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WestJet going regional

Canadian passengers flying in Western Canada will see some relief from rising airfares this summer as WestJet’s new Encore regional service takes flight in June, analysts say.

The airline will add Fort St. John, B.C. to its network and use the first two 78-seat Bombardier Q400s on routes between Vancouver and Victoria, and Calgary to Nanaimo, B.C.

Additional routes will be added as it takes delivery of five more planes by the end of the year.

WestJet (TSX:WJA) says its entry into a new market typically lowers fares by up to 50 per cent and the arrival of Encore is already causing Air Canada to respond with its own fare cuts on some of the routes.

WestJet Encore’s introductory fare on the Fort St. John routes to Vancouver and to Calgary are $109 plus taxes, or up to about $172. Air Canada is lowering its one-way fare including taxes by about 40 per cent to $225 from up to $372 before Encore arrives. The current fare for flights this month is even higher.

Introductory fares for the quick flight between B.C’s capital and Vancouver will be $49 plus taxes (or up to about $87), while flights to Nanaimo will be $79 plus taxes (up to about $140).

Encore isn’t having much impact on fares between Victoria and Vancouver, however, because of the competition from small carriers in addition to Jazz, says industry analyst Robert Kokonis.

The airline has firm orders for 20 Q400s and options for 25 more planes over the next six years.

After increasing its regional service in the West, WestJet plans to introduce Encore to Eastern Canada in about nine to 12 months.

Launching WestJet Encore in the West was expected by industry analysts.

“It’s good news for consumers,” said Kokonis, president of airline consulting firm AirTrav Inc.

“As they progressively increase the capacity as they get additional Q400s we’re going to see these kinds of pricing benefits extended to consumers from coast to coast.”

WestJet will also use the Q400 to add some capacity on routes that don’t warrant a full Boeing 737.

Kokonis expects the airline will eventually use the planes to add flight frequencies targeting corporate and government travellers on the lucrative eastern triangle of Montreal, Ottawa and Toronto.

“Certainly there’s going to be some very interesting pricing actions in the market in the next year and this is also a signal that WestJet’s not just looking at Air Canada but they’re looking at all competitors, including Porter,” he said in an interview.

WestJet Encore’s president called the upcoming launch a “historic moment.”

“We are just getting started,” said Ferio Pugliese, who is also a WestJet executive vice-president.

The airline said Fort St. John, the so-called Energetic City, creates a strong foundation for the new service as a centre for northeastern B.C.’s diverse economic base of oil, natural gas, forestry and agriculture.

The Calgary-based carrier is facing increased competition from Air Canada (TSX:AC.B), which recently announced increased frequencies in Western Canada with its own fleet of Bombardier Q400s, operated by Jazz. It plans to increase its capacity for example between Vancouver and Fort St. John by 19 per cent as of May.

A WestJet spokesman said starting in Western Canada is less about protecting its turf than making sure the Calgary-based Encore is comfortable with starting a new service and adding a new fleet type from its home base.

About 300 employees will be hired by year-end to operate the first seven Bombardier aircraft. Up to 1,800 will be employed when the service is totally ramped up.

Employees will earn about 10 per cent less than what colleagues make at the mainline carrier, but in line with a low-cost regional service, spokesman Richard Bartrem added.

WestJet also announced Monday that it will deploy its fleet of Boeing 737 jets to two more U.S. destinations this spring and beef up its mainline service to several destinations in Canada, the Caribbean and Mexico. Among the Canadian service enhancements is non-stop service between Toronto and Fort McMurray, a major centre for Alberta’s oilsands industry.

On the Toronto Stock Exchange, WestJet’s shares closed down 15 cents at $21.24 in Monday trading.

 
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