WestJet reports 130 per cent jump in second quarter net earnings

Airline achieves 21st consecutive quarter of positive earnings with $21 million of net earnings

CALGARY, Aug. 5 /CNW/ - WestJet (TSX:WJA) today reported second quarter 2010 net earnings of $21 million, or 14 cents per diluted share, which marks its 21st consecutive quarter of profitability and a 130 per cent increase in net earnings, year-over-year. Excluding the impact of a one-time special item related to revised estimates for provincial income tax allocation calculations in the second quarter of 2010, WestJet's adjusted second quarter net earnings for 2010 were $23.4 million or 16 cents per diluted share.

WestJet reported an operating margin of 6.6 per cent, compared to 6.9 per cent in the second quarter of 2009. WestJet's second quarter 2010 pre-tax margin was 5.4 per cent, compared to 2.6 per cent in the same 2009 period.

    
              Operating highlights (stated in Canadian dollars)
    -------------------------------------------------------------------------
                                                  Year-to-  Year-to-
                                                    date      date
                   Q2 2010   Q2 2009    Change      2010      2009    Change
    -------------------------------------------------------------------------
    Net earnings
     (millions)      $21.0      $9.2    129.7%     $34.8     $46.6    (25.2%)
    -------------------------------------------------------------------------
    Net earnings
     excluding
     special
     items*
     (millions)      $23.4      $9.2    155.7%     $40.9     $44.3     (7.7%)
    -------------------------------------------------------------------------
    Diluted earnings
     per share       $0.14     $0.07    100.0%     $0.24     $0.36    (33.3%)
    -------------------------------------------------------------------------
    Diluted earnings
     per share
     excluding
     special
     items*        $0.16     $0.07    128.6%     $0.28     $0.35    (20.0%)
    -------------------------------------------------------------------------
    Total revenues
     (millions)     $612.1    $531.2     15.2%  $1,231.9  $1,110.4     10.9%
    -------------------------------------------------------------------------
    Operating
     margin           6.6%      6.9% (0.3 pts.)     6.4%      8.8% (2.4 pts.)
    -------------------------------------------------------------------------
    ASMs (available
     seat miles)
     (billions)      4.784     4.315     10.9%     9.483     8.672      9.4%
    -------------------------------------------------------------------------
    RPMs (revenue
     passenger
     miles)
     (billions)      3.825     3.285     16.4%     7.665     6.787     12.9%
    -------------------------------------------------------------------------
    Load factor      80.0%     76.1%  3.9 pts.     80.8%     78.3%  2.5 pts.
    -------------------------------------------------------------------------
    Yield (revenue
     per revenue
     passenger
     mile) (cents)   16.00     16.17     (1.1%)    16.07     16.36     (1.8%)
    -------------------------------------------------------------------------
    RASM (revenue
     per available
     seat mile)
     (cents)         12.80     12.31      4.0%     12.99     12.81      1.4%
    -------------------------------------------------------------------------
    CASM (cost per
     available
     seat mile)
     (cents)         11.96     11.46      4.4%     12.16     11.68      4.1%
    -------------------------------------------------------------------------
    CASM excluding
     fuel and
     employee
     profit share
     (cents)*       8.44      8.45     (0.1%)     8.67      8.48      2.2%
    -------------------------------------------------------------------------
    * Refer to reconciliations in the accompanying tables for further
        information regarding adjustments.
    

"We are pleased to deliver our 21st consecutive quarter of profitability," said WestJet President and CEO Gregg Saretsky. "It is WestJetters' unrelenting focus on friendly service and great value that allows our dedicated and talented team to continue producing solid results, quarter after quarter, year in and year out."

"The improving demand and traffic results experienced during the quarter enabled us to increase our revenue by 15.2 per cent and our RASM by 4.0 per cent, compared to the prior period," commented Gregg Saretsky. "In June, we introduced our everyday low pricing structure to provide great fares year-round across our entire schedule and reduce the volatility in pricing. We are encouraged by the early booking trends and the improved mix of fares we are selling." Third quarter RASM estimates are anticipated to be positive again on a year-over-year basis.

During the second quarter, CASM increased 4.4 per cent as the cost of fuel in cents per litre is up 14.5 per cent, including hedging, year-over-year. Focusing on controllable costs, CASM ex fuel and profit share was down 0.1 per cent year-over-year. The main cost reductions came from a stronger Canadian dollar and increased average stage length, offset by higher commissions from WestJet Vacations' significant revenue growth, quarter over quarter. An increase of one to three per cent, year-over-year, in CASM ex fuel and profit share is expected for the third quarter.

Significant investments in technology to enhance WestJet's strategic capabilities in 2009 are now being leveraged to deliver new revenue opportunities, while mitigating cost impacts from the increased complexity in the organization. WestJet continues to focus on implementing innovative self-serve solutions that will enhance guest experience and save time for guests, while expanding margins.

WestJet believes the Canadian economy needs to rebound further before it can support more new domestic capacity growth. Domestic capacity was therefore reduced during the second quarter and new capacity directed into the airline's southern markets. Most of the new capacity will continue to be deployed outside of Canada in the third and fourth quarters as well. The airline's capacity for the third quarter is expected to increase between 11 and 12 per cent. Its full-year capacity is expected to increase nine to 10 per cent.

In light of a recent downward revision to the Canadian GDP growth estimates and the continual assessment of other economic indicators, WestJet is deferring the delivery of three aircraft from 2011 (1) and 2012 (2), out to 2017. WestJet will now be taking delivery of six aircraft in 2011 and five aircraft in 2012. "Economic uncertainty has caused us to re-think our short-term capacity plan," commented Gregg Saretsky. "We have worked closely with our valued partner Boeing to further enhance our fleet plan flexibility."

Caution regarding forward-looking statements

Certain information set forth in this press release, including information regarding future load factors and yield, anticipated RASM in Q3 2010, anticipated CASM in Q3 2010, expected capacity growth, use of new technology, and Q3 2010 capacity utilization and fleet planning, contains 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, 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 described in WestJet's public reports and filings, which are available on 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 statements. WestJet does not undertake to update, correct or revise any forward-looking statements as a result of any new information, future events or otherwise, except as may be required by applicable law.

Management's Discussion & Analysis and the Consolidated Financial Statements and Notes for the three and six months ended June 30, 2010, are available through the Internet on www.westjet.com or WestJet's SEDAR profile at www.sedar.com.

Conference call

WestJet will hold its quarterly analysts' conference call today, August 5, 2010, at 9 a.m. MDT (11 a.m. EDT). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's second quarter 2010 results and answer questions from financial analysts. Following the analysts' question-and-answer period, media will be given an opportunity to ask questions pertaining to the airline's first quarter results. The conference call is available in Toronto by calling 1-647-427-7450 and outside Toronto through the toll-free telephone number 1-888-231-8191. The call can also be listened to through an Internet webcast in the Media and Investor section of www.westjet.com.

About WestJet

WestJet is Canada's preferred airline, offering scheduled service throughout its 71-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, leather seats and live seatback television provided by Bell TV on its modern fleet of 90 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 45 aircraft through 2017, WestJet strives to be one of the five most successful international airlines in the world.

    
    Consolidated Statement of Earnings
    (Stated in thousands of Canadian dollars, except per share amounts)
    (Unaudited)

    -------------------------------------------------------------------------
                       Three months ended June 30   Six months ended June 30
                             2010         2009         2010         2009
    -------------------------------------------------------------------------
    Revenues:
      Guest revenues     $    562,791 $    485,248 $  1,127,194 $    982,343
      Other revenues           49,326       45,915      104,688      128,105
    -------------------------------------------------------------------------
                              612,117      531,163    1,231,882    1,110,448
    Expenses:
      Aircraft fuel           164,450      128,677      324,504      271,068
      Airport operations       92,799       82,644      193,902      176,301
      Flight operations
       and navigational
       charges                 82,403       75,415      161,139      147,122
      Sales and
       distribution            57,340       39,308      123,791       80,222
      Marketing, general
       and administration      48,338       48,757       98,416      101,623
      Aircraft leasing         35,113       27,106       69,086       52,182
      Depreciation and
       amortization            33,308       34,502       66,187       68,395
      Inflight                 31,404       30,299       61,734       59,183
      Maintenance              22,897       26,455       48,379       49,974
      Employee profit
       share                    3,898        1,185        6,213        6,902
    -------------------------------------------------------------------------
                              571,950      494,348    1,153,351    1,012,972
    -------------------------------------------------------------------------
    Earnings from operations   40,167       36,815       78,531       97,476

    Non-operating income
     (expense):
      Interest income           2,065          964        3,772        3,082
      Interest expense        (15,279)     (17,126)     (30,969)     (34,611)
      Gain (loss) on foreign
       exchange                 5,950       (9,033)       2,130       (4,412)
      Gain (loss) on
       disposal of property
       and equipment              542         (607)         398         (713)
      Gain (loss) on
       derivatives               (558)       2,706           74        3,340
    -------------------------------------------------------------------------
                               (7,280)     (23,096)     (24,595)     (33,314)
    -------------------------------------------------------------------------
    Earnings before income
     taxes                     32,887       13,719       53,936       64,162

    Income tax expense:
      Current                     370          686          732        1,392
      Future                   11,488        3,880       18,375       16,185
    -------------------------------------------------------------------------
                               11,858        4,566       19,107       17,577
    -------------------------------------------------------------------------
    Net earnings         $     21,029 $      9,153 $     34,829 $     46,585
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Earnings per share:
      Basic              $       0.14 $       0.07 $       0.24 $       0.36
      Diluted            $       0.14 $       0.07 $       0.24 $       0.36
    -------------------------------------------------------------------------

    Weighted average
     number of shares
     outstanding -
     basic                145,191,666  127,932,712  144,912,473  127,928,389
    Weighted average
     number of shares
     outstanding -
     diluted              145,341,526  127,969,182  145,237,594  128,129,540
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Balance Sheet
    (Stated in thousands of Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2010       2009
    -------------------------------------------------------------------------
    Assets
    Current assets:
    Cash and cash equivalents                      $  1,108,163 $  1,005,181
      Accounts receivable                                29,987       27,654
      Prepaid expenses, deposits and other               40,959       56,239
      Inventory                                          15,402       26,048
      Future income tax                                   1,171        2,560
    -------------------------------------------------------------------------
                                                      1,195,682    1,117,682

    Property and equipment                            2,262,161    2,307,566

    Intangible assets                                    13,622       14,087

    Other assets                                         60,505       54,367
    -------------------------------------------------------------------------
                                                   $  3,531,970 $  3,493,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Current liabilities:
      Accounts payable and accrued liabilities     $    267,128 $    231,401
      Advance ticket sales                              325,675      286,361
      Non-refundable guest credits                       44,517       64,506
      Current portion of long-term debt                 179,759      171,223
      Current portion of obligations under
       capital leases                                       398          744
    -------------------------------------------------------------------------
                                                        817,477      754,235

    Long-term debt                                      954,932    1,048,554

    Obligations under capital leases                      3,286        3,358

    Other liabilities                                    19,306       19,628

    Future income tax                                   297,753      278,999
    -------------------------------------------------------------------------
                                                      2,092,754    2,104,774

    Shareholders' equity:
      Share capital                                     658,120      633,075
      Contributed surplus                                56,409       71,503
      Accumulated other comprehensive loss               (9,344)     (14,852)
      Retained earnings                                 734,031      699,202
    -------------------------------------------------------------------------
                                                      1,439,216    1,388,928

    -------------------------------------------------------------------------
                                                   $  3,531,970 $  3,493,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statement of Cash Flows
    (Stated in thousands of Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------
                       Three months ended June 30   Six months ended June 30
                             2010         2009         2010         2009
    -------------------------------------------------------------------------

    Operating activities:
    Net earnings         $     21,029 $      9,153 $     34,829 $     46,585
    Items not involving
     cash:
      Depreciation and
       amortization            33,308       34,502       66,187       68,395
      Amortization of
       other liabilities         (493)        (654)        (984)        (889)
      Amortization of
       hedge settlements          350          350          699          700
      (Gain) loss on
       derivatives                558       (2,328)         (74)      (3,226)
      (Gain) loss on
       disposal of
       property and
       equipment                 (537)         867         (377)       1,072
      Stock-based
       compensation
       expense                  4,146        3,149        9,431        5,784
      Income tax credit           149            -       (1,667)      (1,952)
      Future income tax
       expense                 11,488        3,880       18,375       16,185
      Unrealized foreign
       exchange (gain)
       loss                    (4,933)       8,577         (667)        (864)
      Change in non-cash
       working capital         19,699      (31,745)      84,254      (10,513)
    -------------------------------------------------------------------------
                               84,764       25,751      210,006      121,277
    -------------------------------------------------------------------------

    Financing activities:
      Repayment of long-term
       debt                   (42,706)     (41,493)     (85,503)     (83,083)
      Decrease in
       obligations under
       capital leases            (299)         (98)        (418)        (195)
      Issuance of common
       shares                     520            -          520            -
      Change in other assets      (17)         700       (4,488)           -
      Change in non-cash
       working capital         (1,587)      (1,849)         942       (1,019)
    -------------------------------------------------------------------------
                              (44,089)     (42,740)     (88,947)     (84,297)
    -------------------------------------------------------------------------

    Investing activities:
      Aircraft additions       (9,994)     (57,202)     (14,789)     (84,196)
      Other property and
       equipment and
       intangible additions    (2,499)     (18,408)      (5,247)     (36,456)
    -------------------------------------------------------------------------
                              (12,493)     (75,610)     (20,036)    (120,652)
    -------------------------------------------------------------------------
    Cash flow from
     operating, financing
     and investing
     activities                28,182      (92,599)     101,023      (83,672)
    Effect of foreign
     exchange on cash and
     cash equivalents           3,342       (3,561)       1,959        3,089
    -------------------------------------------------------------------------
    Net change in cash and
     cash equivalents          31,524      (96,160)     102,982      (80,583)

    Cash and cash
     equivalents, beginning
     of period              1,076,639      835,791    1,005,181      820,214

    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period              $  1,108,163 $    739,631 $  1,108,163 $    739,631
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash interest paid   $     15,445 $     17,200 $     31,683 $     35,206
    Cash taxes paid      $        932 $        845 $      1,655 $      2,085
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Operating highlights
    (Unaudited)
    -------------------------------------------------------------------------
                                               Three months ended June 30
                                           2010           2009        Change
    -------------------------------------------------------------------------
    ASMs                              4,783,649,533  4,314,869,886     10.9%
    RPMs                              3,824,847,258  3,284,898,568     16.4%
    Load factor                               80.0%          76.1%   3.9 pts.
    Yield (cents)                             16.00          16.17     (1.1%)
    RASM (cents)                              12.80          12.31      4.0%
    CASM (cents)                              11.96          11.46      4.4%
    CASM excluding fuel and employee
     profit share (cents)                      8.44           8.45     (0.1%)
    Fuel consumption (litres)           232,129,892    207,532,865     11.9%
    Fuel costs per litre (dollars)             0.71           0.62     14.5%
    Segment guests                        3,752,818      3,417,877      9.8%
    Average stage length (miles)                962            908      5.9%
    Utilization (hours)                        11.5           11.5         -
    Number of full-time equivalent
     employees at period end                  6,388          6,140      4.0%
    Fleet size at period end                     89             79     12.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                                               Six months ended June 30
                                           2010           2009        Change
    -------------------------------------------------------------------------
    ASMs                              9,483,168,878  8,671,675,025      9.4%
    RPMs                              7,664,794,818  6,786,827,711     12.9%
    Load factor                               80.8%          78.3%   2.5 pts.
    Yield (cents)                             16.07          16.36     (1.8%)
    RASM (cents)                              12.99          12.81      1.4%
    CASM (cents)                              12.16          11.68      4.1%
    CASM excluding fuel and employee
     profit share (cents)                      8.67           8.48      2.2%
    Fuel consumption (litres)           462,598,271    423,293,745      9.3%
    Fuel costs per litre (dollars)             0.70           0.64      9.4%
    Segment guests                        7,441,308      6,869,562      8.3%
    Average stage length (miles)                963            923      4.3%
    Utilization (hours)                        11.6           11.9     (2.5%)
    Number of full-time equivalent
     employees at period end                  6,388          6,140      4.0%
    Fleet size at period end                     89             79     12.7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.

    Net earnings and diluted earnings per share excluding special items

    (Stated in thousands of Canadian dollars, except per unit amounts)
    (Unaudited)

    WestJet believes excluding special items is useful for investors to
    evaluate its recurring operational performance.

    -------------------------------------------------------------------------
                       Three months ended June 30   Six months ended June 30
                             2010         2009         2010         2009
    -------------------------------------------------------------------------
    Net earnings - GAAP  $     21,029 $      9,153 $     34,829 $     46,585
    Adjusted for:
      CEO departure (net
       of tax)                      -            -        3,700            -
      Income tax rate
       reductions and
       estimate change          2,372            -        2,372       (2,273)
    -------------------------------------------------------------------------
    Net earnings excluding
     special items -
     non-GAAP            $     23,401 $      9,153 $     40,901 $     44,312
    Diluted weighted
     average number of
     shares outstanding   145,341,526  127,969,182  145,237,594  128,129,540
    -------------------------------------------------------------------------
    Diluted earnings per
     share excluding
     special items -
     non-GAAP            $       0.16 $       0.07 $       0.28 $       0.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 June 30   Six months ended June 30
                             2010         2009         2010         2009
    -------------------------------------------------------------------------
    Operating expenses
     - GAAP              $    571,950 $    494,348 $  1,153,351 $  1,012,972
    Adjusted for:
      Aircraft fuel
       expense               (164,450)    (128,677)    (324,504)    (271,068)
      Employee profit
       share expense           (3,898)      (1,185)      (6,213)      (6,902)
    -------------------------------------------------------------------------
    Operating expenses
     excluding above
     items - non-GAAP   $     403,602 $    364,486 $    822,634 $    735,002
    ASMs (in thousands)     4,783,650    4,314,870    9,483,169    8,671,675
    -------------------------------------------------------------------------
    CASM excluding above
     items - non-GAAP
     (cents)                     8.44         8.45         8.67         8.48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

SOURCE WestJet

For further information: For further information: WestJet Media Relations, 1-888-WJ 4 NEWS (1-888-954-6397), Email: ropalmer@westjet.com; WestJet Investor Relations, 1-877-493-7853, Email: investor_relations@westjet.com, Website: www.westjet.com


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