Skip to main content

Report On Business WestJet’s passenger demand grows despite concerns about Alberta economy

A Westjet Boeing 737-700 taxis to a gate after arriving at Vancouver International Airport in Richmond, B.C., on Monday February 3, 2014.

DARRYL DYCK/THE CANADIAN PRESS

WestJet Airlines Ltd. says passenger demand keeps growing even as concerns mount about the impact on the Calgary-based carrier due to a sluggish Alberta economy following the recent collapse in oil prices.

The airline said passenger traffic increased 1.5 per cent in March from a year ago, as a record 1.7 million people flew on the Calgary-based airline and its regional subsidiary WestJet Encore.

However, WestJet's capacity grew 4.8 per cent, causing its load factor – or the amount of seats that are used – to fall by 2.7 points to 81.3 per cent, from 84 per cent in March, 2014.

Story continues below advertisement

Load factor is one of the statistics used by airlines and analysts to measure whether an airline has right number of flights and seating for the level of passenger demand.

WestJet CEO Gregg Saretsky said load factors have been depressed by the industry's increased supply of seats to some southern sun markets that has been rising faster than demand. Transat AT has said industry seat capacity to sun destinations was up 12 per cent this winter.

"Despite this, the overall demand environment remains strong," Saretsky said in a statement, adding that revenue per available seat for the first quarter is expected to be in line with its prior guidance.

Air Canada's load factor rose last month as passenger traffic gained 12 per cent, outpacing capacity growth of 11.1 per cent.

The load factor for Canada's largest airline rose to 83.1 per cent in the month from 81.7 per cent a year earlier.

David Tyerman of Canaccord Genuity said the March statistics demonstrated that WestJet's traffic isn't breaking, even though lower oil prices are slowing slowing the economy in its home province and nationally.

"We think WestJet's traffic data suggests slow growth, but not a major collapse in demand or pricing," Tyerman wrote in a report.

Story continues below advertisement

WestJet, which has expanded beyond its western base by growing nationally and internationally, has said its exposure to Alberta is now similar to Air Canada, Canada's biggest airline.

National Bank Financial analyst Cameron Doerksen said the weakening Western Canadian economy is investors' biggest concern. He estimates an economic downturn in the province would have an impact since it accounts for about 25 per cent of WestJet's departures.

The analyst said air travel has only been modestly affected in Alberta so far in 2015 as traffic at Calgary Airport is up 0.9 per cent. Edmonton is down 0.7 per cent and Fort McMurray is down 1.7 per cent, but demand "remains healthy" in the rest of WestJet's network.

Analyst Chris Murray of AltaCorp Capital said WestJet will continue to benefit from a "rational and healthy demand environment" as non-fare or ancillary revenues will continue to grow. WestJet's fuel prices, which are down 29 per cent from last year, should more than offset the negative impact of a lower Canadian dollar on fuel and other U.S.-denominated costs.

With files from reporter Greg Keenan

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Discussion loading ...

Cannabis pro newsletter