Southwest Airlines is terminating its long-planned codeshare agreement with WestJet, after the Canadian low-cost airline decided to cut a separate deal with Delta Air...

Southwest Airlines is terminating its long-planned codeshare agreement with WestJet, after the Canadian low-cost airline decided to cut a separate deal with Delta Air Lines covering both codesharing and the proposed transfer of slots from Delta to WestJet at New York LaGuardia Airport.

Dallas-based Southwest Airlines notified WestJet on April 16 of its intent to terminate the agreement to offer connecting service between the United States and Canada with WestJet and instead will consider serving Canada itself, or enter a codeshare agreement with another Canadian carrier.

According to Southwest, WestJet had requested significant changes to the codeshare agreement, which the two airlines had signed in 2008, and WestJet subsequently reaffirmed and clarified its request.

“Southwest cannot agree with the modifications to the confidential agreement,” the Dallas carrier says.

“We prefer the existing terms of our agreement with WestJet. Upon reviewing the number of changes that WestJet has requested, we have decided that it is in the best interest of both parties to move forward independently,” says Bob Jordan, Southwest’s executive vice president of strategy and planning. “We remain interested in exploring the possibility of one day offering service to Canada if it makes sense for Southwest and for our customers. That would not rule out future codeshare relationships with Canadian carriers, or flying north of the border ourselves.”

In 2010 Southwest Airlines' U.S. domestic network includes 69 airports and the carrier has begun serving many of the nation's largest and most-congested airports. Future service growth is likely to lie in offering more linkages among the existing list of destinations, adding more U.S. destinations and ― in future years ― beginning international service to Canada, Mexico and the Caribbean

The proposed Southwest-WestJet codeshare deal was due to begin in early 2010 but, according to a senior airline-industry source familiar with the situation but who wishes to remain unidentified, it was delayed by reservations-system linkage problems, which the source says primarily arose at Southwest.

Southwest itself announced in 2009 that it had agreed with WestJet to postpone the launch of the planned codeshare because it needed to concentrate on more urgent network priorities during the height of the U.S. economic downturn in 2009.

But evidence of a serious rift between Southwest and WestJet came to light in late March, when media sources reported that WestJet apparently intended to enter into a codeshare agreement with Delta Air Lines.

In an April 1 statement responding to the situation, Southwest noted: “At about the same time, Southwest learned of a deal by which Delta would transfer slots at LaGuardia Airport in New York to WestJet. A codeshare between WestJet and Delta, as indicated in media reports, could be inconsistent with the agreement presently in place between Southwest and WestJet.”

Southwest reportedly was furious with Delta’s attempt to transfer slots at congested and tightly slot-controlled LaGuardia to WestJet, arguing to the U.S. Department of Transportation that the slots were not Delta’s property to trade and should be put up for open auction. (Through the FAA the DOT controls slot numbers at LaGuardia.) Having begun service on June 28, 2009 to LaGuardia from Chicago Midway (five times daily) and from BWI (three times daily), Southwest reportedly is keen to acquire more slots at LaGuardia to increase its own service there.

The April 1 statement by Southwest on the WestJet situation quoted Jordan as saying:  “The Southwest/WestJet project was on target in accordance with a mutually agreed-upon timetable. However, WestJet in recent weeks requested material and significant changes to our agreement that we could not accept. We are, and always have been, prepared to move forward to implement our agreement with WestJet. We have not yet been notified of WestJet’s intent to terminate that agreement. If we are so notified in order for WestJet to consummate its deal with Delta, Southwest remains very interested in offering our loyal customers service to Canada via the most efficient means possible.”

Because WestJet is widely recognized as Canada’s leading low-cost airline and one of the leading low-cost airlines in the world, the loss of the WestJet codeshare agreement represents a blow in the short term to Southwest. But is not the only such deal Southwest has in the works.

In 2009, Southwest also agreed a future codeshare deal with fast-growing Mexican low-cost airline Volaris, which is now flying to three destinations in California as well as 23 in Mexico. Reportedly, Volaris also plans to add four more U.S,. destinations this year and its five-year plan calls for it to serve at least a dozen U.S. cities from one or more of its four focus cities in Mexico (Guadalajara, Tojuana, Toluca and Puebla).

Southwest’s planned codeshare deal with Volaris is still on, but because the Volaris codeshare always was expected to begin after the WestJet codeshare, the delay to the launch of the WestJet codeshare pushed the Volaris codeshare back to the end of 2010.

Recently, Jordan told this reporter that Southwest remains interested in potential codeshare deals with long-haul carriers serving the United States. Several years ago Southwest had one such codeshare deal, with Icelandair at Baltimore-Washington International Airport, but Jordan said that while the deal was successful it wasn’t automated and thus was labor-intensive to Southwest. When Icelandair stopped serving BWI the codeshare ended.