If it ain’t broke, don’t fix it.
It’s a cardinal rule when it comes to running a business. Yet in his first year as WestJet’s president and CEO, Gregg Saretsky decided to break it – big time.
The company, he announced this past January, would explore the possibility of creating a regional short-haul carrier, one that would compete directly against Air Canada in some of Canada’s most under-served markets.
He understood that the move would be met with skepticism. “We’d said for 16 years that the success of our business model was a function of its simplicity: a single fleet of 737s, a single maintenance program and a single set of spares. And all of a sudden, we’re talking about a new airline that’s completely different.”
That’s why Saretsky left the final decision in the hands of the company’s 8,600-plus employees. He and his executive team – including all of the company’s vice-presidents – travelled across the country to meet with “WestJetters,” selling them on the plan in face-to-face interactions, small group sessions and a series of larger town hall forums. It worked. On February 8, 2012, the company announced that its plan had been endorsed by 92 per cent of its employees, a show of support that surprised even Saretsky. “I expected it to pass,” he says, “and if it didn’t pass we would be the reason it failed because we didn’t do a good job of explaining why this strategy was important to WestJet. But 92 per cent is resounding, in any kind of vote. It says we have incredible support from our employee-owners, who are ready to take the next step.”
If you only knew about Saretsky from a potted biography, you’d probably conclude he was destined to end up as the CEO of an airline. After all, both of his parents worked for airlines, his two brothers are pilots (one for Cathay Pacific and the other for Air Canada) and he married the daughter of a pilot. As former Canadian Airlines executive and longtime colleague and friend Jack Miles says, Saretsky has “jet fuel running through his veins.” But Saretsky’s bloodlines didn’t really kick in until he was in his mid-20s. “I wanted to be a doctor,” he says. “I did a bachelor of science degree in biochemistry and microbiology at UBC, and the intention was to go on to medical school. It wasn’t until my graduating year that I realized I didn’t really want to do medicine.”
He enrolled in the University of British Columbia’s MBA program, thinking that he could combine his interest in science with a degree in business and work on the commercial side of the health-care field. All the while, though, he was spending his summers working in the airline business, first as a flight attendant for Air Canada and later as a customer service agent with Wardair. After graduating, he worked in banking for two years before realizing that his calling didn’t involve cashing cheques or helping people plan their financial futures. He quit his job at the Bank of Montreal and signed on with Canadian Airlines, and his career took off from there.What was the appeal of the airline industry? “It’s ever-changing, and it’s fast-paced,” he says. “The business has so many different facets. There’s a finance facet, a customer service facet, a production facet. It’s a whole bunch of businesses in one, and the opportunity to try your hand at every one of those things along the way is really attractive. You’ll never be bored, and every day is different.”
He knows what he’s talking about, too. In his decade-long stints at both Canadian and Alaska Airlines, Saretsky did everything short of flying the planes and unloading the baggage. At Canadian, he worked as a marketing manager in a variety of regions and departments before being promoted to the role of vice-president of airports, a position that saw him handle the operational management of Canadian’s 110 North American airports and the people that staffed them. After two years in that role, he was bumped up to vice-president of passenger marketing, where, among other things, he negotiated joint ventures with Qantas, Air New Zealand, and China Airlines in order to open up those growing markets.
He then jumped to upstart Alaska Airlines in 1998, where he spent almost a decade as the company’s executive vice president of marketing and planning. In that role he grew the company’s online sales from three per cent to 48 per cent of total sales, developed a network of code-sharing relationships that expanded the once-regional airline’s reach, and optimized the company’s flight schedule to the point where it led the industry in aircraft utilization.
But after almost two years as Alaska’s executive vice-president of flight and marketing, Saretsky decided to come home to Canada and an airline that bore a striking resemblance to Alaska. “I’d never flown WestJet and I’d never experienced it for myself,” he says, “but I heard these incredible stories about what a wonderful airline it was. And being in the industry I watched their financial results from a distance, and I was always amazed at this little airline that seemingly could do nothing but great things.”
Sarestsky joined WestJet in 2009 as the vice-president of WestJet Vacations, but Miles suspected that he was being groomed for something bigger. “I have a hunch that when they hired him as a vice-president, they were looking at him to see what he was made of and where else he could go,” Miles says. “He spoke to me before he went, and I said ‘Gregg, you’re not going to be in that position very long.’ ”
Sure enough, Saretsky was promoted to executive vice-president of operations of WestJet just four months later, although Miles confesses that even he didn’t expect Saretsky to rise to the very top quite so quickly. But in April 2010, less than a year after he joined the company, Saretsky was appointed as WestJet’s president and CEO. He replaced outgoing president and CEO Sean Durfy, who had held both positions since 2007. Saretsky knew he has some big shoes to fill. “Founders, they cast big shadows. Clive [Beddoe] and the team of founders did a wonderful job giving this airline a great start and getting it as far as they have.
It’s always hard to follow in the footsteps of a founder.”
That said, Saretsky isn’t afraid to try – or to take the company in a direction that differs from the vision laid out by those founders. Take its recent decision to introduce “premium economy” seating, one that has rankled many who take the company’s mission to “liberate Canadians from the high cost of travel” as an article of faith. Saretsky says the move is a reflection of another important aspect of the company’s culture, its commitment to serving its customers, but that he understands why some people might find it curious. Still, he says, the company can’t be afraid of change. “All of these decisions, as our business model
continues to evolve, deviate from the model that was launched in 1996,” he says. “But for a successful business, standing still isn’t an option. A successful business is always moving forward.
According to Dan Muzyka, the president and CEO of the Conference Board of Canada and a professor of entrepreneurship at UBC’s Sauder School of Business, Saretsky’s ability to make that transition between the past and the present is critical to WestJet’s future. “It is very rare – very rare – that you get a sustained successful growth company whose founding entrepreneur hangs on,” he says. “I’ve seen a number of cases where even if that happens, there comes a Rubicon – they don’t make it through the transition. And sometimes they take the company with them.”
WestJet’s challenge, Muzyka says, is to transform itself from a startup to an institution, and that’s something he thinks Saretsky is tailor-made for. His background in the industry and his demonstrated capacity for meeting operational objectives are key assets for the company. “Strategy isn’t just about broad statements and visions,” he says. “It’s about implementing them. And Gregg is very good at that.”
But it’s Saretsky’s leadership style, and the fact that it dovetails so nicely with WestJet’s corporate culture, that really sets him apart, Muzyka says. “There’s a wide array of leadership styles, and an array of successful leaders. But this empathetic quality and ability to relate to people is truly exceptional. Is he bottom line oriented? Absolutely. But he’s achieving that through people.”
Atco chairman Ron Southern – a man who knows a thing or two about leadership – has only known Saretsky since he came to WestJet in 2009, but he says he’s been impressed by the qualities he brings to the table. “The ones that really stand out have an indefinable pride in their organization that they’re able to convey to everybody in the organization,” he says. “From that, these leaders and their companies show an unusual attention to their customers and their satisfaction. It doesn’t matter whether it’s in oilfield equipment supply or in air travel.” And while different people define leadership differently, Southern says, they all know it when they see it. “Gregg’s got it,” he says.
In November, Westjet announced its financial results for the third quarter of 2012, and like the previous 29 quarters it was a profitable one for the company. That’s an impressive streak for any company, but it’s downright remarkable in light of the fact that it runs straight through the 2008/09 recession, a period that drowned just about every other airline in the world in red ink.
The company’s most recent quarter is one of its most impressive yet, too. Its profits jumped 80 per cent year-over-year (and 86 per cent on a fully diluted per-share basis) on revenues of $866.5 million. Those numbers could get even better in the last quarter of the year, too. As of October its load factor (a crucial metric in the airline industry) was 81.2 per cent, the fourth consecutive record monthly figure, and it stands to reason that it will increase even further with the busy holiday travel season.
WestJet’s rosy results are a reflection of the improving North American economy, to be sure, but they’re also a product of the company’s decision to embrace code-sharing – an arrangement where two or more airlines share the same flight, and one that Saretsky used with great aplomb at Alaska – as a low-cost way to expand its reach. It signed its first code-sharing agreement with Cathay Pacific in October of 2010, and this past September reached one with British Airways that brought its total number of code-sharing partners to eight. “We now have people that board WestJet flights every day that come from China and India and Latin America and Europe,” Saretsky says. “These are guests that would never have made it across WestJet’s threshold if we didn’t have these wonderful airline partnerships. That’s provided a fuel for us that allows the airline to continue to grow.”
But despite the company’s financial momentum, Saretsky isn’t prepared to rest on his laurels. “I think we have hit an inflection point,” he says. “We’re not really that fast growth company that was doubling in size every couple of years. We’re an adolescent, and with adolescence come other challenges – but other opportunities as well. Our opportunity, going forward, is to try and harness all the things that contributed to our success in the early days, but not cling to the past. We need to look to the future, and figure out how we can take those strengths and leverage them into opportunities.”
A major part of that is the decision to create a regional carrier, one that will be officially launched in the second half of 2013. In October, WestJet employees voted to name their new carrier “WestJet Encore,” and after some deliberation the company decided to locate its headquarters in Calgary. While it’s a major step forward for the company, it’s also a trip back in time to its days as a startup. “Starting a brand new airline isn’t for sissies,” Saretsky says. “When I think back to 1996, when the founders of WestJet did what they did, that was a pretty bold move. And in many respects, we’re recreating the early days of WestJet with WestJet Encore.
And while the rollout of WestJet Encore will consume most of his time in the near term, Saretsky has other long-term goals for WestJet. He’s a major proponent of the value of mentoring, in large part because he had two mentors himself – Jack Miles and Ted Shetzen – when he was coming up through the ranks at Canadian Airlines. WestJet has never had a formal mentoring program, but Saretsky intends to change that. “I think my biggest opportunity to imprint my leadership style on the company is through our leadership development program,” he says. “It’s something we haven’t done at WestJet. For 16 years we’ve been focused on growth, and just finding people – warm bodies – to fill the jobs as the company grew so fast. Now, it’s time to take a breath. We’re starting a whole new regional airline and we’re going to have opportunities to move people around and give them a chance to try their hand at doing something different. That’s where all the growth takes place.”
He also has his eye on the possibility of one day launching international wide-body service, a move that would truly put it in Air Canada’s league. “It’s on the drawing board,” he says, “but we have a lot of heavy lifting ahead to get our regional airline up and running and make sure it’s contributing to our profitability. But ultimately, yes, I think we dream of the day when we’ll have wide-body aircraft serving the far reaches of the world from Canada.” And while it might be tempting to try and take Air Canada’s title as the largest domestic airline by market share, Saretsky thinks that’s not the right battle for WestJet to fight. “It’s not about being bigger. We don’t aspire to be bigger. We aspire to continue to be better, in everything we do.”
So where will WestJet be in 10 years, and what will it look like? Saretsky can’t say for certain, of course, but he’s been around long enough to know that it would be foolish to make any definitive predictions. “Success, to me, would be that 10 years from now we’re much bigger than we are today, obviously. But 10 years ago we said that we’d never fly to Toronto-Pearson. Today, Toronto-Pearson is the biggest airport in our network as measured by seat miles. So where could we be 10 years from now, when 10 years ago we weren’t even flying to Toronto-Pearson?”