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WestJet returns to profit

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According to WestJet's CEO, the company had its best quarter this year from a revenue perspective.

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Calgary air carrier WestJet says it has posted profits this year, but turbulence is expected in 2024 that could partly benefit travelers.

In a publication on his website at the end of November (New window) (in English), WestJet President and CEO Alexis von Hoensbroech welcomes a return to sharing profits with the company's employees.

He claims that profits for the first three quarters of this year outperformed those of 2019 and that third quarter revenue was even the best in the story of WestJet.

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Alexis von Hoensbroech took over as CEO of the Calgary-based airline in 2022.

The company's financial results are not public because the company was purchased in 2019 by private investor Onex. Cabin crew and pilot unions, however, confirmed the return of profit sharing, a redistribution that had been suspended during the pandemic.

According to aviation consultant Rick Erickson, the carrier's cash flow is not surprising. Air Canada thus published a net profit of $1.25 billion in the third quarter.

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It's not like WestJet is outperforming everyone: 2023 was a banner year for all airlines.

A quote from Rick Erickson, aviation consultant

Rick Erickson says huge post-pandemic travel demand has allowed carriers to raise ticket prices.

WestJet has also transformed its strategy by focusing on Western Canada, abandoning for example the Montreal-Toronto connection.

It seems to have paid off. Combined with this unusual spike in people wanting to travel and paying more to travel, WestJet has proven it can be profitable, notes Rick Erickson.

However, John Gradek, lecturer at McGill University, believes that it will undoubtedly be difficult to repeat this performance.

With inflation and a slowing economy, I think we will have problems repeating performances on international flights and I includes sun destinations, he explains.

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WestJet and Air Canada's competitors are increasing, which could lead to a drop in ticket prices in 2024.

Faced with WestJet, competition from low-cost carriers is growing. Flair Airlines has doubled its number of flights to the United States for summer 2024. Porter Airlines just added 25 new aircraft to its fleet, and Lynx Air continues to add routes to Canada and the South.

The Canadian market does not have the volume and does not have the level of growth to absorb this increase in capacity, believes John Gradek

The price war, especially on trips in Canada, will continue at least until March.

A quote from John Gradek, responsible aviation education

Statistics Canada has already observed a drop in the price of plane tickets of almost 20% between October 2022 and 2023 .

According to Rick Erickson, WestJet, however, has a head start on its low-cost competitors. The acquisition of Sunwing gives it privileged access to sun destinations. Sunwing is primarily based in the east, while WestJet Vacations is strong in the west. So, it's a very good marriage.

WestJet has also decided to integrate its low-cost airline, Swoop, into its core activities. The objective is to offer seats at very low prices within its usual fleet.

WestJet will, for example, around fifty seats at fill while ultra-low-cost carriers offering the same type of products will have to be able to fill entire planes, summarizes Rick Erickson.

John Gradek adds, however, that this integration of Swoop will add a level of complexity to the management of the carrier. When you talk about being competitively priced with Lynx and Flair across the 180 aircraft WestJet manages, that's a completely different story.

This is all the more true since WestJet still has progress to make in managing its usual activities, as Mr. Gradek explains.

According to aviation data firm Cirium, more than a quarter of WestJet flights were late in October.

The number of complaints filed with the Canadian Transportation Agency against the carrier decreased in the last quarter recorded, but the average remains higher than that of Air Canada and Air Transat. Sunwing Airlines and Swoop have among the highest complaint averages.

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They have a long way to go to renew people's confidence, says John Gradek.

The lecturer, however, doubts that this is WestJet’s priority. Onex, founded by Gerry Schwartz, bought the carrier for $5 billion, including debt, just before the pandemic.

The aim of WestJet's owners , is to increase profits to resell, thinks Mr. Gradek. It's cost control.

With information from The Canadian Press

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