WestJet Tops Profit Estimates After Filling Record Seats

WestJet Airlines Ltd. (WJA), Canada’s largest discount carrier, posted higher third-quarter earnings than analysts estimated after flying fuller planes and posting increased average revenue from each available seat.

Profit rose 80 percent to C$70.6 million ($71.1 million), or 52 cents a share, from C$39.3 million, or 28 cents, a year earlier, the company said in a statement today. The average estimate from 14 analysts in a Bloomberg survey was 44 cents.

The company filled 85 percent of its seats, an improvement of 4.5 points from a year earlier, and posted occupancy records each month. Demand for non-premium fares from discounters such as WestJet has held steady since last year while premium-fare bookings of large network carriers fell 13 percent, according to data compiled by Bloomberg. Unit revenue climbed 9.5 percent.

“Demand for air travel in Canada has been very strong, ” Chris Murray, an analyst with PI Financial Corp., said in a telephone interview in Toronto. “And what we’ve seen, particularly with WestJet in the last few months, is muted capacity growth but very strong traffic growth.”

Murray has a buy rating on the stock and estimated adjusted profit of 43 cents a share for the third quarter.

WestJet climbed 0.6 percent to C$18.07 at the close in Toronto. The shares have increased 54 percent this year.

Full-Year Costs

Unit sales growth will slow in the fourth quarter, the Calgary-based company said, and fuel expenses will be 91 to 93 Canadian cents a liter. WestJet maintained its earlier projection that full-year costs for each seat flown a mile, excluding fuel and profit-sharing, will rise as much as 3.5 percent.

WestJet has stepped up its competition with Air Canada this year, resuming flights to New York’s LaGuardia airport in June and working to start a regional unit in 2013 which will serve locations now only reached by Canada’s largest airline. The first group of communities WestJet will serve with the new unit, to be called WestJet Encore, will be announced in early 2013, the company said in the statement.

WestJet is also modifying its fleet to offer premium economy seating with extra legroom in an attempt to woo business travelers, even as Air Canada moves to open its own low-cost carrier with service to holiday destinations in Europe and the Caribbean.

WestJet’s modifications to its single-aisle Boeing 737s should be complete by the end of the year, marking the end of its tradition of all-coach seating. The carrier announced a code-sharing agreement with British Airways on Sept. 24, allowing the U.K.-based carrier to sell flights operated by the Canadian airline.

To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.