(New throughout, recasts, adds comments from CEO and analyst,
forecasts, stock price)
By Susan Taylor
TORONTO, July 29 Lifted by strong demand and
market-beating quarterly results, WestJet Airlines Ltd
on Tuesday laid out growth plans including increased capacity
and new turboprops for its regional carrier.
Canada's No. 2 carrier, which is also plotting expansion
into overseas markets with wide-body planes next year, said
higher ticket prices and tight cost controls more than offset
pressure from climbing fuel prices in the second quarter.
Shares of the Calgary-based airline, which said it exercised
options to buy five Q400 planes from Bombardier Inc
for its growing Encore subsidiary, touched an all-time high of
C$29.11 before paring gains.
WestJet said it is now sourcing four Boeing 767-300ERW to
use on long-haul routes, a market dominated by its bigger rival,
Air Canada. Service will start with two
planes operating an Alberta-Hawaii route next winter, with
expansion into overseas markets in the summer of 2016.
"We are seeing positive momentum as a result of the robust
demand environment, the further roll-out of WestJet Encore plus
the continued success of our fare bundles," WestJet Chief
Executive Gregg Saretsky said on a conference call with
analysts. "For the third quarter, we are expecting strong
traffic and revenue growth."
The airline said it will increase full-year capacity by 6
percent to 7 percent, a percentage point above its previous
forecast. Costs, excluding fuel and profit share, are expected
to rise just 1.5 to 2 percent, an improvement from its earlier
view of a 2 percent to 2.5 percent gain.
"While WestJet is rolling out new capacity, the current
demand environment remains well supportive and we do not see any
market disruptions," RBC Capital Markets analyst Walter
Spracklin said in a note.
The carrier is moving beyond its roots as a domestic,
no-frills carrier by extending its reach, while adding service
fees, tiered ticket pricing, and onboard sales.
This summer, it expanded its one-year-old Encore into
central and eastern Canada and launched its first trans-Atlantic
service to Dublin.
WestJet reported a record net profit of C$51.8 million
($47.9 million), or 40 Canadian cents per share, in the quarter
ended June 30, from C$44.7 million, or 34 Canadian cents a
share, in the same period last year.
Revenue rose 10 percent to C$930.7 million.
Analysts on average had expected a profit of 28 Canadian
cents per share on revenue of C$913.9 million, according to
Costs excluding fuel and profit sharing rose 1.9 percent in
the quarter, well below the company's forecast of an increase of
3 percent to 4 percent.
A recovering Canadian dollar helped to clamp increases,
WestJet said, along with a lower cost of sales, advertising and
($1 = 1.0805 Canadian dollars)
(Additional reporting by Sneha Banerjee and Anannya Pramanick;
Editing by Ted Kerr, Simon Jennings, Nick Zieminski and Paul