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In another possible blow to Bombardier Inc., WestJet Airlines Ltd. is within talks with the struggling company to decelerate deliveries from the Q400 turboprops it’s on order, part of a broader technique to cope with Alberta’s deteriorating economy.
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In an editorial board meeting with the Financial Post, WestJet CEO Gregg Saretsky said the airline is “looking for ways to tap the brakes without jamming them on.”
“We’re in discussions with Bombardier about slowing the deliveries of Q400s, however they are hardly capable of discuss slowing anything,” Saretsky said, pointing towards the company’s stock price, that has been trading below $1 within the last fourteen days.
WestJet is also in discussions with Boeing Co. about deferring delivery of three new 737s, and intends to return nine leased aircraft for their owners by 2017 – the first time in the airline’s history it has not renewed leases.
Bombardier spokeswoman Marianella de la Barrera said the organization is definitely available to engaging using its customers but doesn’t are conscious of any changes to the Q400 delivery schedule.
“I can tell you that our plans for the Q400, our production plans and schedules, are pretty firmed up for the year,” she said. “As far as I know there isn’t any switch to that.”
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Last month, Macquarie analyst Konark Gupta predicted that Bombardier will report a “potentially significant” year-over-year decline in aircraft deliveries when it releases results on Feb. 17.
The company hasn’t recorded a new firm order because of its CSeries jetliner since September 2014 and is hoping its other products, like the Q400, will generate enough revenue to keep it going although it hunts for purchasers.
In total, WestJet has 10 Q400s scheduled for delivery this year and another two in 2017. Its regional carrier, Encore, uses the turboprops because of its short-haul flights.
Saretsky also weighed in on Bombardier’s ill-fated CSeries, that they said “wasn’t created for the Canadian carriers.”
“It’s not big enough,” Saretsky said from the 100- to 150-seat aircraft. “Both ourselves and Air Canada are purchasing bigger and bigger jets for domestic flights.”
Why is the trading down a lot more than Half (from the highs)? I’ve no clue. I’ll refer to it as investor skittishness
WestJet recently sold 10 of its smaller Boeing 737-700 aircraft to Southwest Airlines Co. and replaced all of them with the bigger 737-800. Between those and the Q400s, Saretsky said the airline has everything it must serve the Canadian market.
WestJet’s fourth-quarter profit and revenues took a hit in the slumping Alberta economy, where approximately 25 per cent of the airline’s business originates. The stock price has followed suit, and it is down 24 per cent year up to now.
Investors haven’t been pleased with WestJet’s intend to increase capacity by seven to 10 per cent this season despite the slowdown in Alberta, and worry it isn’t acting quick enough to shift capacity out of the province.
But Saretksy said the airline continues to be in a healthy position, and that he doesn’t realise why the stock has fallen so much.
“Even with all of this economic (pressure), the consensus estimate on WestJet’s earnings this year puts us one of the better five within our 20-year history,” he said.
“Why is the trading down a lot more than 50 per cent (from its highs)? I’ve no clue. I’ll call it investor skittishness and time will inform, but I’m not managing our business for the following quarter and individuals appear to be very centered on the following quarter.”
