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The Globe and Mail

WestJet, Southwest union hits a rough patch


An engagement between WestJet Airlines Ltd. and Southwest Airlines Co. has hit the skids, two years after being billed as a match made in aviation heaven.

Dallas-based Southwest is now complaining that WestJet is attempting to revamp the terms of their original pact. Southwest is also upset that the Calgary-based carrier recently decided to pursue a partnership with Delta Air Lines Inc. of Atlanta, instead of forging an exclusive WestJet-Southwest arrangement for cross-border flights.

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"WestJet in recent weeks requested material and significant changes to our agreement that we could not accept. We are, and always have been, prepared to move forward to implement our agreement with WestJet," said Bob Jordan, Southwest's executive vice-president of strategy.

In July, 2008, Southwest and WestJet signed a "code-sharing" pact that allows for co-operation on connecting flights, baggage handling and electronic ticketing.

Gregg Saretsky, who took over Thursday as WestJet's chief executive officer, said in an interview with The Globe and Mail last week that the snags are on Southwest's side.

"We have been, as you know, under construction at WestJet, building out our capability for code-share," Mr. Saretsky said. "Southwest had said late last year that they needed to put their build-out of their own capability for code-share on hold because they had other higher priority issues internally that they needed to deal with. So, the ball is clearly in Southwest's court. They have said to us that they are not going to be ready for code-share."

Founded in 1996, WestJet patterned its business model after Southwest, and both continue to tout a fun-loving corporate culture that emphasizes team work. Both airlines operate a single-type fleet of workhorse, single-aisle Boeing 737s.

Sean Durfy, who was WestJet's CEO prior to Mr. Saretsky, said in 2008 that the combination of WestJet and Southwest would be "a great marriage" and "a defining moment." WestJet ordered a large cake with the logos of WestJet and Southwest, along with the word "Yahoo!" in icing, to celebrate the planned union.

Indeed, the companies make no apologies for being corny. On Valentine's Days in the past, WestJet offered free flights to passengers with the last name Love or Sweet or Heart. Southwest, based at a Dallas airport called Love Field, has the stock ticker symbol LUV.

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The WestJet-Southwest deal was originally slated to take effect in late 2009, but was then put off until late 2010. Two months ago, WestJet said its revised goal was to implement the partnership plans in early 2011.

"We have not yet been notified of WestJet's intent to terminate that agreement," Southwest's Mr. Jordan said in a statement. "If we are so notified in order for WestJet to consummate its deal with Delta, Southwest remains very interested in offering our loyal customers service to Canada via the most efficient means possible."

Mr. Saretsky said in last week's interview that because Air Canada belongs to the Star Alliance of global carriers, WestJet is scrutinizing the other two groupings, called SkyTeam and Oneworld. Delta belongs to SkyTeam.

WestJet, which got sidetracked as a result of temporary glitches last fall in its new computer reservations system, already has partnership deals in place with Air France-KLM and China Airlines.

Robert Kokonis, president of airline consulting firm AirTrav Inc., said Delta has a global reach that would be more attractive to Canadian travellers than Southwest's network within the United States.

"Delta is a partner that's ready and waiting. With code-sharing, it opens up a whole bank of flights, operated by Delta, across the ocean for WestJet passengers," Mr. Kokonis said yesterday. WestJet doesn't fly overseas to either Asia or Europe.

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Delta, which merged with Northwest Airlines Corp. in 2008, has key U.S. hubs in Atlanta, Minneapolis, Salt Lake City, Detroit and New York's JFK International Airport.

Delta operates nearly 80 flights daily from Canadian cities to the United States, while Southwest doesn't have any cross-border routes, Mr. Kokonis said. Delta has a strong presence in Toronto and Montreal, and it also offers flights in Vancouver, Calgary and Edmonton - all five cities are among the Canadian airports where WestJet would benefit from connecting traffic.

In its statement, Southwest said it has also "learned of a deal by which Delta would transfer slots at LaGuardia Airport in New York to WestJet. A code-share between WestJet and Delta, as indicated in media reports, could be inconsistent" with the original WestJet-Southwest pact.

WestJet spokesman Robert Palmer said yesterday that the Calgary-based carrier "continues to have a strong relationship with Southwest and an agreement in place. We have no further comment at this time."

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