Southwest Airlines to offer flights to Canada

July 8, 2008 11:44 AM PDT DALLAS -- Southwest Airlines Co. said today it plans to offer international service -- a first for the low-fare carrier -- through a deal with Canada’s WestJet.

Southwest said it has taken the first step toward striking a so-called code-sharing agreement and planned to announce schedules and other features of the WestJet partnership by late next year.

The agreement is subject to review by U.S. and Canadian regulators.

Under most code-sharing deals, airlines sell tickets on each other’s flights and share the resulting revenue. Southwest passengers could connect to a WestJet flight to Canada. Frequent-flier programs are typically reciprocal.

Southwest Chairman and Chief Executive Gary Kelly has often talked about offering service to nearby international destinations using a partner airline.

“We are confident that we’ve found a perfect fit with WestJet, and we are excited to work toward opening our expansive U.S. network to include Canadian destinations,” he said in a statement.

The two airlines have similar histories. Southwest started in the 1970s ferrying passengers around Texas on three planes. It later expanded to both coasts and now serves 64 cities with about 3,400 daily flights and 34,000 employees.

Dallas-based Southwest has never offered international flights, and a code-sharing service to Hawaii ended when partner ATA Airlines failed.

WestJet was created as a regional carrier serving five cities in western Canada and has expanded to 49 locations in Canada, the United States, Mexico, and the Caribbean. Like Southwest, it uses Boeing 737 aircraft.

WestJet CEO Sean Durfy called the prospect of a Southwest deal “a defining moment for WestJet.” He said an agreement would significantly improve the reach of both airlines.

Airline industry experts said the partnership would generate new revenue for each airline, and in Southwest’s case, eclipse the $50 million that the airline got at the peak of the ATA deal, which ended when ATA filed for bankruptcy and shut down in April.

Betsy Snyder, an analyst with Standard and Poor’s, said WestJet’s large Canadian route network compared favorably to the ATA code-share, which involved limited cities, “so this could more than offset the loss of ATA.”

Stuart Klaskin, an aviation consultant in Miami, said the deal was an example of how Southwest can enter new markets without actually flying there, and generate new revenue while taking little risk.

Klaskin said the deal would be a warm-up for a similar expansion by Southwest into Mexico and Central America using a Mexican carrier, possibly Avolar, that follows WestJet’s low-fare approach in Canada.

“This is the perfect match,” he said of the Southwest-WestJet deal. “The airlines look very similar, and they have similar management philosophies.”

Mike Boyd, an aviation consultant in Colorado, cautioned that the announcement could generate unwarranted hype about an increase in low-fare service across international borders. He called these arrangements “incremental, but a far cry from what most people think of as international.”

Boyd suggested that the deal would result in more Canadians flying south on low fares than Americans heading north.

“Canada is not a huge market. There’s more moose than people up there,” he said.