rotornut
8th Dec 2004, 10:49
WestJet profit streak could be in jeopardy
By BRENT JANG
From Wednesday's Globe and Mail
POSTED AT 9:39 PM EST Tuesday, Dec 7, 2004
WestJet Airlines Ltd.'s streak of 31 profitable quarters could be in jeopardy after it blamed a prolonged computer crash for depressing on-line bookings last month, hampering the discount carrier as it expanded amid high fuel prices and fierce fare wars.
The airline's load factor, or proportion of available seats filled, slumped to 58.5 per cent, the lowest since it went public in mid-1999.
In November last year, WestJet had a load factor of 64.1 per cent.
While WestJet ran into turbulence amid its strategy of adding capacity, Montreal-based Air Canada reported Tuesday that it reduced capacity and enjoyed a record-high November load factor of 74.6 per cent. That's up from 69.2 per cent in the same month in 2003.
The latest load factor marked the eighth consecutive record of new monthly highs for Air Canada.
At Calgary-based WestJet, however, the computer woes meant that its best fares weren't posted on its website, and seat availability also wasn't accurate, said Clive Beddoe, its chairman and chief executive officer.
WestJet spokesman Siobhan Vinish said the carrier now has the problem under control, although there are some technical glitches still to be resolved.
She said the computer software does complex work, and bookings began going awry in September, and culminated in a widespread system failure in November.
“The largest part of it really is the computer challenges,” said Ms. Vinish, who dismissed suggestions that WestJet's expansion strategy isn't working.
She said that because consumers shop around for fares, the computer failures cost WestJet dearly. The carrier is revamping its computer system and expects to have the project completed by next spring.
Analysts said WestJet's poor November load factor, one of the lowest in North America in recent years, could translate into the airline's first quarterly loss since the fourth quarter of 1996. WestJet, founded in February of that year, began trading on the Toronto Stock Exchange in July, 1999.
“Reporting a loss will be a psychological blow for the stock,” Dlouhy Merchant Group analyst Cameron Doerksen said in a research note.
He forecasts that WestJet, already hampered by high jet fuel prices, could post losses in the fourth quarter this year, and the first quarter of 2005.
In an interview, Mr. Doerksen said WestJet's computer failure would have a spill-over effect in December, because many consumers in November were making their Christmas bookings.
He said the carrier's traffic statistics are cause for concern.
“That load factor is well below anything that anybody was looking for — 58.5 per cent is quite weak in what is normally a pretty weak month already,” Mr. Doerksen said.
WestJet shares fell 20 cents to close at $12.30 Tuesday on the TSX, a 42-per-cent decline from their record high in January. Mr. Doerksen lowered his one-year target to $13.50 from $14, and cut the stock's rating to “hold” from “buy.”
The western-based carrier has been underperforming amid fierce fare wars in the so-called eastern triangle of Toronto, Ottawa and Montreal, analysts say.
Air Canada launched an espionage lawsuit against WestJet in April, and the uncertainty from that continuing legal fight is another factor weighing down WestJet's share price, analysts say. WestJet denies spying on Air Canada.
Class B shares in ACE Aviation Holdings Inc., the new parent company of Air Canada, climbed 94 cents Tuesday to a record-high of $31.74 on the TSX.
For the first 11 months this year, WestJet's load factor averaged 69.5 per cent, compared with 70.3 per cent in the same period last year.
WestJet boosted its November capacity 31 per cent to nearly 799 million available seat miles. WestJet, after expanding its transborder flights into the United States in September and October, saw its revenue passenger miles increase 19.4 per cent to 467 million. The carrier is under pressure from Air Canada and discount airline Jetsgo Corp. of Montreal.
Air Canada chief financial officer Rob Peterson said extra Pacific flights helped bolster its air traffic.
The country's flag carrier, which emerged from bankruptcy protection on Sept. 30, reduced its November capacity to 3.66 billion available seat miles, down 3.6 per cent from a year earlier. Air Canada's revenue passenger miles rose 3.9 per cent to 2.73 billion, with flights to Asian destinations among the bright spots. Its year-to-date load factor averaged 77.7 per cent, compared with 74 per cent in the same period last year.
By BRENT JANG
From Wednesday's Globe and Mail
POSTED AT 9:39 PM EST Tuesday, Dec 7, 2004
WestJet Airlines Ltd.'s streak of 31 profitable quarters could be in jeopardy after it blamed a prolonged computer crash for depressing on-line bookings last month, hampering the discount carrier as it expanded amid high fuel prices and fierce fare wars.
The airline's load factor, or proportion of available seats filled, slumped to 58.5 per cent, the lowest since it went public in mid-1999.
In November last year, WestJet had a load factor of 64.1 per cent.
While WestJet ran into turbulence amid its strategy of adding capacity, Montreal-based Air Canada reported Tuesday that it reduced capacity and enjoyed a record-high November load factor of 74.6 per cent. That's up from 69.2 per cent in the same month in 2003.
The latest load factor marked the eighth consecutive record of new monthly highs for Air Canada.
At Calgary-based WestJet, however, the computer woes meant that its best fares weren't posted on its website, and seat availability also wasn't accurate, said Clive Beddoe, its chairman and chief executive officer.
WestJet spokesman Siobhan Vinish said the carrier now has the problem under control, although there are some technical glitches still to be resolved.
She said the computer software does complex work, and bookings began going awry in September, and culminated in a widespread system failure in November.
“The largest part of it really is the computer challenges,” said Ms. Vinish, who dismissed suggestions that WestJet's expansion strategy isn't working.
She said that because consumers shop around for fares, the computer failures cost WestJet dearly. The carrier is revamping its computer system and expects to have the project completed by next spring.
Analysts said WestJet's poor November load factor, one of the lowest in North America in recent years, could translate into the airline's first quarterly loss since the fourth quarter of 1996. WestJet, founded in February of that year, began trading on the Toronto Stock Exchange in July, 1999.
“Reporting a loss will be a psychological blow for the stock,” Dlouhy Merchant Group analyst Cameron Doerksen said in a research note.
He forecasts that WestJet, already hampered by high jet fuel prices, could post losses in the fourth quarter this year, and the first quarter of 2005.
In an interview, Mr. Doerksen said WestJet's computer failure would have a spill-over effect in December, because many consumers in November were making their Christmas bookings.
He said the carrier's traffic statistics are cause for concern.
“That load factor is well below anything that anybody was looking for — 58.5 per cent is quite weak in what is normally a pretty weak month already,” Mr. Doerksen said.
WestJet shares fell 20 cents to close at $12.30 Tuesday on the TSX, a 42-per-cent decline from their record high in January. Mr. Doerksen lowered his one-year target to $13.50 from $14, and cut the stock's rating to “hold” from “buy.”
The western-based carrier has been underperforming amid fierce fare wars in the so-called eastern triangle of Toronto, Ottawa and Montreal, analysts say.
Air Canada launched an espionage lawsuit against WestJet in April, and the uncertainty from that continuing legal fight is another factor weighing down WestJet's share price, analysts say. WestJet denies spying on Air Canada.
Class B shares in ACE Aviation Holdings Inc., the new parent company of Air Canada, climbed 94 cents Tuesday to a record-high of $31.74 on the TSX.
For the first 11 months this year, WestJet's load factor averaged 69.5 per cent, compared with 70.3 per cent in the same period last year.
WestJet boosted its November capacity 31 per cent to nearly 799 million available seat miles. WestJet, after expanding its transborder flights into the United States in September and October, saw its revenue passenger miles increase 19.4 per cent to 467 million. The carrier is under pressure from Air Canada and discount airline Jetsgo Corp. of Montreal.
Air Canada chief financial officer Rob Peterson said extra Pacific flights helped bolster its air traffic.
The country's flag carrier, which emerged from bankruptcy protection on Sept. 30, reduced its November capacity to 3.66 billion available seat miles, down 3.6 per cent from a year earlier. Air Canada's revenue passenger miles rose 3.9 per cent to 2.73 billion, with flights to Asian destinations among the bright spots. Its year-to-date load factor averaged 77.7 per cent, compared with 74 per cent in the same period last year.