WestJet aims for turn­around


TORONTO — WestJet Air­lines Ltd. aims to lift its lag­ging prof­its over the next four years, pre­dict­ing earn­ings growth of 40 per cent on a per share ba­sis be­tween 2019 and 2022 af­ter a tur­bu­lent year that saw prof­its plunge.

Soar­ing fuel costs, labour un­rest, and steep com­pe­ti­tion at home and abroad caused Canada’s sec­ond-largest air­line to in­cur its first loss in 13 years dur­ing the sec­ond quar­ter, fol­lowed by a steep yearover-year drop in the third quar­ter — which none­the­less bounced back into the black.

Rev­enues and ef­fi­ciency were “nowhere near” the air­line’s po­ten­tial, chief ex­ec­u­tive Ed Sims said at a WestJet in­vestor con­fer­ence in Toronto Tues­day.

Strong de­mand, more branded fares and higher an­cil­lary fees will boost its rev­enue per avail­able seat mile to be­tween two per cent and four per cent in 2019, Sims said.

Branded fares bun­dle var­i­ous perks — such as pre-re­served seats and bag­gage checks — at a higher to­tal price.

Ear­lier this year, the air­line launched transat­lantic ser­vice on the first three of an ex­pected 10 Boe­ing 787 Dream­liner air­craft in a bid for busi­ness pas­sen­gers that chal­lenges Air Canada’s transat­lantic dom­i­nance.

A crowded do­mes­tic mar­ket re­sulted in “over-sup­ply” and weaker rev­enue per avail­able seat mile — a key in­dus­try met­ric that di­vides op­er­at­ing in­come by pas­sen­ger car­ry­ing ca­pac­ity.

A freshly ex­panded Flair Air­lines, soon-to-launch Canada Jet­lines Ltd., and Air Canada’s low-cost Rouge are all crowd­ing the bud­get airspace that WestJet has flown into with its four-mon­thold, ul­tra-low-cost Swoop.

The mar­ket sat­u­ra­tion means WestJet will “step back from prof­it­less vol­ume,” Sims said.

The air­line aims to grow pas­sen­ger ca­pac­ity by be­tween 6.5 per cent and 8.5 per cent next year, mainly through three Dream­lin­ers em­bark­ing on non-stop ser­vice from Cal­gary to Dublin, Paris and Lon­don’s Gatwick Air­port this spring.

Only a sliver of the beefedup ca­pac­ity will come from the do­mes­tic realm, where Swoop plans to ex­pand its fleet to 10, WestJet said.

The air­line is bat­tling with Air Canada on a num­ber of fronts. Its En­core re­gional ser­vice goes up against Air Canada Ex­press and its ul­tra-low-cost Swoop air­line re­cently launched flights to the U.S. and the Caribbean, in com­pe­ti­tion with Air Canada’s six-yearold Rouge unit.

On top of a long-range fleet that still dwarfs WestJet’s, Air Canada’s re­cent deal as the lead of a con­sor­tium to buy the Aero­plan re­ward pro­gram from Aimia Inc. rep­re­sents an­other po­ten­tial ad­van­tage Sims hopes to re­duce through a travel re­wards part­ner­ship with Master­card and the Royal Bank of Canada.

Sims ap­peared un­daunted by his big­gest com­peti­tor’s pur­chase of Aero­plan, an­nounced Nov. 26.

“I don’t have a con­cern,” he said in an in­ter­view Fri­day.

“I think com­pe­ti­tion in this space is healthy. It forces both coali­tions to strengthen the re­la­tion­ship, and I would char­ac­ter­ize our re­la­tion­ship with RBC and Master­card as ev­ery bit as strong as our com­peti­tor’s re­la­tion­ship with TD, CIBC and VISA.

“We fully ex­pect a num­ber of our pas­sen­gers to be car­ry­ing both cards,” he added.

On Tues­day his air­line broad­ened its code­share agree­ment with Qan­tas Air­ways, giv­ing WestJet ac­cess to the Aus­tralian car­rier’s flights be­tween Los An­ge­les and Sydney, Mel­bourne and Bris­bane, along with any at­ten­dant re­ward miles. WestJet’s joint ven­ture with Delta Air Lines, an­nounced in July, opens up more of the south­ern U.S. and western Euro­pean mar­kets via flights to At­lanta and Barcelona. None­the­less, lur­ing high-fly­ing pas­sen­gers away from Air Canada with­out an al­liance net­work to top it off could prove tough.

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