The push includes offering year-round flights for some U.S. cities currently with summer-only operations and adding departures in others, said Chief Executive Officer Gregg Saretsky, 54. Calgary-based WestJet will unveil some of those plans next month when it releases its 2014 schedule, he said.
“Do we think there’s opportunity for more in the U.S.? Absolutely,” Saretsky said in a Dec. 17 telephone interview. “Places like Chicago, Dallas and San Francisco, we only serve during the summer season, and there’s an opportunity to take those to year-round service. And as we continue to grow our airline partnerships, we can add service to their hubs — places like Atlanta, Minneapolis, Miami and Los Angeles.”
A U.S. focus will help lure more high-fare business fliers to an airline founded in 1996 to cater to leisure travelers. Saretsky also is interested in bidding on rights to serve Washington’s Reagan National Airport after winning an auction to resume flights last year at New York’s LaGuardia.
“They are under-penetrated in the U.S. market,” David Tyerman, a Canaccord Genuity Inc. analyst in Toronto, said in an interview. “WestJet is still a young airline and there are lots of large cities that they don’t connect to at all, or don’t have enough service to. The United States is a huge country.”
WestJet, which now serves 18 U.S. cities, has 20 percent of the Canada-U.S. market, said Robert Palmer, a spokesman. Air Canada, the country’s biggest airline, projects its slice at 35 percent. That compares with a 35 percent-19 percent split estimated by Chris Murray, an AltaCorp Capital Inc. analyst in Toronto. WestJet also shares booking codes on some U.S. routes with Delta Air Lines Inc. and American Airlines Group Inc.
U.S. and international flights accounted for about 44 percent of WestJet’s capacity, or the number of seats flown a mile, in 2013’s first nine months, according to a company filing. That’s up from 34 percent three years earlier, WestJet data show.
Saretsky didn’t say how much of WestJet’s planned capacity expansion of 4 percent to 6 percent in 2014 would be in the U.S. Encore, the WestJet short-haul unit that now operates only in Canada, will get about half that growth, he said.
“They carved out their niche in Canada, and maybe they are on the verge of reaching their saturation level,” Chris Hensen, a fund manager at Manulife Asset Management Ltd., said by phone from Toronto. “The natural evolution for them is to expand into the U.S. to try to capture the high-end business market.”
Airlines prize business travelers in part because of their tendency to fly at the last minute, paying more than bargain- minded vacationers who book early. Sprinkling in more of those fliers would add revenue at WestJet, whose sales totaled C$2.74 billion ($2.58 billion) through September.
WestJet gained 41 percent in 2013 through yesterday, topping the 34 percent climb in the Standard & Poor’s/TSX Industrials Index. Air Canada, the country’s biggest airline, has gained more than fourfold.
While Hensen said he sold his WestJet shares earlier this year because he “didn’t see much upside left,” the stock remains a favorite among analysts, with 12 buy recommendations and four holds. That made it the third-highest rated company among Canadian industrials as of yesterday, based on data compiled by Bloomberg. Tyerman lists the stock as buy.
WestJet’s challenges include Montreal-based Air Canada and its larger network — and a stated goal of winning more U.S. business. Cross-border flights remain “very important,” Isabelle Arthur, an Air Canada spokeswoman, said by e-mail.
Air Canada seeks to put more U.S. passengers on overseas flights via connections at its Toronto hub, CEO Calin Rovinescu told investors at a Nov. 19 meeting in Toronto. Rouge, its low- cost leisure unit, added flights to Las Vegas and to Orlando and Sarasota, Florida, for its 2013-14 winter schedule.
WestJet is also preparing to take on Air Canada in the North Atlantic market, with a plan announced last month to begin seasonal flights to Dublin from St. John’s, Newfoundland, in June, and eventually reach other European cities. Saretsky said half of the available Dublin tickets for 2014 have been sold.
Neither Canadian carrier faces Southwest Airlines Co., the largest U.S. discounter, on their side of the border. U.S. airlines do get close: Southwest flies from Buffalo, New York, among other northern U.S. cities, and Allegiant Travel Co.’s network includes Niagara Falls, New York.
WestJet entered the U.S. market in September 2004 with flights to LaGuardia and Los Angeles, later adding destinations such as Orlando, San Francisco and Phoenix. It pulled out of LaGuardia after less than 10 months, saying the route wasn’t viable, then returned last year.
Encore, which began operating in western Canada six months ago, also will contribute to future U.S. growth. The unit will probably start service to the U.S. in 2015, Saretsky said.
While Saretsky didn’t give specifics about the U.S. changes due in 2014, he said next year’s summer schedule would reflect the expansion.
“You will see some of that,” he said. “It’s in the cards.”
–Editors: Molly Schuetz, Ed Dufner
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