Momentous Day For WestJet Shows The Stakes Are Rising
By Bruce Parkinson
WestJet started the day yesterday by announcing a record load factor of 86.4% and a record 1.9 million pax for the month. That was the good news. There was lots more news to come on the day, but not all of it was good.
The same press release also included revised financial guidance that blamed extreme winter weather for a less buoyant outlook on profitability and domestic capacity increases.
WS had previously projected that revenue per available seat mile, a key profitability indicator, would rise 4.5-5.5% in Q1 while domestic capacity would grow 7.5-8.5%. New guidance suggests more modest 2.5-3.5% RASM growth and a 5.5-6.5% domestic capacity rise.
“WestJet experienced twenty-five days of irregular operations in the first two months of 2018 with January representing the single highest month over the past four years,” a statement read.
Yep, Canadian winters suck. But that news from WestJet was quickly pushed aside by the abrupt and immediate retirement announcement of Gregg Saretsky, CEO for the past eight years. He was replaced by 30-year airline veteran Ed Sims, who the airline said had been handpicked and groomed for the top role.
WestJet said Saretsky and the airline’s board came to an agreement that it was the right time for the CEO to retire, “especially with the comfort that there is a strong successor in place.”
Still, the unexpected departure rattled investors, and the WS share price dropped nearly 5% after the news.
RBC Capital Markets Analyst Walter Spracklin, who admitted that he was surprised by the announcement, offered this prediction:
“In the near term, we may continue to see a degree of investor apprehension when considering the 1) surprise CEO retirement; 2) the unexpected downward revision to guidance; and 3) the continued complexity of launching Swoop, while embarking on its wide-body growth initiative,” Spracklin wrote.
The Western Canada upstart airline that succeeded beyond its wildest dreams, WestJet is currently in the most challenging stage of its development. It has ambitious and multifaceted expansion plans – the launch of ultra-low-cost Swoop and an order for wide-body long-haul aircraft being the headliners.
Bruce Parkinson Editor-in-Chief
An observer and analyst of the Canadian and international travel industries for over 25 years, Bruce uses the pre-dawn hours to prepare a daily news and information package to keep industry members up to date.