WestJet departs from past with regional plan

Mon Jan 16, 2012 5:48pm EST
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By Nicole Mordant and Allison Martell

(Reuters) - WestJet Airlines Ltd is mulling the launch of a regional airline, using a fleet of turboprop aircraft to serve smaller markets in Canada, marking a departure from its successful low-cost strategy and presenting a new challenge to bigger rival Air Canada.

WestJet, Canada's No.2 carrier, said on Monday it may launch the short-haul service as early as next year, using a fleet of about 40 turboprops - a move that would add a second type of aircraft to its fleet for the first time in its 15-year history.

The Calgary, Alberta-based carrier is in talks with employees about the plan, which could cost the airline more than $1 billion. Employees will be asked to vote on the proposal, which includes housing the new airline in a sister company, in a process expected to be completed in early February.

Operating a single fleet of Boeing 737 aircraft has been central to WestJet's strategy of being a low-cost airline, as maintenance and training costs don't have to be duplicated.

But the fast-growing airline, which flies within Canada and to mostly sun destinations in the United States, Mexico and the Caribbean, has considered adding a second fleet for some time as it searches for new revenue sources.

"I think there are quite a few opportunities for WestJet in these smaller markets. Some of the fares are quite high," said National Bank Financial analyst Cameron Doerksen.

Air Canada, the country's biggest airline, is the sole carrier on several routes to small communities in Canada through its partner Chorus Aviation, which operates under the Air Canada Express brand.

WestJet's annual operating costs are about one third lower than those of Air Canada, which could help it undercut the larger carrier on fares.   Continued...