WestJet Discussing Wide-Body Jets in Air Canada Challenge

May 06, 2014 4:25 pm ET

(Updates with closing share price in final paragraph.)

May 6 (Bloomberg) -- WestJet Airlines Ltd. said it’s close to a decision on buying wide-body aircraft for trans-Atlantic routes as it prepares to escalate a challenge to Air Canada.

Canada’s second-biggest carrier is negotiating with its pilots over an agreement regarding the operation of twin-aisle aircraft that would be deployed on international routes, Chief Executive Officer Gregg Saretsky said today. WestJet is also holding talks with lessors and jet makers, he said.

“No decision made yet, but we’re getting all the pieces in place,” Saretsky said on a conference call to discuss first- quarter earnings. “Pilots are one piece. If we get all the pieces coming together, then it is fair to say we might move forward with that.”

WestJet is scheduled to begin its first foray into Europe next month to compete head-on with Air Canada with seasonal service to Dublin from St John’s, Newfoundland. With flights “largely sold out,” Calgary-based WestJet will extend service to the Irish capital by three weeks to Oct. 25, the CEO said.

“We’ve had a phenomenal response,” Saretsky said. “All of that gives us great confidence that there is strong demand for a value-based international product that WestJet is looking to pursue.”

Any wide-body aircraft probably wouldn’t enter WestJet’s fleet for 18 months to 3 1/2 years, he said. WestJet now flies only two types of planes: Boeing Co. 737 jets and Bombardier Inc. Q400 turboprops. Saretsky declined to say how many aircraft the airline is looking to order.

High Fares

Destinations in Europe and the Pacific “are all candidates” for WestJet service, he said. “Obviously we’re looking for markets that are burdened by very high airfares, and there are lots of those in the international space. There are opportunities across many geographies.”

Saretsky made the comments after WestJet reported net earnings of C$89.3 million ($81.9 million), or 69 cents a share, compared with C$91.1 million, or 68 cents, a year earlier.

When stripping out the effects of tax recoveries, adjusted earnings were about 58 cents a share, Chief Financial Officer Vito Culmone said on the call. On that basis, WestJet had been projected to earn 63 cents, the average estimate in a Bloomberg survey of 13 analysts.

WestJet fell 2.2 percent to C$24.42 in Toronto. The stock has dropped 12 percent this year, compared with a 7.3 percent climb for Canada’s benchmark Standard & Poor’s/TSX Composite Index.