WestJet to expand regional fleet, push further cost savings

By Susan Taylor and Solarina Ho

TORONTO (Reuters) - WestJet Airlines Ltd will ramp up the operations of its new regional subsidiary in 2014 even as it looks to carve out additional cost savings, its chief executive said on Tuesday.

Canada's No. 2 carrier launched its subsidiary Encore, which flies smaller turboprop planes, in June and plans to grow its operations across the country and possibly into the United States in 2015.

Encore's fleet of Bombardier Inc's Q400 NextGen turbo prop aircraft is expected to hit 16 next year. WestJet initially ordered 20 Q400s from Bombardier, with an option for 25 more.

"Next year, 2014, will be the year where we're going to have to start making some decisions on the first of those 25 options," CEO Gregg Saretsky told Reuters, adding that the company hopes to announce Encore's next expansion at its annual meeting in Toronto in May.

Calgary-based WestJet is mounting a challenge to Air Canada , the country's dominant carrier.

Saretsky said WestJet is also eyeing slots at LaGuardia in New York City and Reagan National Airport in Washington, vacated by American Airlines and U.S. Airways after the two airlines agreed to sell gate slots at half a dozen airports in exchange for government clearance to merge.

EUROPEAN EXPANSION

WestJet will test the highly-competitive European market next June, with its first trans-Atlantic flight to Dublin, a busy battleground for Canadian carriers. The new route is a litmus test for WestJet's expansionist ambitions.

Saretsky said the 737-700 narrow-body planes it will fly are particularly suited for Northern European destinations like the United Kingdom, Ireland, Scandinavian countries and some of northern Continental Europe.

The carrier has already held talks with Boeing Co and Airbus about buying wide-body planes, which are better suited for long-haul flights, he said.

But the airline is only in the exploratory, data collection phase, Saretsky noted, adding that a decision could happen as early as next year or as far out as seven years from now.

Even as it expands, WestJet still expects to hit in 2014 a C$100 million cost savings target it set for itself a year ahead of schedule, Saretsky said. The chief executive said he planned to push for additional cost savings.

"I think we have to," Saretsky said. "Airlines that stop looking for cost savings are the ones that invariably fall into trouble."

(Editing by Jeffrey Hodgson, Bernard Orr)

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