Canada's WestJet Airlines beats profit estimates

By Allison Lampert and Debroop Roy

(Reuters) - Canada's WestJet Airlines Ltd reported a quarterly profit that beat analyst forecasts on the strength of higher ticket prices, but it predicted flattish revenues and higher costs for the last three months of the year.

Canada's second largest airline said it expects revenue per available seat mile, a key industry metric, to range from flat to up 1.0 percent, helped by higher demand but hurt by an end to a codeshare agreement with U.S. carrier American Airlines .

The company's share price initially slid more than half a percent on the outlook but then recovered and was slightly higher in late morning trade.

With sharply higher fuel costs squeezing profit margins, airlines are scaling back on capacity despite strong demand from passengers and a rise in fares.

WestJet also expects cost per available seat mile (CASM), excluding fuel and employee profit share, to be up 1.0 to 2.0 percent in the fourth quarter, which analysts said could pressure margins.

The carrier's fourth-quarter guidance "implies a loss in the quarter," wrote Cowen analyst Helane Becker in a note to clients. "WestJet will likely see a sizable (quarter over quarter) improvement in unit revenue but not enough to overcome higher fuel costs and continued cost pressures from investments in their long-term initiatives."

The carrier, which is also negotiating a first labor contract with its pilots, said an arbitrator's final ruling is expected by year's end.

In a note to clients, J.P. Morgan analyst Nishant Mani called the unresolved pilots contract "an overhang both on the company's strategic initiatives and the stock."

Earlier on Tuesday, the Calgary-based carrier said revenue per available seat mile, an indication of how much the airline gets from each passenger, rose almost 9 percent during the third quarter.

"We have achieved this result despite continued downward pressure from the dramatic increases in fuel price," chief executive Ed Sims, said in a statement.

WestJet's fuel costs jumped more than 30 percent from a year earlier, lifting operating expenses 16 percent to C$1.18 billion.

The carrier reported a net profit of C$45.9 million ($35 million), or 40 Canadian cents per share, for the third quarter ended Sept. 30, down from C$135.9 million, or C$1.15 per share, a year earlier.

Average analysts' profit estimate was 33 Canadian cents per share for the quarter, according to Refinitiv data.

Revenue rose to C$1.26 billion from C$1.21 billion.

($1 = 1.3118 Canadian dollars)

(Reporting by Debroop Roy in Bengaluru and Allison Lampert in Montreal; Editing by James Emmanuel and David Gregorio)