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WestJet chief isn't afraid of his rival

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Feb 14, 2008

Sean Durfy, chief of WestJet Airlines Ltd., is shrugging off revelations that rival Air Canada has drawn interest from private-equity players and pension-fund managers who may be keen on linking the country's dominant airline with a major U.S. carrier.

"Whatever happens to Air Canada, we'll compete with anyone who comes into this market," Durfy said in an interview yesterday. He said WestJet has a 35 per cent cost advantage over the heavyweight competitor.

"We already compete with all the U.S. carriers in the transborder market."

Durfy made the comments after WestJet reported a fourth-quarter profit that more than doubled, thanks in part to lower tax rates and a soaring loonie.

Last week, Robert Milton, the CEO of Air Canada parent ACE Aviation Holdings Inc., suggested Canada's biggest airline has landed in the crosshairs of private buyers. Milton said ACE's sliding share price has lured private-equity and pension funds into approaches about purchasing the parent's 75 per cent stake in Air Canada.

He also hinted that a buyer is seeking to hook up Air Canada with a major carrier in the United States, where United Airlines and Continental Airlines are said to be in talks, while Delta Air Lines and Northwest Airlines are believed to be nearing a deal.

"So, there has been dialogue with the U.S. space looking to change, and I don't think it's inconceivable that Air Canada could be part of it, and I think it would make a lot of sense for a U.S. airline to look at Air Canada," Milton said.

Some observers believe the industry is inevitably moving toward consolidation, but Durfy downplayed the possibility that WestJet could ultimately be forced to participate.

He asked rhetorically whether anyone had ever seen many successful airline mergers.

He also ruled out speculation by an analyst at RBC Capital Markets that WestJet might one day consider a "logical, if controversial" merger with Air Canada.

"In my opinion, it would never work. There's just too much difference between our two companies."

WestJet is known as one of North America's best-performing airlines, with a comparatively new fleet, an admired corporate culture and a record of profitability.

The airline yesterday reported a best-ever fourth-quarter profit of $75.4 million, or 57 cents a share, compared with $26.7 million, or 21 cents, a year earlier. More than half of the improvement, which exceeded analysts' expectations, was due to a lower federal tax rate. Revenue, meanwhile, was $553.4 million.

"All told, we estimate WestJet reported the strongest margins in North America for the 10th straight quarter," David Newman, an analyst at National Bank Financial, said in a note to clients.

WestJet's low-cost structure has helped it weather an era of high fuel prices better than some competitors.

thestar.com

WestJet chief isn't afraid of his rival
airliners.net



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