In another possible blow to Bombardier Inc., WestJet Airlines Ltd. is within talks with the struggling company to decelerate deliveries of the Q400 turboprops it has on order, a 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 methods 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 talk about slowing anything,” Saretsky said, pointing towards the company’s stock price, that has been trading below $1 within the last fourteen days.
WestJet can also be 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 very first time in the airline’s history it has not renewed leases.
Bombardier spokeswoman Marianella en Barrera said the company is definitely available to engaging using its customers but doesn’t are conscious of any changes to its Q400 delivery schedule.
“I let you know our plans for that Q400, our production plans and schedules, are pretty firmed up for that year,” she said. “As far when i know there’s no change 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 if this releases results on Feb. 17.
The company hasn’t recorded a new firm order because of its CSeries jetliner since September 2014 and it is hoping its other products, such as the Q400, will generate enough revenue to help keep it going while it hunts for customers.
In total, WestJet has 10 Q400s scheduled for delivery this season and the other 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, which he said “wasn’t created for the Canadian carriers.”
“It’s too small,” Saretsky said of the 100- to 150-seat aircraft. “Both ourselves and Air Canada are purchasing bigger and bigger jets for domestic flights.”
Why is the stock trading down a lot more than 50 per cent (from its highs)? I’ve no clue. I’ll call it investor skittishness
WestJet recently sold 10 of their smaller Boeing 737-700 aircraft to Southwest Airlines Co. and replaced all of them with the larger 737-800. Between those and the Q400s, Saretsky said the airline has everything it needs to 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 to date.
Investors weren’t happy with WestJet’s intend to increase capacity by seven to 10 % this season regardless of the slowdown in Alberta, and worry it isn’t acting fast enough to shift capacity out of the province.
But Saretksy said the airline continues to be inside a healthy position, and he doesn’t realise why the stock has fallen a lot.
“Even wonderful this economic (pressure), the consensus estimate on WestJet’s earnings this season is going to put us among the best five within our 20-year history,” he explained.
“Why may be the trading down a lot more than 50 per cent (from its highs)? I have no idea. I’ll refer to it as investor skittishness and time will inform, but I’m not managing our business for the following quarter and people appear to be very centered on the following quarter.”
