News Releases

WestJet reports third quarter net earnings of $45.9 million

CALGARY, Oct. 30, 2018 /CNW/ - WestJet (TSX: WJA) today announced its third quarter results for 2018, with net earnings of $45.9 million, or $0.40 per fully diluted share. This result compares with net earnings of $135.9 million, or $1.15 per fully diluted share reported in the third quarter of 2017. Year-to-date, WestJet recorded net earnings of $62.3 million, or $0.54 per fully diluted share.

"We are pleased to return to profitability in the third quarter," Ed Sims, WestJet President and CEO. "We have achieved this result despite continued downward pressure from the dramatic increases in fuel price and competitive capacity, along with the lingering impact of the threat of industrial action. We now look forward to the delivery of our first Boeing 787-9 Dreamliner in late January, and starting direct services in Spring 2019 from Calgary to London (Gatwick), Paris, and Dublin. I would like to thank every WestJetter for their focus on delivering award-winning service to our guests."

Operating highlights (stated in Canadian dollars)


Q3 2018

Q3 2017

Change

Net earnings (millions)

$45.9

$135.9

(66.3%)

Diluted earnings per share

$0.40

$1.15

(65.2%)

Total revenue (millions)

$1,260.9

$1,214.6

3.8%

Operating margin

6.2%

16.3%

(10.1 pts)

ASMs (available seat miles) (billions)

8.880

8.077

9.9%

RPMs (revenue passenger miles) (billions)

7.516

6.922

8.6%

Load factor

84.6%

85.7%

(1.1 pts)

Segment guests

6,940,569

6,530,873

6.3%

Yield (revenue per revenue passenger mile) (cents)

16.78

17.55

(4.4%)

RASM (revenue per available seat mile) (cents)

14.20

15.04

(5.6%)

CASM (cost per available seat mile) (cents)

13.32

12.58

5.9%

Fuel costs per litre (cents)

85

62

37.1%

CASM, excluding fuel and employee profit share (cents)*

9.36

9.29

0.8%

 *Refer to reconciliations in the accompanying tables for further information regarding calculations.

 

Dividend declaration
On October 29, 2018, WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the fourth quarter of 2018, to be paid on December 28, 2018, to shareholders of record on December 12, 2018. All dividends paid by WestJet are, pursuant to subsection 89(14) of the Income Tax Act, designated as eligible dividends, unless indicated otherwise. An eligible dividend paid to a Canadian resident is entitled to the enhanced dividend tax credit.

Caution regarding forward-looking information
Certain information set forth in this news release is forward-looking information within the meaning of applicable securities laws. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond WestJet's control. The forward-looking information contained in this news release is based on WestJet's current forecasts and strategy, the expected demand environment, the utilization of our fleet, the forward-curve for jet fuel price, the expected exchange rate of the Canadian dollar to the U.S. dollar, agreements and bookings, but may vary due to factors including, but not limited to, changes in guest demand, changes in fuel prices, delays in aircraft delivery, general economic conditions, competitive environment, ability to effectively implement and maintain critical systems and other factors and risks described in WestJet's public reports and filings which are available under WestJet's profile at sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking information as actual results may vary materially from the forward-looking information. WestJet does not undertake to update, correct or revise any forward-looking information as a result of any new information, future events or otherwise, except as may be required by applicable law.

Non-GAAP measures
This news release contains disclosure respecting non-GAAP performance measures including, without limitation, CASM, excluding fuel and employee profit share and return on invested capital. These measures are included to enhance the overall understanding of WestJet's current financial performance and to provide an alternative method for assessing WestJet's operating results in a manner that is focused on the performance of WestJet's ongoing operations, and to provide a more consistent basis for comparison between reporting periods. These measures are not calculated in accordance with, or an alternative to, GAAP and do not have standardized meanings. Therefore, they may not be comparable to similar measures provided by other entities. Readers are urged to review the section entitled "Reconciliation of non-GAAP and additional GAAP measures" in WestJet's management's discussion and analysis of financial results for the three and nine months ended September 30, 2018 which is available under WestJet's profile on SEDAR at sedar.com, for a further discussion of such non-GAAP measures and a reconciliation of such measures to GAAP. The financial information accompanying this news release was prepared in accordance with International Financial Reporting Standards unless otherwise noted.

Management's discussion and analysis of financial results and consolidated financial statements and notes for the three and nine months ended September 30, 2018, are available through the Internet in the Investor Relations section of westjet.com or under WestJet's SEDAR profile at sedar.com.

Analyst conference call
WestJet will hold its quarterly analysts' conference call today, October 30, 2018, at 8 a.m. MT (10 a.m. ET). President and CEO Ed Sims and Executive Vice-President, Finance and CFO Harry Taylor will discuss WestJet's third quarter results and answer questions from financial analysts. The conference call will be available in Toronto by calling 416-915-3239, in Vancouver by calling 604-638-5340 and across Canada and the United States through the toll-free telephone number 1-800-319-4610. The call can also be heard live through an Internet webcast accessible via the Investor Relations section of westjet.com.

About WestJet
Together with WestJet's regional airline, WestJet Encore, we offer scheduled service to more than 100 destinations in North America, Central America, the Caribbean and Europe and to more than 175 destinations in over 20 countries through our airline partnerships. WestJet Vacations offers affordable, flexible vacations to more than 60 destinations and the choice of more than 800 hotels, resorts, condos and villas. Members of the WestJet Rewards program earn WestJet dollars on flights, vacation packages and more. Members use WestJet dollars towards the purchase of flights and vacations packages to any WestJet destination with no blackout periods, and have access to Member Exclusive fares offering deals to WestJet destinations throughout our network and those of our partner airlines.

WestJet is proud to be recognized as Best Airline in Canada and Travellers' Choice winner – North America for 2017 and 2018 in the TripAdvisor Travellers' Choice awards for Airlines. The airline was also named the Travellers' Choice Winner – Economy, North America, 2018. All awards are based on authentic reviews from the travelling public on TripAdvisor, the world's largest travel site. We are one of very few airlines globally that does not commercially overbook.

WestJet is publicly traded on the Toronto Stock Exchange (TSX) under the symbol WJA.

For more information about everything WestJet, please visit westjet.com.  

Recent recognition includes:
2018/2017 Best Airline in Canada and Travellers' Choice Winner Mid-Sized and Low Cost Airlines – North America(TripAdvisor Travellers' Choice awards for Airlines)
2018 Travellers' Choice Winner – Economy, North America (TripAdvisor Travellers' Choice awards for Airlines)
2017/2016 Canada's Most Trusted Airline (Gustavson School of Business at the University of Victoria)
2016 Canada's most reputable company for Corporate Social Responsibility (Reputation Institute)
2016/2015/2014/2013/2012 Ranked top three for Canadian Brands (Canadian Business Magazine)
2016/2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in Canada (MoneySense magazine)

Connect with WestJet on Facebook at facebook.com/westjet
Follow WestJet on Twitter at twitter.com/westjet
Subscribe to WestJet on YouTube at youtube.com/westjet
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Read the WestJet blog at blog.westjet.com

Condensed Consolidated Interim Statement of Earnings



(Stated in thousands of Canadian dollars, except per share amounts)



(Unaudited)







Three months ended

September 30

Nine months ended

September 30


2018

2017(i)

2018

2017(i)






Revenue:





Guest

1,215,223

1,157,793

3,363,847

3,192,381

Other

45,679

56,831

176,352

195,195


1,260,902

1,214,624

3,540,199

3,387,576

Operating expenses:





Aircraft fuel

343,276

237,973

926,688

698,424

Salaries and benefits

249,733

231,197

752,517

691,122

Rates and fees

185,999

162,423

530,553

488,549

Depreciation and amortization

104,644

100,519

321,140

297,484

Sales and marketing

107,059

97,318

325,509

291,251

Maintenance

54,826

47,286

162,739

160,787

Aircraft leasing

32,612

40,070

106,985

124,976

Other

96,302

71,793

296,497

236,953

Employee profit share

8,276

27,610

11,403

42,392


1,182,727

1,016,189

3,434,031

3,031,938

Earnings from operations

78,175

198,435

106,168

355,638






Non-operating income (expense):





Finance income

6,862

4,853

20,763

13,500

Finance cost

(12,967)

(11,768)

(37,361)

(40,623)

Gain (loss) on foreign exchange

(2,588)

(204)

2,064

(4,717)

Gain on disposal of property and equipment

1,333

69

4,145

3,986

Gain (loss) on derivatives

(21)

(441)

14

(2,405)


(7,381)

(7,491)

(10,375)

(30,259)

Earnings before income tax

70,794

190,944

95,793

325,379






Income tax expense:





Current

4,507

24,449

4,734

44,501

Deferred

20,432

30,558

28,764

49,625


24,939

55,007

33,498

94,126

Net earnings

45,855

135,937

62,295

231,253






Earnings per share:





Basic

0.40

1.17

0.55

1.98

Diluted

0.40

1.15

0.54

1.96

(i) 

Certain 2017 numbers have been restated for the adoption of IFRS 15.

 

Condensed Consolidated Interim Statement of Financial Position



(Stated in thousands of Canadian dollars)



(Unaudited)







September 30

2018

December 31

2017(i)

Assets



Current assets:



Cash and cash equivalents

1,126,597

1,147,076

Marketable securities

181,097

226,090

Total cash, cash equivalents and marketable securities

1,307,694

1,373,166

Restricted cash

88,938

109,700

Accounts receivable

189,909

152,492

Prepaid expenses, deposits and other

172,324

138,676

Inventory

44,978

43,045


1,803,843

1,817,079

Non-current assets:



Property and equipment

4,776,596

4,567,504

Intangible assets

55,007

59,517

Other assets

81,418

78,584

Total assets

6,716,864

6,522,684




Liabilities and shareholders' equity



Current liabilities:



Accounts payable and accrued liabilities

635,820

546,505

Advance ticket sales

723,054

659,953

Deferred Rewards program

217,011

185,991

Non-refundable guest credits

53,378

58,575

Current portion of maintenance provisions

117,586

82,129

Current portion of long-term debt

553,434

153,149


2,300,283

1,686,302

Non-current liabilities:



Maintenance provisions

246,117

270,347

Long-term debt

1,437,613

1,895,898

Other liabilities

31,252

19,171

Deferred income tax

421,250

392,111

Total liabilities

4,436,515

4,263,829




Shareholders' equity:



Share capital

548,961

548,977

Equity reserves

105,401

97,514

Hedge reserves

(891)

(1,902)

Retained earnings

1,626,878

1,614,266

Total shareholders' equity

2,280,349

2,258,855

Total liabilities and shareholders' equity

6,716,864

6,522,684

(i)

Certain 2017 numbers have been restated for the adoption of IFRS 15.

 

Condensed Consolidated Interim Statement of Cash Flows

(Stated in thousands of Canadian dollars)

(Unaudited)





Three months ended

September 30

Nine months ended

September 30


2018

2017(i)

2018

2017(i)






Operating activities:





Net earnings

45,855

135,937

62,295

231,253

Items not involving cash:





Depreciation and amortization

104,644

100,519

321,140

297,484

Change in maintenance provisions

11,580

12,684

36,691

56,654

Amortization of transaction costs

999

1,128

3,267

3,682

Unrealized (gain) loss on derivatives

22

171

(212)

4,327

Gain on disposal of property and equipment

(1,333)

(69)

(4,145)

(3,986)

Share-based payment expense

3,279

5,058

11,670

14,907

Deferred income tax expense

20,432

30,558

28,764

49,625

Unrealized foreign exchange (gain) loss

2,721

4,778

(2,289)

5,354

Change in non-cash working capital

95,162

122,136

144,259

201,277

Change in restricted cash

(17,781)

(17,233)

20,762

12,767

Change in other assets

(829)

(803)

(3,092)

(1,499)

Change in other liabilities

(7,405)

21

(1,087)

916

Purchase of shares pursuant to compensation plans

(167)

(47)

(3,203)

(3,564)

Maintenance provision settlements

(8,976)

(25,105)

(33,950)

(56,332)


248,203

369,733

580,870

812,865






Investing activities:





Aircraft additions

(117,037)

(204,990)

(453,818)

(696,986)

Aircraft disposals

1,334

280

6,209

8,121

Other property and equipment and intangible additions and disposals

(23,120)

(9,339)

(45,779)

(32,970)

Purchase of marketable securities

-

(30,986)

(33,908)

(181,004)

Maturities of marketable securities

32,968

-

82,968

-

Change in non-cash working capital

5,266

(4,197)

13,121

(10,828)


(100,589)

(249,232)

(431,207)

(913,667)






Financing activities:





Increase in long-term debt

-

40,536

41,131

166,489

Repayment of long-term debt

(37,953)

(37,049)

(115,295)

(114,931)

Shares repurchased

-

(53,509)

(2,386)

(57,723)

Dividends paid

(15,953)

(16,125)

(47,893)

(48,920)

Cash interest paid

(13,929)

(14,703)

(44,421)

(46,070)

Change in non-cash working capital

(2,091)

(3,370)

(9,135)

(9,763)


(69,926)

(84,220)

(177,999)

(110,918)






Cash flow from/(used in) operating, investing and financing activities

77,688

36,281

(28,336)

(211,720)

Effect of foreign exchange on cash and cash equivalents

(5,774)

(12,535)

7,857

(19,746)

Net change in cash and cash equivalents

71,914

23,746

(20,479)

(231,466)






Cash and cash equivalents, beginning of period

1,054,683

1,265,610

1,147,076

1,520,822






Cash and cash equivalents, end of period

1,126,597

1,289,356

1,126,597

1,289,356






Supplemental disclosure of operating cash flows





Cash interest received

6,568

4,208

20,559

12,522

Cash taxes (paid)/received, net

35,771

(20,751)

1,240

(97,304)


(i)

Certain 2017 numbers have been restated for the adoption of IFRS 15.

 

CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except percentage, mile and per unit data)
(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.





Three months ended September 30

Nine months ended September 30

($ in thousands)

2018

2017(i)

Change

2018

2017(i)

Change

Operating expenses

1,182,727

1,016,189

166,538

3,434,031

3,031,938

402,093

Aircraft fuel expense

(343,276)

(237,973)

(105,303)

(926,688)

(698,424)

(228,264)

Employee profit share expense

(8,276)

(27,610)

19,334

(11,403)

(42,392)

30,989

Operating expenses, adjusted

831,175

750,606

80,569

2,495,940

2,291,122

204,818

ASMs

8,880,077,461

8,076,620,199

9.9%

24,830,673,928

23,339,491,015

6.4%

CASM, excluding above items (cents)

9.36

9.29

0.8%

10.05

9.82

2.3%

(i)

Certain 2017 numbers have been restated for the adoption of IFRS 15.

 

Return on invested capital
(Stated in thousands of Canadian dollars, except percentages)
(Unaudited)

ROIC is a measure commonly used to assess the efficiency with which a company allocates its capital to generate returns. Return is calculated based on our earnings before tax, excluding special items, finance costs and implied interest on our off-balance-sheet aircraft leases. Invested capital includes average long-term debt, average finance lease obligations, average shareholders' equity and off-balance-sheet aircraft operating leases.






September 30

2018

September 30
2017(iv)

Change

Earnings before income taxes (trailing twelve months)

168,354

403,140

(234,786)

Add:




Finance costs

50,447

56,004

(5,557)

Implicit interest in operating leases(i)

77,653

87,656

(10,003)

Return

296,454

546,800

(250,346)

Invested capital:




Average long-term debt(ii)

2,026,845

2,044,020

(17,175)

Average shareholders' equity

2,266,479

2,175,805

90,674

Off-balance-sheet aircraft leases(iii)

1,109,333

1,252,223

(142,890)

Invested capital

5,402,657

5,472,048

(69,391)

Return on invested capital

5.5%

10.0%

(4.5 pts.)

(i)

Interest implicit in operating leases is equal to 7.0 per cent of 7.5 times the trailing 12 months of aircraft lease expense. 7.0 per cent is a proxy and does not necessarily represent actual for any given period.

(ii)

Average long-term debt includes the current portion and long-term portion.

(iii)

Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At September 30, 2018, the trailing 12 months of aircraft leasing costs totaled $147,911 (September 30, 2017 – $166,963).

(iv)

Certain 2017 numbers have been restated for the adoption of IFRS 15.

 

SOURCE WESTJET, an Alberta Partnership

For further information: WestJet Media Relations, 1-888-WJ-4-NEWS (1-888-954-6397), Email: media@westjet.com; WestJet Investor Relations, 1-877-493-7853, Email: investor_relations@westjet.com, Website: www.westjet.com