WESTJET AIRLINES $24.67 (Toronto symbol WJA; TSINetwork Rating: Extra Risk)(1-877-493-7853; www.westjet.com; Shares outstanding: 125.8 million; Market cap: $3.1 billion; Dividend yield: 2.3%) serves 93 destinations in North America, Central America, the Caribbean and Europe. Its fleet of 107 modern Boeing 737s are 30% more fuel efficient than older jets.
In June 2013, the company launched WestJet Encore, its Canadian regional airline. This business now operates 22 Bombardier Q400 NextGen turboprop planes, which seat 78 passengers.
The Canadian airline market remains highly competitive, especially with Air Canada expanding its Rouge budget airline to serve more leisure destinations in Europe, the Caribbean, Mexico and the U.S. However, WestJet is now taking delivery of its Boeing 767 widebody aircraft. That will let it compete with Air Canada internationally; it could add more cities in Europe, as well as South America or Asia.
The company has a great hidden asset in its workforce, which continues to refrain from unionizing in favour of directly co-operating with management: both its flight attendants and pilots recently rejected unionization. That’s a plus, because many flyers find WestJet provides friendlier service than unionized airlines. The company also benefits from the fact that most of its employees are also shareholders.
Excluding one-time items, WestJet’s earnings per share jumped 26.8% in the three months ended June 30, 2015, to a record $0.52 from $0.41 a year earlier. This was the company’s 41st consecutive quarter of profitability. It continues to benefit as lower oil prices cut the cost of fuel, which typically accounts for a third of the airline’s operating costs. Revenue rose 1.3%, to $942.0 million from $930.3 million.
WestJet is a buy.
