08/01/2012 08:23 EDT | Updated 10/01/2012 05:12 EDT

WestJet to offer more leg room in four rows at a higher price

WestJet passengers willing to pay more for extra leg room will be able to fly "premium economy" in four rows — but some non-premium customers might notice a little less space in the other seats.

Aiming its premium seats at business travellers with an eye on revenue growth, WestJet will increase the distance between the back of the seat and the one behind it to 36 inches in four rows of its planes across its fleet — an increase of four inches on some of its aircraft.

But that also means the rest of the seats will be reconfigured to 31 to 32 inches of leg room, a move WestJet says will bring it "in line with North American competitors."

"I don't expect our guests to feel any impact from that reconfiguration, but we'll certainly see the revenue benefit," president and CEO Gregg Saretsky told analysts on Wednesday.

However, the number of lower-cost seats available on each flight is going down, Saretsky said after WestJet announced a second-quarter profit of $42.5 million and raised its dividend.

The seat change is aimed at WestJet's business class to compete with Air Canada (TSX:AC.B).

WestJet does not offer a first-class cabin, but the new premium class will bridge a gap in ticket prices between economy and traditional first-class, which is too costly for many travellers.

"We don't have any concern about seats going empty," Saretsky added.

WestJet (TSX:WJA) will also have a new online storefront and consumers will be able to select from a variety of fare categories, instead of seeing just the lowest fare, he said.

The planes should be reconfigured by December and the premium economy seats will offer passengers with the Calgary-based airline early check-in, the airline said.

Currently leg room comes in at 32 inches on WestJet's Boeing 737-600s and 737-700s and 34 inches on its Boeing 737-800s — Imperial measurement is still the standard in the airline industry.

Non-premium seats on all of those planes will be reconfigured to 31 to 32 inches, the airline said.

WestJet's move follows a trend of similar upgrades to economy-class seats at international airlines.

Cathay Pacific announced Monday that it has accepted delivery of a new Boeing 777-300ER fitted with the new premium economy configuration, which features more leg room, as well as dedicated flight attendants for that area, special menus and champagne.

Airline analyst Robert Kokonis said there's a global trend toward "premium economy" seating with airlines.

Over the past five years, WestJet has been progressively rolling out a lot of additional "bells and whistles," moving it beyond being just a low-cost carrier to compete with Air Canada for business travellers, he said.

"They had to penetrate Central Canada and in particular the corporate travel marketplace," said Kokonis, president of airline consulting firm AirTrav Inc. in Toronto.

WestJet has added, for example, a frequent flyer program and lounges in airports across the country, he said.

"They recognize the need to have some sort of premium economy product to have one more offering to the corporate crowd to get them to travel with WestJet."

He said WestJet isn't removing seats for the premium seating, but simply tightening up leg room with passengers.

"To the average person, unless you're really big, it won't be that noticeable," Kokonis said.

WestJet also announced Wednesday that it has firmed up orders for 20 of Bombardier's Q400 NextGen turboprop aircraft, with seven to be delivered in 2013 and the remainder to be delivered in stages through 2016. WestJet also has options to buy up to 25 additional Q400 aircraft.

The Q400 aircraft are for WestJet's planned low-cost regional airline.

"We remain on track for the launch of the low-cost regional airline in the second half of 2013 and are excited by this opportunity," Saretsky said.

"We have commenced hiring the first of up to 1,800 new jobs for our regional airline as well."

Saretsky said WestJet has met with representatives from more than 30 airports, all hoping to have WestJet service in their communities. Some destinations are expected to be announced in early 2013.

The airline said its quarterly dividend will increase to eight cents per share, up two cents per share or 33 per cent, starting in late September.

In its financial results, WestJet announced a big increase in second-quarter profit that hit a record $42.5 million or 31 cents per share. That was up from $25.6 million or 18 cents per share in the year-earlier period.

"We've had an amazing start to 2012 as this marks our second consecutive quarter of record net earnings and our 29th consecutive quarter of profitability," Saretsky said.

Despite the big increase, WestJet missed consensus estimates for profit and revenue.

The average analyst estimate was for a profit of 33 cents per share and revenue of $816 million, according to Thomson Reuters.

WestJet's revenue was up nine per cent from the same time last year, rising to $809.3 million from $742.3 million.

During the quarter, WestJet announced a code-share agreement with South Korea's largest airline, Korean Air, and with China Eastern Airlines, one of the largest airlines in China. Code share agreements allow travellers to more easily transfer from one airline's network to the other's.

The deals came in addition to code-share agreements with American Airlines, Cathay Pacific, Delta Air Lines, Japan Airlines, KLM and Korean Air.

Shares in WestJet closed down 59 cents, or 3.6 per cent, to $15.99 in trading on the Toronto Stock Exchange.