WestJet earnings down two-thirds due to fuel costs and fierce competition

Soaring fuel costs, labor disputes and fierce competition at home and abroad have resulted in a troubled third quarter for WestJet Airlines Ltd., which saw its earnings fall compared to the same period last year. Last year.

"This year has clearly not been in line with our expectations or our wishes," said CFO Harry Taylor. "But we hit several brands this year and were executed.

"We are not where we want to be financially. We have to go back that way, "Taylor said at a conference call with investors Tuesday morning after the release of quarterly results.

The Montreal-based company reported a third quarter profit of $ 45.9 million, down 66% from $ 135.9 million in the same quarter last year.

Fuel costs jumped to 85 cents per liter, up 37% from last year, which was the largest operating expense.

In May, WestJet pilots voted in favor of a strike action before the Air Line Pilots Association (Air Line Pilots Association) agreed with a process of protest. settlement two weeks later. The initial threat frightened potential pbadengers and sparked low-cost fare deals that cost the carrier "tens of millions of dollars" in the second and third quarters, said managing director Ed Sims.

Intense competition is another concern. Flair Airlines, a newly enlarged company, Canada Jetlines Ltd., soon to be on the market, Rouge and low-cost transatlantic players from Air Canada, such as the Icelandic groups Wow Air and Norwegian Air, all occupy fiscal airspace in Canada. which WestJet has been flying for four months. old Swoop at very low cost.

"We have seen a dramatic increase in fares and then an even more dramatic reduction in fares. We have seen another low-cost operator enter and double the size of its network, "said Sims, referring to the private group Flair.

"We consider the domestic market to be saturated so that WestJet's ability to attract incoming leisure traffic from markets such as Europe is not saturated," he added, pointing out that its Boeing 767 wide-bodies are a "very effective weapon against this Red product. . "

Earlier this month, WestJet launched non-stop flight sales linking Calgary to Dublin, Paris and London Gatwick Airport with the top three of the 10 new Boeing 787 Dreamliner aircraft expected as part of a travel offering defying the transatlantic domination of Air Canada.

WestJet announced Tuesday that it would add a Toronto-Barcelona link as well as a Calgary-Atlanta link, with sales starting immediately.

"It's typically very difficult to enter the southeastern United States," said spokeswoman Lauren Stewart, highlighting the market access created by a joint venture with Delta Air Lines, based in Atlanta, announced in July.

Karl Moore, an aviation expert at McGill's Desautels Faculty of Management, sees WestJet "transitioning" from a low-cost national carrier to a full-service intercontinental airline.

"I think they will always try to be the brave Canadian competitor … a little rooted in the West," Moore said. "But it becomes less David and Goliath and more Goliath and a great player.

"The high price of oil is absolutely a problem. High competition is absolutely true. I think there is a bit of difficulty right now, but I think they are positioning themselves very well for the future, "he said.

Earnings in the third quarter amounted to 40 cents per diluted share for the quarter ended September 30, compared to $ 1.15 per diluted share a year ago, the airline said.

Revenues totaled $ 1.26 billion for the quarter, which includes the peak period of summer travel, compared with $ 1.21 billion a year earlier.

Analysts on average expected a profit of 33 cents per share for the quarter, according to Thomson Reuters Eikon.

WestJet's capacity – measured by the number of available seat seats – increased by 9.9% over the same quarter of the previous year, while traffic – measured in revenue pbadenger miles – increased by 8.9%. , 6%.

Its load factor fell to 84.6% from 85.7% a year ago.

A resolution with WestJet pilots is expected by December and binding arbitration submissions will be completed this month.

Companies in this article: (TSX: WJA, TSX: AC)