WestJet reports strong second quarter net earnings

Aug 04, 2011, 07:00 ET from WestJet

Airline achieves EPS of 18 cents, up from 5 cents in the second quarter of 2010

CALGARY, Aug. 4, 2011 /PRNewswire/ - WestJet (TSX:WJA) today reported second quarter 2011 net earnings of $25.6 million, or 18 cents per share, which is up significantly from the net earnings of $6.8 million and 5 cents per share reported in the second quarter of 2010. These financial results mark WestJet's 25th consecutive quarter of profitability.

"A strong pricing environment allowed us to manage our yield in the second quarter to offset the elevated cost of fuel," said WestJet President and CEO Gregg Saretsky. "We saw improvements in our key operational metrics this quarter and also kept our controllable costs in check which contributed to our strong results."

Operating highlights (stated in Canadian dollars)

  Q2 2011  Q2 2010* Change Year-to-date 2011 Year-to-date 2010* Change
Net earnings (millions) $25.6 $6.8 274.7% $73.9 $9.2 702.9%
Diluted earnings per share $0.18 $0.05 260.0% $0.52 $0.06 766.7%
Total revenues (millions) $742.3 $611.7 21.4% $1,514.7 $1,231.0 23.0%
Operating margin 6.9% 4.3% 2.6 pts. 8.7% 4.1% 4.6 pts.
ASMs (available seat miles) (billions) 5.238 4.784 9.5% 10.468 9.483 10.4%
RPMs (revenue passenger miles) (billions) 4.092 3.825 7.0% 8.382 7.665 9.4%
Load factor 78.1% 80.0% (1.9 pts.) 80.1% 80.8% (0.7 pts.)
Yield (revenue per revenue passenger mile) (cents) 18.14 15.99 13.4% 18.07 16.06 12.5%
RASM (revenue per available seat mile) (cents) 14.17 12.79 10.8% 14.47 12.98 11.5%
CASM (cost per available seat mile) (cents) 13.19 12.24 7.8% 13.22 12.45 6.2%
CASM, excluding fuel and employee profit share (cents)** 8.70 8.72 (0.2%) 8.81 8.96 (1.7%)

*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 second quarter of 2011, WestJet launched four new interline relationships and increased the number of city pairings available through its code-share arrangement with American Airlines. "As we expand our reach and welcome aboard new guests, I thank WestJetters for the genuine level of care they continue to display. Even the small things like a friendly smile and a warm welcome add to an already great guest experience and contribute to our airline's overall success. Their hard work helped deliver the net earnings per guest of $6.50 that we achieved this quarter," commented Gregg Saretsky.

WestJet anticipates continued year-over-year RASM growth for the third quarter of 2011 based on advanced bookings. However, this year-over-year growth is expected to come at a moderated pace versus that seen during the first half of 2011 since the pricing environment was more robust during the second half of 2010 as compared to the first half of 2010.

For the third quarter of 2011, WestJet is projecting fuel costs, excluding hedging, to range between $0.90 and $0.93 per litre. The airline expects the third quarter CASM, excluding fuel and employee profit share, to be slightly up year over year and the full year 2011 CASM, excluding fuel and employee profit share, to remain flat compared to the prior year. "Inflated fuel prices present a challenge to the airline industry, but our low-cost structure and proven business model have us well positioned to succeed going forward," concluded Gregg Saretsky.

Dividend declaration
WestJet's Board of Directors declared a cash dividend of $0.05 per common voting share and variable voting share for the third quarter of 2011, to be paid on September 30, 2011, to shareholders of record on September 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 second quarter fuel costs, RASM growth in the third quarter of 2011, and expected CASM in the third quarter and full year of 2011, 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 and forecasts, realized jet fuel prices for July 2011 and forward curve prices for August and September 2011, the expected exchange rate of the Canadian dollar to the U.S. dollar in the third 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-IFRS performance measures including, without limitation, net earnings per guest, 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 in accordance with, or an alternative to, IFRS and do not have standardized meanings. Therefore, they may not be comparable to similar measures provided by other entities. Readers are urged to review the section entitled "Non-IFRS Measures" in WestJet's management's discussion and analysis of financial results for the three and six months ended June 30, 2011, which is available under WestJet's profile on SEDAR at www.sedar.com, for a further discussion of such non-IFRS measures and a reconciliation of such measures to IFRS.

Management's discussion & analysis of financial results and the condensed consolidated interim financial statements and notes for the three and six months ended June 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 today, August 4, 2011, 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 2011 results and answer questions from financial analysts and members of the media. 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 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.

Connect with WestJet on Facebook at www.facebook.com/westjet
Follow WestJet on Twitter at www.twitter.com/westjet
Subscribe to WestJet on YouTube at www.youtube.com/westjet

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

       
    Three months ended June 30     Six months ended June 30
    2011 2010 2011 2010
           
Revenues:          
     Guest   675,844 559,054 1,364,432 1,118,779
      Other   66,444 52,630 150,278 112,197
    742,288 611,684 1,514,710 1,230,976
Expenses:          
  Aircraft fuel   230,577 164,450 449,540 324,504
  Airport operations   99,064 92,736 208,215 193,775
  Flight operations and navigational charges   86,468 82,391 170,565 161,443
  Sales and distribution   61,823 57,329 138,645 123,768
  Marketing, general and administration   54,486 48,139 102,302 97,958
  Depreciation and amortization   43,508 42,677 86,815 85,298
  Aircraft leasing   41,624 35,397 82,337 69,655
  Inflight   34,316 31,404 67,815 61,734
  Maintenance   34,505 27,080 65,127 56,352
  Employee profit share   4,577 3,898 12,169 6,213
    690,948 585,501 1,383,530 1,180,700
Earnings from operations   51,340 26,183 131,180 50,276
           
Non-operating income (expense):          
  Finance income   3,808 2,065 7,739 3,772
  Finance costs   (15,585) (17,902) (31,783) (36,363)
  Gain on foreign exchange   639 3,431 2,138 1,312
  Gain on disposal of property and equipment   16 612 9 606
  Gain (loss) on derivatives   (4,159) (558) (6,416) 74
    (15,281) (12,352) (28,313) (30,599)
Earnings before income tax   36,059 13,831 102,867 19,677
           
Income tax expense:          
  Current   603 370 1,184 732
  Deferred   9,854 6,628 27,832 9,747
    10,457 6,998 29,016 10,479
Net earnings   25,602 6,833 73,851 9,198
           
Earnings per share:          
  Basic   0.18 0.05 0.52 0.06
  Diluted   0.18 0.05 0.52 0.06




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

         
    June 30   December 31
    2011   2010
         
Assets        
Current assets:        
  Cash and cash equivalents   1,216,031   1,187,899
  Accounts receivable   37,783   17,518
  Prepaid expenses, deposits and other   59,802   53,761
  Inventory   27,064   26,095
    1,340,680   1,285,273
Non-current assets:        
  Property and equipment   1,965,286   1,989,522
  Intangible assets   13,503   13,018
  Other assets   93,770   96,167
Total assets   3,413,239   3,383,980
         
Liabilities and shareholders' equity        
Current liabilities:        
  Accounts payable and accrued liabilities   307,027   287,710
  Advance ticket sales   391,958   336,926
  Non-refundable guest credits   39,257   36,381
  Current portion of long-term debt   169,481   178,337
  Current portion of obligations under finance leases   74   108
    907,797   839,462
Non-current liabilities:        
  Maintenance provisions   113,598   106,711
  Long-term debt   765,542   848,465
  Obligations under finance leases   3,212   3,249
  Other liabilities   9,665   8,958
  Deferred income tax   295,557   268,069
Total liabilities   2,095,371   2,074,914
         
Shareholders' equity:        
  Share capital   634,578   647,637
  Equity reserves   69,916   66,726
  Hedge reserves   (10,775)   (10,470)
  Retained earnings   624,149   605,173
Total shareholders' equity   1,317,868   1,309,066
 
Total liabilities and shareholders' equity   3,413,239   3,383,980




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

       
    Three months ended June 30     Six months ended June 30
    2011 2010 2011 2010
           
Operating activities:          
Net earnings   25,602 6,833 73,851 9,198
Items not involving cash:          
  Depreciation and amortization   43,508 42,677 86,815 85,298
  Change in long-term maintenance provisions   7,806 6,808 14,504 13,557
  Change in other liabilities   277 (191) 68 (380)
  Amortization of hedge settlements   350 350 700 699
  (Gain) loss on derivative instruments   4,159 558 6,416 (74)
  Gain on disposal of property and equipment   (16) (653) (9) (676)
  Share-based payment expense   3,743 4,134 7,112 9,735
  Income tax credit   - 149 - (1,667)
  Deferred income tax expense   9,854 6,628 27,832 9,747
  Unrealized foreign exchange (gain) loss   1,651 (2,414) 2,083 151
  Change in non-cash working capital   (32,862) 19,758 43,632 84,111
Change in other assets   (1,158) (1,379) (2,785) (2,829)
    62,914 83,258 260,219 206,870
           
Investing activities:          
Aircraft additions   (4,468) (9,994) (47,608) (14,789)
Other property and equipment and intangible additions   (6,956) (2,499) (16,336) (5,247)
    (11,424) (12,493) (63,944) (20,036)
           
Financing activities:          
Repayment of long-term debt   (49,763) (41,200) (91,046) (82,367)
Decrease in obligations under finance leases   (18) (299) (72) (418)
Shares repurchased   (29,535) -   (57,831) -
Dividends paid   (6,969) - (21,174) -
Change in other assets   (5) (17) (677) (4,488)
Issuance of common shares   - 520 - 520
Change in non-cash working capital   943 (1,587) 7,095 942
    (85,347) (42,583) (163,705) (85,811)
           
Cash flow from operating, investing and financing activities   (33,857) 28,182 32,570 101,023
Effect of foreign exchange on cash and cash equivalents   (2,528) 3,342 (4,438) 1,959
Net change in cash and cash equivalents   (36,385) 31,524 28,132 102,982
           
Cash and cash equivalents, beginning of period   1,252,416 1,076,639 1,187,899 1,005,181
           
Cash and cash equivalents, end of period   1,216,031 1,108,163 1,216,031 1,108,163
Cash taxes paid   (395) (932) (766) (1,655)
Cash interest received   3,150 1,507 6,058 2,675
Cash interest paid   (12,979) (15,445) (27,004) (31,683)




Operating Highlights
(Unaudited)

     
  Three months ended June 30     Six months ended June 30
  2011 2010 2011 2010
         
ASMs 5,237,968,810 4,783,649,533 10,468,245,560 9,483,168,878
RPMs 4,091,544,681 3,824,847,258 8,381,892,647 7,664,794,818
Load factor 78.1% 80.0% 80.1% 80.8%
Yield (cents) 18.14 15.99 18.07 16.06
RASM (cents) 14.17 12.79 14.47 12.98
CASM (cents) 13.19 12.24 13.22 12.45
CASM, excluding fuel and employee profit share (cents) 8.70 8.72 8.81 8.96
Fuel consumption (litres) 253,938,930 232,129,892 511,631,742 462,598,271
Fuel costs per litre (dollars) 0.91 0.71 0.88 0.70
Segment guests 3,941,609 3,752,818 7,840,717 7,441,308
Average stage length (miles) 979 962 1,000 963
Utilization (hours) 11.6 11.5 11.9 11.6
Number of full-time equivalent employees at period end 6,912 6,388 6,912 6,388
Fleet size at period end 96 89 96 89



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 June 30 Six months ended June 30
  2011 2010 2011 2010
         
Operating expenses 690,948 585,501 1,383,530 1,180,700
Adjusted for:        
  Aircraft fuel expense (230,577) (164,450) (449,540) (324,504)
  Employee profit share expense  (4,577) (3,898) (12,169) (6,213)
Operating expenses, adjusted 455,794 417,153 921,821 849,983
ASMs 5,237,968,810 4,783,649,533 10,468,245,560 9,483,168,878
CASM, excluding above items (cents) 8.70 8.72 8.81 8.96




Net earnings per guest
(Stated in thousands of Canadian dollars, except per unit data)
(Unaudited)

WestJet believes that the measure of net earnings per guest provides useful information to investors about unit profit.

     

   
Three months ended June 30     Six months ended June 30
  2011 2010 2011 2010
         
Net earnings 25,602 6,833 73,851 9,198
Segment guests     3,941,609 3,752,818 7,840,717 7,441,308
Net earnings per guest 6.50 1.82 9.42 1.24

 

 

 

SOURCE WestJet