Competitive Analysis of West Jet Airline

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13COMPETITIVE ANALYSIS OF WEST JET AIRLINE

Competitive Analysis of West Jet Airline

Abstract

In this report, the challenges affecting West Jet Airlines will be identified using strategic and competitive analysis tools. Some of the indicators of these challenges will also be examined and the strategies employed in dealing with this challenge will also be discussed. The effectiveness of the strategy will also be evaluated using Lewin’s change model. The report will conclude by discussing some of the ways the change indicators were identified and the justification of the change model chose.

Contents

West Jet Airline competitive analysis 4

1.0 Challenges facing West Jet Airlines 4

2.0 Identification of the challenges 5

3.0 Strategies designed to overcome these challenges 6

4.0 Will the strategy work 7

5.0 Has the strategy worked or failed? 8

6.0 Indicators that the strategy is working 8

7.0 How these indicators were identified 10

References 12

West Jet Airline competitive analysis

1.0 Challenges facing West Jet Airlines

As much as WestJet Airline is a very prominent airline sector, it is universally acknowledged that it is in competition with other well-established airline companies such as Jazz, Air Transat and Air Canada (Barbot, Costa & Sochirca 2008). Additionally, beyond the Canadian jurisdiction, WestJet is believed to compete with an extensive number of American Airlines owing to the fact that they are in a better position to offer and provide lower costs transportation to different locations. As a result, West Jet is able to call upon its differentiation strategy coupled with integrated cost leadership strategy to ensure that it remains competitive as far as product pricing and customer service is concerned. Moreover, though other competition firms may be better placed to compete on price, it is acknowledged that WestJet boasts an advantage in regards to competition because of its unique customer service (Marakas & O’Brien, 2014). Besides, because some of the employees of WestJet possess or rather holds some shares in WestJet, they are believed to care much about the welfare of the airline which is evidenced by the manner in which they treat their customers and passengers

West Jet is undergoing environmental challenges just like other airlines (Min & Joo 2016). Additionally, there are also challenges associated with security threats that have continued to hamper them since the September 11 2011 terror threat coupled with increasing fuel and oil prices that occurred due to the global financial crisis (Marakas & O’Brien 2014). However, since most of the existing airlines have found it hard to combat the effect of the increasing oil prices, it has been known that most of them have tried to pass the increasing costs to their customers. In the process, the expectations of consumers (Brueckner Lee & Singer 2013).Another challenge facing WestJet Airlines has to do with maintaining its corporate culture as the airline expands. In this case, as any organization expands, it is accepted that it becomes extremely challenging to see to it that all workers levels are working towards the best interests of the organization (Min & Joo 2016). Furthermore, Balancing the customer service and cost as a result has also become a challenging aspect for West Jet airlines. In other words, it has become very challenging for them to balance between the demands and the needs of the company and the customer’s needs.

2.0 Identification of the challenges

By conducting a micro and macro environmental analysis, analyzing its corporate strategies such as visions and mission statements and conducting a SWOT analysis, it was clear that West Jet is incurring some challenges as of present (Min & Joo, 2016). In other words, the challenge of increasing oil prices is indicated by the fact that West Jet has tried as much as possible to position itself as a low-cost airline, it is trying in the process to establish ways of coping with the competitive pricing so as it may be able to maintain its customer base (Brueckner Lee & Singer 2013). In the process, they have established some strategies that see to it that they manage their fuel consumption portfolio. Another indicator of the challenges that West jet is facing as far as maintaining its corporate culture as the company expands is the fact that as of recent, West jet is trying to hire and retain only those employees who work and function in line with the airline’s corporate culture. The challenge of balancing between the customer service and cost is indicated by the fact that West Jet is trying to reduce its internal cost so as I t may be better placed to balance out any extra costs that occur as a result of rising fuel prices.

3.0 Strategies designed to overcome these challenges

Differentiation and integrated cost leadership strategy is the strategy that West jet has designed to deal with the current challenges facing the company. West jet has tried to see to it that it manages its fuel hedging portfolio properly and review their hedging program in a more consistent manner that will ensure that they reduce the risk that occurs as a result of unfavorable fuel prices. Additionally, besides, since West jet is universally acknowledged as allow cost airline, then it is important for them to differentiate their products in a manner that will see to it that they compete with the increasing pricing competition and in the process; it does not lose its customers (Homsombat Lei & Fu 2014). Additionally, West Jet is firing those workers that do not conform to the company culture and hires those that are in line with the company corporate culture in a move meant to maintain the company’s corporate culture. In other words, this move is very significant given the fact that corporate sustainability and culture offers a competitive edge that will see to it that they have a foundation basis on which they could execute superior and high-quality customer service (Brueckner Lee & Singer 2013). In simple terms, West Jet will therefore need to see to it that the already existing human resources processes and practices are enough to screen, attract and select the most appropriate workers for their company. In an effort to balance the customer service and costs, west jet should be more cautious not to modify or sacrifice its primary differentiator in an effort to save on its costs internally.

However, these changes can be assumed at some stage to cause West Jet to move away from its original cost structure (Min & Joo 2016). In other words, besides establishing an adequate balance between curbing or mitigating costs and provision of differentiated products, West jet should work towards screening for some potential airline partners that will ensure that they minimize the cost involved in the level of integration required.

4.0 Will the strategy work

Since West Jet Airlines is a well-known as one of the leading low-cost craft while at the same time concentrating on superior and unique customer service in Canada, it is wise to argue that the differentiation strategy and integrated cost leadership strategy employed to curb the challenges will be of benefit to West Jet (Min & Joo 2016). In other words, as far as managing its low-cost structure and rising fuel prices, West jet will be able to operate Boeing 737 aircraft since it helps in keeping the costs involved in training and maintenance very low (Homsombat Lei & Fu 2014). Since most of the employees in airline industries are non-unionized and are paid very little below the average wages in the industry, the cost leadership and differentiation strategy will ensure that West jet offsets these challenges associated with this by establishing an employee stock option plan that will work as an incentive to see to it that that the performance of the employees are in line with the corporate culture and interests of the company (Brueckner Lee & Singer 2013). Since West Jet is a pioneer in technological innovation, it is accepted that the challenges posed by rising fuel prices will be able to be offset through mobile and online checks that increase the customer convenience and lower the operation costs that require fuel consumption.

A differentiation strategy will ensure that West Jet will be able to incorporate unique corporate culture and in the process, promote quest experience (Brueckner Lee & Singer 2013). In this case, it will facilitate a culture of inclusion by seeing to it that it encourages employees to engage in voting and voicing their opinions and in the process, take part in the business decisions .In other words, its caring culture and fun will be leveraged beyond their current operation and in the process, it will continue to improve the delivery of service to its customers.

5.0 Has the strategy worked or failed?

The strategy has worked to some extent (Homsombat Lei & Fu 2014). In this case, as a low-cost Carrier, it is universally acknowledged that West jet has established itself as one of the most prominent airlines in the history of Canada .One of the well-known technique that is believed to be behind this success is the fact that they have lowered the costs involved in staffing in which the pilots are paid 75 % of what the industry pays (Lee & Worthington, 2014). Additionally, the staff working in West Jet are non-unionized hence makes them be non-members of working organizations hence working in favor of West jet. This strategy has made west jet to be more concerned with the idea of giving back and working with the community, engaging with their employees to assist and promote non-profit firms and organizations such as the Beyond Borders ECPAT Canada Make-A-Wish Foundation Canada among others, In so doing, this strategy has helped promote and expand the brand awareness of West Jet airline and makes it develop towards socially responsible customers and guests who may prefer it as compared to other competitors (Lee & Worthington, 2014)

6.0 Indicators that the strategy is working

West Jet Airlines has commanded a strong financial standing since the culmination of the global financial crisis. For instance, at the end of the year 2008, West Jet is believed to have approximately 820 billion dollars which can be classified as eighty percent of its overall total debt. Besides, its overall debt equity ratio revolves around 1.09 which in other words can be classified as being significantly low as compared to other competitors as well as the standards of the airline industry (Chang & Yu, 2014). Additionally, as of recent, West Jet has gained a reputable customer satisfaction and following because of its capability to offer nonstop local flights which place its customers in a better position to make hassle free travels. In other words, its domestic routes are believed to boast of occupancy level of 60-65 percent most especially for the most common 250 sealers Boeing 737s West jet aircraft airlines which may as well encompass smaller Embraer and Bombardier is as well included in this airline routes (Vowles & Lück 2016). In so doing, this strategy has seen to it that West Jet has been able to improve the transportation load to approximately 95 percent and in the process, it has mitigated the cost without compromising the satisfaction of its customers as well as the customer base (Chang & Yu 2014). Moreover, there is better seat utilization because of the integrated cost leadership strategy since the smaller aircraft have been embodied with 100 seats that will basically boast of high occupancy level that the 737s Boeing aircraft which possess around one hundred and forty to one one-hundred and sixty seats (Homsombat Lei & Fu 2014).

In the year 2012, West Jet is believed to have added 10 new travel destinations and in the process, it has signed approximately 17 more business partnerships agreements with other airlines around the globe (Council, 2015). As a result, West Jet as of recent offers over eighty destinations around the globe across the Caribbean, North America, and Mexico. In the process, it is able to operate three kinds of aircraft in the name of Boeing Next-generation 737-800, 737-700 and 737-600 with approximately 136, 119 and 166 capacities (Short, 2013). All these aircraft have been incorporated with a numbe5r of ancillary services that include reserved seating, in-flight entertainment, in-flight meals and drinks and reserved seating. All these features are a clear indicator that the differentiation strategy is working.

Another indicator that the differentiation and integrated cost leadership strategy is working is the fact that in the year 2011, West Jet was recognized as the J.D Power Customer Service Champion and in the process, it was rated as the third highest on the Aon Hewitt’s best Employers in 2012 (Vowles & Lück 2016). It was also chosen as the most prominent and preferred airline in Canada. Besides, West Jet has succeeded in igniting a highly competitive and engaged corporate culture among its workers .For instance, 85 percent of its workers are able to own shares through the companies workers share purchase plan (Short, 2013). In this case, this is a clear indicator that West Jet has ensured that their employees are personally committed to the company’s growth and the welfare of the company as well. In other words, the corporate sustainability of West Jet has ensured that it is able to grow, expand and gain financial stability by realizing a high level of profits.

7.0 How these indicators were identified

The airline industry is universally accepted as a very dynamic industry in the sense that it is affected by a number of global events such as the SARS outbreak, swine flu outbreak and the famous 9/11 since both of this factors result in tremendous decrease in the number of travellers around the globe (Vowles & Lück 2016). Additionally, to survive in the modern airline industry, it is expected that West Jet needs to modify its normal operation and develop into a company that is more capable of adapting to changes whenever they occur. In this case, there are a number of theoretical models that can be used in identifying indicators of change in any strategic decisions (Thomas, 2015). However, while some of this theoretical models are better placed for transformational changes while others are better placed for transactional changes .In this case, Lewin’s change model was used to identify the indicators of change since it helps to identify a change in three stages namely; unfreezing, moving and refreezing (Thomas, 2015). In the case, of West Jet, it can be argued that the change is planned which means that it will definitely affect the whole organization. Hence in this case, a combination of change models was more suitable in comprehending the change characteristics, risk assessment, funding, communication plan and resource planning.

West Jet Airline purposes to be among one of the most renowned airlines in the world by the end of the year 2016 (West & Dellana, 2016).In this case, Lewin’s model indicates that it is very challenging to realize this using a single fleet model. It therefore makes sense for West Jet to employ a differentiation and cost strategy since some of the southwest airlines models which possess the same model as West Jet have employed a similar strategy, hence it makes sense for it to adopt a new fleet in their business so as it may be able to gain more and advance market share hence greater efficiency (West & Dellana, 2016).

References

Barbot, C., Costa, Á. & Sochirca, E. (2008). Airlines performance in the new market context: A comparative productivity and efficiency analysis.
Journal of Air Transport Management, 14(5), 270-274.

Brueckner, J. K., Lee, D., & Singer, E. S. (2013). Airline competition and domestic US airfares: A comprehensive reappraisal. Economics of Transportation, 2(1), 1-17.

Chang, Y. C., & Yu, M. M. (2014). Measuring production and consumption efficiencies using the slack‐based measure network data envelopment analysis approach: the case of low‐cost carriers.
Journal of Advanced Transportation, 48(1), 15-31.

Council, M. V. C. (2015). Airport West Activity Centre Economic Analysis and Market Feasibility Assessment Final Draft Report.

Homsombat, W., Lei, Z., & Fu, X. (2014). Competitive effects of the airlines-within-airlines strategy–Pricing and route entry patterns. Transportation Research Part E: Logistics and Transportation Review, 63, 1-16.

Lee, B. L., & Worthington, A. C. (2014). Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression.
Journal of Air Transport Management, 38, 15-20.

Marakas, G. M., & O’Brien, J. A. (2014). Introduction to information systems. McGraw-Hill Education.

Min, H., & Joo, S. J. (2016). A comparative performance analysis of airline strategic alliances using data envelopment analysis.
Journal of Air Transport Management, 52, 99-110.

Short, D. M. (2013). An empirical analysis of airline network structure: the effect of hub concentration on airline operating costs (Doctoral dissertation, Duke University Durham).

Thomas, M. (2015). WestJet Airlines: hybrid but profitable. Strategic Direction, 31(8), 23-25.

Vowles, T. M., & Lück, M. (2016). Low-Cost Carriers in the USA and Canada. The Low-Cost Carrier Worldwide, 61.

West, D., & Dellana, S. (2016). Linking service structural design to service profitability: a US airline industry study. Operations Management Research, 1-13.