WestJet mulls ‘more fuel-efficient’ growth options
CEO Saretsky turns attention to wide-body aircraft
• WestJet Airlines Ltd. is thinking about adding yet another aircraft type to its fleet as it evaluates “more fuel- efficient” options for its international expansion plans.
Since 2013, WestJet has grown its fleet from one type of aircraft — the Boeing 737 — to three, with the addition of 45 new Bombardier Q400s for its Encore regional airline and four used Boeing 767s for its first wide-body overseas flights.
But the 767 is an “old plane,” the airline’s chief financial officer told an investor conference Thursday.
“Is it the fleet type of the future? No,” Harry Taylor told the AltaCorp Capital and ATB Financial investor conference in Toronto. “We’d like to have a more fuel- efficient wide- body engine. We’re just conscious of the capital investment, so whether it’s new or newish is one of the things that we’ll consider.”
Taylor described the 767s, which were plagued with early reliability issues, as a “test.”
“We liked the results so it’s no longer a test, and we’re going to expand,” he said. “But we’re going to take some time to do that. You don’t want to go too far or too fast.”
The airline’s pilots voted in December to approve expanded widebody operations after rejecting an earlier offer. Chief executive Gregg Saretsky said the vote would allow WestJet to turn its attention “to acquiring additional wide- body aircraft.”
Currently, the 767s are used on flights to London’s Gatwick Airport from Toronto and Calgary and to Hawaii from Edmonton and Calgary, as well as some domestic routes. Taylor said the airline’s network planners are now looking at other possible destinations in both Europe and Asia.
“We believe we’ve got some good business cases to go both east and west, and the question is when and how?” Taylor said. “We don’t want to establish too many different isolated beachheads and lose our economies of scale, so we’re going to work through where we see the most profitable, most attractive opportunities and pursue them.”
BMO analyst Fadi Chamoun downgraded WestJet to market perform from outperform Thursday and lowered his price target to $ 24 from $ 26, arguing that the airline’s wide- body expansion will weigh on its balance sheet.
“We believe that WestJet is likely to underwrite a major wide- body expansion initiative in the near term, which is likely to weigh on balance- sheet metrics and free cash flow and perhaps even raise the operational risk profile in the short term, albeit with attractive long- term growth potential as- suming it is successful,” Chamoun wrote in a research note.
WestJet has said it’s talking to both Boeing Co. and Airbus Group SE about possible aircraft purchases.
Bombardier Inc., meanwhile, said it has no plans at present to build a CS500, the rumoured stretch variant of its CSeries aircraft.
“At this point in time there’s no plan for a larger CSeries, that is not part of the strategic conversation,” chief financial officer John Di Bert told the AltaCorp conference. “The conversation on a bigger platform would only evolve if the market demanded it, if the supply chain was willing to get behind it, and if the customers were willing to step forward on it.”
Bombardier will make a decision on its next major project in the next 12 to 24 months, Di Bert said. That could include federal government investment if a deal is reached on the company’s 14-month-old request for US$1 billion in aid.