WestJet says it had a greater proportion of empty seats on its flights last month as increases in the airline's capacity outpaced its growth in passengers.
The airline said its load factor in September was 76.6 per cent, down from the record of 79.1 per cent a year ago, but in line with its five-year average for the month.
The decrease came as Calgary-based WestJet (TSX:WJA) increased capacity as measured by available seat miles by 9.2 per cent and passenger traffic as measured by revenue passenger miles increased by 5.7 per cent.
Analyst Walter Spracklin of RBC Capital Markets said the results were "a bit softer than expected" as the airline transitioned from its shoulder period into the busy winter season.
"As such, we are less concerned with this data point, but will be watching to see if it extends further into the fourth quarter," he wrote in a report.
For the third quarter, WestJet's load factor dipped 1.8 percentage points to 82.8 per cent as an 11.1 per cent growth in capacity surpassed the 8.7 per cent increase in traffic. The airline flew 4.9 million passengers in the quarter, 7.1 per cent more than a year ago.
"We are pleased with the strong traffic growth we saw in the third quarter, as we not only flew a record number of guests, but also achieved our third highest load factor for a third quarter," stated WestJet President and CEO Gregg Saretsky.
Spracklin said the "healthy" third-quarter load factor in spite of the higher capacity "highlights the strength of both the demand environment and WestJet's product offering."
Analyst Cameron Doerksen of National Bank Financial downgraded WestJet, but raised his target price by $2 to $27 to reflect an approximate 30 per cent increase in WestJet's share price performance since its reported quarterly results July 30.
On the Toronto Stock Exchange, WestJet's shares lost 35 cents at $25.70 in Thursday morning trading.
Doerksen wrote he expects WestJet's revenue per available seat mile will benefit from the ramp up of its high-margin premium economy seating, slowdown in capacity growth and expansion of its Encore regional operation.
WestJet announced last month that it had signed a definitive purchase agreement for 65 Boeing 737 MAX aircraft.
Deliveries are scheduled from 2017 through 2027, WestJet said Thursday. Financial details were not available.
