BRINGING CALGARY TO THE WORLD

BY MELANIE DARBYSHIRE

On February 29, 1996, WestJet Airlines took flight; a Boeing 737-200 departed from the Calgary International Airport (YYC) destined for Vancouver. A giant leap for the nascent company (on a leap year no less), it was the birth of a new era in the Canadian aviation industry, one which would see Calgary assume a leading role.

In the 27 years since, WestJet has grown up: from three aircraft to more than 180, from five destinations in Western Canada to more than 110 destinations worldwide, and from 220 employees (termed ‘WestJetters’) to roughly 12,000 today. It has taken strategic gambles that paid off – for example, the launch of WestJet Vacations in 2006 – and has survived unfathomable challenge in the COVID-19 pandemic.

One year into CEO Alexis von Hoensbroech’s tenure, as airline travel normalizes, the Calgary company has refocused its strategy to return to its roots as the friendly, reliable and affordable airline it started out as.

“The last year was quite the rodeo,” von Hoensbroech reflects from the WestJet campus located adjacent to YYC. “I joined WestJet the same day that the majority of the COVID health measures were dropped by the federal government. The entire airline industry, specifically in Canada, was pretty down. Since then, we have been rebuilding the airline.”

For perspective, during the worst of the pandemic (a period of about 18 months), WestJet’s business plummeted by 90 per cent, causing the company to drop from 14,000 employees to 4,000.

“It was truly dramatic,” von Hoensbroech says. “Having said that, we are very proud that we are one of the very few airlines of this scale that managed to weather the pandemic without taking on any sector-specific money. That speaks to the strength of WestJet’s underlying business model pre-pandemic.”

Coming out of the pandemic has been good. He notes last year’s growth was equivalent to what would typically occur in a decade. “And this happened over just a couple of months,” he marvels. “It was quite a challenge from an operational point of view. Overall, I’m pretty happy that we have rebuilt the airline to something pretty close [roughly 90 per cent] to what it was pre-pandemic. That gives us a lot of confidence for the future.”

A native of Cologne, Germany, von Hoensbroech completed a PhD in astrophysics at the Max Planck Institute for Radio Astronomy in 1999. He worked for six years at The Boston Consulting Group, focused on airline clients. He joined Lufthansa Group in 2005 where he spent 16 years in various roles. “My last role was as CEO and CFO of Austrian

Airlines,” he says. “I actually went into the pandemic with them, and then with WestJet, went out of it.”

He took the opportunity at WestJet because he was fascinated with its story. “I expected it would be very successful and entrepreneurial focused,” he says. “My wife and I thought that moving to Canada would be an interesting adventure for our family and a great opportunity for our kids [the couple has five children between the ages of 6 and 16] to live in an English-speaking country.”

Their decision has been a good one. “Calgary is a great place – to do business and to live,” he praises. “It’s a great business environment. The way this province cares about business and the success of its businesses is remarkable. That’s part of the success story of this province. It’s a province of business enablers and that ultimately drives wealth and the quality of living in Calgary. It also drives the opportunities to contribute back to society and work on sustainability.”

He notes Calgary has been repeatedly selected as the most livable city outside of Europe: “That’s a great compliment to our great standard of living and a testament to the strong business environment.”

It was the strong business environment and culture of entrepreneurialism – coined the Alberta Advantage by Premier Ralph Klein – that lead to WestJet’s birth in the mid-1990s. At the height of the Alberta Advantage, the province had the lowest corporate and personal tax rates in Canada. However with the election of Rachel Notley’s NDP government in 2015, which significantly increased personal and corporate tax rates and introduced a carbon tax, the Advantage evaporated.

The UCP government elected in 2019 dropped the corporate tax rate to 8 per cent, making it the lowest in Canada, significantly reduced business “red-tape” and repealed the carbon tax.

WestJet’s start was a unique moment in Canadian history. At the time, the market was dominated by two airlines (Air Canada and Canadian Airlines), the latter of which was ailing and was later purchased by the former. “It was a market environment that opened a window of opportunity for the founders of WestJet,” von Hoensbroech reflects. He has met all four of the original founders: Clive Beddoe, Donald Bell, Mark Hill and Tim Morgan.

“The business model was a very efficient schedule, low production costs and therefore the ability to offer affordable fares,” he explains. “The startup had excitement around it which was built into the culture. And this was all fueled by the famous Albertan and Calgarian entrepreneurship, which made for a really successful airline.”

For its first 17 years, WestJet operated on a pure local (Western Canada) business model. Over time, new iterations occurred: the regional WestJet Encore was launched, the company expanded into wide body (twin aisle) aircraft, business class and rewards programs were added, and destinations were added across Canada, North and Central America, and in Europe and Asia.

“Some of these moves were really successful and some less so,” von Hoensbroech opines. “But that’s ok because that’s how entrepreneurship works.”

“Having gone through the pandemic,” he continues, “we’ve lost a little of our risk appetite. We looked at what’s been successful, what’s been less so, and decided to do a 120-degree turn to get WestJet back to where it started. Going forward, we will grow our business at the core of what the original success story of WestJet was, which is flying 737, mid-range airplanes all throughout North America in a very efficient, low cost and affordable way.”

WestJet will maintain its regional and wide body flying but has decided to centralize both into Western Canada and will not invest any further into these two segments, at this time: “Their relative share in our business will shrink for a while, but our 737 business will grow significantly.”

The new strategy is centred around three themes. First, the west. “We are WestJet,” von Hoensbroech reiterates. “So, we will double-down on our growth and business in Western Canada because there are still lots of underserved or untapped markets that we can serve in the best way possible.”

The second theme is leisure. To this end, WestJet announced in March its agreement to purchase Sunwing Airlines, a deal von Hoensbroech says will strengthen WestJet’s leisure offering. “We are Canada’s favourite leisure airline,” he says proudly. “Both in Western and Eastern Canada. We will maintain and grow our leisure presence.”

The third theme is low cost, something WestJet was originally known for. “We want to be more affordable than our competitors,” he says. “So, our low-cost culture is very important.”

With roughly 2,000 fewer WestJetters than it had before the pandemic, von Hoensbroech acknowledges the very difficult time all employees experienced over the last few years.

“Overall, we are three years in the pandemic,” he points out. “And this has taken its toll on the team for sure. It’s a fantastic team, a very dedicated team. And they’re all still energized and want to deliver the best possible service.”

He notes many team members never returned after the pandemic, and as a result, there are many new employees today. “We’re building the culture and it’s a big priority for us,” he says. A commitment to sustainability is also very important to WestJet and von Hoensbroech notes that, coming from Europe, he is well versed in the issues.

WestJet’s approach to sustainability is threefold. “First, is technology,” he explains. “We have one of the youngest fleets in North America with a large share of the latest technology. We are a very fuel-efficient airline. Second, our procedures. We work to have the right procedures on the ground and in the air to reduce emissions as much as we can. Third, and in the end the most important piece, is the transition to sustainable aviation fuel (SAF).”

SAF, which can be produced from a variety of resources including forestry and agricultural waste, used cooking oil, carbon captured from the air and hydrogen, is not currently being produced in Canada, which von Hoensbroech says is a pity. “Canada has a strong oil and gas industry and should be at the forefront of producing SAF. Both the government and many companies are looking at building up the facilities for it, so eventually we’ll get there.”

A proud Western Canadian company, WestJet gives back to the people who live here. “It’s an important part of what we do, and equally important for our team because it’s a meaningful way they can engage in their communities.” The company supports a number of charities through its WestJet Cares for Kids program, Airport Community Giving program, Gift of Flight program, WestJet Live Differently Builds program, Miracle Miles program and as the official airline partner of the Canadian Cancer Society and the CIBC Run for the Cure.

Going forward, von Hoensbroech says WestJet is committed to growing its business in Canada: “In September, we placed a large order with Boeing. We currently have potential to add up to 85 aircraft over the next five years. This will allow us to grow our network throughout Canada, with a particular focus on our Western Canada footprint.”

This summer, he continues, the company expects growth in Calgary to be about 30 per cent more than last summer (and 20 per cent more than 2019). “And we’ll see similar growth in Edmonton, Vancouver, Winnipeg, Kelowna, Regina and so on,” he offers. “This will strengthen the business environment, most particularly for Calgary, as there’s a strong relation between the air connectivity of a city, the GDP per capita and business attractiveness. Strong air connectivity has a very strong impact on business.”

In addition, WestJet has concentrated its wide body fleet in Calgary. “So, in addition to North American connectivity, we have a lot of overseas connections from Calgary too. This summer we’ll be flying to London, Edinburgh, Dublin, Paris, Barcelona, Rome and Tokyo. That’s a pretty strong offering for a city the size of Calgary. And we supplement this with a very strong network throughout Canada, through the U.S. and down to the Caribbean. We have really strong customer positioning, particularly in Calgary.”

In its 27-year history, WestJet and the city it calls home have both changed. Each have grown larger, more mature, more diverse. Yet the things that connect and define both WestJet and Calgary – a strong culture of business and entrepreneurship, giving back, caring for others and the environment – remain at the core of both. It’s these qualities that have underpinned the success of each to date, and will be integral to their futures.