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View Full Version : WestJet $46m loss in 4Q2003, incl $47m 732 write off


MarkD
16th Feb 2005, 03:21
http://www.cbc.ca/cp/business/050215/b021586.html

WestJet posts first-ever losses, plans to cut fares to lure more passengers
11:11 PM EST Feb 15
JAMES STEVENSON

CALGARY (CP) - Recording its first financial losses in company history, WestJet Airlines said Tuesday that it plans to cut fares to lure more passengers as it braces for another fiercely competitive year in the Canadian air travel market.

"We'll have more seats available at lower end fares to more consumers in more markets," chief executive Clive Beddoe said Tuesday after the company reported a big quarterly loss.

Beddoe called the Calgary-based airline's current troubles - including a big fourth-quarter loss - a "difficult stage in our evolution," but said WestJet wants to fill more seats rather than worrying about revenue per passenger mile, known as yield in the airline industry.

"The growing competitive nature of our business has also made it clear to us that we cannot let any carrier gain a foothold in any sector of our market," said Beddoe.

WestJet has grown rapidly in the last two years, but faces tough competition from a restructured Air Canada, CanJet Airlines and Jetsgo in the domestic market.

Earlier Tuesday, Calgary-based WestJet (TSX:WJA) reported its first quarterly loss in its nearly eight years as a public company, losing $46.3 million in the fourth quarter, reversing a profit of $12.8 million in the same 2003 period.

A major factor in the losses was the company's decision to take a $47.6-million writedown to speed up the retirement of its 18 remaining, older Boeing 737-200 aircraft which consume 30 per cent more fuel than its newer planes.

WestJet expects the decision to get rid of all its older planes to produce huge cost savings in the future. Beddoe said Tuesday that the older planes in the fleet cost about $1,000 an hour to maintain whereas new aircraft costs are closer to $100 an hour.

Excluding the writedown, the airline still would have recorded a $14.9 million loss in the fourth quarter due to record high fuel prices, rising operating costs and fierce competition.

"We are obviously disappointed with our financial performance in the fourth quarter of 2004, as well as our performance during the rest of the year," said Beddoe.

[snip]

"It's going to be a challenging year, it's going to be a difficult year until there's some rationalization of the competitors," said Beddoe. "It's not so much the capacity, but it's more a question of: in whose hands that capacity resides."

Halifax-based CanJet announced earlier this month it plans to expand past its Atlantic Canadian base and begin flying non-stop service between Toronto, Calgary and Vancouver.

And Montreal-based Jetsgo has been aggressively trying to gain market share with very low fares on many of its routes and is attempting to raid some of WestJet's traditional routes in smaller Western markets like Kelowna, B.C., Fort McMurray, Alta, and Saskatoon, Sask.

For the full year, WestJet reported a net loss of $17.2 million, compared with profits of $60.5 million in 2003 as expenses rose more than 25 per cent, including a big jump in jet fuel costs.

Still, the airline said yearly revenues rose to $1.06 billion from $863.6 million in 2003 as the airline expanded by 30 per cent with its first regularly-scheduled flights to U.S. holiday destinations.

[snip]

Meanwhile WestJet still faces a $220-million lawsuit from the recently restructured Air Canada alleging WestJet executives engaged in corporate espionage. Jetsgo also filed a similar $50-million lawsuit against WestJet.

Beddoe said Tuesday that there were no updates on the ongoing legal battles and maintained that the issues were "overblown" and didn't see any significant liabilities.

WestJet also reported that its long-expected expansion to eight U.S. sun-spot destinations last fall resulted in $4.5 million in losses as the new routes were introduced just as several major hurricanes were hammering Florida.

The airline admitted Tuesday that close to 95 per cent of the tickets to U.S. destinations were still being sold in Canada as it faces stiff competition from traditional U.S. air carriers, but it said 80 per cent of its American routes are now showing positive results.

[snip]

© The Canadian Press, 2005