Category: Airlines

WestJet ( WJA )

Published: 07 November 2012
Written by Editor
TSX   Mining   Financial Results   Up on News   Interesting News  

WestJet reports third quarter net earnings of $71 million, up 80 per cent

Airline achieves earnings per share of $0.52, an increase from $0.28

WestJet (TSX: WJA) today announced third quarter net earnings of $70.6 million, or $0.52 per diluted share; up from the net earnings of $39.3 million, or $0.28 per diluted share, reported in the third quarter of 2011. These financial results mark WestJet's 30th consecutive quarter of profitability. Based on the trailing twelve months, the airline achieved a return on invested capital of 12.7 per cent, up from the 11.4 per cent reported last quarter.

 

"It was another great quarter for WestJet with significant earnings growth and continued margin expansion. We are also pleased to report a 12.7 per cent return on invested capital which surpasses our 12 per cent target," said WestJet President and CEO Gregg Saretsky. "This quarter, we achieved our highest ever quarterly load factor and I thank WestJetters for taking care of this record number of guests and contributing to these strong financial results."

 

                                            Operating highlights (stated in Canadian dollars)
  Q3 2012  Q3 2011 Change Year-to-
date 2012		 Year-to-
date 2011		 Change
Net earnings (millions) $70.6 $39.3 79.9% $181.4 $113.1 60.4%
Diluted earnings per share $0.52 $0.28 85.7% $1.33 $0.80 66.3%
Total revenues (millions) $866.5 $775.3 11.8% $2,566.8 $2,290.0 12.1%
Operating margin 12.5% 8.5% 4.0 pts. 11.1% 8.6% 2.5 pts.
ASMs (available seat miles) (billions) 5.498 5.389 2.0% 16.576 15.857 4.5%
RPMs (revenue passenger miles) (billions) 4.654 4.315 7.8% 13.770 12.697 8.4%
Load factor 84.6% 80.1% 4.5 pts. 83.1% 80.1% 3.0 pts.
Segment guests 4,611,315 4,203,372 9.7% 13,109,328 12,044,089 8.8%
Yield (revenue per revenue passenger mile) (cents) 18.62 17.97 3.6% 18.64 18.04 3.3%
RASM (revenue per available seat mile) (cents) 15.76 14.39 9.5% 15.48 14.44 7.2%
CASM (cost per available seat mile) (cents) 13.80 13.16 4.9% 13.77 13.20 4.3%
CASM, excluding fuel and employee profit share (cents)* 9.10 8.77 3.8% 9.06 8.79 3.1%
*Refer to reconciliations in the accompanying tables for further information regarding calculations.

 

WestJet expects that RASM growth will continue in the fourth quarter at a slightly moderated pace compared to the 2012 year-to-date growth. "Our forward bookings indicate that demand for air travel remains healthy as we head into the winter season. We expect operating margin expansion in the fourth quarter and continued profitable growth into 2013," commented Gregg Saretsky.

The airline anticipates that fuel costs per litre will range between $0.91 and $0.93 in the fourth quarter of 2012. WestJet expects the increase in the fourth quarter CASM, excluding fuel and profit share, will be in line with the year-over-year increase reported in the third quarter of 2012. The projected full-year 2012 CASM, excluding fuel and profit share, remains unchanged from the previous estimate of an increase between three to 3.5 per cent.

WestJet recently announced that the name of its low-cost regional airline will be WestJet Encore and Calgary has been selected as the head office location for the new airline. The launch of WestJet Encore remains on track for the second half of 2013. The initial flight schedule is expected to be released in early 2013 which will include the first group of new communities the new airline plans to serve.

"Our strong brand epitomizes the very principles upon which WestJet was founded. This includes a low-cost focus and a caring guest experience which will be embodied in WestJet Encore," noted Gregg Saretsky. "We are excited to bring even more Canadians access to lower fares, stimulate demand for air travel in smaller communities and repeat our success in the regional space."

Dividend declaration
On November 6, 2012 WestJet's Board of Directors declared a cash dividend of $0.08 per common voting share and variable voting share for the fourth quarter of 2012, to be paid on December 31, 2012, to shareholders of record on December 12, 2012. 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, including, without limitation, information regarding RASM growth in the fourth quarter of 2012, fourth quarter operating margin expansion, continued profitable growth into 2013, fuel costs in the fourth quarter of 2012, CASM, excluding fuel and employee profit share, for the fourth quarter and full-year 2012, the launch of the regional airline in the second half of 2013 and the early 2013 release of WestJet Encore's flight schedule 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, the expected demand environment, our fleet plan, realized jet fuel prices for October 2012 and forward-curve prices for November and December 2012, the expected exchange rate of the Canadian dollar to the U.S. dollar in the fourth quarter of 2012, 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 which are available under WestJet's profile at www.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.

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 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 and additional GAAP measures" in WestJet's management's discussion and analysis of financial results for the three and nine months ended September 30, 2012, 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. 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 condensed consolidated interim financial statements and notes for the three and nine months ended September 30, 2012, 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, November 7, 2012, at 9 a.m. MT (11 a.m. ET). President and CEO Gregg Saretsky and Executive Vice-President of Finance and CFO Vito Culmone will discuss WestJet's third quarter 2012 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 most preferred airline, offering scheduled service to 81 destinations in North America, Central America and the Caribbean. Powered by an award-winning culture of care, WestJet has pioneered low-cost flying in Canada. Recognized nationally as a top employer, WestJet now has more than 8,600 WestJetters across Canada. Operating a fleet of 99 Boeing Next-Generation 737 aircraft with future confirmed deliveries for an additional 36 Boeing Next-Generation 737 aircraft through 2018 and plans to launch a low-cost regional airline in 2013, 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

 

 

Condensed Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
 
      Three months ended
September 30		 Nine months ended
September 30
    2012 2011 2012 2011
           
Revenue:          
  Guest   806,964 714,621 2,349,742 2,079,053
  Other   59,573 60,664 217,027 210,942
    866,537 775,285 2,566,769 2,289,995
Expenses:          
  Aircraft fuel   241,837 230,764 746,571 680,304
  Airport operations   113,074 106,051 336,063 314,266
  Flight operations and navigational charges   92,643 89,063 275,629 259,628
  Sales and distribution   78,057 74,026 236,573 223,996
  Marketing, general and administration   51,367 44,444 148,930 135,421
  Depreciation and amortization   46,935 43,624 139,226 130,439
  Aircraft leasing   40,838 41,384 129,683 123,721
  Maintenance   38,969 38,317 118,816 103,444
  Inflight   38,659 35,519 116,212 103,334
  Employee profit share   16,161 5,973 34,946 18,142
    758,540 709,165 2,282,649 2,092,695
Earnings from operations   107,997 66,120 284,120 197,300
           
Non-operating income (expense):          
  Finance income   4,587 3,865 13,418 11,604
  Finance costs   (12,269) (14,682) (37,264) (46,465)
  Gain on foreign exchange   463 1,255 543 3,393
  Gain (loss) on disposal of property and equipment   4 (20) 381 (11)
  Loss on derivatives   - (1,233) (6,512) (7,649)
    (7,215) (10,815) (29,434) (39,128)
Earnings before income tax   100,782 55,305 254,686 158,172
           
Income tax expense (benefit):          
  Current   16,740 (222) 57,576 962
  Deferred   13,394 16,260 15,662 44,092
    30,134 16,038 73,238 45,054
Net earnings   70,648 39,267 181,448 113,118
           
Earnings per share:          
  Basic   0.53 0.28 1.34 0.81
  Diluted   0.52 0.28 1.33 0.80

 

 

 

 

Condensed Consolidated Statement of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)
 
    September 30 December 31
    2012 2011
Assets      
Current assets:      
  Cash and cash equivalents   1,452,934 1,243,605
  Restricted cash   48,642 48,341
  Accounts receivable   35,330 34,122
  Prepaid expenses, deposits and other   67,585 66,936
  Inventory   36,834 31,695
    1,641,325 1,424,699
Non-current assets:      
  Property and equipment   1,992,490 1,911,227
  Intangible assets   48,296 33,793
  Other assets   87,248 103,959
Total assets   3,769,359 3,473,678
       
Liabilities and shareholders' equity      
Current liabilities:      
  Accounts payable and accrued liabilities   482,722 307,279
  Advance ticket sales   508,790 432,186
  Non-refundable guest credits   43,029 43,485
  Current portion of long-term debt   164,851 158,832
  Current portion of obligations under finance leases   79 75
    1,199,471 941,857
Non-current liabilities:      
  Maintenance provisions   151,784 151,645
  Long-term debt   615,603 669,880
  Obligations under finance leases   3,115 3,174
  Other liabilities   10,155 10,449
  Deferred income tax   339,980 326,456
Total liabilities   2,320,108 2,103,461
       
Shareholders' equity:      
  Share capital   619,661 630,408
  Equity reserves   70,080 74,184
  Hedge reserves   (8,473) (3,353)
  Retained earnings   767,983 668,978
Total shareholders' equity   1,449,251 1,370,217
       
Total liabilities and shareholders' equity   3,769,359 3,473,678

 

 

 

 

Condensed Consolidated Statement of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
 
    Three months ended
September  30 		Nine months ended
September  30
    2012 2011 2012 2011
           
Operating activities:          
Net earnings   70,648 39,267 181,448 113,118
Items not involving cash:          
  Depreciation and amortization   46,935 43,624 139,226 130,439
  Change in long-term maintenance provisions   8,298 8,037 26,567 22,541
  Change in other liabilities   (178) (183) (390) (115)
  Amortization of hedge settlements   350 350 1,050 1,050
  Loss on derivative instruments   - 1,233 6,512 7,649
  (Gain) loss on disposal of property and          
    equipment   (4) 20 (381) 11
  Share-based payment expense   3,104 2,903 9,694 10,015
  Deferred income tax expense   13,394 16,260 15,662 44,092
  Finance income   (4,587) (3,865) (13,418) (11,604)
  Finance costs   12,269 14,682 37,264 46,465
  Unrealized foreign exchange (gain) loss   (251) (696) (2,091) 1,387
  Change in non-cash working capital   155,747 76,596 221,699 122,674
Change in restricted cash   (18,712) (16,686) (301) (13,889)
Purchase of shares pursuant to compensation plans   - - (1,306) -
Change in other assets   (1,568) (1,866) (5,595) (5,328)
Cash taxes received (paid)   75 1,183 (731) 417
Cash interest received   4,580 4,516 13,318 10,574
    290,100 185,375 628,227 479,496
           
Investing activities:          
Aircraft additions   (16,991) (8,682) (186,445) (56,290)
Other property and equipment and intangible          
  additions   (8,130) (8,731) (41,220) (25,067)
    (25,121) (17,413) (227,665) (81,357)
           
Financing activities:          
Increase in long-term debt   - - 72,995 -
Repayment of long-term debt   (41,191) (46,158) (121,273) (137,204)
Decrease in obligations under finance leases   (19) (18) (56) (90)
Shares repurchased   (10,123) (16,740) (78,872) (74,570)
Issuance of shares pursuant to stock option plan   52 34 162 34
Dividends paid   (10,699) (6,912) (26,972) (28,086)
Cash interest paid   (10,746) (12,630) (32,877) (39,634)
Change in non-cash working capital   (1,504) (2,054) (4,367) 261
    (74,230) (84,478) (191,260) (279,289)
           
Cash flow from operating, investing and financing          
  activities   190,749 83,484 209,302 118,850
Effect of foreign exchange on cash and cash          
  equivalents   (2,033) 3,891 27 (547)
Net change in cash and cash equivalents   188,716 87,375 209,329 118,303
           
Cash and cash equivalents, beginning of period   1,264,218 1,190,244 1,243,605 1,159,316
           
Cash and cash equivalents, end of period   1,452,934 1,277,619 1,452,934 1,277,619

 

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 September 30 Nine months September 30
  2012 2011 Change 2012 2011 Change
CASM, excluding fuel and            
  employee profit share            
Operating expenses 758,540 709,165 7.0% 2,282,649 2,092,695 9.1%
Aircraft fuel expense (241,837) (230,764) 4.8% (746,571) (680,304) 9.7%
Employee profit share expense (16,161) (5,973) 170.6% (34,946) (18,142) 92.6%
Operating expenses, adjusted 500,542 472,428 6.0% 1,501,132 1,394,249 7.7%
ASMs 5,497,528,681 5,389,130,444 2.0% 16,576,116,108 15,857,376,004 4.5%
CASM, excluding above items            
  (cents) 9.10 8.77 3.8% 9.06 8.79 3.1%

 

Return on invested capital (ROIC)
(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 earnings before tax, excluding special items, finance costs and implied interest on 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.

 
  September 30
2012		 December 31
2011		 Change
Return on invested capital(i)      
Earnings before income taxes 304,520 208,006 96,514
Add:      
  Finance costs 51,710 60,911 (9,201)
  Implicit interest in operating leases(ii) 90,055 86,925 3,130
  446,285 355,842 90,443
Invested capital:      
  Average long-term debt(iii) 835,581 927,757 (92,176)
  Average obligations under finance leases(iv) 3,231 3,303 (72)
  Average shareholders' equity 1,395,935 1,337,225 58,710
  Off-balance-sheet aircraft leases(v) 1,286,498 1,241,783 44,715
  3,521,245 3,510,068 11,177
Return on invested capital 12.7% 10.1% 2.6 pts.
(i) The trailing 12 months are used in the calculation of ROIC.
(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 for any given period.
(iii) Average long-term debt includes the current portion and long-term portion.
(iv)  Average capital lease obligations include the current portion and long-term portion.
(v)  Off-balance-sheet aircraft leases are calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At September 30, 2012, the trailing 12 months of aircraft leasing costs totalled $171,533 (December 31, 2011 - $165,571).

 

 

 

 

SOURCE: WestJet

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