WestJet prepares to lock in unit revenue growth to outpace cost inflation in 2017

Canada's second largest airline WestJet believes it can attain a positive unit revenue result in 1Q2017, joining many other North American airlines in outlining specific timeframes for the reversal of negative trends. Unlike performance of most airlines in the region that are predicting sequential improvements from 3Q2016 to 4Q2016, WestJet's performance will worsen during the last three months of 2016. The factors driving WestJet's deeper unit revenue decreases include timing of the year-end holidays, competitive capacity pressure in warm weather markets, and fare matching of the start-up competitor ULCC NewLeaf.

Although WestJet believes it will make an important turn in its unit revenue performance in early 2017, it faces some cost inflation for the full year as it adds a larger number of smaller Bombardier Q400 turboprops, which have higher operating costs but in fact also help drive bottom line profitability. Although at this point WestJet cannot forecast its unit revenue performance for FY2017, its goal is to post unit revenue growth that outpaces unit cost increases.