I hope this wont last too long. What about the guys with the delayed ground schools? I'm pretty sure WJA wouldn't leave these guys hanging.From Thursday's Globe and Mail, Thursday, Jun. 04, 2009 03:28AM EDT
TRANSPORTATION REPORTER
The first recession in its 13-year history is cramping WestJet Airlines Ltd.'s WJA-T free-wheeling style and forcing it to adopt a hiring freeze.
WestJet, which takes pride in its upbeat corporate culture, didn't lay off employees after the terrorist attacks of Sept. 11, 2001, and even added staff in 2002 and subsequent years. But the recession of 2009 is another story, spurring a sense of urgency to slash costs.
"It is ugly - a recession that none of us have experienced in our lifetime," chief executive officer Sean Durfy said in an internal memo to WestJet's 7,500 employees, detailing a new cost-cutting program designed to chop $25-million in expenses over the next six months.
"Given the state of the economy, for the time being, we will no longer be hiring externally."
As travel demand slumps, WestJet's planes are departing with more empty seats, pressuring management to tighten belts, including introducing early retirement packages and deferring aircraft painting.
In a place where teamwork is emphasized and perkiness is encouraged, the harsh reality of tough times is sending ripples across the company, where departments carry offbeat labels - with human resources named People, executive offices called Big Shots, accounting is Beanland and reception is Welcoming Team.
Founded in 1996, the Calgary-based company has grown steadily and still intends to protect its track record of never issuing layoff notices, even as it struggles to fill planes. WestJet said yesterday that last month's load factor, the proportion of seats filled by paying passengers, fell to 74.1 per cent from 79.5 per cent a year earlier, and was the lowest May load factor since 2005. Traffic fell 5.8 per cent to 1.06 billion revenue passenger miles.
WestJet's unit revenue - a key industry measure of improvement stated in revenue per available seat mile (RASM) - is forecast to decline 16 to 18 per cent in the second quarter from the same period last year. Fare wars against Air Canada AC.B-T have contributed to the lower RASM.
"These results are showing that we are not bullet-proof. We can run one of the best airlines in the world and still be affected by what's going on in the global economy," Mr. Durfy said in his memo, which began with a "Hey Gang" greeting.
Other WestJet cost-cutting initiatives include a 25-per-cent reduction in travel, training and entertainment budgets, deferred spending on non-essential information technology upgrades, optional unpaid leave and decreased commissions to travel agents to 4 per cent from 9 per cent effective July 1, Mr. Durfy said.
"This is the next challenge in front of us that will test the WestJet spirit. I have no doubt we will succeed," he said.
He noted that he is optimistic about the carrier's long-term prospects, but acknowledged some short-term pain. "The 10,000-pound elephant in the room, however, is the economy," Mr. Durfy wrote. "The result of the recession is that our revenues are not growing at the rate we would have hoped. RASM is falling significantly below where we have been over the last couple of years despite our best efforts to stimulate demand and earn increased market share."
WestJet's first-quarter profit fell 29 per cent to $37.4-million, and it's expected to post another profit in the second quarter, in contrast to money-losing Air Canada. Montreal-based Air Canada, which is expected to release its May traffic results this week, saw its April load factor fall to 81.1 per cent from 82.7 per cent, including travellers on its Jazz affiliate.
Air Canada held talks with its unions yesterday on finding ways to avert a pension plan crisis.
WESTJET (WJA)
Close: $10.91, down $1.03
AIR CANADA (AC.B)
Close: $1.36, down 4¢
