Speculation up since Air Canada cut Nfld. route

Lack of flight connections in London a worry
May 11, 2006. 01:00 AM
RICK WESTHEAD
BUSINESS REPORTER


With its live in-flight TV, perky flight attendants and a collection of leather seats throughout passenger cabins, WestJet Airlines Ltd. has carved itself a lucrative niche in Canada's domestic airline industry.

The Calgary company has lost money in just one year — 2004 — since it began selling stock to the public in 1999. Last year WestJet boosted its yield, or average fare for flying a passenger one mile, 12 per cent. It also filled an average 74.7 per cent of seats on its planes, up from 67.5 per cent a year earlier.

With WestJet filling planes on its domestic routes, its prospective plans for routes to Europe are drawing more scrutiny.

Some financial analysts think the low-cost airline may be just months away from announcing new trans-Atlantic routes to England. Speculation has grown in recent days, after rival Air Canada announced last week that it would abandon its route between St. John's, Nfld., and London.

Some industry analysts are wondering whether Newfoundland's capital city will offer WestJet incentives to use its airport as a hub for flights to Europe. WestJet recently reached an agreement with the provincial government in Price Edward Island to start a Toronto-Charlottetown route. The government guaranteed that if WestJet failed to reach certain financial thresholds, the carrier would be paid up to $300,000 to cover the difference.

Some analysts suspect the airline is holding talks with Newfoundland's government in a bid to reach a similar accord.

"It's definitely something they're looking at," said an analyst who covers WestJet but isn't allowed to comment on it in the press.

Summer travel between Canada and Europe is thriving. Demand is outstripping supply and traffic levels for trans-Atlantic flights have returned to pre-2001 levels. That increased traffic may be spurring WestJet's interest.

Cameron Doerksen, an airline analyst with Versant Partners in Montreal, said WestJet's fleet of 737-800s, equipped with twin engines with fuel-saving "winglets," would likely be adequate for lengthy overseas flights. The planes already are being used for WestJet's Vancouver-Honolulu route, which is about 300 nautical miles longer than St. John's-London.

However, WestJet faces a number of vexing questions.

For starters, it's unclear what English airport the carrier could use.

Jacques Kavafian, an airline analyst with Research Capital Corp. in Toronto, said WestJet's best option in England would probably be London Stansted Airport. It's about 50 kilometres northeast of London, has a single runway and acts as a hub for a number of major European low-cost airlines.

Stansted also has a liability, Kavafian said — poor connections to the rest of Europe.

"Air Canada's flight to Heathrow allows connections anywhere in Europe," Kavafian said. "Without the ability to make connections, it's unlikely that enough people would fly WestJet."

Ticketing is another obstacle.

When a passenger books a flight on Air Canada from Toronto to a destination such as Nairobi via London Heathrow, Air Canada can issue a ticket Toronto-Nairobi and "have enough interlining agreements in place to get your bags seamlessly connected," Kavafian said.

"Good luck in having WestJet issue you a ticket beyond London."