WestJet Annual Profits Soar 873 Percent

WestJet's whopping 873 per cent jump in year-over-year profit has the airline eyeing expansion in Hamilton.

The Calgary-based airline's second-quarter profit hit a record $22.4 million, beating all market expectations.

"The earnings are higher than the market had forecasted and we are very pleased with the results," said Bob Cummings, vice-president of marketing.

Despite the announcement, WestJet's stocks actually fell by 2.5 per cent yesterday with the market predicting a less profitable future.

The success of the discount airline's soaring second quarter is the result of a new fleet of more fuel-efficient planes, the high Canadian dollar, flight service upgrades and a growing brand name, Cummings said.

John C. Munro Hamilton International Airport also had a role to play.

Since last summer, WestJet has increased flights at the Mount Hope airport from 41 weekly flights to 60 and it has paid off.

"We increased the capacity at Hamilton and the market is absorbing that capacity," he said. "Hamilton has definitely contributed to our second quarter results."

However, 60 flights per week is still a far cry from the 167 weekly flights coming in and out of Hamilton in 2000 when the airline decided to make the city its eastern hub. That number dropped by 60 per cent in January 2004 when they deserted Hamilton and moved the eastern hub to Toronto's Pearson Airport.

Now it appears WestJet and Hamilton's airport are on the road to rekindling their relationship with the airline scoping out Steeltown as a spot for future flights.

Cummings said WestJet is in expansion mode increasing its number of planes from 58 to 63 by the end of this year. The airline wants to expand its operations in eastern Ontario and increase the number of flights to the United States, he said.

"WestJet has significant growth plans over the next five years and the fact that some of that will come in the east and some will come in trans-border flights to the U.S. makes Hamilton a strong candidate to move forward with future growth," he said. The Saturday flight from Hamilton to Orlando has been extremely successful and that "bodes well for us to look at Hamilton for future flights to the U.S.," he said. "We are looking for more opportunities like that."

Hamilton is also an attractive place to expand because it has a large catchment area of about 2.3 million, he said and has lower landing fees compared to Toronto.

Richard Koroscil, Hamilton airport president, said he is doing everything on his end to present possible opportunities to the airline. "We are working constantly with WestJet on opportunities that can help them grow," Koroscil said. "We believe there is a strong market in expanding flights from Hamilton to Florida, New York and Las Vegas."

WestJet makes up 85 per cent of the total passenger volume flowing through Hamilton's airport with passenger flights making up half of the airport's overall business.

Flights currently out of Hamilton include Calgary, Edmonton, Winnipeg, Halifax, Moncton, Vancouver and Orlando.

Koroscil said he is optimistic WestJet will send more business Hamilton's way since the airline has already invested an additional 19 flights over the past year and its current profits are more than healthy.

The release of yesterday's earnings comes after a turbulent year for the airline with WestJet's involvement in a case of corporate espionage. Airline managers accessed a password-protected website for Air Canada employees and downloaded information on passenger loads. WestJet agreed to pay $5.5 million in investigation and legal bills as well as make a $10-million donation to charity.

The fact that profits have skyrocketed shows customers have forgiven and forgotten the airline's legal troubles, said Douglas Reid, airline expert with Queens University. "They coped with their internal troubles and hit a home run," Reid said. "WestJet deserves a lot of praise."

However, Rick Erickson, an independent aviation analyst in Calgary, said WestJet's soaring second quarter profit is an achievement, but not as exceptional as many would believe since most airlines are doing well right now. The high dollar and a strong economy means more Canadians are flying to the U.S., Erickson said.

"This is as good as it gets for the airline industry."

Also, WestJet's second quarter profits are being compared to last year's which were low because of strong competition from Jetsgo, he said.

The stock market hasn't given WestJet high marks for the future because the airline will have trouble expanding, he said. Americans don't know the WestJet name and the airline likely won't be successful in the U.S. As far as expanding domestic flights, Erickson said the airline has exhausted its supply of low-cost flights in Canada and doesn't have the variety in services offered by its competitor Air Canada such as business class or air mile points, he said.

"Their 30 per cent of the domestic market won't disappear, but I don't see anywhere else WestJet can grow."



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