Tuesday,  July 16, 2019  2:38 pm

Air Canada & WestJet report record Q1 earnings despite Boeing 737 MAX 8 groundings


Air Canada & WestJet report record Q1 earnings despite Boeing 737 MAX 8 groundings
Christine Hogg

Christine Hogg is the Associate Digital Editor at PAX Global Media. Prior to joining PAX, she obtained her Honours BA in Journalism from the University of Toronto. Upon graduating, she went on to write for several travel publications while travelling the world. Her longest trip was a three-week stint in Europe, and the shortest was a 16-hour adventure in Iceland. Get in touch: christine@paxglobalmedia.com.

Following Transport Canada's order to ground all Boeing 737 MAX 8 aircraft back in March, Air Canada and WestJet have taken serious measures to keep disruption to air travel at a minimum for their passengers.

As of March 25, WestJet reported that 93 per cent of its flying schedules would be totally unaffected by the removal of Boeing aircraft from Canadian airspace. 

READ MORE: VIDEO: Jane Clementino unpacks WestJet's new strategy at travel trade expo

Air Canada has been steadily releasing updates to its flying schedules since March, most recently through Aug. 1, to ensure its guests' vacation plans are unaffected, and has enacted several measures including optimizing the current fleet, consolidating flights on larger aircraft and extending leases on aircraft planned to exit the fleet. By doing so, the airline has said 96 per cent of its planned flying through Aug. 1 has been protected.

Prior to the Boeing 737 MAX 8 groundings, Air Canada had 24 of the aircraft in its fleet, and was expecting six new aircraft in March and April.

WestJet had 13 Boeing 737 MAX 8 in its fleet.

Despite removing the Boeing 737 MAX 8 from their respective fleets, both Air Canada and WestJet are reporting record numbers for the results of their first quarter earnings.

Air Canada: diversion tactics paying off

On May 7, Air Canada reported first quarter earnings of $583 million compared to first quarter earnings of $504 million, representing an increase of $79 million, or eight per cent.

The airline also reported first quarter 2019 operating income of $127 million compared to first quarter 2018 operating income of $86 million, or 32 per cent. On a GAAP basis, the airline reported net income of $345 million in the first quarter of 2019 compared to a net loss of $203 million in the first quarter of 2018. 

"The grounding of the Boeing 737 MAX aircraft following Transport Canada's and other regulators' decisions resulted in the unexpected removal of 24 aircraft from our fleet during the last 18 days of the quarter, with the associated cost and revenue impact," said Calin Rovinescu, president and CEO, Air Canada, in a statement regarding the airline's Q1 earnings. "Our team immediately executed on several significant mitigation measures, including entering into new leases and extensions, contracting other airlines to cover some flights and consolidating flights and frequencies, thereby protecting approximately 98 per cent of our flying from the date of the grounding to April 30. The agility of our business model, the flexibility of our fleet and our team's "can-do" culture was on full display as we adjusted to these unexpected circumstances."

On capacity growth of 4.6 per cent, record first quarter system passenger revenues of $3.8 billion increased $327 million or 9.4 per cent from the same quarter in 2018. 

The increase in system passenger revenues was driven by a yield improvement of 5.0 per cent and traffic growth of 4.2 per cent. The yield improvement resulted from a strong demand environment and included additional yield earned by Air Canada on Aeroplan redemption revenues recorded subsequent to the Aeroplan acquisition on Jan. 10, 2019. 

WestJet reports 33.4% profit

Following the Boeing 737 MAX 8 groundings in March, WestJet has made several exciting announcements, including the successful inaugural transatlantic flight aboard the new Dreamliner, and several new U.S. routes

On May 7, WestJet announced its first quarter results for 2019, with net earnings of $45.6 million, or $0.40 per fully diluted share compared with net earnings of $34.2 million, or $0.30 per fully diluted share reported in the first quarter of 2018, representing a 33.4% increase in first quarter net earnings.

"We remain confident in our strategic direction and continue to see positive trends as a result of our prudent growth and the strategic initiatives we are undertaking," said Ed Sims, WestJet president and CEO. "I want to thank all of our guests for their continued loyalty and all WestJetters for their on-going commitment to providing an award-winning service through a busy first quarter."

WestJet also announced its April 2019 traffic results with a record load factor of 87.7 per cent, an increase of 1.7 percentage points year over year. Revenue passenger miles (RPMs), or traffic, increased 7.0 per cent year over year, while capacity, measured in available seat miles (ASMs), grew 4.9 per cent over the same period. WestJet welcomed an additional 99,000 guests in April, a year over year increase of 4.7 per cent.

"In April, all preparatory work that went into two major initiatives culminated in the launch of our first transatlantic flight operated on our new Boeing 787 Dreamliner aircraft and the opening of our new wide-body hangar in Calgary," Sims said. "Both major programs launched on time, on budget and to scope." 

On April 28, 2019 WestJet's Dreamliner took its first transatlantic flight. The sold-out flight between Calgary and London, Gatwick featured WestJet's new long-haul lie-flat bed Business cabin. WestJet also increased travel options across the Atlantic with new non-stop service between Halifax and Dublin, Ireland. 

Further supporting our global growth, WestJet strengthened its codeshare with Air France providing WestJet guests access to new European destinations from Paris.

In April, Westjet also expanded travel options between the Northwestern United States and Western Canada with inaugural service to Portland, Oregon.

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