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WestJet aims to close gap with Air Canada

Globe and Mail Update

WestJet Airlines Ltd. chief executive officer Sean Durfy says Air Canada is a “desperate competitor” that is “on the ropes,” and he plans on closing the gap with his larger rival.

Mr. Durfy said Thursday that his Calgary-based carrier wants to add 18 new destinations in the United States and the Caribbean over the next four years.

The recession has weakened travel demand and eroded WestJet's profit margins because of an airfare war against Air Canada to lure back passengers, prompting Mr. Durfy to forecast a bumpy second half for WestJet before it recovers in 2010.

“We have the financial strength to weather an economic downturn of this type of proportion,” he said Thursday at the start of a six-hour webcast from Calgary. Industry analysts gathered to hear corporate presentations that often resembled pep rallies, including an Elvis Presley impersonator promoting WestJet trips to Las Vegas.

WestJet poked fun at Air Canada by producing TV commercial spoofs, portraying its chief rival as a company that fumbles customer relations. Mr. Durfy said WestJet has a competitive edge with its upbeat corporate culture, while Montreal-based Air Canada is facing tough challenges.

“We have a very, very desperate competitor in the marketplace, and we've all seen this story before,” Mr. Durfy said, referring to Air Canada encountering a cash crunch in early 2003, months before it filed for bankruptcy protection. “Our competitor is on the ropes. They have a lot of pressure on them today.”

Cash-strapped Air Canada faces a potential $225-million pension payment on July 30, double its previous quarterly contribution. The country's largest carrier is seeking union support for a moratorium on company pension payments until Jan. 30, 2011.

The airline sector has been cut down to size by the recession, Mr. Durfy said. “We are the tallest of the midgets. It's a tough industry.”

Despite economic adversity, WestJet plans to add 10 new sun destinations over the next four years, notably in the Caribbean. WestJet also intends to launch service from Canada to six to eight new U.S. destinations by 2013, despite suffering a setback because of a one-year delay to launch a partnership with Dallas-based Southwest Airlines Co.Domestically, WestJet has weeded out non-stop flights such as Regina-Winnipeg and Saskatoon-Winnipeg – routes considered too thin for the carrier's Boeing 737s. But WestJet executives say they're eyeing smaller aircraft. WestJet has pondered moving beyond its single-type fleet once it has between 100 and 170 Boeing 737s, and the internal debate is over the best timing.

WestJet, which flies to 55 cities, currently has 79 planes in its fleet and expects to take delivery of another seven by the end of 2009. “It positions us very nicely for the winter season and our sun destinations,” Mr. Durfy said.

Gregg Saretsky, formerly at Alaska Airlines Inc., has been named vice-president for tour operator WestJet Vacations, a fast-growing division.

Mr. Durfy also confirmed that he is poised to announce a new pact with the non-union WestJet Pilots Association. Results of the ratification vote are expected by mid-June.

Many pilots were upset at the original proposal to cancel their stock option program, but the new agreement preserves the options. “The hiccup that we had with our pilot agreement actually helped us,” Mr. Durfy said. “It brought us together as a team.”

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