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

The airline is also launching a new regional airline called Encore, which it expects to add capacity to the WestJet. Initial fears of overcapacity drove down shares of WestJet and Air Canada, but as the Vancouver Sun reports, WestJet’s CEO Gregg Saretsky is comfortable with the expansion. Investors looking for airline industry growth without the issues of a legacy carrier should consider a position WestJet to benefit from future expansion.

WestJet is not alone in challenging Air Canada’s dominant market position. A smaller company called Porter Airlines is making moves in the Canadian market as well. The airline is set to begin its first jet flights pending the approval of jet aircraft at the Toronto City Airport. However, Porter remains a privately owned airline, not available for investment by average investors.

Porter cannot match the size of Air Canada or WestJet, but even at its relatively small size, it can add capacity to a market where capacity fears are already starting to spread. Expansion at the Toronto City Airport would add capacity in the Toronto area and possibly lower prices at the Toronto Pearson Airport used by Air Canada and WestJet.

Keeping this in mind, investors in Air Canada and WestJet will need to watch Porter for increasing capacity and competition in the Canadian market over the coming years.

Airlines of the north

Canada’s airlines allow airline investors to diversify beyond the U.S. market, while still investing in North America and collecting some benefits from an U.S. economic recovery. Additionally, the presence of both Air Canada and WestJet gives investors a choice between a traditional legacy carrier and an expanding, industry-challenging airline. I personally own Air Canada shares in the higher-risk section of my portfolio, and I’m considering beginning a WestJet position as a more financially stable airline investment.

The article A Look at Foreign Airlines, Part 2: Canada originally appeared on Fool.com.

Alexander MacLennan owns shares of Air Canada. This article is not an endorsement to buy or sell any security and does not constitute professional investment advice. Always do your own due diligence before buying or selling any security.The Motley Fool recommends Southwest Airlines. Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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