WestJet's Q2 profit loses altitude but beats estimates
Upstart airline WestJet lost some profit altitude in its second quarter, mainly because of higher fuel costs. But the Calgary-based carrier still managed to beat analysts' profit expectations in its latest three months.
WestJet earned $30.2 million, or 23 cents a share, for the second quarter of 2008. That represented a drop in profit of three cents a share compared to the same quarter one year earlier. In the April to June period of 2007, WestJet made $33.7 million excluding an extraordinary charge.
"Excluding this impairment, earnings for the quarter were $33.7 million; this represents a second-quarter 2008 earnings decrease of 10.4 per cent," said the company in a press release.
Including that cost reduced WestJet's profit in the second-quarter of 2007 to $11.5 million, or nine cents a share.
Westjet deals with higher fuel costs(Adrian Wyld/CP Photo)Still, WestJet did better than what brokerage analysts had expected, beating those predictions by four cents a share.
The airline posted higher revenue, up 2.7 per cent, reaching $616 million in the quarter. WestJet hiked its available flying capacity by 21 per cent, accounting for the largest portion of the sales increase.
As well, in the quarter, WestJet boosted its revenue per average seat mile, a measure of an airline's efficiency, by 1.1 per cent.
WestJet benefited from stringent cost controls, which allowed the company to absorb a 50 per cent hike in its per-litre fuel costs in the quarter.
WestJet saw its cost per average seat mile head upward by 7.3 per cent in the period, almost exclusively driven by higher fuel prices. Currently, the airline pays almost $1.05 a litre for jet fuel, compared to an average price of 69.4 cents per litre at this time last year.
Airline cuts costs over 2007WestJet figured that a one-cent-per-litre rise in jet fuel prices takes away $9 million from its bottom line.
Three-month stock chart for WestJetWithout the higher fuel prices, however, WestJet was able to cut costs by nearly seven per cent versus the second quarter of 2007.
"During the second quarter of 2008, the soaring cost of fuel affected our profit margins. Despite these pressures, our quarterly margins are expected to be near the top of the industry," said Sean Durfy, WestJet's president and chief executive officer.
The company said it will continue to add aircraft as it tries to reach its goal of grabbing 25 per cent of the Canadian transborder air market. WestJet expects to take delivery on two Boeing 737 aircraft this year.
Overall, the company has orders for 20 new planes for delivery by 2011. WestJet currently has 75 planes in its fleet compared to 209 for arch-rival Air Canada.
WestJet shares rose 12 cents to $15.10 on the TSX on Wednesday.
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