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WestJet chief Saretsky’s smoother flight path

  Jun 9, 2012 – 7:00 AM ET

At the top of a laundry list of priorities for WestJet Airlines Ltd.’s chief executive Gregg Saretsky last year was building a back-up for the company’s computer and communication systems.

It was perhaps not as sexy as the behind-the-scenes work that was being done to launch WestJet’s new regional carrier. But after 27 years in the business, he knew it was much more essential.

At the time, all the company’s information, from payroll to flight schedules, was being stored at WestJet’s headquarters, which happens to be situated at the end of a runway in Calgary.

“We had a single-point of failure,” Mr. Saretsky said during an interview at the WestJet campus in May. “God forbid you have an aircraft go careening off. Our data centre is attached to our hangar, which is right there on the apron. That could have wiped out communications and our computer system. No computer system, no airline.”

Even if there were an extended power blackout, WestJet would have been in trouble. So, Mr. Saretsky set building a back-up system far away in Toronto as his primary focus for 2011.

“We [now] have complete duplication and redundancy of function,” he said. “So, if anything happens here, we’ve got it there. If anything happens there, we have it here.”

It was just the latest in a string of initiatives Mr. Saretsky has undertaken and successfully executed on since he was appointed CEO of the airline in April 2010.

While WestJet has long been the preferred airline for investors in Canada, prior to his appointment, it was starting to garner a bit of a reputation for overpromising and under-delivering.

The bulk of that stemmed from the trouble the company faced implementing its new reservation system, which was hit with successive delays and pushed out other initiatives like its frequent flyer program and various code-share agreements it had promised investors repeatedly were just around the corner.

When the reservation system was finally installed, the company was unable to transfer some of its existing reservations to a new system, leading to long wait times at call centres and damaging the company’s cherished reputation for customer service.

At that point, while WestJet was consistently turning a profit, many began to wonder whether it was living up to its potential.

When it was announced the company’s CEO Sean Durfy would be stepping down three years into his five-year contract, the timing might have been a surprise, but the change at the top wasn’t.

Under Mr. Saretsky, the airline has carved a much different flight path focused on execution. He has drawn on his near three-decade long career in the industry, which started as a summer job as a flight attendant at Air Canada in the early 1980s, to do so, as well as the existing bench strength at WestJet and a handful of other airline executives he has brought in since.

“This airline was populated by individuals who didn’t have airline backgrounds, and so they didn’t know what they didn’t know,” Mr. Saretsky said. “They didn’t know how difficult some of these things were, and as a result, made a lot of commitments without really being certain they would be able to deliver on them.”

Mr. Saretsky, on the other hand, had a great deal of experience implementing many of the things WestJet is now undertaking during his career at Canadian Airlines and more recently at Alaska Airlines as its executive vice-president of flight operations and marketing. He joined WestJet in June 2009 as the head of WestJet Vacations and quickly worked his way up to becoming the airline’s vice-president of operations later that year before becoming CEO the following year.

He immediately scrapped the company’s plans to partner with Southwest Airlines, which didn’t have experience with such agreements, and instead focused on building code-shares and interline agreements with airlines that did, like Cathay Pacific, American Airlines, and Delta Air Lines. Since then, he has steadily added more partners at a pace of one or more per quarter.

Mr. Saretsky has also made an aggressive push to court business travellers, and made a renewed push into U.S. business destinations like New York and Chicago.

At the same time, he announced earlier this year the airline would finally be pushing ahead with its fleet diversification after winning overwhelming support from employees to launch its new regional carrier using a fleet of smaller Bombardier Q400s which he hopes to have off the ground by late 2013 once the regulatory work is completed.

He has even implemented a small dividend for shareholders.

There is more to come too. In the coming weeks, Mr. Saretsky will implement changes to the company’s mobile and website check-in system as well as adding new kiosks at the airports that standardize its processes. Soon, customers will also be able to change their reservations as well as add things like car rentals and hotel rooms to their online bookings, he said.

WestJet is also developing a new wireless in-flight entertainment system, and he hopes to have WiFi on planes once the technology is in place in Canada in the next 12 to 18 months.

Walter Spracklin, RBC Capital Markets analyst, said he has learned to give Mr. Saretsky the benefit of the doubt over the two years and expects the stock price to react accordingly.

“With Saretsky, it’s just bang, bang, bang, bang,” he said. “You look at where WestJet’s prior highs were and how it did, and you look at what WestJet was then compared to what WestJet is today, you’ve got a much better run airline today than you did back then.”

He also noted that WestJet has become much more proactive than it was in the past with everything from price increases to added fees rather than simply chasing market share.

One of the most telling examples for Mr. Spracklin was when WestJet pushed ahead with charging for a second bag on its domestic routes, something the previous management had balked at when rival Air Canada had tried it in the past.

“[Mr. Saretsky’s] an operator. Durfy, all due respect, was a sales guy,” Mr. Spracklin said.

When Air Canada had tried to implement the second bag fee in Canada, the previous management used it as a marketing tool to herald WestJet’s more consumer-friendly approach.

“Whereas Saretsky looked at it and said that’s $25-million in free revenue,” Mr. Spracklin said. “It’s a great example of how that approach is being applied to every aspect of the business. It’s no longer a sales driven approach, it’s more of an execution driven approach.”

It seems investors are taking notice. WestJet’s shares have improved by about 13% since Mr. Saretsky took over while Air Canada’s have fallen by more than 60% and the Bloomberg U.S. Airlines Index has fallen by 15% over the same period.

Mr. Saretsky said it is no accident that WestJet is executing better on its promises. He said when he first took over there were more than 90 projects on the go at the airline. He has since whittled that down to about 25 per year prioritized by safety and government mandated issues first and then by the revenue or cost savings they will create.

The projects are assigned a simple red, yellow, and green designation at monthly business review meetings. Green means it’s on track. Yellow means it’s off plan, but can be remedied with the application of resources or additional funding. Red means its off track and unlikely to meet its deadline, he said.

“There’s still 90 things we want to do. But we’ve said, ‘Look, we cannot possibly do 90 even if we tried,’” Mr. Saretsky said. “So, we draw a line on the list and everything above the line gets done, and anything below it gets done next year. Maybe it’s still relevant next year. Maybe it’s not.”

The recent bout of shareholder activism elsewhere, including at crosstown Canadian Pacific Railway Ltd., has only highlighted the need for a renewed focus on execution, Mr. Saretsky said.

That’s doubly so at WestJet, where most employees participate in a share purchase program, he said.

Mr. Saretsksy said getting all 8,600 WestJetters behind the airline’s plans is key to its success, including the launch of the new regional carrier.

“When we go into these Air Canada and Porter markets, I want all 8,600 behind me saying ‘Let’s go. Let’s get ’em,’” he said.

He maintains WestJet would have abandoned the plan if it hadn’t won the support of its employees, which it did overwhelmingly this spring.

He said that was accomplished because of a simple message WestJet consistently impresses upon its employees: Take care of your employees, and they’ll take care of the business. The business will take care of shareholders. When the shareholders are happy, the company is doing well, that allows it to grow, which takes care of employees.

“It’s a virtuous cycle,” he said.

 

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