Canadian Competition Bureau approves Westjet – Delta joint venture

Westjet announced Thursday it had received tacit approval for a proposed joint venture with Delta Air Lines, after Canada’s Competition Bureau declined to challenge the partnership.

“This significant achievement brings us closer to implementing a joint venture that provides a world-class experience for customers travelling between the U.S. and Canada,” said Delta chief executive Ed Bastian. “The joint venture between Delta and WestJet will create an expanded network with more frequencies and destinations, improved airport connections and significantly enhanced frequent flyer benefits.”

Under the deal, the airlines intend to operate their trans-border services as though it were a single airline, where it could be a Westjet or a Delta plane on any given route, and the passenger couldn’t tell the difference.

The two airlines will cooperate on pricing, aircraft deployment, capacity management and share all profits and losses on non-stop routes between Canada and the United States, including new or expanded service on a projected 20 routes between the two countries.

MAP BELOW: shows Westjet (blue), Swoop (pink), and Delta (red) transborder routes

The joint venture would give Delta and Westjet about 27% of the market, big enough, they argue, to compete against Air Canada and its partner United Airlines. Delta and Westjet have been code-share partners since 2011, though the joint venture integrates their systems much further.

A map of the proposed joint venture routes suggests that Westjet, despite efforts to reach into the business market, caters largely to Canadian travellers headed to sun destinations in the south of the United States, while Delta connects major Canadian cities to its key hubs.

A Westjet 737-700 departs Vancouver International Airport (photo: Brett Ballah)

“Because the carriers remain competitors with no incentive to divert traffic from their own flights to those of the other, like other arm’s-length codeshare arrangements,” the airlines argue in their application to U.S. regulators, “they are unwilling to grant open access to each other’s networks, resulting in sub-optimal inventory access, fewer and less attractive options for consumers, slower growth of service, and constrained capacity on transborder routes.”

To bolster their argument, the arlines point to two Westjet services, from Calgary to Dallas/Ft. Worth and Chicago, that were operated as a code-share with American Airlines. But they say American had little incentive to open its network to Westjet, who it saw as a competitor, and within five years, Westjet was forced to abandon both routes.

Westjet will include its ultra low-cost division Swoop in the joint venture, though details contained in its application to American regulators are blacked out. Swoop offers its own point-to-point U.S. services from Abbotsford, Kelowna, Edmonton, Winnipeg, London, and Hamilton.

In April, Canadian Transport Minister Marc Garneau got the power to review any foreign joint ventures, though he has yet to exercise that power. The United States Department of Transportation has not yet weighed in on the deal.

So far, Garneau has proven to be reluctant to interfere in the aviation market.

Categories: Westjet

1 reply »