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WestJet CEO's sudden departure creates unexpected turbulence for Calgary-based airline

From labour unrest to grand expansion, the 'little airline that could' is suddenly facing major turbulence without the man whod led the company for the past eight years. Calgary-based WestJet CEO Gregg Saretskys sudden exit a retirement, according to the company caught investors, analysts and union officials off guard.

Gregg Saretsky led company through huge growth, but big challenges await new boss

WestJet investors and staff found out Thursday that Gregg Saretsky, the airline's president and CEO, was retiring, "effective immediately." (Jeff McIntosh/Canadian Press)

From labour unrest to ambitious expansion plans, WestJetAirlines is suddenly facing majorchallengeswithout the man who led the company for the past eight years.

Calgary-based WestJet CEO Gregg Saretsky's sudden exit a retirement, according to the company caught investors, analysts and union officials off guard Thursday.

Its stock retreated on the revelation, sliding more than 4.5 per cent to$24.15 on the Toronto Stock Exchange, perhaps underscoring investors' disappointment.

The airlineoffered no deeper explanation as to why the 58-year-old Saretskyhad chosen Thursday to bid farewell, leadinganalysts to speculate as to the underlying reason. WestJetnamedEdSimsas hisreplacement.

"We wonder if the relationship with the employee group could be a cause for the retirement of Mr. Saretsky," analysts at equity research firm AltaCorpCapital wrote in a note.

It's a fair question, given the sour state of talks between the airline and its pilots, who are currently locked in negotiations for a first contract. The union recently characterized those talks as "going poorly."

WestJetalso ran into issues ahead of the launch of its ultra-low-cost-carrier Swoop after the Air Line Pilots Association (ALPA) said the company was trying to bypass the union by luring its own pilots to fly for Swoop under different working conditions.

Certainly, union officials didn't sound disappointed that the airline's boss was moving on.

"I think we're just looking forward to working with the new CEO, Ed Sims," ALPA's Robert McFadyen told CBC.

"As far as Gregg Saretsky, we'd like to wish him the best in his retirement."

But if labour relations had anything to do with Saretsky's departure, it's most likely just one factor andnot the sole reason, experts said.

"Not at this sensitive point in negotiations," said George Smith, a labour relations consultant and fellow at the School of Public Policy at Queen's University.

"The reality of labour negotiations is that neither side gets to choose who is representing or leading the other side."

If the union was hoping a fresh face might bring betterresults, it might be wishful thinking.

"There's a bargaining team in place and I am assuming none of those people have been changed out and they have a mandate that they got from management and the board," Smith said.

"In my world, you know, nothing really changes unless the new CEO says we want to revise the mandate. And that's an internal company process and probably not one that would see the light of day."
During Gregg Saretsky's eight years at the helm of WestJet, the airline's stock climbed 64 per cent. (Darryl Dyck/Canadian Press)

Saretskyjoined the company in 2009 as vice-president of WestJet Vacations, and later that year became executive vice president of operations. He was named president and CEO in 2010 and led the company through huge changes.

With Saretsky at the helm, WestJet's fleet doubled in size, WestJetEncore was launched andthe first code-share partnerships were introduced. Saretsky alsointroducedEuropean serviceand the WestJetRewards program.

Investors sawWestJet's stock more than double during his time as chief executive.

Fred Lazar, who follows airlines at York University'sSchulich School of Business, said despite the issues with the pilots union, Saretskyremained well respected. Lazar, like others, was surprised by his departure.

"Despite the pilots, he's still well liked by the majority of the employees and definitely by the management," Lazarsaid.

"He's highly regarded in the financial community and he's done a reasonably good job. Not that I necessarily agreed with every strategic move, but so far it's worked out well and I've been proven wrong."

Lazar said the market reaction suggests that investors think there's been a falling out between Saretsky and the board.

"The market is not happy that Saretsky has been pushed out because they basically have been happy with his leadership and they don't think the labour issue is a big deal," Lazarsaid.
WestJet's new CEO will be tasked with getting Swoop, the airline's new ultra-low cost carrier, off the ground in June. (WestJet)

The airlinenow faces some major challenges withoutSaretsky, raisingconcern among analysts.

Instead, the company will be led by Sims, who has three decades in the tourism and aviation industries, including Air New Zealand. He isnow tasked withmanagingthe start of ultra-low-cost carrier Swoop, which the company said this week it is committed to launching in June despite its union issues.

WestJetis also aiming to expand its long-haul service next year.

"While we believe Mr. Simsis a strong and capable leader that can step into Mr. Saretsky'srole, we believe any change will be interpreted negatively by investors, in particular, at a time of significant strategic implementation," TD Securities said in a research note.

Analysts at CIBC also noted that Saretsky'sdeparture follows other major management changes ahead of Swoop's launch and before taking delivery of its first Boeing Dreamliner 787s next year.

"So with WestJeton the verge of migrating from a [low cost carrier] to a network carrier, these management changes at this time add to the heightened execution risk in the WestJetstory," said the research note.

Indeed, itseems there'sno time to put WestJeton auto-pilot.

With files from Reuters