WestJet earned a second-quarter 2017 net profit of C$48.4 million ($37.2 million), up 32% over net income of C$36.7 million in the 2016 June quarter, marking its 49th consecutive profitable quarter.

The strong financial performance buttresses Calgary-based WestJet, Canada’s second largest airline, as it pursues two major initiatives: the establishment of an ultra low-cost carrier (ULCC) subsidiary and the introduction of Boeing 787-9 aircraft into its fleet. The ULCC will begin operations in June 2018, CEO Gregg Saretsky told reporters and analysts during an Aug. 1 conference call. The carrier’s first of 10 787-9s on firm order is scheduled to arrive in the 2019 first quarter. WestJet plans to use 787-9s to fly to both Europe and Asia, with a particular interest in operating flights between Canada and China, according to Saretsky.

WestJet has codeshare relationships with Shanghai-based China Eastern Airlines and Guangzhou-based China Southern Airlines, Saretsky noted. “We’re very well positioned to leverage those partnerships,” he said, describing the Canada-China air travel market as “a huge market with a massive growth rate.” The rapid rate of growth in travel between Canada and China, particularly a growing number of Chinese traveling to Canada, “is perfectly timed for the arrival of our 787 fleet,” he said.

Saretsky said WestJet “will be introducing a lie-flat business class” on the 787-9 that will be priced in line with what other carriers are charging for 787 business-class seats.

Regarding the ULCC, which has not yet been named, the carrier’s initial fleet of 10 high-density 737NGs (to be sourced from WestJet’s mainline fleet) will fly an average stage length of 1,000 miles, Saretsky said. “Hiring is underway” to staff the ULCC, he added. “We have a small headquarters staff.” He expects Transport Canada approval for the ULCC in the 2018 first quarter.

WestJet’s 2Q revenue rose 11.1% year-over-year (YOY) to C$1.05 billion while expenses increased 10% to C$977 million, producing operating income of C$78 million, up 27% over an operating profit of C$61.4 million in the prior-year period.

The carrier’s 2Q traffic increased 8.9% YOY to 6.3 billion RPMs on a 6.3% lift in capacity to 7.6 billion ASMs, producing a load factor of 82.8%, up 2 points. Yield improved 2.1% to C$0.17.

CFO Harry Taylor said WestJet continues to maintain control over its costs, noting that CASM ex-fuel declined 0.9% YOY in the second quarter. “Our business fundamentals remain strong,” he said. Aircraft fuel is “a significant expense,” Taylor acknowledged. WestJet’s fuel costs rose 23.2% YOY to C$224.9 million in the second quarter.

Aaron Karp aaron.karp@penton.com