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Friday, July 04
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As rivals cut, WestJet sees an opening
VIRGINIA GALT
From Friday's Globe and Mail

Calgary-based WestJet Airlines Ltd., long viewed as the maverick of Canada's airline industry, is bucking the trend once again, looking to expand while competitors contract and prowling for opportunities in their abandoned routes.

"We will continue with our program, our strategy, but we will [also] look at whether there are opportunities in what has been announced," Richard Bartrem, WestJet's vice-president of culture and communication, said in an interview yesterday after regional airline Air Canada Jazz announced service cuts.

Jazz said in a statement yesterday it will cut its capacity by 5 per cent and eliminate 270 jobs because of soaring fuel costs and service cuts announced two weeks ago by its primary customer, Air Canada.

The Jazz cutbacks come as airlines south of the border also slash service and staff. American Airlines Inc., a unit of AMR Corp., plans to cut domestic capacity 11 per cent to 12 per cent this fall.

American notified its flight attendants union on Wednesday it will cut up to 900 jobs starting Aug. 31, but that appears to be the tip of the iceberg. While not giving a total figure, the airline says it expects to shed 8 per cent of its work force. With about 85,500 workers, that would represent more than 6,800 jobs.

WestJet, which has a more modern, fuel-efficient fleet and lower operating costs than Air Canada and Jazz, is continuing to expand its service and will continue to hire this year, Mr. Bartrem said.

The Calgary-based airline recently announced plans to introduce flights to Barbados and the Dominican Republic and beef up its service to Mexico this winter. Domestically, WestJet also announced plans last week to add service this fall from Calgary to Grande Prairie, Alta., and Kamloops, B.C.

WestJet said it will take a look at whether there are further expansion opportunities as more details emerge about which routes are being cut by Air Canada and Jazz.

The other airlines are cutting routes that are not cost effective for them, Mr. Bartrem noted. "That's one of the things we would take a look at. If it didn't work for another airline, would it work for WestJet, with our cost structure?"

Cameron Doerksen of Versant Partners said it will be interesting to see what WestJet does in the coming months.

"They are continuing to grow even though others are shrinking," Mr. Doerksen said.

"To some extent, perhaps, this is an opportunity for WestJet to gain some market share because some of their competitors are reducing capacity."

Jazz president and chief executive Joseph Randell, in announcing the airline's service and staffing cuts, said, "These are difficult times for our industry."

"We are in a period of great uncertainty and cannot predict where the price of fuel is going. We have taken immediate action to better match our resources with our new revenue levels," Mr. Randell said.

The regional airline will not know the extent of the route reductions until Air Canada finalizes its fall and winter flying schedule later this month, a spokeswoman said. Jazz has a commercial agreement with Air Canada under which Air Canada purchases substantially all of Jazz's fleet capacity.

However, based on some cancellations already announced by Air Canada, it is known that the following Jazz non-stop routes will be cut: Hamilton to Montreal on July 31; Hamilton to Ottawa on July 31; and Calgary to Comox, B.C., on or about Sept. 2.

Jazz said its staff reductions will affect about 5 per cent of its work force, across all areas of the business. The date for the cuts has not yet been determined, as the airline and its unions are working to "mitigate the job losses," the company said.

Analysts said the Jazz announcement was not unexpected, given the earlier cuts announced by Air Canada.

"Jazz is proactively adjusting its cost base to match its expected level of demand," David Newman of National Bank Financial said in a note to clients.

"Further, we believe Jazz could have idle aircraft available going forward [as a result of reduced demand for Air Canada], which could open up further charter opportunities" such as transportation of employees to remote worksites in the energy sector, Mr. Newman said.

In the U.S., American Airline's planned job cuts follow announcements of similar reductions at other U.S. carriers — 4,000 at Delta Air Lines Inc., 3,000 at Continental Airlines Inc., 2,550 at UAL Corp.'s United Airlines, and 1,700 at US Airways Group Inc. Airlines are raising fares and special fees to raise cash. Late Wednesday, United boosted the fuel surcharge on U.S. travel by $20 (U.S.); it is now up to $170 per round trip. American and Continental matched the increase yesterday.

With a file from Associated Press


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