In WestJet’s newest quarterly financial statements, its net income has dropped almost 50 percent by March 1, 2017. Although the company has managed to obtain a slight growth in revenue, it still ended up in a worse state financially when compared to the same time last year.
The net earning of WestJet has reached to the lowest point in 2017 for the last three years.
This is mainly due to two big increases in the company’s expenses: airplane fuel and maintenance.
“Maintenance has always been a main cost for most airlines,” says Mohammad Rahaman, a professor at Saint Mary’s University who is currently teaching finance and economics.
But this number increased drastically because of the declining economy in Canada.
“It’s like you have a car and you are planning to buy a new car, but you suddenly lost your job. What are you going to do? Instead of buying a new car, you would spend a lot of money on maintaining it keeping it in good shape.”
Another big increase in its expense is the aircraft fuel, which is not a big surprise to a lot of people since the three major oil companies have increased their oil price from 2016 to 2017.
WestJet has been in the spotlight for their unionization. The workers voted to form a union in May, 2017. Along with this considerable net income drop, the stock market is expected to go down. However, the company’s stocking price is at one of its historical highest levels in years, even after the discussion of unionization.
WestJet by mckied on TradingView.com
WesJet’s stock prices have been showing a steady increase since May 16, 2017.
“It looks like the marketers think they believe the company is going to deal with the unionization very well,” Rhanmad says, “it’s the uncertainty that the stock holders fear. Once they know they are or aren’t going to unionize, they are more confident.”
According the company’s financial reports from 2015 to 2017, WestJet has decreased their employ benefit share three years in a row. The company says in their newest annual report that the profit share system is a “variable cost” and the awards for its employees corresponds to how well the company does that year.
WestJet is not the only airline that has been suffering from the increased oil price and a declining domestic economy. In fact, Canada’s largest airline Air Canada also experienced a very similar financial year. The company also ended up with a deficit of 37 million after a surplus in the previous year.
WestJet didn’t respond to voicemail or email about this article.