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TRANSPORTATION REPORTER

Sean Durfy believes WestJet Airlines Ltd. is on pace to challenge Air Canada for the lead in domestic market share four years from now, likening the Calgary-based carrier to a long-distance speed skater who gradually closes in on the favoured rival.

"We're narrowing the gap. It's more of a 5,000-metre event rather than a 500-metre event," said Mr. Durfy, WestJet's chief executive officer.

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By the time the next Winter Olympic Games roll around in 2014, WestJet could be nipping at the heels of Air Canada, he predicted.

At the end of December, WestJet had a domestic market share of 38 per cent, compared with 36 per cent at the end of 2008, Mr. Durfy said in an interview yesterday, basing his figures on revenue passenger miles, a key measure of airline traffic.

While he declined to estimate his rival's share, industry experts say Air Canada's piece of the domestic market stood at 55 per cent at the end of 2009, down from 57 per cent a year earlier.

"We're targeting gaining a point or two every year, so to get to 39 or 40 per cent in late 2010 would be fantastic for us," Mr. Durfy said.

If all goes well for WestJet, the carrier will have roughly 45 per cent of the Canadian scheduled airline market in 2014. Toronto-based Porter Airlines Inc. plans to continue its expansion, solidifying its spot in third place, albeit a long way back from Canada's two largest carriers.

A decade ago, after acquiring Canadian Airlines International Ltd., Montreal-based Air Canada commanded 77 per cent of the domestic market while WestJet held just 7 per cent.

Founded in 1996, WestJet didn't fly east of Manitoba until 2000.

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WestJet has grown steadily from Vancouver Island to Newfoundland in recent years, as Air Canada shifted its attention to U.S. and overseas flights because, historically, long-haul routes carry the highest profit margins.

WestJet announced yesterday that its 2009 profit fell 45 per cent to $98.2-million. Its fourth-quarter profit declined 52 per cent to $20.2-million, but given last year's recession and glitches with a new computer reservations system, the carrier's executives said they were proud to have posted the 19th consecutive quarter of profit.

Versant Partners Inc. analyst Cameron Doerksen said it's realistic for WestJet to set its sights on Air Canada's No. 1 position domestically.

WestJet will benefit from international partnerships, attracting connecting passengers, though some pacts will take longer than expected to come to fruition. An alliance with Dallas-based Southwest Airlines Co., originally slated to take effect in 2009 or 2010, has been rescheduled for launch in 2011.

Mr. Doerksen said WestJet will be limited in Canada at some point with its fleet of Boeing 737 jets, unless it orders aircraft better suited to serving smaller Canadian cities such as Regina. Air Canada has an advantage because it offers flights through its Jazz affiliate, which operates regional jets and turboprops.

"If WestJet does want to tap into the traffic coming from some of these smaller cities, they will have to get smaller aircraft into their fleet or get a partnership going," Mr. Doerksen said.

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WESTJET (WJA)

Close: $14.03, up 17¢

***

WestJet ascends in Canada's skies

Founded in 1996, WestJet began flying east of Manitoba in 2000, gradually loosening Air Canada's grip on domestic flights.

DOMESTIC AIRLINE MARKET SHARE

2000:

Air Canada 77%

Westjet 7%

Other 16%

2006:

Air Canada 60%

Westjet 33%

Other 7%

2009:*

Air Canada 55%

Westjet 38%

Other 7%

* As of Dec. 31, 2009

WESTJET AVAILABLE SEAT MILES, IN BILLIONS

'04 - 9.0

'05 - 10.7

'06 - 12.5

'07 - 14.5

'08 - 17.1

'09 ' 17.6

THE GLOBE AND MAIL / SOURCES: INDUSTRY ESTIMATES; OFFICIAL AIRLINE GUIDE; WESTJET

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