News Releases

WestJet reports third quarter net earnings of $65 million

Airline achieves 34^th consecutive profitable quarter and flies over 300,000 additional guests year over year

CALGARY, Nov. 5, 2013 /CNW/ - WestJet (TSX: WJA) today announced its third quarter 2013 results, with net earnings of $65.1 million, or $0.50 per diluted share. This compares with the net earnings of $70.6 million, or $0.52 per diluted share reported in the third quarter of 2012. Based on the trailing twelve months, the airline achieved a return on invested capital of 13.8 per cent, compared with the 14.4 per cent reported in the previous quarter, and one of the best third quarters in WestJet history.

"We had a strong third quarter in which we flew a record number of guests, exceeded our 12 per cent ROIC target for the fifth consecutive quarter, and reached our initial business transformation initiative milestone one year early by implementing and identifying various opportunities which we believe will result in approximately $100 million in future cost savings in 2014," said WestJet President and CEO Gregg Saretsky. "With the market launch of our Plus product in August, we are now providing our business and leisure guests with even more flexibility, comfort and convenience, and my thanks go to WestJetters for their ongoing efforts to take care of our guests."

Operating highlights (stated in Canadian dollars)


	Q3 2013	Q3 2012	Change	Year-to- date 2013	Year-to- date 2012	Change
Net earnings (millions)	$65.1	$70.6	(7.8%)	$200.9	$181.4	10.7%
Diluted earnings per share	$0.50	$0.52	(3.8%)	$1.51	$1.33	13.5%
Total revenues (millions)	$924.8	$866.5	6.7%	$2,735.8	$2,566.8	6.6%
Operating margin	10.7%	12.5%	(1.8 pts)	10.9%	11.1%	(0.2 pts)
ASMs (available seat miles) (billions)	6.109	5.498	11.1%	18.029	16.576	8.8%
RPMs (revenue passenger miles) (billions)	5.059	4.654	8.7%	14.823	13.770	7.6%
Load factor	82.8%	84.6%	(1.8 pts)	82.2%	83.1%	(0.9 pts)
Segment guests	4,940,943	4,611,315	7.1%	13,927,538	13,109,328	6.2%
Yield (revenue per revenue passenger mile) (cents)	18.28	18.62	(1.8%)	18.46	18.64	(1.0%)
RASM (revenue per available seat mile) (cents)	15.14	15.76	(3.9%)	15.17	15.48	(2.0%)
CASM (cost per available seat mile) (cents)	13.52	13.80	(2.0%)	13.52	13.77	(1.8%)
CASM, excluding fuel and employee profit share (cents)*	8.96	9.10	(1.5%)	8.99	9.06	(0.8%)

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

During the third quarter, WestJet continued the roll-out of WestJet Encore, beginning service to Brandon, Manitoba on September 3 and announcing Terrace, B.C. as a new community that will welcome its first Encore flight on November 25, 2013. WestJet Encore also added new non-stop routes joining the dots in WestJet's network, including flights between Winnipeg and Saskatoon, Winnipeg and Regina and between Vancouver and Kamloops, B.C. "We are very pleased with the overwhelming community support WestJet Encore has received, as we give even more Canadians access to lower fares, stimulate demand in smaller communities, and repeat WestJet's success in the regional space," said Gregg Saretsky.

In the third quarter, WestJet entered into a definitive purchase agreement for 65 Boeing 737 MAX aircraft with deliveries scheduled from 2017 through 2027. This order will enable the airline to enhance its inflight guest experience, support its low-cost business model, and contribute to its profitable growth by utilizing a lower operating cost aircraft that is expected to reduce fuel burn and CO2 emissions by 13 per cent, as compared with the most fuel-efficient single-aisle aircraft currently available.

With the impact on demand caused by the summer flooding in Calgary, Alberta and the surrounding communities behind the airline, WestJet expects continued strong traffic and revenue growth in the fourth quarter of 2013. The airline anticipates its 2013 fourth quarter RASM to be roughly flat as compared to the same period in the prior year.

The airline expects jet fuel costs to range between 90 and 92 cents per litre for the fourth quarter of 2013, representing a down 1.0 to up 1.0 per cent year-over-year change. For the full year 2013, the airline now expects CASM, excluding fuel and employee profit share, to be down approximately 0.5 per cent year-over-year.

Dividend declaration
On November 4, 2013, WestJet's Board of Directors declared a cash dividend of $0.10 per common voting share and variable voting share for the fourth quarter of 2013, to be paid on December 31, 2013, to shareholders of record on December 18, 2013. 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, including, without limitation, information regarding WestJet's business transformation initiative and the $100 million in future cost savings in 2014; WestJet Encore and the communities it will serve; the anticipated timing of the 737 MAX deliveries and the expected financial and operational benefits of these aircraft; traffic and revenue growth in the fourth quarter of 2013; 2013 fourth quarter RASM; jet fuel costs in the fourth quarter of 2013; and CASM, excluding fuel and employee profit share for the fourth quarter of 2013 is forward-looking information within the meaning of applicable Canadian 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 for WestJet and WestJet Encore, 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, future aircraft deliveries, the specifications of the 737 MAX aircraft and the LEAP-1B engine, WestJet's business transformation initiative along with available implementation plans, 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 www.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, 2013, which is available under WestJet's profile on SEDAR at www.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 condensed consolidated financial statements and notes for the three and nine months ended September 30, 2013, are available through the Internet in the Media and Investor Relations section of www.westjet.com or under WestJet's SEDAR profile at www.sedar.com.

Analyst conference call
WestJet will hold its quarterly analysts' conference call today, November 5, 2013, 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 third quarter 2013 results and answer questions from financial analysts and members of the media. 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 Media and Investor Relations section of www.westjet.com.

About WestJet
WestJet is Canada's most preferred airline, offering scheduled service to 87 destinations in North America, Central America and the Caribbean. Powered by an award-winning culture of care, WestJet pioneered low-cost flying in Canada. Recognized nationally as a top employer, WestJet now has more than 9,600 WestJetters across Canada. Operating a fleet of more than 100 Boeing Next-Generation 737 and Bombardier Q400 NextGen aircraft, WestJet strives to be one of the five most successful international airlines in the world. This year, WestJet launched its new regional airline, WestJet Encore.

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Condensed Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
		Three months ended September 30		Nine months ended September 30
		2013	2012	2013	2012

Revenue:
	Guest	853,164	806,964	2,501,170	2,349,742
	Other	71,680	59,573	234,610	217,027
		924,844	866,537	2,735,780	2,566,769
Expenses:
	Aircraft fuel	266,668	241,837	778,920	746,571
	Airport operations	117,480	106,900	343,527	315,016
	Flight operations and navigational charges	104,677	94,232	309,487	281,642
	Sales and distribution	88,681	82,643	262,721	251,607
	Marketing, general and administration	54,005	49,989	158,005	144,893
	Depreciation and amortization	51,499	46,935	148,672	139,226
	Inflight	44,824	40,036	140,117	120,249
	Aircraft leasing	41,791	40,838	133,184	129,683
	Maintenance	44,248	38,969	124,198	118,816
	Employee profit share	11,969	16,161	39,114	34,946
		825,842	758,540	2,437,945	2,282,649
Earnings from operations		99,002	107,997	297,835	284,120

Non-operating income (expense):
	Finance income	4,144	4,587	13,326	13,418
	Finance costs	(10,921)	(12,269)	(31,882)	(37,264)
	Gain (loss) on foreign exchange	(793)	463	958	543
	Gain (loss) on disposal of property and equipment	(545)	4	(2,325)	381
	Loss on fuel derivatives	−	−	−	(6,512)
		(8,115)	(7,215)	(19,923)	(29,434)
Earnings before income tax		90,887	100,782	277,912	254,686

Income tax expense (recovery):
	Current	32,357	16,740	94,805	57,576
	Deferred	(6,577)	13,394	(17,808)	15,662
		25,780	30,134	76,997	73,238
Net earnings		65,107	70,648	200,915	181,448

Earnings per share:
	Basic	0.50	0.53	1.53	1.34
	Diluted	0.50	0.52	1.51	1.33


Condensed Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)

		September 30, 2013	December 31, 2012

Assets
Current assets:
	Cash and cash equivalents	1,232,963	1,408,199
	Restricted cash	56,833	51,623
	Accounts receivable	41,535	37,576
	Prepaid expenses, deposits and other	105,315	101,802
	Inventory	29,764	35,595
		1,466,410	1,634,795
Non-current assets:
	Property and equipment	2,359,363	1,985,599
	Intangible assets	55,905	50,808
	Other assets	71,297	75,413
Total assets		3,952,975	3,746,615

Liabilities and shareholders' equity
Current liabilities:
	Accounts payable and accrued liabilities	465,022	460,003
	Advance ticket sales	542,586	480,947
	Non-refundable guest credits	43,612	47,859
	Current portion of maintenance provisions	68,154	34,135
	Current portion of long-term debt	178,808	164,909
		1,298,182	1,187,853
Non-current liabilities:
	Maintenance provisions	136,364	145,656
	Long-term debt	607,924	574,139
	Other liabilities	11,632	9,914
	Deferred income tax	339,908	356,748
Total liabilities		2,394,010	2,274,310

Shareholders' equity:
	Share capital	606,445	614,899
	Equity reserves	67,762	69,856
	Hedge reserves	(1,944)	(5,746)
	Retained earnings	886,702	793,296
Total shareholders' equity		1,558,965	1,472,305

Total liabilities and shareholders' equity		3,952,975	3,746,615


Condensed Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)

		Three months ended September 30		Nine months ended September 30
		2013	2012	2013	2012

Operating activities:
Net earnings		65,107	70,648	200,915	181,448
Items not involving cash:
	Depreciation and amortization	51,499	46,935	148,672	139,226
	Change in maintenance provisions	5,444	8,499	18,822	27,130
	Change in other liabilities	(196)	(178)	1,985	(390)
	Amortization of hedge settlements	350	350	1,050	1,050
	Loss on fuel derivatives	−	−	−	6,512
	(Gain) loss on disposal of property and equipment	545	(4)	2,325	(381)
	Share-based payment expense	3,594	3,104	10,648	9,694
	Deferred income tax expense/(recovery)	(6,577)	13,394	(17,808)	15,662
	Unrealized foreign exchange gain	(4,258)	(251)	(8,543)	(2,091)
Change in non-cash working capital		109,823	163,450	210,644	245,701
Change in restricted cash		(19,813)	(18,712)	(5,210)	(301)
Change in other assets		874	(1,568)	(1,873)	(5,595)
Cash interest received		4,272	4,580	14,165	13,318
Cash taxes paid		(23,494)	75	(121,008)	(731)
Purchase of shares pursuant to compensation plans		(63)	−	(6,650)	(1,306)
		187,107	290,322	448,134	628,946

Investing activities:
Aircraft additions		(190,215)	(16,991)	(472,560)	(186,445)
Other property and equipment and intangible additions		(19,923)	(8,130)	(59,159)	(41,220)
		(210,138)	(25,121)	(531,719)	(227,665)

Financing activities:
Increase in long-term debt		144,291	-	177,365	72,995
Repayment of long-term debt		(47,081)	(41,191)	(129,646)	(121,273)
Decrease in obligations under finance leases		−	(19)	−	(56)
Shares repurchased		(46,184)	(10,123)	(82,797)	(78,872)
Dividends paid		(12,935)	(10,699)	(39,327)	(26,972)
Issuance of shares pursuant to compensation plans		36	52	69	162
Cash interest paid		(8,763)	(10,746)	(27,176)	(32,877)
Change in non-cash working capital		474	(1,726)	(83)	(5,086)
		29,838	(74,452)	(101,595)	(191,979)

Cash flow from operating, investing and financing activities		6,807	190,749	(185,180)	209,302
Effect of foreign exchange on cash and cash equivalents		2,558	(2,033)	9,944	27
Net change in cash and cash equivalents		9,365	188,716	(175,236)	209,329

Cash and cash equivalents, beginning of period		1,223,598	1,264,218	1,408,199	1,243,605

Cash and cash equivalents, end of period		1,232,963	1,452,934	1,232,963	1,452,934

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)	2013	2012	Change	2013	2012	Change
Operating expenses	825,842	758,540	67,302	2,437,945	2,282,649	155,296
Aircraft fuel expense	(266,668)	(241,837)	(24,831)	(778,920)	(746,571)	(32,349)
Employee profit share expense	(11,969)	(16,161)	4,192	(39,114)	(34,946)	(4,168)
Operating expenses, adjusted	547,205	500,542	46,663	1,619,911	1,501,132	118,779
ASMs	6,108,626,819	5,497,528,681	11.1%	18,028,888,568	16,576,116,108	8.8%
CASM, excluding above items (cents)	8.96	9.10	(1.5%)	8.99	9.06	(0.8%)

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.


($ in thousands)		September 30, 2013	December 31, 2012	Change
Earnings before income taxes		363,454	340,229	23,225
Add:
	Finance costs	43,518	48,900	(5,382)
	Implicit interest in operating leases⁽ⁱ⁾	92,879	91,041	1,838
		499,851	480,170	19,681
Invested capital:
	Average long-term debt⁽ⁱⁱ⁾	783,593	783,880	(287)
	Average obligations under finance leases⁽ⁱⁱⁱ⁾	1,597	1,625	(28)
	Average shareholders' equity	1,504,108	1,421,261	82,847
	Off-balance-sheet aircraft leases^(iv)	1,326,848	1,300,590	26,258
		3,616,146	3,507,356	108,790
Return on invested capital		13.8%	13.7%	0.1pts


(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)	Average obligations under finance leases include the current portion and long-term portion.
(iv)	Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At September 30, 2013, the trailing 12 months of aircraft leasing costs totaled $176,913 (December 31, 2012 - $173,412).

SOURCE WestJet

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