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WestJet Steps Up Air Canada Challenge With Long-Haul Jets

WestJet Airlines Ltd. (WJA) plans to start flying twin-aisle jets as soon as next year as it escalates a challenge to Air Canada, the country’s largest carrier.

WestJet is in the “advanced stages” of procuring used wide-body aircraft, Bob Cummings, executive vice president of sales and marketing, said today in a telephone interview. WestJet has received the support of its pilot association and its board for the plan, which would entail four such planes on routes between Alberta and Hawaii during the winter season beginning in late 2015, the Calgary-based company said in a statement.

Canada’s second-largest airline began its first foray into Europe last month with seasonal service to Dublin from St John’s, Newfoundland, using its narrow-body Boeing Co. 737s. Chief Executive Officer Gregg Saretsky said in May that WestJet was close to a decision on wide-body jets.

WestJet may eventually broaden its wide-body fleet beyond the four aircraft, though the exact timing of such a move hasn’t yet been determined, Cummings said. He told Bloomberg News last month that WestJet may expand service to Europe if the Dublin route proves successful.

Adding used planes “is a prudent step for us,” Cummings said today. “I’m looking forward to getting in the wide-body market for a full calendar year, seeing what this looks like, and then evolve from there,” Cummings said.

International Expansion

Adding twin-aisle planes “provides WestJet with a platform for the next stage of growth, namely international expansion,” Walter Spracklin, an analyst at RBC Capital Markets in Toronto, said today in a note to clients.

WestJet uses 737s on its main jet routes, while its regional unit, Encore, operates Bombardier Inc. Q400 turboprops.

As WestJet “becomes more of a hybrid low-cost carrier,” the company is also “moving away from the simplified operations that made them so successful over the past decade,” Spracklin said. “Accordingly, maintaining a cost advantage, as well as successfully executing, will be tantamount.”

WestJet will provide details on its wide-body fleet by the end of July, Cummings said. He declined to say whether the company plans to buy or lease the jets, and wouldn’t identify the aircraft that WestJet is considering -- other than to say that the planes are used.

“I wouldn’t say it’s 100 percent of a buyer’s market but we’re happy with what we have sourced to date in terms of the quality and the price,” Cummings said.

Alberta-Hawaii

WestJet will initially fly the larger jets on routes between its home province of Alberta and Hawaii, where they will replace two leased Boeing 757-200 aircraft after an agreement with their owner, Thomas Cook Airlines, expires next year. Two of the wide-body aircraft may be deployed on transatlantic routes in the summer season of 2016, Spracklin said.

“We believe we have what it takes to compete and do well in the wide-body market longer-term,” Cummings said. “We’ve been very careful with working through what’s available with respect to the reliability of the aircraft and the in-cabin experience.”

Fuel represents more than 50 percent of the cost of operating a wide-body jet, compared with about 30 percent for a Boeing 737, Cummings said.

“Given that we all pay the same for fuel, it’s harder to achieve cost advantages so we are going to have to compete on some other areas,” he said without being more specific.

WestJet rose 0.4 percent to C$27.10 in Toronto, while Air Canada’s Class B shares fell 2 percent to C$9.85.

To contact the reporter on this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Molly Schuetz, Bruce Rule

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