United Continental Holdings Inc (UAL), Southwest Airlines Co. (LUV): A Look at Foreign Airlines, Part 2: Canada

Page 1 of 2

Investors looking for North American airlines would typically think of the biggest carriers, all U.S.-based, that dominate the industry. But each of the two major airlines in Canada offers investors a unique choice about which model of the airline industry investors are interested in investing in.

The big legacy carrier

Originally a government-owned airline, Air Canada is Canada’s largest carrier, and among the largest airlines in the world. The airline dominates Canada’s international travel segment, has entered the Star Alliance alongside United Continental Holdings Inc (NYSE:UAL), and is modernizing its fleet by spinning the older aircraft off into a new low-cost subsidiary.

United Continental Holdings Inc (NYSE:UAL)

But while Air Canada looks strong in size, it has been run through bankruptcy like other legacy airlines, and it continues to face problems relating to uneasy worker relations and a massive pension liability. Shares slid to under a dollar in mid 2012, but recovered into the CAD$3 range before sliding back into the CAD$2 range after disappointing Q1 earnings and capacity concerns.

While Air Canada has the problems associated with legacy carriers, it stands to benefit from a leading position in international routes compared to rival Canadian carriers. To further strengthen its international presence, Air Canada is adding capacity in the international and overseas flight segments.

One area of particular interest is Air Canada’s new low cost unit, Air Canada rouge (with a lowercase r), which will have lower-priced flights from Canada to Europe among its offerings. International flights should see a boost during an economic recovery as leisure and long distance business travel picks up. As a result, investors looking to bet on Canada’s legacy carrier and its ability to benefit from an economic recovery may be interested in shares of Air Canada.

The airline challengers

In the U.S., Southwest Airlines Co. (NYSE:LUV) has made major moves into the larger American air travel market after expanding from being a Texas-only airline in its early days. While other carriers have declared bankruptcy (sometimes multiple times), Southwest Airlines Co. (NYSE:LUV) has shown nearly 40 years of straight profitability and even rewards its investors with a small dividend.

In Canada, WestJet is taking on the giant Air Canada following much of Southwest Airlines Co. (NYSE:LUV)’s path. WestJet has undergone rapid expansion, kept its house in good financial order, and pays a larger dividend than Southwest Airlines Co. (NYSE:LUV).

But not everything is the same between the two airlines. WestJet is a rare non-union airline, while Southwest Airlines Co. (NYSE:LUV) is heavily unionized (but has managed to maintain good worker relations). Southwest Airlines Co. (NYSE:LUV) is also a much larger airline by market capitalization, and it recently completed a merger with Airtran to increase its size.

WestJet plans to continue expansion, with possible future plans including increasing international flights and the option of an eventual merger. In the meantime, WestJet is continuing what is being called its “March to the East” as the airline looks to join rivals in operating flights out of the Toronto City Airport.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!