WestJet Airlines Ltd. hopes to resume flying its 13 Boeing 737 Max passenger jets in the third quarter and is committed to orders for four more of the planes, which are grounded worldwide after two fatal crashes.
Chief executive Edward Sims said WestJet has extended the lease on one Boeing 737-700 and is using all of its remaining fleet to cover 96 per cent of its capacity while the 737 Max planes are barred by regulators from flying.
WestJet said it is not clear when Boeing Co. will be cleared to deliver the rest of its order – two planes were slated for this year and two for 2020. But, Mr. Sims said, short-term leases on replacement planes are unaffordable and the high cost of adding new seats outweighs any benefit to the airline.
“We remain steadfast in our commitment to prudent growth and believe that the detrimental impact of bringing excess capacity back into the market outweighs the short-term capacity loss,” he told analysts Tuesday on a first-quarter earnings conference call.
For the three months ending March 31, WestJet said it saw no material rise in costs related to the grounding of the 737 Max planes, which form 7 per cent of the company’s fleet, or about 10 per cent of passenger capacity.
The grounding occurred in Canada on March 13, near the end of the first quarter. WestJet responded by suspending its 2019 financial forecast, cancelling routes and flights and overhauling its schedule until well into the summer.
“The last 18 days of March, our absolute revenue was adversely impacted as we spent considerable effort reaccommodating thousands of disrupted guests [and], in the process, losing some of our ability to capture … high-yield premium traffic,” Mr. Sims said.
WestJet posted a 33-per-cent jump in profit in the first quarter. The Calgary-based airline said it flew more passengers to make a profit of $45-million, or 40 cents a share, compared with $34-million (30 cents) in the same period a year earlier.
Fadi Chamoun, a stock analyst with Bank of Montreal, said WestJet’s operating profit missed analysts’ consensus but topped his forecast.
Revenue per available seat miles rose by just 0.2 per cent as yields climbed 0.3 per cent and costs excluding fuel rose less than expected. Fuel costs rose 5.5 per cent. Revenue rose 5.5 per cent to $1.3-billion.
Investors responded to the earnings, released before markets opened, by driving up WestJet’s share price by 3 per cent on the Toronto Stock Exchange, even as most stocks fell.
Regulators around the world grounded the 737 Max after two similar crashes in October, 2018, and March of this year. In October, a Lion Air flight out of Indonesia crashed into the sea, killing 189. Then an Ethiopian Airlines 737 Max crashed shortly after takeoff and killed 157.
Preliminary reports from investigators point to possible problems with pitch sensors and automated controls. Boeing is working to update the plane’s software and pilot procedures but has not said when it expects aviation authorities to approve the model’s return to service.
Boeing has slowed production of the 737 Max to 42 a month from 52. Harry Taylor, WestJet’s finance chief, said it is not clear if this will delay the arrival of the company’s four planes.
“At this point, we’re not anticipating changing our orders or delivery schedule,” Mr. Taylor said. “Trying to accelerate it given the backlog they’ve got will be impossible.”
WestJet employs 14,000 people, has a fleet of about 181 planes and flies to more than 100 destinations.