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Bu 628 part 1

  1. 1. Wilfrid Laurier UniversityCuA~ ~ @ QJJ ~ ~ ~ WJJ &:, ~ ~ COURSE: BU 628 TERM: Spring 2010 LeadershipINSTRUCTOR: John Janetos
  2. 2. Bibliography of copyrighted documents BU 628 (102)The following materials have been copied under license from the copyright holder. Resale or further copying of this material is strictly prohibited.Battilana, Julie; Delong, Thomas; Weber, James, Echoing Green, No. Sep11, Pp. 1·16, © Harvard Business School J/A.(...( (5Publishers/Case Studies, 2009. One-time permission to reproduce granted by Ivey Management Services.DiStefano, Jospeh & Ling, Sing Chee, Century Park Sheraton Singapore, Vol. Ver.A, No. 04-28, © Richard Ivey School ofBusiness, 1986. One-time permission to reproduce granted by Ivey Management Services.Gleave, Tom, Healthcare Equipment Corporation--Managing in Korea, Vol. Ver.A, No. 12-02, Pp. 1-12, © Richard Ivey School ofBusiness, 1998. One-time permission to reproduce granted by Ivey Management Services.Groysberg, Boris et ai, The Pine Street Initiative at Goldman Sachs (HBS), No. Nov 14, © Harvard Business SchoolPublishers/Case Studies, 2006. One-time permission to reproduce granted by Ivey Management Services.Hill, Linda A & Berkley Wagonfeld, Alison, Digital Chocolate, No. Oct.16, © Harvard Business School Publishers/Case Studies,2009. One-time permission to reproduce granted by Ivey Management Services.Ibarra, Herminia;Sackley, Nicole, Charlotte Beers at Ogilvy & Mather Worldwide (A), No. Jan 26, © Harvard Business SchoolPublishers/Case Studies, 1995. One-time permission to reproduce granted by Ivey Management Services.lynes, Jennifer, Scandinavian Airliens: The Green Engine Decision, Vol. Ver.A, No. 06-11, © Richard Ivey School of Business,2009. One-time permission to reproduce granted by Ivey Management Services.Nohria & Spaulding, Who is the Fairest of Them All? Choosing a leader at Deronde International, No. May28, © HarvardBusiness School Publishing, 2009. One-time permission to reproduce granted by Ivey Management Services.Seijets, Gerard & Mark, Ken, WestJet: Building a High-Engagement Culture, Vol. Ver.A, No. 08/11, Pp. 1-24, © Richard IveySchool of Business, 2009. One-time permission to reproduce granted by Ivey Management Services.Sesia , Aldo, Jr.;Rose, Clayton, What Happned at Citiqroup", No. July20, © Richard Ivey School of Business, 2009. One-timepermission to reproduce granted by Ivey Management Services.Simons, Robert & Rosenberg, Kathryn, American Cancer Society: Access to Care, No. Feb9, © Richard Ivey School of Business,2009. One-time permission to reproduce granted by Ivey Management Services.White, Rod E.; Beamish, Paul W.; Schotter, Andreas, ING Insurance Asia/Pacific, Vol. Ver.A, No. 09-14, © Richard Ivey School ofBusiness, 2006. One-time permission to reproduce granted by Ivey Management Services. Arranging copyright permission is a service provided by Custom Course Packages Service of the laurier Bookstore.
  3. 3. Richard Ivey School of Business The University of Western Ontario 9B09C012WEST JET: BUILDING A HIGH-ENGAGEMENT CULTUREKen Mark wrote this case under the supervision of Professor Gerard Seijts solely to provide material for class discussion. Theauthors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguisedcertain names and other identifying information to protect confidentiality.Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction ofthis material is not covered under authorization by any reproduction rights organization. To order copies or request permission toreproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University ofWestem Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca.Copyright © 2009, Ivey Management Services Version: (A) 2009-08-11INTRODUCTIONIn late April, 2009, a senior manager at WestJet Airlines (WestJet) came across two news articles - one inMacleans, a Canadian news magazine, and the other in the Globe and Mail, Canadas national newspaper- that hinted at a dilemma faced by WestJet: How to continue to build its high-engagement culture as itexperienced high rates of growth?WestJet stood out from other Canadian airlines in many ways. For example, despite a difficult year in2008, WestJet was one of only a few airlines worldwide that were profitable that year. Whereas otherairlines had cut their available seats, WestJet had continued to expand its reach. The company was able tonot only survive but to thrive in a depressed environment because of its combination of low operatingcosts, a non-union environment and, most importantly, a unique corporate culture that, among other things,encouraged employees to share suggestions for improvements openly. WestJet press releases weretypically full of good news about how the company was continuing to succeed, whereas other airlines -especially WestJets chief rival, Air Canada - were stumbling.The article in Macleans suggested that WestJet, in an attempt to capitalize on an impending bankruptcyfiling by Air Canada, was doubling its efforts to achieve market dominance in Canada by 2013. The articlealso mentioned a set of customer service standards - known as the WestJet Care-antee - that thecompany would publish, thus clearly setting itself apart from any rival, which would have little or no hopeof matching its offer (see Exhibit 1).On the other hand, the Globe and Mail article suggested that all was not well inside WestJet. Negotiationsbetween WestJet and its pilots had stalled two weeks before their three-year agreement was set to expire onApril 30, 2009. Further, the article reprinted part of a memothat WestJets chief executive officer (CEO),Sean Durfy, had written to pilots, urging them to reconsider the proposal for the purpose of " ...maintaining our wonderful corporate culture and competitive advantage." Negotiations had started in June1 http://www2.macleans.cal2009104130Iwestjet%e2%80%99s-plan-to-crush-air-canadalprintl accessed June 2, 2009 andhttp://www.globeadvisor.com/servletiArticleNews/story/gam/20090417IRTICKER17 ART1937 -9 accessed June 2, 2009.
  4. 4. Page 2 9B09C0122008. Both the pilots and the senior leadership team had agreed on the introduction of interest basedbargaining; and both parties. had attended a training program together.The senior manager was aware of WestJets ambitious goals to become the dominant airline in Canada by2013 and one of the five most successful international airlines in the world by 2016. Achieving these goalswould mean continued expansion in the WestJet organization. Growth was seen as positive because itwould provide new and exciting opportunities for the employees.The senior manager wondered, however, whether the rapid growth at WestJct - which already employed6,187 full-time equivalent staff (including approximately 950 pilots and 2,000 flight attendants), as of theend of December 2008 - would come at the cost of building and maintaining a high-engagement culture.This point was important because, as the founders and senior executives of the company continued toreiterate at every opportunity, culture was everything at WestJet. It would be unfortunate if WestJetdeveloped into a big and bureaucratic organization that was unable to sustain its unorthodox culturebecause of its success in the marketplace.THE HISTORY OF WEST JET AIRLlNES2In 1994, Clive Beddoe, an entrepreneur active in the real estate sector, purchased an aircraft for his weeklybusiness travel between Calgary and Vancouver. Beddoe made the aircraft available for charter to othercost-conscious business people through Morgan Air, which was owned and operated by Tim Morgan. Theresponse to this venture caused Morgan, along with Calgary businessmen Donald Bell and Mark Hill, torealize an opportunity to satisfy the need for affordable air travel in Western Canada by starting an airline.The odds appeared stacked against Beddoe and his colleagues because the airline industry was a toughbusiness. Beddoe was aware of the dozens of failed airlines in Canada; in the recent past, these failuresincluded Greyhound Air, Roots Air, Vistajet, Royal Airlines and Canada 3000. Historical data showed thatalmost 97 per cent of start-up airlines failed within their first seven years of operations. Competition wastough, and many travelers had their misgivings against airlines because of delays, lost luggage, crankyflight attendants, inflexible schedules, onerous rules, uncomfortable seats and a host of other service-related problems. Thus, the founders realized they needed to approach the task of building a successfulairline in an unconventional manner. Said Richard Bartrem, vice-president of Culture andCommunications: " ... to not behave differently from the other airlines would lead us to fail.,,3Beddoe and his colleagues researched the market and focused on low-cost (not discount) carriers, includingSouthwest Airlines and Morris Air, both of which operated in the United States. David Neeleman,president of Morris Air, was contacted for assistance in developing a business plan. Neeleman, along withMorgan, Bell, Hill and Beddoe, became the founding team of the concept that would become WestJetAirlines. .The potent differentiator that the team agreed on was straightforward: People working at WestJet mustdemonstrate a caring attitude toward their colleagues and the passengers (or guests). A culture of care wasregarded as necessary for providing good customer service. The founders developed a strong belief: If weas a corporation take care of our people, then our people will take care of our guests, and our guests will2 This section is based in part on information presented in the case: WestJet Airlines: The culture that breeds a passion tosucceed.3 Personal communication, May 14, 2009.
  5. 5. Page 3 9B09C012take care of our profits. A simple, one-line mission statement was developed: To enrich the lives ofeveryone in WestJets world by providing safe, friendly and affordable air travel.WestJet commenced operations on February 29, 1996, flying to Vancouver, Kelowna, Calgary, Edmontonand Winnipeg. The company started with approximately 200 employees. Rather than fighting for marketshare with larger carriers, WestJets initial strategy was to use low prices and unrestricted tickets to lurepeople who would otherwise drive, take the bus or train, or stay home. WestJet was started in an idealenvironment - Western Canada ---.:. here the main competitor was the financially troubled Canadian wAirlines. Although Canadian Airlines initially tried to match WestJets rock-bottom fares, it could notcompete against the upstarts low-cost structure. For example, WestJet offered no paper tickets, in-flightmeals or frequent flier programs, and passengers were offered only one class of seating. These choicesallowed WestJet to keep its fares competitive with travel by car or train. An initial public offering in July1999 offered 2.5 million common voting shares to investors.In late 1999, taking advantage of turmoil in the Canadian airline industry, WestJet expanded its serviceacross Canada, including flights to Thunder Bay, Ontario. On April 17, 2000, WestJets equity market.capitalization surpassed that of Air Canada, the countrys leading airline. Later that year, the companyreturned to the capital markets for a second round of funds, raising $52.1 million to finance the purchase ofnew aircraft and a new headquarters building. WestJet continued its expansion despite slowdowns in theindustry in 2001, due to a downturn in the economy as a result of the dot-com bust and the terrorist attacksof September 11, 2001, which dampened enthusiasm for air travel. Service was started to Eastern Canadiancities, including Hamilton, Moncton and Ottawa.WestJet was receiving 3,000 to 4,000 resumes each week. Most of the new hires were new to the airlineindustry. "We prefer it that way," stated Beddoe. "This is a new culture, a new vision. Its better to startwith a clean slate.?" In 2002, WestJet was named one of Canadas Top 100 Employers (seehttp://www.canadastopl00.comlindex.html).In 2003, WestJet captured 25 per cent of the domestic Canadian market despite a reduction in skiingtourism due to low snowfall in the West, two outbreaks of severe acute respiratory syndrome (SARS), theNorth American appearance of bovine spongiform encephalopathy (BSE, or more commonly known as"mad cow disease") and higher fuel prices. WestJet added new destinations including Montreal, Windsor,Halifax and St. Johns. In 2004, WestJet began to offer trans-border flights from Canada to several U.S.cities, including Los Angeles, San Francisco, Tampa and Orlando.Sean Durfy joined WestJet in December 2004 as executive vice-president, Marketing and Sales, and wasresponsible for the development of marketing strategies. Durfy had previously spent 10 years in theAlberta energy industry, where he had been president and CEO ofENMAX Corporation, an energy supply,distribution and service company.As a result of rapidly rising fuel prices, WestJet stepped up the retirement of its older 737-200 aircraft in2005, replacing them with the Boeing Next Generation 737s. In 2006, WestJet added its first internationalservice to Nassau, Bahamas; and other international destinations soon followed: Maui, Honolulu, MontegoBay, Mazatlan, st. Lucia, among others. That same year, Beddoe moved to become the chairman ofWestJets board of directors, and Durfy was promoted to president.4 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 96.
  6. 6. Page 4 9B09C012WestJet had a record-breaking year in 2007, when revenues exceeded $2 billion and earnings were $193million. When Beddoe stepped down as CEO on September 4,2007, the company promoted Durfy in hisplace.At the end of 2008, WestJet had approximately 128 million shares outstanding. Beddoe and Durfy owned,respectively, 4,416,049 and 28,266 common voting shares in their company.Revenues grew an additional 20 per cent in 2008 to $2.5 billion, and, despite tough economic conditions,WestJet earned $178 million in net income. WestJet flew to 55 destinations in Canada, the United States,Mexico and the Caribbean (see Exhibit 2). WestJet employed seven times more people in 2008 than it didin 1998. The days were long gone when Beddoe could fit all WestJetters (as the employees were called)into one room for a fire-side chat to explain how and where the business was going. WestJet managementknew that the tremendous growth at WestJet would put pressures on its unique and vibrant culture. Theleaders across the organization (e.g. front-line leaders, directors and vice-presidents) would be underpressure to communicate and to sustain the culture. This challenge led to the inevitable question: Whatskills and competencies would be required by those leaders who were now expected to drive the culture?WEST JETS PERFORMANCESince its beginnings, WestJet was consistently ranked among the most profitable airlines in the world. Thecompany had grown revenues at an average annual rate of 37.4 per cent over 11 years. During the sameperiod, net profit grew at an average annual rate of35.8 per cent. By the end of 2008, WestJet had captured36 per cent of the domestic market for air travel. For perspective, consider that Air Canada had 57 per centof the domestic market.WestJet took pride in the customer service it provided to its guests. Since the Air Travel ComplaintsCommission began tracking passenger complaints in 2000, WestJet had far fewer complaints than its maincompetitor, Air Canada (see Table 1). Thus, the airline had appeared to have executed well against thedifferentiator that the founding team had envisioned: a caring attitude. In 2008, for the third year in a row,WestJet was awarded the title of Canadas Most Admired Corporate Culture by Waterstone HumanCapital, an executive search firm (see http://www.waterstonehc.coml). Table 1 COMPLAINTS INVESTIGATED ABOUT CANADIAN AIR CARRIERS, 2005-2008 2005-2006 2006-2007 2007-2008Air Canada (including Jazz) 385 334 310Air Transat 40 26 38Zoom Airlines 20 17 18Skyservice 33 22 14WestJet 15 10 8Sunwing 0 7 17CanJet 3 9 2Other 10 7 5Total 506 432 412 ..Source: 2007-2008 Annual Report, Canadian Ttenspottetion Agency, Minister of Public Works and Government ServicesCanada, Ottawa, Ontario, 2008. (See http://www.cta-otc.gc.caldoc.php?sid=2004&lang=eng).
  7. 7. Page 5 9B09C012Beddoe, who encouraged employees to address him as Clive, insisted that WestJets corporate culture wasthe primary reason for the airlines superb performance. "The entire environment is conducive to bringingout the best in people," explained Beddoe. "Its the culture that creates the passion to succeed." Durfyechoed a similar sentiment: "For us, thats the key driver to our success."Prior to launching WestJet, Beddoe and his colleagues had no experience running a scheduled airline. Asthey learned more about the airline industry, the founders realized that one of the industrys biggestproblems was dealing with a largely absentee workforce spread allover the country, working at airports, inhangars or in the air. Communication proved to be a challenge. Beddoe stated, "What occurred to me ... iswe had to overcome the inherent difficulty of trying to manage people and to hone the process into onewhere people wanted to manage themselves."?NURTURING THE WEST JET CULTUREWestJets work environment could be described as friendly, caring, fun and youthful. The average age ofthe workforce at the end of 2008 was 34; the average age of the leadership team (people at the rank ofdirector and up) was 38 to 40.Creativity and innovation were both encouraged and rewarded. In addition, WestJetters were expected totake the initiative and resolve issues on their own. Decision-making responsibility was pushed as far downto the front line as possible. The companys core values were expected to guide the decision-makingprocess. WestJetters were encouraged to ask themselves a straightforward question: Do. these actions livethe values of the company or contravene them?The following values were defined by WestJet defined as core:• Commitment to safety• Positive and passionate in everything we do• Appreciative of our people and guests• Fun, friendly and caring• Align the interests of WestJetters with the interests of the company• Honest, open and keep our commitmentsBuilding and maintaining the processes that nurtured the WestJet culture was a task that management andstaff took very seriously. To management, culture was defined by the actions of the executives. Somefocused on empowerment and trust, whereas others focused on profit sharing. The combined actions ofexecutives contributed to and formed part of the WestJet brand. When executives were seen taking actionsthat were not aligned with WestJets values, those activities, too, had an effect on the WestJet culture.Every two weeks, Durfy and Ken McKenzie, executive vice-president of Operations, held informal .meetings with a group of staff members. "What most airlines are missing is the people component,"McKenzie stated. "Its not just numbers - on-time performance, getting the aircraft away on time - itsthe relationships." Leadership teams at most airlines were "populated by incredibly smart people whoknow how to run a business," said McKenzie, but he added that most seemed to miss the significance of5 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 96.6 http://www.financialpost.com/story.html?id=1200493. accessed June 2,2009.7 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 96.
  8. 8. Page 6 9B09C012building an almost cult-like following among passengers and employees alike." WestJetters took notice ofextra steps that management took to recognize their efforts, as indicated by this post by a WestJetter on anonline forum: I just had a hellish night last week and the Director of Flight Operations just sent out an e- mail to the crew and myself, thanking us for our efforts and showing a bunch of data on how it helped the customers and company recover. Its the little stufflike a boss taking the time to do such a thing in the busiest time of the year; or the fact that the crew actually had a good time doing it because the night was just so bad we had to laugh it off. Somehow that little gesture from above rubs off and reciprocates. The culture is the people, and the people having 100% accountability with 0 excuses."Recognizing employees for their hard work was a task that management took seriously. For example,Durfy and his team were known to show up at the Calgary Airport to distribute buttercream cupcakes toWestJet employees. Traveling through the entire airport with the cupcakes stacked on luggage carts,Durfy ensured that every employee received a cupcake, from the ticket counters to the baggage-handlingoperations. 10The commitment to nurture a culture about caring extended beyond thanking flight and crew members forajob well done. WestJet had a group called CARE, or Creating A Remarkable Experience, whose purposewas to propagate the culture throughout WestJets operations. CARE helped WestJetters produce videosand plays that entertained staff. It planned more than 250 events a year, including the profit-sharing events,the twice-annual events at which WestJetters received their profit-sharing cheques face-to-face from aWestJet executive as a personal thank you. I IAccording to Don Bell, one of the founders of WestJet, one of the keys to reinforcing an "intelligent"culture was to re-label tasks and responsibilities. WestJetters were passionate about using the "right"language in treating their guests and working with their colleagues. For example, the call center wasdubbed the "Super Sales Centre"; accounting was referred to as "Beanland"; executives were called "BigShots"; passengers were "Guests"; employees were "People"; and policies were "Promises." WestJet hadno supervisors; instead, the label "Team Leaders" was used. Supervision implied that someone waswatching employees to make sure that they didnt mess up. Leadership had a more positive connotation: atWestJet, leaders were expected to help people to do their jobs better. Team-leaders were, to a great extent,coaches. However, their role as coaches did not mean-that poor performance or using the wrong languagewent unnoticed. For high performance to result, empowerment needed to be coupled with accountability.Therefore, team-leaders were expected to engage in difficult conversations with their people whenrequired.Bell added: Attitude is everything. and attitude is what you do when youre not being watched. We emphasize four things: smile, make eye contact, listen and remember names. We also have a customer service recovery plan so if we lose your luggage, we send you a real apology and a credit for $100.8 Derek Sankey, "Corporate Cultures Competitive Edge: People-focused WestJet Flying High in Industry," Calgary Herald,August 20, 2008, p. E5. . .9 http://www.avcanada.calforums2lviewtopic.php?f=36&t=38128. accessed April 25, 2009.10 Gina Teel, "WestJet Banks on its Brand," Calgary Herald, December 28, 2007, p. E1.11 http://www.thewester:nstar.comlindex.cfm?sid=29989&sc=26. accessed June 2, 2009.
  9. 9. Page 7 9B09C012In another example of policies that were aligned with WestJets culture, in the Sales Super Centre,WestJetters answered the telephone instead of letting callers go through a series of voice-mail prompts.Bell explained: Making customers go through (the voice-mail prompts) means they will end up with an agent and be mad, thus setting up the agent for failure and the customer too. So we answer the phones.Executives routinely helped out the representatives in the Sales Super Centre when call volumes were high."Theres peer pressure among the employees," stated Sandy Campbell, WestJets CFO (who retired in2007). "They recognize who buys into this program and who doesnt, and peer pressure is an amazingthing.,,12Sales Super Centre representatives had the authority to override fares, to decide not to charge fees forcancellations and bookings, and to waive fees for unaccompanied minors. The representatives were trustedto look out for the interests of the company, customers and shareholders. To ensure that checks andbalances were in place, employees were trained to understand the ramifications of the decisions they made.Overrides were tracked and monitored each month. Additional training and one-on-one coaching wereprovided if patterns emerged (e.g. a particular employee consistently waiving extra baggage fees). Employees had a sense of humor and often played practical jokes on one another. For example, in the earlyyears of the airline, founder Tim Morgan, also a pilot for WestJet, would send new WestJetters to "run andget the keys for the airplane." Of course, keys are not needed to start an airplane, but the attendant wouldrush into the office, pick up the key with a huge tag that said "airplane" and rush back through the aisles to loud applause from passengers. Aboard WestJets Boeing 737s, the flight attendants commonly crackedjokes, held contests (e.g. singing contests or aisle-bowling games) with the passengers. The Elvis dress-upparties to and from Las Vegas were a favorite topic of conversation. Most passengers did not seem to mindthe jokes and, in fact, most expected it.WestJet was renowned in the travel industry for its April Fools Day pranks. In 2006, the company,straight-faced, requested that their guests help the airline save energy during takeoff by stretching outtheir arms and flapping. In 2008, the company presented a special air travel offer: For an extra $12, guestswould be accorded the "luxury" of fully flat sleeper cabins (see Exhibit 3). Where were these sleepercabins? The overhead bins, of course. A press release issued by WestJet even showed an accompanyingphoto of just such a sleeper cabin, already in use. More than 800 people called the company and requestedsuch a cabin! Such goofy and off-the-wall ideas were often the brainchild of West Jet employees."Have fun or youre fired," was one of Beddoes lighthearted sayings. For many prospective WestJetters,the first inside look at the WestJet culture came when they applied for a position at the company.The most recent employee engagement survey indicated that the sense of satisfaction with, and loyalty to,the organization was strong. For example, 97 per cent of those employees surveyed strongly agreed orsomewhat agreed with the statement "I work hard to continuously improve my productivity and quality,"and 91 per cent strongly agreed or somewhat agreed with the statement "I would recommend WestJet tofriends and family as a great place to work."12 "Wacky WestJets Winning Ways: Passengers Respond to Stunts that Include Races to -Determine Who Leaves theAirplane First, Financial Post," October 16, 2000, p. C01.
  10. 10. Page 8 9B09C012TALENT SELECTIONDespite a sluggish economy, WestJet continued to hire staff regularly. In 2008, it received an average of1,200 resumes per week, from which a handful were short-listed for screening interviews. BecauseWestJets unique corporate culture was well-known, many potential candidates knew what to expect fromtheir potential future employer.The company looked for two character traits in potential employees - enthusiasm and a sense of humor.Janice Webster, vice-president of talent management and retention oversaw the hiring of flight attendantsat the airline. Webster was hired into WestJet in 2005 and offered this view: I have never been in an organization where people are more passionate about the job they do every day ... They have always had that emphasis that the people were really important ... It was always ... we are going to be different, we are going to be successful because we believe our people are unique.l .Websters outsider status was necessary to recognize that, prior to her arrival, the companys recruitmentstrategy did not match its "great place to work" reality. A disconnect existed between WestJet the Recruiterand WestJet the Employer. For example, the stem and impersonal interview approach did not allow thecandidates to display their personalities, one of WestJets key make-or-break criteria for flight staff andother client-facing employees. Under Websters leadership, the airline changed the interview sessions tobetter identify those inherently cheerful, outgoing people who were not afraid to inform and entertain alarge group of people, such as those seated together in an airplane. In place of the one-on-three panelinterviews, WestJet began to hold interviews with groups of 20 to 30 potential hires to identify those whowould thrive in the airlines culture.Front-line candidates engaged in games and in team and individual tasks and presentations in three-hourlong group interview sessions that were designed to reveal whether they would fit into WestJets culture.WestJet used the group approach not only to hire flight attendants but also to hire its Sales Super Centre,counter and turnaround crew (known in other airlines as luggage handlers). Webster concluded: People that are really attracted to WestJet usually have that crazy, fun personality ... but they also take the job seriously. If they have a phenomenal personality, we will train them for the jobs they are interested in."WestJet was an attractive employer for pilots. Traditionally, pilots with seniority earned significantly morethan pilots with little seniority. For a first officer to work through to captain took years. Because ofWestJets growth, however, the opportunity was available for first officers to make captain fairly quickly.At WestJet, pilots were considered to be "managers," and were, thus, encouraged to think with theexecutive team. For example, WestJet implemented a suggestion from pilots regarding fuel savings as aresult of taxiing with one engine instead of two. The pilots also greeted customers and packed bags on theaircraft: when necessary.13hftp:llwww.workopolis.comlwork. aspx? action= Transfer& View=ContentiCommonIArliclesDetailView&arlicleld=brent20071128File1Arlicle1&lang=EN&arlicleSource=Brent, accessed April 15, 2009. .14hftp:llwww.workopolis.comlwork. aspx? action= Transfer& View=ContentiCommonIArliclesDetailView&arlicleld=brent20071128File1Arlicle1&lang=EN&arlicleSource=Brent, accessed April 15, 2009.
  11. 11. Page 9 9B09C012But WestJetters at all levels were urged to think alongside management about how to reduce costs andenhance guest satisfaction. For example, the ground crew raised an issue about the absence of externalsight gauges to read the water level of the potable water tank that supplies the aircraft with water. The crewalways filled the tank regardless of its destination. The extra water added costs. The installation of anexternal sight gauge allowed the crew to determine how much potable water was used on a specific flightor route. This procedure led to fuel savings and reduced fuel burn and emissions.TALENT ORIENTATION AND TALENT MANAGEMENTOnce hired, the process of welcoming new WestJetters into the company began immediately. WestJetterswere assigned a sponsor who acted as a mentor by teaching them about the organization, helping themwork through any issues in their jobs and ensuring they made the right contacts within the organization.For WestJetters who were identified as high-potential employees, a. more formalized mentoring programwas designed so that they could gain additional skills and knowledge to be effective in their new roles andbeyond. WestJet considered building a pool of talent, a requirement for continued growth ofthe company.Durfy commented: Some people make it at WestJet and some people dont, and usually they know it in the first six months ... Either youre in, or youre out ... Some people say, "Oh my God, Ive . got to drink the Kool Aid" and they call it the "teal Kool-Aid" ... Its because we have a certain culture and a certain set of principles we guide our lives by ... Ive got to tell you when I went there, it was like "wow, whats this all about?" But you understand it and you understand its what makes us so strong. 15WestJets founders had set out to create a company that was managed from the bottom-up. WestJet gaveemployees a high degree of latitude to perform their jobs without too much interference from team leaders.WestJet executives rarely directed. Beddoe stated: "We set some standards and expectations, but dontinterfere in how our people do their jobs.?" The flight attendants were asked to serve , customers in acaring, positive and cheerful manner; how they did that was left up to them. Resource books were providedfor them to refer to, and a team of people continually updated these books. A team of nine staff memberswrote the jokes that flight attendants were encouraged to use.To reinforce the cost-cutting ethos, the company stressed teamwork. With no unions to insist on jobdescriptions, all employees had wide discretion in their day-to-day duties. WestJets pilots often tidied thecabin between flights, and they packed bags on the aircraft when necessary. Even the CEO -Beddoe,during his tenure, and Durfy, after Beddoes departure - would help out when aboard a WestJet flight.This practice was in sharp contrast to the industry-standard union arrangement in which jobs were veryclearly defined, and employees were forbidden to perform cross-functional tasks, even if their colleaguesin the other department were short-staffed or behind schedule. The willingness of WestJetters to pitch in toclean the cabins resulted in annual savings of millions of dollars in grooming and enabled quickturnarounds, usually within a half-hour, although the record was an incredible six minutes. Quickturnarounds were important at WestJet. First, utilization of the aircraft was critical; the airline made nomoney by having the aircraft sitting on the ground. Second, a quick turnaround delivered a positive guestexperience - guests liked leaving early and arriving on or before schedule.15 http://www.thewestemstar.comlindex.cfm?sid=29989&sc=26. accessed June 2, 2009.16 Peter Verburg, "Prepare for Take-off, " Canadian Business, 2000, p. 96.
  12. 12. Page 10 9B09C012The benefits of creating WestJets environment of self-management were substantial. WestJet avoided thecost of an enormous layer of supervisory people. Beddoe added: We have a philosophy of trust here. Sometimes you get burned when you trust people, but most times you dont ... Workers have pride in what they do because they are the ones making the decision about what theyre doing and how theyre doing it ... They are no longer just functionaries. They actually take ownership of their jobs. 17In November 2004, however, WestJet added two levels to its hierarchy: vice-president and executive vice-president. Reporting to five executive vice-presidents were nine vice-presidents who were hired orappointed in early 2005. These added layers were put in place so that WestJet could more effectivelymanage the operational and non-operational areas as it pursued growth. (The organizational structure as ofAugust 2009 is shown in Exhibit 4.)PACT AND COMMUNICATIONTo ensure that WestJetters, collectively, had a voice at the management level, WestJets seniormanagement created the Pro-Active Communication Team (PACT), an employee association that allowedmanagement to keep in touch with the rank and file. PACT allowed management to address concernsbefore they became a problem. PACT provided WestJet employees with the services they might want toreceive through a union - without the hassles, work rules and adversarial environment that a uniontypically engendered with PACT dues totaling $2.50 per employee per pay period. WestJetters get paidevery two weeks.PACT covered the entire company with a number of chapters representing the different work groups. Eachchapter had one or more representatives, who sat on the PACT Executive. Besides dealing with personnelissues, PACT aided and collaborated with management in setting salary scales. Said Beddoe, "It takesaway the opportunity for conflict because the employees are part ofthe solution, not the problem.?"If an employee group, such as the flight attendants, wanted to leave PACT, it required 75 per cent approvalfrom its members. Beddoe added: It ensures we have a successful relationship with our people on a long-term basis ... It took me two years to convince our people to embrace the concept of PACT because everyone here is so antiunion. But the staff voted 92% in favour of it. We have since had some extremely successful resolutions to issues that have cropped Up.19Every year, management nominated a representative from PACT to sit on WestJets board of directors. Asa testament to PACTs effectiveness, three attempts by unions to organize WestJet flight attendants - in2003, 2006, and 2008 - had failed. The main issues that WestJetters raised were the usual suspects:scheduling, wages and pensions. According to a Canadian Auto Workers union representative, however, afew employees had complained about the need to buy in to WestJets corporate culture, with some peoplefinding it "condescending." Yet the union representative was forced to concede that " ... most of the peoplewe spoke to like working at WestJet, but like anything else ... they can be better.?"17 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 96.18 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 97.19 Peter Verburg, "Prepare for Take-off," Canadian Business, 2000, p. 97.20 Gina Teel, "WestJet Confident Union Drive Will Fail," Calgary Herald, September 11, 2008, p. 01.
  13. 13. Page 11 9B09C012To take the pulse of its employees, WestJet conducted an internal twice-annual survey called WHY (WeHear You) that measured culture and employee engagement, and encouraged feedback so leaders couldmake improvements." An online post offered this take on WestJetters attitudes at work: Well, I think our ad campaign sums it up best, "Because owners care" and all that. Its pretty simple. Everyone, and I mean everyone is a customer. Including your fellow employee. We all help each other out, which creates a culture of always helping out the guest, our bottom line. "Its not my job, or I dont know" are not acceptable. I dont know but Ill find out for you or Ill get the person who does that. An example: Many times we get guests from other airlines asking us questions about gates, boarding times, etc. It would be easy to say thats not us, that X airline. Or, go find a departure or arrival board and find the info, or take them to their gate. In short, if we keep each other happy, everyone will be happy, and customers will come back.22Executives made it a habit to connect with employees during airport visits, with what is known as theAdopt a Base program. This program is a structured program to allow executives and senior managementto connect with the business. The executive takes ownership for one or more bases and they will make apoint of visiting them on a regular basis and also attend their social gatherings such as regionalcelebrations for Christmas, etc. For example, in November 2003, Beddoe was invited to give apresentation to the Canadian Club of London (Ontario). Beddoe showed up late, a few minutes before hewas to deliver his speech because he had met with WestJet employees at the London Airport to explainthe corporate direction and some new initiatives. He also answered employees questions and wasinterested whether they had any concerns. To paraphrase Beddoe, "We had a great discussion that took abit longer than I had anticipated."THE INFRASTRUCTURE THAT SUPPORTS WEST JETS PEOPLEWestJets operations were set up in a way that enabled its people to perform at a high level. For example,WestJet strove to generate an average price across the system, aiming to sell at least 50 per cent of itstickets at the lowest fare and 8 per cent at the highest fare. This practice kept prices low enough toencourage people to travel. Using computers, WestJet analysed historical booking patterns on every flightto assess how many tickets from each fare class should be assigned to future flights on the basis of pastsales.WestJet had five different fare classes, or buckets, plus a seat-sale class to stimulate underperforming ornew routes, such as Ottawa to Moncton. More low-bucket fares were available on slow days, such asTuesdays or Wednesdays, to steer passengers to those flights. The system reserved upper-bucket seats forlast-minute travelers and for busier days, such as Fridays and Sundays, when people were anxious to flyand would pay a premium. The on-line booking system was transparent and easy to use: simple fares andfew rules.The company had grown organically and did not need to overcome hurdles in combining two differentcultures or information technology (IT) systems, as Air Canada had faced when it acquired CanadianAirlines. WestJet had enjoyed net profits in every year of operation except for fiscal year 2004. And evenin 2004, it had positive cash flow from operations of $144 million. With $820 million in cash on its books21 http://www.nationalpost.comlrelateditopicsistory.html?id=1200493, accessed April 20, 2009.22 http://www.avcanada.ca/forums2lviewtopic.php?f=36&t=38128. accessed April 15, 2009.
  14. 14. Page 12 9B09C012and a debt-to-equity ratio of approximately 1.1, WestJet was conservatively managed and well-positionedto take advantage of growth opportunities.The airlines main cost-cutting measures were well-publicized. It flew only the 737 model, used theInternet as much as possible to sell tickets, operated without paper tickets and provided no hot meals. Thisapproach was in contrast to Air Canada, whose 16 different planes from nine different manufacturersresulted in much higher training and maintenance costs. As WestJet expanded, it needed to attract abroader range of customers, not just those who were interested in only low fares. To appeal to thesecustomers, amenities, such as in-flight entertainment from LiveTV and lounges in selected Canadianairports (e.g. Toronto, Calgary, Vancouver and Winnipeg), were added to the WestJet offering.In addition, WestJet seemed to outgrow some of its own policies as it continued to expand. In the early2000s, WestJet management stated that it would bypass Toronto for Hamilton because of steep landingfees and a longer than expected turnaround time. Yet, within a. few years, due to growth and theopportunity to optimize the domestic and trans-border network as well as access to market, WestJetreversed this policy and began to fly into Torontos Pearson International Airport.Despite the move away from a purely low-cost, short-haul, point-to-point airlines, WestJet, whencompared to Air Canada, continued to achieve lower costs. In 2008, WestJets operating costs per availableseat mile (a typical measure of airline costs) were 26.4 per cent lower than that of Air Canadas. The sameyear, WestJets average stage length had also surpassed that of Air Canada. (See Exhibit 5 for comparativeoperational statistics for WestJet and Air Canada.)SHARING THE REWARDSTwo programs were established to ensure that contributions made to running an efficient airline could berewarded. A profit share program aimed at providing a more short-term based incentive to reward andreinforce behavior was implemented. This program allows between 10 and 20 per cent of pre-taxoperating income to be set aside for an employee bonus pool. As the profit of the airline increased sowould the employee bonus. Table 2 shows the profit-sharing pool amounts and share per employee overthe past 11 years. Table 2 PROFIT-SHARING POOL AMOUNTS AND SHARE PER EMPLOYEE, 1998-2008 2008 2007 2006 2005 2004Profit sharing pool 33,400,000 46,700,000 20,300,000 6,000,000 2,900,000Profit share per employee $ 5,398 $ 8,219 $ 4,081 $ 1,400 $ 721 2003 2002 2001 2000 1999 1998Profit sharing pool 15,000,000 15,200,000 10,300,000 13,500,000 6,600,000 1,500,000Profit share per employee $ 4,417 $ 5,609 $ 5,586 $ 10,449 $ 7,491 $ 2,256WestJet employees had access to an Employee Share Purchase Plan (ESPP) which allowed them toaccumulate an equity stake in WestJet. Contributions up to 20 per cent of an employees salary werematched dollar-by-dollar by WestJet. This program became the crux of the "We are Owners" campaign.
  15. 15. Page 13 9B09C012The average WestJetter contribution was 15% of base salary; with 86 per cent of the populationparticipating.WestJet implemented these two structures because the founders felt that owners try harder than employees,both to improve the guest experience and to save costs.The average non-management salary at WestJet was $43,000 per year. with participation in the profit-sharing plan equal to an average of 18 per cent increase in pay. Therefore, for the average non-management position, total compensation was $43,000 + $7,740, or $50,740. Since the inception of theplan, WestJetters had earned more than $155 million in profit sharing. Cheques were cut twice yearly atprofit-sharing parties in May and November. Durfy, in a presentation to a business audience, pointed tophotos of smiling, happy WestJet employees showing off their cheques at one such party. He told theaudience that WestJet could, but doesnt, electronically deposit the profit-sharing cheques intoemployees bank accounts " ... because we want to shake peoples hand, we want to say thank you or givethem a high-five. We want to celebrate success.v" On only one occasion, no bonus pay-out was given.This was because the airline had two unprofitable quarters. However, a party was still organized to thankall WestJetters for their hard work. Because the company placed a premium on business literacy amongemployees of all functional backgrounds and ranks, the leadership team also used the event to help peopleunderstand why the company was unable to provide a bonus.As well as cash rewards and personal thank yous, WestJet ran a program called Kudos that recognizedemployees internally and externally for their outstanding accomplishments or deeds. Notable employeeswere rewarded with vacations.f WestJettersand their families were also invited to the annual Dirty Birdwash. Planes were brought into the hangar, and kids were given water and soap to clean the aircraft. Thisfun event was organized as a thank you to the WestJet families. In 2009, WestJet was looking forward tomany more years of success as it pursued its long-term goals.WEST JETS GOALSBy 2016, WestJet aimed to be "one of the five most successful international airlines in the world, providingour guests with a friendly and caring experience that will change air travel forever." WestJet began tobenchmark itself against other leading airlines on criteria such as on-time performance, guest satisfaction,and people- and culture-related variables. On the basis of its bottom line alone, WestJet had alreadyachieved its vision. For example, in 2008, WestJet was ranked as the fifth most profitable airline in theworld, behind Panamas Copa Airlines, Malaysias AirAsia, United Arab Emirates Air Arabia andRepublic Airways in the United States; its operating margin was 12 per cent.WestJet and its competitors domestic, transborder and international market share can be seen in Exhibit 6.WEST JETS CONCERNS - MANAGING THE GROWTHAchieving its goals would require WestJet to continue to generate high performance from its people.Beddoe offered that .Southwest Airlines, on which WestJet was based, had kept its culture alive for 25years, even as its workforce swelled to 30,000. He agreed that protecting the culture was essential. "Itsfocus No.1. Our risk, in my view, is internal, not external, and thats why we put so mueh emphasis on23 Gina Teel, "WestJet Confident Union Drive Will Fail," Calgary Herald, September 11, 2008, p. 01.24 http://www.nationalpost.comlrelatedltopicS/story.html?id=1200493, accessed April 20, 2009.
  16. 16. Page 14 9B09C012it.,,25In 2009, Beddoe was the only WestJet founder left on the management team (serving as chairman ofthe board). Don Bell, who had been instrumental in helping WestJet develop and nurture its unique culture;had retired in late 2008.The senior manager reflected on WestJets developments over the past 12 years of its existence. The airlinehad come a long way since the day it had purchased three used planes from a rival that it planned tocompete against. WestJet had found a way to maintain its high rates of growth in revenues and profits evenas North American airlines fell by the wayside. (WestJets income statements and balance sheets can beseen in Exhibif7.) WestJetters continued to reject the overtures of union organizers despite the fact that theairline after which it had been modeled, Southwest Airlines, had long been under union control.But how long could these advantages last? As WestJet grew, its employees per aircraft had grown nearly50 per cent per aircraft, from 55.1 in 1999 to 81.4 in 2008. Although WestJets operating cost per availableseat mile had fallen from 14.6 cents in 2000 to 13.2 cents in 2008, its revenue per available seat mile hadfallen farther: from 17.4 cents in 2000 to 14.9 cents in 2008. For the past 10 years, WestJets stock hadexperienced significant fluctuations (see Exhibit 8).WestJet had begun to fly to international destinations; however, the employees at these destinations - atthe ticket counter and the turnaround crew - were not WestJetters. These and other jobs had beencontracted out. The people performing the essential service-related tasks, however, needed to understandhow WestJet did its business and how be successful at it."The hardest thing to create is a great culture, but its the easiest thing to lose if, as a leader, you take onewayward action or one wayward step outside of your value set," said Durfy."WestJet had achieved a lot. The airline had taken to the skies only 13 years earlier, with three airplanesflying to five destinations. Now with a market valued at more than $2 billion, the carrier had more than 70Boeing Next Generation 737s, employed 7,000 people and had played host to more than 12 million guests.The plan was to have 121 airplanes by 2013.In April 2009, in light of the companys rosy predictions of further growth and success, WestJets pilotsseemed dissatisfied with elements of the new contract offer. Durfy expressed his commitment to bargainin good faith. In a memo to the pilots, he stated: I am ... alarmed by some of the feedback I have received by what I believe to be a . selective minority ... I am committed, as I hope you are, to maintaining our wonderful corporate culture and competitive advantage.The new agreement had seen a sizeable adjustment to pilots total compensation in an effort to ensuremarket pay parity with the Canadian commercial aviation industry. This meant sizeable changes to thecurrent pay mix, and hence the senior leadership team had asked the pilot association to reconsiderparticular elements of the existing contract. The leadership team went on several road-shows to explain thecontract offer and build support for it. The feedback the team received during these road-shows was verynegative; and on-line feedback from the pilot forum was critical of the deal and the senior leadership team.Many of the pilots felt that the leadership team " ... had taken too many things away." The leadership teamhad met a crossroad. Play hard ball? Times were tough and difficult decisions needed to be made. Or25 Wacky WestJets Winning Ways: Passengers Respond to Stunts that Include Races to Determine Who Leaves theAirplane First, Financial Post," October 16, 2000, p. C01.26 http://www.nationalpost.comlrelated/topicslstory.html?id= 1200493, accessed April 20, 2009.
  17. 17. Page 15 9B09C012should the team halt its process of selling the contract offer and step up its efforts to re-engage the pilots?How?The senior manager wondered whether WestJets culture could withstand the shocks that lay ahead. Whatcould the management team do to keep the unique culture intact? The airline could not afford tocompromise on its promise to offer an amazing guest experience and continue to grow and expand itsnetwork. And how should the team to proceed with the pilot issue?
  18. 18. Page 16 9B09C012 Exhibit 1 THE WEST JET CARE-ANTEE r iL !:::;t charge you for calt centre bookings . ...••v.. i? , IV . charge you to change or cancei yourflight f?r 24 hours after you book . • y.:: r-" overbooK yourflight. N~ n:. r.;;, charge you for I.NO checked bags . ••.e l~~ave the tawast change, cancel and pre-reserved h seating fees in Canada. w" will accommodate you if yourfllghl is delayed - even ITits Mother Natures fault. We wiU fly you in the youngest all-jet fleet in North America. ~ wi:. f}rovide live seatback 1V on our flights. -11 Po wiL give yOU ample legroom and overhead bin space. I We. WItt publish our on-time. baggage and canceltation rates. . .? ,,,;, !;. /111.1 always let you know howwere doing as a company. offer fr-ee online seat selection 24 hours before departure. VIP v•. allow you to transfer your credit files to friends or family for free. l Vv v,". give you free snacks and refreshments on your flight ,••:.~atways Include smiles and thartK yous - always. And mostimportantty: W,,U ",:WByS ct>rc. Bec<;Iuse thats what owners do. Care-anteed.Source: http://c3dsp.westjet.com/guestlspare2 .JsP, accessed June 2, 2009. Reprinted with permission. .
  19. 19. Page 17 9B09C012 Exhibit 2 WEST JET DESTINATIONS ,- ...•.. ! - 1i-_t1t* !/1-1WIl •••• f j ! ,-~,Pu~m] " 1,--,.., r- ••••• , I , r-""""Ctt ---.~ ~J~ 1,* CtDlD ..-,. (;:~tlIIW~ _.--- ~JaiA$ J ~,---. U~IC~S~- ~1:"":WI--" W~.s •.••.. ",< lJlI!~ •. .cic: ,~, "".,."" ---," ~~ --*__ ":4- ;""""" __ /1:i SaOittt-,( "- ..... Uu»i ,.~~ _ Aiijol~1;o f,,, .,.,. -:::s: ~ :.:J.:::::" ~. flll1.la!:tIrdolt-,; ,.,7 IIZIW» ~;. ,_e~:_. Ila!l1tttt,-..,.,,-., z.,_ .•. ---- ~. .•. _ "r . -- !I%J~U! ~ta~-·w 1Ill.lcc.~-mlB .. .,,;,,~";.;: , ::~-:Source: WestJet Annual Information Form 2008, Reprinted with permission.
  20. 20. Page 18 9B09C012 Exhibit 3 WEST JET PROMOTIONWestJet Introduces Sleeper CabinsAirline is first to provide new service without need for cabin upgradesCALGARY, ALBERTA--(Marketwire - April 1, 2008) - WestJet (TSX:WJA) today announced that onApril 1,2008, sleeper cabins will be introduced onboard its existing fleet of73 Boeing 737 Next-Generation aircraft. These sleeper cabins can be booked on all ofWestJets existing flights for a nominalincremental fee of$12."WestJet now offers scheduled service to 47 destinations, continuing on our strategy to be Canadasfavourite airline," commented Bob Cummings, Executive Vice-President Guest Experience and Marketing."Our leather seats and live satellite television are a great part ofWestJets guest experience however, byoffering our existing overhead bins as sleeper cabins, guests will now have the opportunity to lie down fora period oftime and arrive at their destination refreshed, rested and ready to go.""The overhead compartment has traditionally been a place where guests have placed their carry-onbaggage. Given that the overhead bins on our fleet are among the most spacious of any airline, we madethe decision to offer sleeper cabins in that space."To verify sleeper cabin availability on a WestJet flight, guests are encouraged to call WestJet at 1-866-935-2702 (English) or 1-866-935-2703 (French).About WestJetWestJet is Canadas leading high-value, low-cost airline offering scheduled service throughout its 47-cityNorth American and Caribbean network. Named Canadas most admired corporate culture in 2005, 2006and 2007, WestJet pioneered low-cost flying in Canada. With increased legroom and leather seats on itsmodem fleet of 73 Boeing Next-Generation 737 aircraft, and live seatback television provided by BellExpressVu, WestJet strives to be the number one choice for travellers.Source: WestJet webpage, accessed May 24, 2009. Reprinted with permission.
  21. 21. Page 19 9B09C012 Exhibit 4 ORGANIZATIONAL CHART fEVP I VP Levels , _v..~. _v..:::: E;j -- j , E.uaJlMv..,.._ -",,"p-" - Fnanoe & CFO I-a::~ gg -~I);st. -Corp- &MKTG i , ~ i---· , ---- v.._-..... I -EJ -Sate!y iI VP- Trusuy I l- v.._-Guest I ~ ! -,, andAdrninisn!ion ~-=I g ! ., I i I "- /P-ControOer .L VP-F"I1MICePro;ects& j VlcePresidenl- ,- E--"" GowommerIReiations I /P-s.Jos&AiIne end- : vce Pruident· Technical Operations bPresident· Oisbibliion
  22. 22. Page 20 9B09C012 Exhibit 5 OPERATIONAL HIGHLIGHTS OF WEST JET AND AIR CANADAWESTJET Operational highlights Three month. ended December 31 Twelve months ended December 31 2008 2001 Change 20M 2007 Change ASM. 4;:f;QJIM,$2~ 3,81&,613,107 12..~"% 11,1»,&el~f5 ~4.544.i37.~O 17.6% R?M& 3.32S,1!56,003 2.9a7 ..a45.307 122% 1~,130,&aQ,2H i 1,739.0~3,C03 17.0% Load fatte! n~~~. 71.7% {O.! ~ts) 801% 60.7% {O.& ~t&l Yje1d (cents) 18.I>J (0.5%) HUT 13.12 2.5% RASM {cents} 14.45 (ll.7%) 14.e~ 14.62 1.6% CASM (cents} 12..013 4.3% 1::>.11 1.2.34· 6.7% CASf/.. e;;.:ciud.ng fuel and emp!-ayee profit $h.r" {,cent:.) 3.52 2.3% S.ll s.ss- fJ.2%} Fue cc:nsunp>.-ion (litree.~ 210,09).4-34 !a?414.29S 10.9"" aSM~$.92j 723.1C4,Z03 113.1% F.ieJ CC$t$ per ttre (cente) $445 75.15 ~2.4% S5.S" 6?69 :7.3% s.e~me~t gt.:es~5 3.s1o.S6~ 3.260.342 7.:;<J!, t4,1S:J t5~C 1::.CC4,726 9.0% Aver.;;e mge ffigth (mUes) ~9if !63 35"b 113 355 5.7% U:Ji:z.a:::on (hours) 1::.1 1:.3 (1.€~;: _.,. 12-1 1.7% teurrber of f.l.~-time eecu.~a en: empmyee$ at period end 5.652 e.9% a,ler S,fB2 0,9% =teer i!zEi: at :Jerioo end 70 e.6% u, 70 H%Source: WestJet Airlines, Managements Discussion and Analysis of Financial Results 2008, p. 5.AIR CANADA {Cal1adiancollilrs in miUi~tls, except per share figure:). Operatlng Statirtlo ~- ..----.--- Chan~% 50(£2:1 {(2) 62.814 i (1.2 77,8% :-- SCl.6 % l..--~ 1&"1 lS,4 4.3 169 3" 17.4 15.3 10.2 12.4 12.2 , 7 ,.,j .I{l~rdge nurnt:i Dr rull-tiH1il l( {>mpicr-.1t~,,; £thcusanJs) {5! AHCrJrt in 00tT~t~ £><.lV! ti.i.s;;t f&f-(az p+>ri~;df>r~i (6:) "FTE} J L,o,Lt..v(rJ~_~:~::::.~t3~it;O!~J~LH3 .E~.~) r;-; _._. __ ._._~][%.i AV~}(;Jr;~ ~!:gTf";!inH~,!$j{~ cHrG;;ttn~.~ht Lt Fu~dxic~ n~!rtitr:! ((;r<t~,) <: <,1)4! FUi!t!ltt<S {rrHtiuFsl iJ~,Source: Air Canada, Annual Report 2008, p. 2.
  23. 23. Page 21 9B09C012 Exhibit 6 MARKET SHARE - CANADIAN AIRLINES COMPANIES Historical Domestic Revenue Passengers (I) eo 70 ., E C 6() 50 ... 40 ~ ~ 30 ~ Co. 20 !C J::stinult~d Transburder Schcduted (apllcit~ Historical Trausburder Revenue Jlasseu;!crs (l) !larket Share (I) 25 20 ~ 5 ~ 0; !r D ~ Co. Estimated Internati(J" Scheduled Callaeity Hislnrh.ul Revenue Passengers in th,-, Iuteruutional Market Market Share (I) to and from Canada (1) • 25 20 ~ 15 E ~(1) Source: OAG data, based on ASMs during the period from January 1, 2008 to December 31,2008. The estimated shareof the overall domestic scheduled capacity of Air Canada includes the domestic scheduled capacity of Jazz.(2) Source: Transport Canada, Assumptions Report 2008-2022, December 11, 2008. Represents enplaned and deplaneddomestic revenue passengers.Source: Air Canada, Annual Information Form 2008, pp. 11-13.
  24. 24. Page 22 9B09C012 Exhibit 7 WESTJET INCOME STATEMENTS, 2007-2008 2008 2007 Revenues: Guest revenues S 2,301,301 $ 1,899,159 Charter and other revenues 248,205 227,997 2:127,156 Expenses: Aircraft fuel 803,293 , 503,931 Airport operations 342,922 299,004 Flight operations and navigational charges 280,920 258,571 Marketing, general and administration 211,979 177,393 Sales and distribution 170,605 146,194 Depreciation and amortization 136,485 127,223 Inflight 105.,849 85,499 Aircratt leasing 86,050 75,201 Maintenance 85,093 74,653 Employee profit share 33,435 46,705 Loss on impairment of property and equipment {note 5) 31,881 2,256.631 1.826,255 Eamings from operations 292,875 300,901 Non-operating income (expense): Interest income 25.,485 24,301 Interest expense (r6.G78, . (75,749) Gain (loss) on foreign exchange 30,587 (12,750) Gain (loss) on disposal of property and equipment (701) 54 Loss on derivatives (note 11) (17,331) (38,038) (64,144) Earnings before income taxes 254,837 236,757 Income tax expense: (note 7j Current 2,549 2,149 Future 74,153 41,775 76,702 43,924 Net earnings S 178:135 $ 192,833Source: WestJet Airlines, Consolidated Financial Statement and Notes, 2008, p, 4,
  25. 25. Page 23 9B09C012 Exhibit 7 WEST JET BALANCE SHEETS, 2007-2008 Consolidated Balance Sheet As at December 31 (Stated in thousands of Canadian dollars) 2008 2007 Assets Current assets: Cash and cash equivalents (note 4) 820,214 $ 653,558 Accounts receivable 16,837 15,009 Future income tax (note 7) 4,196 Prepaid expenses, deposits and other (note 12(a)) 67,693 39,0[9 Inventory 17.054 10,202 925,994 717,788 Property and equipment lnote 5) 2.281,850 2,213,063 Other assets (note 12(a}) 71,005 53,371 S 3.2713.849 $ 2,984.222 Liabilities and shareholders equity Current liabilities: Accounts payable and accrued liabilities 249.354 $ 168,171 Advance ticket sales 251,354 194,929 Non-refundable guest credits 73,020 54,139 Current portion of long-term debt (nete 5) 165,721 172,992 Current portion of Obligations under capital lease 395 375 739,844 590,6Q6 Long-term debt (note 6) 1:186,182 1.256.526 Obligations under capital lease 713 1,108 Other liabilities (note 12{a)) 24,233 11,337 Future income tax (note 7) 241,740 174,737 2.192,712 2,034,314 Shareholders equity: Share capital (note S(bil 452,885 448,568 Contributed surplus 60,193 57,889 Accumulated other comprehensive loss (note 12(c») (38,112) (11,914) Retained earnings 61.171 455,365 1,086.137 949,908 Commitments and contingencies (ncte 10) S 3.278.849 $ 2,984.222Source: WestJet Airlines, Consolidated Financial Statement and Notes, 2008, p. 5.
  26. 26. (I) I!0t::<1 Stock Price· Adjusted for splits~ ...•. ...•. N N::r 0 0 01 0 0 01 0 0 0 ~-S 0 8 0 0 0 0 0 7/13/1999~Q)~. I 1/13/2000Q):::J@ I 7/13/2000~::r0p 1/13/2001 :e8.3 7/13/2001 r1 I m f/)Q) I ~g 1/13/2002 I m -t(1) f/)!:l S f/)(1)Q. 7/13/2002 -l n :lI" -t 0 0 ~"~ 111312003 I " :e :::!. :;: " CD " ;;:u II) c..." I00 7/13/2003 c:c: (; m~ x 1/13/2004 I -<~ !" c... ~ c: -» CD _. c: ;:+ - CD::1 CD _. r- 0) 7/13/2004 -I I I -::::;.?- I ! ! ::s -< SCD 1/13/2005 -I I ~ .f 1 »" C CD CD CD 7/13/2005 -I i j ~f ! . I 3: N C -t 0 C » 1/13/2006 -I I ! ---3- Ii I ! CD " ~ r- 7/13/2006 -l I J...:," I ~ J I N C c CD 1/13/2007 I I ~. • I I 7/13/2007 1/13/2008 7/13/2008 1 ! ! ~ ! I I ICD m 1/13/2009 -I I !~- :=::- t I I I .g - 0 0 r-.)