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Opinions Norman Levine
Westjet AirlinesWJA.TOCOMMENTMar 21, 2014
Stock price when the opinion was issued
As of Dec 13, 2019. Market Open.
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A really interest deal with Onex. He has been a long term fan for years. His first professional 10 bagger. He is not convinced Onex over paid -- they probably saw this as a great time -- comparable to US peers. He thinks the regulators will approve the deal.
Lyle Stein
In the past, he has favoured WestJet because its management is disciplined, they operated a single type of plane, they had happy non-unionized employees, and they focused on the Canadian market. But then they decided they wanted to be Air Canada. They operate several types and sizes of planes on more routes--if he had to invest in an airline now, it probably would NOT be Westjet. They were the Southwest of Canada but they have destroyed what they had, WestJet’s share price has been drifting sideways while Air Canada’s has been rising. He asserted that WestJet’s problems are all self-inflicted.
It has come down a lot. Airlines find it so difficult to make money. Their capacity and load rates are good but fuel costs eat into profits. At some point the bottom will come in. He is not sure what the turnaround story is going to be. You could look at it if you are a value investor.
He is a firm believer that if you own an airline, it is a Trade only, not a long-term investment. This one has been a good stock to be in, but generally this is a trade only and is very cyclical. Declining Cdn$ hurts their cross-border traffic. Good economies help them. Another thing that has helped them is the consolidation in the North American airline industry in the US. This stock has probably got hurt recently by probably getting overvalued, a weaker Cdn$, but have also gone into a lot of expansion into regional markets. The good days are gone here for now and he would wait for it to stop going down, which doesn’t look like it is happening here.