March 4, 2009 / 10:26 PM / in 9 years

UPDATE 1-WestJet cuts revenue outlook despite solid traffic

(Adds Air Canada, Jazz traffic data)

CALGARY, Alberta, March 4 (Reuters) - WestJet Airlines Ltd WJA.TO expects its revenue per seat sold to fall by 10 to 12 percent in the first quarter as it wrestles with the sputtering economy and brisk competition on fares, Canada’s second-largest airline said on Wednesday.

Its shares sank 71 Canadian cents, or 6 percent, to C$11.24 on the Toronto Stock Exchange as analysts cut their earnings forecasts.

WestJet warned of the weaker outlook as it and its chief rival, Air Canada ACa.TO, reported solid February traffic data.

WestJet said the drop in fuel costs as oil prices have retreated is only partly offsetting the weakness in revenue per available seat mile.

“This decline reflects current economic challenges, the aggressive competitive pricing we have faced and the shift of Easter to the second quarter in 2009,” Chief Executive Sean Durfy said in a statement.

WestJet said its planes flew 82.6 percent full in February, down just 0.2 percentage points from the same month in 2008 while its capacity, measured by available seat miles, increased 5.7 percent to 1.35 billion.

Revenue passenger miles rose 5.5 percent to 1.116 billion.

Versant Partners analyst Cameron Doerksen cut his price target on WestJet to C$15 from C$16 a share, but maintained a “buy” rating on the stock.

“We expect that the weaker than expected Q1 unit revenue will put some pressure on the stock in the near term and may cast a cloud of uncertainty over the air travel demand outlook for the remainder of 2009,” Doerksen wrote in a research note.

UBS analyst Fadi Chamoun said near-term earnings are likely to suffer. “Capacity redeployment into Canada in coming months, coupled with moderating demand, leads us to believe that substantial pressure on (revenue per available seat mile) will persist,” he wrote.

For its part, Air Canada said planes in its mainline service flew 80.7 percent full, beating last year’s load factor by 1.2 percentage points.

That was against a 11.1 percent drop in capacity to 3.879 billion available seat miles and a 9.8 percent cut in traffic to 3.13 billion revenue passenger miles.

Canada’s biggest airline had been reducing capacity to deal with the downturn, especially in U.S. and overseas markets.

“Capacity adjustments are on track and we continue to follow the market closely, fine tuning capacity as required,” Air Canada Chief Executive Montie Brewer said in a statement.

At Jazz Air JAZ_u.TO, Air Canada’s regional affiliate, the February load factor dropped 6.8 percentage points to 69.6 percent, as capacity fell 9.7 percent to 401 million available seat miles and traffic tumbled 17.7 percent to 279 million revenue passenger miles.

Air Canada shares jumped 10 Canadian cents, or nearly 12 percent to 95 Canadian cents. Jazz Air Income Trust units rose 28 Canadian cents, or 7 percent, to C$4.05.

$1=$1.27 Canadian Reporting by Jeffrey Jones; editing by Frank McGurty

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