AC soars, WJ nosedives

Discuss topics relating to Westjet.

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AC soars, WJ nosedives

Post by pelmet » Sat Sep 01, 2018 6:08 pm

One of today’s most compelling business sagas is the reversal of fortunes at WestJet Airlines Ltd.

For most of its 22-year existence, the Calgary-based company has been one of the world’s few consistently successful major airlines.
But today’s WestJet appears to be on a flight path to mediocrity, or worse. In its most recent quarter, WestJet reported its first loss in 13 years.
Should WestJet investors, employees and customers be worried?
In a word, yes.
WestJet described its abysmal second-quarter performance as the result of a perfect storm of higher fuel costs, cancelled bookings due to a threatened pilots’ strike and weather disturbances.
But WestJet’s worsening financial performance pre-dates those conditions.
WestJet’s profits have dropped 22.8 per cent over the past three years. In its zeal for growth, the airline has committed the basic business failing of allowing growth in costs during that time (up 17.1 per cent) to outpace growth in revenues (12.5 per cent).
And about that perfect storm: WestJet would not have suffered the loss of tens of millions of dollars’ worth of bookings this year due to a threatened pilots’ strike if its labour relations, once a model of harmony for the industry, were not so fractious.
And the fuel bill has been more punishing than need be due to WestJet’s rapid expansion of its aircraft fleet without sufficient additional revenues to offset a coincident recovery in the world oil price.
Working with the same industry conditions, WestJet’s archrival, Air Canada, is in the midst of a turnaround for the ages.
Air Canada now outperforms all of its North American major-airline peers on the key metric of revenue per employee, at $688,000 to WestJet’s $392,000.
AC has gone from barely breaking even three years ago to posting a robust $2-billion profit in 2017. Over the past five years, shares in Air Canada have soared in value by about 800 per cent.
WestJet stock has gone in the other direction. The stock-market value of WestJet has plunged by about 45 per cent since its 2014 peak.
WestJet has strayed from an original business model that made it both financially successful and Canada’s favourite, most passenger-friendly major airline.
Recall that the old WestJet, like the Texas-based Southwest Airlines Co. it was modelled on, was a non-union carrier whose employee profit-sharing and folksy management kept unions at bay.
The old WestJet flew just one aircraft type, the industry workhorse Boeing 737. That saved enormous sums of money on training, maintenance and aircraft downtime.
The old WestJet was a strictly domestic carrier, save for a few vacation-package flights to relatively nearby sunspots in North America and the Caribbean. It offered just one product: Discount-fare, medium-haul flights on routes carefully selected for their profitability.
And the old WestJet was distinctive. Proudly Western Canadian, it was determined to match its nationally beloved Alberta peer, Wardair, in exemplary treatment of employees and passengers, an airline where senior management helped clean the aircraft cabins.
In recent years, however, WestJet has been made over into an impersonal, multi-functional airline like Air Canada, but without AC’s immense financial resources and entrenched market position.
At today’s WestJet, many pilots are unionized. And union drives are underway with unhappy flight attendants and ground crews. During the eight-year tenure of CEO Gregg Saretsky, a period marked by rapid growth and diversification at WestJet, the airline lost touch with its employees.
Saretsky abruptly departed in March. But in May, WestJet was revealed to have asked selected passengers to spy not only on WestJet’s in-flight employees, but those of competing airlines. WestJet apologized “unreservedly” for the unseemly incident.
Today, industry experts say, what keeps flyers loyal to both AC and WestJet is their loyalty rewards programs, not their customer satisfaction levels. The latter are now indistinguishable. And the two airlines’ pricing regimes are effectively identical. WestJet, no longer a committed discounter, has raised its fares five times this year.
If passenger TLC is no longer a WestJet hallmark, discontented employees help explain why. Both WestJet and Air Canada face formal allegations of maltreatment of flight attendants — yet another indication the two carriers have become same-as airlines.
The new WestJet flies several aircraft types, including the Boeing 767, the Q400 turboprop and the Saab 340B. And WestJet will soon take delivery of the first of 20 Boeing 787-9 “Dreamliners” it has ordered.
Operating a Dreamliner, one of today’s most expensive commercial aircraft, is a statement that an airline has “arrived.” WestJet now wishes to be known as “a global airline.”
Few global airlines have avoided a spell in bankruptcy protection, including Air Canada. Other troubled carriers have been merged out of existence. They include a Wardair that was a victim of the same over-expansion with which WestJet is now flirting.
Finally, the WestJet brand has been diluted by the company’s confusing new variety of products.
The new WestJet operates short-haul, medium-haul, vacation-package, trans-ocean, premium-priced and deep-discount flights (its new Swoop airline). A WestJet that once vowed not to fly east of Manitoba now flies to Europe. With its Dreamliners, WestJet hopes to serve Pacific and South American destinations, as well.
WestJet has not gained mastery of its new size and complexity. Last year, the company’s total operating costs surged past the $4-billion threshold, on a revenue base of just $3.9 billion.
WestJet began life as a repudiation of the hulking, passenger-insensitive Air Canada. WestJet is now set on matching its archrival in revenues and product diversity.
But Air Canada, one of the world’s dozen biggest airlines, with 2017 revenues of $13.3 billion, has the resources to defend its markets and finance expansion. WestJet’s profits of $284 million last year were just 14.2 per cent of Air Canada’s. And in revenue terms, a comparatively diminutive WestJet is essentially an overgrown regional carrier whose reach appears to exceed its grasp.
WestJet now operates about 170 aircraft, more than half the size of AC’s fleet of 300. But WestJet generates only 29 per cent of AC’s revenues – a warning signal Bay Street has so far ignored.
WestJet finally acknowledged last month that it is over-stretched, announcing a campaign to cut an annual $200 million from the firm’s costs.
Distracted by its pell-mell growth ambitions, WestJet lost focus on its existing business — on controlling costs, on cosseting its passengers, on respecting its employees and offering a product that was something special in the skies.
In a nutshell, today’s WestJet appears to be running on hubris, not wise management.
The shame of it is that, while Canadian travellers still mourn the demise of Wardair, they would not miss the new WestJet. It has, after all, become an airline like the others.

https://www.msn.com/en-ca/money/topstor ... spartandhp
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Re: AC soars, WJ nosedives

Post by privateer » Sat Sep 01, 2018 8:35 pm

WestJet posts a $20.8 million loss and the newspaper writes the sky is falling.
Air Canada posts a $170 million loss and it means all is going great. Go figure.
https://www.thestar.com/business/2018/0 ... r-ago.html
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Re: AC soars, WJ nosedives

Post by Mach1 » Sun Sep 02, 2018 8:32 am

It is a well written, well researched article that firmly places the blame for the current economic and labour issues with the creators of these issues. The company's executive.

It is refreshing to see something that is not a copy and paste of a company issued PR statement.
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Re: AC soars, WJ nosedives

Post by Diadem » Sun Sep 02, 2018 9:03 am

The author ignored Air Canada's 2018 financial results and cherry-picked his data to state that AC has had three years of profits. At the same time as WestJet posted a $21 million loss, AC reported a $71 million dollar loss, which was their second of the year, but WestJet is the one that's imploding.
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Re: AC soars, WJ nosedives

Post by Mach1 » Sun Sep 02, 2018 9:52 am

Look after your employees, they will look after your customers, your customers will look after your stock price. A business model WJ followed with massive success until they decided they wanted to be AC from the 1990's. Antagonize your employees, who will take revenge upon you any way possible and watch your stock tank. I have no idea why WJ has gone down the road they have chosen, but we've all seen the results of this particular business model. Even AC has seen the light and decided to treat the employees as an asset and it is showing in the moral and the stock price.... WJ's treatment of their employee groups is also showing in the moral and the stock price.

Rovinescu turned the moral around at AC.
Saretsky did exactly the same for WJ. (Ed's walking the same path, so a change in name only but not direction)
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Re: AC soars, WJ nosedives

Post by privateer » Sun Sep 02, 2018 11:59 am

Mach1 wrote:
Sun Sep 02, 2018 9:52 am
Look after your employees, they will look after your customers, your customers will look after your stock price. A business model WJ followed with massive success until they decided they wanted to be AC from the 1990's. Antagonize your employees, who will take revenge upon you any way possible and watch your stock tank. I have no idea why WJ has gone down the road they have chosen, but we've all seen the results of this particular business model. Even AC has seen the light and decided to treat the employees as an asset and it is showing in the moral and the stock price.... WJ's treatment of their employee groups is also showing in the moral and the stock price.

Rovinescu turned the moral around at AC.
Saretsky did exactly the same for WJ. (Ed's walking the same path, so a change in name only but not direction)
Again. AC reported two consecutive losses. WJ reports a small loss because they are buying 787. :goodman:
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Re: AC soars, WJ nosedives

Post by 7ECA » Sun Sep 02, 2018 12:57 pm

WestJet's in trouble..., and look at that they're in the middle of arbitration with the pilots. :roll:
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Re: AC soars, WJ nosedives

Post by Transonic » Mon Sep 03, 2018 4:00 am

privateer wrote:
Sun Sep 02, 2018 11:59 am
Mach1 wrote:
Sun Sep 02, 2018 9:52 am
Look after your employees, they will look after your customers, your customers will look after your stock price. A business model WJ followed with massive success until they decided they wanted to be AC from the 1990's. Antagonize your employees, who will take revenge upon you any way possible and watch your stock tank. I have no idea why WJ has gone down the road they have chosen, but we've all seen the results of this particular business model. Even AC has seen the light and decided to treat the employees as an asset and it is showing in the moral and the stock price.... WJ's treatment of their employee groups is also showing in the moral and the stock price.

Rovinescu turned the moral around at AC.
Saretsky did exactly the same for WJ. (Ed's walking the same path, so a change in name only but not direction)
Again. AC reported two consecutive losses. WJ reports a small loss because they are buying 787. :goodman:
The Q2 loss was due to the pilots strike vote that cost " tens of millions" dollars of lost revenue. Of course, the strike vote was caused by Swoop.
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Re: AC soars, WJ nosedives

Post by rookiepilot » Mon Sep 03, 2018 7:03 am

Mach1 wrote:
Sun Sep 02, 2018 9:52 am

Look after your employees, they will look after your customers, your customers will look after your stock price. A business model WJ followed with massive success until they decided they wanted to be AC from the 1990's. Antagonize your employees, who will take revenge upon you any way possible and watch your stock tank. I have no idea why WJ has gone down the road they have chosen, but we've all seen the results of this particular business model. Even AC has seen the light and decided to treat the employees as an asset and it is showing in the moral and the stock price.... WJ's treatment of their employee groups is also showing in the moral and the stock price.
This.
I used to bash AC because frankly some of their employees, particularly check in agents, were so unbelievably rude, without cause. I can't stand rudeness in service employees in any industry, just because one thinks they can get away with it.

I get how some customers are total pigs, but I'm not one of those, BTW.

AC have steadily improved in this area, in my view.
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Re: AC soars, WJ nosedives

Post by lostaviator » Mon Sep 03, 2018 8:51 am

But our people are great and make the difference....

No. We aren't. Air Canada has a far superior product and rank higher in customer satisfaction. Air Canada has a 3 circle rating from JD power, and Westjet has 2.

You cant turn a ship around by lying about the collision course it’s on.
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Re: AC soars, WJ nosedives

Post by ant_321 » Mon Sep 03, 2018 9:08 am

lostaviator wrote:
Mon Sep 03, 2018 8:51 am
But our people are great and make the difference....

No. We aren't. Air Canada has a far superior product and rank higher in customer satisfaction. Air Canada has a 3 circle rating from JD power, and Westjet has 2.

You cant turn a ship around by lying about the collision course it’s on.
Couldn’t agree more. In my experience the “travelers” that love WestJet are the ones who fly once a year or less. Anyone who flies relatively frequently recognizes what AC offers.
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Re: AC soars, WJ nosedives

Post by privateer » Mon Sep 03, 2018 10:54 am

Let's not forget that back in the CDN/AC days the aviation industry was under heavy regulation and the Canadian Government dictated who flew what routes etc (favouring AC). The times have changed so if you're trying to make the claim that WJ is somehow headed down the same path you need to give your head shake. Unions are all part of the growing pains of becoming a major carrier.

This AC lover from The Star is not considering AC's losses. Strange. AC has so many aircraft now they are cannibalizing their own hubs.
Airbus Rouge service YCD-YYZ? YYJ-YUL? YKA-YYZ? DUMB
Read the report by Ben Cherniavsky from Raymond James and tell me who has more to lose in the long run.

 With Air Canada being the source of some of the highest-cost, fastest-growing, and least- profitable capacity on the continent, we believe its valuation discount is warranted and we see no reason to recommend the purchase of its shares over any other equally “cheap” airline at present. While Air Canada is a high-volatility stock that can be traded nimbly from time to time—especially around the peak summer season—we prefer to base our investment thesis on underlying long-term industry and company fundamentals. For reasons outlined in this report, our analysis of these fundamentals suggests that there is still considerable risk in this stock, especially as fuel costs begin to creep back into the equation.

 We believe that many of WestJet’s self-inflicted problems also warrant a discount on its stock. However, we still prefer it over Air Canada because of its superior cost-structure and balance sheet. We also believe that—unlike Air Canada—investor sentiment on WestJet is extremely negative, which could set it up favourably if the airline simply performs better than everyone fears. Finally, we note that WestJet’s stock is now trading at book value, which historically has always been a good entry point, and a very low CAPE ratio. While all of this arguably sets the stock up for a decent trade going into the 2Q18 report, the longer- term issues of WestJet’s overall strategic direction, its margin and ROIC compression, and the over-supplied state of the market keeps us on the sidelines for the time being.
The Folly of Over-flying Hubs
Three new non-stop domestic routes to B.C. provide a good example of why we believe Air Canada is stretching the limits of its network expansion. Effective this summer Air Canada is now flying A319 Rouge aircraft between Toronto-Kamloops, Toronto-Nanaimo, and Montreal-Victoria BC. Despite what appears to be a relatively low “community of interest” between each of these city-pairs, we believe Air Canada will have little trouble filling these flights during the busy summer months (as long as they are appropriately priced and the Canadian consumer keeps spending!). However, we question the impact that this new non-stop discounted Rouge service will have on the airline’s overall network, yields, and revenue management strategy.
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Re: AC soars, WJ nosedives

Post by Mach1 » Mon Sep 03, 2018 11:52 am

Air Canada has issues of their own. However, that does not mean that WestJet has no issues at all. The " They are worse" argument is irrelevant and almost feels like a bunch of Bot accounts or management mouthpieces spouting propaganda and "what about-ism" arguments to avoid facing the fact that there are real problems at WestJet and those problems are a direct result of executive decisions and direction.

Perhaps the root of the problem is the fact that people keep looking at what others are doing and using the "what about-ism" argument to justify bad behaviour and bad results instead of looking inward and trying to improve yourself and your results.

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Re: AC soars, WJ nosedives

Post by altiplano » Mon Sep 03, 2018 1:06 pm

privateer wrote:
Mon Sep 03, 2018 10:54 am
Let's not forget that back in the CDN/AC days the aviation industry was under heavy regulation and the Canadian Government dictated who flew what routes etc (favouring AC). The times have changed so if you're trying to make the claim that WJ is somehow headed down the same path you need to give your head shake. Unions are all part of the growing pains of becoming a major carrier.

This AC lover from The Star is not considering AC's losses. Strange. AC has so many aircraft now they are cannibalizing their own hubs.
Airbus Rouge service YCD-YYZ? YYJ-YUL? YKA-YYZ? DUMB
Read the report by Ben Cherniavsky from Raymond James and tell me who has more to lose in the long run.

 With Air Canada being the source of some of the highest-cost, fastest-growing, and least- profitable capacity on the continent, we believe its valuation discount is warranted and we see no reason to recommend the purchase of its shares over any other equally “cheap” airline at present. While Air Canada is a high-volatility stock that can be traded nimbly from time to time—especially around the peak summer season—we prefer to base our investment thesis on underlying long-term industry and company fundamentals. For reasons outlined in this report, our analysis of these fundamentals suggests that there is still considerable risk in this stock, especially as fuel costs begin to creep back into the equation.

 We believe that many of WestJet’s self-inflicted problems also warrant a discount on its stock. However, we still prefer it over Air Canada because of its superior cost-structure and balance sheet. We also believe that—unlike Air Canada—investor sentiment on WestJet is extremely negative, which could set it up favourably if the airline simply performs better than everyone fears. Finally, we note that WestJet’s stock is now trading at book value, which historically has always been a good entry point, and a very low CAPE ratio. While all of this arguably sets the stock up for a decent trade going into the 2Q18 report, the longer- term issues of WestJet’s overall strategic direction, its margin and ROIC compression, and the over-supplied state of the market keeps us on the sidelines for the time being.
The Folly of Over-flying Hubs
Three new non-stop domestic routes to B.C. provide a good example of why we believe Air Canada is stretching the limits of its network expansion. Effective this summer Air Canada is now flying A319 Rouge aircraft between Toronto-Kamloops, Toronto-Nanaimo, and Montreal-Victoria BC. Despite what appears to be a relatively low “community of interest” between each of these city-pairs, we believe Air Canada will have little trouble filling these flights during the busy summer months (as long as they are appropriately priced and the Canadian consumer keeps spending!). However, we question the impact that this new non-stop discounted Rouge service will have on the airline’s overall network, yields, and revenue management strategy.
"Favouring AC"

They were the established incumbent and also served all the small town small market losing routes.

"Cannibalising hubs"

YVR-YYZ is jam packed... They're filling 777, 787, 321, 737 hourly... YCD, YKA direct YYZ getting successful numbers and routing into a hub.

More bigger spokes here, not cannibalising hubs... Feeding more Atlantic traffic out of YYZ, YUL

AC loses money on the back of the year because they have the staff and assets to run full tilt in the busy months... We'll see how full year does.

"AC lover"

As you quote Cherniavsky from Westjet's very own underwriter Raymond James? This guy has zero credibility in his analysis... the fact that he tempers his AC hate on/WS love on is maybe because he's trying to salvage some credibility given recent developments.
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Re: AC soars, WJ nosedives

Post by privateer » Mon Sep 03, 2018 3:22 pm

Air Canada Debt: $6,063,000,000
WestJet Debt: $627,000,000

WestJet reported a loss of $20.8-million after 13 years.
Air Canada reported a loss of $77-million. No surprises there.

So you can fill planes and ad routes but AC still can't make a buck. :P
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Re: AC soars, WJ nosedives

Post by altiplano » Mon Sep 03, 2018 5:23 pm

We'll see year end who has the higher profit... not like I care other than to know I'm working at a healthy company.

AC has work to do, no question, but their costs are going the right way and they are making profits every year.

You haven't been paying attention if you think you can just throw out the old realitychex or Ben Cherniavsky narrative on AC and some simple numbers and make your point.

11 professional analysts follow AC, 9 Buy, 1 Strong buy, 1 hold.
3 professional analysts follow WestJet, 3 Hold.

Fact is they are very different airlines with different strategies and AC is going in a solid direction.

Sure AC has more debt, but it has way higher revenues, significantly higher profit (and potential), and far more assets... and it's shedding the old baggage.

Here's my 2-bit analysis:
WestJet profit last year was nothing to sneeze at, around $300 million.
Air Canada profit last year was about $2 billion. That's more than WestJet made in the last 5 years combined... and that's 4 years in a row of AC profit.
My take is... good, two healthy airlines.
I suggest you check your ideas... as I said you haven't been paying attention if you think one quarter is the definition of things. And your old AC ideas are wrong...
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Re: AC soars, WJ nosedives

Post by rookiepilot » Mon Sep 03, 2018 5:34 pm

"Professional Analyst".

What's that exactly?

Equivalent to having an rec pilots licence...and calling oneself an experienced, expert pilot......LOL
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Re: AC soars, WJ nosedives

Post by altiplano » Mon Sep 03, 2018 6:28 pm

rookiepilot wrote:
Mon Sep 03, 2018 5:34 pm
"Professional Analyst".

What's that exactly?

Equivalent to having an rec pilots licence...and calling oneself an experienced, expert pilot......LOL
I don't know... maybe poor choice of wording on my part, but industry analysts seem to have more credit than avcanada's peanut gallery.
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Re: AC soars, WJ nosedives

Post by rookiepilot » Mon Sep 03, 2018 6:32 pm

altiplano wrote:
Mon Sep 03, 2018 6:28 pm
rookiepilot wrote:
Mon Sep 03, 2018 5:34 pm
"Professional Analyst".

What's that exactly?

Equivalent to having an rec pilots licence...and calling oneself an experienced, expert pilot......LOL
I don't know... maybe poor choice of wording on my part, but industry analysts seem to have more credit than avcanada's peanut gallery.
Oh yeah. Not mocking you. Mocking them.

They are one step above financial advisors at the bottom of the financial industry pigpen.
Maybe both above the ratings agencies. They line the floor, covered in pig excrement.
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All three are sales positions. Analysis in name only.
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Re: AC soars, WJ nosedives

Post by Old fella » Mon Sep 03, 2018 6:49 pm

The loudmouth “suit and haircut”types that one would see in departure lounges over the many years is my interpretation of sales lot.
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Re: AC soars, WJ nosedives

Post by privateer » Mon Sep 03, 2018 7:00 pm

RookiePilot. I'll say again.
Air Canada Debt: $6,063,000,000
WestJet Debt: $627,000,000

WestJet reported a loss of $20.8-million after 13 years.
Air Canada reported a loss of $77-million.

Putting giant pie charts up on here doesn't make it profitable.
AC has too much overhead.
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Re: AC soars, WJ nosedives

Post by privateer » Mon Sep 03, 2018 7:03 pm

I wonder what the price of a barrel of oil has to reach to make those old Rouge 767 unprofitable...
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Re: AC soars, WJ nosedives

Post by FL410AV8R » Mon Sep 03, 2018 7:14 pm

privateer wrote:
Mon Sep 03, 2018 7:03 pm
I wonder what the price of a barrel of oil has to reach to make those old Rouge 767 unprofitable...
Probably the same price that will make WestJet’s old 767s unprofitable.
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Re: AC soars, WJ nosedives

Post by rookiepilot » Mon Sep 03, 2018 7:17 pm

privateer wrote:
Mon Sep 03, 2018 7:00 pm
RookiePilot. I'll say again.
Air Canada Debt: $6,063,000,000
WestJet Debt: $627,000,000

WestJet reported a loss of $20.8-million after 13 years.
Air Canada reported a loss of $77-million.

Putting giant pie charts up on here doesn't make it profitable.
AC has too much overhead.
Not sure why you're addressing me. Not a fan of airline stocks, in general.

That said I think WJ's management is completely confused in its vision.
Hence the stock is getting totally hammered.
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Re: AC soars, WJ nosedives

Post by Kaykay » Mon Sep 03, 2018 7:50 pm

Never ceases to amaze me how many pilots seem to believe they’re financial experts. Just because you’re a pilot, doesn’t mean you have any real clue about the financials of where you work or where other people work. Have your opinion, others will have theirs, life goes on. If pilots spent half as much time working together as they do bickering amongst each other, everyone would be much farther ahead.
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