tense meetings to chart a new course. Cummings and others pored over 30 years of airline data. They canvassed the company’s board of directors, made up of executives from fields as diverse as banking and energy. And they did something that many companies would never consider: they met with employees to seek out their opinions. Every company pays lip service to the idea that their people are their strength. But at WestJet, employees are also among the company’s biggest owners thanks to a generous stock purchase plan. Workers are potentially the most crucial weapon in WestJet’s customer service arsenal, and they are among the biggest potential beneficiaries of the company’s success.

Two starkly different paths emerged, each with its own payoffs, but also huge risks. The easy choice would be to hunker down, they observed. WestJet could simply conserve its cash and ride out the storm, confident its strong finances would see it soundly through to the end. There was even talk at one point of following the herd by charging for phone reservations and cutting back on snacks. But the ramifications of this duck-and-cover approach were too great to ignore. WestJet was built on a customer service ethic. In some ways it owes its existence to widespread discontent over the indignities of air travel. The airline made casual, friendly service its calling card—first-time passengers were often surprised to hear flight attendants tell jokes over the intercom—and it thrived. To turn stingy now would risk undermining everything it had built.

Even harder to ignore, though, was the momentous opportunity this recession presents. If WestJet were struggling, it could be sure Air Canada would suffer even more. In short, this wasn’t a time to be cautiously conservative; it was a chance for WestJet to step on its rival’s windpipe. In the end, at a lengthy board meeting on Nov. 7, the company opted to bank with the headwinds. “We looked at all those nickel-and-dime options, but at the end of the day our cost structure gave us the flexibility to take the route we’re taking,” says Cummings. While other airlines are concerned with just surviving this downturn, WestJet has chosen an aggressive plan to dominate Canada’s skies. “When we looked at 2009 it became the year we had to steal market share from the competition while positioning for the longer term.”