In pumping installations, fluid transient computations are necessary to achieve safety, efficiency and economy in design and operation. In some systems, where air content and air entrainment exist, such computations become highly inaccurate when constant wave speed is assumed. In this paper, a numerical model and a computational procedure have been developed to investigate the effects of air entrainment on the pressure transient in pumping systems. Free gas in the fluid and cavitation at the fluid vapour pressure were modeled in the form of variable wave speed model, which was numerically solved by the method of characteristics. This model was tested for the case of pump trips due to power failures. The pressure transient results obtained by this variable wave speed model were analyzed and compared with those results obtained by constant wave speed model and with the experimental results of other investigators.