WestJet announces a 72 per cent increase in third quarter net earnings
Airline reports 22nd consecutive quarter of profitability
CALGARY, Nov. 3 /PRNewswire-FirstCall/ - WestJet (TSX:WJA) today reported third quarter 2010 net earnings of $54 million, or 37 cents per diluted share, which marks its 22nd consecutive quarter of profitability and a 72 per cent increase in net earnings, year over year.
WestJet reported an operating margin of 13.2 per cent, compared to 12.8 per cent in the third quarter of 2009. WestJet's third quarter 2010 pre-tax margin was 11.1 per cent, compared to 8.3 per cent in the same period in 2009.
Operating highlights (stated in Canadian dollars)
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Year-to- Year-to-
date date
Q3 2010 Q3 2009 Change 2010 2009 Change
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Net earnings
(millions) $54.0 $31.4 72.0% $88.8 $78.0 13.8%
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Net earnings
excluding
special
items*
(millions) $54.0 $31.4 72.0% $94.9 $75.7 25.4%
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Diluted earnings
per share $0.37 $0.24 54.2% $0.61 $0.61 -
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Diluted earnings
per share
excluding
special
items* $0.37 $0.24 54.2% $0.65 $0.59 10.2%
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Total revenues
(millions) $684.6 $600.6 14.0% $1,916.4 $1,711.1 12.0%
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Operating
margin 13.2% 12.8% 0.4 pts. 8.8% 10.2% (1.4 pts.)
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ASMs (available
seat miles)
(billions) 5.031 4.503 11.7% 14.514 13.175 10.2%
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RPMs (revenue
passenger
miles)
(billions) 4.007 3.587 11.7% 11.671 10.374 12.5%
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Load factor 79.6% 79.7% (0.1 pts.) 80.4% 78.7% 1.7 pts.
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Yield (revenue
per revenue
passenger
mile) (cents) 17.09 16.74 2.1% 16.42 16.49 (0.4%)
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RASM (revenue
per available
seat mile)
(cents) 13.61 13.34 2.0% 13.20 12.99 1.6%
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CASM (cost per
available
seat mile)
(cents) 11.81 11.63 1.5% 12.04 11.66 3.3%
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CASM excluding
fuel and
employee
profit share
(cents)* 8.25 8.16 1.1% 8.53 8.37 1.9%
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* Refer to reconciliations in the accompanying tables for further
information regarding adjustments.
"We are very pleased with our third quarter results," said WestJet President and CEO Gregg Saretsky. "I thank WestJetters for their passion and commitment to providing outstanding guest service, which has boosted our bottom line. While delivering strong financial results, the quarter also involved tremendous effort leading up to the execution of two significant strategic milestones for us with the October announcement of WestJet's first code-share agreement, with Cathay Pacific Airways, and the first interline agreement with a U.S. carrier, American Airlines."
WestJet continues to focus on ways to reduce costs and make its operations more efficient, while providing guests with increased self-service options. The airline has now introduced self-serve baggage tagging at both Vancouver and Calgary airports, with plans to fully implement this capability at both Toronto Pearson and Edmonton International Airport by the end of 2010.
The airline plans fourth quarter capacity to increase 13 to 14 per cent year over year which it expects to absorb while improving year-over-year RASM. WestJet is encouraged by the gradual recovery in pricing and the pace of current bookings.
WestJet is continuing its efforts to drive increased ancillary revenue while maintaining its value leadership position. Effective today, for travel on or after January 19, 2011, WestJet will begin charging a $20 fee to guests checking a second bag on all flights. Concurrent with this change, WestJet will reduce the fee for the third and fourth bags from $75 to $50. "These fees are less than what other North American airlines are charging," added Gregg Saretsky. "This, we believe, strikes the right balance for our guests, our shareholders and our employees."
Caution regarding forward-looking statements
Certain information set forth in this press release, including information regarding anticipated capacity increases in the fourth quarter of 2010, 2010 RASM, cost reductions and operational efficiency, initiatives to increase ancillary revenues, checked baggage services and fees, and corporate vision contains forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond WestJet's control. These forward-looking statements are based on currently available implementation plans, agreements and bookings, but may vary due to factors including, but not limited to, changes in consumer demand, changes in fuel prices, delays in aircraft delivery, changes in guest demand, general economic conditions, competitive environment, ability to effectively implement and maintain critical systems and other factors described in WestJet's public reports and filings, which are available on WestJet's profile at www.sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking statements as actual results may vary materially from the forward-looking statements. WestJet does not undertake to update, correct or revise any forward-looking statements as a result of any new information, future events or otherwise, except as may be required by applicable law.
Management's Discussion & Analysis and the Consolidated Financial Statements and Notes for the three and nine months ended September 30, 2010, are available through the Internet on www.westjet.com or WestJet's SEDAR profile at www.sedar.com.
Conference call
WestJet will hold its quarterly analysts' conference call today, November 3, 2010, at 9 a.m. MDT (11 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's third quarter 2010 results and answer questions from financial analysts. Following the analysts' question-and-answer period, media will be given an opportunity to ask questions pertaining to the airline's third quarter results. The conference call is available in Toronto by calling 1-647-427-7450 and outside Toronto through the toll-free telephone number 1-888-231-8191. The call can also be heard through an Internet webcast in the Media and Investor section of www.westjet.com.
About WestJet
WestJet is Canada's preferred airline, offering scheduled service throughout its 71-city North American and Caribbean network. Inducted into Canada's Most Admired Corporate Cultures Hall of Fame and named one of Canada's best employers, WestJet pioneered low-cost flying in Canada. WestJet offers increased legroom, leather seats and live seatback television provided by Bell TV on its modern fleet of 90 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 45 aircraft through 2017, WestJet strives to be one of the five most successful international airlines in the world.
Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------------------------------------
Revenues:
Guest $ 636,182 $ 557,413 $ 1,763,376 $ 1,539,756
Other 48,382 43,217 153,070 171,322
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684,564 600,630 1,916,446 1,711,078
Expenses:
Aircraft fuel 170,828 150,648 495,332 421,716
Airport operations 94,134 84,131 288,036 260,432
Flight operations
and navigational
charges 84,149 78,327 245,288 225,449
Sales and
distribution 64,938 41,721 188,729 121,943
Marketing, general
and administration 44,483 52,034 142,899 153,657
Aircraft leasing 36,469 26,676 105,555 78,858
Depreciation and
amortization 34,021 36,072 100,208 104,467
Inflight 30,680 26,155 92,414 85,338
Maintenance 26,085 22,414 74,464 72,388
Employee profit
share 8,567 5,476 14,780 12,378
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594,354 523,654 1,747,705 1,536,626
-------------------------------------------------------------------------
Earnings from operations 90,210 76,976 168,741 174,452
Non-operating income
(expense):
Interest income 2,531 965 6,303 4,047
Interest expense (14,893) (16,729) (45,862) (51,340)
Gain (loss) on foreign
exchange (1,563) (7,140) 567 (11,552)
Gain (loss) on
disposal of property
and equipment (113) (140) 285 (853)
Loss on derivatives (473) (4,329) (399) (989)
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(14,511) (27,373) (39,106) (60,687)
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Earnings before income
taxes 75,699 49,603 129,635 113,765
Income tax expense:
Current 383 710 1,115 2,102
Future 21,333 17,475 39,708 33,660
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21,716 18,185 40,823 35,762
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Net earnings $ 53,983 $ 31,418 $ 88,812 $ 78,003
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Earnings per share:
Basic $ 0.37 $ 0.24 $ 0.61 $ 0.61
Diluted $ 0.37 $ 0.24 $ 0.61 $ 0.61
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Weighted average
number of shares
outstanding
- basic 145,192,443 128,268,390 145,041,379 128,042,968
Weighted average
number of shares
outstanding
- diluted 145,346,219 128,325,048 145,308,757 128,195,425
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-------------------------------------------------------------------------
Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
September 30, December 31,
2010 2009
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,218,063 $ 1,005,181
Accounts receivable 27,259 27,654
Prepaid expenses, deposits and other 34,151 56,239
Inventory 15,329 26,048
Future income tax 1,086 2,560
-------------------------------------------------------------------------
1,295,888 1,117,682
Property and equipment 2,238,573 2,307,566
Intangible assets 13,012 14,087
Other assets 58,699 54,367
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$ 3,606,172 $ 3,493,702
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-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 314,893 $ 231,401
Advance ticket sales 323,441 286,361
Non-refundable guest credits 38,906 64,506
Current portion of long-term debt 184,252 171,223
Current portion of obligations under
capital leases 329 744
-------------------------------------------------------------------------
861,821 754,235
Long-term debt 906,601 1,048,554
Obligations under capital leases 3,268 3,358
Other liabilities 19,067 19,628
Future income tax 318,990 278,999
-------------------------------------------------------------------------
2,109,747 2,104,774
Shareholders' equity:
Share capital 658,226 633,075
Contributed surplus 59,334 71,503
Accumulated other comprehensive loss (9,149) (14,852)
Retained earnings 788,014 699,202
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1,496,425 1,388,928
-------------------------------------------------------------------------
$ 3,606,172 $ 3,493,702
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------------------------------------
Operating activities:
Net earnings $ 53,983 $ 31,418 $ 88,812 $ 78,003
Items not involving
cash:
Depreciation and
amortization 34,021 36,072 100,208 104,467
Amortization of
other liabilities (452) (860) (1,436) (1,749)
Amortization of
hedge settlements 350 350 1,049 1,050
Issuance of shares
pursuant to
employee share
purchase plan - 7,236 - 7,236
Loss on derivatives 473 2,653 399 1,020
(Gain) loss on
disposal of
property and
equipment 113 101 (264) 1,173
Stock-based
compensation
expense 3,031 5,577 12,462 11,361
Income tax credit - - (1,667) (1,952)
Future income tax
expense 21,333 17,475 39,708 33,660
Unrealized foreign
exchange Loss 2,075 7,985 1,408 7,121
Change in non-cash
working capital 48,427 24,811 132,681 12,705
-------------------------------------------------------------------------
163,354 132,818 373,360 254,095
-------------------------------------------------------------------------
Financing activities:
Repayment of long-term
debt (42,843) (41,387) (128,346) (124,470)
Decrease in
obligations under
capital leases (87) (99) (505) (294)
Issuance of common
shares - 172,463 520 172,463
Share issue costs - (7,456) - (7,456)
Change in other assets 77 - (4,411) -
Change in non-cash
working capital 1,679 1,691 2,621 672
-------------------------------------------------------------------------
(41,174) 125,212 (130,121) 40,915
-------------------------------------------------------------------------
Investing activities:
Aircraft additions (3,938) (24,065) (18,727) (108,261)
Other property and
equipment and
intangible additions (6,817) (7,772) (12,064) (44,228)
-------------------------------------------------------------------------
(10,755) (31,837) (30,791) (152,489)
-------------------------------------------------------------------------
Cash flow from
operating, financing
and investing
activities 111,425 226,193 212,448 142,521
Effect of foreign
exchange on cash and
cash equivalents (1,525) (4,176) 434 (1,087)
-------------------------------------------------------------------------
Net change in cash and
cash equivalents 109,900 222,017 212,882 141,434
Cash and cash
equivalents, beginning
of period 1,108,163 739,631 1,005,181 820,214
-------------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 1,218,063 $ 961,648 $ 1,218,063 $ 961,648
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Cash interest paid $ 15,081 $ 16,431 $ 46,764 $ 51,637
Cash taxes paid $ 712 $ 2,712 $ 2,367 $ 6,037
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Operating highlights
(Unaudited)
-------------------------------------------------------------------------
Three months ended September 30
2010 2009 Change
-------------------------------------------------------------------------
ASMs 5,031,112,301 4,503,392,044 11.7%
RPMs 4,006,665,895 3,587,028,442 11.7%
Load factor 79.6% 79.7% (0.1 pts.)
Yield (cents) 17.09 16.74 2.1%
RASM (cents) 13.61 13.34 2.0%
CASM (cents) 11.81 11.63 1.5%
CASM excluding fuel and
employee profit share (cents) 8.25 8.16 1.1%
Fuel consumption (litres) 245,122,101 218,950,368 12.0%
Fuel costs per litre (dollars) 0.70 0.69 1.4%
Segment guests 3,928,723 3,654,097 7.5%
Average stage length (miles) 962 921 4.5%
Utilization (hours) 11.6 11.6 -
Number of full-time equivalent
employees at period end 6,581 6,062 8.6%
Fleet size at period end 90 81 11.1%
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-------------------------------------------------------------------------
Nine months ended September 30
2010 2009 Change
-------------------------------------------------------------------------
ASMs 14,514,281,179 13,175,067,069 10.2%
RPMs 11,671,460,713 10,373,856,153 12.5%
Load factor 80.4% 78.7% 1.7pts.
Yield (cents) 16.42 16.49 (0.4%)
RASM (cents) 13.20 12.99 1.6%
CASM (cents) 12.04 11.66 3.3%
CASM excluding fuel and
employee profit share (cents) 8.53 8.37 1.9%
Fuel consumption (litres) 707,720,372 642,244,113 10.2%
Fuel costs per litre (dollars) 0.70 0.66 6.1%
Segment guests 11,370,031 10,523,659 8.0%
Average stage length (miles) 963 922 4.4%
Utilization (hours) 11.6 11.8 (1.7%)
Number of full-time equivalent
employees at period end 6,581 6,062 8.6%
Fleet size at period end 90 81 11.1%
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-------------------------------------------------------------------------
Reconciliation of non-GAAP measures to GAAP
To supplement the consolidated financial statements presented in accordance with Canadian GAAP, WestJet uses various non-GAAP performance measures. These measures are provided to enhance the reader's overall understanding of WestJet's current financial performance and are included to provide investors and management with an alternative method for assessing the operating results in a manner that is focused on the performance of ongoing operations and to provide a more consistent basis for comparison between quarters. These measures are not in accordance with, or an alternative to, Canadian GAAP and do not have standardized meanings. Therefore, they are not likely to be comparable to similar measures presented by other entities.
Net earnings and diluted earnings per share excluding special items
(Stated in thousands of Canadian dollars, except per unit amounts)
(Unaudited)
WestJet believes excluding special items is useful for investors to
evaluate its recurring operational performance.
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------------------------------------
Net earnings - GAAP $ 53,983 $ 31,418 $ 88,812 $ 78,003
Adjusted for:
CEO departure (net
of tax) - - 3,700 -
Income tax rate
reductions and
estimate change - - 2,372 (2,273)
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Net earnings excluding
special items -
non-GAAP $ 53,983 $ 31,418 $ 94,884 $ 75,730
Diluted weighted
average number of
shares outstanding 145,346,219 128,325,048 145,308,757 128,129,425
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Diluted earnings per
share excluding
special items -
non-GAAP $ 0.37 $ 0.24 $ 0.65 $ 0.59
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CASM excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except per unit amounts)
(Unaudited)
WestJet excludes the effects of aircraft fuel expense and employee profit
share expense to assess the operating performance of the business. Fuel
expense is excluded from operating results due to the fact that fuel
prices are impacted by a host of factors outside WestJet's control, such
as significant weather events, geopolitical tensions, refinery capacity
and global demand and supply. Excluding this expense allows WestJet to
analyze its operating results on a comparable basis. Employee profit
share expense is excluded from operating results due to its variable
nature and excluding this expense allows greater comparability.
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Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
-------------------------------------------------------------------------
Operating expenses
- GAAP $ 594,354 $ 523,654 $ 1,747,705 $ 1,536,626
Adjusted for:
Aircraft fuel
expense (170,828) (150,648) (495,332) (421,716)
Employee profit
share expense (8,567) (5,476) (14,780) (12,378)
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Operating expenses
excluding above
items - non-GAAP $ 414,959 $ 367,530 $ 1,237,593 $ 1,102,532
ASMs (in thousands) 5,031,112 4,503,392 14,514,281 13,175,067
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CASM excluding above
items - non-GAAP
(cents) 8.25 8.16 8.53 8.37
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SOURCE WestJet
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