ALBERTA

WestJet's increase in capacity outpaced passenger growth in September

10/03/2013 08:16 EDT | Updated 01/23/2014 06:58 EST
Canada's two largest airline both reported a higher proportion of empty seats in September as growth in passenger traffic was unable to keep up with increases in capacity.

Montreal-based Air Canada (TSX:AC.B) posted a load factor of 83.2 per cent for the month versus 84.9 per cent in September 2012 as system traffic increase 1.9 per cent while system-wide capacity, which includes Air Canada Rouge, increased 3.9 per cent.

For the third quarter, Air Canada posted a system load factor of 86.2 per cent versus a record 86.3 per cent in the year-earlier quarter.

Meanwhile, Calgary-based WestJet (TSX:WJA) said its load factor in September was 76.6 per cent, down from the record of 79.1 per cent a year ago, but in line with its five-year average for the month.

The decrease came as the airline increased capacity, as measured by available seat miles, by 9.2 per cent, while passenger traffic, as measured by revenue passenger miles, increased 5.7 per cent.

Analyst Walter Spracklin of RBC Capital Markets said the results were "a bit softer than expected" as WestJet transitioned from its shoulder period into the busy winter season.

"As such, we are less concerned with this data point, but will be watching to see if it extends further into the fourth quarter," he wrote in a report.

For the third quarter, WestJet's load factor dipped 1.8 percentage points to 82.8 per cent as an 11.1 per cent growth in capacity surpassed the 8.7 per cent increase in traffic. The airline flew 4.9 million passengers in the quarter, 7.1 per cent more than a year ago.

"We are pleased with the strong traffic growth we saw in the third quarter as we not only flew a record number of guests, but also achieved our third-highest load factor for a third quarter," said WestJet president and CEO Gregg Saretsky.

Air Canada president and CEO Calin Rovinescu said his airline's September results were led by "strong gains of almost six per cent in the Pacific market."

"For the third quarter, our load factor of 86.2 per cent is in line with last year's all-time high for the same period and is a strong indication of the effectiveness of our capacity management strategy given the increase in industry capacity that came into the markets in the quarter."

Meanwhile, Air Canada said that as a result of the impact of cost reduction initiatives across various expense line categories, it now expects is third-quarter 2013 adjusted CASM (costs per available seat mile) to decrease between three and 3.5 per cent compared with Q3 2012. That compares with an adjusted CASM decrease of 1.5 to 2.5 per cent projected in early August.

On the Toronto Stock Exchange, WestJet's shares closed down 64 cents at $24.41 on Thursday, while Air Canada, which issued its report after markets closed, saw its stock rise seven cents to $3.97.

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