January 19, 2012 / 10:33 PM / in 6 years

WestJet sees C$2 billion market for regional carrier

TORONTO (Reuters) - WestJet Airlines Ltd (WJA.TO) could compete in a short-haul market it estimates is worth C$2 billion ($2 billion) a year with the new regional airline it is considering, Canada’s second-biggest carrier said on Thursday.

Speaking at an investor conference, WestJet gave some fresh details on a proposal it announced Monday to use a fleet of about 40 turboprop aircraft in a regional airline that would serve smaller cities. The plan would add a second type of plane to the WestJet fleet for the first time in its 15-year history.

“We’ll be able to service new destinations,” Chief Financial Officer Vito Culmone said at a CIBC investor conference, via webcast. “When you look at the regional market in both Canada and the U.S., transborder, we think that’s about a C$2 billion market. And we’re not participating in that market today.”

WestJet already competes with bigger rival Air Canada ACa.TO on many domestic and vacation routes, and the planned carrier would increase rivalry between the two. A smaller third domestic airline, Porter Air, flies turboprop planes from its base at Toronto’s downtown airport.

Culmone said smaller cities have been asking Calgary, Alberta-based WestJet for service, but it was not profitable using the airline’s current fleet of Boeing (BA.N) 737 planes.

The proposed new airline, which could cost WestJet more than $1 billion and will be discussed with employees over the next three weeks, would also fuel growth for WestJet’s existing operations, Culmone said.

He said turboprop planes could “join some of the dots”, with flights between cities that WestJet serves but does not fly between. WestJet flies to 30 cities in Canada, while Air Canada flies to 59, Culmone said.

WestJet reported C$2.61 billion in revenue in 2010.

Culmone said the new fleet could also help WestJet increase the frequency of flights and boost its schedule on popular runs, such as the business-travel heavy triangle between Toronto, Montreal and Ottawa or at slots in New York’s LaGuardia Airport.

Culmone said there are no plans to change an order for 38 more 737s because of the regional carrier proposal. WestJet currently operates 97 Boeing 737s.

($1 - 1.01114 Canadian dollars)

Reporting By Susan Taylor; Editing by Janet Guttsman

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