Real competition is back! - Macleans.ca

Real competition is back!

WestJet & Air Canada go head to head

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Take off eh.comLet’s not jump for joy yet but the green shoots of airline competition in Canada may finally be ready to bloom into a crop that could be a bonanza for the Canadian consumer.

Since the demise of Canadian Airlines and its absorption into Air Canada, there have been several attempts by the likes of Jetsgo, Harmony, Roots Air and Canjet to take on the scheduled air dominance of Air Canada. Sadly, none of them succeeded. WestJet, on the other hand, has not only survived but seems to be emerging as a bonafide challenger to Air Canada.

WestJet started as a low cost regional carrier focused on the west. Over the past few years however, they have moved into the high density markets of Toronto, Montreal, Ottawa and Halifax where they are meeting with considerable success in what has traditionally been Air Canada territory. Having gained traction in the east and secured a share of the national market, WestJet is now testing the waters both in the USA and the Caribbean. These markets are dominated by Air Canada, who has a significant market share advantage over their upstart rival. However, Air Canada can no longer ignore the new competitive reality they find themselves in – the days of WestJet being a niche domestic player are over.

The present economic downturn has been particularly tough for Air Canada as well as most other major carriers and this has resulted in a rationalization and elimination of some routes. WestJet has certainly not been spared by our present economic hardships but, rather than pull back, they are taking advantage of the situation and continuing their expansion plans. This is a bold play and, whilst it will increase market share, there could be economic consequences if they don’t get it right. The next year or two will determine which strategy worked.

On international routes, Air Canada is still a major power and WestJet has barely scratched the surface. Air Canada’s powerful frequent flier program, well respected website, membership in the Star Alliance and worldwide perception as “Canada’s airline” are formidable competitive assets. For WestJet to take on Air Canada in the long haul international arena will mean a complete rewrite of their business plan and a decision to move away from the ‘one aircraft type’ policy. Their Boeing 737’s have served them well until now, but if WestJet truly has international ambitions then aircraft capable of crossing the Atlantic will need to be purchased. If WestJet goes this route, the dog fight for market share will make their domestic experience seem like a cakewalk.

Airline competition is good for the consumer. In the short term, heated rivalry over USA and the Caribbean markets could result in significant price wars. If WestJet solidifies a deferred codeshare agreement with Southwest Airlines, the landscape could change very rapidly. WestJet could literally piggyback onto the massive Southwest route network and have access to many more points in the USA. Southwest would also get access to Canada, which would be very attractive to American tourists.

Scheduled airline competition over international routes will take longer. WestJet’s recent memorandum of understanding with the massive Air France/KLM group, to provide a domestic feed on transatlantic flights, could provide a test scenario for further growth in that area. And even if WestJet limits their forays into international markets to deals with foreign carriers, it will still help stimulate competition. By providing these carriers with add on fares and seats that they often found hard to get from Air Canada, WestJet will be growing both their share and that of the international partner.

Competition is most certainly intensifying and Air Canada will not give up its dominance without a fight, so for the consumer this can only be a good thing. Bring it on!

Photo Credits: WestJet, Air Canada

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