News Releases
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Airline has net earnings of $9.2 million and takes steps to continue
future profitability
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CALGARY, Aug. 6 /CNW/ - WestJet (TSX:WJA) today announced second quarter results for 2009. The airline reported net earnings of $9.2 million, or seven cents per diluted share. Compared to the second quarter of 2008, these results were negatively impacted by the weak economy driving lower yields in the marketplace.
Sean Durfy, WestJet President and CEO, commented, "Similar to the first quarter, the weakened economy and aggressive pricing continue to have an unfavorable impact on RASM. However, lower fuel prices resulted in a significant decline in CASM from last year and lessened the profitability erosion."
"In the face of these daunting times, our WestJetters continue to show how much they care about our guests and our company. Our on-time performance, completion and baggage rates were exceptional this quarter, which along with our caring WestJetter-driven service, continues to build guest loyalty. For that, I'm truly appreciative," acknowledged Sean Durfy. "Once again, we demonstrated the strength and sustainability of our business strategy, even in this difficult climate. In the face of poor demand conditions, we were able to produce a solid operating margin of 6.9 per cent, while expanding our network into new destinations."
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Operating highlights (stated in Canadian dollars)
-------------------------------------------------------------------------
Year-to- Year-to-
date date
Q2 2009 Q2 2008 Change 2009 2008 Change
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Net
earnings
(millions) $9.2 $26.8* (65.7%) $46.6 $78.6* (40.7%)
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Diluted
earnings
per share $0.07 $0.21* (66.7%) $0.36 $0.60* (40.0%)
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Revenue
(millions) $531.2 $616.0 (13.8%) $1,110.4 $1,215.3 (8.6%)
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ASM
(available
seat miles)
(billions) 4.315 4.235 1.9% 8.672 8.300 4.5%
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RPM (revenue
passenger
miles)
(billions) 3.285 3.366 (2.4%) 6.787 6.697 1.3%
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Load factor 76.1% 79.5% (3.4 pts.) 78.3% 80.7% (2.4 pts.)
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Yield (revenue
per revenue
passenger
mile) (cents) 16.17 18.30 (11.6%) 16.36 18.15 (9.9%)
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RASM (revenue
per available
seat mile)
(cents) 12.31 14.55 (15.4%) 12.81 14.64 (12.5%)
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CASM (cost per
available
seat mile)
(cents) 11.46 13.33* (14.0%) 11.68 13.04* (10.4%)
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CASM excluding
fuel and
employee
profit
share(xx)
(cents) 8.45 8.24* 2.5% 8.48 8.27* 2.5%
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* The 2008 comparatives have been restated due to a change in
accounting policy.
(xx) Refer to reconciliation of this non-GAAP measure to GAAP section at
the end of release.
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"The flexibility of our fleet deployment strategy allows us to quickly react to demand changes by adjusting our schedule for more profitable flying," stated Sean Durfy. "For the remainder of 2009, we will lower our aircraft utilization rates through more efficient scheduling of domestic frequencies. This will lower our previously planned third quarter capacity growth to a decline of between one and two per cent. It will also drop our full-year capacity growth to between two and three per cent. For our winter schedule, we are introducing 11 new destinations and three new countries, plus adding many new route pairings between Canada and Mexico. We believe this will allow us to capture additional market share as we keep expanding WestJet and WestJet Vacations into the domestic, transborder and international markets."
"In the second quarter we introduced an internal program, 'All Eyes on Cost,' focused on cost containment for the remainder of 2009 and 2010. We have already identified a number of sustainable savings, cost deferrals and cost avoidances that will be implemented this year and next," added Sean Durfy. "When we asked our WestJetter's to help in this effort, they did so brilliantly - coming up with millions of dollars in savings ideas. The Executive team and I are truly inspired by WestJetters as together we tackle difficult decisions to enable us to come through this deep recession as a stronger and more competitive airline. Despite these conditions, we remain committed to our long-term strategic initiatives and vision - to be one of the five most successful international airlines."
WestJet plans to take delivery of two new aircraft in August, which will bring its fleet size to 81. For the balance of the year, WestJet plans to receive an additional five aircraft in the fourth quarter, which will bring its fleet to 86.
The airline completed the quarter with a cash balance of $739.6 million. The decrease primarily results from the purchase of one leased aircraft, providing WestJet with an unencumbered aircraft for financial flexibility if required, and a reduction in working capital. An $85 million credit facility secured against the new Calgary Campus was finalized, providing additional liquidity if necessary.
"In times of economic turmoil, a strong balance sheet is paramount for continuation of our strategic initiatives. In comparison to our peers, we have maintained a healthy cash position relative to our sales, created a solid working capital position, and introduced additional financial flexibility with limited costs, all while keeping our debt ratios low. We are maintaining a healthy level of cash while focusing on improving revenues and reducing costs," explained Sean Durfy.
"We are making excellent progress on our strategic initiatives, as evidenced by accelerating our interline relationship with Air France and KLM, announcing RBC and MasterCard as our credit card partners for our rewards program and having our reservation system continue on track for a fourth quarter implementation," added Sean Durfy. "These initiatives will allow us to provide an even greater guest experience and valued benefits that our guests have been asking for."
Sean Durfy further said, "With the continued weak outlook for the economy for the remainder of 2009, we are not expecting any real improvement in our RASM numbers for the balance of the year. For the third quarter 2009, we are seeing RASM declines continuing at similar declines from the second quarter year-over-year results. Although there have been some early indications that the economy may be improving, the airline industry typically lags economic improvement by six or more months."
WestJet had strong second quarter operational performance. WestJet calculates its on-time performance and completion rate 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 strives to be one of the top North American airlines for these three operational performance metrics.
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Year-to- Year-to-
date date
Q2 2009 Q2 2008 Change 2009 2008 Change
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On-time
performance 89.5% 84.3% 5.2 pts. 80.7% 77.2% 3.5 pts.
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Completion
rate 99.4% 99.0% 0.4 pts. 98.5% 98.6% (0.1 pts.)
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Bag ratio 2.54 3.32 23.5% 3.47 4.23 18.0%
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Caution regarding forward-looking statements
Certain information set forth in this press release, including but not limited to information regarding WestJet's operational plans for the remainder of 2009, capacity projections, new winter schedule, anticipated aircraft delivery schedule, implementation of strategic programs, and projections as to RASM in the third quarter of 2009, contain 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, delay in aircraft delivery, change in customer demand, general economic conditions and availability of personnel and outside consultants. These and additional risk factors are discussed in WestJet's most recent Annual Information Form (AIF) and in other documents WestJet files from time to time with securities regulatory authorities, which are available through the Internet on WestJet's SEDAR 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 any forward-looking statements, except as is required by law.
The Management's Discussion and Analysis and Consolidated Financial Statements and Notes for the three and six months ended June 30, 2009, are available through the Internet on westjet.com or WestJet's SEDAR profile at www.sedar.com.
Conference call
WestJet will hold a live analysts' conference call today at 9 a.m. MDT (11 a.m. EDT). Sean Durfy, President and CEO, and Vito Culmone, Executive Vice-President of Finance and CFO, will discuss WestJet's second quarter 2009 results and answer questions from financial analysts. The conference call is available calling (416) 644-3434 (in Toronto) or through the toll-free telephone number 1-800-731-5319. The call can also be heard live through an Internet webcast in the Media and Investors section of westjet.com.
About WestJet
WestJet is Canada's preferred airline, offering scheduled service throughout its 66-city North American and Caribbean network. 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 79 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 42 aircraft, bringing its fleet to 121 by 2013, WestJet strives to be the number one choice for travellers.
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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
2009 2008 2009 2008
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Restated Restated
Revenues:
Guest revenues $ 485,248 $ 557,305 $ 982,343 $ 1,083,005
Charter and other
revenues 45,915 58,695 128,105 132,343
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531,163 616,000 1,110,448 1,215,348
Expenses:
Aircraft fuel 128,677 213,610 271,068 381,327
Airport operations 82,644 82,293 176,301 166,221
Flight operations
and navigational
charges 75,415 70,297 147,122 137,872
Marketing, general
and administration 48,757 49,239 101,623 96,644
Sales and
distribution 39,308 44,825 80,222 86,140
Depreciation and
amortization 34,502 33,807 68,395 66,656
Inflight 30,299 26,987 59,183 52,386
Aircraft leasing 27,106 21,458 52,182 40,541
Maintenance 26,455 19,717 49,974 39,123
Employee profit
share 1,185 2,187 6,902 15,334
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494,348 564,420 1,012,972 1,082,244
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Earnings from
operations 36,815 51,580 97,476 133,104
Non-operating income
(expense):
Interest income 964 6,478 3,082 13,784
Interest expense (17,126) (19,148) (34,611) (38,681)
Gain (loss) on
foreign exchange (9,033) 60 (4,412) 3,997
Loss on disposal of
property and
equipment (607) (63) (713) (133)
Gain on derivatives 2,706 - 3,340 -
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(23,096) (12,673) (33,314) (21,033)
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Earnings before
income taxes 13,719 38,907 64,162 112,071
Income tax expense:
Current 686 1,162 1,392 2,153
Future 3,880 10,905 16,185 31,314
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4,566 12,067 17,577 33,467
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Net earnings $ 9,153 $ 26,840 $ 46,585 $ 78,604
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Earnings per share:
Basic $ 0.07 $ 0.21 $ 0.36 $ 0.61
Diluted $ 0.07 $ 0.21 $ 0.36 $ 0.60
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Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
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June 30, December 31,
2009 2008
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Restated
Assets
Current assets:
Cash and cash equivalents $ 739,631 $ 820,214
Accounts receivable 17,121 16,837
Future income tax 3,034 8,459
Prepaid expenses, deposits and other 33,705 53,283
Inventory 17,858 17,054
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811,349 915,847
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Property and equipment 2,321,728 2,269,790
Intangible assets 12,386 12,060
Other assets 67,500 71,005
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$ 3,212,963 $ 3,268,702
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 188,624 $ 249,354
Advance ticket sales 271,001 251,354
Non-refundable guest credits 62,483 73,020
Current portion of long-term debt 165,186 165,721
Current portion of obligations under
capital lease 585 395
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687,879 739,844
Long-term debt 1,103,634 1,186,182
Obligations under capital lease 328 713
Other liabilities 12,803 24,233
Future income tax 260,382 241,740
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2,065,026 2,192,712
Shareholders' equity:
Share capital 453,862 452,885
Contributed surplus 65,000 60,193
Accumulated other comprehensive loss (18,534) (38,112)
Retained earnings 647,609 601,024
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1,147,937 1,075,990
Commitments and contingencies
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$ 3,212,963 $ 3,268,702
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Consolidated Statement of Shareholders' Equity
(Stated in thousands of Canadian dollars)
(Unaudited)
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Three months ended June 30 Six months ended June 30
2009 2008 2009 2008
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Restated Restated
Share capital:
Balance, beginning
of period $ 453,638 $ 453,192 $ 452,885 $ 448,568
Issuance of shares
pursuant to stock
option plans - 227 - 227
Stock-based
compensation on
stock options
exercised 224 5,990 977 10,614
Shares repurchased - (7,091) - (7,091)
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453,862 452,318 453,862 452,318
Contributed surplus:
Balance, beginning
of period 62,075 57,788 60,193 57,889
Stock-based
compensation
expense 3,149 3,596 5,784 8,119
Stock-based
compensation on
stock options
exercised (224) (5,990) (977) (10,614)
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65,000 55,394 65,000 55,394
Accumulated other
comprehensive loss:
Balance, beginning
of period (31,060) (11,200) (38,112) (11,914)
Other comprehensive
income 12,526 199 19,578 913
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(18,534) (11,001) (18,534) (11,001)
Retained earnings:
Balance, beginning
of period 648,603 507,871 611,171 455,365
Change in accounting
policy (10,147) (11,260) (10,147) (10,518)
Shares repurchased - (22,329) - (22,329)
Net earnings 9,153 26,840 46,585 78,604
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647,609 501,122 647,609 501,122
Total accumulated other
comprehensive loss
and retained earnings 629,075 490,121 629,075 490,121
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Total shareholders'
equity $ 1,147,937 $ 997,833 $ 1,147,937 $ 997,833
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Consolidated Statement of Comprehensive Income
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Net earnings $ 9,153 $ 26,840 $ 46,585 $ 78,604
Other comprehensive
income, net of tax:
Amortization of hedge
settlements to
aircraft leasing 350 350 700 700
Net unrealized gain
(loss) on foreign
exchange derivatives
under cash flow
hedge accounting
(2009 net of tax of
$447 and $164; 2008
- $21 and ($280)) (1,066) (48) (156) 544
Reclassification of
net realized gain on
foreign exchange
derivatives to net
earnings (2009 net
of tax of $669 and
$1,576; 2008 - $45
and $138) (1,601) (103) (3,977) (331)
Net unrealized gain
on fuel derivatives
under cash flow
hedge accounting
(net of tax of
($4,050) and
($4,018)) 9,866 - 9,583 -
Reclassification of
net realized loss on
fuel derivatives to
net earnings (net of
tax of ($2,083) and
($5,606)) 4,977 - 13,428 -
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12,526 199 19,578 913
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Total comprehensive
income $ 21,679 $ 27,039 $ 66,163 $ 79,517
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Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Operating activities:
Net earnings $ 9,153 $ 26,840 $ 46,585 $ 78,604
Items not involving
cash:
Depreciation and
amortization 34,502 33,807 68,395 66,656
Amortization of
other liabilities (654) (234) (889) (469)
Amortization of
hedge settlements 350 350 700 700
Unrealized gain on
derivative
instruments (2,328) - (3,226) -
Loss on disposal of
property and
equipment 867 210 1,072 1,087
Stock-based
compensation expense 3,149 3,596 5,784 8,119
Income tax credit
receivable - - (1,952) -
Future income tax
expense 3,880 10,905 16,185 31,314
Unrealized foreign
exchange loss (gain) 8,577 98 (864) (4,203)
Change in non-cash
working capital (31,745) 50,350 (10,513) 133,915
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25,751 125,922 121,277 315,723
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Financing activities:
Increase in
long-term debt - - - 67,947
Repayment of
long-term debt (41,493) (41,455) (83,083) (82,882)
Decrease in
obligations under
capital lease (98) (93) (195) (185)
Increase (decrease)
in other assets 700 (593) - (2,665)
Shares repurchased - (29,420) - (29,420)
Issuance of common
shares - 227 - 227
Change in non-cash
working capital (1,849) (491) (1,019) (2,206)
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(42,740) (71,825) (84,297) (49,184)
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Investing activities:
Aircraft additions (57,202) (6,492) (84,196) (73,956)
Other property and
equipment additions (18,408) (20,070) (36,456) (36,207)
Other property and
equipment disposals - 10 - 165
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(75,610) (26,552) (120,652) (109,998)
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Cash flow from (used in)
operating, financing
and investing
activities (92,599) 27,545 (83,672) 156,541
Effect of foreign
exchange on cash and
cash equivalents (3,561) 93 3,089 1,891
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Net change in cash and
cash equivalents (96,160) 27,638 (80,583) 158,432
Cash and cash
equivalents, beginning
of period 835,791 784,352 820,214 653,558
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Cash and cash
equivalents, end of
period $ 739,631 $ 811,990 $ 739,631 $ 811,990
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Cash interest paid $ 17,200 $ 19,340 $ 35,206 $ 38,973
Cash taxes paid $ 2,085 $ 594 $ 3,325 $ 1,362
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Operational Highlights
(Unaudited)
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Three months ended June 30
2009 2008 Change
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Available seat miles (ASM) 4,314,869,886 4,234,625,866 1.9%
Revenue passenger miles 3,284,898,568 3,365,923,157 (2.4%)
Load factor 76.1% 79.5% (3.4 pts.)
Yield (cents) 16.17 18.30 (11.6%)
Revenue per ASM (cents) 12.31 14.55 (15.4%)
Cost per ASM (CASM) (cents) 11.46 13.33* (14.0%)
CASM, excluding fuel and
employee profit share (cents)(xx) 8.45 8.24* 2.5%
Fuel consumption (litres) 207,532,865 205,847,264 0.8%
Fuel costs per litre (dollars) 0.62 1.04 (40.4%)
Segment guests 3,417,877 3,546,184 (3.6%)
Average stage length (miles) 908 906 0.2%
Utilization (hours) 11.5 12.2 (5.7%)
Number of full-time equivalent
employees at period end 6,140 6,156 (0.3%)
Fleet size at period end 79 75 5.3%
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* The 2008 comparatives have been restated due to a change in
accounting policy.
(xx) Refer to reconciliation of this non-GAAP measure to GAAP section at
the end of release.
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-------------------------------------------------------------------------
Six months ended June 30
2009 2008 Change
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Available seat miles (ASM) 8,671,675,025 8,299,617,667 4.5%
Revenue passenger miles 6,786,827,711 6,696,736,600 1.3%
Load factor 78.3% 80.7% (2.4 pts.)
Yield (cents) 16.36 18.15 (9.9%)
Revenue per ASM (cents) 12.81 14.64 (12.5%)
Cost per ASM (CASM) (cents) 11.68 13.04* (10.4%)
CASM, excluding fuel and
employee profit share (cents)(xx) 8.48 8.27* 2.5%
Fuel consumption (litres) 423,293,745 408,002,930 3.7%
Fuel costs per litre (dollars) 0.64 0.93 (31.2%)
Segment guests 6,869,562 7,015,589 (2.1%)
Average stage length (miles) 923 911 1.3%
Utilization (hours) 11.9 12.3 (3.3%)
Number of full-time equivalent
employees at period end 6,140 6,156 (0.3%)
Fleet size at period end 79 75 5.3%
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* The 2008 comparatives have been restated due to a change in
accounting policy.
(xx) Refer to reconciliation of this non-GAAP measure to GAAP section at
the end of release.
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Reconciliation of non-GAAP measures to GAAP
(Stated in thousands of Canadian dollars, except per unit amounts)
(Unaudited)
CASM, excluding fuel and employee profit share
-------------------------------------------------------------------------
Three months ended June 30 Six months ended June 30
2009 2008 2009 2008
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Restated Restated
Operating expenses -
GAAP $ 494,348 $ 564,420 $ 1,012,972 $ 1,082,244
Adjusted for:
Aircraft fuel
expense (128,677) (213,610) (271,068) (381,327)
Employee profit
share expense (1,185) (2,187) (6,902) (15,334)
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Operating expenses,
excluding above
items - Non-GAAP $ 364,486 $ 348,623 $ 735,002 $ 685,583
ASM (thousands) 4,314,870 4,234,626 8,671,675 8,299,618
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CASM, excluding above
items - Non-GAAP
(cents) 8.45 8.24 8.48 8.27
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