The country’s second-biggest airline says it’s passing the savings gained from the dramatic drop in jet fuel prices onto customers by lowering base fares.
“Consumers are benefiting from lower all-in travel costs. There are bargains today that are better than they were a year ago. And that’s a function of the lower fuel environment,” Gregg Saretsky, chief executive of the Calgary airline said on a conference call on Tuesday.
“We’re effectively passing that along to our guests,” he said. On Wednesday, experts weighed in after combing over the carrier’s latest numbers.
Jet fuel is the most expensive single cost for an airline, accounting for about third of a carrier’s budget. WestJet says its fuel costs dropped by a whopping 35.5 per cent through the first three months of 2o15.
MORE: WestJet making millions on new fees – and it’s just getting started
Profit margins – the percentage of money from sales WestJet keeps after its costs are covered – jumped sharply in the latest three-month stretch, the airline’s financial documents show, to 18.2 per cent.
The carrier is also making more money on baggage fees, taking in millions from the $25 it began charging economy customers in September on their first checked piece of luggage.
Minimalists save
Yet WestJet continues to draw in plenty of travellers, experts noted Wednesday, remarkably even in Alberta where oil’s plunge has grounded more than few travel plans. WestJet chalked the surprisingly resilient demand up to its competitive pricing – as Saretsky said.
“WestJet has reduced some fares,” airline stock experts at CIBC World Markets said in a note to clients.
Stripping out “ancillary revenues”, or the money WestJet collects for products and services sold on top of base airfare (which now includes the new luxury of taking a piece of luggage), average ticket prices have indeed dropped by a few bucks, according to CIBC analyst Kevin Chiang.
“Fares are lower for customers who want to opt out of certain costs,” the analyst said.
Comments