WestJet reports a significant return to second quarter profitability

CALGARY, July 26, 2019 /CNW/ – WestJet (TSX: WJA) today announced its second quarter results for 2019, with net earnings of $44.3 million, or $0.38 per fully diluted share compared with a net loss of $15.8 million, or $0.14 per fully diluted share reported in the second quarter of 2018.

“We are very pleased with this significant return to second quarter profitability.” said WestJet President & CEO Ed Sims. “I want to acknowledge the remarkable effort of all 14,000 WestJetters who rose to the challenge of delivering this notable improvement in year over year performance and thank all of our guests for their continued loyalty.”

Operating highlights* (stated in Canadian dollars)

	Q2 2019	Q2 2018	Change
Net earnings (millions)	$44.3	($15.8)	379.8%
Diluted earnings per share	$0.38	($0.14)	371.4%
Total revenue (millions)	$1,212.9	$1,087.6	11.5%
Operating margin	3.5%	(0.7%)	4.2 pts.
ASMs (available seat miles) (billions)	8.145	7.922	2.8%
RPMs (revenue passenger miles) (billions)	7.099	6.646	6.8%
Load factor	87.2%	83.9%	3.3 pts.
Segment guests	6,493,802	6,276,226	3.5%
Yield (revenue per revenue passenger mile) (cents)	17.09	16.36	4.5%
RASM (revenue per available seat mile) (cents)	14.89	13.73	8.5%
CASM (cost per available seat mile) (cents)	14.38	13.84	3.9%
Fuel costs per litre (cents)	81	81	–
CASM, excluding fuel and employee profit share (cents)*	10.66	10.06	6.0%

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

 

Dividend declaration
On July 26, 2019, WestJet’s Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the third quarter of 2019, to be paid on September 30, 2019, to shareholders of record on September 11, 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.

Second quarter conference call
Given WestJet’s proposed arrangement with an affiliate of Onex Corporation (TSX: ONEX), WestJet will not be hosting an earnings call or webcast to discuss its second quarter results. For further information, please contact WestJet Investor Relations.

Caution regarding forward-looking information
Certain information set forth in this news release, including, without limitation, information regarding our dividend 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 three and six months ended June 30, 2019 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 three and six months ended June 30, 2019, are available through the Internet in the Investor Relations section of westjet.com or under WestJet’s SEDAR profile at sedar.com.

About WestJet
The WestJet group of companies offers 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 for three consecutive years as Best Airline in Canada (2017-19) and awarded among travellers’ favourite Mid-Sized Airlines in North America (2019). From 2017-2018, WestJet was also awarded among travellers’ favorite Mid-Sized and Low-Cost Airlines in North America. The airline was also recognized among the Economy Class winners in 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:
2019/2018/2017 Best Airline in Canada (TripAdvisor Travellers’ Choice awards for Airlines)
2019 Winner Among Mid-Sized Airlines in North America (TripAdvisor Travellers’ Choice awards for Airlines)
2018/2017 Winner Among Mid-Sized and Low Cost Airlines – North America (TripAdvisor Travellers’ Choice awards for Airlines)
2018 Winner – Economy, North America (TripAdvisor Travellers’ Choice awards for Airlines)
2018 Number-One-Ranked Airline Credit Card in Canada (Rewards Canada)
2018 North America’s Best Low-Cost Airline (Skytrax)
2018/2017/2016 Canada’s Most Trusted Airline (Gustavson School of Business at the University of Victoria)

Connect with WestJet on Facebook at facebook.com/westjet
Follow WestJet on Twitter at twitter.com/westjet
Follow WestJet on Instagram instagram.com/westjet/
Subscribe to WestJet on YouTube at youtube.com/westjet
Read the WestJet blog at blog.westjet.com

 

Condensed Consolidated Statements of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)
		Three months ended June 30		Six months ended June 30
		2019	2018(i)	2019	2018(i)
Revenue:
Guest		1,163,239	1,039,317	2,341,535	2,148,624
Other		49,681	48,256	129,041	130,673
		1,212,920	1,087,573	2,470,576	2,279,297
Operating expenses:
Aircraft fuel		301,290	302,261	598,212	583,412
Salaries and benefits		267,119	247,659	536,695	502,784
Rates and fees		175,852	175,624	351,055	344,554
Depreciation and amortization		158,917	146,184	316,723	292,683
Sales and marketing		106,922	98,871	233,018	218,450
Maintenance		49,365	35,636	100,928	85,631
Other		109,945	92,745	225,292	195,879
Employee profit share		1,541	(3,257)	6,790	3,127
		1,170,951	1,095,723	2,368,713	2,226,520
Earnings (loss) from operations		41,969	(8,150)	101,863	52,777
Non-operating income (expense):
Finance income		10,319	7,191	19,703	13,901
Finance cost		(30,122)	(15,527)	(55,980)	(29,059)
Gain (loss) on foreign exchange		16,873	(5,718)	23,637	(12,819)
Gain on disposal of property and equipment		2,089	595	16,965	2,812
Gain (loss) on derivatives		(2,804)	(30)	(3,483)	35
Other non-operating		(10,394)	–	(10,394)	–
		(14,039)	(13,489)	(9,552)	(25,130)
Earnings (loss) before income tax		27,930	(21,639)	92,311	27,647
Income tax expense (recovery):
Current		5,283	(7,597)	10,044	227
Deferred		(21,632)	1,784	(7,627)	9,046
		(16,349)	(5,813)	2,417	9,273
Net earnings (loss)		44,279	(15,826)	89,894	18,374
Earnings (loss) per share:
Basic		0.39	(0.14)	0.79	0.16
Diluted		0.38	(0.14)	0.78	0.16

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

Condensed Consolidated Statements of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)
		June 30 2019	December 31 2018(i)
Assets
Current assets:
Cash and cash equivalents		1,502,280	1,185,806
Marketable securities		66,687	93,771
Total cash, cash equivalents and marketable securities		1,568,967	1,279,577
Restricted cash		68,646	115,615
Accounts receivable		162,971	145,544
Prepaid expenses, deposits and other		164,276	190,224
Inventory		49,857	39,742
		2,014,717	1,770,702
Non-current assets:
Property and equipment		5,578,206	5,312,995
Intangible assets		49,129	54,851
Other assets		75,632	102,537
Total assets		7,717,684	7,241,085
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable and accrued liabilities		634,289	658,067
Advance ticket sales		849,788	695,367
Deferred Rewards program		247,673	224,608
Non-refundable guest credits		63,848	62,914
Current portion of maintenance provisions		42,704	22,576
Current portion of long-term debt and lease obligations		897,250	675,953
		2,735,552	2,339,485
Non-current liabilities:
Maintenance provisions		359,950	387,023
Long-term debt and lease obligations		1,916,359	1,850,007
Other liabilities		11,449	10,263
Deferred income tax		394,091	405,160
Total liabilities		5,417,401	4,991,938
Shareholders’ equity:
Share capital		574,032	548,979
Equity reserves		85,004	106,655
Hedge reserves		(2,444)	6,856
Retained earnings		1,643,691	1,586,657
Total shareholders’ equity		2,300,283	2,249,147
Total liabilities and shareholders’ equity		7,717,684	7,241,085

(i)      Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

Condensed Consolidated Statements of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)
		Three months ended June 30		Six months ended June 30
		2019	2018(i)	2019	2018(i)
Operating activities:
Net earnings (loss)		44,279	(15,826)	89,894	18,374
Items not involving cash:
Depreciation and amortization		158,917	146,184	316,723	292,683
Change in maintenance provisions		10,660	600	26,558	2,117
Amortization of transaction costs		953	1,132	1,918	2,268
Unrealized (gain) loss on derivatives		75	33	474	(234)
Gain on disposal of property and equipment		(2,089)	(595)	(16,965)	(2,812)
Share-based payment expense		2,330	4,513	5,800	8,391
Deferred income tax expense (recovery)		(21,632)	1,784	(7,627)	9,046
Unrealized foreign exchange (gain) loss		(19,167)	2,484	(23,650)	5,596
Change in non-cash working capital		(6,871)	(30,779)	186,189	54,355
Change in restricted cash		34,766	25,647	46,970	38,543
Change in other assets		10,445	212	7,753	(1,163)
Change in other liabilities		(4)	(524)	(7)	(848)
Purchase of shares pursuant to compensation plans		(3,080)	(3,021)	(3,215)	(3,036)
Maintenance provision settlements		(9,133)	(5,963)	(17,261)	(24,208)
		200,449	125,881	613,554	399,072
Investing activities:
Aircraft additions		(114,937)	(187,559)	(631,588)	(336,781)
Aircraft disposals		6,257	565	7,293	4,875
Proceeds from sale-and-leaseback transaction		–	–	577,143	–
Other property and equipment and intangible additions and disposals		(9,142)	(9,966)	(31,594)	(32,222)
Purchases of marketable securities		–	(32,739)	(33,922)	(33,908)
Maturities of marketable securities		25,000	50,000	58,047	50,000
Change in non-cash working capital		3,022	11,871	907	26,207
		(89,800)	(167,828)	(53,714)	(321,829)
Financing activities:
Increase in long-term debt		–	20,576	–	41,131
Repayment of long-term debt		(37,920)	(39,719)	(64,461)	(77,342)
Repayment of long-term lease obligations		(39,207)	(35,115)	(82,715)	(68,534)
Shares repurchased		–	(2,386)	–	(2,386)
Dividends paid		(16,149)	(15,970)	(32,102)	(31,940)
Cash interest paid		(25,466)	(19,889)	(45,441)	(37,152)
Change in non-cash working capital		(4,376)	(4,725)	(5,755)	(7,044)
		(123,118)	(97,228)	(230,474)	(183,267)
Cash flow from operating, investing and financing activities		(12,469)	(139,175)	329,366	(106,024)
Effect of foreign exchange on cash and cash equivalents		(7,036)	6,400	(12,892)	13,631
Net change in cash and cash equivalents		(19,505)	(132,775)	316,474	(92,393)
Cash and cash equivalents, beginning of period		1,521,785	1,187,458	1,185,806	1,147,076
Cash and cash equivalents, end of period		1,502,280	1,054,683	1,502,280	1,054,683
Supplemental disclosure of operating cash flows
Cash interest received		9,939	7,211	19,417	13,991
Cash taxes paid, net		(3,283)	(14,891)	(7,026)	(34,531)

(i)      Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

 

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 June 30			Six months ended June 30
($ in thousands)	2019	2018(i)	Change	2019	2018(i)	Change
Operating expenses	1,170,951	1,095,723	75,228	2,368,713	2,226,520	142,193
Aircraft fuel expense	(301,290)	(302,261)	971	(598,212)	(583,412)	(14,800)
Employee profit share expense	(1,541)	3,257	(4,798)	(6,790)	(3,127)	(3,663)
Operating expenses, adjusted	868,120	796,719	71,401	1,763,711	1,639,981	123,730
ASMs	8,145,063,263	7,921,730,038	2.8%	16,601,154,841	15,950,596,467	4.1%
CASM, excluding above items (cents)	10.66	10.06	6.0%	10.62	10.28	3.3%

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

 

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.

	June 30 2019	December 31      2018(i)	Change
Earnings before income taxes	203,988	139,325	64,663
Add:
Finance costs	94,433	67,511	26,922
	298,421	206,836	91,585
Invested capital:
Average long-term debt and lease obligations(ii)	2,690,171	2,526,573	163,598
Average shareholders’ equity	2,248,210	2,226,033	22,177
	4,938,381	4,752,606	185,775
Return on invested capital	6.0%	4.4%	1.6 pts

(i)    Certain 2018 numbers have been restated for the adoption of IFRS 16.

(ii)   Average long-term debt and lease obligations is comprised of the current portion and long-term portion of long-term debt and lease obligations.

 

SOURCE WESTJET, an Alberta Partnership

 

« »