A Tale of Two Airlines: Westjet and Canada 3000

By Martin, Bernadette; Feils, Dorothee J. et al. | Journal of the International Academy for Case Studies, January-February 2005 | Go to article overview

A Tale of Two Airlines: Westjet and Canada 3000


Martin, Bernadette, Feils, Dorothee J., Allen, Grace C., Journal of the International Academy for Case Studies


CASE DESCRIPTION

The primary subject matter of this case is the financial and business risks of airlines. Secondary issues examined include impact of the financial structure and different growth strategies on financial risks of airlines. The case has a difficulty level of three and should be appropriate for undergraduate and graduate courses in financial and strategic management. The case is designed to be taught in one to two class hours, with three hours of outside preparation by students.

CASE SYNOPSIS

Over the last twenty years, all airlines, from large international carriers such as United Airlines, Swiss Air, and Air Canada to small short haul carriers such as WestJet have faced enormous risks in their operations. The Gulf War and the War in Iraq, high oil price volatility, the threat of terrorism, and lately SARS all have had a negative impact on airlines around the globe. Many airlines have seen losses, resulting in reduced capacity, large layoffs and quite frequently in bankruptcy. However, a few exceptional airlines have been able to stay profitable even in such a demanding business environment. In this case study we examine two Canadian airlines: WestJet and Canada 3000. The former is an example of an airline that is thriving despite the hostile business environment while the later is an example of an airline that failed shortly after September 11, 2001. Why did this happen? Both airlines were of similar size and initially followed a similar strategy. However, one succeeded, one did not. The major factors that explain WestJet's success and Canada 3000's failure are examined. While we use two Canadian airlines for the analysis, the lessons learned apply to airlines around the world.

COMPANY BACKGROUND

WESTJET

In February 1996, WestJet started operations with three airplanes out of Calgary, Canada. Clive Beddoe, its current president, and three other entrepreneurs saw a business opportunity in operating a low cost air carrier in Canada. In the early 1990s, the airline industry was suffering from the recession and the effects of the Gulf War that led to high fuel costs and a decline in air travel. Almost every airline's profits were negatively affected except those of low cost carriers such as SouthWest Airlines in the United States; thus, WestJet's executives chose to follow SouthWest Airlines' successful business model. SouthWest Airlines, established in 1971, had pioneered the low fare, high-efficiency airline model, and is the most consistently profitable airline in the world. WestJet started operations out of Calgary servicing other western Canadian cities.

Within three years, WestJet was servicing most of its niche market of large western Canadian cities. In 1999, WestJet reached its critical goal of completing its first IPO, which allowed the firm to continue its expansion strategy of adding a plane and a route at a time. The IPO raised C$30 million and allowed WestJet to purchase more aircrafts to add to their existing Boeing 737 aircrafts. With the additional aircraft WestJet was able to add eastern cities such as Hamilton and Ottawa to routes.

WestJet has since added many more Canadian cities to its routes and has turned itself into a national carrier. In both its prospectus and annual reports, WestJet stresses its desire to capture both leisure and business travelers during peak travel times. WestJet emphasizes everyday low fares, convenient schedules and 100% ticketless reservation system.

The small airline carrier expanded into a profitable national air carrier. It growth has been achieved by using internal capital to increase size and market share. Expansion for WestJet has come slowly without veering away from its business model and niche markets. It continues to be recognized for its outstanding achievements in meeting the diverse goals of its travelers, employees, and shareholders.

CANADA 3000

Canada 3000 began its operations in 1988 and was once considered Canada's airline alternative to the two national carriers at the time: Canadian Airlines and Air Canada.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

A Tale of Two Airlines: Westjet and Canada 3000
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.