News Releases
Airline achieves 21st consecutive quarter of positive earnings with $21 million of net earnings
CALGARY, Aug. 5 /CNW/ - WestJet (TSX:WJA) today reported second quarter 2010 net earnings of $21 million, or 14 cents per diluted share, which marks its 21st consecutive quarter of profitability and a 130 per cent increase in net earnings, year-over-year. Excluding the impact of a one-time special item related to revised estimates for provincial income tax allocation calculations in the second quarter of 2010, WestJet's adjusted second quarter net earnings for 2010 were $23.4 million or 16 cents per diluted share.
WestJet reported an operating margin of 6.6 per cent, compared to 6.9 per cent in the second quarter of 2009. WestJet's second quarter 2010 pre-tax margin was 5.4 per cent, compared to 2.6 per cent in the same 2009 period.
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Operating highlights (stated in Canadian dollars)
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Year-to- Year-to-
date date
Q2 2010 Q2 2009 Change 2010 2009 Change
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Net earnings
(millions) $21.0 $9.2 129.7% $34.8 $46.6 (25.2%)
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Net earnings
excluding
special
items*
(millions) $23.4 $9.2 155.7% $40.9 $44.3 (7.7%)
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Diluted earnings
per share $0.14 $0.07 100.0% $0.24 $0.36 (33.3%)
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Diluted earnings
per share
excluding
special
items* $0.16 $0.07 128.6% $0.28 $0.35 (20.0%)
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Total revenues
(millions) $612.1 $531.2 15.2% $1,231.9 $1,110.4 10.9%
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Operating
margin 6.6% 6.9% (0.3 pts.) 6.4% 8.8% (2.4 pts.)
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ASMs (available
seat miles)
(billions) 4.784 4.315 10.9% 9.483 8.672 9.4%
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RPMs (revenue
passenger
miles)
(billions) 3.825 3.285 16.4% 7.665 6.787 12.9%
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Load factor 80.0% 76.1% 3.9 pts. 80.8% 78.3% 2.5 pts.
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Yield (revenue
per revenue
passenger
mile) (cents) 16.00 16.17 (1.1%) 16.07 16.36 (1.8%)
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RASM (revenue
per available
seat mile)
(cents) 12.80 12.31 4.0% 12.99 12.81 1.4%
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CASM (cost per
available
seat mile)
(cents) 11.96 11.46 4.4% 12.16 11.68 4.1%
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CASM excluding
fuel and
employee
profit share
(cents)* 8.44 8.45 (0.1%) 8.67 8.48 2.2%
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* Refer to reconciliations in the accompanying tables for further
information regarding adjustments.
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"We are pleased to deliver our 21st consecutive quarter of profitability," said WestJet President and CEO Gregg Saretsky. "It is WestJetters' unrelenting focus on friendly service and great value that allows our dedicated and talented team to continue producing solid results, quarter after quarter, year in and year out."
"The improving demand and traffic results experienced during the quarter enabled us to increase our revenue by 15.2 per cent and our RASM by 4.0 per cent, compared to the prior period," commented Gregg Saretsky. "In June, we introduced our everyday low pricing structure to provide great fares year-round across our entire schedule and reduce the volatility in pricing. We are encouraged by the early booking trends and the improved mix of fares we are selling." Third quarter RASM estimates are anticipated to be positive again on a year-over-year basis.
During the second quarter, CASM increased 4.4 per cent as the cost of fuel in cents per litre is up 14.5 per cent, including hedging, year-over-year. Focusing on controllable costs, CASM ex fuel and profit share was down 0.1 per cent year-over-year. The main cost reductions came from a stronger Canadian dollar and increased average stage length, offset by higher commissions from WestJet Vacations' significant revenue growth, quarter over quarter. An increase of one to three per cent, year-over-year, in CASM ex fuel and profit share is expected for the third quarter.
Significant investments in technology to enhance WestJet's strategic capabilities in 2009 are now being leveraged to deliver new revenue opportunities, while mitigating cost impacts from the increased complexity in the organization. WestJet continues to focus on implementing innovative self-serve solutions that will enhance guest experience and save time for guests, while expanding margins.
WestJet believes the Canadian economy needs to rebound further before it can support more new domestic capacity growth. Domestic capacity was therefore reduced during the second quarter and new capacity directed into the airline's southern markets. Most of the new capacity will continue to be deployed outside of Canada in the third and fourth quarters as well. The airline's capacity for the third quarter is expected to increase between 11 and 12 per cent. Its full-year capacity is expected to increase nine to 10 per cent.
In light of a recent downward revision to the Canadian GDP growth estimates and the continual assessment of other economic indicators, WestJet is deferring the delivery of three aircraft from 2011 (1) and 2012 (2), out to 2017. WestJet will now be taking delivery of six aircraft in 2011 and five aircraft in 2012. "Economic uncertainty has caused us to re-think our short-term capacity plan," commented Gregg Saretsky. "We have worked closely with our valued partner Boeing to further enhance our fleet plan flexibility."
Caution regarding forward-looking statements
Certain information set forth in this press release, including information regarding future load factors and yield, anticipated RASM in Q3 2010, anticipated CASM in Q3 2010, expected capacity growth, use of new technology, and Q3 2010 capacity utilization and fleet planning, 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 six months ended June 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, August 5, 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 second 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.
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.
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Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
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Three months ended June 30 Six months ended June 30
2010 2009 2010 2009
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Revenues:
Guest revenues $ 562,791 $ 485,248 $ 1,127,194 $ 982,343
Other revenues 49,326 45,915 104,688 128,105
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612,117 531,163 1,231,882 1,110,448
Expenses:
Aircraft fuel 164,450 128,677 324,504 271,068
Airport operations 92,799 82,644 193,902 176,301
Flight operations
and navigational
charges 82,403 75,415 161,139 147,122
Sales and
distribution 57,340 39,308 123,791 80,222
Marketing, general
and administration 48,338 48,757 98,416 101,623
Aircraft leasing 35,113 27,106 69,086 52,182
Depreciation and
amortization 33,308 34,502 66,187 68,395
Inflight 31,404 30,299 61,734 59,183
Maintenance 22,897 26,455 48,379 49,974
Employee profit
share 3,898 1,185 6,213 6,902
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571,950 494,348 1,153,351 1,012,972
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Earnings from operations 40,167 36,815 78,531 97,476
Non-operating income
(expense):
Interest income 2,065 964 3,772 3,082
Interest expense (15,279) (17,126) (30,969) (34,611)
Gain (loss) on foreign
exchange 5,950 (9,033) 2,130 (4,412)
Gain (loss) on
disposal of property
and equipment 542 (607) 398 (713)
Gain (loss) on
derivatives (558) 2,706 74 3,340
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(7,280) (23,096) (24,595) (33,314)
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Earnings before income
taxes 32,887 13,719 53,936 64,162
Income tax expense:
Current 370 686 732 1,392
Future 11,488 3,880 18,375 16,185
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11,858 4,566 19,107 17,577
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Net earnings $ 21,029 $ 9,153 $ 34,829 $ 46,585
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Earnings per share:
Basic $ 0.14 $ 0.07 $ 0.24 $ 0.36
Diluted $ 0.14 $ 0.07 $ 0.24 $ 0.36
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Weighted average
number of shares
outstanding -
basic 145,191,666 127,932,712 144,912,473 127,928,389
Weighted average
number of shares
outstanding -
diluted 145,341,526 127,969,182 145,237,594 128,129,540
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Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
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June 30, December 31,
2010 2009
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Assets
Current assets:
Cash and cash equivalents $ 1,108,163 $ 1,005,181
Accounts receivable 29,987 27,654
Prepaid expenses, deposits and other 40,959 56,239
Inventory 15,402 26,048
Future income tax 1,171 2,560
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1,195,682 1,117,682
Property and equipment 2,262,161 2,307,566
Intangible assets 13,622 14,087
Other assets 60,505 54,367
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$ 3,531,970 $ 3,493,702
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 267,128 $ 231,401
Advance ticket sales 325,675 286,361
Non-refundable guest credits 44,517 64,506
Current portion of long-term debt 179,759 171,223
Current portion of obligations under
capital leases 398 744
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817,477 754,235
Long-term debt 954,932 1,048,554
Obligations under capital leases 3,286 3,358
Other liabilities 19,306 19,628
Future income tax 297,753 278,999
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2,092,754 2,104,774
Shareholders' equity:
Share capital 658,120 633,075
Contributed surplus 56,409 71,503
Accumulated other comprehensive loss (9,344) (14,852)
Retained earnings 734,031 699,202
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1,439,216 1,388,928
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$ 3,531,970 $ 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 June 30 Six months ended June 30
2010 2009 2010 2009
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Operating activities:
Net earnings $ 21,029 $ 9,153 $ 34,829 $ 46,585
Items not involving
cash:
Depreciation and
amortization 33,308 34,502 66,187 68,395
Amortization of
other liabilities (493) (654) (984) (889)
Amortization of
hedge settlements 350 350 699 700
(Gain) loss on
derivatives 558 (2,328) (74) (3,226)
(Gain) loss on
disposal of
property and
equipment (537) 867 (377) 1,072
Stock-based
compensation
expense 4,146 3,149 9,431 5,784
Income tax credit 149 - (1,667) (1,952)
Future income tax
expense 11,488 3,880 18,375 16,185
Unrealized foreign
exchange (gain)
loss (4,933) 8,577 (667) (864)
Change in non-cash
working capital 19,699 (31,745) 84,254 (10,513)
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84,764 25,751 210,006 121,277
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Financing activities:
Repayment of long-term
debt (42,706) (41,493) (85,503) (83,083)
Decrease in
obligations under
capital leases (299) (98) (418) (195)
Issuance of common
shares 520 - 520 -
Change in other assets (17) 700 (4,488) -
Change in non-cash
working capital (1,587) (1,849) 942 (1,019)
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(44,089) (42,740) (88,947) (84,297)
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Investing activities:
Aircraft additions (9,994) (57,202) (14,789) (84,196)
Other property and
equipment and
intangible additions (2,499) (18,408) (5,247) (36,456)
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(12,493) (75,610) (20,036) (120,652)
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Cash flow from
operating, financing
and investing
activities 28,182 (92,599) 101,023 (83,672)
Effect of foreign
exchange on cash and
cash equivalents 3,342 (3,561) 1,959 3,089
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Net change in cash and
cash equivalents 31,524 (96,160) 102,982 (80,583)
Cash and cash
equivalents, beginning
of period 1,076,639 835,791 1,005,181 820,214
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Cash and cash
equivalents, end of
period $ 1,108,163 $ 739,631 $ 1,108,163 $ 739,631
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Cash interest paid $ 15,445 $ 17,200 $ 31,683 $ 35,206
Cash taxes paid $ 932 $ 845 $ 1,655 $ 2,085
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Operating highlights
(Unaudited)
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Three months ended June 30
2010 2009 Change
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ASMs 4,783,649,533 4,314,869,886 10.9%
RPMs 3,824,847,258 3,284,898,568 16.4%
Load factor 80.0% 76.1% 3.9 pts.
Yield (cents) 16.00 16.17 (1.1%)
RASM (cents) 12.80 12.31 4.0%
CASM (cents) 11.96 11.46 4.4%
CASM excluding fuel and employee
profit share (cents) 8.44 8.45 (0.1%)
Fuel consumption (litres) 232,129,892 207,532,865 11.9%
Fuel costs per litre (dollars) 0.71 0.62 14.5%
Segment guests 3,752,818 3,417,877 9.8%
Average stage length (miles) 962 908 5.9%
Utilization (hours) 11.5 11.5 -
Number of full-time equivalent
employees at period end 6,388 6,140 4.0%
Fleet size at period end 89 79 12.7%
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Six months ended June 30
2010 2009 Change
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ASMs 9,483,168,878 8,671,675,025 9.4%
RPMs 7,664,794,818 6,786,827,711 12.9%
Load factor 80.8% 78.3% 2.5 pts.
Yield (cents) 16.07 16.36 (1.8%)
RASM (cents) 12.99 12.81 1.4%
CASM (cents) 12.16 11.68 4.1%
CASM excluding fuel and employee
profit share (cents) 8.67 8.48 2.2%
Fuel consumption (litres) 462,598,271 423,293,745 9.3%
Fuel costs per litre (dollars) 0.70 0.64 9.4%
Segment guests 7,441,308 6,869,562 8.3%
Average stage length (miles) 963 923 4.3%
Utilization (hours) 11.6 11.9 (2.5%)
Number of full-time equivalent
employees at period end 6,388 6,140 4.0%
Fleet size at period end 89 79 12.7%
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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 June 30 Six months ended June 30
2010 2009 2010 2009
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Net earnings - GAAP $ 21,029 $ 9,153 $ 34,829 $ 46,585
Adjusted for:
CEO departure (net
of tax) - - 3,700 -
Income tax rate
reductions and
estimate change 2,372 - 2,372 (2,273)
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Net earnings excluding
special items -
non-GAAP $ 23,401 $ 9,153 $ 40,901 $ 44,312
Diluted weighted
average number of
shares outstanding 145,341,526 127,969,182 145,237,594 128,129,540
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Diluted earnings per
share excluding
special items -
non-GAAP $ 0.16 $ 0.07 $ 0.28 $ 0.35
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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 June 30 Six months ended June 30
2010 2009 2010 2009
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Operating expenses
- GAAP $ 571,950 $ 494,348 $ 1,153,351 $ 1,012,972
Adjusted for:
Aircraft fuel
expense (164,450) (128,677) (324,504) (271,068)
Employee profit
share expense (3,898) (1,185) (6,213) (6,902)
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Operating expenses
excluding above
items - non-GAAP $ 403,602 $ 364,486 $ 822,634 $ 735,002
ASMs (in thousands) 4,783,650 4,314,870 9,483,169 8,671,675
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CASM excluding above
items - non-GAAP
(cents) 8.44 8.45 8.67 8.48
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