Fuel falling, but WestJet says it won’t drop fares

WestJet Airlines Ltd. expects its fuel costs to fall by as much as 30 per cent in the first quarter, but travellers won’t see a penny of that unless the airline experiences a sudden drop in demand, executives said Tuesday.

“Our plan is not to pass any of it on,” WestJet CEO Gregg Saretsky told reporters when asked if the company would lower fares as a result of falling fuel costs. “We price according to supply and demand.”

So far, demand remains strong, with WestJet reporting a load factor of 79.7 per cent in the fourth quarter and 81.4 per cent for 2014. As long as approximately 80 per cent of the seats on WestJet’s planes are filled, there’s no reason to drop fares, Saretsky said.

“We have fare sales from time to time and we will continue to use fare sales — but we’re not planning to lower the entire fare structure,” he said.

WestJet said Tuesday it expects to pay an average of $0.63 to $0.65 per litre for fuel in the first quarter, a yearover-year decrease of 30 per cent at the high end, thanks to the recent plunge in oil prices. (Oil prices have been creeping up in the past few days, but not enough to cause significant impact in the first quarter.)

Analysts have cautioned that falling crude prices aren’t all good news for WestJet, since the Calgary-based airline is disproportionately exposed to the Alberta market.

But Saretsky disputed that Tuesday, arguing that WestJet’s domestic exposure to Alberta is similar to that of Air Canada.

“I wouldn’t say we’re any more exposed than any other operator,” he said. “We do have a national footprint and a large southern footprint as well.”