WestJet to cut back short-haul flights
Dawn Walton And Patrick Brethour 00:00 EDT Friday, April 26, 2002
CALGARY -- WestJet Airlines Ltd. announced yesterday that it is eliminating flights on some short-haul routes, saying the government's recently implemented $24 security fee is a deterrent to customers.
Clive Beddoe, president of the Calgary-based no-frills carrier, said 13 flights a week will be cut from its Calgary-Edmonton route by early summer. At that time, there will also be "some significant reductions" in the number of flights between Vancouver and Kelowna, B.C., Mr. Beddoe said after the company's annual meeting. "We have a contingency plan in place and we'll see how it goes."
Earlier in the day, Mr. Beddoe told analysts that while WestJet experienced a surge in bookings before April 1 -- the date the security fee was put in place -- it was followed by decline in reservations on short-haul routes.
Bearskin Airlines, the operating brand of Sioux Lookout, Ont.-based Bearskin Lake Air Service Ltd., also said yesterday that it has cut capacity on service to some of its 38 markets.
Bearskin cited a combination of Ottawa's "security tax" and the public servants strike in Ontario.
"There's no question we're losing business as a result of that security tax," said Bearskin marketing director Ron Hell. "There's no question the government has made a significant error in implementation of that tax."
At Quikair Inc., the airport security tax has proven to be a boon for business, because it isn't applied to the private terminals in Edmonton and Calgary that the airline uses. President Paul Phee said his firm would add three airplanes to its existing fleet of four, a move partly spurred by the security tax. "It's a $24 reason," He said.
Mr. Phee said the tax has made Quikair's total ticket cost competitive with those of no-frills WestJet.
Calin Rovinescu, Air Canada's executive vice-president of corporate development and strategy, said the airline has not yet noticed any decline in traffic because of the security tax, but predicted such a drop will eventually happen if the fee isn't lowered.
WestJet's announcement came as the company reported its 21st consecutive quarter of profit.
Profit jumped 22 per cent to $7.1-million or 15 cents a share for the three months ended March 31. That compares with $5.8-million or 13 cents last year.
Revenue soared almost 49 per cent higher to $137.1-million in the first quarter, up from $92.3-million the year before.
Although earnings beat the 14-cent-a-share estimates of analysts in a poll by Thomson Financial/First Call, WestJet shares closed lower yesterday at$30.75 on the Toronto Stock Exchange.
Also yesterday, shareholders approved a share split effective May 1, giving one half share for each common share outstanding.
During the quarter, WestJet increased its capacity by more than 56 per cent. However, its load factor dropped marginally, as did its yield as a result of December's expansion into Sudbury, Sault Ste. Marie and London in Ontario and in Thompson, Man. It adds Toronto as its 22nd destination next month. (It's also adding nine Boeing 737 aircraft to its fleet this year.) Mr. Beddoe also said he hopes to add routes to Halifax, St. John's and Montreal within 12 months.
Mr. Beddoe doesn't expect this short-term negative impact related to expansion to continue into the next quarter.
"The new markets are building very nicely," he told analysts.
Mr. Beddoe also suggested that Zip Air Inc., which was unveiled by Air Canada last week as its Western-based discount carrier, may help level the playing field.
Money-losing Air Canada currently has a hold on almost 80 per cent of the domestic market, but it has lost market share to WestJet in recent years. With Zip and Tango, its other discount brand launched late last year, Air Canada hopes to make up ground.
"If Air Canada's mainline disappears in the West, then those people who had traditionally flown only Air Canada will look at Zip as being essentially something equivalent or less than what WestJet provides," Mr. Beddoe told analysts.
"We may well see a migration from those traditional Air Canada passengers onto WestJet," he said.
Zip president and CEO Stephen Smith -- who previously headed WestJet -- dismissed his former employer's claim that it stands to benefit from Air Canada's move to no-frills flights between Vancouver and Calgary.
"We think it's great that WestJet is happy we're launching, because we're happy we're launching."
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