Investing in stocks can be a rewarding way to build wealth over time, but it’s essential to understand the process and risks involved before jumping in. WestJet Airlines Ltd. is a prominent Canadian airline, and like any publicly traded company, its stock presents an opportunity for investors. This article provides an in-depth look at how to invest in WestJet stock, from understanding the company’s financial performance to choosing the right method for purchasing shares.
Understanding WestJet: A Brief Overview
Before considering an investment in WestJet stock, it’s important to understand the company itself. Founded in 1996, WestJet Airlines is a Canadian low-cost carrier headquartered in Calgary, Alberta. Over the years, it has grown to become one of the largest airlines in Canada, offering both domestic and international flights. WestJet operates a fleet of over 100 aircraft, serving more than 100 destinations across North America, Europe, and the Caribbean.
In 2019, WestJet was acquired by Onex Corporation, a private equity firm. While it was once a publicly traded company on the Toronto Stock Exchange (TSE), WestJet is no longer available for public trading. Therefore, potential investors cannot directly purchase WestJet stock in the same manner as other publicly listed companies. However, there are still ways to gain exposure to the airline industry and WestJet through related investments.
Why Invest in the Airline Industry?
The airline industry can be a lucrative sector to invest in, offering both potential for growth and challenges. Historically, airlines have experienced periods of strong profitability followed by challenges such as economic downturns, rising fuel costs, and the impact of global events like the COVID-19 pandemic.
For investors looking to tap into the airline sector, WestJet has been a relatively stable and attractive option, especially considering its expansion and competitive positioning in the Canadian market. Investors typically consider airlines as a hedge against inflation since travel demand tends to rise alongside inflationary pressures. Moreover, air travel is expected to grow as economies recover from recessions and people continue to prioritize travel.
However, investing in the airline industry also comes with risks. The sector is known for its cyclical nature, where profitability can fluctuate significantly based on the state of the global economy, fuel prices, and geopolitical factors. For these reasons, understanding the broader context of the industry is crucial before deciding to invest.
Indirect Investment in WestJet
As mentioned earlier, since WestJet is no longer publicly traded following its acquisition by Onex, direct investment in WestJet stock is not an option. However, investors can still gain exposure to WestJet through various indirect methods:
1. Invest in Onex Corporation
Onex Corporation, the private equity firm that acquired WestJet, remains a publicly traded entity. Onex trades on the Toronto Stock Exchange under the ticker symbol “ONEX.” By investing in Onex stock, investors can gain exposure to the performance of WestJet, as Onex holds a significant stake in the airline.
Onex’s investment strategy is diversified, with holdings across various sectors, including healthcare, financial services, and aerospace. However, a portion of Onex’s portfolio is tied to WestJet’s performance, and as such, investors who are optimistic about the future of WestJet can consider buying Onex shares as a proxy investment.
2. Invest in Airline ETFs
Another way to gain exposure to WestJet’s performance is through exchange-traded funds (ETFs) focused on the airline industry. These ETFs invest in a basket of airline stocks, including those of major airlines like American Airlines, Delta, and Air Canada. While WestJet itself is not directly included in most airline ETFs due to its private status, some ETFs might hold shares of Onex, indirectly providing exposure to the company’s ownership of WestJet.
Examples of airline ETFs include the U.S.-based U.S. Global Jets ETF (JETS) and Canada’s Horizons Global Airlines ETF (HAIR). These ETFs track the performance of the airline industry and provide investors with a diversified exposure to the sector, reducing the individual risk tied to any single airline.
3. Invest in Related Sectors
If you’re particularly interested in WestJet due to its position in the airline industry, but can’t invest in the company itself, consider exploring other related sectors. The aviation industry is supported by various sectors, such as aircraft manufacturing, air traffic control, airport management, and aviation technology.
By investing in companies that supply products or services to airlines, such as Bombardier (a major player in aircraft manufacturing) or Airport Authority Funds, you can gain indirect exposure to the aviation ecosystem. These companies often benefit from growth in the airline industry, including WestJet’s expansion.
How to Invest in Onex and Airline ETFs
If you’ve decided to invest indirectly in WestJet by purchasing Onex stock or an airline ETF, the process is straightforward. Here’s a step-by-step guide:
1. Choose a Brokerage Account
To purchase Onex or any airline ETFs, you need a brokerage account. There are numerous online brokerage platforms available, such as TD Ameritrade, E*TRADE, or Canadian brokerages like Questrade or WealthSimple. Compare the available platforms, considering factors like commissions, account fees, and the ease of use of their interfaces.
Once you have selected a broker, open an account and fund it using your preferred method, such as a bank transfer, wire transfer, or using a debit card.
2. Research and Select Stocks or ETFs
Before buying any stock or ETF, it’s essential to do your research. Look at the financial health of Onex, its business portfolio, and how WestJet fits within the company’s strategy. Also, consider reviewing airline ETF performance, expense ratios, and the specific airlines included in the fund.
For example, Onex’ stock price might fluctuate based on the performance of its other holdings, so it’s important to understand the broader picture. Similarly, airline ETFs might have varying allocations and risk profiles, so make sure to select one that aligns with your investment goals.
3. Place Your Order
Once you have selected the stock or ETF you want to invest in, the next step is placing an order. You can place a market order (where your order is executed immediately at the best available price) or a limit order (where you specify the maximum price you are willing to pay per share).
4. Monitor Your Investment
After your purchase, it’s important to regularly monitor your investment. Keep track of the performance of Onex stock or the airline ETF, along with any news related to WestJet and the broader airline industry. It’s also important to reassess your portfolio periodically to ensure that it remains aligned with your investment goals.
Risks of Investing in the Airline Industry
While the potential for growth exists in the airline industry, it’s also important to be aware of the risks. The airline sector can be highly volatile, and factors like fuel price increases, labor strikes, and even global crises (such as pandemics or geopolitical conflicts) can have a significant impact on stock prices.
For instance, the COVID-19 pandemic caused a massive decline in global air travel, which hurt airline stocks across the board. Although the industry has recovered in many parts of the world, further disruptions remain a possibility.
Conclusion
Investing in WestJet stock directly is not possible due to its acquisition by Onex Corporation. However, investors who are still interested in the airline industry can gain exposure through Onex shares or by investing in airline-focused ETFs. Understanding the broader trends in the airline industry, the performance of companies like Onex, and the risks involved will help you make informed investment decisions.
Ultimately, the key to successful investing is thorough research, careful planning, and regular portfolio reviews. Whether you choose to invest in Onex, airline ETFs, or related sectors, understanding the market dynamics is essential for making wise and profitable investment choices.
