Senior executives of Southwest Airlines Co. are sending strong signals that they're preparing to enter the Canadian market, although cities in Canada are among 50 new destinations the airline is still considering.
"We have visited Canadian airports and Canadian airports have visited us and they make a compelling argument as to why we should serve Canada," Andrew Watterson, Southwest's vice-president of network planning and performance, said in an interview at the airline's headquarters in Dallas. He would not identify which airports are involved.
If Southwest expands to Canada it will bring lower fares, chief executive officer Gary Kelly said.
"I'd be surprised if we weren't in Canada at least by the end of the decade," Mr. Kelly told reporters during media events at the airline's headquarters.
Southwest, which carries the highest number of passengers in the United States annually, began its first international flights earlier this year to such destinations as Aruba and Mexico City from cities in the United States.
Its growth from three flights within Texas when it first started flying in 1971 to today has been propelled by low fares, adding airline travel to U.S. cities that were underserved and winning a reputation for good service and making travel fun. Other airlines around the world, including Calgary-based WestJet Airlines Ltd., have tried to replicate its formula of keeping costs low to maintain low fares.
"Wherever we go we will want to lower fares and stimulate the market to the extent we can," Mr. Kelly said.
Adding Canadian destinations to the Southwest network would pit Air Canada and WestJet against a much larger rival with deep pockets and a fleet of 700 airplanes – about twice the size of Air Canada's fleet.
Industry analyst Robert Kokonis, who heads consulting firm AirTrav Inc., said Southwest could potentially have a bigger impact on U.S. border airports such as Buffalo, N.Y., which attract an estimated five million Canadians a year, who fly out of and into those airports because of lower fees. Southwest already flies out of Buffalo while Bellingham, Wash., Detroit and other U.S. border cities are served by other U.S. airlines.
Mr. Watterson said that's not the market Southwest would tap.
The airline sees higher fares and underserved transborder markets that fit its strategy, he said, but high airport fees for airlines are a negative factor as the airline assesses the Canadian market.
"For Canada, the question for us becomes how do the yields offset those high facilities' costs, given that we like to have low fares, it's part of our brand."
Mr. Kokonis said flights from Calgary to Houston, Toronto to Baltimore or Washington and Vancouver or Abbotsford, B.C., to Las Vegas or Phoenix would be among the potential routes for Southwest.
The cheapest flight between Seattle and Las Vegas on Southwest is offered at $415 (U.S.). Air Canada's lowest fare, on its Rouge, low-cost airline, is $489 (Canadian). WestJet has a sale on for flights in October, with its lowest return ticket at $402.90.
Mr. Kelly said expansion to Canada is made possible by Southwest's purchase of Boeing 737-800 aircraft, which can fly farther than the smaller versions of the plane.
But industry analyst Ben Cherniavsky, who follows the Canadian airlines for Raymond James Ltd., in Vancouver, said he believes Southwest will reject Canadian cities.
"I think Southwest is going to look at Canada and say there's too many things that are unattractive that don't make sense about the market," Mr. Cherniavsky said.
"Southwest doesn't like seasonal routes. There's nothing that crosses the border that isn't seasonal."