WestJet short-haul fares to beat Air Canada

A WestJet plane. (MARCEL CRETAIN/QMI Agency)

A WestJet plane. (MARCEL CRETAIN/QMI Agency)

Nicole Mordant, Reuters

, Last Updated: 9:39 AM ET

WestJet Airlines Ltd's planned Canadian short-haul carrier will likely charge about a third less than its main rival Air Canada for last-minute travel, WestJet's chief executive said on Tuesday.

In what some analysts have called its boldest move since its launch 16 years ago, WestJet, Canada's second-biggest airline, announced in February that it will start a new regional operation to fly to smaller Canadian cities and towns.

Some of them are only served by Air Canada, resulting in high air fares even for short distances. WestJet, whose cost structure is about a third lower than Air Canada's, sees this as an opportunity to exploit.

"Our last minute, walk-up fares are 30% lower than Air Canada's. I would expect that at minimum that fares in the regional space would have a similar relativity," WestJet CEO Gregg Saretsky said in an interview.

"At the bottom end, Air Canada does have fare sales from time to time. I expect that we would be competitive with, at the low end, what exists today," he said by telephone from WestJet's head office in Calgary, Alberta.

WestJet has said it plans to launch the yet-to-be-named airline in the back end of 2013. In May it said it had chosen Montreal-based Bombardier Inc to supply up to 45 turboprop aircraft for the new carrier at a cost of about C$1 billion. But further details have been few and far between.

Saretsky said that representatives of airports and councils from 32 communities, including Peterborough in Ontario, Nanaimo on Vancouver Island, and Gander in Newfoundland and Labrador, recently came to Calgary to pitch to WestJet why the airline should serve them.

Only a handful of the presentations were "real long shots," Saretsky said, adding that the final number of destinations would be "at the higher end rather than the lower end" of the 32.

WestJet expects to take delivery of five to seven turboprops -- smaller, more fuel-efficient planes that can operate on shorter runways -- in 2013 from June or July to the end of December.

It is busy deciding whether it will start service in either Western or Eastern Canada, expanding to the other side of the country in the following year, when it expects to take delivery of another eight planes.

WestJet has said it will only reveal its schedule and the communities it will serve in the first quarter of 2013.

The airline, which started off life as a low-cost airline and still only flies a single fleet type -- Boeing 737s -- plans to hire some 1,800 employees for the new operation. It currently employs about 8,300 non-unionized staff.

Unlike Air Canada, WestJet's labor relations are generally smooth and 91% of employees voted in favor of the new short-haul venture.

The new regional operation is an attempt by WestJet, which commands about 36% market share in Canada, behind Air Canada's 56%, to search for new revenue avenues. WestJet is also targeting more aggressively the business traveler market in Eastern Canada and the Northeast United States.

Last month it launched service from New York's LaGuardia airport and this week built that up to eight round-trips daily.

At LaGuardia, "we are tracking exactly as we had hoped, possibly slightly ahead," Saretsky said. He added that air fares had "come down a bit" since WestJet started flying from the busy airport.


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