WestJet offering more seat sales in “intensely competitive” environment

WestJet Airlines Inc. (TSX:WJA) is offering a lot more seat sales to travellers than it has in the past as recession-weary consumers scrutinize every dollar they spend, says the chief executive of the Calgary-based carrier.


CALGARY — WestJet Airlines Inc. (TSX:WJA) is offering a lot more seat sales to travellers than it has in the past as recession-weary consumers scrutinize every dollar they spend, says the chief executive of the Calgary-based carrier.

“We have felt over this recession how discretionary the buying of an airline ticket really is,” Sean Durfy told analysts on a conference call to discuss his company’s third-quarter results.

WestJet and chief rival, Air Canada (TSX:AC.B), have been vying for customers by aggressively pricing their fares, a factor Durfy said had led his company to post lower third-quarter revenues.

“It is intensely competitive in this marketplace,” he said.

And it appears the recession is playing a much larger role in consumers’ spending decisions than the H1N1 flu scare.

The virus first surfaced in Mexico in the spring, scaring travellers away from holidays in that region for a time.

However, that does not appear to be the case anymore, Durfy said.

“Because we did have an issue with H1N1 in Mexico a while back, you would think there would be some skepticism from the travelling public but . . . we’re not seeing it,” he said.

“I can’t associate any booking declines with the H1N1 scare.”

On Tuesday, WestJet added a twice-weekly flight to Ixtapa/Zihuatanejo, Mexico, bringing the number of cities it now travels to in that country to six. The airline also recently introduced several other routes to various Caribbean holiday destinations.

Earlier Wednesday, WestJet reported profits of $31.4 million, or 24 cents per share, down from $57.9 million or 45 cents in last year’s third quarter. Revenue fell to $600.6 million from $718.4 million.

Analysts polled by Thomson Reuters were, on average, expecting earnings per share of 27 cents and revenues of $603 million.

Last month, WestJet overhauled its reservation system, which in its initial few days caused headaches for some travellers. The airline’s website crashed, and its call centre was overwhelmed with an onslaught of callers.

“That won’t happen again. These are one-time events,” said Durfy.

There are still a few more wrinkles to iron out, like how to handle customers who booked with WestJet before the new system came into effect, but scheduled to fly afterwards.

Migrating the entries from the old system to the new one was no problem, but making changes to those flights has been tricky.

WestJet chose to install a new reservation system, called SabreSonic, to pave the way for code-share agreements with a number of other airlines worldwide.

Code sharing means a traveller can transfer from one airline to another seamlessly, which essentially gives WestJet access to markets around the world.

WestJet is working with Texas-based Southwest Airlines on bringing their code-share agreement into effect, though the timing is uncertain, said executive vice-president Hugh Dunleavy.

Interline pacts, which lay the ground work for code-shares, with Air France and Dutch carrier KLM are working out well so far. Next month, WestJet plans to increase the number of Canadian cities that can connect to those European airlines.

“Look forward to 2010 with three or four additional announcements in terms of partnerships being put into production at WestJet,” said Dunleavy, without disclosing which other airlines are involved.

The airline also reported separately that its load factor had improved last month compared with October 2008 when the magnitude of the U.S.-led global recession began to be felt by Canadian consumers.

For October, WestJet’s load factor increased to 77.3 per cent, up 1.5 percentage points from the year-earlier period.

For the July-September quarter, WestJet’s load factor was down 1.7 points at 79.7 per cent from 81.4 per cent in 2008.

Shares in the airline were 14 cents higher at $11.23 in afternoon trading on the Toronto Stock Exchange.

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