The message from WestJet Airlines Ltd. on Tuesday was clear: Don’t expect the carrier to reduce airfares for customers just because its own costs have dropped significantly.
Gregg Saretsky, the head of the country’s second-biggest airline, said the carrier will do its best to keep ticket prices from moving lower even as jet fuel costs cascade down alongside oil, which has fallen dramatically in cost since the summer.
Much like other airlines, fuel represents about a third of WestJet’s operating costs. The drop in jet fuel prices in recent months is providing a financial windfall for WestJet, Air Canada and other North American carriers, experts say.
But so far, there’s little incentive to pass through any of the benefits to flyers, who continue to fly in strong numbers. WestJet flew 1.6 million customers last month, a new high the carrier said, and an increase of two per cent over January 2014.
“This is a supply-and-demand business and we price according to demand. If demand stays robust, we will continue the pricing strategy we’ve had in effect,” Saretsky said.
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Baggage fees
That pricing strategy includes the controversial introduction of new baggage fees on economy-class fliers who check one piece of luggage or more. WestJet said Tuesday the fee, which was implemented in the fall and quickly matched by Air Canada, is generating more revenue than the carrier initially thought it would.
Company officials said the fee is now expected to raise about $100 million this year for the carrier, which bills itself as the lower-cost alternative to Air Canada.
Stimulate as required
Still, airfares are being reduced on certain WestJet routes and seats.
The airline’s “load factor” measures how full its planes are in a given month. WestJet’s load factor for January was 79.5 per cent, meaning more than one in five seats went unfilled across its network of routes.
That’s a drop of 1.4 percentage points from last January as WestJet continues to add seats and new routes, including on its Encore regional service.
To fill those seats, WestJet has held limited sales events. Those promotions will continue to be offered on an infrequent basis.
“We have fare sales from time to time, we will continue to use fare sales as a vehicle for providing periodic lower prices,” Saretsky said. “But we’re not planning on lowering the whole fare structure.”
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