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Alexis von Hoensbroech says integration of Swoop, Sunwing will lead to more fare options across wider range of flights
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WestJet Airlines Ltd.‘s move to combine its discount airline Swoop and recently acquired Sunwing Airlines into its mainline carrier is a bet on a changing concept in the airline industry in which customer segments are differentiated within one airplane, rather than across various airline brands, its chief executive said.
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The company has suggested that the move will allow it to be more competitive on price, amid questions from some quarters about whether narrowing competition in the airline industry could lead to higher prices for consumers.
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“We’re much better off in having a WestJet plane flying (a) route and then offering super low fares to those guests that just want a super low fare, but also offer a more upmarket product for those guests that actually want an upmarket product,” WestJet chief executive Alexis von Hoensbroech said. “That’s the concept: we differentiate within the aircraft … between different brands.”
He said in the current model with Swoop as a separate ultra-low cost carrier, travellers who would actually like to have a more premium type of product would be forced either to take a different flight, to connect to another city or fly with a competitor, rather than take the discount seats.
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For example, he said, Swoop doesn’t have any flights out of Calgary, meaning the company doesn’t currently offer those ultra low fares to Calgarians. With the integration into WestJet’s main line, the company will be in position to offer discounted fares across the entirety of its network, von Hoensbroech said.
“So the idea is instead of having 16 Swoop planes offering ultra low cost, we will now have 180 WestJet planes offering ultra low cost fares for those guests that want it, and same with Sunwing. So it’s actually creating more choice for consumers and not less,” von Hoensbroech said.
WestJet said it plans to grow and keep operating Sunwing Vacations, the tour operator, as a separate business. The brand will be run side-by-side with its existing operator WestJet Vacations.
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The company had closed its acquisition of Sunwing Vacations and Sunwing Airlines in May, nearly two months after the federal government gave the takeover the green light.
The transaction, first announced in March last year, has given Calgary-based WestJet an expanded presence in the east, where Sunwing is headquartered. The airlines had said they will initially continue as independent operations before the two entities combine.
While the integration of Swoop is anticipated to conclude by the end of October 2023, Sunwing Airlines will not start integrating before 2024 and will continue with business as usual at this time, WestJet said.
In response to WestJet’s announcement to integrate Sunwing Airlines, federal transport minister Omar Alghabra said the government’s approval in March included “strict terms and conditions for WestJet to follow to ensure Sunwing Vacations remains its own distinct brand for at least five years.”
“This will ensure Canadians have access to affordable flights and keep our air sector strong,” Alghabra said in a Twitter post on June 21.
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As for concerns about less competition in Canada’s airline industry, von Hoensbroech said consolidating the three airlines into one would not reduce competition.
“It certainly doesn’t because we already own those airlines. They are not in competition, but in co-operation already internally,” he explained, adding that the combination of the three will just allow the company to create more scale.
John Gradek, head of McGill University’s aviation management program, said the move to combine all three airlines points to the company reducing costs following a significant hike in labour costs from an agreement with its pilots.
“The ALPA contract that they had with a 24 per cent increase in salaries has forced the hands on WestJet to basically take other initiatives to reduce their costs,” Gradek said.
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Rather than having three departments for human resources, finance, marketing, procurement, Gradek said the move will let the company just have one to handle all three.
The airline and its pilots reached a last-minute agreement on May 19, narrowly averting a work stoppage just ahead of the Victoria Day long weekend. The agreement, which includes a 24 per cent bump in pay for the pilots over four years, is in effect from Jan. 1, 2023 and will be in place until Dec. 31, 2026.
Von Hoensbroech said the pilots were pleased with the plan to integrate Swoop.
“This is actually something that our pilots were really looking forward to, that we will integrate Swoop into WestJet, as this is actually adding more jobs to the airline,” he said.
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The CEO said the integration is not intended to create any layoffs, as all employees are slated to move to the main line. With new aircraft capacity coming in, the company will have open positions, he said.
“We need everyone on board. There are some duplications and we will work through that,” he added. “The intention with this is without any layoffs and we are confident that we can get there.”
Sunwing Airlines’ integration is a bit trickier, Gradek said, as the airline has a different union for its pilots than those with WestJet and Swoop, which are represented by the Air Line Pilots Association (ALPA).
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“This consolidation with Sunwing is a two-year game plan. So it’s not gonna happen tomorrow, it’s gonna happen over time,” he said.
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