GLOBE & MAIL: WestJet Picks Bombardier Plane For Regional Service

05/02/2012| 08:30am US/Eastern

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(This article was originally published Tuesday.)

(From Canada's Globe and Mail newspaper, May 2 edition.)

By Brent Jang

Of THE GLOBE AND MAIL

TORONTO (Globe and Mail)--WestJet Airlines Ltd.'s (WJA.T) decision to order Canadian-built Bombardier Inc. (BBD.B.T) Q400 turboprops will allow the carrier to enter smaller markets across Canada while diversifying the fleet beyond Boeing 737s.

Bombardier, which assembles the Q400 at its Downsview plant in Toronto, will deliver up to 45 planes to WestJet under a schedule that calls for new regional routes starting in the second half of 2013.

At a list price of $30 million for each turboprop, the deal's 45-plane value totals $1.35-billion spread over six years. Major orders get discounted, but WestJet and Bombardier declined to provide pricing details on the 20 firm orders, with options for 25 more Q400s.

The winning bid from Montreal-based Bombardier beat a rival submission that touted the French-Italian ATR 72-600. European aerospace giant EADS (>> EADS) co-owns ATR with Italy's Alenia Aermacchi.

"There was a vigorous competition between the two manufacturers, and we're very pleased with the price that we were able to secure these aircraft for," WestJet chief executive officer Gregg Saretsky said during a conference call Tuesday.

Communities such as Penticton, B.C., and Brandon, Man., have been lobbying WestJet for new service. Calgary-based WestJet also wants to "connect the dots" for destinations already on its network map so that non-stop flights are introduced, including the possibility of Regina-Winnipeg and Saskatoon-Winnipeg service, Mr. Saretsky said. More frequent flights are planned for some of the carrier's established routes.

New destinations will be unveiled by early 2013, as WestJet seeks to challenge Air Canada and affiliates such as Jazz Air in smaller markets. Jazz and Porter Airlines Inc. already have Q400s.

The Q400 might be configured to have 76 seats - ideal for markets deemed too small for WestJet's Boeing 737s, which seat 119, 136 or 166 passengers, depending on the model. WestJet has flown Boeing 737s since the carrier began operations in 1996.

Besides being assembled in Toronto, more than 54% of the Q400's parts and components originate in Canada, including engines, landing gear and electrical systems.

"Once we landed on terms that were commercially positive for us, being able to support another Canadian company was just an added benefit," Mr. Saretsky said, after WestJet posted a record first-quarter profit of C$68.3-million (Canadian), up 42% from a year earlier and surpassing analysts' expectations.

Philippe Poutissou, vice-president of marketing at Bombardier's aerospace division, described the Q400 as a productive aircraft with a capability that fits well with WestJet's brand. The Q400 has a faster maximum cruising speed and longer range than the ATR 72-600, although the European rival argued that its turboprop fared better on fuel economy.

Mr. Poutissou noted that the Q400's larger cargo compartment proved to be another advantage because many of WestJet's customers need to transport golf clubs and skis.

WestJet is strongly endorsing the Bombardier turboprop, National Bank Financial Inc. analyst Cameron Doerksen said in a research note. "The WestJet win is a much-needed shot in the arm for the Q400," he said.

Analysts say that the Q400 is more fuel-efficient than similar-sized jets. On Tuesday, WestJet said it will be suspending its fuel-hedging program.

WestJet executives also said they're examining whether to extend the use of seat-back screens with "LiveTV" in the long term on the existing Boeing 737s. Two weeks ago, Skycast Solutions Inc. said it will be partnering in June with WestJet to introduce new tablets with preloaded content for passengers aboard WestJet's two newest Boeing 737s.

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