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WestJet reports its second-highest ever third quarter net earnings of $119.4 million

CALGARY , Oct. 28, 2019 /CNW/ - WestJet (WJA.TO) today announced its third quarter results for 2019, with net earnings of $119.4 million , or $1.02 per fully diluted share compared with net earnings of $70.1 million , or $0.61 per fully diluted share reported in the third quarter of 2018, a year-over-year increase of 70.4 per cent and 67.2 per cent respectively.

"We are very pleased with these remarkable results, achieving our highest ever third quarter load factor, second-highest ever third quarter net earnings and the third-highest quarterly net earnings in WestJet's history," said Ed Sims , WestJet President and CEO. "These results would not have been possible without the continued energy and dedication of all 14,000 WestJetters in delivering our award-winning brand of friendly and caring service through the busy summer period. I also want to thank the almost seven million guests who travelled with us in the third quarter for their continued support."

Operating highlights* (stated in Canadian dollars)


Q3 2019

Q3 2018

Change

Net earnings (millions)

$119.4

$70.1

70.4%

Diluted earnings per share

$1.02

$0.61

67.2%

Total revenue (millions)

$1,392.9

$1,260.9

10.5%

Operating margin

13.5%

8.0%

5.5 pts.

ASMs (available seat miles) (billions)

8.838

8.880

(0.5%)

RPMs (revenue passenger miles) (billions)

7.671

7.517

2.1%

Load factor

86.8%

84.6%

2.2 pts.

Segment guests

6,812,228

6,940,569

(1.8%)

Yield (revenue per revenue passenger mile) (cents)

18.16

16.78

8.2%

RASM (revenue per available seat mile) (cents)

15.76

14.20

11.0%

CASM (cost per available seat mile) (cents)

13.64

13.06

4.4%

Fuel costs per litre (cents)

76

85

(10.6%)

CASM, excluding fuel and employee profit share (cents)*

9.96

9.10

9.5%


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

 

Dividend declaration
On October 28, 2019 , WestJet's Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the fourth quarter of 2019, to be paid on December 31, 2019 , to shareholders of record on December 18, 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.

Third quarter conference call
Given WestJet's proposed arrangement with an affiliate of Onex Corporation (ONEX.TO), WestJet will not be hosting an earnings call or webcast to discuss its third 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 nine months ended September 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 nine months ended September 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
Together with WestJet's regional airlines, WestJet Encore and WestJet Link, we offer scheduled service to 110 destinations in North America, Central America, the Caribbean and Europe and to more than 250 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' favourite 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)
2019 Number-One Ranked Canadian Airline Loyalty Program in Member Engagement (Bond Brand Loyalty)
2019/2018 Number-One-Ranked Airline Credit Card in Canada (Rewards Canada)
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 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
September 30

Nine months ended

September 30



2019

2018(i)

2019

2018(i)







Revenue:






Guest


1,347,872

1,215,223

3,689,407

3,363,847

Other


45,067

45,679

174,108

176,352



1,392,939

1,260,902

3,863,515

3,540,199

Operating expenses:






Aircraft fuel


304,616

343,276

902,828

926,688

Salaries and benefits


263,101

249,733

799,796

752,517

Rates and fees


182,866

185,999

533,921

530,553

Depreciation and amortization


157,209

141,931

473,932

434,614

Sales and marketing


118,253

107,059

351,271

325,509

Maintenance


58,431

30,708

159,359

116,339

Other


100,034

93,007

325,326

288,886

Employee profit share


20,692

8,276

27,482

11,403



1,205,202

1,159,989

3,573,915

3,386,509

Earnings from operations


187,737

100,913

289,600

153,690







Non-operating income (expense):






Finance income


8,270

6,862

27,973

20,763

Finance cost


(22,132)

(12,857)

(78,112)

(41,916)

Gain (loss) on foreign exchange


(6,398)

7,731

17,239

(5,088)

Gain on disposal of property and equipment


(155)

1,333

16,810

4,145

Gain (loss) on derivatives


1,817

(21)

(1,666)

14

Other non-operating


(2,244)

(12,638)



(20,842)

3,048

(30,394)

(22,082)

Earnings before income tax


166,895

103,961

259,206

131,608







Income tax expense:






Current


18,642

4,507

28,686

4,734

Deferred


28,865

29,395

21,238

38,441



47,507

33,902

49,924

43,175

Net earnings


119,388

70,059

209,282

88,433







Earnings per share:






Basic


1.03

0.61

1.82

0.78

Diluted


1.02

0.61

1.80

0.77

(i)

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

 

Condensed Consolidated Interim Statements of Financial Position
(Stated in thousands of Canadian dollars)
(Unaudited)





September 30

2019

December 31

2018(i)

Assets



Current assets:



Cash and cash equivalents

1,330,211

1,185,806

Marketable securities

34,343

93,771

Total cash, cash equivalents and marketable securities

1,364,554

1,279,577

Restricted cash

87,244

115,615

Accounts receivable

174,213

145,544

Prepaid expenses, deposits and other

177,300

190,224

Inventory

56,138

39,742


1,859,449

1,770,702

Non-current assets:



Property and equipment

5,566,236

5,312,995

Intangible assets

46,029

54,851

Other assets

91,020

102,537

Total assets

7,562,734

7,241,085




Liabilities and shareholders' equity



Current liabilities:



Accounts payable and accrued liabilities

803,966

658,067

Advance ticket sales

838,071

695,367

Deferred rewards program

257,272

224,608

Non-refundable guest credits

62,326

62,914

Current portion of maintenance provisions

39,150

22,576

Current portion of long-term debt and lease obligations

470,116

675,953


2,470,901

2,339,485

Non-current liabilities:



Maintenance provisions

376,535

387,023

Long-term debt and lease obligations

1,870,034

1,850,007

Other liabilities

11,231

10,263

Deferred income tax

423,858

405,160

Total liabilities

5,152,559

4,991,938




Shareholders' equity:



Share capital

576,690

548,979

Equity reserves

86,663

106,655

Hedge reserves

(8)

6,856

Retained earnings

1,746,830

1,586,657

Total shareholders' equity

2,410,175

2,249,147

Total liabilities and shareholders' equity

7,562,734

7,241,085

(i)

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

 

Condensed Consolidated Interim Statements of Cash Flows
(Stated in thousands of Canadian dollars)
(Unaudited)







Three months ended
September 30

Nine months ended
September 30



2019

2018(i)

2019

2018(i)







Operating activities:






Net earnings


119,388

70,059

209,282

88,433

Items not involving cash:






Depreciation and amortization


157,209

141,931

473,932

434,614

Change in maintenance provisions


12,996

(17,373)

39,554

(15,256)

Amortization of transaction costs


834

999

2,752

3,267

Unrealized (gain) loss on derivatives


(5)

22

469

(212)

(Gain) loss on disposal of property and equipment


155

(1,333)

(16,810)

(4,145)

Share-based payment expense


4,392

3,279

10,192

11,670

Deferred income tax expense


28,865

29,395

21,238

38,441

Unrealized foreign exchange (gain) loss


8,190

(2,042)

(15,460)

3,554

Change in non-cash working capital


151,219

106,136

337,408

160,491

Change in restricted cash


(18,599)

(17,781)

28,371

20,762

Change in other assets


(6,572)

(901)

1,181

(2,064)

Change in other liabilities


(46)

1,585

(53)

737

Purchase of shares pursuant to compensation plans


(137)

(167)

(3,352)

(3,203)

Maintenance provision settlements


(4,490)

(9,490)

(21,751)

(33,698)



453,399

304,319

1,066,953

703,391







Investing activities:






Aircraft additions


(132,703)

(117,037)

(764,291)

(453,818)

Aircraft disposals


2

1,334

7,295

6,209

Proceeds from sale-and-leaseback transaction


577,143

Other property and equipment and intangible additions and disposals


(9,557)

(38,769)

(41,151)

(70,991)

Purchases of marketable securities


(33,922)

(33,908)

Maturities of marketable securities


32,646

32,968

90,693

82,968

Change in non-cash working capital


12,956

12,437

13,863

38,644



(96,656)

(109,067)

(150,370)

(430,896)







Financing activities:






Increase in long-term debt


41,131

Repayment of long-term debt


(449,236)

(37,953)

(513,697)

(115,295)

Repayment of long-term lease obligations


(41,596)

(44,041)

(124,311)

(112,575)

Shares repurchased


(2,386)

Dividends paid


(16,207)

(15,953)

(48,309)

(47,893)

Cash interest paid


(22,242)

(17,526)

(67,683)

(54,678)

Change in non-cash working capital


(4,869)

(2,091)

(10,624)

(9,135)



(534,150)

(117,564)

(764,624)

(300,831)







Cash flow from operating, investing and financing activities


(177,407)

77,688

151,959

(28,336)

Effect of foreign exchange on cash and cash equivalents


5,338

(5,774)

(7,554)

7,857

Net change in cash and cash equivalents


(172,069)

71,914

144,405

(20,479)







Cash and cash equivalents, beginning of period


1,502,280

1,054,683

1,185,806

1,147,076

Cash and cash equivalents, end of period


1,330,211

1,126,597

1,330,211

1,126,597

Supplemental disclosure of operating cash flows






Cash interest received


8,580

6,568

27,997

20,559

Cash taxes paid, net


9,190

35,771

2,164

1,240

(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 September 30

Nine months ended September 30

($ in thousands)

2019

2018(i)

Change

2019

2018(i)

Change

Operating expenses

1,205,202

1,159,989

45,213

3,573,915

3,386,509

187,406

Aircraft fuel expense

(304,616)

(343,276)

38,660

(902,828)

(926,688)

23,860

Employee profit share







expense

(20,692)

(8,276)

(12,416)

(27,482)

(11,403)

(16,079)

Operating expenses,







 adjusted

879,894

808,437

71,457

2,643,605

2,448,418

195,187

ASMs

8,838,226,376

8,880,077,461

(0.5%)

25,439,381,217

24,830,673,928

2.5%

CASM, excluding above







items (cents)

9.96

9.10

9.5%

10.39

9.86

5.4%

(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 and finance costs. Invested capital includes average long-term debt, average lease obligations and average shareholders' equity.






September 30

2019

December 31
2018
(i)

Change

Earnings before income taxes

266,920

139,325

127,595

Special item(ii)

12,638

12,638

Adjusted earnings before income taxes

279,558

139,325

140,233

Add:




Finance costs

103,707

67,511

36,196

Return

383,265

206,836

176,429

Invested capital:




Average long-term debt and lease obligations(iii)

2,443,471

2,526,573

(83,102)

Average shareholders' equity

2,330,363

2,226,033

104,330


4,773,834

4,752,606

21,228

Return on invested capital

8.0%

4.4%

3.6 pts.

(i)

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

(ii)

At September 30, 2019, special item includes non-operating acquisition costs of $12,638 (December 31, 2018 – $nil).

(iii)

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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