The CEO of WestJet Airlines Ltd. warned Tuesday a potential strike could end its 13-year streak of quarterly profits as about 150 picketing pilots in uniform greeted shareholders at the company’s annual meeting.
The airline’s shares plummeted after it issued first-quarter results that cautioned its revenue per available seat mile will be flat or fall by two per cent in the current quarter partly due to a possible pilots’ strike.
“What we have seen over the last two weeks is a significant deferral of bookings, while some guests will either postpone travel plans or make other decisions,” CEO Ed Sims said Tuesday morning during a conference call.
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WestJet has agreed to give refunds if job action results in travel disruptions, he added.
The Calgary-based airline and its pilots have been in contract negotiations since September. However, negotiations have been fraught as the union takes issue with the company’s hiring of outside pilots for its new ultra-low cost carrier Swoop, which is set to launch in June.
After the annual meeting at the company’s Calgary International Airport headquarters, Sims said he doesn’t see the share price drop as a comment on his leadership since unexpectedly being appointed to replace retiring Gregg Saretsky in March.
“It’s always challenging to go through a tough quarter and potentially to be advising on a future tough quarter but it is part of the headwinds that come in the aviation industry… I don’t tend to personalize those sort of reactions,” he told reporters.
Analysts on the call challenged Sims for maintaining the same strategy despite an abrupt change in CEO. He defended the strategy, saying it was developed by a team and not one person.
The airline is committed to remaining at the negotiating table with pilots until a sustainable agreement is reached, Sims said, noting there has been some progress.
On the sidewalk outside, WestJet 230 YYC chairman Capt. David Colquhoun agreed the quality and frequency of negotiations has improved since the pilots commenced a strike vote late last month.
The voting is expected to wrap up by May 10 and, if strike action is endorsed, job action could be taken after a cooling off period ends May 18.
The pilots’ main concern, said Colquhoun, is job security. They fear that WestJet will move planes and jobs to Swoop after it begins operations in June.
Earlier Tuesday, WestJet reported it earned $37.2 million or 32 cents per diluted share in its latest quarter, down from a profit of $46.7 million or 40 cents per diluted share a year ago.
The results fell short of analysts’ expectations for earnings of 36 cents per share, according to data from Thomson Reuters Eikon.
The airline attributed the drop to factors including heightened spending to prepare for the introduction of Swoop, the introduction of Boeing 787s for international routes, increased domestic competition, winter weather disruptions and an increase in fuel costs.
Its charter business also slowed as construction on Suncor Energy Inc.’s Fort Hills oilsands mine came to a close and partnership revenue fell due to the loss of its codeshare relationship with American Airlines.
WestJet is expanding its relationship with Delta Airlines and exploring partnerships for new regions including the transatlantic.
It also moved up its goal of finding $200 million in annual savings by two years to 2020 from 2022.
Revenue for the three-month period totalled $1.19 billion, up from $1.11 billion in the same quarter last year.
The increase in revenue came as capacity increased 4.3 per cent and revenue passenger miles – a measure of traffic – increased 6.5 per cent.
Revenue for non-fare ancillary services like checked baggage and upgrades increased 7.4 per cent to $109.5 million in the quarter or $18.58 per passenger.
WestJet said it raised prices three times in its first quarter and five times since November to partially adjust to rising fuel costs, which rose 14.1 per cent in the quarter compared with the same period last year.
However, it is cautious about raising fares too much and causing demand to falter.
Still, Sims said the fundamentals of the airline’s business remain strong. WestJet’s load factor, a measure of how full its aircraft were, increased to 84.8 per cent compared with 83 per cent a year ago.
