Canadian airlines end year on high but face uncertain 2012

Canada?s largest airlines ended 2011 seemingly untouched by global economic concerns as they brace for a slow domestic economy recovery and higher fuel prices this year.

WestJet and regional carrier Porter Airlines reported record load factors in December while Air Canada, the country?s largest carrier, saw its passenger traffic grow slightly from a year ago.

The Montreal-based airline?s load factor increased to 81 per cent from 80.8 per cent in December 2010 as system traffic, including capacity purchased from regional airlines, increased 3 per cent on a capacity increase of 2.8 per cent.

Calgary-based WestJet said it flew a record 1.4 million passengers in the month as the airline reported a load factor of 80.9 per cent, tying its second-highest December load factor ever.

Toronto-based Porter, which offers routes in Eastern Canada and the United States, also reported a strong December. Its load factor for the month was 63.9 per cent, up 1.5 percentage points from December 2010 and a record for the airline.

Chris Murray of PI Financial Corp. said the results show the carriers aren?t experiencing any drop-off in traffic that?s associated with economic weakness.

"We keep looking for the shoe to drop," he said in an interview.

With few new aircraft expected to be added in Canada this year and weak economic growth, the traffic results should soften in 2012, he said.

"I?m expecting that, as we start entering into the year, we?ll see more muted year-over-year comparisons."

Robert Kokonis, president of airline consulting firm AirTrav Inc., said fuel prices are "the big wild card right now."

"As long as there?s not any major seismic shifts in the economy in the U.S. or further deterioration in Europe for the sector overall, I think 2012 looks reasonable with the exception of where oil is going to be," he said in an interview.

WestJet CEO Gregg Saretsky recently mused about pushing to become the country?s largest airline within five years by expanding its regional service to smaller communities.

Murray said such a move would make sense and help to feed more traffic to its mainline service, just as Jazz does for Air Canada.

Porter?s load factor was based on 117.6 million available seat miles, an increase of 26.7 per cent over the same month in 2010 as the airline expanded its number of routes over the year, and 75.2 million revenue passenger miles, up 29.9 per cent.

For the full year, Porter said it flew a record 2.1 million passengers, up from 1.56 million the previous year.

"Porter is one of the fastest growing airlines in North America," president and CEO Robert Deluce said in highlighting the results. "We?re proud of what we?ve accomplished as a team and are ready to make our mark in 2012."

Besides adding new destinations in 2011, Porter, based at Billy Bishop Toronto City Airport, took delivery of six new Bombardier Q400 aircraft.

Porter?s traffic results are a good indication that its network is gaining public traction, said Kokonis.

"It?s evidence (Deluce is) maturing these routes and he?s demonstrating there?s a true demand for alternative service. Is it profitable? We still don?t know yet."

Kokonis expects Porter won?t launch an initial public offering until 2013 if market conditions are positive.

Porter?s service to the United States could accelerate once customs clearance is added to the Toronto airport.