WestJet Airlines Ltd. topped expectations in its latest quarter, but chief executive Ed Sims said Tuesday the airline continues to face challenges from the grounding of its Boeing 737 Max aircraft and lagging demand at its discount subsidiary.
B次元官网网址淔or the last 18 days of March, our absolute revenue was adversely impacted, as we spent considerable effort re-accommodating thousands of disrupted guests,B次元官网网址� Sims said, referring to impact of the grounding of the 737 Max aircraft.
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The grounding weighed on the companyB次元官网网址檚 revenue in the first quarter, which rose 5.5 per cent year over year to $1.26 billion B次元官网网址� slightly lower than analysts expected.
Sims said the impact on its second quarter looks harsher, with passenger capacity reduced by up to three per cent from April through June.
WestJetB次元官网网址檚 13 Max 8s B次元官网网址� about 10 per cent of its total seat capacity B次元官网网址� remain grounded after regulatory authorities across globe closed their skies to the aircraft following a second fatal crash in March that Boeing has since linked to a malfunctioning safety alert.
While Air Canada has extended leases on a half-dozen narrow-body jetliners alongside long-term leases for six Airbus A321 jets picked up from IcelandB次元官网网址檚 WOW Air B次元官网网址� which went defunct less than three weeks after the March 10 crash B次元官网网址� WestJet has extended just one lease B次元官网网址� on a Boeing 737-700 jetliner B次元官网网址� relying on its existing fleet.
B次元官网网址淐ertainly, I have not seen any kind of rationale that would justify the costs of short-term leases,B次元官网网址� Sims said, adding that he has B次元官网网址渁 clear line of sightB次元官网网址� to the Boeing software updates that are expected to precipitate a lift on the flight ban.
Meanwhile Swoop, WestJetB次元官网网址檚 discount brand, continued to struggle in the shoulder season, said chief financial officer Harry Taylor.
B次元官网网址淪woop was weaker than we expected and would have liked,B次元官网网址� he said. B次元官网网址淎wareness is so low. It hasnB次元官网网址檛 even had its first birthday yet.B次元官网网址�
Competition among budget carriers is intensifying, with Swoop recently launching routes to Mexican and Caribbean hot spots to battle for customers with Transat A.T. B次元官网网址� now in talks to sell the company B次元官网网址� Air Canada and Sunwing Airlines.
Capacity among Canadian airlines for Mexican and Caribbean sun destinations jumped about eight per cent this winter, according to Transat. That includes a 16 per cent leap by Air Canada B次元官网网址� which has put more pressure on the sun market since Rouge entered the airspace in 2012 B次元官网网址� and a 14 per cent increase by WestJet B次元官网网址� excluding the additional routes from Swoop.
The rivalries have spawned a predatory pricing investigation into WestJet and Swoop by CanadaB次元官网网址檚 competition watchdog, following a complaint from Flair Airlines.
Taylor said the ultra-low-cost Swoop, which launched last June, is now listed on travel fare search engines such as Skyscanner and Google Flights, prompting an uptick in bookings. The company is also negotiating agreements with large online travel agencies, including Expedia, he said.
B次元官网网址淲e are not giving up or worried about it,B次元官网网址� Taylor said.
SwoopB次元官网网址檚 woes were the B次元官网网址減rimary driverB次元官网网址� behind low revenue per available seat mile (RASM), a key performance measure, Sims said on a conference call with investors ahead of the airlineB次元官网网址檚 annual meeting in Calgary.
Analyst Doug Taylor of Canaccord Genuity called the results B次元官网网址渕ixed,B次元官网网址� pointing to solid profits but B次元官网网址渟lightly disappointingB次元官网网址� RASM. The metric grew just 0.2 per cent last quarter versus the 4.5 per cent RASM growth that Air Canada posted in quarterly results Monday.
SwoopB次元官网网址檚 RASM is expected to pick up in the second half of the year, analysts said.
On Tuesday, WestJet announced that it and regional offshoot WestJet Encore had each reached tentative agreements with the Canadian Airline Dispatchers Association.
WestJet topped expectations as it reported its first-quarter profit climbed more than 30 per cent compared with a year ago.
The Calgary-based company said it earned $45.6 million or 40 cents per diluted share for the quarter ended March 31, compared with a profit of $34.2 million or 30 cents per diluted share a year ago.
Analysts on average had expected a profit of 34 cents per share and revenue of $1.28 billion, according to Thomson Reuters Eikon.
The increased earnings came as WestJet saw both its capacity, measured by available seat miles, and its traffic, measured by revenue passenger miles, climb by 5.3 per cent compared with a year ago.
The airlineB次元官网网址檚 load factor, a measure of how full its aircraft were, held steady at 84.8 per cent in the quarter.
Christopher Reynolds, The Canadian Press
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