Canada’s Westjet Airlines Stocks Take a Nose Dive

Canada’s WestJet Airlines Ltd stock have dipped 10 per cent downward on Tuesday 31st July 2018   even as the airline prepared itself for higher costs and lower revenue, reports the Financial Post. According to the report, the airline which is Canada’s second largest carrier had witness considerable loss in the second quarter and are of the opinion that things could only get worse.WestJet’s net loss was $20.8 million, or 18 Canadian cents per share, in the quarter, compared with a profit of $48.4 million, or 41 Canadian cents per share, a year earlier, because of the threat of labour disruption.

WestJet anticipates a decline in the third quarter of about 4 to 6 percent of revenue per available seat mile (RASM). They expect the cost per available seat mile (CASM), excluding fuel and profit share to increase by 3 per cent to 4 percent during the quarter. However, they still reported a smaller-than-expected second-quarter loss as they flew more passengers and improved a key revenue metric, taking care of a rise in fuel prices.

“We are now operating in a very different fuel and competitive environment.” Said CEO Ed Sims “…Despite several increase in airfare by the carrier, the company still faces immense pressure from domestic competition.“We continue to see the symptoms of oversupply in the domestic market which is fully offsetting the relative demand strength,” he said. He complained that the profit margins are already relatively slim based on high fuel costs and this has caused airlines to take a step back on capacity despite having the demand. It has also forced airlines such as the West jet to raise fares despite overwhelming local competition. The airline also has issues with execution of some of its projects, it is planning an international expansion alongside having to deal with launching its new carrier, and also having to negotiate initial contracts with pilots and its flight attendants move to unionize.

According to Sims, the carrier expects the situation to get better in the fourth quarter as it plans to scale back on costs, capacity and realise the profits from its new carrier, swoop.

“We continue to believe that our long term strategy is the right direction,” he said.

The carrier lowered its forecast for full-year cost per available seat mile, saying it now expects it to rise 2 to 3 per cent, an improvement from the cost rise of 2.5 to 3.5 per cent it originally forecast. The also expect full-year system capacity to increase from 5.5per cent to 6.5 per cent, down from an initial forecast of 6.5 per cent to 8.5 per cent.

WestJet Airlines Ltd. Was founded in 1966 and began operations as a low-cost alternative to the country's competing major airlines. WestJet provides scheduled and charter air service to one hundred and seven destinations in Canada, the United States, Europe, Mexico, Central America and the Caribbean. WestJet is currently the second-largest Canadian air carrier, behind Air Canada