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

A worker gives a business presentation.
Stocks for Beginners

2 Reasons to Buy Onex Stock Like There’s No Tomorrow

Onex (TSX:ONEX) stock has been a strong performer over the years, both in terms of growth and dividends that investors…

Read more »

Canadian Dollars
Stocks for Beginners

The Best Stocks to Invest $5,000 in Right Now

Are you looking to put some cash into the stock market? Here are three picks to put on your watch…

Read more »

calculate and analyze stock
Dividend Stocks

Got $1,000? 3 Dividend Stocks to Buy and Hold Forever

Dividend stocks like Restaurant Brands International (TSX:QSR) can pay substantial amounts of passive income.

Read more »

financial freedom sign
Bank Stocks

This Ridiculously Cheap Warren Buffett Stock Could Help Make You Richer

American Express stock is part of Warren Buffett's equity portfolio, and the stock trades at a steep discount in 2024.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, February 26

After rising for two weeks in a row, the main TSX index is now at its highest level in more…

Read more »

stock analysis

Buy the Dip: 2 Stocks to Buy Today and Hold for the Next 5 Years

These Canadian stocks are trading at discounted valuations, providing an opportunity for buying the dip.

Read more »

bulb idea thinking

Safety in Size? 2 of the Bluest Blue-Chip Stocks I’d Buy Now

TC Energy (TSX:TRP) and another cash cow have huge dividend yields for safe investors.

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »