CALGARY, Alberta (Reuters) - Canada’s two major airlines said on Tuesday they have yet to see domestic demand for air travel slacken because of the slumping U.S. economy, though fuel costs are a rising concern.
Speaking at a Toronto investment conference, the chief executives of Air Canada and WestJet Airlines Ltd said domestic demand for air travel remains robust and there has been little sign so far of the turbulence that has roiled U.S. carriers.
“With fuel the price it is and fares that are going up to cover that ... we’ve been watching very closely to see how that’s impacting demand,” Montie Brewer, Air Canada’s chief executive, said on the Webcast of his presentation. “Thus far, we’ve not seen any dramatic change in our booking levels even though the fare increases have gone in.”
U.S. airlines have been hit hard by the economic downturn, which has cut travel demand at the same time that costs climb due to record fuel prices.
The trouble in the U.S. market, spurred by the fallout from the subprime mortgage crisis, was highlighted on Tuesday when Delta Air Lines Inc said it would cut 2,000 jobs, or 3 percent of its staff, and cut flights.
Brewer said Air Canada, the country’s biggest carrier, had no change to its bookings for the next three months and expects a busy summer travel season.
“I’ve been waiting for the Canadian economy and the Canadian traffic to slow down,” he said. “But as you’ve seen ... even when it does slow down it is still at a very healthy pace relative to the U.S. guys, who’ve seen contracting domestic revenues.”
Calgary, Alberta-based WestJet, which has reported record monthly capacity results for better than a year, said it too has not seen its advance bookings decline because of the economy.
“In Canada and Alberta the economy continues to be strong,” said Sean Durfy, WestJet’s chief executive. “It’s anybody’s guess what will happen ... given what’s happening to the U.S.”
Durfy said WestJet sees strong Canadian consumer confidence, with high demand for vacation packages. And if economic conditions soften, Durfy said, WestJet was sitting on more than C$650 million in cash at the end of last year, a cushion against what he called “turbulent times.”
With oil prices near $110 a barrel, the cost of jet fuel is a concern for both companies, the executives said.
The two carriers have been able to pass through some of the costs to customers and the strength of the Canadian dollar has also served to mitigate some of the rise. However Durfy said some turmoil may be on the way should high prices continue.
”It’s expensive and it’s going to be an issue. No doubt about it,“ he said, ”You are going to see fallout from the cost of oil ... throughout the industry in North America and you’re seeing it in the United States now.
Air Canada’s class A shares, down by half over the past 12 months, fell a further 25 Canadian cents to C$8.65 on Tuesday on the Toronto Stock Exchange.
WestJet dropped 4 Canadian cents to C$17.66 a share on the Toronto exchange. Its stock has gained 18 percent over the past 12 months.
Reporting by Scott Haggett; Editing by Peter Galloway