* Signs that declines in revenue stabilizing
* CEO says H1N1 flu not hitting bookings
* Working on new code-share pacts
* Earnings down 46 pct
(Recasts with CEO interview, analyst comment)
By Nicole Mordant
VANCOUVER, British Columbia, Nov 4 (Reuters) - WestJet Airlines Ltd WJA.TO posted a 46 percent slide in quarterly earnings on Wednesday, but Canada's second-biggest carrier sees signs that a brutal air-travel slowdown is ending.
In the past six to eight weeks, declines in revenue per available seat mile, or RASM, a key industry benchmark, look to have leveled off, the no-frills airline's chief executive said, sending WestJet's share price higher.
"I am cautiously optimistic that (the environment) has improved," said Sean Durfy in an interview. "I think the marketplace is less sensitive to pricing and we are starting to see a pickup."
Though Durfy said the trend "might be a blip," analysts jumped on the comments as a positive sign.
"It was certainly the most optimistic outlook for the last few quarters," said Paradigm Capital analyst Doug Cooper.
"There is reason to believe that RASM will trend higher in 2010, driven by the return of the business traveler, which they are starting to see signs of," he said.
Durfy said he was pleased with the fares WestJet is getting this winter on flights to sunny destinations like Mexico and the Caribbean. So far he couldn't link any decline in travel bookings to the H1N1 flu virus.
Earlier, WestJet reported earnings of C$31.4 million ($29.6 million), or 24 Canadian cents a share, for the three months to Sept. 30. That's down from a profit of C$57.9 million, or 45 Canadian cents, on weak demand and price cuts as airlines scrambled to fill seats.
The results were below the 27 Canadian cents a share analysts on average had expected from Air Canada's ACa.TO biggest domestic competitor, according to Thomson Reuters I/B/E/S.
Revenue at the airline, one of the few profitable carriers in the world, fell 16.4 percent to C$600.6 million and RASM fell 15.5 percent.
WestJet has signed a number of memorandums of understanding with other unnamed airlines to enter into code-share agreements, Durfy said, referring to partnerships that lets one carrier sell tickets to passengers from another carrier.
The Calgary, Alberta-based airline is already working toward a full code-share deal with Air France-KLM (AIRF.PA).
Glitches experienced with the launch last month of its new Sabre reservation system were hopefully behind it and shouldn't have an impact on fourth quarter results, Durfy said.
WestJet expects its capacity to increase between 2 percent and 3 percent in the fourth quarter, mostly to cross-border and other international destinations. The airline flies to 60 cities in North America and the Caribbean.
The carrier will take delivery of five aircraft in the fourth quarter, boosting its fleet to 86 by year-end.
Separately WestJet said its load factor, the percentage of available seats that are filled with paying passengers, fell 1.7 percentage points to 79.7 percent in October.
The stock rose 11 Canadian cents or 1 percent, to C$11.20 on the Toronto Stock Exchange. ($1=$1.06 Canadian) (Additional reporting by Scott Anderson; editing by Frank McGurty)