Thank you very much.
I want to begin by telling you that I'm not here to talk about airline issues, airport rents, or taxes and fees.
Given the weather of the past couple of days, you might want to talk to me about the airlines, but we can do that afterwards.
Instead, I am here to outline for you an idea WestJet has for amending the Income Tax Act. The purpose of what we're looking to do is to ensure that all employees, regardless of the industry they work in, have a much greater opportunity to directly benefit from the financial success of their employer. Our idea is based on our own experiences at WestJet and is designed to address the growing productivity challenge we face in this country.
When we started WestJet in 1996, we had 200 employees. Today we have almost 7,000 employees. We started with three aircraft. Today we have 70 aircraft, all Boeing 737s, costing approximately $40 million U.S. apiece. We have grown from less than 1% of domestic market to approximately 37%, and we fly to 13 other countries in North America and South America. But perhaps most importantly throughout this entire period of growth and job creation, we have turned a profit every year. Our success is due to one very simple fact: we have been able to align the interests of the company with the interests of the employee.
We have done this by making WestJet employees owners of the airline. Making employees owners achieves two things. They are able to far more readily partake in the financial success of the business, and they think and act like owners. They have a direct stake in the success of the company. These factors, in turn, drive productivity, efficiency, and competitiveness. At WestJet we enable employees to be owners through two mechanisms--an employee share purchase plan and a profit share plan.
Under our employee share purchase plan, from each paycheque employees can purchase WestJet shares and the company will match the employee purchase dollar for dollar up to an amount equal to 20% of their base pay. Currently, 85% of our employees participate in the share purchase plan, contributing on average 13% of their pay to buy shares. We require our employees to hold the shares for one year before they can sell them.
We also have a profit share plan and every six months we pay a portion of profits to our employees. Last month we had our largest profit share party ever. And they are parties. If you're ever in Calgary when we're doing them, let me know and please come. We have a very good time. WestJet employees earned approximately $30 million in profit share for Q-2 and Q-3 of this year. Employees can use their profit share cheques to buy shares in WestJet, and again, the company will match the purchase dollar for dollar up to that 20% threshold.
As robust as this approach is to driving ownership and enabling WestJetters to benefit from the success of the business, these efforts are being undermined to a degree by the Income Tax Act. Under the act, when the company buys the employee the matching shares, the employee has to immediately pay tax at their personal marginal rate on the full amount of the company's contribution. Thus, to purchase shares, employees must first pay their regular income tax on wages, then they pay the money to buy the shares, then they have to immediately pay the tax on the employer's contribution. This clearly inhibits the ability of the typical employee to participate. It is eating up too much of their disposable income.
The solution to this problem is very simple: don't require employees to immediately pay income tax on the company's matching contribution. Instead, defer the tax until the employee actually sells the shares. And please note, we're saying defer the tax, we're not saying wipe out the tax.
Fortunately for us, the concept of deferring the tax is already in the act. When someone receives stock options, they are not immediately taxed on the value of the stock options. In fact, they are not taxed until the options are actually exercised or can be exercised. Employee share purchase plans should be treated the same way.
At WestJet, under our share purchase plan, you cannot sell the shares for one year. Thus, just as is the case with options, there is no financial benefit until the waiting period is finished.
Taking the concept of deferral that already applies to stock options and applying it to employee share purchase plans will allow a far greater proportion of the workforce to fully embrace and utilize share purchase plans. It will also encourage more companies to adopt share purchase plans.
At the end of the day, it is WestJet's view that to drive overall Canadian productivity, we have to look at mechanisms that focus on the individual employee mechanisms that go across industries; that go across regions; and that include part-time, full-time, hourly, and salaried employees. We need to look at mechanisms that make it more direct and meaningful for employees to benefit from their company's success, and mechanisms that align the interests of the employee and the company. Based on our experience to date over the past 11 years, we believe we have found the model that achieves these objectives reasonably well--nothing is perfect--in a notoriously difficult industry.
By recommending that the tax on employer contributions to an employee share purchase plan be deferred until the employee actually sells the shares, this committee can make a small but very important change to drive overall Canadian productivity and competitiveness.
Thank you.