Many investors avoid the airline industry completely because of the history of failure in the sector. It seems like every major North American airline has entered bankruptcy restructuring at least once.
Westjet Airlines Ltd. (TSX:WJA) is a notable exception to the rule. The company has never really been in dire financial straits in its 15+ year history.
Westjet has delivered a profit for 44 consecutive quarters, a streak which dates back through depths of the Great Recession. If that doesn’t prove the company can operate in any environment, nothing will.
The company has a couple of major things going for it. The first is the maturation of Canada’s domestic market. Previously, both Westjet and Air Canada (TSX:AC) would compete on price, especially when times were tough. That isn’t really the case anymore, with both companies keeping domestic fares stubbornly high even in today’s tepid economy.
Westjet also prides itself on keeping costs low. Its commitment to one kind of plane is one way it keeps expenses under wraps, along with not having unions. These add up to a cost per mile flown of approximately 25% less than Air Canada.
Other revenue sources are proving successful as well, including selling wifi on flights and offering premium food offerings. A fee for checked baggage helps as well. These add-on fees help lessen Westjet’s dependence on revenue from seat sales.
The company’s dividend is 2.3%. Dividend increases should resume as soon as the economy in Alberta, its home province, improves.
