WestJet reports solid third quarter net earnings of $39 million

Achieves 26th consecutive profitable quarter and carries record number of guests

CALGARY, Nov. 9, 2011 /CNW/ - WestJet (TSX: WJA) today announced third quarter results for 2011. The airline reported net earnings of $39.3 million, or 28 cents per share; compared to third quarter 2010 net earnings of $43.8 million or 30 cents per share.

"We had a solid third quarter in which we saw growth in both our yield and RASM, and we carried a record 4.2 million guests," said WestJet President and CEO Gregg Saretsky. "Despite significantly higher fuel costs, we delivered our 26th consecutive quarter of profitability thanks to the tremendous work by WestJetters and their passion for contributing to, and sharing in, our ongoing success."


Operating highlights (stated in Canadian dollars)

    Q3 2011     Q3 2010*     Change    Year-to-date 
2011
 Year-to-date 
2010*
  Change  
Net earnings (millions) $39.3 $43.8 (10.4%) $113.1 $53.0 113.3%
Diluted earnings per share $0.28 $0.30 (6.7%) $0.80 $0.36 122.2%
Total revenues (millions) $775.3 $684.1 13.3% $2,290.0 $1,915.1 19.6%
Operating margin 8.5% 11.3% (2.8 pts.) 8.6% 6.7% 1.9 pts.
ASMs (available seat miles) (billions) 5.389 5.031 7.1% 15.857 14.514 9.3%
RPMs (revenue passenger miles) (billions) 4.315 4.007 7.7% 12.697 11.671 8.8%
Load factor 80.1% 79.6% 0.5 pts. 80.1% 80.4% (0.3 pts.)
Yield (revenue per revenue passenger mile) (cents) 17.97 17.07 5.3% 18.04 16.41 9.9%
RASM (revenue per available seat mile) (cents) 14.39 13.60 5.8% 14.44 13.19 9.5%
CASM (cost per available seat mile) (cents) 13.16 12.06 9.1% 13.20 12.32 7.1%
CASM, excluding fuel and employee profit share (cents)** 8.77 8.50 3.2% 8.79 8.80 (0.1%)

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

In the third quarter of 2011, WestJet launched a code-share arrangement with KLM Royal Dutch Airlines and entered into three additional interline relationships. "Our airline partnership growth strategy remains on track as we continue to form alliances with leading airlines from around the world and connect new global traffic flows to our WestJet network," said Gregg Saretsky.

For the fourth quarter of 2011, WestJet expects comparable RASM growth to that achieved in the third quarter of 2011. "The broader economy continues to experience a great deal of volatility and consumer confidence measures echo that uncertainty, however, we are not seeing this impact reflected in our forward bookings in any significant manner," noted Gregg Saretsky. "We are optimistic that demand for air travel will remain healthy and are confident that with our high-value travel proposition and low-cost business model we will continue to deliver profitable results moving forward."

Jet fuel prices remained stubbornly high in the third quarter as WestJet reported fuel costs of $0.89 per litre, an increase of 27 per cent year over year. For the fourth quarter of 2011, WestJet is projecting fuel costs to range between $0.90 and $0.93 per litre. In terms of controllable costs, WestJet anticipates that full-year 2011 CASM, excluding fuel and employee profit share, will be up approximately one per cent, mainly attributable to higher maintenance expense compared to 2010.

In October, WestJet received three prestigious Canadian business awards for employee engagement and culture. WestJet placed third in Aon Hewitt's Best Employers in Canada study, and WestJet also placed among Canada's Top 100 Employers as measured in Mediacorp's annual study of the best workplaces in Canada. Also, WestJet was named one of Canada's Most Admired Corporate Cultures for Western Canada by Waterstone Human Capital. "There is an amazing level of employee engagement at WestJet and these accolades are not born from the work of any single individual but rather the teamwork and dedication of all WestJetters," commented Ferio Pugliese, WestJet's Executive Vice-President, People, Culture and Inflight Services.

Dividend declaration

WestJet's Board of Directors declared a cash dividend of $0.05 per common voting share and variable voting share for the fourth quarter of 2011, to be paid on December 30, 2011, to shareholders of record on December 14, 2011. 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 WestJet's partnership growth strategy, RASM growth in the fourth quarter of 2011, our forward bookings and demand for air travel, fuel costs in the fourth quarter of 2011, 2011 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 October 2011 and forward-curve prices for November and December 2011, the expected exchange rate of the Canadian dollar to the U.S. dollar in the fourth quarter of 2011, 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 including WestJet's management's discussion and analysis and annual information form for the year ended December 31, 2010, 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-GAAP performance measures including, without limitation, and CASM, excluding fuel and employee profit 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, 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 measures" in WestJet's management's discussion and analysis of financial results for the three and nine months ended September 30, 2011, 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.

Management's discussion and analysis of financial results and the condensed consolidated interim financial statements and notes for the three and nine months ended September 30, 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 on Wednesday, November 9, 2011, 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 third quarter 2011 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 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. Named a J.D. Power 2011 Customer Service Champion, WestJet offers increased legroom, leather seats and live seatback television provided by Bell TV on its modern fleet of 96 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 39 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
September 30
Nine months ended
September 30
    2011 2010 2011 2010
           
Revenues:          
  Guest   714,621 632,659 2,079,053 1,751,438
  Other   60,664 51,440 210,942 163,637
    775,285 684,099 2,289,995 1,915,075
Expenses:          
  Aircraft fuel   230,764 170,828 680,304 495,332
  Airport operations   106,051 94,051 314,266 287,826
  Flight operations and navigational charges   89,063 83,890 259,628 245,333
  Sales and distribution   67,846 64,928 206,491 188,696
  Marketing, general and administration   50,624 44,369 152,926 142,327
  Depreciation and amortization   43,624 42,598 130,439 127,896
  Aircraft leasing   41,384 36,754 123,721 106,409
  Maintenance   38,317 30,268 103,444 86,620
  Inflight   35,519 30,680 103,334 92,414
  Employee profit share   5,973 8,567 18,142 14,780
    709,165 606,933 2,092,695 1,787,633
Earnings from operations   66,120 77,166 197,300 127,442
           
Non-operating income (expense):          
  Finance income   3,865 2,531 11,604 6,303
  Finance costs   (14,682) (17,670) (46,465) (54,033)
  Gain on foreign exchange   1,255 441 3,393 1,753
  Gain (loss) on disposal of property and equipment   (20) (11) (11) 595
  Loss on derivatives   (1,233) (473) (7,649) (399)
    (10,815) (15,182) (39,128) (45,781)
Earnings before income tax   55,305 61,984 158,172 81,661
           
Income tax expense:          
  Current   (222) 383 962 1,115
  Deferred   16,260 17,770 44,092 27,517
    16,038 18,153 45,054 28,632
Net earnings   39,267 43,831 113,118 53,029
           
Earnings per share:          
  Basic   0.28 0.30 0.81 0.37
  Diluted   0.28 0.30 0.80 0.36



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

       
    September 30 December 31
    2011 2010
       
Assets      
Current assets:      
  Cash and cash equivalents   1,320,091 1,187,899
  Accounts receivable   30,859 17,518
  Prepaid expenses, deposits and other   69,815 53,761
  Inventory   28,650 26,095
    1,449,415 1,285,273
Non-current assets:      
  Property and equipment   1,936,747 1,989,522
  Intangible assets   14,487 13,018
  Other assets   93,911 96,167
Total assets   3,494,560 3,383,980
       
Liabilities and shareholders' equity      
Current liabilities:      
  Accounts payable and accrued liabilities   337,046 287,710
  Advance ticket sales   433,801 336,926
  Non-refundable guest credits   39,594 36,381
  Current portion of long-term debt   165,151 178,337
  Current portion of obligations under finance leases   75 108
    975,667 839,462
Non-current liabilities:      
  Maintenance provisions   117,718 106,711
  Long-term debt   725,556 848,465
  Obligations under finance leases   3,193 3,249
  Other liabilities   9,483 8,958
  Deferred income tax   315,491 268,069
Total liabilities   2,147,108 2,074,914
       
Shareholders' equity:      
  Share capital   629,994 647,637
  Equity reserves   72,060 66,726
  Hedge reserves   257 (10,470)
  Retained earnings   645,141 605,173
Total shareholders' equity   1,347,452 1,309,066
         
Total liabilities and shareholders' equity   3,494,560 3,383,980



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

       
    Three months ended
September 30
Nine months ended
September 30
    2011 2010 2011 2010
           
Operating activities:          
Net earnings   39,267 43,831 113,118 53,029
Items not involving cash:          
  Depreciation and amortization   43,624 42,598 130,439 127,896
  Change in long-term maintenance provisions   8,037 7,292 22,541 20,849
  Change in other liabilities   (183) (150) (115) (530)
  Amortization of hedge settlements   350 350 1,050 1,049
  Loss on derivative instruments   1,233 473 7,649 399
  (Gain) loss on disposal of property and equipment   20 (68) 11 (744)
  Share-based payment expense   2,903 2,772 10,015 12,507
  Income tax credit   - - - (1,667)
  Deferred income tax expense   16,260 17,770 44,092 27,517
  Unrealized foreign exchange (gain) loss   (696) 71 1,387 222
  Change in non-cash working capital   78,429 48,339 122,061 132,450
Change in other assets   (1,942) (1,445) (4,727) (4,274)
    187,302 161,833 447,521 368,703
           
Investing activities:          
Aircraft additions   (8,682) (3,938) (56,290) (18,727)
Other property and equipment and intangible additions   (8,731) (6,817) (25,067) (12,064)
    (17,413) (10,755) (81,357) (30,791)
           
Financing activities:          
Repayment of long-term debt   (46,158) (41,322) (137,204) (123,689)
Decrease in obligations under finance leases   (18) (87) (90) (505)
Shares repurchased   (16,740) - (74,570) -
Dividends paid   (6,912) - (28,086) -
Issuance of common shares   34 - 34 520
Change in other assets   76 77 (601) (4,411)
Change in non-cash working capital   (2) 1,679 7,092 2,621
    (69,720) (39,653) (233,425) (125,464)
           
Cash flow from operating, investing and financing activities   100,169 111,425 132,739 212,448
Effect of foreign exchange on cash and cash equivalents   3,891 (1,525) (547) 434
Net change in cash and cash equivalents   104,060 109,900 132,192 212,882
           
Cash and cash equivalents, beginning of period   1,216,031 1,108,163 1,187,899 1,005,181
           
Cash and cash equivalents, end of period   1,320,091 1,218,063 1,320,091 1,218,063
Cash taxes received (paid)   1,183 (712) 417 (2,367)
Cash interest received   4,512 1,819 10,574 4,493
Cash interest paid   12,630 15,081 39,634 46,764



Operating Highlights
(Unaudited)

     
  Three months ended
September 30
Nine months ended
September 30
  2011 2010 2011 2010
         
ASMs 5,389,130,444 5,031,112,301 15,857,376,004 14,514,281,179
RPMs 4,315,419,154 4,006,665,895 12,697,311,801 11,671,460,713
Load factor 80.1% 79.6% 80.1% 80.4%
Yield (cents) 17.97 17.07 18.04 16.41
RASM (cents) 14.39 13.60 14.44 13.19
CASM (cents) 13.16 12.06 13.20 12.32
CASM, excluding fuel and employee profit share (cents) 8.77 8.50 8.79 8.80
Fuel consumption (litres) 260,282,959 245,122,101 771,914,701 707,720,372
Fuel costs per litre (dollars) 0.89 0.70 0.88 0.70
Segment guests 4,203,372 3,928,723 12,044,089 11,370,031
Average stage length (miles) 958 962 985 963
Utilization (hours) 11.7 11.6 11.8 11.6
Number of full-time equivalent employees at period end 7,011 6,581 7,011 6,581
Fleet size at period end 96 90 96 90



CASM, excluding fuel and employee profit share
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)

WestJet excludes the effects of aircraft fuel expense and employee profit share expense to assess the operating performance of the business. Fuel expense is excluded from operating results due to the fact that fuel prices are impacted by a host of factors outside WestJet's control, such as significant weather events, geopolitical tensions, refinery capacity and global demand and supply. Excluding this expense allows WestJet to analyze its operating results on a comparable basis. Employee profit share expense is excluded from operating results due to its variable nature and excluding this expense allows greater comparability.

     
  Three months ended
September 30
Nine months ended
September 30
  2011 2010 2011 2010
         
Operating expenses 709,165 606,933 2,092,695 1,787,633
Adjusted for:        
  Aircraft fuel expense (230,764) (170,828) (680,304) (495,332)
  Employee profit share expense  (5,973) (8,567) (18,142) (14,780)
Operating expenses, adjusted 472,428 427,538 1,394,249 1,277,521
ASMs 5,389,130,444 5,031,112,301 15,857,376,004 14,514,281,179
CASM, excluding above items (cents) 8.77 8.50 8.79 8.80

 

 

 

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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