WestJet braces for currency headwinds after recording favourable results for FY2013

Canada's WestJet managed to grow FY2013 earnings by nearly 11% - in the same year it launched a new regional carrier, reconfigured its aircraft to offer an extended legroom section and introduced new fare bundles. The results are commendable given the debut of Encore in particular pressured WestJet's unit revenue and yields during the latter half of 2013.

WestJet maintains a relatively positive view in the early days of 2014, supported by a recent 2% fare hike across its network that for the moment is being matched by its competitors and absorbed by the market. But the carrier is warning of cost headwinds during 2014 driven by a weakening of Canada's currency against the US dollar and the acceleration of certain engine overhauls.

With a fairly decent balance sheet, WestJet should be able to withstand some of the potential economic challenges created by currency fluctuations that are driven by uncertainty in the emerging markets. But if conditions worsen, it may need to temper some of its growth plans in order to protect its consistent profitability.