WestJet traffic grew 11.5% in August, but load factor dipped on higher capacity

WestJet Airlines reported Thursday that passenger traffic increased by 11.5 per cent in August compared with the same month last year, but an even larger growth in capacity caused its load factor to drop by one percentage point to 87.9 per cent.

The Calgary-based airline says it flew 1.8 million passengers in August, up 150,000 or 9.1 per cent, from the prior year.

However, WestJet’s (TSX:WJA) capacity or available seat miles grew 12.8 per cent, compared with the 11.5 per cent increase in revenue passenger miles (RASM).

“We are very pleased with the double digit year-over-year traffic growth and strong load factor achieved in August, especially considering our almost 13 per cent capacity growth,” said CEO Gregg Saretsky.

In August, the introduced a new premium economy plus service designed to attract more business travellers. It offers extra leg room, change and cancel options, advance boarding and complimentary food and beverage.

The airline also launched its WestJet Encore regional service in Western Canada, which services smaller communities using Bombardier’s Q400 turboprops.

During the first eight months of the year, the airline’s load factor had decreased to 82.9 per cent from 83.5 per cent a year earlier as traffic increased 8.7 per cent on a 7.8 per cent increase in capacity.

Analyst Cameron Doerksen of National Bank Financial said the lower load factor was expected after WestJet previously indicated that third-quarter RASM would decrease four to five per cent, in line with the drop in the second quarter.

“We expect RASM to improve late this year or early 2014 as capacity growth eases and as the new premium economy product gains traction,” he wrote in a report.

Doerksen added he remains positive about WestJet because its cost performance is better than forecast and it will benefit from slowing capacity growth and the roll out of new fare initiatives.

WestJet flies to 87 destinations in North America, Central America and the Caribbean using a fleet of more than 100 Boeing and Bombardier aircraft.

On the Toronto Stock Exchange, its shares lost two cents at $22.74 in Thursday afternoon trading.