WestJet's Codeshare Expansion with Aeromexico: A Strategic Play on North American Travel Recovery

North American travel demand is rebounding post-pandemic, with Mexico-Canada corridors emerging as a key growth axis. Against this backdrop, WestJet's expanded codeshare partnership with Aeromexico—effective July 2, 2025—positions the Canadian airline to capitalize on rising leisure and business travel between the two countries. This move not only deepens regional integration but also unlocks operational synergies and revenue upside, making WestJet a compelling investment opportunity in the aviation sector.

Tapping into Mexico-Canada Travel Recovery

The partnership adds 10 new Mexican destinations (e.g., Oaxaca, Puerto Escondido) and 4 Canadian cities (Comox, St. John's) to the codeshare network, expanding access to over 30 Mexican and 20 Canadian cities. This expansion is timely, as Mexico's tourism sector is booming. Data shows a 13.5% year-over-year increase in international tourists in April 2025, driven partly by Canadian travelers seeking alternatives to the U.S. amid trade tensions and tariffs. Meanwhile, Canadian leisure travel to Mexico is rising, with analysts noting redirected demand from U.S.-bound travelers (down 24% in air returns in May 2025).

WestJet's leadership in Mexico, reinforced by this partnership, is a strategic advantage. As the top Canadian carrier to Mexico, it now offers seamless connectivity to lesser-served cities like Durango and Tuxtla Gutiérrez, catering to travelers seeking cultural and coastal experiences. For Aeromexico, access to Canadian cities such as St. John's opens new markets, fostering two-way tourism growth.

Operational Synergies and Revenue Potential

The codeshare agreement streamlines travel logistics, enabling passengers to book a single ticket for multi-segment trips, with baggage transfers and loyalty rewards (e.g., WestJet Rewards). This reduces friction for travelers, likely boosting demand.

• Cost Efficiency: Shared networks reduce redundant routes and optimize aircraft utilization. Aeromexico's SkyTeam alliance membership also provides WestJet passengers access to 1,000+ global destinations, enhancing appeal.
• Revenue Upside: The integration of Sunwing's 200-aircraft fleet (post-2025 acquisition) expands WestJet's capacity, supporting higher passenger volumes and ancillary sales (e.g., baggage fees, seat upgrades).
• Market Share Growth: With Mexican tourism revenue up 12.5% in April 2025, WestJet is well-positioned to capture incremental demand.

Investment Thesis: A Play on Regional Aviation Integration

WestJet's partnership with Aeromexico exemplifies the trend toward collaborative networks in North America. Key drivers for investment include:
1. Structural Growth: Mexico-Canada travel is underpenetrated, with room for expansion as cross-border ties strengthen.
2. Margin Expansion: Operational efficiencies from shared routes and loyalty programs could improve margins.
3. Resilience to Macroeconomic Risks: The partnership diversifies revenue streams, reducing reliance on volatile U.S. travel demand.

Analyst forecasts from IATA and OAG suggest the aviation sector will generate $36 billion in global profits in 2025, with Latin America leading growth. WestJet's early-mover advantage in Mexico-Canada routes could translate to sustained outperformance.

Risks and Considerations

• Execution Risks: Seamless integration of codeshare operations requires robust IT systems and coordination.
• Regulatory Hurdles: U.S.-Mexico-Canada Agreement (USMCA) compliance and geopolitical tensions could disrupt trade flows.
• Fuel Costs: Rising diesel prices (up 6.33% in 2024) may pressure margins unless offset by fare increases.

Conclusion: Buy WestJet for Regional Aviation Bet

WestJet's codeshare expansion with Aeromexico is a strategic move to capitalize on Mexico-Canada travel recovery. With strong demand tailwinds, operational synergies, and a leadership position in a growing corridor, the airline is well-positioned to deliver outperformance. Investors seeking exposure to North American aviation integration should consider adding WestJet (TSX:WJA) to their portfolios.

This partnership isn't just about flights—it's about shaping the future of cross-border travel in North America. For the bullish investor, WestJet offers a compelling leveraged play on that vision.