Canada's WestJet beats profit on sale-leaseback deal

(Reuters) - WestJet Airlines Ltd beat analysts’ estimates for quarterly profit on Tuesday, helped by higher traffic and proceeds from a sale-leaseback deal for three aircraft, but the Canadian carrier still faces the impact of the global grounding of the 737 MAX.

WestJet airline signage is pictured at Vancouver's international airport in Richmond, British Columbia, Canada, February 5, 2019. REUTERS/Ben Nelms

WestJet, which operated 13 MAX planes, is eying a return of the Boeing jets to service during the third quarter. The jets were grounded worldwide in March following two deadly crashes involving the model.

WestJet Chief Executive Ed Sims said the company would be “firm and uncompromising with Boeing in terms of their understanding of the challenges that it has created for us,” at its annual general meeting in Calgary.

“But it is also a time for understanding of their challenges and to work with them (Boeing) to turn a short-term crisis into the best possible opportunity for us longer term.”

While the carrier would not provide a 2019 financial forecast, Chief Financial Officer Harry Taylor told analysts earlier in the day that cost per available seat mile (CASM), a key airline metric, would be affected during the second quarter because of the grounding.

Canada’s second-largest carrier has been adding international flights and wooing affluent travelers to boost profit.

WestJet has also expanded its budget carrier Swoop by adding more aircraft and flights. But demand for the ultra-low-cost airline has fluctuated and was disappointing to the company in the quarter.

“Swoop was weaker than we expected and would have liked,” Taylor said.

WestJet said traffic rose 5.3 percent in the first quarter, while available seat miles, a measure of passenger carrying capacity, ticked up at the same level.

The carrier’s net profit for the quarter rose to C$45.6 million ($33.9 million), or 40 Canadian cents per share, from C$34.2 million, or 30 Canadian cents per share, a year earlier.

The results were helped by an estimated C$15 million ($11.13 million) gain during the quarter from a sale-leaseback deal for three Boeing Dreamliner jets.

Analysts on average had expected the company to post a profit of 30 Canadian cents per share, according to IBES data from Refinitiv.

Total revenue rose 5.5 percent to C$1.26 billion.

Rival Air Canada on Monday reported a surprise quarterly profit, boosted by strong growth in passenger traffic and its purchase of a loyalty program, despite also being hit by the MAX jet groundings.

Reporting by Allison Lampert in Montreal and Shanti S Nair in Bengaluru; editing by Shounak Dasgupta, Andrea Ricci and Bill Berkrot