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Author: phoolishandy Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 265  
Subject: My stock pitch Date: 1/22/2002 7:20 PM
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To all interested parties,

The best way to begin this note is with a question; have you ever heard of a little airline by the name of Southwest? If you haven't, then I guess I can fill you in with a quick description. Southwest is one of the greatest stories in capitalism. Herb Kelleher stormed into an industry that was traditionally most unfriendly to investors, as it was plagued with being capital intensive, low margin, and ridden with failures. However, Mr. Kelleher was able to revolutionize this said industry with many novel ideas that are too numerous to name here. Since the airline was founded, it has been a great success story for shareholders and employees alike. However, Southwest has matured greatly since its founding, and it can be argued that there isn't a lot of phenomenal, easy, growth left for the company.

Here lies the conundrum, we have a great business plan with a proven record, but market saturation is beginning to set in. The simple resolution for this is to find a copy cat; another airline that looks like a duck, quacks like a duck, but doesn't compete with the original duck. Fellow Fools, look to the North. The Great White North that is.

Currently in Canada, there are two main airlines; Air Canada and Westjet Airlines. Air Canada is a big, top heavy, former crown corporation that has an 80% market share (declining). It is also extremely unprofitable, and with an enourmous 10 billion debt load. Air Canada's cash reserves are also quite pitiful, and there is little chance of a revival. In addition, the Canadian government has no plans for any bailout package, as the people pf Canada are sick and tired of lending aid to this mismanaged behemoth. Westjet, on the other hand, is a lean, mean, well-managed machine. It has an unending record of profitability since its inception in the mid-90's, and an unparalleled record of earnings growth in its industry. What we're talking here is 63% sales growth, 91%income growth, and profit margins around 8% (the industry average is -10%). If you think this is too good to be true, I ain't lying: http://ca.moneycentral.msn.com/investor/research/wizards/srwfund.asp?Symbol=wja Perhaps best of all, when considering the most burdensome number for airlines, is Westjet's cash position. They have cash far in excess to their debt, and their coffers are growing while their debt is falling. Further, we are not dealing with a micro cap stock here seeing as Westjet's market cap is 1 billion.

Most importantly, the outlook for Westjet is quite rosy. This business is not just currently healthy, it will continue to be healthy in the future. They currently serve 20 Canadian cities, with a 33 possible destinations in the future, as earmarked by the CEO in a recent statement. So, if you're interested in a mini Southwest, with better future growth potential, and a healthier market, then take a gander at the newest duck in the skies.
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