Hot Air 8: What’s next for WestJet? [2/2]

With their joint venture awaiting antitrust approval, WestJet recently announced service to Delta’s mega-hub in Atlanta. (Photo: John Jamieson, July 30th, 2012, YVR)

With WestJet in the midst of a major transition, their changing place in the industry continues to gain international attention. As recently as November 13th, WestJet has been recognized for its success as a low-cost carrier (Named the Best Low-Cost Airline in North America according to AirlineRatings). While the airline is undoubtedly proud of the recognition, I suspect they secretly crave to be recognized as a full-service hybrid carrier.

In May, WestJet unveiled its new “Dreamliner Inspired” business class product and rolled out its new corporate livery. Around the same time, the airline committed to upgrading its North American Plus product to a distinct 2×2 business class layout. While its possible that WestJet chose to head in this direction irrespective of outside factors, I suspect that their joint venture with Delta Airlines involved the creation of a comparable product for Delta Medallion and SkyTeam elite members. As I believe this to be the case, I think it’s worth taking a deeper look at their relationship and forecasting WestJet’s future partnerships.

In Hot Air 6, we discussed WestJet’s global ambitions and analyzed their existing codeshare and interline partners. In this post, we’ll define the concept of joint ventures, examine the role they play in aviation and discuss how WestJet’s potential “JV” with Delta might be valuable for the carrier’s global ambitions.

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With strong hubs in Calgary, Toronto, and Vancouver, WestJet is well positioned to develop connections throughout Canada. (Photo: John Jamieson, April 16th, 2018, YYC))

Firstly, it’s important to understand the differences between codesharing, interline agreements, and joint ventures. From a simplistic standpoint, interline agreements occur when passengers are able to fly with multiple airlines on a single itinerary and code-sharing occurs when 2 or more airlines place their “code” on the same flight (I.E American Airlines 6218 operated by British Airways); while they have their differences, these agreements basically allow passengers to fly to more destinations on their chosen airline. (P.S. I made use of these agreements on my recent trip to Texas; keep your eyes open for a future Trip Report).

In the early days, there were few problems; most airlines offered comparable products. However, as Ryanair and Southwest began popularizing the low-cost model, some legacy airlines chose to downscale their cabin services in order to remain competitive. Cabin products and food services became less comparable. Some airlines held on to historical standards, while others cut expendable costs. Alliances became trendy as they helped group like-minded carriers. While they usually offered similar network benefits, they stood out for their strengthened business relationships and their heightened service standards (business class amenities, mileage programs, lounge access, etc).

For most of WestJet’s history as a low-cost carrier, they lacked a true business class product. While the airline was reportedly approached by BA and American about potentially joining Oneworld, the deal eventually fell through. By the time they began developing their Plus product in 2015, alliances were beginning to saturate. 

Air Canada, United Airlines, and Lufthansa formed their mega Trans-Atlantic joint venture in 2009.  (Photo: John Jamieson, August 18th, 2018, YVR)

As the alliances had grown, many of the smaller members had been forced to invest in product upgrades and membership costs. However, at the same time, the larger airlines began feeling that they were paying too much money for what was being provided by the smaller members. These carriers sought increased market share with fewer group payments. Internal Joint Ventures began coinciding with alliance memberships; a case of the large becoming larger. 

These agreements were designed to allow two or three carriers to coordinate marketing, pricing, and scheduling procedures between their respective markets: for example- Delta’s joint venture with Virgin Atlantic (UK) allows it’s customers greater access to London and more reward program benefits. While they are appealing for some, joint ventures have been criticized by smaller carriers as being anti-competitive. Due to their potential implications, all joint ventures involving US carriers have to pass US government approval before they can be finalized.

While the Department of Transport has provided antitrust immunity in the past, American and Qantas were denied their TransPacific joint venture in 2016 and have been fighting for a re-examination. At the time of writing, this has yet to occur. Now that you’re a little more familiar with the topic, let’s examine WestJet and Delta’s proposed JV.

Through their partnership, WestJet has built close ties with Delta’s SkyTeam partners. Evidence would suggest that a joint venture with Korean Air or KLM-Air France could be on the horizon. (Photo: John Jamieson, August 1st, 2015, YVR)

As their codeshare partnership developed, Delta was in the middle of growing its global empire. By the time news of their proposed joint venture broke in December 2017, Delta had already acquired equity stakes in Virgin Atlantic, Aeromexico, and China Eastern. About a week after the proposal was made, American Airlines announced they would be ending their partnership with WestJet. At one point, the two carriers enjoyed a moderate codeshare partnership and even offered a choice on daily flights between Calgary and Dallas. It wasn’t necessarily the fact that their relationship wasn’t profitable, Delta had just become a bigger influence in the global market. 

So, assuming that approval is granted, what can we expect from the new joint venture? Well, we’ve already started to see a few signs that WestJet and Delta want to expand their shared transborder network. On October 15th, 2018, the airlines announced their intent to launch 6 new routes. While network expansion was expected to be a part of the JV, these 6 new routes potentially create new market development. Additionally, WestJet’s confirmed Calgary-Atlanta service, which was announced on October 30th and is set to launch in March 2019, becomes a natural addition. While I’d happily dig deeper into the network possibilities, there are other elements in the JV which I find equally interesting.

Personally, I’m interested in seeing how much influence Delta imposes on WestJet’s cabin products and terminal experience. To this point, WestJet has a quasi-business class in its Plus Product, and unbranded lounge access in London and all the major cities in Canada. I would expect to see further development of WestJet’s soft products as the joint venture develops. Additionally, should the carrier decide to enter JVs with other SkyTeam members, I’ll be interested to see if they negotiate direct access to dedicated SkyTeam lounges.

This brings me to my final point. How will the Delta JV impact WestJet’s existing partnerships? There will probably be some which remain untouched by Delta, however, any partnerships involving Oneworld or Star Alliance members may be re-examined. I wouldn’t be surprised if Delta steered WestJet towards other joint ventures that it’s currently negotiating or involved in. This could mean partnerships with Aeromexico, Virgin Atlantic, and Korean Air. I’m really interested to see how this relationship develops; 2019 should reveal a great deal about WestJet’s long-term expansion plans.

I’m hoping to cover WestJet’s inaugural service to Atlanta in March. Hopefully, I’ll be able to learn some more information about the joint venture with Delta. As an “avgeek”, I’m also looking forward to exploring Calgary’s new international terminal; from what I’ve seen landside, I’m already really impressed!

Calgary’s new international terminal looked amazing when I visited in December 2016, I’m hoping the post-security side is as nice! 
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