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)
| |
