WestJet raises prices as weaker Canadian dollar swells costs

Tue Feb 4, 2014 2:53pm EST
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By Susan Taylor

TORONTO (Reuters) - WestJet Airlines Ltd's (WJA.TO: Quote) chief executive said on Tuesday that the low-cost carrier recently raised ticket prices to compensate for climbing expenses caused by a weaker Canadian dollar, and may do so again if the currency falls further.

Chief Executive Officer Gregg Saretsky made the comments after Canada's second-largest carrier reported fourth-quarter results on Tuesday that largely met expectations, though WestJet warned it sees the currency and an accelerated maintenance schedule swelling costs in 2014.

"If it makes sense that we need to offset some of the input cost increases, as a result of the change in foreign exchange, we'll make whatever changes are smart for the business, respecting of course the impact on demand," Saretsky said on a conference call.

"We're watching this very closely."

The airline also hiked its dividend by 20 percent and said it expected earnings growth in full-year 2014. Its stock rose 3 percent as healthy yield growth allayed concerns that WestJet's expansion would dent profits, said independent airline consultant Robert Kokonis.

WestJet, which is working to grow beyond its low-fare origins to lure business customers and add more fees to plump up revenue, said it introduced a system-wide 2 percent fare increase last week, which was matched by competitors.

The Calgary, Alberta-based carrier repeated that it does not plan to add a currency surcharge to offset the weaker dollar, despite such a move by rivals including Air Canada's ACb.TO vacation packages arm and Transat AT TRZb.TO.

"The primary method by which the airlines can offset both a weaker Canadian dollar and higher fuel prices is by increasing air fares. This is easier said than done, especially in an environment where overall market capacity is increasing," National Bank Financial analyst Cameron Doerksen wrote in a note to clients.   Continued...

President and Chief Executive Officer of Westjet Airlines Gregg Saretsky addresses shareholders during the company's annual general meeting in Calgary, Alberta, May 7, 2013. REUTERS/Todd Korol