Press Release
August 2, 2001
CALGARY, AB -- WestJet Airlines (TSE:WJA) yesterday announced that its net earnings for the second quarter of 2001
rose 11.3% to $8.2 million over the $7.4 million achieved in the same period of 2000.
In the first six months of 2001, the airline's net earnings grew 20.9% to $14.1 million from $11.6 million during
the first six months of 2000.
Operating revenue increased this quarter by 40.9% to $112.8 million over $80.1 million from the second quarter
last year. Year to date, operating revenue grew 47.0% to $205.1 million, an increase from $139.5 million during
the same period in 2000. The airline's diluted earnings per share grew to 18 cents for April to June 2001, up from
17 cents for the second quarter of 2000. Year to date, diluted earnings per share have increased to 30 cents, from
26 cents during the same period last year. As of June 30, 2001, the number of common shares outstanding was 45,990,582,
as compared to 42,136,554 on June 30, 2000.
WestJet grew its capacity, measured in available seat miles (ASMs), by 51.8% this quarter to 691,401,288 from 455,514,882.
Year to date ASMs increased 58.3% to 1,289,837,640 from 815,031,521. Revenue passenger miles (RPMs) increased 52.5%
to 529,276,876 this quarter, from 347,014,809 in the second quarter of 2000. For the first six months of 2001,
RPMs increased to 944,849,752 from 608,996,503, up 55.1% from the first two quarters of 2000. WestJet's load factor
for the quarter also increased to 76.6% from 76.2% with year to date load factor down slightly to 73.3% from 74.7%.
WestJet decreased its costs per ASM during the second quarter to 14.4 cents, from 14.7 cents in the same period
of 2000.
This 2.0% cost reduction this quarter was achieved in the face of a negative impact due to a change in accounting
treatment for maintenance expenditures. This, together with the introductory costs of the 737-700 series aircraft,
represented 0.4 cents per ASM, which had the effect of reducing earnings by 3 cents per share. With only one 737-700
series aircraft in service in the last month of the quarter, the Company has yet to realize the full impact of
cost benefits that these aircraft will bring. WestJet's cost controls were particularly effective during the period
in which fuel costs on a unit basis increased 12%.
Yield (revenue per revenue passenger mile) decreased by 7.8% to 21.3 cents from 23.1 cents, as a result of two
principle factors. Management estimates approximately half of the decrease in yield was attributed to market stimulation
initiatives on its new long-haul routes and a 4.3% increase in stage length, to 438 miles from 420 miles. The remaining
portion is attributed to competitive pressures.
Clive Beddoe, WestJet's President, CEO and Executive Chairman, commented this morning: ``We are pleased with our
performance throughout the second quarter in the face of a very competitive marketplace. Our investment in future
growth during this quarter has caused short-term downward pressure on earnings as a result of start-up costs incurred
with respect to our new generation aircraft, simulators, facilities and our Sabre distribution initiative. However,
we are extremely pleased with the initial data that is being generated from the operations of our new 737-700 series
aircraft. We are experiencing even greater than expected efficiencies on fuel burn and reliability, and as a result,
we will be investigating the opportunity to accelerate the retirement of our current 200 series aircraft in favor
of replacing them with 700 series aircraft.
``It is particularly pleasing to once again implement a significant capacity increase of 51.8% in this quarter,
and to watch it being absorbed by the flying public. We have invested significantly in new market stimulation initiatives
focussed on promoting our new longer haul service, while aggressively maintaining the lowest fares in the Canadian
industry.
``We remain committed to the successful low fare strategy that has made our customers loyal to WestJet. As we look
forward to the remainder of the summer travel season and into the fall and we continue to be confident that WestJet
will lead the way in profitability as the lowest cost airline in Canada despite the changing and challenging Canadian
airline industry.''
WestJet Airlines serves the 17 Canadian cities of Victoria, Comox, Vancouver, Abbotsford/Fraser Valley, Prince
George, Kelowna, Calgary, Edmonton, Grande Prairie, Fort McMurray, Saskatoon, Regina, Winnipeg, Thunder Bay, Hamilton,
Ottawa and Moncton. WestJet has a fleet of 23 Boeing 737-200 aircraft and has taken delivery of three next generation
737-700 aircraft. WestJet is publicly traded on the Toronto Stock Exchange under the symbol WJA.
WestJet Airlines Ltd.
Consolidated Financial Statements
June 30, 2001
(Unaudited)
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WestJet Airlines Ltd.
Consolidated Balance Sheets
June 30, 2001 and December 31, 2000
(Stated in Thousands of Dollars)
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June 30, December 31,
2001 2000
(Unaudited)
Assets
Current assets
Cash and short-term investments $ 61,142 $ 79,025
Accounts receivable 9,344 6,447
Prepaid expenses and deposits 9,253 6,099
Inventory 1,009 604
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80,748 92,175
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Capital assets 292,851 239,320
Other long-term assets 5,386 5,677
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$378,985 $337,172
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 34,437 $ 54,087
Advance ticket sales 47,719 18,764
Non-refundable passenger credits 7,579 6,996
Current portion of long-term debt (note 4) 9,094 9,336
Current portion of obligations under
capital lease (note 5) 3,132 1,597
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101,961 90,780
Long-term debt (note 4) 45,597 40,953
Obligations under capital lease (note 5) 15,370 8,519
Deferred gain on foreign exchange 315 0
Future income tax 17,733 15,828
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180,976 156,080
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Shareholders' equity
Share capital (note 3) 128,247 125,390
Retained earnings 69,762 55,702
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198,009 181,092
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$378,985 $337,172
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WestJet Airlines Ltd.
Consolidated Income, Expenses and Retained Earnings For the
periods ended June 30, 2001 and 2000
(Unaudited)
(Stated in Thousands of Dollars, Except Per Share Data)
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Three months Six months
ended June 30 ended June 30
2001 2000 2001 2000
Income
Passenger revenues $107,059 $ 75,760 $193,972 $132,318
Charter and other 5,738 4,309 11,088 7,171
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112,797 80,069 205,060 139,489
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Expenses
Passenger services 23,747 14,930 44,593 27,893
Aircraft fuel 20,698 12,142 39,078 21,831
Maintenance 19,025 12,926 33,388 23,556
Amortization 8,010 4,408 14,548 6,697
Sales and marketing 6,714 5,097 12,374 9,066
Flight operations 5,166 3,374 9,574 6,139
General and
administration 4,617 2,763 8,416 4,400
Reservations 3,780 2,954 6,709 5,579
Inflight 3,000 2,627 5,542 4,732
Aircraft leasing 2,243 1,600 4,251 2,802
Employee profit share
provision (note 6) 2,502 4,206 3,809 5,623
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99,502 67,027 182,282 118,318
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Earnings from operations 13,295 13,042 22,778 21,171
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Non-operating income
(expense)
Interest income 675 752 1,611 1,401
Interest expense (1,201) (772) (2,166) (1,522)
Gain (loss) on disposal
of capital assets 43 (11) 89 (262)
Gain on foreign exchange 307 0 307 0
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(176) (31) (159) (383)
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Earnings before income
taxes 13,119 13,011 22,619 20,788
Income taxes
Current 3,673 4,828 6,654 7,097
Future 1,224 799 1,905 2,057
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4,897 5,627 8,559 9,154
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Net earnings 8,222 7,384 14,060 11,634
Retained earnings,
beginning of period 61,540 29,698 55,702 25,448
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Retained earnings,
end of period $ 69,762 $ 37,082 $ 69,762 $ 37,082
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Number of common shares
outstanding 45,990,582 42,136,554 45,990,582 42,136,554
Number of stock options
outstanding 4,090,509 3,806,608 4,090,509 3,806,608
Earnings per share (note 2)
Basic $ 0.18 $ 0.18 $ 0.31 $ 0.28
Diluted $ 0.18 $ 0.17 $ 0.30 $ 0.26
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Operating highlights:
Available seat
miles 691,401,288 455,514,882 1,289,837,640 815,031,521
Revenue passenger
miles 529,276,876 347,014,809 944,849,752 608,996,503
Load factor 76.6% 76.2% 73.3% 74.7%
Revenue per
passenger mile
(cents) 21.3 23.1 21.7 22.9
Revenue per
available seat
miles (cents) 16.3 17.6 15.9 17.1
Cost per
passenger mile
(cents) 18.8 19.3 19.3 19.4
Cost per available
seat mile (cents) 14.4 14.7 14.1 14.5
Fuel consumption
(litres) 55,795,181 37,102,355 104,276,215 67,204,281
Fuel cost/litre
(cents) 37.1 32.8 37.5 32.7
Segment passengers 1,161,156 801,648 2,126,734 1,479,766
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WestJet Airlines Ltd.
Consolidated Statement of Cash Flows
For the periods ended June 30, 2001 and 2000
(Unaudited)
(Stated in Thousands of Dollars)
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Three months Six months
ended June 30 ended June 30
2001 2000 2001 2000
Cash flows from (used in):
Operations
Net earnings $ 8,222 $ 7,384 $ 14,060 $ 11,634
Items not involving cash:
(Gain) loss on disposal of
capital assets (43) 11 (89) 262
Realized gain on foreign
exchange (287) 0 (14) 0
Amortization 8,010 4,408 14,548 6,697
Future income tax 1,224 799 1,905 2,057
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Cash flow from operations 17,126 12,602 30,410 20,650
Decrease in non-cash
working capital 10,733 16,943 3,547 16,314
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27,859 29,545 33,957 36,964
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Financing
Repayment of long-term debt (2,309) (2,100) (4,544) (3,688)
Increase in long-term debt 7,350 0 8,946 3,364
Decrease in obligations
under capital lease (521) (35) (916) (67)
Increase in other long-term
assets (308) (369) (509) (4,545)
Share issuance costs 0 (23) 0 (23)
Issuance of common shares 977 625 2,857 1,713
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5,189 (1,902) 5,834 (3,246)
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Investing
Aircraft additions (18,270) (13,397) (37,285) (22,429)
Aircraft disposals 0 0 0 1,825
Other capital asset
additions (14,301) (8,624) (20,393) (11,492)
Other capital asset
disposals 0 0 4 0
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(32,571) (22,021) (57,674) (32,096)
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Net change in cash 477 5,622 (17,883) 1,622
Cash, beginning of period 60,665 46,740 79,025 50,740
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Cash, end of period $ 61,142 $ 52,362 $ 61,142 $ 52,362
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WestJet Airlines Ltd.
Notes to Consolidated Financial Statements
Six month period ended June 30, 2001
(Unaudited)
(Tabular Dollar Amounts are Stated in Thousands,
Except Per Share Data)
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The interim consolidated financial statements of WestJet Airlines Ltd. (``WestJet'' or ``the Corporation'') have
been prepared by management in accordance with accounting principles generally accepted in Canada. The interim
consolidated financial statements have been prepared following the same accounting policies and methods of computation
as the consolidated financial statements for the fiscal year ended December 31, 2000, except as described below.
The disclosures provided below are incremental to those included with the annual consolidated financial statements.
The interim consolidated financial statements should be read in conjunction with the consolidated financial statements
and the notes thereto in the Corporation's annual report for the year ended December 31, 2000.
1. Financial instruments:
The Corporation has managed its exposure to fluctuations in the lease payments, which are designated in U.S. dollars,
for the ten Boeing new generation aircraft leases. In accordance with the aircraft lease agreements, the U.S. dollar
amount of the lease payments are fixed based on the value of the 10-year U.S. Swap Rate on the day the aircraft
is delivered. WestJet has managed this exposure by entering into Interest Rate Collar and Forward Starting Swap
agreements.
Interest Rate Collar agreements on the first two new generation aircraft expired within the collar range, and therefore
without any financial effect to the Corporation. As at June 30, 2001 the fair value of the remaining eight contracts,
for aircraft to be delivered between July 2001 and December 2002, was a gain of U.S. $4,221,548.
2. Per share amounts:
The Canadian Institute of Chartered Accountants has approved a new standard for the computation, presentation and
disclosure of per share amounts. Under the new standard, the treasury stock method is used instead of the imputed
earnings method to determine the dilutive effect of stock options and other dilutive instruments. Under the treasury
stock method, only ``in the money'' dilutive instruments impact the diluted calculations. In computing diluted
net earnings per share, 1,048,470 shares were added to the weighted average number of common shares outstanding
during the three months ended June 30, 2001 (2000 - 2,251,739 shares) and 982,618 shares were added to the weighted
average number of common shares outstanding during the six months ended June 30, 2001 (2000 - 2,412,549 shares)
for the dilutive effect of employee stock options. The new standard has been applied retroactively with the resulting
effect of reducing the diluted earnings per share by 1 cent for the six month period ended June 30, 2000.
3. Share capital:
(a) Issued:
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2001
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Number Amount
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Common shares:
Balance, beginning of period 44,998,583 $ 125,390
Exercise of options 991,999 2,857
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Balance, end of period 45,990,582 $ 128,247
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(b) Stock Option Plan:
Changes in the number of options, with their weighted average
exercise prices, are summarized below:
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2001
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Weighted
Number Average
of Exercise
Options Price
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Stock options outstanding,
beginning of period 3,358,121 $ 9.64
Granted 1,774,997 21.99
Exercised (991,999) 2.88
Cancelled (50,610) 20.48
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Stock options outstanding,
end of period 4,090,509 $ 16.51
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Exercisable, end of period 616,125 $ 3.64
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4. Long-term debt:
During the period the Corporation drew an additional $7,244,000 on the new generation flight simulator loan facility.
The balance of the term loan of $16,000,000 (December 31, 2000 - $8,756,000) is repayable in monthly installments
of $145,000 including interest at 7.125% maturing July 2016. The interest rate of 7.125% has been fixed for a period
of two years, after which time the Corporation will have the ability to fix the rate for a period of 1 to 5 years.
5. Leasehold commitments:
The Corporation has entered into operating leases for aircraft, buildings, computer hardware, and software licenses
and capital leases relating to computer hardware, vehicles and aircrafts. The payment obligations on a calender
- year basis, are as follows:
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Capital Leases Operating Leases
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July 2001 - December 2001 $ 2,284 $ 10,728
2002 4,548 20,627
2003 4,429 18,224
2004 4,370 16,224
2005 and there after 7,166 115,187
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Total Lease Payments 22,797 $ 180,990
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Less imputed interest at 8.4% (4,295)
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Net minimum lease payments 18,502
Current portion of obligation
under capital lease (3,132)
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$ 15,370
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6. Employee profit share:
The provision for employee profit share is estimated based on actual year-to-date earnings results. The employee
profit share amount is discretionary and is to be determined by the Board of Directors based on audited financial
results at the completion of the financial year. [JF1] [JF2]
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Contact:
WestJet Airlines Ltd.
Siobhan Vinish (Pronounced Sha-von), 403/444-2615
Fax: 403/444-2261
E-mail: svinish@westjet.com
Website: www.westjet.com