March 16, 2010 / 7:55 PM / 8 years ago

UPDATE 1-ANALYSIS-New CEO may be just what WestJet needs

* Gregg Saretsky a 25-year industry veteran

* Has experience in areas that WestJet focusing on

* No major changes in strategy expected

* WestJet shares drop as much as 4 pct (Adds comments from Durfy, Saretsky)

By Nicole Mordant

VANCOUVER, March 16 (Reuters) - The resignation of WestJet Airlines Ltd’s (WJA.TO) chief executive caught investors off guard, knocking the carrier’s shares lower on Tuesday, but his replacement by an industry veteran may be just what the former market darling needs, analysts said.

Canada’s No.2 airline, which has seen its earnings fall for the past six quarters and has wrestled in recent months with a new reservations system, said late on Monday that Sean Durfy will step down as CEO on April 1 for unspecified personal reasons.

He will be replaced by WestJet’s head of operations, Gregg Saretsky, a 25-year veteran of the Canadian and U.S. airline industry, who Durfy hired just nine months ago to replace him in a couple of years time.

“I think it’s a good move putting somebody at the helm that has strong capability from the airline sector directly and has a good track record,” said Robert Kokonis, managing director of Air Trav Inc, an airline consulting company.

Saretsky, 50, started his career at now-defunct Canadian Airlines in 1985 where he held several marketing and operations positions. He left in 1998 to join Seattle-based Alaska Airlines Inc [ALKAIR.UL].

At Alaska he set up airline alliances, developed a network of partners with other U.S. airlines, and helped to build a rewards program, initiatives that WestJet is busy on itself.

Saretsky joined the carrier in June 2009 as vice-president of WestJet Vacations but was soon promoted to vice-president of airline operations in October.

NO BIG CHANGES IN STRATEGY EXPECTED

WestJet’s stock fell as much as 4 percent on the Toronto Stock Exchange as investors were surprised by Durfy’s sudden departure after just 2-1/2 years at the helm. By mid-afternoon the stock was off its lows at C$13.41, for a loss of 46 Canadian cents, or 3.3 percent.

Analysts said they did not expect Saretsky to stray far from the course plotted by Durfy, not least because Durfy is staying on until September to help with the transition.

Saretsky, who said Durfy had hired him from Alaska Airlines, told Reuters that attracting more business travelers to WestJet will be one of his priorities.

Some analysts speculated that Durfy had been booted out because of the booking system snafu and weaker results, but he insisted that the decision to leave was his, that he is quitting for family reasons and had no future career plans.

“One of the jobs of CEO is making sure you’ve got good successors in place, and when we brought Gregg on it was for ‘in a couple of years we hope you’re ready to take the top spot’. The issue was that it was only a year,” Durfy said.

WestJet, once beloved of investors who pushed its stock above C$23 in 2007, has been through a tough 18 months. Earnings have fallen in every quarter since the middle of 2008 as airline traffic globally dried up during the recession.

In its recent quarter, profit fell more than 50 percent partly because of glitches with its Sabre booking system that led to unrecognized bookings and frustrated travelers.

Troubles with the system caused WestJet to delay the rollout of its long-awaited loyalty program, an expected moneyspinner, from December to March. A planned partnership with Dallas-based Southwest Airlines Co (LUV.N), which would have helped a U.S. expansion, was put on hold last May.

“In our opinion, Durfy did some valuable things for WestJet during his tenure at the company. Nevertheless, we believe that, given the circumstances, change was necessary,” Raymond James analyst Ben Cherniavsky said in a note to clients.

On the positive side, WestJet, unlike many of its peers, has remained profitable in the recession and has continued to win market share from its bigger rival, Air Canada ACa.TO.

WestJet’s rise in the industry is well known -- founded on the Southwest Airlines no-frills model in 1996 with three aging Boeing 737s flying to five Western Canadian destinations.

The company now flies 88 aircraft to 69 cities in North America and the Caribbean.

$1=$1.01 Canadian Additional reporting by Jeffrey Jones in Calgary; editing by Rob Wilson

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