WestJet's New Reservation System Again Delayed

WestJet is looking at lost opportunities worth hundreds of million of dollars because of its inability to link with other airlines.


CALGARY (CP) - WestJet Airlines (TSX:WJA) announced yet another delay to its long-awaited reservation system Wednesday.

But besides facing a $30-million writeoff if it cannot come to terms with the developer of the AiRES reservation system, WestJet is looking at lost opportunities worth hundreds of million of dollars because of its inability to link with other airlines, said an industry analyst.

That means international carriers such as British Airways, American Airways or Asia's Cathay Pacific can't add connecting flights with WestJet to a passenger's itinerary. All have expressed interest in partnering with the Calgary-based airline.

''Without a reservation system that permits that kind of interlining, WestJet continues to not (gain) from the additional benefits that could come from that kind of alliance,'' said Rick Erickson, an aviation consultant who heads Calgary-based RP Erickson and Associates.

Air Canada (TSX:AC.B), WestJet's major domestic competitor, has said the feed from its allied partners amounts for more than 30 per cent of total revenues.

That could mean a $500-million boost on WestJet's annual revenues of about $1.5 billion, a figure Erickson says is achievable after the first year.

''It's not as if WestJet isn't being courted,'' he said. ''I'm sure there's a steady stream of airlines wanting to get in and do a deal with WestJet.''

OneWorld, a global airline industry alliance, has been in talks with WestJet, while small domestic players are also interested in feeding the carrier.

WestJet said Wednesday it has suspended its current AiRES contract with developer Travelport to negotiate an amendment to the contract. Last month, WestJet said its spring rollout of the AiRES system would not be going ahead as planned.

''It's not as though building an airline reservation system is some kind of brand new rocket science - all air carriers around the world have one,'' said Erickson. ''Three years is an exceptionally long time to get the system built.''

Air Canada is on the cusp of releasing its second computer reservation system since coming out of its bankruptcy restructuring in 2004.

No new release date has been set, but WestJet says it's continuing to work with AiRES suppliers to develop the system.

''We have made the difficult decision to suspend this implementation while we renegotiate the terms under which we will deploy a future release of AiRES,'' said WestJet president Sean Durfy.

WestJet has spent about $38 million developing the AiRES system.

If an agreement with Travelport cannot be reached by May 31, 2007, WestJet said there is a potential of a one-time writeoff of $30 million.

Shares in the carrier were down 23 cents to $14.62 in trading on the Toronto Stock Exchange.

WestJet has grown from a western regional startup to Canada's second-largest airline, with about 33 per cent of the domestic market. But in its early days, it looked to cut costs by keeping as much of the business as possible in-house, including the reservation system.

The airline has extended a support agreement with Open Skies reservation and distribution system provider Navitaire until December 2008.

One of the architects of the AiRES reservation system, vice-president of information services Russ Hall, resigned from WestJet in September.



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