WestJet eyes higher fees, cost cuts to offset weak Canadian dollar

Tue May 6, 2014 12:10pm EDT
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By Susan Taylor

TORONTO (Reuters) - WestJet Airlines Ltd (WJA.TO: Quote) will try to cut more costs and notch fees and fares higher, the country's second-largest airline said on Tuesday, as it grapples with a weaker Canadian dollar that is driving up expenses.

The carrier, which is expanding its regional subsidiary into eastern Canada and launching trans-Atlantic service this summer, said its first-quarter results took a C$33 million ($30.10 million) hit from foreign exchange.

The Calgary, Alberta-based airline has no plans to add a currency surcharge, Chief Executive Gregg Saretsky said on a conference call, but it will fight the "FX problem."

"Airlines get into trouble when all they do is just keep raising their airfares," he said. "You'll see us continue to work through the balance of the year both on cost reduction and on revenue initiatives."

A falling Canadian dollar hurts airlines because they make major purchases in U.S. dollars, including fuel and planes.

The low-cost carrier, which has cut some C$125 million from annual expenses, will mull higher ancillary fees for services like seat reservations, and fare increases that do not hurt demand.

Ancillary revenue jumped 37 percent in the first quarter to C$50.7 million, WestJet said, as it made gains with tiered ticket pricing and premium economy seating.

Since WestJet introduced a system-wide 2 percent fare increase in February, it has twice lifted fares in specific geographic markets.   Continued...

WestJet CEO Gregg Saretsky poses for a picture before the annual general meeting for shareholders at a TMX market opening ceremony in Toronto, May 6, 2014. REUTERS/Mark Blinch