UPDATE 1-WestJet adds growth avenue with American alliance

* WestJet stock rises more than 5 pct

* Analysts say pact is low-risk way to add travelers

* See more alliances, possibly Oneworld in long term
(Recasts with WestJet, analyst comments, adds background)

By Nicole Mordant

VANCOUVER, Oct 20 (BestGrowthStock) – WestJet Airlines Ltd’s
(WJA.TO: ) alliance with American Airlines is a key step in its
quest to boost its business traveler numbers and will likely be
followed soon by more such deals, analysts said on Wednesday.

Shares in WestJet leapt more than 5 percent on Wednesday on
news that Canada’s second-biggest airline had signed its first
ticketing and baggage agreement with a U.S. carrier.

The deal, known in the industry as an interline agreement,
will allow passengers of AMR Corp-owned (AMR.N: ) American and
its affiliates to connect seamlessly into WestJet’s Canadian
network on a single ticket.

“This is a relatively low-risk method of adding traffic to
WestJet’s domestic network through a marketing agreement, while
opening the door to future opportunities,” PI Financial analyst
Chris Murray said.

WestJet, which competes head-on with bigger carrier Air
Canada (ACa.TO: ), is keen to get more passengers traveling
through its domestic hubs like Calgary and Toronto so it can
justify adding more flights.

“High frequencies (of flights) is one of those key
attributes that business travelers look for,” Murray said.

WestJet, which started off as a low-cost, no-frills
carrier, has strayed somewhat from its roots and begun courting
business travelers aggressively as it searches for new sources
of revenue.

The agreement with American, which takes effect on Nov. 9,
does not reciprocally make it easier for WestJet passengers
flying from Canada to connect to American’s network in the
United States, a feature WestJet wants to add later on.

“Economically it is far more in our interest for American
to be selling into WestJet’s network at this point in time,”
WestJet’s executive vice-president of strategy and planning
Hugh Dunleavy told Reuters.

At this stage, WestJet flies a limited number of flights to
a handful of mostly holiday destinations in the United States
although it wants to expand these. By comparison, American and
its affiliates have frequent flights to Canada’s big cities.

The choice of American instead of another U.S. carrier was
“more of a timing issue”, Dunleavy said and “does not mean we
are not continuing our discussions with other partners in the
United States”.

Analysts expect WestJet to sign a full code-share agreement
with American in time, a closer co-operation agreement that
allows airlines to sell space on each other’s flights.

WestJet’s management has indicated they are looking to add
three to four new code-share arrangements by the end of next
year, Murray said.

The Calgary-based airline recently signed its first
code-share deal with Hong Kong’s Cathay Pacific Airways
(0293.HK: ) and has interline pacts with Air France-KLM (AIRF.PA: )
and China Airlines (2610.TW: ).

Speculation has swirled for some time that WestJet is also
in talks with British Airways.

There is also talk that it may eventually want to join a
global alliance of airlines like Oneworld, which includes BA,
American and Spain’s Iberia (IBLA.MC: ), or SkyTeam, which houses
Air France-KLM and will add China Airlines in 2011.

“I do believe WestJet will join a global alliance; it is at
this point simply impossible to say with certainty which one —
especially given WestJet’s streak of independence and doing
what is right for WestJet,” said Robert Kokonis, managing
director of airline consulting firm AirTrav Inc.

WestJet stock rose as high as C$12.50 on the Toronto Stock
Exchange on Wednesday, gaining 38 Canadian cents, or more than
5 percent.

AMR’s stock surged 11 percent to $7.24 on the New York
Stock Exchange after it posted its first quarterly profit since
the third quarter of 2007.

($1=$1.02 Canadian)
(Editing by Rob Wilson)

UPDATE 1-WestJet adds growth avenue with American alliance