WestJet says premium launch could have gone smoother
Airline's Q2 profit tops average estimate of analysts
The CEO of WestJet Airlines admits the rollout this spring of a premium service geared toward business travellers could have gone more smoothly, but all of the kinks should be out of the system in time for its official launch in a few weeks.
"It wasn't pretty," Gregg Saretsky told analysts on a conference call Tuesday to discuss the company's second-quarter results.
"We apologize to our guests and our flight attendants for that, but we'll have that fixed for August 17."
The Calgary-based airline introduced three separate fare bundles — Econo, Flex and Plus — with little fanfare in April.
Econo is the cheapest, least flexible option. Flex has a few more bells and whistles, including less costly itinerary changes and the ability to prebook seats in emergency access rows. Plus has the most perks, such as access to roomier seats toward the front of the plane, two free checked bags instead of one and priority security screening.
Because the rollout of the new tiered service offering was so low key, there were some cases of passengers seating themselves in the first three rows of the retooled Boeing 737 aircraft, unaware they were supposed to pay for the privilege.
"They saw the empty seats there and they just thought they'd sit themselves down and take advantage of some of the extra elbow room," said Saretsky.
"And that put our flight attendants in a very awkward and untenable position of having to try to move them out of that space or charge them on board the aircraft."
One big mistake, Saretsky said, was not demarcating the Plus rows clearly enough — with different coloured seat fabric, for instance.
"To the uninformed guest, the Plus section looked just the same as any other section, unless you travel with a tape measure and can measure the seat pitch," said Saretsky, adding those sections of the cabins will be more clearly branded in time for the launch.
For the rest of 2013, WestJet expects the new fare bundles to bring in $20 million to $30 million in revenues. Once the services are fully up and running, that's expected to increase by $50 million to $80 million per year.
Earlier Tuesday, WestJet reported second-quarter profits of $44.7 million, or 34 cents per share — beating the average analyst estimate by a penny, according to data compiled by Thomson Reuters.
During the same period year earlier, WestJet brought in $42.5 million in profits, or 31 cents per share.
The company's quarterly revenue came in at $843.69 million, an increase from $809.28 million in the year-before period but below an analyst estimate of $860.7 million.
The results included $8.4 million in one-time costs, including voluntary buyouts for flight attendants and the cost of relocating some of its 9,600 employees as WestJet started basing its crews out of multiple cities.
New regional service
WestJet launched a new regional service called Encore at the end of June.
In early June, WestJet received two new Q400 turboprop planes from Bombardier, the first of 20 firm orders and 25 additional options.
The airline plans on using the two 78-seat Bombardier planes for Encore.
Encore will initially add Fort St. John, B.C. to WestJet's network and also fly on routes between Vancouver and Victoria, as well as Calgary to Nanaimo, B.C. Additional routes will be added as it takes delivery of five more planes by the end of the year.
In an effort to compete more effectively with Air Canada, the country's biggest airline, WestJet has been looking to draw more international traffic into its network.
In the United States, WestJet is working with American Airlines and Delta. On the international front, WestJet has announced partnerships with British Airways, Cathay Pacific, China Airlines, Air France and KLM.
WestJet is also looking to beef up its presence in the ultra-competitive Toronto-Ottawa-Montreal circuit by offering more frequent flights and various perks to business travellers.
WestJet said it expects to continue its strong traffic and revenue growth in the third quarter of 2013 and expects jet fuel costs to range between 90 and 92 cents per litre in the third quarter, representing a two per cent year-over-year increase.
On Monday, WestJet's board declared a cash dividend of 10 cents per common voting share and variable voting share to be paid on Sept. 30, 2013.
Shares of WestJet finished Tuesday down two cents, closing at $20.11 on the TSX.