UPDATE 3-WestJet Airlines profit slumps, but beats estimates

Tue Jul 26, 2016 1:46pm EDT
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(Recasts with forecast for rising costs, adds comments from WestJet executives' conference call)

July 26 (Reuters) - WestJet Airlines Ltd's quarterly profit slumped 40.5 percent and the carrier said Tuesday that costs would rise this year due to the timing of maintenance expenses on its widebody aircraft and extra charges incurred on a new London route.

WestJet said it expected cost per available seat mile (CASM), excluding fuel and employee profit share, to rise by 2.5 to 3.5 percent in 2016, higher than the 0.5 to 1.5 percent anticipated earlier. The company forecast a 1.0 to 1.5 percent increase in current-quarter adjusted CASM, a measure of how much an airline spends to fly a passenger.

Still, WestJet beat analysts' estimates as the Canadian carrier flew more passengers and its fuel costs declined.

Macquarie Capital Markets analyst Konark Gupta said the cost increase was not "overly concerning" as it related to "teething issues" on London flights.

WestJet Chief Executive Gregg Saretsky told analysts on a conference call that the carrier's performance recently improved on trips to London after previously incurring charges for irregular operations, such as when a flight fails to operate on schedule.

"It was a blip and the blip is behind us," Saretsky said.

Britain's recent vote to leave the European Union should not affect flights into London, Saretsky said, adding that as a low-cost carrier, WestJet could attract more customers.

"To the extent that the Brits become more price sensitive, that plays really to the strength of our model."   Continued...