But I still say that by adding frills, costs money, even if at the same time, the CASM decreases. Adding costs will enable lower cost alternatives to come in, so there comes a point down the road where passengers will either choose an airline based on costs, or amenities?
Adding frills does cost money, there's no denying that. LiveTV for example costs $500K per aircraft for installation (don't even get me started on tail 010). However, will these added short-term costs payoff in the long-term? The great thing about Westjet is the ability of our company to launch initiatives which a) increase revenue, b) save the company money, or c) lower our CASM. If we didn't see the potential for a return on our investment (LiveTV, for example) we wouldn't have done it. The same goes for removing 4 seats to create more legroom and having leather seats instead of cloth. Both have valid, cost related reasons.
Now, you kind of contradict yourself when you say that adding frills costs money even if at the same time CASM decreases
. The only thing that could or would be affected by adding frills is Westjet's debt or the loans it has to obtain in order to pay for them. The Ontario Teachers Pension Fund or whatever its called injected $150M worth of capital to fund the purchase of additional aircraft and LiveTV installation. Fidelity also recently invested a significant amount of money into our airline, so not all of our costs are through loans or debts. That's just a guess, but am I correct in thinking that?
Westjet has a very competitive and low CASM, even with the perks/frills we have been and are adding. If a "lower cost alternative" enters the market, that airline won't have a significant cost advange over Westjet. Jetsgo, for example, probably does has a lower CASM than Westjet but it can't be by much. If airline X has a CASM of 9 cents while airline Y has a CASM of 10 cents, airline X is obviously at an advantage, cost-wise. However, if airline Y has IFE, food, more room, etc., etc., and airline X doesn't, airline Y can price competitively and attract more customers simply based on perks.
Anyway, the point I'm trying to make is this: there is an evolution of low-cost carriers going on right now. Airlines like JetBlue and yes, Westjet, are revolutionizing the way low-cost carriers operate. Carriers will be able to operate with low costs AND
frills while others will try to compete with no-frills (or very limited frills) and low costs. If one customer can get more bang for his/her buck on one carrier over the other, than he/she is going to fly on that airline.
All this talk about customer loyalty being nonexistant is completely false IMO. With diversification of products, you'll see a lot of customer loyalty. Customer loyalty for rock bottom prices; customer loyalty for customer service; customer loyalty for IFE; customer loyalty for AirMiles or Aeroplan points. The list goes on and on. As long as an airlines costs remain low and competitive, the sky is the limit for what frills can or can't be added.
Or what I've been saying is all one big pipe dream.