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WestJet reports a significant return to second quarter profitability

CALGARY, July 26, 2019 /CNW/ - WestJet (TSX:WJA.TO - News) 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.TO - News), 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


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