News Releases

WestJet reports first quarter net earnings of $89 million

Airline achieves 36^th consecutive profitable quarter and record earnings per share

CALGARY, May 6, 2014 /CNW/ - WestJet (TSX: WJA) today announced its first quarter results for 2014, with net earnings of $89.3 million, or $0.69 per diluted share. This compares with the net earnings of $91.1 million, or $0.68 per diluted share reported in the first quarter of 2013. Based on the trailing twelve months, the airline achieved a return on invested capital of 13.7 per cent, compared with the 13.9 per cent reported in the previous quarter. These results include pre-tax recoveries of value added taxes of $17.6 million associated with fuel costs and $2.5 million associated with airport costs incurred from 2009 to 2013.

"We had a very strong start to 2014, as we achieved our second best ever first quarter earnings, recorded our 36^th consecutive quarter of profitability and exceeded our 12 per cent ROIC target for the seventh consecutive quarter, even when we exclude the tax recoveries," said WestJet President and CEO Gregg Saretsky. "Our continued track record of profitability combined with strong liquidity and solid market position contributed to Standard & Poor's assigning WestJet an investment grade credit rating of BBB- this past February, placing us among the very few airlines in the world to be rated investment grade. I want to thank our nearly 10,000 WestJetters for all their hard work that makes these accomplishments possible."

Operating highlights (stated in Canadian dollars)

	Q1 2014	Q1 2013	Change
Net earnings (millions)	$89.3	$91.1	(2.0%)
Diluted earnings per share	$0.69	$0.68	1.5%
Total revenues (millions)	$1,042.1	$967.2	7.7%
Operating margin	12.6%	13.7%	(1.1 pts)
ASMs (available seat miles) (billions)	6.515	6.032	8.0%
RPMs (revenue passenger miles) (billions)	5.416	5.088	6.4%
Load factor	83.1%	84.3%	(1.2 pts)
Segment guests	4,806,685	4,493,324	7.0%
Yield (revenue per revenue passenger mile) (cents)	19.24	19.01	1.2%
RASM (revenue per available seat mile) (cents)	16.00	16.03	(0.2%)
CASM (cost per available seat mile) (cents)	13.98	13.84	1.0%
CASM, excluding fuel and employee profit share (cents)*	9.28	8.94	3.8%

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

Supporting WestJet Encore's expansion across Canada, WestJet announced in March 2014 that it had converted five of its 25 options to firm orders for Bombardier Q400 NextGen aircraft, scheduled for delivery in the second half of 2015.

In February 2014, WestJet announced it had signed a multi-year agreement with Panasonic Avionics Corporation to provide the airline with a new inflight entertainment system with added connectivity and entertainment options. "Combining wireless connectivity with our continually improving schedule and network, our WestJet Rewards program and the additional amenities and space offered by our Plus product is part of our ongoing plans to enhance our value proposition for both business and leisure travelers," said Bob Cummings, WestJet Executive Vice-President, Sales, Marketing and Guest Experience.

Dividend declaration
On May 5, 2014, WestJet's Board of Directors declared a cash dividend of $0.12 per common voting share and variable voting share for the second quarter of 2014, to be paid on June 30, 2014, to shareholders of record on June 18, 2014. 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 the timing of future aircraft deliveries 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, 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 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 months ended March 31, 2014, 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 consolidated financial statements and notes for the three months ended March 31, 2014, 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, May 6, 2014, at 6 a.m. MDT (8 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's first quarter 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
We are proud to be Canada's most-preferred airline, powered by an award-winning culture of care and recognized as one of the country's top employers. We offer scheduled service to more than 85 destinations in North America, Central America, the Caribbean and Europe. Through our regional airline, WestJet Encore, and with partnerships with airlines representing every major region of the world, we offer our guests more than 120 destinations in more than 20 countries. Leveraging WestJet's extensive network, flight schedule and remarkable guest experience, WestJet Vacations delivers affordable, flexible travel experiences with a variety of accommodation options for every guest. Members of our WestJet Rewards program earn WestJet dollars on flights, vacation packages and more. Our members use WestJet dollars towards the purchase of WestJet flights and vacations packages on any day, at any time, to any WestJet destination with no blackout periods ̶ even on seat sales. For more information about everything WestJet, please visit www.westjet.com.

Recent recognition includes:
2014 Value Airline of the Year (Air Transport World magazine)
2014/2013/2012 Canada's Most Attractive Employer (Randstad)
2013 Highest equity score: airline, vacation package supplier brands (Harris/Decima EquiTrend Study)
2013 Gold Stevie Award Best Transportation Company (American Business Awards)
2013 Chairman's Circle Award: WestJet Vacations (CPSC)
2013 Canada's Most Preferred Airline (Leger Marketing)
2013 WestJet RBC MasterCard ranked #1 in Canada (Money Sense magazine)

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Condensed Consolidated Statement of Earnings For the three months ended March 31 (Stated in thousands of Canadian dollars, except per share amounts) (Unaudited)

		2014	2013

Revenue:
	Guest	936,829	879,394
	Other	105,261	87,848
		1,042,090	967,242
Operating expenses:
	Aircraft fuel	284,836	271,048
	Airport operations	127,361	115,275
	Flight operations and navigational charges	116,145	101,875
	Sales and distribution	101,310	91,310
	Depreciation and amortization	61,022	48,019
	Maintenance	52,795	39,697
	Marketing, general and administration	52,221	49,515
	Aircraft leasing	49,108	47,509
	Inflight	44,702	46,319
	Employee profit share	20,998	24,311
		910,498	834,878
Earnings from operations		131,592	132,364

Non-operating income (expense):
	Finance income	4,357	4,744
	Finance costs	(11,668)	(10,698)
	Gain (loss) on foreign exchange	(1,487)	79
	Gain (loss) on disposal of property and equipment	11	(1,018)
		(8,787)	(6,893)
Earnings before income tax		122,805	125,471

Income tax expense (recovery):
	Current	44,694	46,653
	Deferred	(11,180)	(12,255)
		33,514	34,398
Net earnings		89,291	91,073

Earnings per share:
	Basic	0.70	0.69
	Diluted	0.69	0.68


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

		March 31 2014	December 31 2013
Assets
Current assets:
	Cash and cash equivalents	1,112,484	1,256,005
	Restricted cash	46,547	58,106
	Accounts receivable	55,446	42,164
	Prepaid expenses, deposits and other	111,042	133,263
	Inventory	35,347	36,722
		1,360,866	1,526,260
Non-current assets:
	Property and equipment	2,613,317	2,487,734
	Intangible assets	61,313	58,691
	Other assets	71,118	70,778
Total assets		4,106,614	4,143,463

Liabilities and shareholders' equity
Current liabilities:
	Accounts payable and accrued liabilities	510,456	543,167
	Advance ticket sales	518,523	551,022
	Non-refundable guest credits	45,761	46,975
	Current portion of maintenance provisions	57,964	76,105
	Current portion of long-term debt	188,004	189,191
		1,320,708	1,406,460
Non-current liabilities:
	Maintenance provisions	169,061	142,411
	Long-term debt	675,191	689,204
	Other liabilities	8,759	8,834
	Deferred income tax	295,394	306,714
Total liabilities		2,469,113	2,553,623

Shareholders' equity:
	Share capital	599,748	603,861
	Equity reserves	69,354	69,079
	Hedge reserves	58	105
	Retained earnings	968,341	916,795
Total shareholders' equity		1,637,501	1,589,840

Total liabilities and shareholders' equity		4,106,614	4,143,463


Condensed Consolidated Statement of Cash Flows For the three months ended March 31 (Stated in thousands of Canadian dollars) (Unaudited)

		2014	2013

Operating activities:
Net earnings		89,291	91,073
Items not involving cash:
	Depreciation and amortization	61,022	48,019
	Change in maintenance provisions	432	9,082
	Change in other liabilities	(75)	(207)
	Amortization of hedge settlements	350	350
	(Gain) loss on disposal of property and equipment	(11)	1,018
	Share-based payment expense	3,858	3,575
	Deferred income tax expense (recovery)	(11,180)	(12,255)
	Unrealized foreign exchange (gain) loss	(2,808)	(1,125)
Change in non-cash working capital		31,912	105,480
Change in restricted cash		11,559	1,499
Change in other assets		8,551	(1,939)
Cash interest received		4,492	5,353
Cash taxes paid		(129,662)	(77,183)
Purchase of shares pursuant to compensation plans		(5,432)	(1,486)
		62,299	171,254

Investing activities:
Aircraft additions		(136,905)	(125,481)
Other property and equipment and intangible additions		(9,757)	(22,990)
		(146,662)	(148,471)

Financing activities:
Increase in long-term debt		32,430	-
Repayment of long-term debt		(47,674)	(41,240)
Shares repurchased		(24,724)	(4,064)
Dividends paid		(15,325)	(13,231)
Issuance of shares pursuant to compensation plans		40	33
Cash interest paid		(10,186)	(9,568)
Change in non-cash working capital		(418)	(455)
		(65,857)	(68,525)

Cash flow from operating, investing and financing activities		(150,220)	(45,742)
Effect of foreign exchange on cash and cash equivalents		6,699	2,343
Net change in cash and cash equivalents		(143,521)	(43,399)

Cash and cash equivalents, beginning of period		1,256,005	1,408,199

Cash and cash equivalents, end of period		1,112,484	1,364,800

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 March 31
	2014	2013	Change
Operating expenses	910,498	834,878	75,620
Aircraft fuel expense	(284,836)	(271,048)	(13,788)
Employee profit share expense	(20,998)	(24,311)	3,313
Operating expenses, adjusted	604,664	539,519	65,145
ASMs	6,514,585,070	6,032,096,070	8.0%
CASM, excluding above items (cents)	9.28	8.94	3.8%

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.


		March 31 2014	December 31 2013	Change
Earnings before income taxes		369,419	372,085	(2,666)
Add:
	Finance costs	44,417	43,447	970
	Implicit interest in operating leases⁽ⁱ⁾	93,054	92,214	840
		506,890	507,746	(856)
Invested capital:
	Average long-term debt⁽ⁱⁱ⁾	780,523	808,722	(28,199)
	Average obligations under finance leases⁽ⁱⁱⁱ⁾	-	-	-
	Average shareholders' equity	1,593,465	1,531,073	62,392
	Off-balance-sheet aircraft leases^(iv)	1,329,338	1,317,345	11,993
		3,703,326	3,657,140	46,186
Return on invested capital		13.7%	13.9%	(0.2 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)	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 March 31, 2014, the trailing 12 months of aircraft leasing costs totaled $177,245 (December 31, 2013 - $175,646).

SOURCE WestJet

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