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number cruncher

What are we looking for?

How North American airline companies compare across unique industry-specific metrics that highlight operational and cost efficiencies.

The screen

The North American airline industry is relatively compact with only a few companies reaching economies of scale to compete as going concerns. Today's screen attempts to differentiate between these companies based on key performance indicators (KPIs) unique to the airline industry.

Companies included in the screen must be headquartered within either Canada or the United States and have been ranked according to how well they perform across three unique KPIs reported during the past fiscal year.

The first measure shown is the passenger load factor, detailing the percentage of passenger miles travelled compared to seats available on the plane, with a higher number representing greater operational efficiency. The revenue and cost per available seat mile (ASM) are shown next, which, collectively, are our second key metric. They highlight the revenue and cost, respectively, associated with each mile travelled. Finally, the difference between these two figures is shown as the operating margin per ASM, with positive numbers representing greater cost efficiencies. The ranking scheme has weighted each of the aforementioned factors equally (33.3 per cent) and displayed the results in the corresponding order.

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What did we find?

Of the 13 companies that met the screen criteria, Alaska Air Group tops the list receiving the highest aggregate score across the three metrics. The company achieved superior scores by seeing greater operating efficiencies in measuring revenue against cost per available seat mile, while maintaining a high passenger-load factor across its flight services. The two Canadian companies, WestJet Airlines and Air Canada, scored closely across the screen with WestJet seeing more cost efficiencies through high operating margins on its flights while Air Canada noticed greater operational efficiencies with flights operating closer to capacity.

This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.

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