Tuesday, 31 July 2018

$20.8 million loss for WestJet


WestJet have announced its second quarter results for 2018 this week and the Canadian airline reports a net loss of $20.8 million,  a terrible result when compared with net earnings of $48.6 million reported in the second quarter of 2017. 


The airline says that higher fuel prices and the threat of industrial action are the main causes of such a vast loss, "The impact of the threat of industrial action, in combination with the dramatic increase in fuel price and competitive capacity provided particularly significant challenges in the second quarter." Ed Sims, WestJet President and CEO. "While we are disappointed with these results, all WestJetters can take great satisfaction from the successful delivery of key strategic initiatives like Swoop and WestJet Link.".






Operating highlights (stated in Canadian dollars)

Q2 2018
Q2 2017
Change
Net earnings (loss) (millions)
($20.8)
$48.6
(142.7%)
Diluted earnings (loss) per share
($0.18)
$0.41
(143.9%)
Total revenue (millions)
$1,087.6
$1,058.3
2.8%
Operating margin
(2.5%)
7.4%
(9.9 pts.)
ASMs (available seat miles) (billions)
7.922
7.564
4.7%
RPMs (revenue passenger miles) (billions)
6.646
6.260
6.2%
Load factor
83.9%
82.8%
1.1 pts.
Segment guests
6,276,226
5,908,876
6.2%
Yield (revenue per revenue passenger mile) (cents)
16.36
16.91
(3.2%)
RASM (revenue per available seat mile) (cents)
13.73
13.99
(1.9%)
CASM (cost per available seat mile) (cents)
14.08
12.95
8.7%
Fuel costs per litre (cents)
81
62
30.6%
CASM, excluding fuel and employee profit share (cents)*
10.30
9.88
4.3%
 *Refer to reconciliations in the accompanying tables for further information regarding calculations.

Condensed Consolidated Statement of Earnings
(Stated in thousands of Canadian dollars, except per share amounts)
(Unaudited)




Three months ended
June 30
Six months ended
June 30

2018
2017(i)
2018
2017(i)





Revenue:





Guest
1,039,317
1,003,168
2,148,624
2,034,588

Other
48,256
55,114
130,673
138,365

1,087,573
1,058,282
2,279,297
2,172,953
Operating expenses:





Aircraft fuel
302,261
224,935
583,412
460,451

Salaries and benefits
247,659
228,810
502,784
459,925

Rates and fees
175,624
163,863
344,554
326,126

Depreciation and amortization
108,599
99,342
216,496
196,965

Sales and marketing
98,871
91,347
218,450
193,933

Maintenance
52,992
46,553
107,913
113,501

Aircraft leasing
36,889
40,565
74,373
84,907

Other
95,509
76,736
200,195
165,160

Employee profit share
(3,257)
7,755
3,127
14,782

1,115,147
979,906
2,251,304
2,015,750
Earnings (loss) from operations
(27,574)
78,376
27,993
157,203





Non-operating income (expense):





Finance income
7,191
4,448
13,901
8,647

Finance cost
(13,284)
(13,154)
(24,394)
(28,855)

Gain (loss) on foreign exchange
4,707
(4,230)
4,652
(4,513)

Gain on disposal of property and equipment
595
2,549
2,812
3,917

Gain (loss) on derivatives
(30)
353
35
(1,964)

(821)
(10,034)
(2,994)
(22,768)
Earnings (loss) before income tax
(28,395)
68,342
24,999
134,435





Income tax expense (recovery):





Current
(7,597)
9,311
227
20,052

Deferred
(40)
10,420
8,332
19,067

(7,637)
19,731
8,559
39,119
Net earnings (loss)
(20,758)
48,611
16,440
95,316





Earnings (loss) per share:





Basic
(0.18)
0.42
0.14
0.81

Diluted
(0.18)
0.41
0.14
0.81
(i)
Certain 2017 numbers have been restated for the adoption of IFRS 15.

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


June 30
2018
December 31
2017(i)
Assets


Current assets:



Cash and cash equivalents
1,054,683
1,147,076

Marketable securities
216,242
226,090


Total cash, cash equivalents and marketable securities
1,270,925
1,373,166

Restricted cash
71,157
109,700

Accounts receivable
164,874
152,492

Prepaid expenses, deposits and other
114,811
138,676

Inventory
39,830
43,045

1,661,597
1,817,079
Non-current assets:



Property and equipment
4,711,758
4,567,504

Intangible assets
56,143
59,517

Other assets
88,055
78,584
Total assets
6,517,553
6,522,684



Liabilities and shareholders' equity


Current liabilities:



Accounts payable and accrued liabilities
434,295
546,505

Advance ticket sales
739,858
659,953

Deferred Rewards program
205,691
185,991

Non-refundable guest credits
64,897
58,575

Current portion of maintenance provisions
106,082
82,129

Current portion of long-term debt
153,718
153,149

1,704,541
1,686,302
Non-current liabilities:



Maintenance provisions
261,116
270,347

Long-term debt
1,883,372
1,895,898

Other liabilities
16,528
19,171

Deferred income tax
401,856
392,111
Total liabilities
4,267,413
4,263,829



Shareholders' equity:



Share capital
548,961
548,977

Equity reserves
102,288
97,514

Hedge reserves
1,915
(1,902)

Retained earnings
1,596,976
1,614,266
Total shareholders' equity
2,250,140
2,258,855
Total liabilities and shareholders' equity
6,517,553
6,522,684
(i)
Certain 2017 numbers have been restated for the adoption of IFRS 15.

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


Three months ended
June 30
Six months ended
June 30

2018
2017(i)
2018
2017(i)





Operating activities:




Net earnings (loss)
(20,758)
48,611
16,440
95,316
Items not involving cash:





Depreciation and amortization
108,599
99,342
216,496
196,965

Change in maintenance provisions
12,557
8,658
25,111
43,970

Amortization of transaction costs
1,132
1,128
2,268
2,554

(Gain) loss on derivatives
33
(372)
(234)
4,156

Gain on disposal of property and equipment
(595)
(2,549)
(2,812)
(3,917)

Share-based payment expense
4,513
5,704
8,391
9,849

Deferred income tax expense (recovery)
(40)
10,420
8,332
19,067

Unrealized foreign exchange (gain) loss
(5,303)
2,968
(5,010)
576
Change in non-cash working capital
(34,586)
19,441
49,097
79,141
Change in restricted cash
25,647
18,950
38,543
30,000
Change in other assets
(299)
(3,716)
(2,263)
(696)
Change in other liabilities
(50)
(72)
6,318
895
Purchase of shares pursuant to compensation plans
(3,021)
(3,338)
(3,036)
(3,517)
Maintenance provision settlements
(102)
(23,287)
(24,974)
(31,227)

87,727
181,888
332,667
443,132





Investing activities:




Aircraft additions
(187,559)
(336,874)
(336,781)
(491,996)
Aircraft disposals
565
5,656
4,875
7,841
Other property and equipment and intangible additions
(2,882)
(14,313)
(22,659)
(23,631)
Purchase of marketable securities
(32,739)
(50,271)
(33,908)
(150,018)
Maturities of marketable securities
50,000
-
50,000
-
Change in non-cash working capital
4,402
11,833
7,855
(6,631)

(168,213)
(383,969)
(330,618)
(664,435)





Financing activities:




Increase in long-term debt
20,576
84,245
41,131
125,953
Repayment of long-term debt
(39,719)
(39,375)
(77,342)
(77,882)
Shares repurchased
(2,386)
(4,214)
(2,386)
(4,214)
Dividends paid
(15,970)
(16,387)
(31,940)
(32,795)
Cash interest paid
(16,465)
(16,889)
(30,492)
(31,367)
Change in non-cash working capital
(4,725)
(4,827)
(7,044)
(6,393)

(58,689)
2,553
(108,073)
(26,698)





Cash flow from operating, investing and financing activities
(139,175)
(199,528)
(106,024)
(248,001)
Effect of foreign exchange on cash and cash equivalents
6,400
(6,490)
13,631
(7,211)
Net change in cash and cash equivalents
(132,775)
(206,018)
(92,393)
(255,212)





Cash and cash equivalents, beginning of period
1,187,458
1,471,628
1,147,076
1,520,822





Cash and cash equivalents, end of period
1,054,683
1,265,610
1,054,683
1,265,610





Supplemental disclosure of operating cash flows




Cash interest received
7,211
4,239
13,991
8,314
Cash taxes paid, net
(14,891)
(31,571)
(34,531)
(76,553)

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