September 16, 2014 / 11:25 PM / 5 years ago

Westjet CEO says new bag fees will help it lower fares

WestJet CEO Gregg Saretsky speaks at their annual general meeting for shareholders at a TMX market opening ceremony in Toronto, May 6, 2014. REUTERS/Mark Blinch

VANCOUVER (Reuters) - A new fee for checked bags will allow Canada’s Westjet Airlines Ltd to lower fares, while at the same time help the budget carrier battle rising costs, its chief executive said on Tuesday.

Gregg Saretsky said the C$25 (US$22.78) fee, announced on Monday, is in response to consumer demands for lower fares and the rising number of Canadian travelers crossing the border to fly from airports in United States.

“(Our guests) get it,” he told reporters at an event in Vancouver. “They want low fares and so this creates a vehicle for us to bring to the market even lower fares.”

Saretsky said he expects the bag fee will boost revenue, allowing Westjet to balance higher costs related to aircraft maintenance, employee compensation, airport fees and taxes with consumer demand for ever lower ticket prices.

“We don’t want to be revenue negative by these changes,” he said. “At the same time I’m hoping that with lower fares we can generate more demand and offset some of that dilution through the extra demand.”

The C$25 fee will apply to new “Econo” bookings for trips on, or after, Oct. 29, within Canada and between Canada and the United States. Westjet expects the change will impact about one-fifth of its customers.

Thousands of Canadians drive across the border each month to catch cheap flights from airports in cities like Bellingham in Washington state and Buffalo, New York, despite the fact that many U.S. airlines charge additional fees for checked bags.

Saretsky declined to comment on whether he expected the company’s main rival, Air Canada, to start charging for bags on its domestic flights, but he noted the other carrier currently charges for bags on flights to and from the United States.

Shares of Westjet closed up 22 Canadian cents at C$32.80 on the Toronto Stock Exchange on Tuesday.

Reporting by Julie Gordon

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