Canadian airline says prolonged low oil prices slowing Alberta demand for flights

MONTREAL – WestJet Airlines says fewer Albertans are booking flights because of the oil price slump.

While the Calgary-based carrier said it didn’t see any signs of a slowdown in the first quarter, the situation worsened in the seasonally slower second quarter.

“We are seeing some softening in the Alberta market as you would expect with what’s gone on with the prolonged oil prices,” Bob Cummings, executive vice-president commercial, told a Cowen and Company transportation conference in Boston.

About a quarter of WestJet’s (TSX:WJA) capacity originates from the oil-producing province.

Cummings said that a switch in some traffic from charter carriers to scheduled service has helped to mitigate the situation. He added that demand in British Columbia and Ontario remains healthy.

“So far, the financial performance is sound; bookings going forward, they are softening, but we certainly are flexible to adapt,” he said.

The carrier last week said its August traffic was up just 1.7 per cent from the prior year on a 7.3 per cent increase in capacity. That resulted in fewer full planes as the load factor slipped 4.7 percentage points to 84.6 per cent. Demand was partially impacted by the late Labour Day weekend, which is expected to help September’s traffic numbers.

WestJet says it has a 38 per cent market share in Canada, 13 per cent of the transborder market and a 20 per cent share to sun destinations in Mexico and the Caribbean.

Four widebody Boeing 767s it plans to use to offer international service have recently been delivered to the carrier. The initial destinations, starting next spring, will be announced later this month. The first plane will be used for transcontinental service in Canada and for winter flights to Hawaii.

WestJet will also try to lure more business travellers by offering a section of its Boeing 737s with an empty middle seat as of Monday.

“The value proposition is such that for the cost-conscious business traveller we believe this is a killer product,” he added.