Analysts should not make too much of WestJet's delayed code-share agreement with US-based Southwest Airlines, the CEO of Canada's No. 2 carrier said Thursday, as it can quickly strike deals with other airlines to help spark growth.
WestJet has discussed partnerships with 70 airlines globally and is on schedule to launch a new reservation system in the fourth-quarter that will help support such agreements, the company said at an investor conference.
"There's some tremendous opportunities with other great partners that we could implement pretty quickly," CEO Sean Durfy said.
Southwest remains committed to the code-share deal, but first needs to "get its house in order" in the struggling US travel market, Durfy said.
Afterwards, it can launch the arrangement, which Durfy said could include joint procurement and cargo arrangements, along with provisions for the two airlines to sell seats on each other's flights.
"The US is under a ton of pressure right now, so let's not read too much into this," he said of the delay.
Code-share arrangements are lucrative, particularly for expansion into the rich market for business travel.
The market for connecting passengers is worth about CAD$2 billion annually, said WestJet, with the United States leading the market size.
The Calgary, Alberta-based airline said in February that it would study a code-share deal with Air France-KLM and has an incoming passenger pact with China Airlines.
DIFFICULT ENVIRONMENT
WestJet predicts "short-term pain" over the next two quarters, as it faces a slumping economy, weak demand, jitters over swine flu, and lower pricing on tougher competition.
It is estimated that the global airline industry saw demand fall 14 percent over the last six to eight months, Durfy said, leaving about 2,200 planes sitting on tarmacs.
There is speculation by some analysts that Canada's biggest carrier, Air Canada, is again headed for bankruptcy protection because it faces major financial and union problems.
Asked by analysts about WestJet's main rival, Durfy said that "there's a lot of irrational behavior in the marketplace" when it comes to fare pricing.
But Durfy said that WestJet, which has been compared to a cockroach due to its tenacity and survival ability, will emerge as a stronger company when the economy recovers.
"We will survive and we will thrive as we come out of this blip," he said, adding that he expects to announce a new contract with pilots soon.
"We understand how to run this business when times are tough. We've done it before and we'll do it again."
To help weather sagging revenue, the low-cost, no-frills airline plans to cut CAD$25 million from costs over the next six months. It will also review operations and make adjustments for inefficient flights that hamper capacity growth.
