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Abstract

This paper examines the stock and accounting performance of two airlines in Canada, WestJet and Air Canada, over the past four years, taking into account the aftermath of the September 11, 2001, attacks. September 11 (9-11) resulted in dramatic changes in the airline industry and had significant implications on the economic gains of most airlines. Our study focuses on the viability of low-cost (LCC) versus conventional-cost (legacy) business models in Canada under the current business environment. We chose WestJet as a typical low-cost airline and compare its accounting and stock performance to Air Canada, a legacy carrier and rival in several business sectors. We found that WestJet’s performance was highly superior to that of Air Canada. As a result of our findings, we argue that WestJet’s business model provides the firm with significantly more financial and operational flexibility than the one exhibited by its legacy rival, Air Canada. WestJet’s lower operating costs, high consumer trust, product offering, corporate structure, workforce and work practices, as well as operational procedures are all factors that appear to contribute to its relative success.

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