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Air Canada, WestJet continued to benefit from strong passenger demand in April

Canada's two largest airlines continued to experience strong growth of passenger demand as traffic in April increased along with available seats.

Air Canada (TSX:AC.B) reported a record system load factor for April of 83.3 per cent, up from 82.1 per cent a year earlier. Traffic grew by nine per cent, outpacing a 7.5 per cent increase in capacity.

The monthly numbers include flights on the Montreal-based airline along with low-cost subsidiary Air Canada Rouge and regional airlines from which Air Canada purchases capacity.

"Air Canada generated greater traffic for the month of April in all markets the airline serves...led by increases in traffic in Latin America, Caribbean, Atlantic and U.S. transborder markets," CEO Calin Rovinescu said after markets closed.

Earlier Monday, WestJet Airlines Ltd. (TSX:WJA) said it flew 1.6 million passengers in April, up 7.7 per cent or 116,000 extra passengers from the same month in 2013.

The Calgary-based airline said it had a load factor of 82.3 per cent, down from 82.7 per cent in the same month last year.

Its passenger traffic increased 6.5 per cent year over year, while capacity grew 7.1 per cent to 2.15 billion available seat miles.

"We are pleased with our continued strong growth in traffic as we welcomed a record number of guests in April into our network," said president and CEO Gregg Saretsky.

The airline has said half the anticipated growth this year will come from its Encore regional service.

WestJet expects to take delivery of eight Q400s this year, doubling its fleet to 16 as it expands service from Toronto.

Walter Spracklin of RBC Capital Markets said WestJet's traffic results beat his expectations and demonstrate solid passenger demand.

"With WestJet introducing new capacity, the traffic environment continues to remain robust enough such that much of the new capacity is being sopped up with new traffic," he wrote in a report.

"The key question will be on pricing and to what extent WestJet is utilizing fare sale activity to stimulate traffic demand."

WestJet releases its first-quarter financial results on Tuesday, ahead of its annual meeting in Toronto. The airline's adjusted earnings are expected to decrease to 63 cents per share, down from 68 cents per share a year earlier, according to analysts polled by Thomson Reuters. Revenues are forecast to surpass $1 billion, increasing 7.8 per cent from last year.

Air Canada said its domestic service experienced a 4.7 per cent increase in available seats, outpacing a 4.2 per cent growth in traffic, causing planes to fly 85.2 per cent full, down from 85.6 per cent a year ago.

Transborder traffic grew by 11.7 per cent compared with a 6.2 per cent increase in capacity as load factor grew to 83.5 per cent, from 79.4 per cent in April 2013.

Atlantic traffic increased 11.7 per cent on a 10.2 per cent increase in capacity, while Pacific traffic was slightly ahead of the 5.7 per cent increased capacity. Latin America and Caribbean routes that benefited most from Rouge's higher density seating saw traffic increase 20.2 per cent compared to a 16.4 per cent gain in capacity.

Spracklin said Air Canada's "strong April" confirmed earlier commentary from management, which said the airline expected a strong summer booking season.

". . . We see April's results as being supportive of a stronger pricing environment," Spracklin said in a note. "We are also encouraged by the strong uptake in traffic growth on the Pacific region, which we note is a key region for Air Canada's growth initiatives."

On the Toronto Stock Exchange, Air Canada's shares closed down three cents at $7.82 while WestJet was up 20 cents to $24.97.

_ Follow @RossMarowits on Twitter.

Note to readers: This is a corrected story. A previous version misspelled the surname 'Rovinescu.'

The Canadian Press


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