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.
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.
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