July 9, 2008

Southwest Takes First Step Toward International Routes

By Bob Cox, Fort Worth Star-Telegram, Texas

Jul. 9--Southwest Airlines has taken its first step toward offering customers travel outside the continental U.S. by announcing that it has begun efforts to form a code-share arrangement with the Canadian airline WestJet.

Southwest spokeswoman Beth Harbin said Tuesday that the two airlines had reached a memorandum of understanding and have begun discussions to create a formal alliance that would allow each airline to book passengers who could earn or use frequent flier miles on either airline's flights.

The arrangement will have no immediate effect on either airline's operations. WestJet was required by Canadian law to disclose the discussions, Harbin said, and the two airlines hope to have a formal agreement worked out by late 2009.

"We've expressed our desire to go outside the U.S. border for a long time," Harbin said. "WestJet offers us a great opportunity."

Southwest previously had a code-share arrangement with ATA Airlines but only on flights within the continental U.S. and to Hawaii.

ATA, which went bankrupt and ceased operations this year, also had some scheduled service to the Caribbean that was not part of the code-share arrangement with Southwest.

Harbin said that exactly how and where Southwest and WestJet would link up, as well as fares and schedules, has yet to be determined.

WestJet offers service to 49 cities, including nonstop flights from Canada to 12 U.S. destinations, three of them in Hawaii.

Southwest serves seven of those cities, including Phoenix, Los Angeles, Las Vegas and Orlando, Fla.

The plan to code share with Southwest "is a defining moment for WestJet," President and Chief Executive Sean Durfy said in a statement. "It marks an important step forward for our guests and their ability to fly to more destinations in the United States conveniently and cost-effectively."

Based in Calgary, WestJet was founded in 1996 with three airplanes as a Western regional airline using the Southwest low-fare model. In addition to its U.S. stops, the airline now offers service to destinations in Mexico and the Caribbean. It operates a fleet of 75 Boeing 737 aircraft and has plans to expand to 121 planes by 2013.

Even before the code share is completed, Southwest said customers can purchase tickets on WestJet flights at southwest.com.

Betsy Snyder, an analyst with Standard and Poor's, told The Associated Press that WestJet's large Canadian route network compared favorably with the ATA code share, which involved limited cities, "so this could more than offset the loss of ATA."

Stuart Klaskin, an aviation consultant in Miami, said the deal shows how Southwest can enter new markets without flying there and generate new revenue while taking little risk.

Klaskin said the deal will be a warm-up for a similar expansion by Southwest into Mexico and Central America using a Mexican carrier, possibly Avolar, which follows WestJet's low-fare approach.

"This is the perfect match," he told AP. "The airlines look very similar, and they have similar management philosophies."

Mike Boyd, an aviation consultant in Colorado, cautioned that the announcement could generate unwarranted hype about an increase in low-fare service across international borders. He called these arrangements "incremental, but a far cry from what most people think of as international."

Boyd suggested in an interview with AP that the deal would result in more Canadians flying south on low fares than Americans heading north.

"Canada is not a huge market," he said.


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