WestJet’s Profit Plunges 40.5 Pct On Higher Costs

July 26, 2016

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WestJet’s quarterly profit slumped 40.5 percent and the carrier said costs would rise this year due to the timing of maintenance expenses on its wide-body aircraft and extra charges incurred on a new London route.

Net earnings fell to CAD$36.7 million (USD$27.8 million), due to higher operating expenses excluding fuel costs. Revenue rose slightly to CAD$949.3 million

WestJet's fuel expenses, typically an airline's largest variable cost, declined 15 percent in the quarter ended June 30.

Load factor rose to 80.8 percent from 78.1 percent a year earlier.

WestJet chief executive Gregg Saretsky said the carrier's performance recently improved on trips to London after previously incurring charges for irregular operations, such as when a flight fails to operate on schedule.

"It was a blip and the blip is behind us," Saretsky said.

Britain's recent vote to leave the European Union should not affect flights into London, Saretsky said, adding that as a low-cost carrier, WestJet could attract more customers.

"To the extent that the Brits become more price sensitive, that plays really to the strength of our model."

WestJet said it expected cost per available seat mile (CASM), excluding fuel and employee profit share, to rise by 2.5 to 3.5 percent in 2016, higher than the 0.5 to 1.5 percent anticipated earlier. It forecast a 1.0 to 1.5 percent increase in current-quarter adjusted CASM.

The company expects added fourth-quarter maintenance costs as it does the work late this year to free up planes for flights to Hawaii in the first quarter of 2017.

It expects the decline in revenue per available seat mile (RASM) to slow to 1 to 3 percent in the current quarter from 5.8 percent in the second quarter.