WestJet and Air Canada assume a role reversal in 2013 as Air Canada starts to rebound

After spending much of 2012 battling labour groups to forge contracts with more favourable terms, including the establishment of its new low-cost carrier Rouge, Air Canada is enjoying a more peaceful 2013, reflected most recently in its downward revision of cost guidance for the year. At the same time its stock has more than tripled during the past year as it intensifies its attempts to create a lasting business model.

After touting the highly anticipated launch of its new regional carrier Encore throughout 2012, Air Canada's rival WestJet has encountered some headwinds in 2013 as its yields and unit revenues have come under pressure and its own capacity additions and an overall increase in domestic supply in Canada have pressured its yields and unit revenue.

As both carriers march towards reporting 3Q2013 earnings, Air Canada might be beginning to get some traction in its efforts to transform its legacy business model. WestJet, meanwhile, has warned of continued unit revenue degradation during 3Q2013 as it also works to beat back the inevitable cost creep associated with a certain level of maturity.