UPDATE 2-WestJet warns on outlook but optimistic on costs

Tue Jul 30, 2013 3:33pm EDT
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* Profit rises 5 percent, helped by cost-cutting

* Earnings top estimates, but near-term outlook worries

* Average revenue per seat declines 4.6 percent

* Roll-out of regional carrier Encore hits efficiency

By Solarina Ho

TORONTO, July 30 (Reuters) - WestJet Airlines Ltd posted a slightly higher-than-expected quarterly profit on Tuesday but warned that a key measure of airline efficiency would decline in the near term as it launches its Encore regional carrier.

Canada's No. 2 airline said revenue per available seat mile (RASM) fell 4.6 percent in the second quarter and would show a similar drop in the current quarter. But it cut its costs in the latest quarter and issued an improved cost outlook.

WestJet reduced its estimate for cost per available seat mile for the full year, excluding fuel and employee profit-sharing costs. It now expects a decline of 0.5 percent to 1 percent, compared with a prior forecast of flat to up 1 percent.

"On the positive side of the ledger, investors will be comforted by the solid cost-control efforts," Walter Spracklin, an analyst with RBC Dominion Securities Inc, said in a note. "On the negative side are the declines in yields and RASM..."   Continued...