Home / WestJet Airlines Ltd bruised by ‘sudden, deep’ slowdown in Alberta as it braces for more blows
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WestJet Airlines Ltd bruised by ‘sudden, deep’ slowdown in Alberta as it braces for more blows

The weakening Alberta economy hurt WestJet's Q4 profit.

WestJet Airlines Ltd. took a one-two punch from Alberta’s economy in the fourth quarter, forcing the airline to discount fares and redeploy capacity in anticipation of more blows this year.

Shares fell 11.07 per cent to $16.63 Tuesday to close at their lowest level since 2012 after the Calgary-based company said unit revenues will plunge in the first quarter as it cuts ticket prices in Alberta to win over frugal customers.

“It’s not clear that we’ve found the bottom yet of the current downturn,” WestJet CEO Gregg Saretsky said on a conference call with analysts.

Saretsky said the impact of Alberta’s oil-price-fuelled slowdown “was sudden and it’s gotten very deep,” adding that the provincial economy is much softer now than it was even during the financial crisis.

For WestJet, the numbers are stark: fourth-quarter profit fell 30 per cent to $63.4 million or $0.51 per share, well below the consensus estimate of $0.63 per share. On a per-seat basis, revenue fell 5.8 per cent while adjusted costs rose nine per cent partly due to the weaker loonie.

For the first quarter of this year, WestJet expects unit revenue to fall a further 10 to 12 per cent with adjusted unit costs rising seven to 10 per cent.

The airline has been shuffling its fleet of planes, moving capacity out of Alberta and into other parts of Canada where the economy is stronger. However, it still expects capacity to increase seven to 10 per cent in 2016, only a slight reduction from its previous forecast of eight to 11 per cent.

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