WestJet orders longer-range Boeings

WestJet Airlines Ltd. (TSX:WJA) has set out an ambitious plan that will see it expand both internationally and into ultra-low cost offerings.

The company said Tuesday it has placed a firm order for 10 Boeing Dreamliners, which will allow it to serve new destinations in Asia, South America and Europe with higher-end offerings like lie-flat seating.

Company chief executive Gregg Saretsky said the company is also moving ahead with a plan to launch a separate brand and operation with 10 planes to offer a lower-cost service than WestJet itself.

“We’ll have three very distinct products that will address those three segments, from thrift to luxury, and all within an appropriate cost structure to match,” said Saretsky.

WestJet won’t see its first Dreamliner 787s delivered until 2019, with the option of buying another 10 between 2020 and 2024.

The ultra-low cost carrier, or ULCC, should be in operation by early next year with a no-frills structure modelled from the likes of European carriers Ryanair and easyJet.

“The focus on the ULCC is to have the absolutely, rock-bottom entry fare, and then you pay as you consume for all the other products and services,” Saretsky said.

Saretsky said the new carrier’s costs would be about 6.5 cents per available seat mile, compared with 10 cents for its WestJet operations, as it does away with free extras like snacks and baggage and squeezes more travellers into the planes.

The new offering would focus on leisure travel routes not served by WestJet to avoid cannibalizing its own business, with Saretsky saying one of the target markets is the 5.5 million flights Canadians take from airports just across the U.S. border.

The company is also pushing to lower costs across its operations, with plans to add another row of seats to its to its existing 737-700s and 800s, and to shift more customer service online and away from call centres.

WestJet’s expansion plans come as the company faces another pilot union drive, with voting set to begin on whether to join the Air Line Pilots Association.

The plans also come as the company emerges from a tough quarter after a record number of weather interruptions, pushing first quarter net earnings down to $48.3 million or 41 cents per share from $87.6 million or 71 cents per share last year

WestJet shares have fallen to their lowest levels in nearly a month. They were at $22.00 at midday, down 84 cents.

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