WestJet, today in partnership with The National Hockey League (NHL®), announced it will serve as the official airline of the 2023 Tim Hortons NHL Heritage Classic™ on Sunday, October 29, 2023.

Returning to its city of origin in Edmonton, the 2023 Tim Hortons NHL Heritage Classic™ will be hosted at the iconic Commonwealth Stadium at 5 p.m. MT in celebration of the 20^th anniversary of the outdoor NHL game.

WestJet’s decision to integrate Swoop

Written by Alexis von Hoensbroech, CEO WestJet Group

WestJet entered the Canadian aviation market in 1996 on the promise of making flying more accessible and more affordable, with remarkable success. When WestJet joined a market, Canadians saw air fares cut in half and the number of people travelling grew by 50%.

As WestJet grew to serve more diverse guest segments, we pioneered a new venture to establish the first pure play, ultra-low-cost carrier (ULCC) in Canada under the brand of Swoop, just over five years ago.

 In many ways, Swoop was a great success. As the first to market, Swoop quickly built up to 16 aircraft. Swoop met cost projections and had an unbeatable cost per available seat mile (CASM excluding fuel) of less than six cents. Swoop pioneered the no frills product in Canada and was best in class in generating ancillary revenues. It had a young fresh brand, a passionate team and was loved by its travellers. It achieved its ultimate objective, to make air travel super affordable for the most price sensitive of Canadians.

 So why did we choose to integrate Swoop into WestJet?

The ULCC business model

I’ve been working in Europe for most of my career and have seen the extremely successful spread of ULCCs across the entire continent, offering super low fares from anywhere to everywhere. They operate a simple and robust business model of one aircraft type, high aircraft and crew productivity, and high-volume point-to-point flying, often from secondary low-cost airports. This allows them to offer super low fares that stimulate incremental travellers, making it a commercial success. At first glance, it appears obvious that the same should work in Canada, so why wouldn’t WestJet continue to be at the forefront of this.

 After operating in the Canadian ULCC space for five years with Swoop, we have real-world experience and can now recognize a few remarkable and structural differences in this domestic market.

 High Infrastructure cost to operating an airline in Canada

Have you ever wondered why $39 tickets in Canada are not the norm like in Europe? Have you ever wondered why not even one American ULCC is flying to Canada?

 A major barrier to stimulating air travel is Canada’s high structural cost, that every flight must cover, irrespective of the business model. Canada is one of the most expensive places to operate an airline. Fees, taxes and charges for airports, air traffic control, security and other shared services are among the highest of any country. Since flights in Canada are usually long, the fuel bill is also much higher than in Europe or in the US.

 To buy a return trip from Calgary to Toronto on one of our Boeing 737-800s, as an example, your ticket is burdened with $70 in AIF, $28 in landing and terminal fees, $30 in provincial GST/HST, $22 in NAV Canada fee, and $14 security fee (this doesn’t even account for other infrastructure fees such as loading, apron usage, de-icing, slot administration, and more). This adds up to more than $160 at minimum for just using the infrastructure. A comparable trip infrastructure cost in the US would be around $80. On top of this, the long flight distance adds another $160 fuel costs per passenger at current fuel price. So, the first $320 of your ticket is already accounted for before an airline even starts paying for aircraft, crew, or any other service the airline provides. It is very tough to run a pure play ULCC that needs to stimulate traffic if the floor price for operating profitably is so high.

 It is an interesting observation, that American legacy carriers like Delta or United frequently fly to Canada, as their business model can support high infrastructure fees. However, not a single American ULCCs like Frontier, Spirit, or even Southwest dares to fly into Canada as this would impede their cost centric business model. Instead, they fly into US airports that are close to the Canadian border like Bellingham, WA or Buffalo, NY. In doing so, they can attract Canadians willing to drive across the border to those airports, while avoiding the expensive Canadian infrastructure fees.

Canada’s vast geography and low population density

The European Union covers 450 million inhabitants on a geography that is not even half the size of Canada. This creates thousands of high demand city pairs that airlines can serve. Canada, with its 40 million inhabitants on the other hand, has just eight major population centres, which allows for only a small number of high demand routes you can serve on a frequent basis with a large jet aircraft. All of these markets are actively well served by strong and competitive airlines. 

 The average flight length in Europe is just one hour, which favours a business model of quick turnarounds that allows a ULCC to squeeze in one or two additional flights a day to increase asset utilization. Canada’s geography requires around 2.5 hours of average flight time, which leaves far less room to use fast turns to accumulate sufficient time to squeeze in additional flights. This impedes one of the fundamentals in the ULCC business model. 

 Difficulty to stimulate demand

The European population density allows for people travelling on many modes of transportation, such as cars, trains, busses, and planes. A lot of the stimulation from ULCCs in Europe comes from poaching passengers from cars, trains, and busses into the air. Canada in contrast already heavily relies on air transportation with almost no public ground transportation options across most of its geography, so it lacks this uber important source of stimulation. 

 Another source of stimulation for European ULCCs is offering super low fares from secondary airports and thus attracting passengers willing to drive from cities a few hours away. In Europe, this usually gives you a catchment area with 10 million or more inhabitants, no matter where your airport is located. This is very different in Canada, where the next major population centre is often a full day drive or more away.

Canada is special – and needs a special ULCC approach

So, what’s the solution for all those Canadians who are looking for ultra-affordable fares?

The answer is a flexible product onboard every aircraft. Instead of deploying just 16 ULCC aircraft, WestJet will offer a ULCC product on all 180+ of our airplanes. We will densify the back part of our 737 aircraft to distribute costs across even more seats, allowing us to charge a lower fare. At the same time, we will maintain the premium cabin at the front and expand the number of extra legroom seats in economy class. This lets us offer more differentiated products to our guests aligned with their preferences. 

 As an example: Swoop has been operating a daily ULCC flight from Kelowna to Toronto with 189 seats. Given the market size of Kelowna, there are not 189 people every day looking to fly this route for a super low price, but there may be 60 price seekers. At the same time, there are many retirees living in Kelowna who prefer a higher level of comfort and service. Today, these guests have to settle for a no-frills product on Swoop, connect on WestJet through Calgary or fly on a competitor. In the future, we’ll accommodate all preferences onboard the very same aircraft: ULCC at the back, more comfort and service in the front. 

 WestJet has the largest narrow body aircraft order book in Canada, with up to 80 Boeing 737 MAX aircraft arriving over the next five years, most of them in the largest MAX10 version. The MAX10 will have 212 seats making it, by far, the lowest unit cost of any midrange aircraft in the Canadian market. This will allow us to offer the lowest fares in the market, while still maintaining a viable business model in this very special Canadian geography.

Given future fleet plans, WestJet is well positioned to serve the ULCC market in Canada. For comparison, the US market currently supports 350 aircraft worth of ULCC flying. Canada, being a tenth of the population size of the US, in theory could support 35 ULCC aircraft, everything else being equal. By offering a ULCC product in the back of every WestJet aircraft, we can easily provide a net ULCC capacity worth that much, providing plenty of ultra-affordable fares to all Canadian markets in a way that is more conducive to growing this segment over time.

We have turned a corner as we see demand and profitability returning. The strength of our business is robust, and WestJet is unrelenting in our commitment to increase affordability of air travel in Canada, just as we have done for the past 27 years. We are grateful for all that we have learned from five years of operating our Swoop business. We will transfer all that was good at Swoop into WestJet to create the best of both worlds. And as we significantly grow our capacity in the coming years, we look forward to seeing more Canadians on board our aircraft, no matter where they chose to sit.

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• Source: https://worldairlinenews.com/2023/09/25/westjet-announces-official-2023-tim-hortons-nhl-heritage-classictm-partnership-going-inside-westjets-decision-to-discontinue-swoop/