Bishops Consulting

1
Bishops Consulting

• Erik Desrosiers
• Rachel Kelly
• Charlene Marion
• Samuel Saintonge

2
Agenda

• Key concern
• Recommendation
• Industry Analysis
• Company Analysis
• Implementation

3
Key Concern

• Determining whether or not Pearson Airport
  provides Westjet with the highest growth
  potential.

4
Recommendation

• The recommendation for WestJet is to move its
  operations from the Hamilton airport to the
  Pearson airport within the next year

5
Canadian Airline Industry

• Threat of New Entrants High
• Emergence of Low Cost Airlines
• (Jetsgo, CanJet, WestJet)

• Buyer Power High
• Several Airlines offering same routes
• Extremely Price Elastic

• Supplier Power
• Not an area of concern

• Level of CompetitionHigh
• Derregulation and emergence of low cost carriers
  have lead to decreased pricing power

• Substitutes Low
• Geographic Reality of Canada

6
Key Success Factors

• Industry Trends
• Increasing Presence of low cost carriers
• Decreasing profitability of major airline
• Increasing number of km flown
• Price vs. Experience

• Key Success Factors
• Price of ticket
• Cost Efficiency
• Route offering
• Location
• Volume
• Service consistency

-
7
Roots of Competitive Advantage

• Tangible Resources
• - Services major city hubs
• Intangible Resources
• - Reputation
• - Brand Recognition

Value Creation through LOW COST

• Superior
• - Efficiency
• Quality
• Customer
• Responsiveness

Distinctive Competencies
Higher Profits

• Capabilities
• Capable management
• Asset utilization
• Experience
• Culture

8
Pearsons Potential

• Opportunities
• High traffic area
• Connecting hub
• Capacity
• Torontos population

• Threats
• Increase ticket prices
• Renovation fees
• Landing fees
• Competitive response

9
Pro-formas, moving to Pearson
10
Financials

• Revenue loss (Hamilton) 125 MM
• Operating Expense (Hamilton) 108MM
• Revenue (Toronto) 195 MM
• Operating Expenses (Toronto) 168MM
• Includes operating 10 new aircrafts
• Addition to operating profit from Toronto region
• First year 10MM (or 58)
• By 2010 29MM (or 270, )

11
Increasing length of flights vs profitability
12
Decision Criteria
13
Key Concern

• Determining whether or not Pearson Airport
  provides Westjet with the highest growth
  potential.

14
Recommendation

• The recommendation for WestJet is to move its
  operations from the Hamilton airport to the
  Pearson airport within the next year

15
Implementation
Financial
16
Timeline
(in months)
0
3
6
9
12

17
Human Resources

• Large decrease in business at Hamilton
• Minimal number of employees
• Offer tranfers to Toronto
• Gas allowance
• Moving expenses
• Natural attrition

18
Human Resources

• Increased business at Pearson
• Use any tranferred employees
• Recruitment and selection if needed
• Loose labour market
• Train any new employees
• Job
• Culture

19
Marketing

• Devise advertising campaign
• Goal
• Create awareness for target customers
• Message
• Consistent with current image
• Consistent with current message (product)

20
Financial implications

• Current Debt to Equity 1.03
• Potential Debt to Equity 2.45
• At current equity, could increase debt by 856MM
• Cost of new aircrafts is capital expenditure
• Not part of operating expenses

21
Internal Implications

• Management preferences
• Consistent with growth strategy
• Consistent with organizations current goals
• Culture
• No drastic strategic move

22
External Implications
23
Customer Response

• Benefits outweigh costs for customers
• Increase in service (flights)
• Greater presence in major city hub
• Ticket price increase of 20
• Benefits outweigh costs for WestJet
• Greater access to largest national airport
• Proximity to larger customer base

24
Competitive Response

• Air Canada Tango
• Focus Low Cost Carrier in direct competition
• Reaction compete on route availability

25
Competitive Response

• Air Canada Jazz
• Focus Low Cost Carrier in direct competition for
  our regional flights
• Reaction compete on route offering

26
Competitive Response

• Air Canada
• Focus Major Carrier in direct competition
• For major routes
• Reaction compete on route offering

27
Competitive Response

• JetsGo
• Focus Low cost carrier for both transborder and
  domestic flights
• Reaction compete on price

28
Competitive Response

• CanJet
• Focus Low cost carrier for eastern America
• in direct competition for that market
• Reaction not compete in near future for rest of
  Canada due to corporate goal

29
Summary

• Key Issue
• Determining whether or not Pearson Airport
  provides Westjet with the highest growth
  potential.
• Recommendation
• The recommendation for WestJet is to move its
  operations from the Hamilton airport to the
  Pearson airport within the next year