Executives at WestJet Airlines Ltd. are stuck in a bind -- they desperately want to raise air fares to offset rising costs, but are afraid of diminishing the airline's status as a low fare leader.
While WestJet managed to eke out a second quarter profit after two consecutive quarterly losses, the airline's performance over the last three months still failed to impress analysts, who had been expecting a sharper turnaround.
WestJet said yesterday that earnings fell nearly 70% during the period to $2.3-million, or 2 cents a share, compared to $7.5-million (6 cents) a year earlier. Analysts had been expecting earnings of 12 cents to 14 cents a share. Sales at the airline grew 27% to $326-million during the quarter.
Clive Beddoe, WestJet's chief executive, said the airline was affected by the high cost of jet fuel and "half a million" seats it had sold at steeply discounted prices prior to the collapse of discount carrier Jetsgo Corp. in March.
He said Jetsgo's demise has brought more rational pricing back to the industry, but that he is worried about moving too quickly to offset rising costs with further fare hikes.
"We are the leading low-fare airline in Canada and we don't want to damage that franchise," Mr. Beddoe told analysts during a conference call yesterday. "We can see the markets will adjust to higher fares, but there will be some decline in demand if we're not careful."
WestJet's competitors -- Air Canada and, to a lesser extent, CanJet Airways -- have also made a return to a higher fare environment difficult because of seat sales and special promotions that WestJet has felt compelled to match. "We are dragged down to the lowest common denominator," Mr. Beddoe explained.
Since Jetsgo's collapse in March WestJet has been busy reorganizing its operations to take advantage of the new competitive landscape. The airline has launched new routes, inked a deal with the federal government to fly civil servants and is in midst of a massive marketing push in Central and Eastern Canada. As well, WestJet is in the process of retiring its older fleet of less fuel-efficient Boeing 737s and replacing them with next-generation models.
However, while most observers agree that the future looks brighter for WestJet, some are wondering whether the airline could have done a better job at making money over the past six months.
"WestJet's profit performance is pathetic," said Doug Reid, a business professor at Queen's School of Business. "I could get a better rate of return by leaving my money in my chequing account. For all intents and purposes, this has become a break-even airline."
It's become apparent in recent days that the majority of users on the Canadian aviation forum, AvCanada, are tiring of one individual user's antics. This user, Blastor, is fond of quoting articles about the Calgary-based carrier, Westjet -- particularly those that focus on the negative.
To the amusement of some and annoyance of other's, Blastor is also very prone to high-lighting half of each posted article, to emphasize the more negative comments and statements throughout.
"It's like he's on some petty crusade against WestJet," said another AvCanada user who asked to remain anonymous -- even behind his already anonymous handle. "Even those of us who are not fans of WestJet ourselves have really had enough of him. It displays a tiresome grudge of no apparent origin, and a marked lack of wit that he cannot make any arguments or statements on his own, but rather must resort to this goofy posting. And waste of bandwidth."
Blastor also seems to have made a turncoat switch since last year. Early in 2004, Blastor seemed to have his sights set on another major Canadian carrier, Air Canada, and even exalted WestJet to that end. In a debate with another user with regard to Air Canada versus WestJet, he is quoted as saying:
"*Westjet will offer, starting at the end of April, 'Live Satelite TV' in every seat back of every seat on every B737-700 aircraft. That's 40 chanel (sic) you can surf to your heart's content. LIVE TV is a Canadian first and only available on Westjet.
"*On Westjet there's no 'rubber chicken', 'mystery meat' and 'lukewarm noodle' (sic). You can bring your lunch with you if you want to.
"*You're correct. Westjet is different (sic)
"*You're correct. Air Canada screwed over the flying public for years. You know what they say about Karma?
"*Westjet CARE (sic). That's why The B737-700 has 136 seats instead of 140. More legroom for the Guest.
"*Westjet has become succefull (sic) without a single penny from the taxpayers.
"*Westjet is not perfect. I agree. I wish they go to Barbados... (sic) "
It has been suggested that perhaps Blastor has, in fact, no real issue with the western airline, but rather has embarked on this mission of undermining in order to fill many empty hours spent in his mother's basement. It seems that WestJet has simply become an easier target in recent months. Many have speculated on which airline will next become the target of Blastor's childish blasting.
Others have suggested that if AvCanada users ignore his trademark posts and do not ever respond to him, than perhaps he will go away.
I'm not one to take newspapers too seriously but we cannot ignore the fact that it will become increasingly difficult to maintain a true low-cost environment. Robert Milton once said that the AC model "was broken". That was nothing more than scare tacticts against his own labour unions. How ironic to sit here just two years later and find that the low-cost model may soon have to change. Is the low-cost model broken? Not yet. But it is hard to imagine how much longer that market can be called "low" cost. Maybe we will see it called "slightly lower cost". WJ seems to be taking on a pay per use mentality, charging even that $1 for the headsets. The no frills are gone as there seems to be more and more frills to be had for a price. Still though, good idea in my view. You always have the choice not to buy all the extra goodies. More importantly wiil be the rising cost of fuel and taxes. In the end, we might see RM telling us the low cost model is broken. But don't take him too seriously.
Even though you are an admitted aspiring Air Canada'er, it's good to see that you can call a spade a spade. There are good people at both places, but man there are some tools too. I have no use for thoughtless bashing of Air Canada by any supposed WestJetter, and the some goes for the small minds that get some satisfaction from bashing WJ at any opportunity. Childhood issues on display on an interent chat forum. Very impressive.
Ryan Coke wrote:There are good people at both places...
I agree. The airlines might have different philosophies and might be fierce competitors in the domestic market, but we're all still pilots when all is said and done. I don't wish to see WJ do poorly anymore than I'd want to see it at AC or any other carrier in Canada.
kkboy.
Don't be afraid of a little bad news. Get used to it. The bigger you get, the more they whant to bring you down. Tell your friend Clive to get used to it. Up till now, he's loved the press. But just wait till there's a little bad news. They will be your worst enemy. Good luck.
So is stock price being posted repeatedly as a slam to Westjet employees (and their ESP) or as a slam to Westjet the company or both? How bout it, Blastor? Can you answer that?
