WestJet to go ahead with short-haul carrier

Wed Feb 8, 2012 2:36pm EST
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By Susan Taylor

TORONTO (Reuters) - WestJet Airlines Ltd (WJA.TO: Quote) will launch a new regional operation to serve smaller Canadian destinations after winning the endorsement of its workforce for a plan that will ratchet up the pressure on Air Canada ACa.TO, its larger rival.

Shares of non-unionized WestJet rose more than 4 percent on Wednesday after the company said it expected to launch the division before the end of 2013. It is talking with two aircraft makers about buying a single fleet of turboprop planes to serve the new routes.

The country's No. 2 airline, which also reported lower quarterly earnings that still topped analyst expectations, said the new regional operation would boost its bottom line.

The smooth implementation of WestJet's plan, first announced last month, highlights its advantages over Air Canada. Labor strife has stymied the No. 1 Canadian airline's own plan to start a lower-cost carrier, which its CEO has said is critical to sustained profitability.

"The regional carrier is the single most important aviation development in Canada since WestJet was launched," said independent airline consultant Robert Kokonis.

"The opportunity is so significant - there are so many communities across Canada where Jazz or another Tier 3 carrier has monopoly service and WestJet's perfectly poised to exploit that," he said, referring to Chorus Aviation's CHRb.TO Jazz, which operates short-haul Air Canada Express-branded flights under contract.

Calgary, Alberta-based WestJet said 91 percent of its 8,500 employees voted in favor of launching the short-haul airline as a wholly owned subsidiary. The company is known for a corporate culture that values consultation between employees and management, in contrast to a confrontational tone that prevails between Air Canada and its unionized workforce.

Air Canada, which reports fourth-quarter results on Thursday, last spring proposed a low-cost carrier but has not announced progress in launch plans. The airline, which is in contract negotiation with its unions, would operate its low-cost carrier in low-yield, high volume international destinations and southern vacation spots.   Continued...

<p>A WestJet Airlines Boeing 737-700 aircraft lands at Calgary International Airport in Alberta January 7, 2010. REUTERS/Todd Korol</p>