Packed planes lift WestJet's profits; Airline moves ahead with premium economy seating, regional service

Nov. 8, 2012
With its planes jammed with passengers during the peak summer season, WestJet Airlines was soaring high in the third quarter, recording strong profits. The Calgary-based airline said revenue rose to $866.5 million, up from $755.3 million the same quarter the year before. Profit for the quarter was $70.6 million, or 52 cents per share, up from $39.3 million, or 28 cents per share, in the same period a year ago.

With its planes jammed with passengers during the peak summer season, WestJet Airlines was soaring high in the third quarter, recording strong profits.

The Calgary-based airline said revenue rose to $866.5 million, up from $755.3 million the same quarter the year before. Profit for the quarter was $70.6 million, or 52 cents per share, up from $39.3 million, or 28 cents per share, in the same period a year ago.

Gregg Saretsky, president and CEO, noted that the airline had the highest load factors in the quarter at 84.5 per cent, compared with 80.1 per cent in the year before.

Return on invested capital was 12.7 per cent, up from 11.4 per cent, reported last quarter.

Saretsky conceded that while WestJet has had another great quarter, the company will face some additional costs going into next year as it launches its new regional airline, WestJet Encore.

WestJet appointed Ferio Pugliese, who heads up the airline's human resources division, to become president of WestJet Encore.

WestJet hasn't said yet where the airline, which will serve smaller Canadian cities, will fly. It plans to start with seven Q400 turboprop aircraft in the latter half of 2013, either centred around its Calgary hub or Toronto hub.

Details on destinations are expected in January.

Air Canada, which reports its earnings on Thursday, also already made a pre-emptive strike by boosting its service in Western Canada, centred around Calgary.

In August, WestJet also announced plans to reconfigure its Boeing 737 planes, to offer new premium economy seating, where passengers would pay more for slightly more legroom.

Originally the airline had hoped to have the changes in place by the end of the year, but it is now delayed until the first quarter.

Saretsky said the airline is still waiting for official regulatory approval for the new seating plan. It has received the go-ahead from the U.S. Federal Aviation Administration on certain models, but still needs it for its newest planes as well as from Transport Canada.

He said WestJet expects to see an immediate lift from the premium economy strategy, but said Encore will be an initial drag on earnings because the costs involved of the startup, but should begin to yield benefits.

"These small communities are victims of monopoly airfares that are very high. With our low cost structure, we can dramatically reduce yields, make profits, and offer Canadians an opportunity to travel," Saretsky said.

Copyright 2012 Toronto Star Newspapers Limited