WestJet earnings up, CEO still committed to low fares

Tue Nov 4, 2014 1:39pm EST
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By Allison Martell

(Reuters) - WestJet Airlines Ltd, Canada's No. 2 airline, reported higher third-quarter adjusted earnings on Tuesday and forecast a jump in capital expenditure in 2015, but shares slipped after Chief Executive Gregg Saretsky vowed to keep fares low.

The Calgary-based airline is growing beyond its roots as a no-frills domestic carrier, boosting capacity and adding more international flights. But on a call with analysts and investors on Tuesday, Saretsky said cheap fares are still a top priority.

"I am loathe to take any fare increases. Our whole ethos here is to provide Canadians with access to affordable travel, so we are all motivated to continue to move fares down, and that requires us to take cost out of our business," he said.

Shares dropped after the comments and were down 3.9 percent at C$30.77 by midday. Rival Air Canada also fell, sliding 2.8 percent to C$9.22.

RBC Capital Markets analyst Walter Spracklin said in a note to clients that the focus on cost control instead of revenue growth was not what investors wanted to hear, and suggested that a new bag fee might not significantly boost profits after all.

WestJet announced the new fee for checked bags on Sept. 15, and its shares rallied on hopes the charge would boost revenue and earnings. But a day later, Saretsky said the fee would make it possible to cut fares.

WestJet said it sees 2015 capital expenditures between C$820 million and C$840 million, up from an estimated C$660 million in 2014. The carrier is replacing seats across its fleet.

It improved 2014 cost guidance, saying it now expects cost per available seat mile, excluding fuel and profit sharing, to rise between 1.0 percent and 1.5 percent. It had previously seen an increase between 1.5 percent and 2.0 percent.   Continued...