North America is a big place. When you think about where the next big airline battle is likely to be, you probably aren’t going to guess it’s in small town Canada. You’d be wrong. The battle is brewing, and Air Canada is on the defensive. WestJet is getting ready to invade.

In Canada, there are two big domestic players. We have the big ole’ legacy Air Canada and the young punk WestJet. (Yes, there are other players including the stylish and cool Porter and some of the guys doing rugged flying into the north, but those are niche players.) WestJet has often been called the Southwest of Canada, but it’s really more like JetBlue. There is live television onboard, and the airline wants to partner with many others in order to feed its flights. It also has put together an extra legroom product that it will sell for a fee.

Dynamics of Canada
One of the more interesting announcements to come from the WestJetters was the decision earlier this year to create a regional airline that would fly turboprops around smaller cities.

This sounds pretty goofy, but Canada is a different kind of place, eh? It is an enormous country from a geographic perspective but all but 2 or 3 people out of its 35 million residents (an eighth of the US population) live very close to the US border. So the country’s air travel needs tend to be very unique.

WestJet Choose Small Over Big
There aren’t a ton of cities that can support big airplane service, but WestJet has done a great job of making huge gains in those places. But the opportunity is somewhat limited, and that means WestJet had to start thinking about going elsewhere if it wanted to expand. It could have been like most airlines and tried to go bigger. After all, flying big airplanes over oceans is downright sexy, right? But that would have been pretty stupid.

Air Canada today already flies all over the world and fills many of those seats with cheap connectors from the US. There is limited service from non-Canadian carriers (thanks to some protectionist policies up north) but ultimately, there isn’t a lot of opportunity. At least, there isn’t nearly the opportunity that there could be in the opposite direction.

Feeding small cities in the global network is still largely the domain of Air Canada and its regional fleet. Sure, there are plenty of other operators who do a lot of the tiny town flying – places like mines and oil fields. But for getting people around Canada and into the rest of the world, Air Canada dominates. WestJet saw that and decided that there was opportunity. After all, two beavers are better than one, right?

An Encore
So WestJet has been rolling right along. It decided to buy a fleet of Q400 turboprops. (Buy Canadian!) And it decided to name the airline… WestJet Encore. At first that named seemed odd, but then I remembered the dual French/English thing up there. WestJet Encore works in both languages. Though I think that I speak for English-speakers everywhere in saying that we would have all been perfectly fine with WestJet Part Deux instead.

But let’s get back to the point. WestJet Encore is pretty much ready to go except for a few tiny things… like where it’s going to fly. Routes won’t be announced until early 2013, and it won’t start flying until later next year. So there is plenty of time, but Air Canada isn’t taking any chances.

Air Canada Flexes Its Muscles
Air Canada has already seen a lot of traffic disappear domestically thanks to WestJet’s growth, and it doesn’t want to lose anything on the smaller routes it still dominates. So even though we don’t know where WestJet Encore will go, Air Canada is ramping up.

Apparently Air Canada thinks that a big chunk of the ramp-up will be in the West and so it’s diving in head first. Starting December 1, there will be one more flight each day between Calgary and Fort McMurray, Grand Prairie, and Yellowknife. Edmonton to Ft McMurray, Regina, and Saskatoon will see an extra flight as well. And not to be left out, Vancouver will get an extra flight each day to both Ft St John and Nanaimo. As of today, most of these are flown with 50 seat CRJs. Beginning in February, however, the 74 seat Q400 will begin moving into these and other routes in the region. So we’re seeing more flights and more seats on each flight. Let the bloodbath begin!

By the time WestJet moves into these markets, it looks like Air Canada will be ready for a fight. I’d imagine we’re going to see some serious bleeding until things sort out.

In the end, I can’t imagine that these markets can support all the service they’re about to get, so there will have to be changes down the line. Will WestJet really be able to make money in an area where other low cost carriers have struggled? If this were in the US, I’d say no. But it’s Canada. And things work differently up there. At least, that’s what WestJet is banking on.

[Photo via Wikimedia Commons User Leech44/CC-SA 3.0]

JetBlue and WestJet both had separate announcements last week around the same basic idea. The airlines are cutting legroom in the back of the bus in order to create or expand a section with more legroom up front. This is an interesting contrast to Southwest, which apparently doesn’t see the value in a differentiated “Economy Plus”-style product. I’m with JetBlue and WestJet on this.

JetBlue announced that it would double the number of seats with Even More Space on the Embraer 190 fleet from 8 to 16. To add those extra inches, it either has to get rid of some seats or it has to shrink legroom elsewhere. Looking at the seat maps, it appears JetBlue is going the latter route. It will still have 100 seats on the airplane but at least some of the regular coach seats are bound to drop from the usual 33 inches of pitch.

WestJet said it would introduce its first premium economy product on its whole fleet. As part of this new offering, WestJet will “standardize the seat pitch for the remaining rows on all aircraft to 31 to 32 inches.” On some aircraft, today’s seat pitch is as high as 34 inches so it will be a change for the worse for those who don’t want to pay for legroom.

Southwest, on the other hand, announced awhile ago that it would introduce new, denser seating on its airplanes. It’s adding a row of seats but all seats will be the same on the airplane.

Which strategy is right? These are all customer-friendly airlines and they’re using different tactics. I’d argue Southwest is missing the boat on this one. Why? It’s not a perfect comparison but we can learn alot from the failure of American’s More Room Throughout Coach many years ago while United’s Economy Plus succeeded.

There is value in the upsell.

When American first rolled out increased legroom for all coach seats on the airplane many years ago, the idea was to become a premium airline that people would pay extra to fly. That didn’t happen. A lot of coach travel is viewed by consumers as a commodity. They just want to get places for cheap. So when American removed seats, it increased its unit costs (costs ended up being spread out over fewer seats) and it couldn’t get enough revenue to justify it.

With United, however, Economy Plus was just a subsection of coach. It took the airline years to figure this out, but there are absolutely some people who will pay for more legroom. Some people. United’s Economy Plus has now become so popular and profitable that not only did the new (ex-Continental) management decide to keep it despite biases to do otherwise, but American and Delta have all copied it as well.

JetBlue used to have two inches more legroom in the front half of the airplane on its A320s but it never charged for it. The airline rearranged rows and created the Even More Legroom product which it could sell to those who were interested. It was a success and JetBlue has brought in tons of cash with the program. Now it is expanding it further on the Embraer 190.

WestJet is possibly more interesting as a comparison since it is often thought of as the Southwest of Canada. But the egalitarian model doesn’t look as good north of the border anymore. Though WestJet has good legroom for all travelers today, those travelers don’t all want to pay for it. Now the airline can give average legroom in the back while upselling to those who want to pay more to get more.

That makes a lot of sense. So when Southwest decided to redo its seating, why didn’t it do the same? Instead of adding an extra row, the airline could have just reduced seat pitch (which it did) and added a couple of rows of premium economy. Maybe then it could bundle it with Business Select fares and actually drive some revenue with that product. (Business Select makes a lot less than JetBlue makes with its extra legroom seats and JetBlue is a much smaller airline.)

I know for Southwest, the idea is to remain that same egalitarian airline that it’s always been. But in a world where people are willing to pay more for more, you’d think the airline might have thought differently. It seems to me that WestJet and JetBlue are making smart moves here.

Remember that whole Delta/US Airways slot swap deal? US Airways gave most of its slots at New York’s La Guardia airport to Delta in exchange for most of Delta’s slots at Washington’s National Airport along with a couple of other considerations. As part of that, Delta had to put 24 slot pairs up to auction for new entrants. That happened last week, and now, we know the winners . . . sort of.

At La Guardia, there were two bundles of 8 slot pairs being auctioned off. That means that two airlines will get the right to operate 8 takeoffs and 8 landings per day at good times. The bidders had to be either new entrants or airlines with very small presences at the airport already. One of the winners has been officially announced . . . WestJet.

That’s right. Those crazy Canucks are swooping in to fly 8 daily trips to La Guardia. It’s not a surprise that WestJet was interested. The rumors were that WestJet’s proposed partnership with Southwest ended over something closely related to La Guardia. See, WestJet wanted to be able to partner with multiple airlines in order to help feed its network. This was important at La Guardia, where Southwest couldn’t add much. Southwest supposedly didn’t want to see WestJet partner with anyone else. The partnership ended so that WestJet would be free to pursue a life of religious fulfillment, er, um, multiple partnerships.

Earlier this year, Delta launched an interline partnership with WestJet. I imagine we might see it get a little cozier now that Delta will have so many flights that could feed WestJet. Someone is going to need to fill those 8 flights, most if not all of which are undoubtedly bound for Toronto.

But what about the other eight? That’s a bit more of a mystery. Though it hasn’t officially been announced, Bloomberg reports that JetBlue won that bid. It also is said to have picked up the 8 slot pairs down at Washington/National as well. That’s a big win for the Blue Crew.

JetBlue’s interest should be no surprise. It already runs just shy of a dozen daily flights out of La Guardia to Ft Lauderdale, Orlando, and West Palm Beach. At National, it has nine with flights to Boston, Ft Lauderdale, and Orlando. This will help the airline expand its reach at those airports with a nice chunk of new slots.

So is anything surprising about this whole thing? You bet. The most surprising thing is that Southwest didn’t win anything. It has a gajillion* dollars in the bank (*rough estimate) and certainly could have outbid anyone if it wanted. It has made serving big cities a priority lately as a way to get its customers wherever they need to go in the US.

Southwest fought its way into La Guardia when it got 8 slot pairs there to start flights to Baltimore and Chicago. It gained more when it acquired AirTran, which has about 20 slot pairs. It acquired its first beachhead at National with AirTran’s 12 slots there. So you would think it would have been hungry for more, and in fact, it has expressed great interest in the past. It just somehow got outbid this time.

So, Southwest fans won’t be thrilled, but JetBlue lovers should be. There will be more JetBlue flights coming soon, assuming the deal gets done. And Canadians can rejoice that they will have another option to get to New York.

Now we just have to wait for all the “i’s” to be dotted and “t’s” crossed. Oh yeah, and we’re still waiting for final governmental approval in a couple areas. But things are starting to shape up nicely.

If you want to follow this closely, head on over to Things in the Sky. Dan Webb is keeping a close eye on this.

[Original photo via Flickr user Bob n Renee/CC 2.0]

In a move that surprised nobody, Southwest told WestJet to take a hike last week after their relationship fell on hard times. It looks like Volaris will now be Southwest’s first modern codeshare partner while they look for other options on how to serve Canada. That’s too bad. Looks like the Canadian Mountie costume I wore to Southwest’s Halloween a couple years back was all for naught.

This little fight became publicly known in late March when new WestJet CEO Gregg Saretsky said he wasn’t happy with how long it was taking for Southwest to get its act in order. Then he went on to say they were talking with Delta about a codeshare, conveniently fitting with Delta’s plan to transfer 5 slots to WestJet at LaGuardia. Uh huh.

Southwest said that WestJet had asked for some material changes to the agreement awhile back and then on Friday, the axe fell. Southwest walked away. So what were those material changes? If I had to guess, I’d say it was related to other partnerships that WestJet wanted (duh). Did they give Southwest blanket exclusivity? I’m sure not, but I’m guessing Southwest wasn’t too happy with them trying to link up with another large domestic US airline. So that’s over.

Now, Southwest says (in a very stilted way) this:

We remain interested in exploring the possibility of one day offering service to Canada if it makes sense for Southwest and for our Customers. That would not rule out future codeshare relationships with Canadian carriers, or flying north of the border ourselves.

Hmm, future codeshare relationships? Well if it’s not WestJet and I can’t imagine Air Canada, that leaves some pretty slim pickings. Air Labrador is probably working on trying to feed Sun Country and its burgeoning Gander hub. Maybe Southwest can connect up with Buffalo Airways in Yellowknife? No, I know. It’ll be Aklak Air in Inuvik. Like I said, the pickings are slim.

At this point, Southwest probably needs to look at whether it’s even worth flying to Canada at all. Without WestJet, I imagine a codeshare opportunity is dead, so it becomes a matter of whether they want to build up a tiny operator in Canada (I doubt it) or start flying there themselves. There aren’t going to be that many cities that are attractive for high frequency service on a 737. I mean, look at Air Canada. They fly 70-80 seaters on a ton of routes to the US and they have all kinds of feed coming from within Canada already. Yes, Southwest can bring feed from the US, but I’m just not convinced it’s worth it.

Now Departing: Delta Cuts Ties with Midwest Airlines – BNET
Midwest and Delta are no longer going to be frequent flier buddies.

Southwest Fail: Technical Delays Frustrate WestJet’s New Boss – BNET
WestJet is not happy that it’s taken Southwest so long to get its act together regarding the announced codeshare. Looks like their eyes are straying toward Delta.

Bend Not Break: Boeing 787 Passes Wing Load Test – BNET
It wasn’t as dramatic as the 777 wing snap, but the 787 passed the wing load test with flying colors.

American Airlines Seeks Air Supremacy in New York (With JetBlue’s Help) – BNET
This is my take on what American is up to in New York – a complementary piece to my JetBlue-focus here on Cranky.

United’s new Boeing 777 to have video-on-demand – Chicago Tribune
The Trib picked up on my United 777 story, and I had a couple comments to add.

Airline Baggage Fees: The Perils of Making Air Travel Suck More – BNET
Airlines that charge bag fees like to crow about the revenue bump, but they don’t talk much about the hidden costs of the policy. Oh yeah, and that whole customer dissatisfaction thing.