Retrenched in ‘Fortress Calgary,’ WestJet CEO says airline stayed profitable through 2023 in year filled with change

Aviation expert expects WestJet to double down on building up service from its home base

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From the outside, WestJet’s ride through 2023 appeared to feature several moments of turbulence and changes in direction.

While the Calgary-based airline is leaving behind a year in which it narrowly avoided a pilots’ strike and executed a major exit from Eastern Canada, the company has still protected its bottom line, CEO Alexis von Hoensbroech said in a year-end interview with Postmedia.

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And 2024 is setting up to be another interesting year, with unusually high competition in Canadian airspace forcing airlines to find ways to secure their stake in the market.

Awaiting its fourth quarter results, the chief executive said WestJet posted a profit in the first three quarters of the year and increased its capacity by 30 per cent compared to 2022, with similar growth targets for 2024. Those first-quarter returns marked the first “normal quarter’ since COVID-19 began, he said earlier this year.

“We started the year in a very, very tough spot,” von Hoensbroech said, alluding to early winter storms that grounded several flights. Von Hoensbroech stepped into the CEO role in February 2022.

In June 2022, WestJet announced it was pulling out of several short-haul regional routes in Eastern Canada — particularly those in the Toronto-Ottawa-Montreal triangle — to focus on western Canadian markets. It continued to follow through on that plan this year, suspending its Toronto-Montreal route between October and April.

Among initial skeptics of the plan was Rick Erickson, a Calgary-based aviation consultant.

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“Not serving Toronto and Montreal — I couldn’t conceive that ever occurring. If someone would ask me that in 2018, 2019, I would’ve asked what cave they lived in,” he said. But combined with the acquisition of Sunwing Airlines, it’s “a well-thought-out gambit,” Erickson said.

WestJet CEO Alexis von Hoensbroech
Alexis von Hoensbroech, CEO of WestJet, speaks at an event at the Calgary Chamber of Commerce on Wednesday, April 12, 2023. Azin Ghaffari/Postmedia file

Relative strength of Calgary economy supports WestJet’s growth, CEO says

Von Hoensbroech said the move came with reasonable risk but noted refusing to change would also pose problems to the company in the future.

“Every change comes with a risk, but not changing also comes with risk, so we collectively came to the conclusion that this is a path that has every opportunity to work out if everyone supports it,” he said.

Aviation experts have approved of the Sunwing Airlines and Sunwing Destinations acquisition — the first purchase by the company — which will allow WestJet to expand to more sun destinations through Sunwing’s 45 hotels.

Calgary International Airport’s capacity for further growth, combined with the city’s record population increase and relatively strong economy compared to the rest of Canada, played an important role in the decision, he said.

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“We saw the trajectory of Calgary was actually very strong in terms of population and economy, so therefore it actually should support constant growth year by year,” von Hoensbroech said.

John Gradek, an aviation expert and lecturer at McGill University, said he expects WestJet to focus on locking down dominance in the Calgary-Toronto corridor, which will likely feature abnormal levels of competition in 2024.

“They really want to build up Fortress Calgary, and (it’s) going to be a buildup of their Toronto-to-Calgary service,” Gradek said. “I think what we’re seeing is WestJet being really selective in those markets in which it feels that it can get a significant competitive advantage and, of course, make money.

“They’re kind of reorienting their operations to be more Calgary-focused.”

Another flashpoint in 2023 for WestJet was the 11th-hour deal it struck with its pilots union, narrowly dodging a potentially catastrophic strike that forced the airline to pre-emptively cancel more than 120 flights.

Shortly after, WestJet folded ultralow-cost carrier Swoop into its operations, viewed by some as a decision driven by the pilots agreement and the challenge of offering low ticket prices in the Canadian market. (von Hoensbroech has been a vocal critic of Canada’s airport fees, saying they make it difficult to sustainably offer cheaper ticket prices.)

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WestJet at Calgary airport
A person is silhouetted against a window as a WestJet plane gets ready for take-off at Calgary International Airport on Friday, May 19, 2023. Azin Ghaffari/Postmedia file

Labour agreement with WestJet pilots ‘future proof’: von Hoensbroech

WestJet will likely have the number of pilots it needs by early 2024, von Hoensbroech said, with the company hiring 2,200 people in 2023. (WestJet’s total head count bottomed out at 400 people during the pandemic.)

Von Hoensbroech called the agreement with pilots “future proof.”

Heading into 2024, Canadian air travel has become “somewhat overpopulated,” he said, with Porter significantly scaling up and Lynx, Flair and Canada Jetlines fighting for space in the ultralow-cost market. Even this year, von Hoensbroech has seen ticket prices drop due to heavy competition on some routes.

“Let’s assume that not every airline can look back at four profitable quarters this year,” von Hoensbroech said.

WestJet is also betting on international travel out of Calgary and Atlantic Canada, having recently announced direct flights from Calgary to Iceland and Seoul. The company also views Alberta as a destination market for foreign travellers, and is hoping to build on its relatively small international travel portfolio.

“It’s a niche business in our case and it’s appropriate to the market size of Calgary . . . We feel pretty comfortable that this modest offering we have is going to work out,” he said.

“We think we can compete very well with those guys.”

— With files from Chris Varcoe

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X: @mattscace67

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