Dissertation: Westjet vs. Air Canada Why Westjet Will Win

Pages: 50 (17068 words)  ·  Bibliography Sources: 75  ·  Level: Master's  ·  Topic: Transportation  ·  Buy This Paper

¶ … airline industry has become increasingly competitive in recent years due in part to the horsewhipping it experienced following the terrorist attacks of September 11, 2001. The ongoing global economic downturn and high energy prices have added further constraints to airline performance. In this environment, it is not surprising that airlines that are agile and nimble in their response to changing market conditions will enjoy a competitive advantage, and this has certainly been the case with WestJet's performance compared to the struggling Air Canada airlines. By providing the flying public with no-frills, low-cost regional and international alternatives, WestJet has not only survived during this turbulent period, it has also gained market share from Air Canada, continuing the bleeding of this former industry leader. The purpose of this study was to examine the relevant literature to identify what WestJet and Air Canada are doing right -- and wrong -- to achieve a competitive advantage in an increasingly competitive marketplace.

Table of Contents

1.0

Chapter One: Introduction

1.1

Statement of the Problem

1.2

Purpose of Study

1.3

Research Questions

1.4

Importance of Study

1.5

Rationale of Study

1.6

Overview of Study

2..0

Chapter Two: Literature Review

2.1

Recent Trends in the Airline Industry

2.2

Westjet

2.3

Air Canada

3.0

Chapter Three: Methodology

3.1

Description of the Study Approach

3.2

Data-gathering Method and Database of Study

4.0

Chapter Four: Findings/Data Analysis

4.1

Case Studies

4.2

Meta-Analysis

5.0

Chapter Five: Conclusions and Recommendations

WestJet vs. Air Canada: Why WestJet Will Win

1.0

Chapter One: Introduction

In what more than one analyst has likened to a David-and-Goliath battle, the competition between giant Air Canada and its smaller counterpart in WestJet appears to be so lopsided in favor of the Goliath, Air Canada, to preclude any inroads in its market share by the David, WestJet. Indeed, the U.S.-Canada market represents one of the largest air transportation markets in the world today, and Air Canada's already enjoys a transborder network with 59 cities each in the U.S. And Canada ("United Airlines and Air Canada to Form Transborder Joint Venture" 2010). Furthermore, Air Canada is the country's largest domestic and international full-service airline, and it provides scheduled and charter international passenger and cargo air services to more than 170 locations spanning five continents providing scheduled and charter air transportation for passengers and cargo to more than 170 destinations on five continents, with around 31 million passengers each year (United Airlines and Air Canada to Form Transborder Joint Venture 2010). Besides the 118 destinations in its North American market, Air Canada also services 60 destinations throughout the Middle East, Europe, Australia, Asia, the Caribbean, and Latin America; moreover, as part of the Star Alliance which it helped to establish, Air Canada is part of the largest air transportation network in the world, providing air services to almost 1,200 destinations and 181 countries (United Airlines and Air Canada to Form Transborder Joint Venture 2010).

By very sharp contrast, WestJet Airlines Ltd. (hereinafter "WestJet" or "the company") provides scheduled services to a North American and Caribbean network comprised of 69 cities ("Profile: WestJet Airlines Ltd." 2010). Despite its business model that has traditionally focused on low-cost and convenient alternatives, WestJet now features extra legroom, leather seats and live seatback television on its fleet of 87 Boeing Next-Generation 737 aircraft; in addition, as of December 31, 2009, WestJet had leased an additional 10 aircraft (seven 737-700s and three 737-800s), bringing its total of leased aircraft to 33 ("Profile: WestJet Airlines Ltd." 2010).

1.1

Statement of the Problem

During the closing decades of the 20th century, global air transportation grew at a steady pace until the terrorist attacks of September 11, 2001 resulted in a drastic but short-lived downturn in the passenger and cargo traffic. Although the industry has largely recovered since that time, many air carriers continue to struggle during a period characterized by a global economic downturn combined with escalating energy costs. In this regard, Janda, Flouris and Oum emphasize that, "At this juncture, it is important for Canada to examine its medium-term air transport policy options, taking into account the changed and changing industry environment domestically and internationally" (2005:73).

This problem is especially acute for countries such as Canada where its large geographic size means that the airline industry plays an important role in its economic performance. As Janda and his associates emphasize, "Transportation has been a cornerstone of Canada's national political and economic policy since before Confederation and continues to be vitally important to this country's future" (2005:73). Because it is vitally important, major successes and failures in the transportation sector have a very real impact on the economy of Canada and its neighbors. In this environment, identifying which factors contribute to the success of Canadian air carriers represents a timely and valuable enterprise, an enterprise that is also directly tied to the purpose of this study which is discussed further below.

1.2

Purpose of Study

The purpose of this study was three-fold as follows:

1.2.1

To determine the historic performance of Air Canada and what factors have contributed to its successes and failures.

1.2.2

To determine the historic performance of WestJet and what factors have contributed to its successes and failures.

1.2.3

To develop a qualitative synthesize based on the foregoing findings to identify the superior performer and what steps are being used to achieve this superior performance.

1.3

Research Questions

The study was guided by the following research questions:

1.3.1

What has Air Canada been doing that has contributed to its successes? Its failures?

1.3.2

What has WestJet been doing that has contributed to its successes? Its failures?

1.3.3

Are there any airline industry best practices that can be identified which can be used by Air Canada to improve its performance?

1.4

Importance of Study

Taken together, the foregoing trends and the importance of the issues that are involved create a real need for informed policies for the Canadian airline industry. For instance, Janda et al. also note that, "Given the global restructuring of the aviation industry that is well underway, it is critically important that Canada chart a clear course for Canada's airlines and air service providers" (2005:74). Although a number of steps have been taken to help the Canadian airline industry become more competitive and technological innovations have contributed to its efficiency, these initiatives and technological innovations have been balanced by the increased need for security procedures and the potential for terrorist threats throughout the world in recent years. Indeed, although the airline industry in general has regained some of its strength, many carriers have experienced difficult times and some have even folded as a result of increased competition combined with a wide range of external factors that have made competing in the 21st century airline industry even more challenging. Consequently, the importance of this study directly relates to the need to determine what business models are providing the best results, and these issues are discussed further below.

1.5

Rationale of Study

According to Flouris and Walker (2005), the new business models represented by low-cost airlines such as Canada's WestJet managed to outperform legacy carriers even following the terrorist attacks of September 11, 2001. Moreover, following deregulation of the airline industry in North America, new business models are increasingly required to compete more effectively, particularly during turbulent political and economic periods. Therefore, identifying what works best so that more of this can be done by others just makes good business sense.

1.6

Overview of Study

This study used a five-chapter format to achieve the purpose stated above; chapter one introduced the topic under consideration, a statement of the problem, the purpose and importance of the study, as well as its scope and rationale. Chapter two provides a critical review of the relevant and peer-reviewed literature concerning the regulatory and competitive environment in the North American airline industry in general and the Canadian airline industry in particular, and chapter three describes more fully the study's methodology, including a description of the study approach, the data-gathering method and the database of study consulted. Chapter four consists of the case studies of WestJet and Air Canada as well as the meta-analysis of recent media reports concerning these two airlines. Finally, chapter five presents the study's conclusions together with a summary of the research and salient recommendations.

2.0 Chapter Two: Literature Review

2.1

Recent Trends in the Airline Industry

Following the terrorist attacks of September 11, 2001, many observers were heard to venture that, "Things would never be the same" and in many ways, they were right. Because of its enormous impact on the airline industry, this date does serve as a useful demarcation point for before-and-after types of analyses. In this regard, just prior to the 9/11 attacks, there were about a dozen or so low-cost carriers that were competing in the United States besides the industry leader, Southwest Airlines (Doganis 2001). In these halcyon days for the legacy carriers, these low-cost carriers did not represent much of a threat and while major airlines continued to enjoy… [END OF PREVIEW]

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