WestJet Posts Profit, Air Canada Sees Loss, But Numbers Are Encouraging

Canada’s major airlines are attracting more passengers and filling a higher percentage of seats, but Air Canada swung to a loss in Q2 while WestJet marked its 21st consecutive quarter of profitability.

WestJet today reported second quarter 2010 net earnings of $21 million – a 130% increase year-over-year. Meanwhile, despite reporting operating income of $75 million in Q2 2010 compared to an operating loss of $113 million in the second quarter of 2009, Air Canada posted a net loss of $203-million, compared with a profit of $155-million during the same quarter of 2009.

A $156-million foreign exchange loss was the biggest factor in AC’s results. The airline also says it lost about $20-million in operating profits from flight cancellations after the closure of European airspace in mid-April because the volcanic eruption in Iceland.

Canada’s airlines are flying full these days: for the month of July Air Canada reported a record system load factor of 84.9 per cent on a consolidated basis with Jazz. That compares with 83.6 per cent in July 2009, an increase of 1.3 percentage points. WestJet posted a July load factor of 80.7 per cent, up 4.3 points year over year.

“We are very encouraged with our fifth straight month of double-digit traffic increases and the year-over-year load factor improvement given the capacity increase,” said WestJet President and CEO Gregg Saretsky. “New strategic initiatives, such as our WestJet Frequent Guest Program and WestJet RBC MasterCard are contributing nicely to growth.”

Despite the loss, Air Canada CEO Calin Rovinescu says the airline is performing well and achieving objectives. “I am pleased to report stronger second quarter results that underscore the progress we’ve made on maximizing revenues and reducing costs, and also reflect encouraging signs of a gradual economic recovery,” said Rovinescu.

“Although we are not at 2008 levels, premium revenue and yields have increased over the past two quarters. While there remains much work to do, over the past 15 months we have met many of the objectives we set out to achieve — namely to build adequate liquidity and achieve strong revenue management and better cost control while expanding our international network.”

WestJet says it believes the Canadian economy needs to rebound further before it can support more domestic capacity growth. Domestic capacity was reduced during the second quarter and new capacity directed into the airline’s southern markets. The airline says that approach will continue in the third and fourth quarters. WestJet capacity for the third quarter is expected to increase between 11 and 12 per cent. Its full-year capacity is expected to increase nine to 10 per cent.

WestJet has also decided to defer the delivery of three aircraft scheduled for 2011 and 2012 out to 2017, citing a recent downward revision to the Canadian GDP growth estimates and the continual assessment of other economic indicators. It will now take delivery of six aircraft in 2011 and five in 2012. “Economic uncertainty has caused us to re-think our short-term capacity plan,” commented Saretsky.

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