WestJet partners up with Delta Air Lines in second U.S. interline pact

CALGARY – WestJet Airlines Ltd. made further inroads into the U.S. market with a partnership Monday that will enable its passengers to easily connect with Delta Air Lines flights.

Customers of either airline can now travel over connecting flights on one ticket, get boarding passes for all flight legs at check-in and tag bags through to their final destination, Calgary-based WestJet (TSX:WJA) said of the interline agreement.

“This is part of our strategy to have a partnership in each of the major geographic regions,” said Hugh Dunleavy, WestJet’s executive vice-president of strategy and planning, in an interview.

“The United States is such a huge market and it’s obviously a focus of our attention.”

Interline deals often pave the way for code-shares, in which airlines can sell seats on each other’s planes using the same two-digit code.

The new pact, in effect at more than 25 Canadian and U.S. gateways, follows a similar deal WestJet inked last fall with American Airlines Ltd (NYSE:AMR).

Dunleavy said WestJet considers both American and Delta as vital to its U.S. operations.

“I think each partner would like an exclusive partnership, and that’s probably true as much as European and Asian carriers as well,” he said.

“The truth is when you’re competing in this space, you need enough partners that can help you to become relevant in each of the markets that you wish to serve.”

For instance, Delta, whose main hub is Atlanta, gives WestJet more access to the U.S. Eastern Seaboard than would American, which flies out of Dallas.

AirTrav airline analyst Robert Kokonis has long said Delta represents a “more logical” partner for WestJet than American, since it serves twice as many Canadian destinations.

“Furthermore, where the WestJet-Delta interline agreement has two-way flow, the WestJet-American Airlines interline agreement covers only sales for U.S. originating flights on WestJet and American,” he wrote in a research note.

National Bank Financial analyst Cameron Doerksen said the Delta (NYSE:DAL) deal will pay off for WestJet, but it will take time for the results to show.

“WestJet has an existing interline agreement with American Airlines so the addition of Delta gives it two strong sources of inbound U.S. travellers,” the analyst wrote in a note to clients.

“Both American and Delta have extensive U.S. networks (along with large international networks) with a strong presence in key business markets, which are not well served by WestJet currently.”

WestJet has already has an interline deal with British Airways, and code-share deals with Air France-KLM, Hong Kong-based Cathay Pacific and China Airlines.

Interline and code-share agreements have helped WestJet to expand its market reach, since its fleet of Boeing 737 aircraft can’t make the long flights to Europe or Asia.

The Delta deal gets WestJet greater access to Latin America, a market where the airline has had limited reach so far.

“With the 737 fleet there are range limitations to that size aircraft. It gets us most of the way down to the southern end of the Caribbean, but beyond that you have range issues with that particular aircraft,” Dunleavy said.

Aviation analyst Rick Erickson said the interline and code-share deals offer WestJet a source of revenue at a relatively low cost.

“You don’t need to work anywhere near as hard, and incur the kinds of costs you do if you’re eating the whole distribution cost of finding a brand-new passenger,” he said.

WestJet is set to announce its fourth-quarter and full-year results later this week. Analysts polled by Thomson Reuters are on average expecting earnings of 18 cents per share and revenues of $664 million.

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