WestJet Airlines Ltd. overcame the grounding of its 13 Boeing 737 Max jets in the second quarter, reversing a loss ahead of the Calgary airline’s takeover by Onex Corp.
WestJet reported a profit of $44-million, or 38 cents a share, compared with a loss of $15.8-million in the same quarter a year ago. Sales rose by almost 12 per cent to $1.2-billion for the three months ending on June 30 as the airline flew 3.5 per cent more passengers, WestJet said in a financial report released after markets closed on Friday.
Ed Sims, WestJet’s chief executive officer, said the company responded to the global grounding of the plane that accounts for about 10-per-cent of WestJet’s capacity by better utilizing the rest of its fleet and careful scheduling that enabled it to keep as many planes flying a possible.
“No one could have forecast the grounding and I certainly don’t welcome it,” Mr. Sims said by phone. “But I think part of the story of this result is the story of recovery from the grounding.
WestJet had been scheduled to release its financial results next week, but moved up the date – and cancelled a conference call with analysts – in light of the coming takeover.
In its second-quarter financial statement, WestJet said the loss of the Max capacity was “largely offset” by its WestJet Swoop and WestJet Link feeder airline. The tighter capacity was reflected in higher ticket prices, as revenue per passenger mile rose by 8.5 per cent, more than offsetting a 4-per-cent rise in as costs per seat mile.
“I’m very confident that part of the quality of this result is driven by the way which we’ve recovered … but I would be [remiss] if I didn’t say I am anxious to get this aircraft back in the sky as soon as it is safe to do so,” said Mr. Sims, CEO since March, 2018.
WestJet has 181 planes, including 13 grounded 737 Max jets, and another 57 Max on order. WestJet in June scrubbed the Max from its schedule through to August 29. Suspended routes include Halifax-Paris, Vancouver-Regina and Toronto-Kelowna.
Mr. Sims said he has no plans to cancel the outstanding orders for the Max, which remains grounded worldwide after two fatal crashes in Ethiopia and Indonesia killed 346 passengers and crew. The crashes have been linked to an automated control system in the plane that threw the planes into dives.
He said he has full confidence in the abilities of WestJet and the country’s pilots to operate the plane safely. “I believed in this aircraft from day one. I like the length and the range. I love the fuel efficiency and I love the guest experience on this aircraft,” Mr. Sims said.
WestJet shareholders on Wednesday approved the takeover by Onex worth $3.5-billion, or $31 a share. The deal, subject to regulatory approvals, is expected to be complete later this year.
Onex, a private equity company and investment manager founded in 1984 by chief executive officer Gerry Schwartz, has assets worth $37-billion. Its holdings include Celestica Inc., Pure Canadian Gaming and Auto Source.
The takeover makes Canada’s second-biggest airline a private company 23 years after being founded as a low-cost, regional carrier with three planes and 220 employees. It went public in 1996, and has grown to more than 14,000 employees serving more than 100 destinations.
WestJet’s bid to compete with Air Canada by adding international flights and premium fares has added costs that have driven down profits and the share price. The recent high for the stock is above $33 in December, 2014.
WestJet executives say Onex’s private structure is a better environment in which to execute the strategy, rather than the quarterly updates and shareholder accountability that a public listing require.
Mr. Sims, who is staying on under the new owners, reiterated Onex plans to continue WestJet’s strategy.
The $31 takeover price WestJet agreed to is a discount from the $35.75-per-share Onex proposed before taking into account the negative impacts of the Boeing 737 Max grounding and other factors unearthed when it looked at WestJet’s books.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Eric Atkins