July 16, 2009 / 8:59 PM / in 8 years

WestJet strikes transport deal with Air France-KLM

OTTAWA (Reuters) - WestJet Airlines Ltd said on Thursday it has struck a deal with Air France-KLM that lets passengers board the European carriers’ planes and travel to a final destination in WestJet’s Canadian network with a single ticket.

WestJet, Canada’s second-biggest airline, said the interline agreement is an “important strategic move” and could lead to a full code-share deal, in which the airlines sell seats on each other’s flights.

“Is this significant from a revenue point of view? No question,” said independent airline consultant Rick Erickson. “It’s almost gravy on your bottom line.”

Erickson said that Air Canada executives have said on conference calls that as much as 15 percent to 20 percent of gross revenue comes from alliance partners.

Initially, connections will be made through WestJet’s Calgary and Vancouver gateways, with the option to continue on to Vancouver, Calgary or Edmonton.

That provides a “measured and thoughtful approach”, said WestJet, which plans to expand the arrangement to its entire Canadian network.

The arrangement will also allow the airlines to try out WestJet’s new reservations system software, before a full launch the company has scheduled for the fourth quarter.

Late in 2008, WestJet said it had signed a deal with Sabre Airline Solutions for its SabreSonic reservation system after it was forced to abandon its attempt to have one designed.

“There’s some very significant players that fly into Canada that don’t have any feed, and I think that WestJet is very likely to sign up a number more of those operators,” said Erickson, who heads RP Erickson & Associates.

“WestJet has been utterly besieged by all the big players -- it’s a major Canadian airline with increasing fingers throughout North America.”

WestJet said in February that it would study a code-share pact with Air France-KLM. In May, such a deal with U.S.-based Southwest Airlines was delayed.

Southwest is committed to the code-share deal, which would have been WestJet’s first, but needed to “get its house in order” in the difficult U.S. market, WestJet said.

Full code-share deals provide participating carriers cheaper and easier access to new customers.

Shares of WestJet closed down 1 Canadian cent at C$9.99 on the Toronto Stock Exchange on Thursday.

Erickson, who holds shares in WestJet and Air Canada, said airline stocks are performing poorly in the economic downturn because, as well as being hit by sluggish demand, carriers are affected by such external factors as fuel prices, foreign exchange and fears of the H1N1 flu outbreak.

($1=$1.12 Canadian)

Reporting by Susan Taylor; editing by Rob Wilson

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