WestJet flew more passengers last month than in March 2013 but the increase didn’t absorb all the fleet capacity the airline has added over the past year, mainly from the launch of its new Encore regional service.
The Calgary-based company said it had an 84.0 per cent load factor in March, a decline of 2.1 percentage points from the same month last year.
WestJet (TSX:WJA) said its passenger traffic last month was up 3.9 per cent from the previous year.
But, over the same period, its capacity grew by 6.6 per cent to 2.265 billion available seat miles.
During the first three months of the year, WestJet’s load factor fell 1.2 points from the same time last year to 83.1 per cent as capacity grew by eight per cent, outpacing the 6.4 per cent increase in traffic.
“We are pleased with the strong traffic growth we saw in the first quarter as we not only flew over 300,000 additional guests compared to last year, we also achieved our second-highest first quarter load factor in WestJet’s history,” said CEO Gregg Saretsky.
Much of WestJet’s increased capacity has came from the expansion of its Encore regional service. The airline has said 50 to 60 per cent of those passengers connected to its regular flights.
WestJet plans to expand Encore this summer to Eastern Canada and recently announced the conversion of five of 25 options for Q400 turboprops into firm orders.
The planes will be delivered in the second half of 2015, increasing the airline’s fleet of Q400s to 25 by the end of next year. It still has options for 20 more Bombardier Q400 aircraft between 2016 and 2018.
Analysts remain optimistic about the airline’s long-term prospects despite the weaker March numbers.
“March traffic data (was) below expectations, but does not yet point to a negative trend,” Walter Spracklin of RBC Capital Markets wrote in a report.
He added that first-quarter traffic was “quite strong” with an 80 per cent load factor on new capacity that was in line with his expectations.
Cameron Doerksen of National Bank Financial said there was no change to WestJet’s February guidance for flat to lower revenues per seat mile in the quarter, but he continues to anticipate improvements later this year as capacity growth slows and WestJet’s bundled fare and premium economy product gains more traction.
“We are positive on WestJet’s longer-term prospects for earnings growth, but would like to see some stabilization in the Canadian dollar as well as some evidence that the airlines can pass though higher costs with higher airfares before becoming more bullish on the stock,” he wrote.
Meanwhile, Air Canada reported late Thursday that its load factor last month was 81.7 per cent, dropping 1.8 percentage points from March 2013.
The airline’s passenger traffic increased by 1.4 per cent in March year-over year, while its capacity grew by 3.6 per cent.
It said it expected a strong summer based on future bookings.
“During the first quarter, we continued to execute our priorities to build a sustainably profitable airline. Based on the ongoing positive results of our cost transformation and revenue enhancement initiatives, we now expect EBITDAR for the first quarter to be in line with last year’s level for the same period,” said Calin Rovinescu, president and CEO at Air Canada.
“In addition, based on forward bookings, we expect a strong summer travel season ahead. I would like to thank our employees for their hard work and transporting our customers safely to their destinations despite the ongoing challenges of severe winter weather during the month and the quarter.”
Air Canada said it also anticipates earnings for the first quarter to be better than expected, and in line with last year’s level.