FLYING HIGH
WestJet posts best ever third-quarter profit while expanding route network,
CALGARY— WestJet Airlines Ltd. reported its best-ever third-quarter profit Tuesday, as expanded routes and lower fuel prices helped offset a continuing downturn in its home province.
The Calgary-based airline said it had $116 million in net income, or 97 cents per share, in the three months that ended Sept. 30 — up from $102 million, or 82 cents per share, in the same quarter last year for what it said was its second-best quarter ever.
The increase comes as the company continues to expand its international offerings. The airline added a direct flight to Belize in the third quarter and its service to London’s Gatwick Airport moved to full-year service for the first time.
Overall, the company says it expects capacity growth of about 9 per cent this year, with1.5 per cent of that from domestic growth. For 2017, it expects overall capacity growth of between 3.5 and 5.5 per cent year over year.
During an analyst conference call, the company said it is still looking for more positive indicators out of Alberta but is happy with performance in the province after cutting back capacity.
WestJet chief executive Gregg Saretsky said the Alberta carbon tax set to go into effect next year will have a limited effect on operations, but that future increases provincially and federally are a much bigger concern.
“We’re paying currently $60 million a year in fuel tax across the various provincial and federal jurisdictions in which we operate. Alberta, starting Jan. 1, will have a carbon tax that’ll add another couple or three million dollars in 2017,” Saretsky said. “As that goes up, and as the federal government gets their hands on carbon taxes, the number could be very significant, upwards of $60 to $70 million, incremental, all of which we would work to pass through ticket prices.”
The Alberta government says the $20-a-tonne carbon tax going into place in 2017 will add 5.17 cents per litre to jet fuel, rising to 7.75 cents per litre when the carbon tax rises to $30 a tonne in 2018.
WestJet benefited from an almost 10-per-cent drop in fuel costs per litre in the quarter compared with last year, with the company paying 57 cents per litre compared with 63 cents per litre in the third quarter of 2015.
Revenue was up 7.6 per cent to $1.12 billion, from $1.05 billion, and revenue passenger-miles, an industry measure of passenger traffic, was up 13.6 per cent to 6.4 billion thanks largely to the addition of the London route.
The London flights have been hit with numerous delays because of mechanical issues with the used Boeing 767s the company took on for the route.
The delays resulted in significant compensation payouts to customers, but the company said reliability improved significantly in the third quarter.
WestJet said it continues to consider further expansion across Canada, the U.S. and internationally and is actively negotiating with pilots on a new agreement that would cover an expanded wide-bodied fleet.
Saretsky said WestJet reached a tentative agreement with pilots over the past weekend that will now go to ratification with the WestJet Pilots’ Association.