Source: Reuters Author: Isheeta Sanghi 10/01/2009
Subject Concerned: Opinion Airlines
RBC Capital Markets raised WestJet Airlines Ltd to "outperform" from "sector perform" and raised its price target on the stock, saying Canada's second largest airline is cash rich at a time of many opportunities.
The airline's travel-planning unit, WestJet Vacations, has grown organically to date but this could change with Sunquest Vacations, owned by British tour operator Thomas Cook, as one potential acquisition target, analyst Nick Morton said.
WestJet, which closed a C$172 million financing deal on Sep. 30, is expected to have C$900 million in hand, Morton said.
Cash and cash equivalents at the end of the company's 2008 fiscal year totalled C$820.2 million.
Analyst Morton expects WestJet to enter into a code-sharing arrangement with various airlines and this could expand to include a foreign equity partner.
WestJet also has the competitive advantage of its low-cost operating model, using only Boeing 737s and non-union labor, said Morton, who raised his target on the stock to C$16 from C$14.
The company's unit costs are estimated to be 30 percent lower than that of rival Air Canada, he added.
Shares of the Calgary, Alberta-based carrier closed at C$11.05 on the Toronto Stock Exchange on Sep. 30.