Air Canada's load factor reached a record for August as the Montreal-based airline and its domestic rival WestJet both benefited from higher traffic on additional capacity.
The country's largest carrier (TSX:AC.B) reported Thursday that its system load factor increased to 89.5 per cent on a 4.7 per cent boost in traffic and 2.9 per cent increase in capacity. The airline's traffic numbers include low-cost carrier Rouge which began operations July 1, plus regional airlines from which Air Canada purchases capacity.
"The increase in our load factor by 1.6 percentage points over the prior year underscores the effectiveness of our capacity management strategy," stated CEO Calin Rovinescu.
The growth in system-wide traffic was led by the Pacific, Atlantic and domestic markets, which grew 12.5 per cent, 5.8 per cent and two per cent respectively. The U.S. transborder traffic was up one per cent while Latin America was down 1.3 per cent.
For the eighth consecutive month, Air Canada boarded a record number of passengers in August, including a single day record of 127,100 customers on Aug. 15.
WestJet Airlines said its passenger traffic increased by 11.5 per cent in August compared with the same month last year, but an even larger growth in capacity caused its load factor to drop by one percentage point to 87.9 per cent.
The Calgary-based airline said it flew 1.8 million passengers in August, up 150,000 or 9.1 per cent, from the prior year.
However, WestJet's (TSX:WJA) capacity or available seat miles grew 12.8 per cent, compared with the 11.5 per cent increase in revenue passenger miles (RASM).
"We are very pleased with the double digit year-over-year traffic growth and strong load factor achieved in August, especially considering our almost 13 per cent capacity growth," said CEO Gregg Saretsky.
In August, the introduced a new premium economy plus service designed to attract more business travellers. It offers extra leg room, change and cancel options, advance boarding and complimentary food and beverage.
The airline also launched its WestJet Encore regional service in Western Canada, which services smaller communities using Bombardier's Q400 turboprops.
During the first eight months of the year, the airline's load factor had decreased to 82.9 per cent from 83.5 per cent a year earlier as traffic increased 8.7 per cent on a 7.8 per cent increase in capacity. Air Canada's load factor this year was up 0.7 percentage points to 83.6 per cent on a two per cent increase in traffic and 1.1 per cent growth in capacity.
Analyst Cameron Doerksen of National Bank Financial said WestJet's lower load factor was expected after the airline's management previously indicated that third-quarter RASM would decrease four to five per cent, in line with the drop in the second quarter.
"We expect RASM to improve late this year or early 2014 as capacity growth eases and as the new premium economy product gains traction," he wrote in a report.
Doerksen added he remains positive about WestJet because its cost performance is better than forecast and it will benefit from slowing capacity growth and the roll out of new fare initiatives.
WestJet flies to 87 destinations in North America, Central America and the Caribbean using a fleet of more than 100 Boeing and Bombardier aircraft.
Air Canada serves more than 175 destinations on five continents. It is among the 20 largest airlines in the world and carries nearly 35 million passengers a year.
Earlier Thursday, the airline said it completed the transfer in August of all 15 Embraer 175 aircraft to Sky Regional, its non-unionized Air Canada Express partner. Rovinescu said the move was an important step in its ongoing efforts to reduce costs.
On the Toronto Stock Exchange, Air Canada's shares closed up four cents at $2.94, while WestJet's shares gained 22 cents at $22.98 in Thursday trading.
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