WestJet positive about its revenue performance as it works to shore up falling returns
Canada’s WestJet is maintaining a reasonable level of confidence that its unit revenue growth will outpace cost inflation in early 2017, as it attains positive unit revenue in 1Q2017 for the first time in eight quarters. Improving conditions in the province of Alberta and growing ancillary revenue are helping to lift WestJet’s unit revenues in early 2017.
WestJet’s return on invested capital has been falling during the last few months, dropping out of its targeted range of 13% to 16%. The airline is not offering a specific timeframe to post an improved ROIC performance, but believes a better operating environment in Alberta should create a favourable scenario to attain targeted return levels.
After WestJet’s pilots endorsed a new deal in late 2016 that allows for the expansion of the airline’s widebody operations, speculation grew about a potential aircraft order from the company in the not too distant future. But WestJet is taking a cautious approach to its widebody evaluations, as current capital expenditures could reach CAD920 million (USD703 million) in 2017 and investors are looking for definitive progress in restoring historical ROIC performance.
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