February 3, 2012 / 11:01 AM / 7 years ago

WestJet sees opportunity to boost ancillary income

TORONTO (Reuters) - WestJet Airlines Ltd. (WJA.TO) sees an opportunity to double the amount of so-called ancillary revenue it generates from service fees, partner revenue and onboard sales that come in addition to ticket prices, the head of Canada’s second-biggest airline said on Thursday.

Snow covered mountains are seen under the wing of a WestJet commercial flight on route from Vancouver to Calgary November 23, 2010. REUTERS/Mike Blake

Calgary-based WestJet, which reports fourth-quarter financial results on February 8, averaged about C$7.50 per passenger in ancillary revenue in the third quarter, Chief Executive Gregg Saretsky said at a Raymond James airline conference, via webcast.

In the three months ended September 30, 2011, the carrier’s ancillary revenue totalled C$31.7 million, a near 40 percent jump over the same period in 2010.

“We think that the opportunity is perhaps two-fold that and where the money comes from is in a whole variety of ways,” he said, but did not specify a time frame for that increase.

This year, for example, WestJet will launch a revamped website that allows passengers to bundle services with fares, he said. Such services could include checked baggage, onboard food and drink, or flexible flight change or cancellation plans.

The carrier also recently said it was mulling the installation of seating with extra legroom, at an additional charge, at the front of its Boeing 737 jets, but would stick with its all-economy cabins.

WestJet also generates ancillary revenue from existing reserved seating and frequent flier loyalty programs.

Saretsky said that WestJet is “very carefully” watching the airline industry practice of charging passengers a fee for their first bag of checked luggage.

“There’s a potential future significant source of ancillary revenue from charging for first bags but we want to be very careful, because obviously there’s a trade-off there between brand, reputation, loyalty,” Saretsky said.

“We’re very close to our 12 percent (return on invested capital target) and so ... trading off our brand strength is something we want to do very carefully.”

WestJet currently charges C$20 to check in a second bag on flights leaving Canada. Air Canada, the country’s largest airline, introduced a C$25 first bag fee in late 2011.

WestJet employees are currently voting on a plan to start a new short-haul regional carrier in Canada, using a fleet of turboprop aircraft to serve smaller markets. The company said it could launch service as early as next year using a fleet of about 40 turboprops.

The move is a significant change for WestJet as it adds a second type of aircraft to its fleet for the first time in its 15-year history.

Shares of WestJet were up 25 Canadian cents at C$13.05 on the Toronto Stock Exchange on Thursday.

Reporting By Susan Taylor

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