Westjet Profits Flying High

courtesy of www.visitcalgary.com

Written by Rob, The Dividend Apprentice.

Westjet Airlines Ltd (WJA) released their Q3 profit results yesterday, announcing a whopping year over year increase of nearly 80%. Their EPS came in at 52 cents, up from 28 cents the year before and far exceeding expert predictions of 42 cents per share.

One of Canada’s 4 biggest airlines, Westjet employs more that 8800 workers across North America, Central America and the Caribbean. Founded in 1996, they quickly gained a reputation for a friendly, laid back atmosphere offering increased leg room, leather seats and seatback television entertainment. A great customer experience and cheaper flights than their competition has been their governing philosophy, as evidenced in their “Owners Care” advertisements.

Westjet also took this time to announce their president for Westjet Encore, Westjet’s new regional carrier. Ferio Pugliese, previously Westjet’s executive vice-president for people, culture and inflight services will take the reins of the regional carrier which is expected to begin operations in the second half of 2013. It plans to fill a gap by catering to smaller cities with Bombardier Q400 aircraft.

Stock prices held fairly steady on the news, closing down only 18 cents at $18.07, and staying close to their 52 week high. Westjet has had 2 dividend increases in 2012, and now pays a quarterly dividend of  8 cents/share, yielding 1.77%

Airlines, especially in North America, are notoriously difficult to manage. They constantly walk a fine line between making a profit and their high-industry costs of business. Rising fuel prices account for over 1/3 of their total cost. Union conflicts between the various employee groups and management, aging aircraft fleets, and increasing maintenance costs can easily topple start-up airlines if management doesn’t stay on top of things. As a commercial pilot in a previous life, this fact was all too clear to me as the small regional company I worked for was bought and sold twice in the 2.5 years I worked with them. The fact that Westjet has become major competition for Air Canada for domestic air travel in Canada in only 15 years of service makes them one to watch.

Readers, what’s your take? Do you own shares in Westjet? Do you think airline stocks are risky investments?