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Southwest will offer flights to Canada

From the Associated Press

Southwest Airlines Co. said Tuesday that it planned to offer international service -- a first for the low-fare carrier -- through a deal with Canada’s WestJet.

Southwest said it had taken the first step toward striking a so-called code-sharing agreement and planned to announce schedules and other features of the WestJet partnership by late next year.

The agreement is subject to review by U.S. and Canadian regulators.

Under most code-sharing deals, airlines sell tickets on each other’s flights and share the resulting revenue. Southwest passengers could connect to a WestJet flight to Canada. Frequent-flier programs are typically reciprocal.

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Southwest Chief Executive Gary Kelly has often talked about offering service to nearby international destinations using a partner airline.

“We are confident that we’ve found a perfect fit with WestJet, and we are excited to work toward opening our expansive U.S. network to include Canadian destinations,” he said in a statement.

The two airlines have similar histories. Southwest started in the 1970s ferrying passengers around Texas on three planes. It later expanded to both coasts and now serves 64 cities with about 3,400 daily flights and 34,000 employees.

Dallas-based Southwest has never offered international flights, and a code-sharing service to Hawaii ended when partner ATA Airlines failed.

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WestJet was created as a regional carrier serving five cities in western Canada and has expanded to 49 locations in Canada, the United States, Mexico and the Caribbean. Like Southwest, it uses Boeing 737 aircraft.

WestJet CEO Sean Durfy called the prospect of a Southwest deal “a defining moment for WestJet.” He said an agreement would significantly improve the reach of both airlines.

Airline industry experts said the partnership would generate new revenue for each airline, and in Southwest’s case eclipse the $50 million that the airline got at the peak of the ATA deal, which ended when ATA filed for bankruptcy protection and shut down in April.

Standard and Poor’s analyst Betsy Snyder said WestJet’s large Canadian route network “could more than offset the loss of ATA” for Southwest.

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Stuart Klaskin, an aviation consultant in Miami, said the deal was an example of how Southwest can enter new markets without actually flying there, and generate new revenue while taking little risk.

Klaskin said the deal would be a warm-up for a similar expansion by Southwest into Mexico and Central America using a Mexican carrier, possibly Avolar, that follows WestJet’s low-fare approach.

“This is the perfect match,” he said of the Southwest-WestJet deal. “The airlines look very similar, and they have similar management philosophies.”

Shares of Southwest rose 80 cents, or 6.1%, to $13.95.

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