Deteriorating ROIC overshadows WestJet's revenue improvement, but its ambitions remain high

A favourable revenue performance by Canadian low cost airline WestJet during 2Q2017 was somewhat overshadowed by the company's continuing deterioration of return on invested capital (ROIC) performance.

The 9.8% ROIC WestJet posted during the quarter is approximately 6ppt below the high end of the airline's targeted ROIC of 13% to 16%. WestJet management believes the company has hit the low point of its ROIC performance, as its fortunes in the province of Alberta continue to improve and some of the longer term investments the airline is making bear fruit.

At the same time as WestJet works to improve its ROIC, the airline continues to lay the groundwork to debut its new ULCC in 2018, albeit later than initially anticipated, and develop its long haul network after formally seeking approval for service to China.

Between growing its widebody network and creating a new ultra low cost carrier, WestJet has one of the most ambitious agendas among airlines worldwide. Over the course of the next few quarters, the company's efforts to achieve its goals on those projects will be watched closely.