May 25, 2009 / 1:56 PM / 10 years ago

CORRECTED - UPDATE 3-Southwest, WestJet delay code-share

(Corrects paragraph 4 to remove reference to Southwest’s stock move as market was closed)

* Delay blamed on recessionary revenue environment

* Analyst says move disappointing but not a big revenue hit

* WestJet: Southwest says remains committed to partnership

By Nicole Mordant

VANCOUVER, British Columbia, May 25 (Reuters) - A planned code-share partnership between low-cost carriers WestJet Airlines Ltd (WJA.TO) and Southwest Airlines Co (LUV.N) will be delayed because of a sharp slowdown in air travel, WestJet, Canada’s No. 2 airline, said in a surprise announcement on Monday.

WestJet said U.S.-based Southwest has decided to put the funds earmarked for the code-share program to other, unnamed, uses in the current slow sales environment.

The code-share program, which was announced in July last year and was expected to be operating by the end of 2009, would have seen the two airlines selling seats on each other’s flights. This would have meant cheaper and easier access to new customers for each carrier.

Shares of WestJet were slightly weaker at midday on Monday. WestJet’s stock was down 24 Canadian cents at C$12.24 on the Toronto Stock Exchange. Southwest’s stock was untraded in New York with U.S. markets closed for the Memorial Day holiday.

“We are kind of disappointed but it’s not a big deal,” said Research Capital analyst Jacques Kavafian, who researches WestJet’s stock.

“The revenue potential from this was not great and so it is not a big loss,” he told Reuters.

He noted that the tie-up was delayed, not canceled.

Southwest has not given WestJet any indication when the codeshare implementation might be revived, Hugh Dunleavy, WestJet’s executive vice-president of commercial distribution told Reuters.

Bob Jordan, Southwest’s executive vice-president of strategy and planning, said in the statement that Southwest remained “absolutely committed” to its partnership with WestJet and to code-sharing in general.

The two airlines have already implemented a distribution agreement and are close to starting a cargo program.

The codeshare agreement with Southwest was WestJet’s first such deal. In February, it said it had agreed to study a code-sharing alliance with Air France-KLM (AIRF.PA).

WestJet also said on Monday that implementation of its Sabre reservation system, which is key to code-sharing, is continuing on track. It will be ready for launch in the fourth quarter, the company said.

$1=$1.12 Canadian Additional reporting by Isheeta Sanghi in Bangalore; editing by Peter Galloway

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