Article in the Vancouver Sun today.. buy some stock!
CALGARY - Shareholders of WestJet Airlines Ltd. have been having an excellent summer.
While its rivals and peers in Canada and the United States flounder in bankruptcy protection, cut staff and worry about the glaring gap between what they're required to pay in pensions and the value of their plans, WestJet has been enjoying business as usual. It's posting profits and filling its planes in a vindication of the strategy of chief executive Clive Beddoe, who modeled his airline after Southwest Airlines Co., the U.S. company that pioneered the discount business.
Since the Calgary-based airline reported its second-quarter earnings, its stock has gained more than 45 per cent, rising to Friday's 52-week high of $24.60 from more than $16 in July.
During that time, the shares have posted the best performance among the company's rivals on the large-cap TSX 100 index, with ATI Technologies Inc. coming in second with at 39-per-cent gain.
The rapid rise in the stock seems counterintuitive. The economy isn't in great shape. The impact of plunging tourism brought about by SARS, weak industrial production and the mad cow crisis caused Canada's economy to contract in the second quarter for the first time in two years.
As well, fuel prices are high as crude oil continues to trade above $30 US a barrel and the impending second anniversary of the Sept. 11, 2001, terrorist attacks on New York and Washington is making some consumers think about whether they really want to book flights. Meanwhile, new discount airlines such as Jetsgo are trying to horn in on WestJet's action.
Despite the industry's problems, WestJet shares continue to rise as it cements its role as the country's only airline investors want to put money into.
"From an investment point of view, airlines are pretty much off most people's radar screens," says Bill MacLachlan, a portfolio manager at Calgary's Mawer Investment Management. "I am not aware of any investment manager who believes that any airline stock, with the possible exception of WestJet, is worth purchasing right now."
Of course, Air Canada shares continue to trade, even as the company restructures its operations under court protection from creditors. Its stock is changing hands at about $1.25 a share, even though most analysts and investors acknowledge the equity will be worthless once it emerges from the restructuring process.
U.S. airlines are also struggling. United Airlines, owned by UAL Corp., is in bankruptcy protection as well. It's stock is now at about 75 US cents, down from more than $80 just three years ago and a number of its rivals have also seen their shares plunge.