Business

WestJet looks to expand long-haul fleet, signs deal with pilots

Despite mechanical difficulties, WestJet's flghts to London led it to solid earnings over the summer as the airline flew nearly 6 million passengers in the quarter — a record. The airline said it is actively looking for more jets to add to the 767 fleet.

WestJet said its long-haul experiment is a success and is looking to expand

WestJet said its capacity and load factor grew in the third quarter, as the airline posted a profit that topped the expectations of analysts. (CBC)

Despite mechanical difficulties, WestJet's flights to London led it to solid earnings over the summer. The airline flew nearly 6 million passengers in the quarter — a record. Calling the experiment a success, the airline is now looking to expand its fleet of wide-bodied jets beyond the four Boeing 767s it currently operates.

"The best opportunity for us is to grow the wide-bodied fleet responsibly but quickly," said Gregg Saresky, chief executive of WestJet, on the company's earnings conference call.

Earnings up 14 per cent

WestJet earned $116 million, or 97 cents a share, in net profit in the third quarter of 2016, beating the 94 cents a share that analysts surveyed by Reuters had expected.

The airline said that was its second-best quarterly profit ever as capacity grew by 10.6 per cent and the airline's load factor — the percentage of seats filled — rose to 84 per cent from 81.8 per cent a year earlier.

As WestJet noted in its earnings report for the quarter, which ended Sept. 30, the airline posted its fifth straight month of double digit passenger growth. That coincides with its May launch of flights from five Canadian cities to London's Gatwick airport.

Load factor high on London flights

WestJet has been dealing with delays, cancellation and diversions with its London route, but aggressive discounting of the fares kept seats filled over the summer flying season.

In a research report released last month, Raymond James airline analyst Ben Cherniavsky estimated that approximately 60 basis points of WestJet's improved load factors were related to its new London service.

On the earnings call with analysts, WestJet executive were peppered with questions about the reliability and age of the aircraft, the profitability of the route and plans for expansion. 

Saretsky defended WestJet's decision to buy older Boeing 767s. 

"We don't believe the 767 is the problem, said Saresky. "And as soon as we get the last of the reliability issues behind us, we think it might make sense to add more 767s to our fleet. They're very low capital cost, and in a low fuel cost environment they actually generate good return for us."

Saretsky said that the existing jets have a further life span of five years, at most, and that WestJet intends to eventually flip the wide-bodied fleet to new or gently used jets.

Tentative deal with pilots

Expanding the fleet is dependent on coming to an agreement with cabin crew about operating the new aircraft. Conventionally, pilots and flight attendants are paid more for operating larger aircraft and longer flights.

Saretsky said on the conference call that the airline came to a tentative agreement with pilots on October 30th, which needs to be ratified by the pilot group. 

"As soon as we know the outcome of that vote, we'll be in a better position to talk about the what the future of wide-bodied at WestJet looks like."

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