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WestJet to fly for Thomas Cook in Canada

Reuters

A WestJet plane. File photo

A WestJet plane. File photo

WestJet Airlines Ltd. said on Wednesday it has reached a deal with Thomas Cook Group to be the exclusive airline for the UK travel group's tour operator business in Canada this coming winter, wresting the business from a competitor.

The deal expands an existing two-year, Canada-wide partnership between WestJet, Canada's second-biggest airline, and Thomas Cook. It makes WestJet the only airline providing seat capacity for Thomas Cook's tour operator arm, Sunquest, in the Canadian market.

The announcement comes five days after Canada's Chorus Aviation Inc, a small Canadian airline that mainly flies shorter, regional routes for Air Canada, lost its contract to run Thomas Cook vacation flights from Canada.

Thomas Cook ended the Chorus contract three years before its expiration, blaming a "change in market dynamics" and the need for "more flexible flying arrangements".

The deal represents "a substantial increase in capacity", for WestJet, National Bank airline analyst Cameron Doerksen said in a note to clients.

"While we do not know the terms of the new agreement with WestJet, we do note that the Sunquest flying represented about $100 million in annual revenue to Chorus," he said.

WestJet earned revenue of $2.8 billion in 2011.

WestJet's stock was flat on the Toronto Stock Exchange on Wednesday morning at $14.18. Chorus Aviation's stock was 1.8% lower at C$3.29.

To provide aircraft for some of the seats purchased by Thomas Cook, WestJet plans to extend leases on three aircraft that were due to be returned in early 2013.

WestJet operates a single fleet of Boeing Next-Generation 737 aircraft. The uniform fleet, which allows lower maintenance, training and other costs, is often cited as a major reason why WestJet's expenses are one-third lower than bigger rival Air Canada.

WestJet, which started life as a low-cost airline 15 years ago, has been looking for ways to expand. It is in the process of setting up a smaller, regional airline in Canada next year to fly to smaller, under-serviced communities.

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