Summary:
WestJet Airlines acquired a rise in profit of 72% from $31.4 million to $54 million by the end of their third quarter. As a result of their success, WestJet has decided that it would begin paying dividends. The company also announced that they would buy back up to 7.26 million or 5% of their stock shares over the next year. After hearing this news, investors sent the WestJet shares up more than 4% on Wednesday. Another result of their success is an increase in revenue of 14% to $684.6 million. WestJet decided to begin charging a $20 fee for guest checking a second bag starting on or after January 19th, and also dropping the fee for third and fourth bags to $50 from $75 in hopes to increase revenue.
Connection:
This chapter consists of financial statements and dividends which are both mentioned in this article. Financial statements are important in a company because it gives both the business managers and investors (insiders and outsiders) an understanding of how well the company is doing, which ultimately affects decision making. One obvious example used in this article is profit margin ratio. It clearly states that the company has been doing significantly well which not only enables many opportunities for the company, but also attract many investors. As mentioned in the textbook, dividends aren’t recorded on the income statements. However, this dividends declared would affect retained earnings and therefore WestJet would be losing some of their earnings but at the same times pleasing their investors.
Reflection:
I believe that WestJet is going to become even more successful throughout the next quarter due to the amount of revenue they earned this quarter. If this money is invested correctly then they would have a huge opportunity to earn an even greater sum of money. By buying back 7.26 million of their shares, they would not have to pay more dividends and therefore increasing their profit. They can also sell these shares in the future for a higher price and therefore earning an even larger profit if their company does well. In short, WestJet is investing in itself and I believe that this is a really strategic and risky move that would lead to either their downfall or success.
http://online.wsj.com/article/BT-CO-20101103-714320.html
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In response to both the article and your blog, it is nice to see the rising success of WestJet airlines and their “honesty is the best policy” approach to the public. As you have mentioned in the reflection part of the blog, that WestJet might become even more successful because of their upturn in how they are doing right now in their finances I do have to agree with you. Although, there are a lot of other factors that may disturb their increasing revenue they are doing a pretty good job right now as it is. But considering their new strategic game plan of investing in themselves.. In my opinion might lose potential investors because it shows that they are capable of accomplishing their goals on their own.
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