WestJet flush with cash as profit falls 28 percent

Mon Nov 10, 2008 1:34pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - WestJet Airlines Ltd, Canada's No. 2 carrier, has tempered its plans to boost capacity but remains cash-rich and expects to grab more market share as the North American economy sputters.

While reporting a 28 percent drop in third-quarter profit due to sky-high fuel costs, WestJet said it now expects its capacity to rise by 5 percent in 2009, down from its previous outlook of 8 percent.

But it blamed aircraft delivery delays due to the recently settled strike among machinists at Boeing Co for the pullback, not weak industry conditions. Its main competitor, Air Canada, and numerous U.S. airlines have chopped capacity over the past several months.

WestJet, one of just a few airlines that have stayed profitable during the industry downturn and credit crunch, plans a 2007 capacity increase of 18 percent.

"It will come off next year, but at the same time, we think it's prudent to continue to grow and we're growing profitably -- we wouldn't do it if we weren't making money," WestJet Chief Executive Sean Durfy told analysts. "So we continue to do that and continue to take market share."

In addition, the carrier ended the quarter with C$800 million ($672 million) of cash on its balance sheet and has minimal capital expenditures in 2009, giving it a thick cushion as rivals burn through their reserves.

Last week, Air Canada said it had it had C$1.114 billion on its balance sheet, just C$114 million more than is considered comfortable.

"They're strong financially. Their outlook is more positive than I would have expected -- that's the bottom line for me," analyst Cameron Doerksen of Versant Partners said. "They have a decent view of what the fourth quarter looks like. Perhaps the first quarter and second quarter are a little more uncertain."   Continued...

<p>A Westjet airline plane lands at the Calgary International Airport in Calgary, Alberta, June 17, 2008. REUTERS/Todd Korol</p>