Westjet Analysis

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November 15, 2011

Company Overview
Westjet, established in1996, is a low-cost Canadian airline company specializing in flights to various destinations in Canada, the United States, the Caribbean and Mexico. It is a non-union, self-run employee organization that focuses on world-class guest experience at an affordable rate. Westjet prides itself on a corporate culture that blends devoted employees with efficient service.

Westjet’s business plan, since day one, has been focused on a distinct advantage over other airlines: lower costs and increased customer satisfaction. It executes this plan by investing in one type of aircraft to serve main cities in North America instead of investing in different aircrafts needed to reach all cities and communities. Industry

Westjet operates in a very afflicted, declining industry. Because the airline industry is one closely tied with economic growth and trade it is continuously changing. In fact, twenty-eight domestic airlines have disappeared in the past twenty years due to reduced numbers. Fortunately, Westjet has found its niche in the industry.

Through extensive research, Westjet determined a market segment that was seemingly unaccounted for in the airline industry: families with small children who often travel by vehicle. Westjet offered lower prices on air travel in order to present an alternative to these families. This plan took off.

Today, Westjet is the second largest Canadian airline, only behind Air Canada. It is however, the most successful domestic airline and continuously growing. Westjet’s most direct competition includes Air Canada, Air Transat, Sunwing Airlines and Porter Airlines. Despite the current struggle in the airline industry, Westjet continues to grow.

Analysis Summary
In order to recognize the success, growth and direction of Westjet, many aspects must be considered. A financial analysis had been conducted in order to understand the numerical progress and profit of the company. This includes overviews of both interim and annual financial statements including the Statement of Earnings, Balance sheet and Statement of Retained Earnings. The Statement of Earnings has been used to evaluate profitability over a 5 year period with a particular focus on Sales, Operating expenses and Net Earnings. This includes the calculation of earnings per share and price-earnings ratio. The Balance Sheet has been used to better recognize the assets and foundation of the company compared to its debts and commitments. The calculation of working capital, current ratio and debt-to-assets has been done. These numbers will not only show the growth over time of the company but also how the numbers have compared to its close competitors.

However, numbers do not always tell the whole story. As a result, I have analyzed the company policies and goals in order to truly see the successes of the company. This includes its consideration of all GAAP policies and concern for investor information. Also, I considered outside economic factors that have affected the profits of the company in the past and also how they may affect the operations in the future. I analyzed economic growth and decline, airline use compared to other transportation and finally, customer experiences.

Accounting Policies
In order to fully recognize the credibility and faithful representation of Westjet financial statements, the use of accounting policies and procedures must be considered. Although one can confidently say Westjet financial statements are continuously prepared in accordance with GAAP principles, we may look into further detail.

First, it is useful to consider the application of preparing the financial statements. Westjet has a distinct management team separate from other managing authorities that prepare the statements. This segregation of duties allow for a faithful representation. This shows strong internal control. To assist, Westjet’s statements are audited by independent...
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