Tuesday, February 7, 2017

WestJet Posts Profit Decline on Higher Fuel, Maintenance Costs: Canadian air carrier flew 5.4 million passengers in latest quarter, a record amount during the period

WestJet Airlines Ltd. on Tuesday reported a 13% drop in fourth-quarter earnings as rising fuel and maintenance costs outweighed an increase in airline passengers amid the Canadian air carrier’s international expansion push.

WestJet’s profit decline comes as the company expanded its international reach, offering daily flights from six Canadian cities to London’s Gatwick airport beginning last May.

While the new routes led to a 10% rise in passengers, those additional flights weighed on the company’s profit as it incurred additional costs operating its new fleet of Boeing 767-300 jets.

WestJet flew 5.4 million passengers in the quarter, a record amount during the period, the company said.

“I’m very pleased with how our resilient business model has performed, even during an economic downturn in Alberta of unprecedented proportion,” said Chief Executive Gregg Saretsky during an analyst call on Tuesday.

Calgary, Alberta-based WestJet posted a fourth-quarter profit of 55.1 million Canadian dollars ($42.1 million), or 47 Canadian cents a share. Results came in below the C$63.4 million, or 51 Canadian cents, it earned a year earlier but ahead of the 41 Canadian cents analysts polled by Thomson Reuters expected.

Revenue rose 6% to C$1.02 billion, in line with analyst expectations. WestJet also maintained its quarterly dividend at 14 Canadian cents a share.

A stronger Canadian dollar versus its U.S. counterpart led to rising aircraft fuel costs, the company’s biggest operating expense. Fuel costs, which the airline incurs in U.S. dollars, were up 15% from a year earlier, while maintenance charges rose 15% as well.

WestJet’s cost per available seat mile, excluding fuel costs and employee profit-sharing, was 9.87 Canadian cents, a decline of 1.7% from the same quarter last year. The airline’s load factor was 80.2% in the quarter, up from 78.4% in the same quarter last year.

Mr. Saretsky said the airline has improved both its completion rate and its on-time performance on trans-Atlantic routes after some notable stumbles in the second quarter.

WestJet expects annual capacity growth of 6% to 6.5% in the first quarter of 2017, while domestic capacity should grow between 8% and 8.5%, Mr. Saretsky said. Roughly, two-thirds of WestJet’s domestic growth is attributed to expanding its WestJet Encore regional routes and its charter business. WestJet also expects a return to positive revenue per available seat mile growth of 1% to 3% in the first quarter of the year, Mr. Saretsky said.

Cameron Doerksen, an aviation analyst with National Bank of Canada, said investors may be concerned about WestJet’s ability to see revenue growth outpace higher fuel costs. “We therefore forecast another year of declining earnings,” Mr. Doerksen said in a note.

Air Canada, WestJet rival’s and the country’s biggest airline, is scheduled to report its fourth-quarter results on Feb. 17.

Original article can be found here:  https://www.wsj.com

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