News Releases
Airline reports third quarter net earnings of $31.4 million
CALGARY, Nov. 4 /CNW/ - WestJet (TSX:WJA) today announced third quarter results for 2009. The airline reported net earnings of $31.4 million or 24 cents per diluted share; this compared to the third quarter of 2008 net earnings of $57.9 million or 45 cents per diluted share.
"We are extremely happy to have once again turned a difficult economic period into another profitable quarter," said WestJet President and CEO Sean Durfy. "For more than a year now, economic instability has been eroding consumer confidence. The third quarter saw continued scrutiny from price-sensitive Canadians, resulting in airlines stimulating demand through aggressive pricing. Regardless, we believe we will produce margins that are among the best in North America. Our success this quarter, and every quarter, is a direct result of the efforts and abilities of WestJetters who are committed to ensuring guests receive the best value for their hard-earned dollars."
WestJet reported an operating margin of 12.8 per cent, compared to 14.0 per cent in the third quarter of 2008. WestJet's third quarter 2009 pre-tax margin was 8.3 per cent, compared to 11.5 per cent in the same 2008 period.
"Relief from significantly lower fuel costs, compared to the same period in 2008, considerably off-set our drop in revenue," added Sean Durfy. "Our ability to successfully stimulate demand while keeping our controllable costs in line played an important part in our strong margins."
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Operating highlights (stated in Canadian dollars)
-------------------------------------------------------------------------
Year-to- Year-to-
Q3 2009 Q3 2008 Change date 2009 date 2008 Change
-------------------------------------------------------------------------
Net earnings
(millions) $31.4 $57.9 (45.7%) $78.0 $136.5 (42.8%)
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Diluted
earnings per
share $0.24 $0.45 (46.7%) $0.61 $1.04 (41.3%)
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Revenue
(millions) $600.6 $718.4 (16.4%) $1,711.1 $1,933.7 (11.5%)
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ASM (available
seat miles)
(billions) 4.503 4.551 (1.1%) 13.175 12.851 2.5%
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RPM (revenue
passenger
miles)
(billions) 3.587 3.705 (3.2%) 10.374 10.402 (0.3%)
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Load factor 79.7% 81.4% (1.7 pts.) 78.7% 80.9% (2.2 pts.)
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Yield (revenue
per revenue
passenger
mile) (cents) 16.74 19.39 (13.7%) 16.49 18.59 (11.3%)
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RASM (revenue
per available
seat mile)
(cents) 13.34 15.78 (15.5%) 12.99 15.05 (13.7%)
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CASM (cost per
available seat
mile) (cents) 11.63 13.58* (14.4%) 11.66 13.23* (11.9%)
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CASM, excluding
fuel and
employee profit
share (cents) 8.16 7.96* 2.5% 8.37 8.14* 2.8%
-------------------------------------------------------------------------
* The 2008 comparatives have been restated due to a change in
accounting policy.
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"Throughout the quarter, we remained committed to our strategy," stated Sean Durfy. "The recent successful cutover to our new reservation system was a major milestone for our airline. This transition from our old system to our new system has been difficult on our guests and our people. We are extremely appreciative of our guests, who have shown tremendous loyalty and patience, as we implement changes that will enhance the benefits we can provide. We offer a heartfelt apology for this inconvenience and assure you that we will be back to our high standards of excellent service very soon."
Sean Durfy continued, "Our new reservation system provides the capabilities necessary to properly support our growing business and deliver on key strategic initiatives like attracting more business travellers, increasing ancillary revenue and enabling airline partnerships. Completing a project of this magnitude was no small feat, and it wouldn't have been possible without our hard-working team of WestJetters who are extremely invested in the success of our airline."
In the third quarter, WestJet revised its aircraft delivery schedule and completed an equity offering that brought the airline's cash balance to $961.6 million.
"The challenges that we encountered leading up to the end of the third quarter are creating a lot of uncertainty around the remainder of 2009 and into 2010," explained Sean Durfy. "We smoothed our aircraft delivery schedule, enhanced flexibility around our fleet and capacity, and added 14 more aircraft to our future growth plans. Our equity offering strengthened our balance sheet and provided an additional level of comfort for meeting our future growth commitments."
Throughout the remainder of the year, WestJet will implement its Frequent Guest Program and co-branded credit card program; continue to grow its vacations business, which is already seeing year-to-date revenue improvements of over 80 per cent; and take delivery of an additional five aircraft for an end-of-year fleet size of 86.
"Capacity for the fourth quarter is expected to increase two to three per cent, with all new capacity being deployed into our transborder and international markets," said Sean Durfy. "We have enhanced our winter schedule with 10 new sun destinations, and bookings for WestJet Vacations remain strong."
"We are encouraged by talks of recovery," commented Sean Durfy. "In the past six to eight weeks, we have seen indications that RASM declines have levelled off, and we are seeing signs of improvement from what we were previously experiencing. While it is still too early to predict the strength or speed of a potential recovery, we feel optimistic about the future and the continued success of our airline."
WestJet also reported third quarter improvements for all three categories of 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-
Q3 2009 Q3 2008 Change date 2009 date 2008 Change
-------------------------------------------------------------------------
On-time
performance 87.5% 83.8% 3.7 pts. 83.2% 79.7% 3.5 pts.
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Completion rate 99.5% 99.4% 0.1 pts. 98.9% 98.9% -
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Bag ratio 3.04 3.40 10.6% 3.32 3.94 15.7%
-------------------------------------------------------------------------
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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 fourth 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, H1N1 impact 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 nine months ended September 30, 2009, are available through the Internet on westjet.com or WestJet's SEDAR profile at www.sedar.com.
Conference call
WestJet will hold its quarterly analysts' conference call today at 9 a.m. MST (11 a.m. EST). WestJet President and CEO Sean Durfy, and Executive Vice-President of Finance and CFO Vito Culmone, will discuss WestJet's third quarter 2009 results and answer questions from financial analysts. The conference call is available by calling 1-416-644-3417 (in Toronto) or through the toll-free telephone number 1-800-733-7560. 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 81 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 54 aircraft through 2016, 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)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Revenues:
Guest revenues $ 557,413 $ 656,782 $ 1,539,756 $ 1,739,787
Charter and other
revenues 43,217 61,593 171,322 193,936
-------------------------------------------------------------------------
600,630 718,375 1,711,078 1,933,723
Expenses:
Aircraft fuel 150,648 244,544 421,716 625,871
Airport operations 84,131 84,635 260,432 250,856
Flight operations
and navigational
charges 78,327 72,945 225,449 210,817
Marketing, general
and administration 52,034 54,145 153,657 150,789
Sales and distribution 41,721 43,717 121,943 129,857
Depreciation and
amortization 36,072 35,000 104,467 101,656
Inflight 26,155 27,018 85,338 79,404
Aircraft leasing 26,676 22,799 78,858 63,340
Maintenance 22,414 21,826 72,388 60,949
Employee profit share 5,476 11,453 12,378 26,787
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523,654 618,082 1,536,626 1,700,326
-------------------------------------------------------------------------
Earnings from operations 76,976 100,293 174,452 233,397
Non-operating income
(expense):
Interest income 965 6,077 4,047 19,861
Interest expense (16,729) (18,947) (51,340) (57,628)
Gain (loss) on
foreign exchange (7,140) 6,249 (11,552) 10,246
Loss on disposal of
property and equipment (140) (93) (853) (226)
Loss on derivatives (4,329) (10,995) (989) (10,995)
-------------------------------------------------------------------------
(27,373) (17,709) (60,687) (38,742)
-------------------------------------------------------------------------
Earnings before
income taxes 49,603 82,584 113,765 194,655
Income tax expense:
Current 710 92 2,102 2,245
Future 17,475 24,616 33,660 55,930
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18,185 24,708 35,762 58,175
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Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480
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-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share:
Basic $ 0.24 $ 0.45 $ 0.61 $ 1.06
Diluted $ 0.24 $ 0.45 $ 0.61 $ 1.04
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-------------------------------------------------------------------------
Consolidated Balance Sheet
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
September 30, December 31,
2009 2008
-------------------------------------------------------------------------
Restated
Assets
Current assets:
Cash and cash equivalents $ 961,648 $ 820,214
Accounts receivable 19,635 16,837
Future income tax 4,093 8,459
Prepaid expenses, deposits and other 42,068 53,283
Inventory 18,714 17,054
-------------------------------------------------------------------------
1,046,158 915,847
Property and equipment 2,320,989 2,269,790
Intangible assets 13,596 12,060
Other assets 58,246 71,005
-------------------------------------------------------------------------
$ 3,438,989 $ 3,268,702
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 198,995 $ 249,354
Advance ticket sales 301,581 251,354
Non-refundable guest credits 59,486 73,020
Current portion of long-term debt 165,107 165,721
Current portion of obligations under
capital lease 555 395
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725,724 739,844
Long-term debt 1,062,326 1,186,182
Obligations under capital lease 259 713
Other liabilities 17,393 24,233
Future income tax 276,052 241,740
-------------------------------------------------------------------------
2,081,754 2,192,712
Shareholders' equity:
Share capital 628,740 452,885
Contributed surplus 69,933 60,193
Accumulated other comprehensive loss (20,465) (38,112)
Retained earnings 679,027 601,024
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1,357,235 1,075,990
Commitments and contingencies
-------------------------------------------------------------------------
$ 3,438,989 $ 3,268,702
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statement of Shareholders' Equity
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Share capital:
Balance, beginning
of period $ 453,862 $ 452,318 $ 452,885 $ 448,568
Issuance of shares
pursuant to stock
option plans - - - 227
Stock-based
compensation expense
on stock options
exercised 75 458 1,052 11,072
Stock-based
compensation expense
on executive share
units exercised 569 - 569 -
Issued on public
offering 172,463 - 172,463 -
Issuance of shares
pursuant to employee
share purchase plan 7,236 - 7,236 -
Share issue costs (7,456) - (7,456) -
Tax effect of share
issue costs 1,991 - 1,991 -
Shares repurchased - - - (7,091)
-------------------------------------------------------------------------
628,740 452,776 628,740 452,776
Contributed surplus:
Balance, beginning
of period 65,000 55,394 60,193 57,889
Stock-based
compensation
expense 5,577 2,735 11,361 10,854
Stock-based
compensation expense
on stock options
exercised (75) (458) (1,052) (11,072)
Stock-based
compensation expense
on executive share
unit settlement (569) - (569) -
-------------------------------------------------------------------------
69,933 57,671 69,933 57,671
Accumulated other
comprehensive loss:
Balance, beginning
of period (18,534) (11,001) (38,112) (11,914)
Other comprehensive
income (loss) (1,931) 1,284 17,647 2,197
-------------------------------------------------------------------------
(20,465) (9,717) (20,465) (9,717)
Retained earnings:
Balance, beginning
of period 647,609 515,735 611,171 455,365
Change in accounting
policy - (14,613) (10,147) (10,518)
Shares repurchased - - - (22,329)
Net earnings 31,418 57,876 78,003 136,480
-------------------------------------------------------------------------
679,027 558,998 679,027 558,998
Total accumulated other
comprehensive loss
and retained earnings 658,562 549,281 658,562 549,281
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Total shareholders'
equity $ 1,357,235 $ 1,059,728 $ 1,357,235 $ 1,059,728
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statement of Comprehensive Income
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480
Other comprehensive
income (loss), net
of tax:
Amortization of hedge
settlements to
aircraft leasing 350 350 1,050 1,050
Net unrealized gain
(loss) on foreign
exchange derivatives
under cash flow
hedge accounting
(2009 net of tax
$53 and $217; 2008 -
($499) and ($779)) (138) 1,124 (294) 1,668
Reclassification of
net realized gain on
foreign exchange
derivatives to net
earnings (2009 net
of tax nil and
$1,576; 2008 - $226
and $364) - (506) (3,977) (837)
Net unrealized gain
(loss) on fuel
derivatives under
cash flow hedge
accounting (2009 net
of tax $2,493 and
($1,525)) (6,140) 316 3,443 316
Reclassification of
net realized loss on
fuel derivatives to
net earnings (2009
net of tax ($1,673)
and ($7,279)) 3,997 - 17,425 -
-------------------------------------------------------------------------
(1,931) 1,284 17,647 2,197
-------------------------------------------------------------------------
Total comprehensive
income $ 29,487 $ 59,160 $ 95,650 $ 138,677
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Operating activities:
Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480
Items not involving
cash:
Depreciation and
amortization 36,072 35,000 104,467 101,656
Amortization of
other liabilities (860) (235) (1,749) (704)
Amortization of
hedge settlements 350 350 1,050 1,050
Unrealized loss on
derivative
instruments 2,653 402 1,020 402
Issuance of shares
pursuant to
employee share
purchase plan 7,236 - 7,236 -
Loss on disposal of
property and
equipment 101 93 1,173 226
Stock-based
compensation
expense 5,577 2,735 11,361 10,854
Income tax credit
receivable - - (1,952) -
Future income
tax expense 17,475 24,616 33,660 55,930
Unrealized foreign
exchange loss (gain) 7,985 (6,900) 7,121 (11,103)
Change in non-cash
working capital 24,811 (36,626) 12,705 98,243
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132,818 77,311 254,095 393,034
-------------------------------------------------------------------------
Financing activities:
Increase in
long-term debt - 33,835 - 101,782
Repayment of
long-term debt (41,387) (54,945) (124,470) (137,827)
Decrease in
obligations under
capital lease (99) (95) (294) (280)
Issuance of shares 172,463 - 172,463 227
Share issue costs (7,456) - (7,456) -
Shares repurchased - - - (29,420)
Increase in other
assets - (1,419) - (4,084)
Change in non-cash
working capital 1,691 (689) 672 (2,895)
-------------------------------------------------------------------------
125,212 (23,313) 40,915 (72,497)
-------------------------------------------------------------------------
Investing activities:
Aircraft additions (24,065) (36,572) (108,261) (110,528)
Other property and
equipment and
intangible additions (7,772) (27,285) (44,228) (63,497)
Other property and
equipment disposals - - - 170
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(31,837) (63,857) (152,489) (173,855)
-------------------------------------------------------------------------
Cash flow from (used
in) operating,
financing and
investing activities 226,193 (9,859) 142,521 146,682
Effect of foreign
exchange on cash and
cash equivalents (4,176) 4,382 (1,087) 6,273
-------------------------------------------------------------------------
Net change in cash
and cash equivalents 222,017 (5,477) 141,434 152,955
Cash and cash
equivalents, beginning
of period 739,631 811,990 820,214 653,558
-------------------------------------------------------------------------
Cash and cash
equivalents, end
of period $ 961,648 $ 806,513 $ 961,648 $ 806,513
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash interest paid $ 16,431 $ 18,849 $ 51,637 $ 57,822
Cash taxes paid $ 2,712 $ 428 $ 6,037 $ 1,790
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Operating Highlights
(Unaudited)
-------------------------------------------------------------------------
Three months ended September 30
2009 2008 Change
-------------------------------------------------------------------------
ASMs 4,503,392,044 4,551,211,270 (1.1%)
RPMs 3,587,028,442 3,705,367,631 (3.2%)
Load factor 79.7% 81.4% (1.7 pts.)
Yield (cents) 16.74 19.39 (13.7%)
RASM (cents) 13.34 15.78 (15.5%)
CASM (cents) 11.63 13.58* (14.4%)
CASM, excluding fuel and
employee profit share
(cents) 8.16 7.96* 2.5%
Fuel consumption (litres) 218,950,368 221,606,557 (1.2%)
Fuel costs per litre
(dollars) 0.69 1.10 (37.3%)
Segment guests 3,654,097 3,749,679 (2.5%)
Average stage length (miles) 921 930 (1.0%)
Utilization (hours) 11.6 12.5 (7.2%)
Number of full-time
equivalent employees at
period end 6,062 6,275 (3.4%)
Fleet size at period end 81 76 6.6%
-------------------------------------------------------------------------
* Restated
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nine months ended September 30
2009 2008 Change
-------------------------------------------------------------------------
ASMs 13,175,067,069 12,850,828,937 2.5%
RPMs 10,373,856,153 10,402,104,231 (0.3%)
Load factor 78.7% 80.9% (2.2 pts.)
Yield (cents) 16.49 18.59 (11.3%)
RASM (cents) 12.99 15.05 (13.7%)
CASM (cents) 11.66 13.23* (11.9%)
CASM, excluding fuel and
employee profit share
(cents) 8.37 8.14* 2.8%
Fuel consumption (litres) 642,244,113 629,609,487 2.0%
Fuel costs per litre
(dollars) 0.66 0.99 (33.3%)
Segment guests 10,523,659 10,765,268 (2.2%)
Average stage length
(miles) 922 918 0.4%
Utilization (hours) 11.8 12.4 (4.8%)
Number of full-time
equivalent employees at
period end 6,062 6,275 (3.4%)
Fleet size at period end 81 76 6.6%
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*Restated
-------------------------------------------------------------------------
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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.
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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CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except per unit amounts)
(Unaudited)
-------------------------------------------------------------------------
Three months ended September 30 Nine months ended September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Restated Restated
Operating
expenses
- GAAP $ 523,654 $ 618,082 $ 1,536,626 $ 1,700,326
Adjusted
for:
Aircraft
fuel
expense (150,648) (244,544) (421,716) (625,871)
Employee
profit
share
expense (5,476) (11,453) (12,378) (26,787)
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Operating
expenses,
excluding
above
items -
non-GAAP $ 367,530 $ 362,085 $ 1,102,532 $ 1,047,668
ASMs 4,503,392,044 4,551,211,270 13,175,067,069 12,850,828,937
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CASM,
excluding
above items
(cents) -
non-GAAP 8.16 7.96 8.37 8.14
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