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WestJet, Air Canada pursue own international growth strategies

Nov. 20, 2013, Calgary - Canada's two largest airlines are both targeting international growth, with WestJet dipping its toe in European waters and Air Canada trying to boost its share of U.S. passengers flying through Canadian hubs.


November 20, 2013
By The Canadian Press

Calgary-based WestJet Airlines says next summer's launch of service
to Dublin will help it learn about the European market and its different
regulations, operational requirements, taxation and carbon emissions
rules.

 

"There's four five other markets potentially that the
(Boeing 737-700) can serve out of St. John's, NL, and use St. John's as a
bit of a launching pad," chief financial officer Vito Culmone told
Scotiabank's transportation conference on Tuesday.

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He said sales to Dublin have been "very very strong" since the route was announced last Friday.

 

The 2014 summer schedule is set,
so any new destinations would have to wait, a company official later
clarified. WestJet plans to use three of the narrowbody aircraft on the
route.

 

Culmone said WestJet (TSX:WJA) has had
discussions with Boeing and Airbus about acquiring wide-body aircraft
that are better suited for long-haul flights, but that the company is
focused over the coming years on expanding its new regional Encore
service and the delivery of more fuel-efficient, re-engined Boeing 737
Max aircraft.

 

Air Canada CEO Calin Rovinescu called WestJet's
Irish foray an "interesting move" but

"insignificant" to his airline's
own expansion plans involving its low-cost carrier Rouge.

 

"So while they may have plans and ambitions in
the future, at this stage it's a non event as far as we're concerned and
that's not going to affect our decision on the ramp up of Rouge one way
or another," he said in a separate presentation.

 

Rouge launched service last
summer with just four planes — two large aircraft destined for Europe
and two smaller planes for sun spots. It plans to operate 33 aircraft by
the end of next year as it moves older planes from its mainline fleet
upon delivery of new Boeing 777 and 787 aircraft.

 

Rovinescu said aircraft carrying additional
seats will help the carrier's efforts to reduce costs and sustainably
improve profits.

 

Air Canada, Canada's largest airline,
is seeking its own international growth by expanding service to Asia
and Europe. Rovinescu said the airline could tap into $400 million in
additional revenues if it get its fair share of the U.S. passengers
flying abroad.

 

The airline currently has just 0.3 per cent of
that market but figures it could add 1.1 million passengers by boosting
its share to 1.5 per cent by servicing secondary U.S. markets like
Philadelphia and Boston.

 

"So as we compete with the other
powerful hubs such as Chicago, JFK and some the international hubs, we
expect to pick up a large portion of that U.S. to Europe and Asia
traffic," Rovinescu said.

 

Air Canada's chief executive said WestJet
Encore, with six Q400s in Western Canada, isn't yet a significant
factor, but the Montreal-based carrier isn't waiting until it grows
before reacting.

 

The airline is working with partners such as Sky
Regional to drive down costs. It also launched a request for proposals
to operate service to the United States and is pressuring partner Chorus
Aviation to further cut costs.

 

"We would be open to see if there are solutions
because they have always been a very good partner," Rovinescu said of
Chorus, which operates the Jazz subsidiary.

 

Meanwhile, Culmone said WestJet's
Encore could generate $400 million to $600 million in additional annual
revenues with its hoped for share of the $2-billion market in Canada and
the United States using aircraft with 50 to 75 seats.

 

Encore plans to launch service in Eastern Canada
next summer and operate 16 planes by year-end when service is extended
across Canada. Service to the United States could be added by the end of
2015.

 

WestJet has firm orders for 20 Bombardier
aircraft and options for 25 more to reach its estimate of the number of
planes needed for a mature market.