WestJet reports first quarter net earnings of $13.8 million
Airline achieves 20th consecutive quarter of positive earnings
CALGARY, May 4 /PRNewswire-FirstCall/ - WestJet (TSX:WJA) today reported first quarter 2010 net earnings of $13.8 million, or 10 cents per diluted share, which marks its 20th consecutive quarter of profitability. Excluding the impact of a one-time special item related to the departure of WestJet's CEO in the first quarter of 2010, WestJet's adjusted first quarter net earnings for 2010 were $17.5 million or 12 cents per diluted share.
"We are very pleased to be starting 2010 with another quarter of profitability," said WestJet President and CEO Gregg Saretsky, "especially in light of the challenging economic environment and rising energy costs. Our talented and dedicated team of WestJetters and a disciplined approach to running a low-cost business have produced first quarter results that continue to be among the best in North America based on normalized earnings before tax margins."
Operating highlights (stated in Canadian dollars)
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Q1 2010 Q1 2009 Change
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Net earnings (millions) $13.8 $37.4 (63.1%)
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Net earnings excluding special items* $17.5 $35.2 (50.3%)
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Diluted earnings per share $0.10 $0.29 (65.5%)
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Diluted earnings per share excluding
special items* $0.12 $0.27 (55.6%)
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Total revenue (millions) $619.8 $579.3 7.0%
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Operating margin 6.2% 10.5% (4.3 pts.)
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ASMs (available seat miles) (billions) 4.700 4.357 7.9%
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RPMs (revenue passenger miles) (billions) 3.840 3.502 9.7%
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Load factor 81.7% 80.4% 1.3 pts.
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Yield (revenue per revenue passenger
mile) (cents) 16.14 16.54 (2.4%)
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RASM (revenue per available seat mile)
(cents) 13.19 13.30 (0.8%)
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CASM (cost per available seat mile)
(cents) 12.37 11.90 3.9%
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CASM excluding fuel and employee profit
share (cents)* 8.92 8.50 4.9%
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* Refer to reconciliations in the accompanying tables for further
information regarding adjustments.
With regard to the airline's first quarter operational highlights, Gregg Saretsky commented, "We are happy to have achieved a seven per cent year-over-year improvement in revenue, notwithstanding a 2.4 per cent decline in yield. Our yield continued to be under pressure from price-sensitive travellers, which resulted in a RASM decline of 0.8 per cent."
Indications that stronger load factor and improving yield trends are starting to emerge - and assuming this trend remains - the airline expects to see year-over-year RASM gains in the second quarter of 2010.
A 3.9 per cent increase in CASM, contributed to the company's first quarter profit declining from the profit recorded in the first quarter of 2009. CASM increases were primarily due to higher sales and distribution costs and elevated fuel prices. Significant WestJet Vacations' revenue growth and the associated commissions on sales during the quarter were the main drivers behind the increased sales and distribution expense. Based on current cost trends, WestJet anticipates second quarter 2010 CASM, excluding fuel and employee profit share, to increase less than 2.5 per cent year-over-year compared to the 4.9 per cent year-over-year increase seen in the first quarter.
WestJet's capacity growth of 7.9 per cent for the first quarter was driven exclusively by expansion in the airline's southern markets. WestJet Vacations' continued growth helped support the airline's performance in its southern markets and positively contributed to the bottom line. The airline's capacity for the second quarter is expected to increase 10 per cent. Its full-year capacity is expected to increase nine to 10 per cent with the majority of the additional capacity going to southern destinations.
"WestJet's focus for 2010 will be to leverage the investments we made in technology and capabilities throughout 2009," said Gregg Saretsky. "Our priorities are to drive cost efficiencies and to tap into new sources of revenue now that we have our long-term reservation system in place, while utilizing our capacity to drive profitability, including airline partnerships and new ancillary revenues from our recently launched Frequent Guest Program and our WestJet RBC MasterCard program."
WestJet also announced its first quarter 2010 operational performance statistics. WestJet calculates its on-time performance (the percentage of flights that arrived within 15 minutes of their scheduled time) and completion rate (the percentage of flights completed from flights originally scheduled) based on the U.S. Department of Transportation's standards. WestJet's baggage ratio represents the number of delayed or lost baggage claims made per 1,000 guests. The airline reported improvements in all three categories for the first quarter of 2010.
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Q1 2010 Q1 2009 Change
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On-time performance 72.4% 70.6% 1.8 pts.
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Completion rate 98.4% 97.5% 0.9 pts.
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Bag ratio 3.95 4.41 10.4%
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Caution regarding forward-looking statements
Certain information set forth in this press release, including information regarding future load factors and yield, anticipated RASM in Q2 2010, anticipated CASM in Q2 2010, expected capacity growth, demand recovery and WestJet's 2010 business focus, 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 months ended March 31, 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, May 4, 2010, at 8 a.m. MDT (10 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's first 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 first 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 listened to through an Internet webcast in the Media and Investor section of www.westjet.com.
Annual general meeting (AGM)
WestJet will hold its AGM at 2 p.m. MDT (4 p.m. EDT) today on May 4, 2010, at WestJet's Calgary Campus, which is located at 22 Aerial Place NE. The AGM webcast will be available live in the Media and Investor section of www.westjet.com.
Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
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Three months ended March 31 2010 2009
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Revenues:
Guest revenues $ 564,403 $ 497,095
Other revenues 55,362 82,190
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619,765 579,285
Expenses:
Aircraft fuel 160,054 142,391
Airport operations 101,103 93,657
Flight operations and navigational charges 78,736 71,707
Sales and distribution 66,451 40,914
Marketing, general and administration 50,078 52,866
Aircraft leasing 33,973 25,076
Depreciation and amortization 32,879 33,893
Inflight 30,330 28,884
Maintenance 25,482 23,519
Employee profit share 2,315 5,717
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581,401 518,624
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Earnings from operations 38,364 60,661
Non-operating income (expense):
Interest income 1,707 2,118
Interest expense (15,690) (17,485)
Gain (loss) on foreign exchange (3,820) 4,621
Loss on disposal of property and equipment (144) (106)
Gain on derivatives 632 634
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(17,315) (10,218)
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Earnings before income taxes 21,049 50,443
Income tax expense:
Current 362 706
Future 6,887 12,305
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7,249 13,011
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Net earnings $ 13,800 $ 37,432
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Earnings per share:
Basic $ 0.10 $ 0.29
Diluted $ 0.10 $ 0.29
Weighted average number of shares
outstanding - basic 144,630,179 127,924,018
Weighted average number of shares
outstanding - diluted 145,132,507 128,291,679
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Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
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March 31, December 31,
2010 2009
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Assets
Current assets:
Cash and cash equivalents $ 1,076,639 $ 1,005,181
Accounts receivable 17,821 27,654
Future income tax 2,288 2,560
Prepaid expenses, deposits and other 44,959 56,239
Inventory 19,850 26,048
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1,161,557 1,117,682
Property and equipment 2,284,801 2,307,566
Intangible assets 14,056 14,087
Other assets 57,618 54,367
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$ 3,518,032 $ 3,493,702
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 283,865 $ 231,401
Advance ticket sales 281,711 286,361
Non-refundable guest credits 58,718 64,506
Current portion of long-term debt 171,021 171,223
Current portion of obligations under
capital leases 679 744
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795,994 754,235
Long-term debt 1,004,895 1,048,554
Obligations under capital leases 3,303 3,358
Other liabilities 19,553 19,628
Future income tax 285,701 278,999
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2,109,446 2,104,774
Shareholders' equity:
Share capital 649,024 633,075
Contributed surplus 60,839 71,503
Accumulated other comprehensive loss (14,279) (14,852)
Retained earnings 713,002 699,202
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1,408,586 1,388,928
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$ 3,518,032 $ 3,493,702
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Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
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Three months ended March 31 2010 2009
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Operating activities:
Net earnings $ 13,800 $ 37,432
Items not involving cash:
Depreciation and amortization 32,879 33,893
Amortization of other liabilities (491) (235)
Amortization of hedge settlements 349 350
Unrealized gain on derivative instruments (632) (1,474)
Loss on disposal of property, equipment and
aircraft parts 160 205
Stock-based compensation expense 5,285 2,635
Income tax credit receivable (1,816) (1,952)
Future income tax expense 6,887 12,305
Unrealized foreign exchange loss (gain) 4,266 (9,441)
Change in non-cash working capital 64,555 21,808
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125,242 95,526
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Financing activities:
Repayment of long-term debt (42,797) (41,590)
Decrease in obligations under capital leases (119) (97)
Decrease in other assets (4,471) (700)
Change in non-cash working capital 2,529 830
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(44,858) (41,557)
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Investing activities:
Aircraft additions (4,795) (26,994)
Other property and equipment and intangible
additions (2,748) (18,048)
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(7,543) (45,042)
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Cash flow from operating, financing and investing
activities 72,841 8,927
Effect of foreign exchange on cash and cash
equivalents (1,383) 6,650
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Net change in cash and cash equivalents 71,458 15,577
Cash and cash equivalents, beginning of period 1,005,181 820,214
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Cash and cash equivalents, end of period $ 1,076,639 $ 835,791
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Cash interest paid $ 16,239 $ 18,006
Cash taxes paid $ 723 $ 1,240
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Operating Highlights
(Unaudited)
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Three months ended March 31
2010 2009 Change
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ASMs 4,699,519,345 4,356,805,139 7.9%
RPMs 3,839,947,560 3,501,929,143 9.7%
Load factor 81.7% 80.4% 1.3 pts.
Yield (cents) 16.14 16.54 (2.4%)
RASM (cents) 13.19 13.30 (0.8%)
CASM (cents) 12.37 11.90 3.9%
CASM excluding fuel and employee
profit share (cents) 8.92 8.50 4.9%
Fuel consumption (litres) 230,468,379 215,760,880 6.8%
Fuel costs per litre (dollars) 0.69 0.66 4.5%
Segment guests 3,688,490 3,451,685 6.9%
Average stage length (miles) 963 938 2.7%
Utilization (hours) 11.7 12.2 (4.1%)
Number of full-time equivalent
employees at period end 6,259 6,224 0.6%
Fleet size at period end 88 78 12.8%
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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.
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Three months ended March 31
2010 2009
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Net earnings - GAAP $ 13,800 $ 37,432
Adjusted for:
CEO departure (net of tax) 3,700 -
Income tax rate reductions and estimate
change - (2,273)
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Net earnings excluding special items
- non-GAAP $ 17,500 $ 35,159
Diluted weighted average number of shares
outstanding 145,132,507 128,291,679
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Diluted earnings per share excluding special
items - non-GAAP $ 0.12 $ 0.27
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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 March 31
2010 2009
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Operating expenses - GAAP $ 581,401 $ 518,624
Adjusted for:
Aircraft fuel expense (160,054) (142,391)
Employee profit share expense (2,315) (5,717)
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Operating expenses excluding above items
- non-GAAP $ 419,032 $ 370,516
ASMs 4,699,519,345 4,356,805,139
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CASM excluding above items - non-GAAP
(cents) 8.92 8.50
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About WestJet
WestJet is Canada's preferred airline, offering scheduled service throughout its 68-city North American and Caribbean network. Inducted into the corporate culture hall of fame after being named one of Canada's most admired corporate cultures in 2005, 2006, 2007 and 2008, 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 88 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 47 aircraft through 2016, WestJet strives to be one of the five most successful international airlines in the world.
SOURCE WestJet
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