WestJet reports fourth quarter and full year results

CALGARY, Feb. 5, 2019 /CNW/ - WestJet (TSX: WJA) today announced its fourth quarter and year end results for 2018, with full year net earnings of $91.5 million, or $0.80 per fully diluted share. This compares with net earnings of $279.1 million, or $2.38 per fully diluted share in the full year 2017. In the fourth quarter of 2018 the airline achieved net earnings of $29.2 million, or $0.26 per fully diluted share. This result compares with net earnings of $47.8 million, or $0.41 per fully diluted share reported in the fourth quarter of 2017.

"In 2018 we executed several significant milestones on our path to becoming a high-value global network airline," said Ed Sims, WestJet President and CEO. "As we enter 2019, we continue to build momentum and are well-positioned to deliver on our strategic initiatives and expand margins. I would like to thank every WestJetter for their hard work through an especially busy holiday season culminating in our WestJet mainline business achieving the highest completion rate in North America in December, as measured by FlightStats."

Operating highlights (stated in Canadian dollars)

	Q4 2018	Q4 2017	Change	Full year 2018	Full year 2017	Change
Net earnings (millions)	$29.2	$47.8	(39.0%)	$91.5	$279.1	(67.2%)
Diluted earnings per share	$0.26	$0.41	(36.6%)	$0.80	$2.38	(66.4%)
Total revenue (millions)	$1,193.3	$1,119.1	6.6%	$4,733.5	$4,506.7	5.0%
Operating margin	4.1%	6.9%	(2.8 pts)	3.3%	9.6%	(6.3 pts)
ASMs (available seat miles) (billions)	8.109	7.659	5.9%	32.939	30.998	6.3%
RPMs (revenue passenger miles) (billions)	6.615	6.329	4.5%	27.587	25.904	6.5%
Load factor	81.6%	82.6%	(1.0 pts)	83.8%	83.6%	0.2 pts
Segment guests	6,185,541	6,010,069	2.9%	25,491,290	24,137,477	5.6%
Yield (revenue per revenue passenger mile) (cents)	18.04	17.68	2.0%	17.16	17.40	(1.4%)
RASM (revenue per available seat mile) (cents)	14.72	14.61	0.7%	14.37	14.54	(1.2%)
CASM (cost per available seat mile) (cents)	14.11	13.61	3.7%	13.90	13.14	5.8%
Fuel costs per litre (cents)	83	69	20.3%	81	64	26.6%
CASM, excluding fuel and employee profit share (cents)*	10.29	10.26	0.3%	10.11	9.93	1.8%

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

Note: All values in the above table are at a consolidated WestJet group level

Dividend declaration
On February 4, 2019, WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the first quarter of 2019, to be paid on March 29, 2019, to shareholders of record on March 13, 2019. All dividends paid by WestJet are, pursuant to subsection 89(14) of the Income Tax Act, designated as eligible dividends, unless indicated otherwise. An eligible dividend paid to a Canadian resident is entitled to the enhanced dividend tax credit.

Caution regarding forward-looking information
Certain information set forth in this news release is forward-looking information within the meaning of applicable securities laws. By its nature, forward-looking information is subject to numerous risks and uncertainties, some of which are beyond WestJet's control. The forward-looking information contained in this news release is based on WestJet's current forecasts and strategy, the expected demand environment, the utilization of our fleet, the forward-curve for jet fuel price, the expected exchange rate of the Canadian dollar to the U.S. dollar, agreements and bookings, but may vary due to factors including, but not limited to, changes in guest demand, changes in fuel prices, delays in aircraft delivery, general economic conditions, competitive environment, ability to effectively implement and maintain critical systems and other factors and risks described in WestJet's public reports and filings which are available under WestJet's profile at sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking information as actual results may vary materially from the forward-looking information. WestJet does not undertake to update, correct or revise any forward-looking information as a result of any new information, future events or otherwise, except as may be required by applicable law.

Non-GAAP measures
This news release contains disclosure respecting non-GAAP performance measures including, without limitation, CASM, excluding fuel and employee profit share and return on invested capital. These measures are included to enhance the overall understanding of WestJet's current financial performance and to provide an alternative method for assessing WestJet's operating results in a manner that is focused on the performance of WestJet's ongoing operations, and to provide a more consistent basis for comparison between reporting periods. These measures are not calculated in accordance with, or an alternative to, GAAP and do not have standardized meanings. Therefore, they may not be comparable to similar measures provided by other entities. Readers are urged to review the section entitled "Reconciliation of non-GAAP and additional GAAP measures" in WestJet's management's discussion and analysis of financial results for the year ended December 31, 2018 which is available under WestJet's profile on SEDAR at sedar.com, for a further discussion of such non-GAAP measures and a reconciliation of such measures to GAAP. The financial information accompanying this news release was prepared in accordance with International Financial Reporting Standards unless otherwise noted.

Management's discussion and analysis of financial results and consolidated financial statements and notes for the year ended December 31, 2018, are available through the Internet in the Investor Relations section of westjet.com or under WestJet's SEDAR profile at sedar.com.

Analyst conference call
WestJet will hold its quarterly analysts' conference call today, February 5, 2019, at 8 a.m. MT (10 a.m. ET). President and CEO, Ed Sims and Executive Vice-President, Finance and CFO, Harry Taylor, will discuss WestJet's fourth quarter and year end 2018 results and answer questions from financial analysts. 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 Investor Relations section of westjet.com.

About WestJet
Together with WestJet's regional airline, WestJet Encore, we offer scheduled service to more than 100 destinations in North America, Central America, the Caribbean and Europe and to more than 175 destinations in over 20 countries through our airline partnerships. WestJet Vacations offers affordable, flexible vacations to more than 60 destinations and the choice of more than 800 hotels, resorts, condos and villas. Members of the WestJet Rewards program earn WestJet dollars on flights, vacation packages and more. Members use WestJet dollars towards the purchase of flights and vacations packages to any WestJet destination with no blackout periods, and have access to Member Exclusive fares offering deals to WestJet destinations throughout our network and those of our partner airlines.

WestJet is proud to be recognized as Best Airline in Canada and Travellers' Choice winner – North America for 2017 and 2018 in the TripAdvisor Travellers' Choice awards for Airlines. The airline was also named the Travellers' Choice Winner – Economy, North America, 2018. All awards are based on authentic reviews from the travelling public on TripAdvisor, the world's largest travel site. We are one of very few airlines globally that does not commercially overbook.

WestJet is publicly traded on the Toronto Stock Exchange (TSX) under the symbol WJA.

For more information about everything WestJet, please visit westjet.com.  

Recent recognition includes:
2018 Number-One-Ranked Airline Credit Card in Canada (Rewards Canada) 
2018 North America's Best Low-Cost Airline (Skytrax) 
2018/2017 Best Airline in Canada and Travellers' Choice Winner Mid-Sized and Low Cost Airlines – North America (TripAdvisor Travellers' Choice awards for Airlines) 
2018 Travellers' Choice Winner – Economy, North America (TripAdvisor Travellers' Choice awards for Airlines)
2018/2017/2016 Canada's Most Trusted Airline (Gustavson School of Business at the University of Victoria) 
2016 Canada's most reputable company for Corporate Social Responsibility (Reputation Institute)2016/2015/2014/2013/2012 Ranked top three for Canadian Brands (Canadian Business Magazine)2016/2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in Canada (MoneySense magazine)

Connect with WestJet on Facebook at facebook.com/westjet
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Subscribe to WestJet on YouTube at youtube.com/westjet
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Read the WestJet blog at blog.westjet.com

 

Consolidated Statement of Earnings (Stated in thousands of Canadian dollars, except per share amounts) (Unaudited)
	Three months ended December 31		Twelve months ended December 31
	2018	2017^(i)	2018	2017^(i)
Revenue:
Guest	1,119,682	1,046,545	4,483,529	4,238,926
Other	73,581	72,534	249,933	267,729
	1,193,263	1,119,079	4,733,462	4,506,655
Operating expenses:
Aircraft fuel	304,944	251,619	1,231,632	950,043
Salaries and benefits	246,864	244,423	999,381	935,545
Rates and fees	160,740	156,214	691,293	644,763
Sales and marketing	114,783	102,331	440,292	393,582
Depreciation and amortization	108,766	105,537	429,906	403,021
Maintenance	69,314	42,440	232,053	203,227
Aircraft leasing	32,718	40,925	139,703	165,902
Other	101,541	94,061	398,038	331,014
Employee profit share	4,534	4,401	15,937	46,793
	1,144,204	1,041,951	4,578,235	4,073,890
Earnings from operations	49,059	77,128	155,227	432,765
Non-operating income (expense):
Finance income	8,658	6,125	29,421	19,626
Finance cost	(19,666)	(13,087)	(57,027)	(53,710)
Gain (loss) on foreign exchange	902	(159)	2,966	(4,877)
Gain on disposal of property and equipment	(96)	2,576	4,049	6,562
Gain (loss) on derivatives	1,232	(21)	1,246	(2,426)
	(8,970)	(4,566)	(19,345)	(34,825)
Earnings before income tax	40,089	72,562	135,882	397,940
Income tax expense (recovery):
Current	10,078	14,144	14,812	58,645
Deferred	841	10,612	29,605	60,237
	10,919	24,756	44,417	118,882
Net earnings	29,170	47,806	91,465	279,058
Earnings per share:
Basic	0.26	0.42	0.80	2.40
Diluted	0.26	0.41	0.80	2.38

 (i) Certain 2017 numbers have been restated for the adoption of IFRS 15.

Consolidated Statement of Financial Position (Stated in thousands of Canadian dollars) (Unaudited)
	December 31 2018	December 31 2017^(i)
Assets
Current assets:
Cash and cash equivalents	1,185,806	1,147,076
Marketable securities	93,771	226,090
Total cash, cash equivalents and marketable securities	1,279,577	1,373,166
Restricted cash	115,615	109,700
Accounts receivable	145,544	152,492
Prepaid expenses, deposits and other	190,242	138,676
Inventory	39,742	43,045
	1,770,720	1,817,079
Non-current assets:
Property and equipment	4,814,200	4,567,504
Intangible assets	54,851	59,517
Other assets	118,284	78,584
Total assets	6,758,055	6,522,684
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities	654,422	546,505
Advance ticket sales	695,367	659,953
Deferred Rewards program	224,608	185,991
Non-refundable guest credits	62,914	58,575
Current portion of maintenance provisions	101,852	82,129
Current portion of long-term debt	536,044	153,149
	2,275,207	1,686,302
Non-current liabilities:
Maintenance provisions	278,898	270,347
Long-term debt	1,442,913	1,895,898
Other liabilities	33,512	19,171
Deferred income tax	424,958	392,111
Total liabilities	4,455,488	4,263,829
Shareholders' equity:
Share capital	548,979	548,977
Equity reserves	106,655	97,514
Hedge reserves	6,856	(1,902)
Retained earnings	1,640,077	1,614,266
Total shareholders' equity	2,302,567	2,258,855
Total liabilities and shareholders' equity	6,758,055	6,522,684

(i) Certain 2017 numbers have been restated for the adoption of IFRS 15.

Consolidated Statement of Cash Flows (Stated in thousands of Canadian dollars) (Unaudited)
	Three months ended December 31		Twelve months ended December 31
	2018	2017^(i)	2018	2017^(i)
Operating activities:
Net earnings	29,170	47,806	91,465	279,058
Items not involving cash:
Depreciation and amortization	108,766	105,537	429,906	403,021
Change in maintenance provisions	13,946	(9,216)	50,637	47,439
Amortization of transaction costs	983	1,125	4,250	4,807
Unrealized (gain) loss on derivatives	(478)	(268)	(690)	4,059
Gain on disposal of property and equipment	96	(2,576)	(4,049)	(6,562)
Share-based payment expense	4,318	4,143	15,988	19,050
Deferred income tax expense	841	10,612	29,605	60,237
Unrealized foreign exchange (gain) loss	(5,303)	(2,858)	(7,592)	2,496
Change in  non-cash working capital	76,889	42,581	221,148	243,858
Change in restricted cash	(26,678)	(19,818)	(5,916)	(7,051)
Change in other assets	(6,041)	203	(9,133)	(1,296)
Change in other liabilities	991	5,463	(96)	6,379
Purchase of shares pursuant to compensation plans	(3,065)	(1,220)	(6,268)	(4,784)
Maintenance provision settlements	(16,725)	17,694	(50,675)	(38,638)
	177,710	199,208	758,580	1,012,073
Investing activities:
Aircraft additions	(70,454)	(184,083)	(524,272)	(881,069)
Aircraft disposals	73	1,390	6,282	9,511
Other property and equipment and intangible additions and disposals	(75,929)	(15,884)	(121,708)	(48,855)
Purchase of marketable securities	(25,000)	(50,289)	(58,908)	(231,293)
Maturities of marketable securities	118,447	-	201,415	-
Change in non-cash working capital	(3,328)	(5,182)	9,793	(16,009)
	(56,191)	(254,048)	(487,398)	(1,167,715)
Financing activities:
Increase in long-term debt	-	20,307	41,131	186,796
Repayment of long-term debt	(42,156)	(39,318)	(157,451)	(154,249)
Shares repurchased	-	(32,594)	(2,386)	(90,317)
Dividends paid	(15,952)	(15,966)	(63,845)	(64,886)
Cash interest paid	(16,989)	(17,118)	(61,410)	(63,188)
Change in non-cash working capital	(4,545)	(4,833)	(13,680)	(14,597)
	(79,642)	(89,522)	(257,641)	(200,441)
Cash flow from/(used in) operating, investing and financing activities	41,877	(144,362)	13,541	(356,083)
Effect of foreign exchange on cash and cash equivalents	17,332	2,082	25,189	(17,663)
Net change in cash and cash equivalents	59,209	(142,280)	38,730	(373,746)
Cash and cash equivalents, beginning of period	1,126,597	1,289,356	1,147,076	1,520,822
Cash and cash equivalents, end of period	1,185,806	1,147,076	1,185,806	1,147,076
Supplemental disclosure of operating cash flows Cash interest received Cash taxes (paid)/received, net
	9,963	5,112	30,522	17,634
	(338)	(607)	902	(97,911)

(i) Certain 2017 numbers have been restated for the adoption of IFRS 15.

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

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

	Three months ended December 31				Twelve months ended December 31
($ in thousands)	2018	2017^(i)	Change		2018	2017^(i)	Change
Operating expenses	1,144,204	1,041,951		102,253	4,578,235	4,073,890	504,345
Aircraft fuel expense	(304,944)	(251,619)		(53,325)	(1,231,632)	(950,043)	(281,589)
Employee profit share expense	(4,534)	(4,401)		(133)	(15,937)	(46,793)	30,856
Operating expenses, adjusted	834,726	785,931		48,795	3,330,666	3,077,054	253,612
ASMs	8,108,583,582	7,658,815,460		5.9%	32,939,257,510	30,998,306,475	6.3%
CASM, excluding above items (cents)	10.29	10.26		0.3%	10.11	9.93	1.8%

 (i) Certain 2017 numbers have been restated for the adoption of IFRS 15.

Return on invested capital
(Stated in thousands of Canadian dollars, except percentages)
(Unaudited)

ROIC is a measure commonly used to assess the efficiency with which a company allocates its capital to generate returns. Return is calculated based on our earnings before tax, excluding special items, finance costs and implied interest on our off-balance-sheet aircraft leases. Invested capital includes average long-term debt, average finance lease obligations, average shareholders' equity and off-balance-sheet aircraft operating leases.

	December 31 2018	December 31 2017^(i)	Change
Earnings before income taxes	135,882	397,940	(262,058)
Add:
Finance costs	57,027	53,710	3,317
Implicit interest in operating leases^(ii)	73,344	87,099	(13,755)
Return	266,253	538,749	(272,496)
Invested capital:
Average long-term debt^(iii)	2,014,002	2,047,853	(33,851)
Average shareholders' equity	2,280,711	2,185,204	95,507
Off-balance-sheet aircraft leases^(iv)	1,047,773	1,244,265	(196,492)
Invested capital	5,342,486	5,477,322	(134,836)
Return on invested capital	5.0%	9.8%	(4.8 pts.)

(i)	Certain 2017 numbers have been restated for the adoption of IFRS 15.
(ii)	Interest implicit in operating leases is equal to 7.0 per cent of 7.5 times the trailing 12 months of aircraft lease expense. 7.0 per cent is a proxy and does not necessarily represent actual interest for any given period.
(iii)	Average long-term debt includes the current portion and long-term portion
(iv)	Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At December 31, 2018, the trailing 12 months of aircraft leasing costs totaled $139,703 (December 31, 2017 – $165,902).

SOURCE WESTJET, an Alberta Partnership

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

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