Wings Magazine

WestJet sees profit fall 4.3 per cent in Q4

Feb. 9, 2012, Calgary - WestJet is raising its dividend by 20 per cent, as the airline reported Wednesday that it will launch a regional carrier to give it a presence in smaller markets where competitor Air Canada is currently the lone operator.

February 9, 2012  By The Canadian Press

The airline said its employees voted overwhelmingly in favour of the strategy.

"With resounding support from WestJetters, the leadership team and the board have made the decision to move ahead with plans to launch a new low-cost regional airline that will replicate our success in stimulating demand by bringing low fares to many new communities,'' chief executive Gregg Saretsky said Wednesday in a news release.

But WestJet said that profits fell 4.3 per cent in the fourth quarter.

The Calgary-based company said the quarterly dividend will climb a penny to six cents per share, to be paid on March 30.


WestJet posted lower profits of $35.6 million, or 26 per share, compared to $37.2 million, or 26 cents per share in the comparable period of 2010.

The results beat average analyst expectations of 20 cents per share, according to a poll by Thomson Reuters.

Revenue grew 12.9 per cent to $721.5 million from $692.2 million.

"We managed to cover the elevated fuel costs with our revenue growth and improve our profit margin on a full-year basis,'' Saretsky said.

"Low-cost continues to be our focus and I am proud of WestJetters for their efforts throughout 2011 to keep controllable costs per unit relatively flat, while at the same time delivering a remarkable guest experience.''

WestJet's fleet currently comprises one type of aircraft, Boeing 737s that can carry between 119 and 166 passengers. Those planes are too big to economically shuttle passengers between small destinations like Lethbridge, Alta., or Hamilton.

The regional carrier, which would operate separately from the main airline, would use 70-seat aircraft like Bombardier's Q400s.

In another effort to compete more effectively with Air Canada, the country's biggest airline, WestJet has been looking to draw more international traffic into its network.

WestJet's 737s can't make long-haul journeys to Asia or Europe. So the company has been seeking partnerships with other carriers to expand its global reach.

In the United States, WestJet is working with American Airlines and Delta. On the international front, WestJet has announced partnerships with British Airways, Cathay Pacific, China Airlines, Air France and KLM.

National Bank Financial analyst Cameron Doerksen said 91 per cent of WestJet's employees voted in favour its plan for a new regional airline and will send requests for proposals for the Q400 NextGen to Bombardier and to ATR.

With a planned launch in 2013, WestJet will now send requests for proposals for the Q400 NextGen to Bombardier and to ATR Aircraft for the ATR 72-600, Doerksen said in a research note.

Doerksen said WestJet's earnings were better than forecasted and revenue of $782 million was essentially in line with his estimate of $776 million. Earnings per share of 26 cents was beat his forecast of 21 cents, he said.


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