Dividend Policy

Airline Industry

The airline industry consists of scheduled and charters flights that transport passengers by planes.  Cargo and freight is not included.  The Canadian airline industry has fluctuated growth in the past few years, and it’s expected to grow moderately and stably in the next 5 years.  The industry generated $17.25 billion of revenue in 2013, which is about a growth of 6.2% compared to 2012.  60.1% of passengers are travelling domestically and the rest travels internationally.  It will increase in the next five years by 20.4%, according to the forecast, and reaching a value of $20.7 billion (Airlines in Canada).

Here is the conclusion of Porter’s 5 forces industry analysis, the detail breakdown is included in Appendix 1.  In this industry, suppliers have strong powers over the airlines, due to the small number of suppliers in the market.  Buyers have moderate power over airlines.  Substitution of airlines is fairly low due to the fact that airplanes are probability the only way to travel over long distances.  The industry has very high entry barriers.  It is mainly because the industry is capital intensive and the cost of purchasing/leasing and maintenance of aircrafts is high.   And lastly, there is intense competition in this industry.  Major airlines in the Canadian market are Air Canada, WestJet and Transat.

WestJet and Its Competitors’ Operating Strategy

WestJet Airlines Ltd. is a Canadian based airline company that provides scheduled and chartered flights to 88 destinations in 20 countries on itself and more than 140 destinations with its partners.  The main destinations are in Canada, the United States and the Caribbean.  The company operates under two business divisions with multiple brands and subdivision (Appendix 2).  The first division is “guest”, which transports passengers to North America, Central America and the Caribbean.  The three brands under guest divisions are WestJetters, WestJet Encore and WestJet Vacations, and each...