WestJet Airlines Ltd. (WJA), Canada’s second-largest carrier, said it expects slower growth in seating capacity next year as it confronts increased operating costs.

The airline forecast capacity growth of 4 percent to 5 percent in 2015, with the Encore unit representing about half of that. The increase this year will be 6.5 percent, the Calgary-based company said in a statement today.

Matching the supply of seats to market demand helps airlines retain more power over fares. That will be important for WestJet, which predicts 2015 capital spending of as much as C$840 million ($736 million), along with higher costs for each available seat flown a mile, a closely watched gauge in the industry.

“We view the slowing capacity growth as hugely positive for WestJet as load factors and pricing should move higher as a result of the lower growth,” Helane Becker, an analyst at Cowen & Co., wrote in a note to investors. She rates the shares outperform.

The carrier’s outlook for capital expenditures indicates an increase of as much as 27 percent in 2015 from this year as it takes delivery of aircraft, signs deposits on future jets, overhauls some engines and installs a new in-flight entertainment system.

WestJet fell 5.7 percent to C$30.20 in Toronto. That trimmed its gains this year to 8.4 percent, compared with a 5.6 percent gain of the benchmark Standard & Poor’s/TSX Composite Index.

Quarterly Earnings

The company today also reported third-quarter profit that missed analysts’ predictions as additional capacity and plane maintenance caused spending to rise. An aircraft disposal also resulted in a one-time cost.

Net income fell 20 percent to C$52.2 million, or 40 cents a share, from C$65.1 million, or 50 cent, a year earlier, WestJet said. Adjusted earnings were 66 cents a share, compared with the 68-cent average of 14 analyst estimates compiled by Bloomberg. Sales rose 9.2 percent to C$1 billion, matching the average estimate.

Operating costs in quarter climbed 7 percent, including an 8.6 percent increase for maintenance, with the figures boosted in part by currency shifts, the company said. WestJet also recorded a C$45.5 million non-cash pretax loss from the sale of 10 planes to U.S. carrier Southwest Airlines Co.