WestJet sees ‘opportunity for Canada’

More Mexicans are visiting Canada due to political uncertainty in the U. S., posing an opportunity for Canadian airlines to snag a growing number of foreign tourists, according to the chief executive of WestJet Airlines Ltd.

“Certainly anecdotally, we’ve seen airports announce that the number of Mexican visitors to Canada is up,” Gregg Saretsky told analysts Tuesday.

“As border i ssues and political issues continue to intensify, I think there is perhaps an opportunity for Canada to benefit from increasing foreign tourist arrivals.”

Vancouver International, for example, saw the number of arrivals from Mexico jump 84.3 per cent between January and November of last year. In total, Mex- ican visitors to Canada rose 19.5 per cent in the first 11 months of 2016, according to Destination Canada, which promotes tourism on behalf of the federal government.

Besides a growing sense among Mexicans that they are unwelcome in the U. S., Canada also lifted its visa requirements for Mexican visitors on Dec. 1. That same day, Aeromexico increased its capacity to Canada by 47 per cent and said it plans to add more flights to Vancouver, Toronto and Montreal this summer.

WestJet flies to 12 destinations in Mexico. Saretsky said the uncertainty created by U. S. President Donald Trump’s immigration and travel policies could help the airline attract more passengers. “We are watching with interest what’s going on and the changing political landscape,” he said. “We haven’t seen any big movement yet but there is a possibility for some accretion there.”

Closer to home, the Alberta economy appears to have “bottomed out,” leading Saretsky to predict that WestJet’s unit revenue will be positive in the first half of 2017 after eight quarters of year-over-year declines.

WestJet is very exposed to Alberta, with about 40 per cent of its capacity travelling to, from or within the province. The economy is coming out of “two horrendous years,” Saretsky said, and as it improves it will boost WestJet’s revenue per available seat mile (RASM) and return on invested capital (ROIC).

“As Alberta crawls out of its hole, we fully expect and we are seeing now signs of new life, stronger demand, increases in RASM, and that will generate the types of ROIC that we’ve committed our organization to,” he said.

WestJet has long targeted return on invested capital of 13 to 16 per cent, but its number for the fourth quarter fell to 11.3 per cent. Yield, a measure of the average fare paid per mile, per passenger, also fell in the quarter to 17.5 cents, down 6.7 per cent from a year earlier.