CASE STUDY: TURBULENT FLIGHT PLAN

82%.That's the market share held by Air Canada, the sole remaining major Canadian airline, after its take over of money losing Canadian airlines in spring 2000. The Canadian airline industry, in the meantime is going through some major problems. The consumers in this airline market are relying on a single carrier (Air Canada) and complaining of almost total monopoly. They are complaining of flights being overbooked, extremely long lines at check in, telephone call centers with half hour plus waits on hold, and prices that are too high. In response to this airline industry situation, the Canadian government encouraged discount airlines and vowed to punish companies involved in price hike.

Westjet airline is one such discount airline trying to succeed in this turbulent environment. Of the six scheduled discount airlines started in Canada in the last 20 years, only Westjet is still flying. It serves thirteen western Canadian cities and has 5% of the Canadian market. But Stephen Smith, the vice president of Westjet has made a strategic decision to take the company national. Westjet boasts of a number of distinctive elements. Westjet fares are an average of 40% lower than Air Canada's. It offers one class of seating, has no meals on board or executive lounges in airports and concentrates on flights of 400 miles or less. Passengers don't have tickets, only confirmation numbers. To cut costs, Westjet encourages ticket sales through the internet which now accounts for about 11% of its tickets sold. As many of these strategies illustrate, Smith has made a commitment of keeping operating costs low. In addition, Westjet flies one class of air jet, which minimizes pilot training, maintenance costs and gate turnaround time. To keep its employees non-unionized and giving the company more control over wages, Westjet uses several incentives. A major one is that all the workers who have been with the company for at least three months participate in profit sharing plan. In addition to this 70% of the employees participate in stock purchase plan.

Smith's no frills model appears to be working. Westjet growth has been steady. It is enjoying steady increase in profits and there are no customer complaints. To accommodate its national expansion Westjet ordered 20 new Boeing jets to be delivered over eight years and plans to have 10 more. To out run Westjet, Air Canada started its own discount carrier in summer 2000 serving Westjet's key area, the western Canada. Although industry analysts say that unionized Air Canada will have a hard time matching non-unionized Westjet's cost structure, some feel that Westjet maybe expanding faster than demand for its services.

a.What type of Corporate and Business level strategy is being followed by Westjet? Justify your answer.

b.Based on Porter's five forces model, analyze the bargaining power of buyers and intensity of current rivalry

c.According to Maslow's hierarchy, which need(s) is being fulfilled by Westjet to motivate its employees. Explain your answer?