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Analysts Square Off On Westjet

Sun May 30, 2004 11:43 am

Analysts square off over Westjet
Maintenance an issue: Dlouhy's Doerksen disagrees with Mark Rosen

WestJet Airlines ltd. prides itself on making Canadian air travel fun for its passengers and lately it's also providing plenty of distractions for financial analysts.

The most amusing issue boils down to how westjet accounts for major maintenance checks (d-checks) on its aircraft, which at $2-million to $3-million every five to seven years, can have a significant impact on the bottom line depending on how and when the expense is taken.

A report from accountability research first shed light on the issue in january, and put westjet and its underwriters on the defensive by saying the day of reckoning was near.

This week dlouhy merchant struck back, saying the company is doing the right thing and recent changes to the maintenance regime makes the topic "Irrelevant."

More at:

To refresh your memory as to the original allegations of accounting here a link to the previous article and discussion:
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RE: Analysts Square Off On Westjet

Mon May 31, 2004 7:14 am

That picture of a WS captain inspecting his plane in YYC is rather old. It's taken from either Gate 32 or 33 on the old "D" Concourse at the Calgary airport - gates which WestJet hasn't used since November of 2002. Actually, they don't exist anymore.... that whole area is being renovated and overhauled to make way for new transborder-slash-Canada Customs gates.

As for the article, the most interesting paragraph - and perhaps the one which will influence investors the most - is not the ones you quoted, CanadaEH, but this one;

Mr. Rosen says the interest expense argument only clouds the issue, while estimating is a common practice in accounting. In his view, everything boils down to the fact that the airline's rapid growth means that deferred expenses are mushrooming, earnings are overstated, and heady earnings multiples don't take into account the total cost of flying passengers.

Now that the issue is well aired, it's up to the market to decide.

[Edited 2004-05-31 00:15:43]
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