Midnight Mike
2008-11-13, 11:00 AM
Delayed Deliveries Aid In Capacity Cuts
All things considered, the recent machinists strike at Boeing couldn't have come at a better time for Canadian low-cost carrier WestJet.
The Vancouver Sun reports WestJet is slated to take delivery of 10 Boeing 737-700s in 2009... but due to the recently-resolved labor action, at least three of those planes won't be delivered in 2009.
Though WestJet executives publicly expressed some disappointment, in truth those delayed deliveries help the airline more than they hurt.
Like its US counterparts, WestJet -- which reported a 28 percent falloff in its third-quarter earnings on Monday -- has worked to reduce capacity in the face of a slumping economy. The airline still expects to add seats in 2009... but with the delays, WestJet has cut its growth plans from eight percent to five.
Analysts see that as a positive... noting WestJet had already spoken of such a reduction, and would have incurred penalties from Boeing had it opted to defer those deliveries anyway.
"We would have been very happy to take our planes. But I think the investment community is seeing it as a potential relief," said WestJet CFO Vito Culmone in an interview Monday.
While it's unlikely the carrier will see any compensation from Boeing -- as delays stemming from labor actions are often exempt from any reimbursement on purchase contracts -- the fact WestJet won't need to write checks for those three planes in 2009 should also help the carrier's bottom line.
All things considered, the recent machinists strike at Boeing couldn't have come at a better time for Canadian low-cost carrier WestJet.
The Vancouver Sun reports WestJet is slated to take delivery of 10 Boeing 737-700s in 2009... but due to the recently-resolved labor action, at least three of those planes won't be delivered in 2009.
Though WestJet executives publicly expressed some disappointment, in truth those delayed deliveries help the airline more than they hurt.
Like its US counterparts, WestJet -- which reported a 28 percent falloff in its third-quarter earnings on Monday -- has worked to reduce capacity in the face of a slumping economy. The airline still expects to add seats in 2009... but with the delays, WestJet has cut its growth plans from eight percent to five.
Analysts see that as a positive... noting WestJet had already spoken of such a reduction, and would have incurred penalties from Boeing had it opted to defer those deliveries anyway.
"We would have been very happy to take our planes. But I think the investment community is seeing it as a potential relief," said WestJet CFO Vito Culmone in an interview Monday.
While it's unlikely the carrier will see any compensation from Boeing -- as delays stemming from labor actions are often exempt from any reimbursement on purchase contracts -- the fact WestJet won't need to write checks for those three planes in 2009 should also help the carrier's bottom line.