sokolov

Thank you for clarifying that! I stand corrected.

makin'miles

Well that may well be the mean, I would expect that median employee stake in the company is significantly lower - with higher-level management and executives holding much much larger ownership stakes.

HangTen

I seem to recall that about 85% of Westjet employees are in the stock purchase plane and that they contribute, on average about 80% of the allowable amount every year, (which is up to 20% of the their salary including profit share).

New employees have to be there for 6 months before voluntarily joining the program which is why it could never be 100% participation.

They get to buy stock at half price, hold it for at least a year, then sell it if they choose. It is taxed as a capital gain which is way lower than regular payroll tax.

With targets hovering around $30 these days and they are picking it up for about $12, it is a heck of a deal. Over a 20 year career, that would generate a very nice sum of cash!

I wonder what percentage of Air Canada employees own stock in the company?

opethfan

This leads to a separate question: if WS is highly profitable, still growing, is almost entirely non-unionized, and is only one of 2 national Canadian carriers, why aren't we seeing more entrants into the Canadian aviation market? Surely the success of WS would inspire other carriers to want a slice of the pie, too.

Symmetre

Historically, the Canadian market seems to be large enough to support two major national carriers and that's about it. Carving the pie into any more pieces seems to result in all starving ... and only those with the deepest pockets surviving the resultant crash.

I think airlines like Porter, Sunwing and Air Transat are successful because they exploit niche markets. Realistically, Billy Bishop airport in downtown Toronto is the key to Porter's success - I doubt they would prove anywhere near as successful if they operated out of Pearson. Sunwing and Air Transat, operating as charters catering to vacation travel exclusively, have also found profitable places in the market. But it will be interesting to see if they can retain that position with the launch of AC's rouge, or if Westjet does proceed with widebodies and more overseas routes. Given that AC and Westjet both have domestic service that can feed their overseas flights from non-hub cities, they may be able to successfully challenge Sunwing and Transat. My feeling is that both AC rouge and Westjet are eyeballing Transat and Sunwing with a view to eating their lunch, but time will tell if they do.

I think it's also interesting to note that even with its huge demand for air travel, right now in the States we're seeing major consolidation - i.e. mergers between AA and US, DL and Northwest, UA and Continental. It's hard to imagine expansion of the aviation industry in Canada when a much larger market nearby is pulling back in such a huge way. Economy of scale seems to be the buzzword of the day.

aerobod

Unfortunately the CRA takes income tax off the Westjet share match, capital gains is only applicable to any increase in price of the shares from purchase to sale after the one year holding period.

rehoult

Yeah, a 50% discount on share purchase is very clearly a benefit and would be taxed at the employees' marginal tax rate. As it should be given that it's no different than cash.

YOWgary

YTZ was their entire value proposition when they launched; "YTZ-YOW in 1/3 the time of YYZ-YOW".

HangTen

The last time Porter provided their numbers, it was anything but successful, unless losing almost $40m is defined as success.

If you read the recent Raymond James report, Porter has their work cut out to survive Encore's arrival in the market.

Porter's revenues are predicted to decline about $65m a year once Encore takes on Toronto to Sault, Sudbury, Timmins, Windsor, Boston and Chicago, and most of that is on just a couple of routes.

When you are starting with revenue of about $350m a year and if you make a 5% margin, you are making $17.5m a year before interest and taxes.

If Porter made 5% margins, they'd have easily IPO'd by now to allow investors to get some liquidity in their investment after 7 years which they haven't which tells you that they aren't making 5% margins.

If you knock $65m a year off the revenue stream, with costs going up, not down, due to higher volume, a maturing workforce, an aging fleet and stubbornly high fuel costs and you are in BIG trouble.

Symmetre

I think there is universal agreement that Encore will represent a serious threat to Porter. Time will tell, I suppose.

YOWgary

I'd be curious to see which routes are their profit centres and which are losing; if you'd told me when Porter launched that they'd be serving MDW and IAD, I'd have bet money against you.