Canada's WestJet reports higher-than-expected profit

Tue May 3, 2016 12:26pm EDT
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(Reuters) - Canada's WestJet Airlines Ltd (WJA.TO: Quote) on Tuesday reported a higher-than-expected quarterly profit, helped by lower fuel costs.

Calgary-based WestJet's fuel expenses, typically an airline's largest variable cost, fell nearly 21 percent to C$166.4 million ($132.4 million).

WestJet has shifted its focus to eastern Canada and suspended nearly a dozen daily flights in January from Alberta's airports after airlines operating in the oil-rich province started recording a significant decline in passenger traffic.

On a conference call with analysts, Chief Financial Officer Harry Taylor said the airline would continue with efforts to control its costs, including renegotiating contracts with vendors.

"We are not going to leave any stone unturned," Taylor said.

The company's cost per available seat mile, a measure of how much an airline spends to fly a passenger, fell 4.2 percent to 12.45 Canadian cents in the first quarter, from a year earlier.

WestJet's full-year CASM is projected to rise 0.5 percent to 2.5 percent, higher than the carrier's previous guidance.

However, WestJet's revenue per available seat mile (RASM), an indicator of an airline's efficiency calculated by dividing operating income by available seat miles, fell 11 percent to 14.14 Canadian cents. WestJet projects RASM to be down between 7.5 percent and 9.5 percent in the second quarter.

"While we sense that full year expectations are reasonable particularly given the pullback in capacity, the bar was higher following the strong Air Canada results and guidance," wrote BMO analyst Fadi Chamoun in a note to clients on Tuesday. "Reception of these results is likely to be muted."   Continued...

A Westjet Boeing 737-700 takes off at the International Airport in Calgary, Alberta, May 3, 2011.   REUTERS/Todd Korol