Demand for flights on Canadian airlines up

A WestJet plane. (MARCEL CRETAIN/QMI Agency)

A WestJet plane. (MARCEL CRETAIN/QMI Agency)

Reuters

, Last Updated: 10:51 AM ET

Canadian airlines reported record demand for the travel-heavy month of August on Thursday as ticket sales strengthened, while capacity increases were tightly controlled.

The country's largest airline, Air Canada, said its load factor, or the percentage of available seats filled with paying customers, rose to record high of 87.9%, a whisker above 87.8% in August 2011.

WestJet Airlines Ltd, Canada's No. 2 carrier, said code-share and interline pacts with other airlines helped lift its August load factor to a record 88.9% from 83.3% a year earlier.

Traffic at Air Canada increased just 0.7%, while capacity, measured in available seat miles, rose 0.6 %.

"This record load factor result for the month underscores our disciplined capacity management," Chief Executive Calin Rovinescu said in a statement after markets closed.

The strongest load factor gain was in Air Canada's domestic flights, a 1.2% point increase. On U.S. transborder flights, it rose half a percentage point and the Atlantic market declined by 1.5% points. The load factor in the Australia, Caribbean, Mexico and Central and South America market rose 1 % point.

Year-to-date, the airline's load factor has climbed to 82.9% from 82.3%, with traffic up 2% and capacity just 1.3% higher.

Air Canada shares dipped 1 Canadian cent to end at $1.06 on the Toronto Stock Exchange on Thursday.

Shares of Calgary-based WestJet closed 3.4%, or 57cents, higher at $17.14.

WestJet's traffic increased 9.2% in August, while capacity, measured in available seat miles, rose just 2.3%.

"The demand environment remains strong and we are seeing a growing contribution from our airline code-shares and interline partnerships," Chief Executive Gregg Saretsky said in a statement.

Under code-share deals, airlines sell space on each other's flights, which can boost revenue as they can offer more destinations to passengers while controlling costs.

Interline pacts, often a precursor to full code-share deals, allow customers to purchase one ticket for a trip involving multiple airlines.

National Bank Financial analyst Cameron Doerksen said WestJet will likely report a third-quarter load factor well ahead of his forecast of 81.5%.

"With the load factor trending well ahead of expectations and fuel costs so far in the quarter largely in-line with our estimate, we believe our Q3 EPS estimate of $0.43 (versus $0.28 last year and the consensus of $0.39) is probably too low," Doerksen said in a note.

"Clearly WestJet's August numbers point to a healthy demand environment. Further evidence of a strong end-market environment comes from Porter Airlines."

Privately held Porter Airlines, a small, short-haul carrier, said it also set a record in August, with a load factor of 74.5%, up from 68.7% a year earlier.

Traffic rose 21.4%, while capacity rose 12%.

"This is the best month we've had in nearly six years of operating," said Chief Executive Robert Deluce.

Year-to-date, Porter's load factor has climbed to 62.9% from 59.1%. Traffic is 26% higher and capacity is up 18.3%.


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