One of the biggest competitive advantages for WestJet Airlines Ltd. (TSX:WJA) over the years has been its creativity, agility, and strengths in operational execution in comparison to the industry juggernaut Air Canada (TSX:AC).
WestJet has run a successful advertising and marketing campaign on the basis of superior service and customer/employee interaction due to the company’s non-unionized business structure.
As it turns out, the WestJet marketing team will have quite the task ahead in re-communicating the WestJet brand and value proposition to its consumer base, after a majority of WestJet pilots agreed to unionize earlier this month.
WestJet investors have likely taken note that while the current valuation multiple premium still exists with WestJet compared with its major competitor Air Canada, the unionization vote implies that some of the valuation premium attributed to WestJet is likely to get eaten away as the market attempts to find the equilibrium level for both airlines.
While I have largely steered clear from airlines in the past on the advice of Warren Buffett himself, in recent years airlines have simply become too cheap for even the "Oracle of Omaha" to ignore.
The fact that Air Canada still trades at a significant discount to WestJet is something that I think still astounds investors, and I would not be surprised to see a "leveling out" of the Canadian aerospace industry over the coming quarters, meaning investors are likely to see some significant moves in the stock prices of both Air Canada and WestJet in the near- to medium-term.
