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WestJet shares are at a two-year high and analysts are hiking price targets

The tail of a WestJet plane is shown by the Calgary skyline before the airline's annual meeting in Calgary, Tuesday, May 3, 2016

Jeff McIntosh/The Canadian Press

Shares of WestJet Airlines hit a more than two-year high after the Calgary-based airline reported the highest quarterly load factor in its 21-year history.

The shares peaked at $27.77, the highest level since June, 2015. They closed at $27.64, up 1.1 per cent in Thursday trading on the Toronto Stock Exchange.

WestJet said its planes were 85.7 per cent full in the July to September months. For September, the load factor was 80.4 per cent as traffic increased 5.9 per cent from a year ago on a 5.3 per cent growth in available seats.

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In the third quarter, the airline flew a record 6.5 million guests, up 10.7 per cent or 630,000 passengers from a year ago.

Several industry analysts raised their target price for WestJet shares on anticipation of strong results when the airline reports its results Oct. 31.

"The September traffic numbers again confirm the improving fundamentals in the air travel market, though the quarter is impacted by hurricanes and increased competition south of the border," said Doug Taylor of Canaccord Genuity.

Cameron Doerksen of National Bank Financial said he expects strong earnings to continue into the fourth-quarter and next year but has longer-term concerns for the airline.

He said the airline could struggle juggling next year's planned launch of a new ultra low cost carrier to be called Swoop, major international expansion using large aircraft and ongoing growth of its core operations.

"We are concerned the airline has too many new strategic initiatives underway simultaneously, which could impair successful execution," he wrote in a report.

Cash flows will be constrained in the coming years as it takes deliveries of new Boeing 737 Max and wide-body 787s.

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And Doerksen said he's skeptical that Swoop, which will start next summer with six planes, will cannibalize some of WestJet's existing customers.

"We are also not convinced Swoop will have a cost structure that is as low as potential new ULCC entrants," he added.

The analyst also said unionization efforts by pilots could result in higher labour costs.

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