WestJet profit soars, names boss for Encore

CALGARY, Alberta Wed Nov 7, 2012 4:49pm EST

A WestJet Airlines Boeing 737-700 aircraft lands at Calgary International Airport in Alberta January 7, 2010. REUTERS/Todd Korol

A WestJet Airlines Boeing 737-700 aircraft lands at Calgary International Airport in Alberta January 7, 2010.

Credit: Reuters/Todd Korol

CALGARY, Alberta (Reuters) - WestJet Airlines Ltd (WJA.TO) flew past third-quarter profit estimates on Wednesday and moved closer to starting a regional carrier by naming a boss for the unit, lifting the shares of Canada's second-largest airline despite a broad market drop.

WestJet said earnings surged 80 percent and its load factor, a measure of how many passengers its aircraft carried compared with capacity, climbed 4.5 points to a company record 84.6 percent as capacity increased by just 2 percent.

The Calgary-based company also boosted revenues and expanded its operating margin, prompting the unexpectedly rich return.

The results were strengthened by WestJet's expansion of its network through interline agreements and new code-share partners, the latest being British Airways (ICAG.L), announced in September.

It will start up its regional unit, called WestJet Encore, next year to take on top competitor Air Canada (ACa.TO) and its Jazz Air (CHRb.TO) affiliate.

On Wednesday, it appointed Ferio Pugliese, WestJet's vice-president of people, culture and in-flight service, as president of the new operation, which will serve smaller centers with Bombardier (BBDb.TO) Q400 turboprop planes, a departure from the tried-and-true Boeing (BA.N) 737s in its mainline network.

"Everything remains on track for the planned launch in the second half of 2013 and the first set of new destinations that WestJet Encore will serve is expected to be announced in early 2013," Chief Executive Gregg Saretsky told analysts.

Despite the strong results, WestJet shares fell initially on the Toronto Stock Exchange on Wednesday, swept lower by a more than 1 percent fall in the TSX composite index in the aftermath of the re-election of U.S. President Barack Obama. But they recovered to end up 11 Canadian cents at C$18.07, having already climbed 56 percent this year.

"Shame on airlines and aerospace companies for releasing on the morning after a presidential election," said Robert Kokonis, managing director of airline consultancy AirTrav Inc.

Kokonis pointed out that WestJet's results put it among the top three North American airlines this quarter in important metrics, including operating margins and revenue growth.

WestJet is pushing for further growth from new revenue-boosting initiatives such as roomier "premium economy" seating, which means more leg room in four rows on each plane.

In the third quarter, WestJet earned C$70.6 million ($70.9 million), or 52 Canadian cents a share, up from a year-earlier C$39.3 million, or 28 Canadian cents a share.

That handily beat the average estimate among analysts of 43 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 12 percent to C$866.5 million. Analysts had expected C$843.2 million.

Chief Financial Officer Vito Culmone said WestJet will add five 737s in 2013, and it will sell and lease back three of them. It will take delivery of seven Q400s for Encore.

WestJet's service to New York's LaGuardia airport was halted for three days last week due to Hurricane Sandy, affecting 16 daily flights, executives said. Since then the airline has not had problems obtaining jet fuel there, they said.

($1=$1.00 Canadian)

(Additional reporting by Ankur Banerjee and Susan Taylor; Editing by Joyjeet Das, Saumyadeb Chakrabarty, Sofina Mirza-Reid and Peter Galloway)

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