WestJet reports first quarter net earnings of $13.8 million

Airline achieves 20th consecutive quarter of positive earnings

CALGARY, May 4 /CNW/ - WestJet (TSX:WJA) today reported first quarter 2010 net earnings of $13.8 million, or 10 cents per diluted share, which marks its 20th consecutive quarter of profitability. Excluding the impact of a one-time special item related to the departure of WestJet's CEO in the first quarter of 2010, WestJet's adjusted first quarter net earnings for 2010 were $17.5 million or 12 cents per diluted share.

"We are very pleased to be starting 2010 with another quarter of profitability," said WestJet President and CEO Gregg Saretsky, "especially in light of the challenging economic environment and rising energy costs. Our talented and dedicated team of WestJetters and a disciplined approach to running a low-cost business have produced first quarter results that continue to be among the best in North America based on normalized earnings before tax margins."

    
              Operating highlights (stated in Canadian dollars)

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                                             Q1 2010      Q1 2009     Change
    -------------------------------------------------------------------------
    Net earnings (millions)                    $13.8       $37.4      (63.1%)
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    Net earnings excluding special items*    $17.5       $35.2      (50.3%)
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    Diluted earnings per share                 $0.10       $0.29      (65.5%)
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    Diluted earnings per share excluding
     special items*                          $0.12       $0.27      (55.6%)
    -------------------------------------------------------------------------
    Total revenue (millions)                  $619.8      $579.3        7.0%
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    Operating margin                            6.2%       10.5%   (4.3 pts.)
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    ASMs (available seat miles) (billions)     4.700       4.357        7.9%
    -------------------------------------------------------------------------
    RPMs (revenue passenger miles) (billions)  3.840       3.502        9.7%
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    Load factor                                81.7%       80.4%    1.3 pts.
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    Yield (revenue per revenue passenger
     mile) (cents)                             16.14       16.54       (2.4%)
    -------------------------------------------------------------------------
    RASM (revenue per available seat mile)
     (cents)                                   13.19       13.30       (0.8%)
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    CASM (cost per available seat mile)
     (cents)                                   12.37       11.90        3.9%
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    CASM excluding fuel and employee profit
     share (cents)*                           8.92        8.50        4.9%
    -------------------------------------------------------------------------
    * Refer to reconciliations in the accompanying tables for further
        information regarding adjustments.
    

With regard to the airline's first quarter operational highlights, Gregg Saretsky commented, "We are happy to have achieved a seven per cent year-over-year improvement in revenue, notwithstanding a 2.4 per cent decline in yield. Our yield continued to be under pressure from price-sensitive travellers, which resulted in a RASM decline of 0.8 per cent."

Indications that stronger load factor and improving yield trends are starting to emerge - and assuming this trend remains - the airline expects to see year-over-year RASM gains in the second quarter of 2010.

A 3.9 per cent increase in CASM, contributed to the company's first quarter profit declining from the profit recorded in the first quarter of 2009. CASM increases were primarily due to higher sales and distribution costs and elevated fuel prices. Significant WestJet Vacations' revenue growth and the associated commissions on sales during the quarter were the main drivers behind the increased sales and distribution expense. Based on current cost trends, WestJet anticipates second quarter 2010 CASM, excluding fuel and employee profit share, to increase less than 2.5 per cent year-over-year compared to the 4.9 per cent year-over-year increase seen in the first quarter.

WestJet's capacity growth of 7.9 per cent for the first quarter was driven exclusively by expansion in the airline's southern markets. WestJet Vacations' continued growth helped support the airline's performance in its southern markets and positively contributed to the bottom line. The airline's capacity for the second quarter is expected to increase 10 per cent. Its full-year capacity is expected to increase nine to 10 per cent with the majority of the additional capacity going to southern destinations.

"WestJet's focus for 2010 will be to leverage the investments we made in technology and capabilities throughout 2009," said Gregg Saretsky. "Our priorities are to drive cost efficiencies and to tap into new sources of revenue now that we have our long-term reservation system in place, while utilizing our capacity to drive profitability, including airline partnerships and new ancillary revenues from our recently launched Frequent Guest Program and our WestJet RBC MasterCard program."

WestJet also announced its first quarter 2010 operational performance statistics. WestJet calculates its on-time performance (the percentage of flights that arrived within 15 minutes of their scheduled time) and completion rate (the percentage of flights completed from flights originally scheduled) 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 reported improvements in all three categories for the first quarter of 2010.

    
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                                             Q1 2010     Q1 2009      Change
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    On-time performance                        72.4%       70.6%    1.8 pts.
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    Completion rate                            98.4%       97.5%    0.9 pts.
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    Bag ratio                                   3.95        4.41       10.4%
    -------------------------------------------------------------------------
    

Caution regarding forward-looking statements

Certain information set forth in this press release, including information regarding future load factors and yield, anticipated RASM in Q2 2010, anticipated CASM in Q2 2010, expected capacity growth, demand recovery and WestJet's 2010 business focus, 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 months ended March 31, 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, May 4, 2010, 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 first 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.

Annual general meeting (AGM)

WestJet will hold its AGM at 2 p.m. MDT (4 p.m. EDT) today on May 4, 2010, at WestJet's Calgary Campus, which is located at 22 Aerial Place NE. The AGM webcast will be available live in the Media and Investor section of www.westjet.com.

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

    -------------------------------------------------------------------------
    Three months ended March 31                        2010          2009
    -------------------------------------------------------------------------

    Revenues:
      Guest revenues                               $   564,403   $   497,095
      Other revenues                                    55,362        82,190
    -------------------------------------------------------------------------
                                                       619,765       579,285
    Expenses:
      Aircraft fuel                                    160,054       142,391
      Airport operations                               101,103        93,657
      Flight operations and navigational charges        78,736        71,707
      Sales and distribution                            66,451        40,914
      Marketing, general and administration             50,078        52,866
      Aircraft leasing                                  33,973        25,076
      Depreciation and amortization                     32,879        33,893
      Inflight                                          30,330        28,884
      Maintenance                                       25,482        23,519
      Employee profit share                              2,315         5,717
    -------------------------------------------------------------------------
                                                       581,401       518,624
    -------------------------------------------------------------------------
    Earnings from operations                            38,364        60,661

    Non-operating income (expense):
      Interest income                                    1,707         2,118
      Interest expense                                 (15,690)      (17,485)
      Gain (loss) on foreign exchange                   (3,820)        4,621
      Loss on disposal of property and equipment          (144)         (106)
      Gain on derivatives                                  632           634
    -------------------------------------------------------------------------
                                                       (17,315)      (10,218)
    -------------------------------------------------------------------------
    Earnings before income taxes                        21,049        50,443

    Income tax expense:
      Current                                              362           706
      Future                                             6,887        12,305
    -------------------------------------------------------------------------
                                                         7,249        13,011
    -------------------------------------------------------------------------
    Net earnings                                   $    13,800   $    37,432
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per share:
      Basic                                        $      0.10   $      0.29
      Diluted                                      $      0.10   $      0.29

    Weighted average number of shares
     outstanding - basic                           144,630,179   127,924,018
    Weighted average number of shares
     outstanding - diluted                         145,132,507   128,291,679
    -------------------------------------------------------------------------
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    Consolidated Balance Sheet
    (Stated in thousands of Canadian dollars)
    (Unaudited)
    -------------------------------------------------------------------------
                                                      March 31,  December 31,
                                                          2010          2009
    -------------------------------------------------------------------------

    Assets
    Current assets:
      Cash and cash equivalents                    $ 1,076,639   $ 1,005,181
      Accounts receivable                               17,821        27,654
      Future income tax                                  2,288         2,560
      Prepaid expenses, deposits and other              44,959        56,239
      Inventory                                         19,850        26,048
    -------------------------------------------------------------------------
                                                     1,161,557     1,117,682

    Property and equipment                           2,284,801     2,307,566

    Intangible assets                                   14,056        14,087

    Other assets                                        57,618        54,367
    -------------------------------------------------------------------------
                                                   $ 3,518,032   $ 3,493,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and shareholders' equity
    Current liabilities:
      Accounts payable and accrued liabilities     $   283,865   $   231,401
      Advance ticket sales                             281,711       286,361
      Non-refundable guest credits                      58,718        64,506
      Current portion of long-term debt                171,021       171,223
      Current portion of obligations under
       capital leases                                      679           744
    -------------------------------------------------------------------------
                                                       795,994       754,235

    Long-term debt                                   1,004,895     1,048,554

    Obligations under capital leases                     3,303         3,358

    Other liabilities                                   19,553        19,628

    Future income tax                                  285,701       278,999
    -------------------------------------------------------------------------
                                                     2,109,446     2,104,774

    Shareholders' equity:
      Share capital                                    649,024       633,075
      Contributed surplus                               60,839        71,503
      Accumulated other comprehensive loss             (14,279)      (14,852)
      Retained earnings                                713,002       699,202
    -------------------------------------------------------------------------
                                                     1,408,586     1,388,928

    -------------------------------------------------------------------------
                                                   $ 3,518,032   $ 3,493,702
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

    -------------------------------------------------------------------------
    Three months ended March 31                        2010          2009
    -------------------------------------------------------------------------

    Operating activities:
    Net earnings                                   $    13,800   $    37,432
    Items not involving cash:
      Depreciation and amortization                     32,879        33,893
      Amortization of other liabilities                   (491)         (235)
      Amortization of hedge settlements                    349           350
      Unrealized gain on derivative instruments           (632)       (1,474)
      Loss on disposal of property, equipment and
       aircraft parts                                      160           205
      Stock-based compensation expense                   5,285         2,635
      Income tax credit receivable                      (1,816)       (1,952)
      Future income tax expense                          6,887        12,305
      Unrealized foreign exchange loss (gain)            4,266        (9,441)
      Change in non-cash working capital                64,555        21,808
    -------------------------------------------------------------------------
                                                       125,242        95,526
    -------------------------------------------------------------------------

    Financing activities:
      Repayment of long-term debt                      (42,797)      (41,590)
      Decrease in obligations under capital leases        (119)          (97)
      Decrease in other assets                          (4,471)         (700)
      Change in non-cash working capital                 2,529           830
    -------------------------------------------------------------------------
                                                       (44,858)      (41,557)
    -------------------------------------------------------------------------

    Investing activities:
      Aircraft additions                                (4,795)      (26,994)
      Other property and equipment and intangible
       additions                                        (2,748)      (18,048)
    -------------------------------------------------------------------------
                                                        (7,543)      (45,042)
    -------------------------------------------------------------------------

    Cash flow from operating, financing and investing
     activities                                         72,841         8,927
    Effect of foreign exchange on cash and cash
     equivalents                                        (1,383)        6,650
    -------------------------------------------------------------------------
    Net change in cash and cash equivalents             71,458        15,577

    Cash and cash equivalents, beginning of period   1,005,181       820,214

    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period       $ 1,076,639   $   835,791
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash interest paid                             $    16,239   $    18,006
    Cash taxes paid                                $       723   $     1,240
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Operating Highlights
    (Unaudited)

    -------------------------------------------------------------------------
                                             Three months ended March 31
                                           2010           2009       Change
    -------------------------------------------------------------------------
    ASMs                              4,699,519,345  4,356,805,139      7.9%
    RPMs                              3,839,947,560  3,501,929,143      9.7%
    Load factor                               81.7%          80.4%  1.3 pts.
    Yield (cents)                             16.14          16.54     (2.4%)
    RASM (cents)                              13.19          13.30     (0.8%)
    CASM (cents)                              12.37          11.90      3.9%
    CASM excluding fuel and employee
     profit share (cents)                      8.92           8.50      4.9%
    Fuel consumption (litres)           230,468,379    215,760,880      6.8%
    Fuel costs per litre (dollars)             0.69           0.66      4.5%
    Segment guests                        3,688,490      3,451,685      6.9%
    Average stage length (miles)                963            938      2.7%
    Utilization (hours)                        11.7           12.2     (4.1%)
    Number of full-time equivalent
     employees at period end                  6,259          6,224      0.6%
    Fleet size at period end                     88             78     12.8%
    -------------------------------------------------------------------------

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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.

    
    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 March 31
                                                       2010          2009
    -------------------------------------------------------------------------

    Net earnings - GAAP                            $    13,800   $    37,432
    Adjusted for:
      CEO departure (net of tax)                         3,700             -
      Income tax rate reductions and estimate
       change                                                -        (2,273)
    -------------------------------------------------------------------------
    Net earnings excluding special items
     - non-GAAP                                    $    17,500   $    35,159

    Diluted weighted average number of shares
     outstanding                                   145,132,507   128,291,679
    -------------------------------------------------------------------------
    Diluted earnings per share excluding special
     items - non-GAAP                              $      0.12   $      0.27
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    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 March 31
                                                       2010          2009
    -------------------------------------------------------------------------

    Operating expenses - GAAP                      $   581,401   $   518,624
    Adjusted for:
      Aircraft fuel expense                           (160,054)     (142,391)
      Employee profit share expense                     (2,315)       (5,717)
    -------------------------------------------------------------------------
    Operating expenses excluding above items
     - non-GAAP                                    $   419,032   $   370,516

    ASMs                                         4,699,519,345 4,356,805,139
    -------------------------------------------------------------------------
    CASM excluding above items - non-GAAP
     (cents)                                              8.92          8.50
    -------------------------------------------------------------------------
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About WestJet

WestJet is Canada's preferred airline, offering scheduled service throughout its 68-city North American and Caribbean network. Inducted into the corporate culture hall of fame after being 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 88 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 47 aircraft through 2016, WestJet strives to be one of the five most successful international airlines in the world.

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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