WestJet Drops Most Since 2002 After Profit Misses Estimates

  • Margins will be `squeezed in the short term,' CEO says
  • Unit revenue is seen dropping 10-12% in the first quarter

WestJet Airlines Ltd. tumbled the most in 13 years after reporting profit that missed analysts’ estimates and warning that first-quarter revenue per mile will decline.

Adjusted fourth-quarter profit dropped to 51 Canadian cents a share, the country’s second biggest carrier said in a statement Tuesday. That fell short of the 63-cent average forecast in a Bloomberg survey of 14 analysts. Revenue rose 3.6 percent to C$958.7 million ($681.7 million), missing the C$973.6 million average forecast.

Faced with a deteriorating economy in Western Canada, the carrier has been shifting flights from Alberta to bolster revenue. About 25 percent of WestJet’s capacity begins in the province, the hub of Canada’s oil industry, and weakness there has damped ticked sales, Chief Executive Officer Gregg Saretsky said on a conference call.

Margins will be “squeezed in the short term,” he said. The airline is looking to cut costs, including exploring options possibly to defer some deliveries of Boeing Co.’s 737 jetliner, Saretsky said.

WestJet now plans to increase capacity by 7 percent to 10 percent this year, rather than the 8 percent to 11 percent previously forecast.

“Investor concern is that capacity addition will not be matched with demand, especially in this uncertain demand environment,” Hilda Maarachlian, an analyst at Cormark Securities, said in a note to clients.

WestJet fell 11 percent to C$16.63 at the close of trading Tuesday in Toronto, its largest decline since December 2002. The stock is now at its lowest level since September 2012.

Revenue for each seat flown a mile will fall 10 percent to 12 percent in the first quarter, WestJet said. Walter Spracklin, an analyst at RBC Capital Markets, had been expecting a 4.2 percent drop, according to a note to investors.

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