Interview: WestJet CEO Gregg Saretsky on the power of culture

Gregg Saretsky landed in the CEO’s chair at WestJet in 2010 after the surprise departure of Sean Durfy, the heir-apparent to founder Clive Beddoe, after only three years on the job. Saretsky had only spent a year steeping in WestJet’s legendary corporate culture after much longer stints at Canadian Airlines and Alaska Airlines. But he’s piloted the plane like an old hand, navigating turbulence over premium seating, code sharing with other airlines, the launch of regional airline WestJet Encore and, this year, a foray into trans-Atlantic travel. These developments were unthinkable when WestJet was a cheap-and-cheerful upstart out of Western Canada 18 years ago. But as Saretsky notes, keeping up with—indeed, ahead of—the evolving marketplace means distinguishing between traditions to be broken and a core brand to be upheld.

You’re an aviation insider, to the point of being descended from airline employees. Is that more of an advantage or a disadvantage in your job?

I guess you could say I’m genetically predisposed to this business. I did spend two years in banking which was long enough to know that it wasn’t my passion. I think having grown up in an airline family gave me an appreciation for the business but mostly a love for travel. And that led me back to this role. Yeah, I think it’s probably an advantage.

You’ve spent most of your career in this business, starting at Canadian Airlines and then at Alaska Airlines. How do you stay focused on innovation and not just do things other airlines are doing?

That’s pretty easy. WestJet was founded on a platform of being anything but what the other airlines were, because there weren’t a lot of examples out there of airlines that were doing things well. Since our founding in 1996, I think the industry has done a lot of things to make itself better, and certainly WestJet has continued to innovate to stay in front of the pack .

Can you think of an innovation you’ve applied that no one else is doing?

Well, starting this fall, we’re going to be the first airline in North America with a brand-new inflight entertainment system that we spent the better part of two years working on. The aircraft will have broadband satellite wi-fi connected to every seat in the house. It’ll have live television—we’re the only airline in Canada that offers live content—stored content, entertainment and games. People can transact business if they want or they can go on their Facebook. I think that will revolutionize how people think about inflight entertainment while travelling, and that was all conceived by WestJetters.

WestJet was known for its unique culture when you joined the company in 2009. Did you have to adjust your own thinking and leadership style to fit in?

When you start with the understanding that WestJet’s culture is all about care and empowerment and engagement, then leading in this culture requires that you embrace those things, that you adopt a collaborative style, that you involve your people very early on in decisions that affect them. The [employee] ownership platform is so powerful that to best leverage it you really have to allow owners to have their voices be heard. This is at the end of the day their company, so while I lead it, I also believe in service leadership, so I lead from behind in many cases, allowing our people to be the ones who are having their fingerprints on some of the changes that we’re driving.

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You’ve travelled the country consulting employees in advance of major decisions. Are you getting strategic ideas from them or are you trying to win them over to the management strategy?

It’s a bit of both. You start from the premise that employees will be motivated if they understand the why behind decisions. There’s an obligation as a leader to make sure that you’re sharing the “why” with them, but also being open-minded and listening to their feedback enough that you can make course corrections and adjustments to the strategy before you implement it. One of the things we say at WestJet is we like doing things with our people, not to our people. Not too many companies share the strategic elements of their business plan for fear it leaks out or fear that, you know, people are made insiders before we’re ready to take things public. We’ve done the exact opposite. We have driven a lot of changes to our strategic planning as a result of those dialogues.

Can you share an example?

I’d say that when we launched WestJet Encore, that was a pretty big change to our business model. We’d said from the beginning that the core to our success was a single aircraft type, a single fleet type. And now we were launching a regional service under a separate operating certificate. So these people would have different benefits, a different wage structure. They’d be a completely separate legal entity. We put that whole plan to a vote. We said we won’t launch a regional airline if you can’t stand behind it. We had a fantastic voter turnout, and employees voted 91% to support it.

But there was still an impact on some employees, correct?

We were converting certain stations, like Thunder Bay and Comox, to the new regional platform, which meant those employees, many of whom were long-serving WestJetters, were going to have their pay and benefits impacted. So we said, “Look, the way we do it here, we do things with you, not to you. So why don’t we pull together a group of employees from these affected stations, and you will draft the policies and procedures that will impact people that are affected by this change.” And we called that the Framework for Fairness. Those employees actually developed plans for how they would be treated in that transition that were different than what we had in mind. What ended up happening was employees stayed engaged, they stayed positive, and we’ve had a very successful transition in stations where our competitors have faced a rather different outcome.

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Two new discount airlines were announced in Western Canada this year—Jet Naked and Canada Jetlines. Is Encore meant to compete with those head-on?

Not Encore specifically, but certainly WestJet was founded on a platform of affordability and Encore is doing that in the regional space. So, to the extent that these airlines want to start service to any of the places where Encore is, Encore will be the brand that will defend our market position in those communities. If they’re flying to places where WestJet’s jets are, we’ll use that brand to defend our market position. We have a great history of being furious competitors.

You’re also talking about entering wide-body, international routes, which seems like you’re looking to fight a war on both fronts. What’s the key part of the brand you want to push forward?

We’ve always been about affordable travel. The whole reason for creating Encore was to liberate Canadians from the high cost of travel in those smaller communities where they didn’t have choice before. There was only one game in town and it was an expensive one.

People used to call it the WestJet Effect when a WestJet flight would come in with lower fares.

Absolutely. If you look at the passenger boardings in Terrace, B.C., for example, they’re up 69% year over year since WestJet Encore entered that market. So we’re allowing people the opportunity to travel at reasonable airfares and they’re taking us up on that option. But I think the WestJet Effect has already happened. I’m not sure there’s more stimulation to be had by having others in the market. We all pay the same for an airplane. We all pay the same for fuel. We pay the same station costs. And those costs are about two-thirds of what it costs to run an airline. And the last third might be a difference in labour costs. We pay our people well. They’re very productive. They’re very efficient. And when we’re called to fight the war, they’ll be there and they’ll provide the caring service at low fares that have made us famous for 18 years. It’s not a war on two fronts; it’s the same war. It just happens to take place in different geographies.

What was the deciding factor in whether or not to purchase wide-body aircraft and enter the international market?

We started that international game this summer with service from Toronto and St. John’s to Dublin. It’s been the fastest [growing] new route we’ve started in our history in terms of being full and being well subscribed. And we’ve had to learn a lot about flying to Europe. There are different rules in the EU, for selling in different currencies, in different points of sale, and we’re having to settle transactions by taking on a bank settlement plan in different countries—we had to build that foundation to allow us to fly to Dublin. And now that it has been built, it’s obviously extendable to any international geography and we’ve decided we want to take advantage of that opportunity by bringing wide-body aircraft into our fleet and adding some international travellers to the group of folks who want to be liberated from the high cost of travel.

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Can you think of a mistake you’ve made in your career that taught you a lesson you use to this day?

I’ve made lots of mistakes in my career. Sometimes if you’re not making mistakes you are not working hard enough to drive the change that will lead to success in business. But I always tell our people the same thing: make mistakes, just make sure you’re not betting the company. In a past life at another airline I had responsibility for revenue management. All airlines have flights at the tail ends of the day—really early in the morning and really late at night—that operate with lower loads. I thought wouldn’t it be great if we developed a flight-specific fare that was so attractively priced but only applied at the tail end of the day. Internally we referred to those fares as “Fly them or Frame them.” You either took that flight for which you paid that cheap fare, or you had to frame that ticket and put it on the wall because it had no value if you wanted to change it or use it on another flight. But what we found is we had a lot of customers who would buy that early or late flight but then would come down to the airport at midday and say, ‘So I’m on that midnight flight but I really want to be on that 5 p.m. flight.’ And our agents had to say, ‘I’m sorry, that’s non-refundable and not changeable.’ You can imagine what that did in terms of the interaction between customer and employee. Employees would say, ‘I think you should write a letter to our head of revenue management,’ which was me. I got quite a few of those letters.

What did you learn?

I realized that while I was doing on paper what we wanted to do—to drive demand to those early and late flights—it was putting our people in the way of a good customer experience. I could have avoided a lot of grief had I gone to the employees first and said, “Help me think this through. What are some of the potential consequences of that and can we live with them?” I probably could have saved myself a lot of grief. It really brings us back to the conversation on how WestJet likes to operate.