WestJet says weak loonie causing reversal of cross border travel flows

WestJet Airlines says the low loonie is prompting a role reversal in cross-border travel with more Americans heading north to catch flights and fewer Canadian travellers heading south to U.S. airports.

Officials at Bellingham airport in Washington state say traffic from nearby Vancouver was down 14 per cent last year, while activity at Vancouver International Airport grew five per cent.

And while the Calgary-based airline doesn’t have national figures, it believes the number of Canadians boarding flights at airports in Plattsburgh and Buffalo, N.Y., along with Burlington, Vt., are also down.

“We’re told that we have licence plates coming the other way now to fly out of Canadian airports, which is quite ironic,” said Bob Cummings, executive vice-president, marketing, sales and guest experience.

About 5.5 million Canadians have crossed the U.S. border annually in recent years until a 40 per cent drop in the Canadian dollar wiped out the much of the financial advantage.

“It’s great to see Canadians flying from home and WestJet is benefiting from that,” CEO Gregg Saretsky said during a conference call about the airline’s fourth-quarter and 2015 results.

WestJet (TSX:WJA) is also taking advantage of the low loonie to offer fares that are encouraging Americans to fly through Canada next summer when it introduces wide-body service to London’s Gatwick airport.

While demand for transatlantic service is strong, it has tempered overall earnings expectations for the start of 2016 amid ongoing economic weakness in Alberta.

“It’s not clear that we’ve found the bottom yet of the current downturn at this point,” Saretsky told analysts.

Expecting the Alberta and Prairie markets to be soft all year, the airline is shifting capacity starting in mid-February to stronger markets in B.C., Ontario and Atlantic Canada.

Despite the economic weakness in its core market, Saretsky said the fundamentals of its business are strong.

“If the rest of Canada starts to catch the cold from Alberta we’ll clearly have to revisit our capacity plan, but from where we sit today and the regional strengths we see we think we’re in relatively good shape.”

WestJet posted record results in 2015 despite a 30 per cent drop in fourth-quarter profits to $63.4 million on a 3.6 per cent decrease in revenues to $958.7 million.

For the full year, it earned $367.5 million on $4.03 billion of revenues, up 29 per cent from $284 million on $3.98 billion of revenues in 2014.

It was helped by a 55 per cent increase to $336.3 million in ancillary revenues, mainly from the addition of first checked bag fees for economy fare passengers and a 25 per cent drop in fuel costs.

On the Toronto Stock Exchange, WestJet shares closed down $2.07, or 11.07 per cent, at $16.63.


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