Southwest Walks Away From WestJet, Now What?

Southwest, Westjet

In a move that surprised Me and Southwest CEO Gary Kellynobody, 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.

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17 comments on “Southwest Walks Away From WestJet, Now What?

  1. How about Porter Airlines? They do fly to Chicago Midway, so they could be the last hope for Southwest to codeshare in Canada.

    1. I classify Porter under the “build up a tiny operator in Canada” strategy. Though they’re making a lot of noise, they’re tiny and they’re only successful because of their monopoly at the close-in Toronto city airport. I don’t know that Southwest would want to bother.

  2. If there’s money to be made by WN from flights across the 49th parallel why don’t they just do it themselves? That’s what I never really understood about the WestJet code share in the first place. West Jet already flies Canadians to all the warm weather leisure spots. None of my Canadian relatives fly down to Florida and then want to jump over to Dallas or Chicago or Denver. They’re on the beach for a week and then back to the great white north.

    Cross border travel for busines and expatriots alike seems the sweet spot for WN. Delta has a monopoly on Canadian flights from MSP. A common route I take is MSP – YYC where flights average around $500 R/T for Y class on an A319. One would think WN could be a real thorn in the side of DL if they competed on that same route. Likewise to UA and AA out of DEN and DAL respectively. Then again, me thinks WN would already be doing it if they could make $$$ on those routes.

    1. WN isn’t trying to fill planes with folks heading to Canada. They are trying to pick up a few extra folks on flights they are already running from their outstations feeding into a large city that would connect to another carriers flight. It’s not about serving Canadian cities, just grab a few more folks along the way.

  3. But hey.. Virgin America thinks it’s found a pot of gold in Toronto……

    Seems to me this is the difficulty with US-Canada traffic:

    1) Most Canadians live within driving distance (2-3 hours) of a good-sized US city if they want to come shop or laugh at Americans.
    2) They also live just as close to a good-sized US airport (where fares are likely a good deal cheaper – see BLI).
    3) Whatever traffic exists between parts of Canada and the US away from the border (generally to warmer climes) is well-handled by existing service.
    4) Canadian carriers also provide nonstop service to other places Canadians want to go (like Mexico, Cuba, Hawaii, the Caribbean, etc.), likely meaning more loyalty.

    That DL uses CRJs between the biggest hub in the world and the biggest city in Canada says something.

  4. I never really understood what WN’s motivation to stab into the Great White North was to begin with. The only thing WS brought to the table is a ‘similar-ish’ business model. BW beat me to the punch with 4 really good points that marginalized the venture before it ever took off…then factor in the VERY aggressive tariffs tax levied in Canada and you end up with a zero sum (or negative) ROI.

    From a geographic and demographic standpoint, WN setting its sights south of the border makes more sense. The Canadian market is mature and will bump along with GDP…the Mexican market is poised to grow…significantly…over the long term.

  5. Cranky, in an earlier post, you explained which airlines were eligible for the divested slots.

    “airlines that hold less than 5% of the slots at each airport. No cheating allowed – the sales can’t be to any airline that is owned by Delta/US Airways or even one that codeshares with them.”

    Technically Westjet qualifies now, but they’re saying if they do get the slots, they will indeed turn around and codeshare with Delta. Seems kind of sneaky to me.

    Another somewhat related question. Republic Airways Holdings has 124 slots at LGA/DCA (I don’t know the breakdown for each airport) that they are leasing to US Airways. Who is the slot interest holder for those particular slots. Republic – who owns them or US who leases them from Republic?

    1. Yep, seems sneaky to me as well but then again, they weren’t actually complying with the feds’ request anyway so I guess it doesn’t matter.

      As for the slots holdings, I don’t know the technical details. I believe that some of them were US Airways slots that they sold to Republic and leased back to raise cash awhile back.

  6. Kinda disappointed you left out Porter. They filed an IPO next week and are talking about moving to larger gauged aircraft. Sounds like a very nice codeshare partner, indeed!

  7. WN would do better to use its own planes and keep being a thorn in the side to U.S. carriers. They would need low cost partners if they want to partner up to Canada and Mexico, so you are right there are slim choices left for Canada.

  8. Ooh yeah, Joe McBryan and Southwest together, wont that be fun.

    If you’re not getting it down there Brett, Ice Pilots NWT covers the day to day operation of Buffalo — It’s a good watch if you like things like the last scheduled DC3 passenger service in the world.

  9. It would make a lot of sense for WN to start Canada-Florida. There are never enough seats to YUL/YYZ from TPA/MCO/FLL, and no need to worry about connecting passengers!

  10. With the codeshare idea, the idea of selling Southwest seats to Canadian destinations was actually secondary. While most WestJet passengers would have been terminating their journeys in Las Vegas, Orlando, etc. there would have been some who wished to fly onward to Albuquerque, Nashville, Houston, et al. The idea behind the codeshare was that Southwest would fill existing flights with WestJet customers who might otherwise have flown another US carrier or Air Canada because WN/WS wouldn’t serve their destinations together. Codeshare was meant to increase loads at focus cities by expanding the outbound market to include inbound connecting passengers from another airline (something relatively new to Southwest – from a formal interline agreement perpective). Again, this wasn’t about Southwest serving Canada, it was about filling existing airplanes on existing flights by making it easier for passengers to connect to Southwest flights when they needed to.

  11. I have heard that Southwest can’t offer international flights of its own (to Canada or Mexico) because they don’t have assigned seating and this is required on those type of flights. I could be totally wrong on this but it would seem like they’d at least have been flying to Mexico for a while by now if they could (lots of leisure markets, close to Texas, etc.) I think international is an area they should look at moving into…at least Mexico and Canada…even if they have to have assigned seating on those flights, since I think they’re running out of places to grow in the US market.

  12. Did Southwest really have IT problems or did management start to realize they were entering into a partnership that wasn’t worth the resources it would take, especially with a partner that was looking to hook up with someone else the whoel time they were dancing?

    1. They were having IT problems, but they’re still doing those projects for other airlines like Volaris. The reality here is that WestJet is the one who really walked away even though technically it was Southwest. WestJet wants to work with Delta and Southwest wasn’t willing to let that happen, so they walked away. But I don’t think WestJet was talking to Delta the entire time.

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