WestJet reports fourth quarter results; full-year net earnings up 65 per cent

WestJet to launch a new regional airline
Airline announces a normal course issuer bid and increases its quarterly dividend

CALGARY, Feb. 8, 2012 /CNW/ - WestJet (TSX: WJA) today announced its fourth quarter and year-end results for 2011. The airline reported fourth quarter net earnings of $35.6 million, or $0.26 per share and full-year net earnings of $148.7 million, or $1.06 per share; up significantly from the net earnings of $90.2 million, or $0.62 per share, reported for 2010. WestJet's operating cash flow per share for the full-year 2011 was $3.60, an increase of 25 per cent compared to last year.

"We are very pleased with our strong fourth quarter and full-year results for 2011. We managed to cover the elevated fuel costs with our revenue growth and improve our profit margin on a full-year basis," said WestJet President and CEO Gregg Saretsky. "Low-cost continues to be our focus and I am proud of WestJetters for their efforts throughout 2011 to keep controllable costs per unit relatively flat, while at the same time delivering a remarkable guest experience."

On January 16, 2012, WestJet announced that it was examining the possibility of launching a new low-cost short-haul, regional airline. Since that time, WestJetters have provided their input and voted overwhelmingly in favour of the strategy. "With resounding support from WestJetters, the leadership team and the board have made the decision to move ahead with plans to launch a new low-cost regional airline that will replicate our success in stimulating demand by bringing low fares to many new communities," commented Gregg Saretsky. "This is an exciting time for WestJet as we embark on the next phase of our evolution and introduce our friendly and caring service to more markets across North America." 

Operating highlights (stated in Canadian dollars)

  Q4 2011  Q4 2010* Change Full-year
2011
Full-year
2010*
Change
Net earnings (millions) $35.6 $37.2 (4.3%) $148.7 $90.2 64.9%
Diluted earnings per share $0.26 $0.26 - $1.06 $0.62 71.0%
Total revenues (millions) $781.5 $692.2 12.9% $3,071.5 $2,607.3 17.8%
Operating margin 7.6% 9.2% (1.6 pts.) 8.4% 7.3% 1.1 pts.
Operating cash flow per share** $0.52 $0.33 57.6% $3.60 $2.89 24.6%
ASMs (available seat miles) (billions) 5.329 5.021 6.1% 21.186 19.535 8.5%
RPMs (revenue passenger miles) (billions) 4.194 3.942 6.4% 16.891 15.613 8.2%
Load factor 78.7% 78.5% 0.2 pts. 79.7% 79.9% (0.2 pts.)
Yield (revenue per revenue passenger mile) (cents) 18.64 17.56 6.2% 18.18 16.70 8.9%
RASM (revenue per available seat mile) (cents) 14.67 13.79 6.4% 14.50 13.35 8.6%
CASM (cost per available seat mile) (cents) 13.55 12.51 8.3% 13.29 12.37 7.4%
CASM, excluding fuel and employee profit share (cents)** 9.03 8.79 2.7% 8.85 8.80 0.6%

*Financial information has been restated in accordance with International Financial Reporting Standards (IFRS).
**Refer to reconciliations in the accompanying tables for further information regarding calculations.

Today, WestJet also announced that the Toronto Stock Exchange has accepted the airline's notice to make a normal course issuer bid for five per cent of the currently issued and outstanding shares. The airline also declared an increase to its quarterly dividend from $0.05 to $0.06. "We successfully completed our previous bid in August 2011, and believe that continuing the share buy-back program and increasing the quarterly dividend demonstrates the robustness of our business model and commitment to return value to our shareholders," added Gregg Saretsky.

In the fourth quarter of 2011, WestJet launched a code-share arrangement with Japan Airlines and entered into two additional interline relationships. There were a total of 13 new airline partnerships introduced in 2011; three new code-share agreements and ten interline relationships. This pace is expected to continue as the airline anticipates launching another three to four code-shares and several interline relationships in 2012. In January 2012, Delta Air Lines, the world's second largest airline, was welcomed as WestJet's fifth code-share partner, expanding on the interline relationship that was introduced in early 2011.

WestJet is focused on continuing to improve the value it provides business travellers. In 2011, the airline launched an initiative with unique service offerings on its expanded daily service between Toronto and Montreal and between Toronto and Ottawa. WestJet also successfully bid on landing slots at New York's LaGuardia airport in November 2011, and plans to introduce service in June 2012. "Connecting this key business market directly to the WestJet network, in conjunction with a growing list of airline partnerships and a maturing frequent guest program, are helping expand our penetration into the higher yielding corporate travel segment," noted Gregg Saretsky.

The airline anticipates that its full-year 2012 CASM, excluding fuel and employee profit share, will be flat to up one per cent year over year.  For the first quarter of 2012, WestJet expects fuel costs, excluding hedging, to range between $0.93 and $0.95 per litre. This represents a nine to 12 per cent increase compared to the first quarter of 2011, and a 37 to 40 per cent increase versus 2010.

"We continue to expand our reach and grow profitably thanks to the teamwork of over 8,600 WestJetters and their commitment to the success of our airline," added Gregg Saretsky. "Our forward bookings remain healthy as we have not seen any negative impact despite the ongoing broader economic uncertainty." WestJet anticipates modest year-over-year RASM growth for the first quarter of 2012.

Dividend declaration
WestJet's Board of Directors declared a cash dividend of $0.06 per common voting share and variable voting share for the first quarter of 2012, to be paid on March 30, 2012, to shareholders of record on March 14, 2012. 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 statements
Certain information set forth in this news release, including, without limitation, the information regarding the launch of a new short-haul regional airline, WestJet's partnership growth strategy, plans to introduce service to LaGuardia, RASM growth in the first quarter of 2012, our forward bookings and demand for air travel, fuel costs in the first quarter of 2012, 2012 CASM, excluding fuel and employee profit share, and our future profitability, 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 budget, forecasts and strategy, our fleet plan, realized jet fuel prices for January 2012 and forward-curve prices for February and March 2012, the expected exchange rate of the Canadian dollar to the U.S. dollar in the first quarter of 2012, along with available implementation plans, agreements and bookings, but may vary due to factors including, but not limited to, changes in consumer demand, changes in fuel prices, delays in aircraft delivery, changes in guest demand, 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 statements 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.

This news release contains disclosure respecting non-IFRS performance measures including, without limitation, and CASM, excluding fuel and employee profit share and operating cash flow per share. These measures are included to enhance 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 quarters. These measures are not calculated in accordance with, or an alternative to, IFRS 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-IFRS measures" in WestJet's management's discussion and analysis of financial results for the year ended December 31, 2011, which is available under WestJet's profile on SEDAR at www.sedar.com, for a further discussion of such non-IFRS measures and a reconciliation of such measures to IFRS.

Management's discussion and analysis of financial results and consolidated financial statements and notes for the year ended December 31, 2011, 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, February 8, 2012, at 9 a.m. MST (11 a.m. EST). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's 2011 fourth quarter and year-end 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 favourite airline, offering scheduled service throughout its 76-city North American and Caribbean network. Inducted into Canada's Most Admired Corporate Cultures Hall of Fame and named one of Canada's best employers, WestJet pioneered low-cost flying in Canada. WestJet offers increased legroom and leather seats on its modern fleet of 97 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 38 aircraft through 2018, 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 share and per share amounts)
(Unaudited)

     
  Three
months ended
December 31
Twelve
months ended
December 31
  2011 2010 2011 2010
         
Revenues:        
  Guest 711,246 639,449 2,790,299 2,390,887
  Other 70,299 52,770 281,241 216,407
  781,545 692,219 3,071,540 2,607,294
Expenses:        
  Aircraft fuel 235,574 179,276 915,878 674,608
  Airport operations 107,295 100,286 421,561 388,112
  Flight operations and navigational charges 84,814 80,249 344,442 325,582
  Sales and distribution 66,873 67,036 273,364 255,732
  Marketing, general and administration 56,954 52,154 209,880 194,481
  Depreciation and amortization 44,312 42,566 174,751 170,462
  Aircraft leasing 41,850 36,972 165,571 143,381
  Maintenance 42,816 30,437 146,260 117,057
  Inflight 36,144 31,889 139,478 124,303
  Employee profit share 5,662 7,442 23,804 22,222
  722,294 628,307 2,814,989 2,415,940
Earnings from operations 59,251 63,912 256,551 191,354
         
Non-operating income (expense):        
  Finance income 4,383 3,607 15,987 9,910
  Finance costs (14,446) (16,881) (60,911) (70,914)
  (Loss) gain on foreign exchange (908) 826 2,485 2,579
  (Loss) gain on disposal of property and equipment (43) (25) (54) 570
  Gain (loss) on derivatives 1,597 365 (6,052) (34)
  (9,417) (12,108) (48,545) (57,889)
Earnings before income tax 49,834 51,804 208,006 133,465
         
Income tax expense:        
  Current 274 458 1,236 1,573
  Deferred 13,976 14,178 58,068 41,695
  14,250 14,636 59,304 43,268
Net earnings 35,584 37,168 148,702 90,197
         
Earnings per share:        
  Basic 0.26 0.26 1.06 0.62
  Diluted 0.26 0.26 1.06 0.62
         
Weighted average number of shares outstanding - basic 138,259,455 144,292,212 139,902,637 144,852,548
Weighted average number of shares outstanding - diluted 138,627,995 144,559,472 140,638,659 145,080,105

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

         
    December 31 December 31 January 1
    2011 2010 2010
         
Assets        
Current assets:        
  Cash and cash equivalents   1,243,605 1,159,316 994,989
  Restricted cash   48,341 28,583 10,192
  Accounts receivable   34,122 17,518 27,654
  Prepaid expenses, deposits and other   66,936 53,761 64,868
  Inventory   31,695 26,095 31,505
    1,424,699 1,285,273 1,129,208
Non-current assets:        
  Property and equipment   1,911,227 1,989,522 2,108,351
  Intangible assets   33,793 13,018 14,087
  Other assets   103,959 96,167 98,451
Total assets   3,473,678 3,383,980 3,350,097
         
Liabilities and shareholders' equity        
Current liabilities:        
  Accounts payable and accrued liabilities   307,279 287,710 228,911
  Advance ticket sales   432,186 336,926 297,720
  Non-refundable guest credits   43,485 36,381 63,164
  Current portion of long-term debt   158,832 178,337 165,111
  Current portion of obligations under finance leases   75 108 744
    941,857 839,462 755,650
Non-current liabilities:        
  Maintenance provisions   151,645 113,206 97,722
  Long-term debt   669,880 848,465 1,028,165
  Obligations under finance leases   3,174 3,249 3,358
  Other liabilities   10,449 8,958 9,517
  Deferred income tax   326,456 266,407 223,509
Total liabilities   2,103,461 2,079,747 2,117,921
         
Shareholders' equity:        
  Share capital   630,408 647,637 633,075
  Equity reserves   74,184 66,726 75,866
  Hedge reserves   (3,353) (10,470) (14,852)
  Retained earnings   668,978 600,340 538,087
Total shareholders' equity   1,370,217 1,304,233 1,232,176
         
Total liabilities and shareholders' equity   3,473,678 3,383,980 3,350,097

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

         
  Three months ended
December 31
Twelve months ended
December 31
  2011 2010 2011 2010
         
Operating activities:        
Net earnings 35,584 37,168 148,702 90,197
Items not involving cash:        
  Depreciation and amortization 44,312 42,566 174,751 170,462
  Change in long-term maintenance provisions 16,933 7,078 38,522 27,927
  Change in other liabilities (198) (155) (313) (685)
  Amortization of hedge settlements 349 351 1,400 1,400
  (Gain) loss on derivative instruments (1,597) (365) 6,052 34
  Loss (gain) on disposal of property and equipment 43 (19) 54 (763)
  Share-based payment expense 2,538 2,989 12,553 15,497
  Income tax credit (1,667)
  Deferred income tax expense 13,976 14,178 58,068 41,695
  Unrealized foreign exchange loss 66 115 1,453 337
  Change in non-cash working capital (25,600) (34,068) 88,410 98,382
Change in restricted cash (5,869) (20,972) (19,758) (18,391)
Change in other assets (7,785) (1,384) (3,510) (5,659)
  72,752 47,482 506,384 418,766
         
Investing activities:        
Aircraft additions (4,975) (11,157) (61,265) (29,884)
Other property and equipment and intangible additions (32,041) (6,611) (57,108) (18,675)
  (37,016) (17,768) (118,373) (48,559)
         
Financing activities:        
Repayment of long-term debt (62,021) (41,300) (199,225) (164,989)
Decrease in obligations under finance leases (18) (239) (108) (744)
Shares repurchased (31,391) (74,570) (31,391)
Dividends paid (6,914) (35,000)
Issuance of common shares 34 520
Change in other assets (235) 1,464 (836) (2,947)
Change in non-cash working capital 14 (7,147) 7,106 (4,526)
  (69,174) (78,613) (302,599) (204,077)
         
Cash flow from operating, investing and financing activities (33,438) (48,899) 85,412 166,130
Effect of foreign exchange on cash and cash equivalents (576) (2,237) (1,123) (1,803)
Net change in cash and cash equivalents (34,014) (51,136) 84,289 164,327
         
Cash and cash equivalents, beginning of period 1,277,619 1,210,452 1,159,316 994,989
         
Cash and cash equivalents, end of period 1,243,605 1,159,316 1,243,605 1,159,316
Cash taxes received (paid) (391) (590) 26 (2,958)
Cash interest received 4,057 3,850 14,631 8,343
Cash interest paid (12,088) (14,516) (51,722) (61,280)

CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except per unit amounts)
(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
December 31
Twelve months ended
December 31
  2011 2010 2011 2010
         
Operating expenses 722,294 628,307 2,814,989 2,415,940
Aircraft fuel expense (235,574) (179,276) (915,878) (674,608)
Employee profit share expense  (5,662) (7,442) (23,804) (22,222)
Operating expenses, adjusted 481,058 441,589 1,875,307 1,719,110
ASMs 5,328,928,405 5,021,010,134 21,186,304,409 19,535,291,313
CASM, excluding above items (cents) 9.03 8.79 8.85 8.80

Operating cash flow per share
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)

Cash flow from operations divided by the diluted weighted average number of shares outstanding.

         
    Three months ended
December 31
Twelve months ended
December 31
  2011 2010 2011 2010
         
Cash flow from operating activities 72,752 47,482 506,384 418,766
Weighted average number of shares outstanding - diluted 138,627,995 144,559,472 140,638,659 145,080,105
Diluted operating cash flow per share 0.52 0.33 3.60 2.89

 

SOURCE WestJet

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


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