WestJet Airlines Ltd. Soars Through its Second Quarter

Revenues and load factors are up for WestJet Airlines Ltd. (TSX:WJA), and some new expansions are on the horizon.

| More on:

Much has changed since WestJet Airlines Ltd. (TSX: WJA) first entered the market in the 1990s, and all these years later WestJet Airlines is now a major force in Canada’s aviation industry. What was once a “fly-by night” (pun very much intended) operation in Calgary is now producing quarter after quarter of impressive earnings.

The flight numbers are in

The second quarter turned out to be a very successful one for the company, as it broke its previous record for quarterly revenue. It earned $930 million in revenue, up from $843 million during the same period last year, a boost of 10.3%. It appears that WestJet’s experiment of creating three different tiers of fare options is paying off. The program offers passengers choices between Econo, Flex, and Plus, which gives passengers access to better seating and cheaper insurance options.

Net earnings also took off this quarter, totaling $51.8 million, up from $44.7 million in Q2 2013. When these results are broken down into EPS, the total was $0.40 per share, up from $0.34 per share last year. This is an increase of 17.6% and soared past analysts’ expectations of $0.27 per share.

Load factor in the quarter doesn’t look as impressive; it was 79.6%, up from 79.4% in last year’s quarter. However, looking at the growth of total guests in the quarter justifies the record revenue. A total of 847,545 guests flew with WestJet in the past quarter, up from 768,612 guests during the same period last year. It seems that the 13-week experiment in 24/7 advertising on its own channel with Rogers Communications Inc’s (TSX: RCI.B)(NYSE: RCI) cable division during the winter may have had some impact.

New expansions

These numbers are encouraging WestJet to continue its expansion plans, with several new routes announced along with the quarterly report. Loreto, Mexico, will become one of WestJet’s newest ports of call, with service available from Calgary beginning in February. This flight comes with an estimated price tag of $269.63 per person after taxes and fees. Another new route for the main WestJet banner is going to be service to Fort Lauderdale from Winnipeg starting this November, just in time to escape the deep freeze and unplowed roads.

WestJet’s discount regional carrier Encore wasn’t overlooked in terms of new routes, as its newly activated hub in Toronto will begin offering service to Fredericton, New Brunswick. This is the first new route added since the initial announcement to expand the carrier’s network eastward. In order to keep up with the growing Encore network, WestJet announced that it had ordered four additional Q-400 Turboprop aircraft from Bombardier (TSX: BBD.B). These will be added to its existing fleet of 13 Q-400s and keep the company on track to reach the 30 aircraft originally projected for service.

The turbulent loonie

All of these expansions in the U.S. and Mexico make the company more vulnerable to the current woes of the loonie, which closed Thursday at U.S.$0.9162. Back in April, WestJet reported that for every cent that the loonie fell, its operating costs would rise by $13 million. This is due to the increased price of fuel paid in U.S. dollars, which makes up $11 million of the estimated operational increases.

Another area of turbulence for the company is the current rumour that Southwest Airlines Co (NYSE: LUV) could be looking to expand northward. Following the release, the stock is looking healthy, closing Thursday at $28.07, near its 52-week high and still a few dollars short of its average price target of $33.57.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Cameron Conway has no position in any stocks mentioned.

More on Investing

Gold bullion on a chart
Dividend Stocks

TFSA Investors: Why You Should Invest Your Room ASAP With These 3 Stocks

Choosing the right TFSA stocks for your portfolio might take some time. But with the right choices, you can stick…

Read more »

Hands holding trophy cup on sky background

These TSX Winners Should Keep Running in 2023

Consider Dollarama (TSX:DOL) and another cheap defensive stock to power gains going into 2023

Read more »

The sun sets behind a high voltage telecom tower.
Energy Stocks

Is Algonquin a Good Long-Term Buy Right Now?

After a steep 44% drop, Algonquin boasts high-yielding dividends, and it might be a good asset to buy and hold…

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

Whatever You Do, Don’t Sell Suncor Stock

Canada's oil sands king believes it can generate the highest long-term value for shareholders by keeping its retail business.

Read more »

Portrait of woman having fun in the street.
Energy Stocks

I’m Buzzing on These 3 Energy Stocks for 2023

Three energy stocks remain attractive buys for 2023 due to stronger balance sheets from continuous debt reductions and growing free…

Read more »

Target. Stand out from the crowd
Dividend Stocks

Here’s the Next TSX Stock I’m Going to Buy

Innergex is a TSX stock that is growing its revenue and earnings at an enviable pace. It also pays investors…

Read more »

Growing plant shoots on coins

This Growth Stock Could 10X in 10 Years

Here's why Shopify (TSX:SHOP) is a growth stock with the potential to provide 1,000% returns over the next 10 years.

Read more »

energy industry
Energy Stocks

CNQ Stock Fell by 1.7% in November: Is it a Buy Now?

CNQ stock is down in recent days after a relatively stable November. Is the dip a good opportunity to buy?

Read more »