“I've always said that everyone here should imagine ourselves as a digital retailer first,” says Steven Greenway, president of WestJet Group's Swoop.
After a fairly active spring for Canada’s WestJet, which saw new routes open up for its primary airline and its ultra-low-cost subsidiary Swoop, Steven Greenway, president of the WestJet unit, is looking forward to some “boredom” eventually.
But it appears he’ll have a while until dullness sets in.
Last week, WestJet and Delta Air Lines said that their proposed U.S./Canada transborder joint venture received clearance from the Canadian Competition Bureau. The arrangement solidifies an existing codeshare partnership between the carriers and follows the signing of a memorandum of understanding the two brands initiated in December 2017.
In May, WestJet accepted an acquisition offer estimated at roughly C$5 billion (USD $3.72 billion) by private equity firm Onex. At around the time the contracts were being finalized in March, WestJet, like many other airlines, also had to concentrate on managing the grounding of the Boeing 737 and replace its 13 Boeing 737 MAX planes – out of a fleet of more than 180 – when it was grounded.
The Onex deal nevertheless has continued to move forward. The proposed acquisition cleared its first Canadian regulatory hurdle at the end of June and appears poised to close following a WestJet shareholders meeting July 23rd, though there are several other regulatory approvals still required before it’s all complete.
In addition to checking in with Greenway on what the Onex purchase might mean for WestJet’s holdings generally and Swoop in particular, Kambr Media also sought his views on the current state of airline retailing and the process of digital transformation within aviation.
Greenway was named EVP of WestJet this past March, exactly a year after serving as president of Swoop (the two-year-old ULCC just celebrated its first anniversary of its inaugural flight on June 20). Greenway brought more than 20 years of airline, loyalty and advisory experience with an emphasis on low-cost carriers.
Prior to Swoop and WestJet, Greenway’s most recent posts were as CEO of reward-U, an LCC loyalty program operated by HK Express. He was also the Board Director of Zuji, one of Asia's main online travel agencies. Over the course of his career, Greenway also worked in a variety of executive and leadership roles at airlines including Japanese LCC Peach Aviation, Virgin Blue, Virgin Atlantic and Qantas, in addition to serving as a founding member and Chief Commercial Officer for Scoot, Singapore Airlines' mid-to-long-haul LCC.
Kambr Media: What does the acquisition with Onex say about WestJet position and maybe what does it say about this moment in terms of the industry itself.
Steven Greenway: We had a town hall with my team at headquarters and were busy with announcements, both in terms of the privatization – or potential privatization of WestJet. Then, four days later Air Canada made a bid for Air Transat. We woke up the next morning and read in the papers that there was someone else bidding for Air Transat [before the $520 million deal was completed last week]. Certainly, Canada has seen a lot of action in the past couple of weeks.
Obviously, the privatization, or the proposed privatization, of WestJet by Onex is an important development for us. Onex, as a Canadian investment firm, has interests in aviation and travel – from air, cars, and leasing companies too.
So they've got experience in that market. They decided to make an offer and they're certainly paying a pretty premium for it in the marketplace at $31, which is about a 67 percent premium where we were trading before the deal was announced. It's an endorsement of the WestJet group.
Is the Onex deal likely to change WestJet’s focus and brand identity? What does it mean for Swoop in particular?
The WestJet Group is a number of companies. It's WestJet as the airline, it's Encore, it's Swoop, it's the loyalty program, which operates as a separate business, and WestJet Vacations. So you've got five reasonably large companies all under the one banner.
Certainly, the question about what the impact is for Swoop has come up. Is Swoop going to be sold? But Onex has paid a premium because they like what they see. It's almost like buying a house. You sit there and go, "Well okay, I'll pay a bit extra because I really... this house looks really good."
It's the same thing with the WestJet Group. Onex has bought into the strategy. They buy into what we're attempting to do both in terms of the ULCC at Swoop, all the way through to the whole execution that WestJet is doing in terms of the 787s being rolled out.
They like the whole picture. They believe, as we do, that there's so much more potential in the company and in the group. We're really at the tip of the iceberg in terms of developing the group and it's truly a multi-platform, multi-national airline.
In keeping with the “house building and buying” analogy, are there any plans to make any major renovations in the structure of WestJet and its respective units?
You never sit still on an airline. You always have to reinvent yourself. But the process of home improvement was already well under way before the Onex deal. You saw that in Swoop. It started because of the ULCC markets springing up in Canada and WestJet wanting to participate in that. But also, it reflected WestJet changing itself and becoming more of a full-service carrier. So I think the 787 is an indication of that - where you've got a true, actually wonderful, business-plus product economy and long-haul economy product in the 787 widebody.
That process of renovation, if that's what you want to call it, is already well underway and that's what Onex bought into. They haven't bought into something that was stale and rudderless.
Their thinking was, "We like the journey. We like where you're going. We like what we see. We believe it is on the right track and we believe that we can help you stay on the right track through capital and providing strategic support."
One small thing that’s always noted is that Onex owns an aircraft leasing firm, so surely we must be able to get good rates on new aircraft. Just an example. Nothing confirmed, nothing dealt with, but that's the type of opportunity that we have with them. If anything they'll probably push the agenda faster. We hope the acquisition gets through in the next couple of months and we'll see what we can do in terms of accelerating the path of the company.
Swoop recently had its one millionth flier. Does that milestone kind of also say anything about the health and the direction that you've been going at this with?
It was pretty well spot-on where we thought it would be. We thought we'd get a million before our first year was out, and we made it within 25 days.
Our first anniversary was on June 20th. It was something we hoped we would make. It was a great little story where William and Emily Burchat and their family probably wouldn't be able to afford to travel if it wasn't for Swoop. There was a great photo of their twin infant daughters. And they were going to take the twins and go between the grandparents and Edmonton.
Those are the type of stories we get. You don't get the stories of, "Oh, you supply WestJet or Air Canada and are now flying here, because you're cheaper." You get stories like, "You're enabling me to be able to go and surprise my sister. I'm able to go and celebrate my friend's 50th birthday. I'm able to take our children and see the grandparents."
We always hear those stories. I was in Halifax, and someone came up and thanked me because they were going to a band called Twenty One Pilots. You know them? I've never heard of them. He took his daughter to Toronto for the concert. He was looking probably to pay $1,500-to-$2,000 worth in airfares on another carrier, but he went to us and he was able to see it.
That's very heartwarming. It means the model's working, because it means we're stimulating the market. That's the key thing.
Just to keep on the topic of Swoop, I was wondering what you thought from looking at the growth of Swoop and the other parts of WestJet. Where do you see that the biggest potential is for routes and infrequency? Do you see it as just staying where it isn't just keeping things maintained?
In terms of Swoop, we went through a substantial growth spurt. We serve 18 destinations in 39 markets. We were, from launch until January of this year, launching roughly a new route every week and a half. That's a lot of pressure. We launched in four countries as well. We spent our first six months really pushing the envelope in terms of getting our breadth of the network out.
What we're doing now is, we're just taking a breather. It's the best way to describe it. You have a little bit of a growth spurt. Take a rest for six to 12 months. It doesn't mean we actually stop growing. We've just taken our seventh aircraft and we’re taking three more in Q4.
My motto is "Boring is good." Where another carrier is flying twice a week to Vegas, we go three times a week. Where they’re doing something daily, we go double daily. Rather than do a whole new heap of route launches, we're really just filling in the blanks that we couldn't do because our fleet was so small in the first place.
Increasing frequency, increasing capacity, flying into the destinations we already fly to – that’s the basic plan. It’s minimalist. We’re just squeezing more out of what we've got, focusing on the cities we already operate, a few new cities like London, Ontario. We’ve also opened up San Diego, CA., and Los Cabos, Mexico. The next twelve months, we’ll be boring. Then, we’ll open up a handful of new destinations. But we’ll just keep everything steady.
The idea is that you're allowing the airline to consolidate its gains. You can't have a massive growth spurt and the business keeps on going. You have to take a breather, make sure all the fundamentals of the business are working, and then you move on.
Does that “minimalist,” steady plan also cover the other parts of the WestJet Group?
Yes. WestJet's main liners are growing. It’s predominantly because of long haul flights. They've already got three 787s; they'll get another three next year, and four after that. They still have another ten options to exercise, should they want to.
The initial numbers out of the box for the 787 have been fantastic. People love it. I've been on it, and it's like a party. People truly appreciate how fantastic the aircraft is. They've launched all their three new routes, Gatwick, Paris, and also Dublin, which just launched.
The growth on the WestJet side is focused on the 787s going long haul, and that initially is doing really, really well.
Aside from that, you've got the loyalty program. There’s massive upside there in terms of making it a loyalty program of choice for Canadians. I think if you have to choose the three things that are growing the business with WestJet, it's the long haul piece, it's the loyalty piece, and it's the Swoop piece. Those are the growth engines, at least, the next couple years.
Does the acquisition change the identity of WestJet and its properties at all?
Not really. WestJet remains WestJet. The core values of WestJet haven't dissipated in any way. If anything, it's now just got an international flavor. As the new liveries have on the side of the plane, the brand is the "Spirit of Canada." WestJet lives and breathes that. It's no longer a Calgary-centric airline. It's becoming a global airline. It's been to markets it's never been in before, and it's taking the Spirit of Canada with that. That's probably the only nuance from the WestJet of 23 years ago. It's amazing how the company has grown and has expanded, but it's still WestJet, just with slightly different flavor. I would probably say that flavor at the moment is the international flavor.
How do you expect ancillaries to evolve industrywide? Do you think it’s got too complex for passengers?
On a product front, it's fair to say that pretty much every airline sees the vast bulk of revenue generated from ancillaries. But it only comes from three or four products: bags, seats, sometimes pre-order meals, and travel insurance. That hasn't changed for the past decade or longer.
From the product side, there are sometimes new product innovations and new ancillaries listed.
Where do you see the innovation coming from?
The next two years will be different from the previous two years, in that airlines, and certainly Swoop is no different, are trying to get better at effectively retailing.
Let me give an example. You might come to our website and you might do an express checkout. It’s almost equivalent to a one-click purchase on Amazon. It's dangerous isn't it? One click and you're like, "I'm out of pocket $150. What happened?"
That's always the way. We've seen where people really don't care about anything except for the lowest fare. Then they might figure out later how they tailor that experience.
This is where retailing comes in really well. We all need to adapt from industries outside of the airline industry. Airlines are one form of retailing. When we talk about express checkout, using a storefront that you can come back into, and tailor make your experience with us – or maybe you choose not to; that's your call.
The airline has enough data on you based on your booking and your profile, that we can come to you and say, "Hey look, we know that last time you went to Edmonton, you checked in a bag that was 20 kilos because you go shopping there. We suggest that you purchase a bag. This is what we're suggesting. We know that you like sitting in seat 1A, if for some reason, you didn't choose 1A this time, it is available for $25. Here you go."
That retailing conversation, it's almost like, "Would you like fries with that?"
A lot of people don't realize at all. You hear it all the time: "I didn't know I could buy travel insurance. I didn't know I should buy travel insurance, better still. I didn't know I could pre-order a meal." You realize you're going to be on a flight for six hours, you might want to pre order a meal because unless you do, we might run out of it on board.
So the industry is having that retailing conversation, which I don't think airlines are too good at. That's where, certainly for Swoop, over the next two years you'll see that go leaps and bounds in terms of having that conversation.
How is WestJet’s mobile strategy adapting to the connected consumer, who is used to ordering everything from food delivery to ride-hailing to booking a restaurant to ordering furniture?
We've adopted a policy of mobile-first. Rather than having a website, and then doing a mobile app on the side, everything is mobile-first.
Our proposition to travelers is, look, you can go to the website, and the website will probably have, maybe, I'm making the number up at the moment because we haven't landed on exactly what the number would be, but let's say 50 percent of the functionality.
If you really want to immerse yourself in the Swoop experience, if you really want to have a full-bodied customer servicing experience, and all of that type of stuff, you need to download the app. That's really our core-central focus is mobile first, making sure we enable to traveler with everything they need through our mobile app to circumvent the pain points of traveling through an airline. That's where we're heading.
A couple months ago, our innovation and experience centre worked with Navitaire to co-develop, our mobile app, which allows this functionality to be given to customers.
What other issues do you want to see the airline industry sort out when it comes to reducing the complexity of services and functions?
There are three things.
The first is the booking process. If you go to any airline in the world, the booking process is almost exactly the same. Yes, they've got different colors. And maybe they ask for some additional information. But the booking process is virtually the same anywhere you go.
I'll give you one business logic example. "I need to collect your name before I assign you a seat." That's an example. Every airline does that. There is no variety. There is no innovation. There is no nothing. One problem we've got is we, airlines, have back engine systems that are decades old. For them to work, you have to go through a certain logical sequence. They're not built on today's technology; they're not built in a way that allows you to innovate or change things.
The second problem is airports. Looking at what we can do with airports and how we can completely reimagine the experience in the ULCC way and make it as easy and efficient as possible. It's also making sure that we can get more people through the same infrastructure, which is really key. It's always difficult to expand airport footprints. But we need to address how we get more people processed through the airport as efficiently as we can in an experience that is reasonable.
Third, it comes back to the retailing experience. Airlines have to genuinely become a proper retailer. I've always said that everyone here should imagine ourselves as a digital retailer first, that happens to fly planes. We are an airline. We get it. There are all the regulatory and safety things that go with that. But we do need to reimagine how we have the retailing experience with our customers, with our travelers. Again, this is something I think airlines have been woeful at for many years.