Air Canada and WestJet fill more seats as passengers return

[Blastor]

Air Canada and WestJet fill more seats as passengers return to skies

But high cost of jet fuel is still causing analysts concern

By BRENT JANG
TRANSPORTATION REPORTER
Thursday, October 7, 2004 - Page B8

Air Canada and WestJet Airlines Ltd. filled more of their seats last month as passengers continued returning to the skies, but soaring jet fuel prices are hurting both airlines.

While the war in Iraq and the SARS outbreak depressed last year's passenger statistics, a buoyant economy has boosted this year's load factors -- the percentage of available seats filled.

At Air Canada, September marked the airline's sixth consecutive month of record-high load factors. The Montreal-based carrier said its load factor reached 79.2 per cent in September, up from 73.4 per cent in the same month in 2003.

From April through September this year, the load factor on Air Canada's mainline operation hit new highs for each of the six months. A company record-high load factor, 83.2 per cent, was set in August.

Air Canada had a load factor of 77.9 per cent in the first nine months of this year, up from 74.5 per cent a year earlier.

Separate data for Air Canada's Jazz subsidiary also showed improvement, with the load factor rising to 66.2 per cent in September from 54.7 per cent in the same month last year. In the first nine months, the proportion of available seats filled at Jazz climbed to 63 per cent from 60.1 per cent.

Air Canada emerged last week from bankruptcy protection.

Calgary-based WestJet reported that its September load factor rose to 71.3 per cent from 68.3 per cent. The discount carrier's load factor for the first nine months of 2004 was 71 per cent, up slightly from 70.7 per cent.

Load factors can be an important indicator of an airline's health, but analysts are waiting for the two airlines to reveal other data such as their yields -- revenue per passenger mile -- in their third-quarter financial results.

High oil prices, which in turn boost jet fuel costs, remain a concern. Yesterday, Dlouhy Merchant Group analyst Cameron Doerksen cited extra energy costs as the main reason for reducing his one-year target price for WestJet to $15.20 from $17.25.

WestJet and Air Canada haven't hedged any of their fuel requirements, so both airlines are getting hit hard by oil price jumps, Mr. Doerksen said.

Every $1 (U.S.) rise in the annual average price for a barrel of oil slashes WestJet's yearly profit by $3.4-million (Canadian) and chops Air Canada's yearly operating profit by $28-million.

Fuel surcharges have offset some of the higher energy expenses, but "as the industry enters the seasonally weak fall and winter months, airlines will have a more difficult time passing on higher costs to passengers," Mr. Doerksen said in a new research study.

Even with fuel surcharges, "the impact of high fuel expenses will likely be felt more acutely" at the two airlines over the next six months, he said.

Nav Canada, which provides air navigation services in Canada, also reported yesterday that the country had busier air traffic in June and July, compared with a year earlier. June's air traffic grew 7.9 per cent while July's increased 8.5 per cent.

However, traffic is still down slightly from the June-July period in 2001, just before the Sept. 11 terrorist attacks.

In the first 11 months of Nav Canada's fiscal year, year-to-date traffic rose 4.4 per cent from the same period in the previous fiscal year.

Class B voting shares in Air Canada's new parent company, ACE Aviation Holdings Inc., fell $1.24 to close at $22.55 yesterday on the Toronto Stock Exchange. WestJet gained 6 cents to $13.41 on the TSX.

Nick Morton, an analyst with RBC Dominion Securities Inc., said ACE's 5-per-cent drop yesterday stemmed largely from creditors unloading shares. Meanwhile, Scotia Capital Inc. analyst James David reduced his one-year price target for ACE to $13.75 from $16.50.



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[Rebel]

Hmm I’m concerned that no one is making any money because of the high cost of fuel. It’s all about yield and with the low fares being charged coupled with the fuel cost there is no way this industry is going to survive long term.

In my opinion only..

[TTail]

it's time engineers start designing solar powered aircraft. or better yet....start using plutonium. We need it for the flux capacitor to work.

[Blastor]

Hydrogen fuel cell!

[Swamp Donkey]

methane.....pilots will have to eat more beans!

[KKboy]

The price of fuel is not relevant as long as surcharges exist.
When fuel is low cost the complaint is weather or SARs or something.
The fact of the matter is the only well run airline in the country is based in Calgary the only efficient aviation hub in Canada other than perhaps Winnipeg.
Ever one else is either smoke and mirrors or not a credible contender.
Jetsgo has a chance if they survive but frankly the business model better fits a dairy queen unless they start donig their own maintenance.
Airlines are complex and cannot simply be booted up and on line through a mix of farmed out contracts loosly joined together by an office dweller in TO or Monteral.
The future looks good for airmen however as Air Canada slowly melts down and alternatives develop. Jazz will be history in a couple years of CRJ operations, essentially dead once they move out of turbo props.
What the country needs is a few more regional one start up operators.

[Panama Jack]

Hmm I’m concerned that no one is making any money because of the high cost of fuel. It’s all about yield and with the low fares being charged coupled with the fuel cost there is no way this industry is going to survive long term.

In my opinion only..

Well said Rebel, and I agree. There seems to be such a hesitation to raise fares to reflect the realities of the world market. When supply costs go up, then so should prices. That is the way it seems to be in most industries. Yes, some customers will be lost, however, as you said, this is not a sustainable industry given the way business is being done.

[Rebel]

Panama Jack

You understood exactly the message that I was trying to convey.

The paradigm change is the realization that air travel has become similar to bus or car travel. It is no more the exclusive reserve of the elite who travel in style, eating fancy food and being pampered. The reality is, also, that all airlines are reliant on external factors that they do not have control of such as fuel prices, traffic control, airport charges, etc

Then we have pilots who think it’s cool to refer to themselves, as “drivers”. These folks should give their head a shake as they may get what they wish for..

[Pindunder Jeep]

Well said Rebel. Have you watched airline recently on A&E? It is like watching Jerry Springer.

So KKboy, the price of fuel is not relevant as long as surcharges exist? Not sure I understand that one. Someone still has to pay for it. What flavour of Kool Aid are they giving you over there in Calgary anyway?

[matrix]

What flavour of Kool Aid are they giving you over there in Calgary anyway?

Man, that joke is SOOOOO old. Let it go already.

[LT]

"Oh, yeah!"

[KKboy]

I do not mean to say fuel is irrelivant

Surcharges however do allow the operators increased flexibilty to add this like a tax.
Quickly and without a bunch of modifications to marketing and computer sytems etc. So it is felxible and washes out the ups and downs.

Fuel is a variable and it is high now, 10 years futures in the stock market have a barrel of crude at $15.00 at the moment.

The key to todays market is service and who has want passengers want.

I went across Canada J class with AC and they would'nt hang up my coat or get me a drink. Try that in Asia or on BA.
WJ has no J so what's a boy to do in Canada, Platinum Jet?

[thrust set]

"I went across Canada J class with AC and they would'nt hang up my coat or get me a drink"


Sorry to say but I have to call bullsh!t on this one.

Never see that ever happen .........