A Westjet Boeing 737-700 takes off at the International Airport in Calgary, Alta.Todd Korol/Reuters
WestJet Airlines Ltd. plans to increase capacity in the first quarter and full year of 2018 as it expands domestically, internationally and with its ultralow-cost carrier taking flight later this year.
Passenger-carrying capacity will grow by 4.5 per cent in the first quarter and between 6.5 per cent and 8.5 per cent this year over all, WestJet executives said as they released 2017 fourth-quarter and full-year financial results.
"Our capacity increases by some analysts might be seen to be aggressive, [but] they pale in comparison to other carriers in this market who are throwing even more capacity at margins that are half of ours," WestJet chief executive officer Gregg Saretsky said in response to questions from analysts on a conference call.
"So, I'm not going to apologize for the growth that we're pursuing and the profitability we're generating over time," Mr. Saretsky said. "The whole goal is to grow profits in a way where margins expand and we get back to return on invested capital that's within our target range."
He made his comments in response to a question from Raymond James analyst Ben Cherniavsky who said WestJet officials said last year they were going to increase profit margins.
Chief financial officer Harry Taylor promised an assault on costs to make up for forecasts that the price of jet fuel will rise between 13 per cent and 16 per cent this year.
"We're going to be as relentless as possible in terms of trying to arrest the cost inflation that is either inherent in the business or brought about not just by fuel, but the foreign-exchange rate as well," Mr. Taylor said.
WestJet has already increased fares where possible and "we have a history over 21 years of over time being able to offset the rising cost of energy," Mr. Saretsky said. WestJet posted a return on invested capital of 10 per cent, but Mr. Saretsky said it expects to get back to its target level of 13 per cent to 16 per cent in the next eight quarters.
The carrier is increasing its international presence this year by adding flights to Paris from Halifax, preparing for the delivery of Boeing 787 planes that will add more overseas capacity next year and gearing up its Swoop ultralow-cost carrier for its first flights in June.
Swoop will begin service with six planes when flights begin to various cities in June and July, but could it could grow to 30 to 40 planes eventually, Mr. Saretsky said.
Fuel costs rose 10 cents last year – to 64 cents a litre from 54 cents on average – contributing to a drop in profit from 2016.
Annual profit fell to $283.6-million or $2.42 a share in 2017 from $295.5-million or $2.45 a year earlier.
Revenue rose to $4.5-billion from $4.1-billion.