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WestJet To Acquire 738s & Q29 Of Profitability  
User currently offlineYOW From , joined Dec 1969, posts, RR:
Posted (10 years 4 months 5 days 3 hours ago) and read 2898 times:

WestJet Announces 2004 First Quarter Results: 29th
Consecutive Quarter of Profitability

CALGARY, ALBERTA--(CCNMatthews - Apr 28, 2004) - WestJet today
announced its 2004 first quarter results with operating revenue
of $216.7 million, a 25.5% increase from the $172.7 million
achieved in the first three months of 2003.

WestJet achieved net earnings in the first quarter of 2004 of
$512,000, down from $778,000 in net earnings achieved in the same
quarter of 2003. In the January through March period of 2004, the
airline recorded basic and diluted earnings per share of one
cent, equal to earnings per share of one cent during the first
quarter of 2003.

Beginning January 1, and in accordance with Canadian Generally
Accepted Accounting Principles, WestJet began recognizing
compensation expense for stock options granted on or after
January 1, 2002. This change in accounting policy requires the
fair value of stock options on their grant date be recognized as
a compensation expense over the period that the stock options
vest. As a result, in the first quarter of 2004, WestJet incurred
a non-cash expense of $2.5 million related to stock options.

On March 31, 2004, the Alberta Government substantively enacted a
corporate tax rate reduction from 12.5% to 11.5%. This required a
revaluation of the airline's future tax liability to the lower
rate, which resulted in a tax benefit to WestJet of approximately
$1.2 million during the first quarter of this year.

Excluding the expense related to stock options and the benefit
from the tax rate change, the airline outperformed operating
results from the first quarter of 2003 by 131.4% from $778,000 to
$1.8 million.

In the first quarter of 2004, WestJet implemented a series of
schedule changes in both eastern and western Canada that in the
short term created a decline in revenues per revenue passenger
mile. Schedule changes, particularly of the magnitude
implemented, create a dip in revenues because bookings decline on
the affected flights as the changeover date approaches, while
increases in bookings on the newly created flights only gather
momentum once the flights have commenced. In order to help
overcome this erosion of revenue during this period, WestJet
pursued a policy of deeper discounting through seat sales which
contributed to lower yields and revenues during the quarter. As a
result, WestJet's yield (revenue per revenue passenger mile) was
15.9 cents in the first quarter of 2004 as compared with 18.1
cents in the same period in 2003.

WestJet increased capacity, measured in available seat miles
(ASMs), in the first quarter by 35.2%, from 1,485 million ASMs to
2,008 million ASMs during the same period in 2003. Revenue
passenger miles grew by 42.3% to 1,362 million in the first
quarter of 2004 from 957 million during the same three-month
period of 2003.

During the first three months of the year, WestJet's average
stage length increased by 18.1% to 731 miles compared with 619
miles during the same period last year, while cost per ASM
decreased 6.1% to 10.8 cents this quarter compared with 11.5
cents in the first quarter of 2003. This increase in stage length
also contributed to the reduction in yield and cost.

Clive Beddoe, WestJet's Chairman, President and CEO, commented
today: "Although we are disappointed with the level of
profitability we achieved this quarter, we are nevertheless
pleased that we were able to produce our 29th consecutive quarter
of profitability. This was no minor achievement given the
extremely competitive environment and the high price of fuel.
This and other non-recurring expenses relating to aircraft
modifications collectively impacted our anticipated costs by
approximately $7.6 million.

"On a more positive note, our performance during this period, as
measured by load factor, surpassed our performance for the same
period in 2003 as our load factor for the first quarter reached
67.8% as compared to 64.4% in the first quarter of 2003.

"We took advantage of this period, the weakest quarter of the
year, to reconfigure the cabins and to add blended winglets to
our Next-Generation aircraft. These initiatives to improve fuel
efficiency and to increase legroom for our guests were completed
on March 19. The practical timing of these improvements from an
operational perspective meant negligible disruption to our
schedule but did keep three aircraft out of revenue service on a
rotating basis for the duration of the quarter. The impact that
this had on our earnings through reduced revenues and increased
costs was not insignificant. However, we are confident that this
investment will pay off significantly in the future.

"We continue to be frustrated by the length of time our suppliers
of LiveTV are taking to secure FAA and Transport Canada approval
for their installation. We had been previously assured that our
entire fleet of Next-Generation aircraft would be equipped with
LiveTV by June 30. However, it now appears that only a few
aircraft will be equipped with this technology in time for the
peak travel season. Although this is disappointing, we remain
confident that given the current strength of our advanced
bookings, our summer revenue should remain very healthy as we
will not be taking down the schedule to accommodate this
installation.

"While Air Canada's troubles continue to cause yield challenges
for WestJet, their difficulties also continue to point to
opportunities for our airline as Air Canada adjusts capacity and
progressively concedes market share to their low-cost
competitors.

"We continue to be pleased with the successes of our charter
operations even though they have been impacted by high fuel
prices. By virtue of our contracts we can charge back some of
these increases to our partners, however we have had to absorb a
portion of these increased costs which has somewhat lessened the
margins that this program would have produced. We are in the
midst of finalizing the destinations for the summer and winter
schedules with our charter partners as well as working on our
launch of scheduled service in the fall of 2004 to Los Angeles,
California, and Ft. Lauderdale and Orlando, Florida, with
seasonal scheduled service to Phoenix, Arizona and Palm Springs,
California."

In response to increasing charter flying and scheduled
transborder service set to begin in the fall of 2004, WestJet has
elected to convert five of its previously ordered Boeing 737-700
series aircraft to 737-800 series aircraft for delivery in 2005.
In 2005, the airline will now accept delivery of seven 737-700
aircraft with a 136-seat configuration and five 737-800 aircraft
with a 164-seat configuration. These 800-series aircraft are
eligible for Ex-Im Bank support, and like the airline's
700-series aircraft, will be equipped with leather seats,
enhanced legroom, and LiveTV.


I wonder if the 738s will have winglets installed too?


21 replies: All unread, jump to last
 
User currently offlineAirbusfanYYZ From Canada, joined Oct 2002, 1434 posts, RR: 25
Reply 1, posted (10 years 4 months 5 days 2 hours ago) and read 2815 times:

Wow good news for Westjet! IMO the acqusition of widebody aircraft will be the next logical step. Can TransAtlantic, Hawaii flts be far off?

Cheers,
Kaz



t.dot photography
User currently offlineFrmyqr From Canada, joined Apr 2004, 143 posts, RR: 0
Reply 2, posted (10 years 4 months 5 days 1 hour ago) and read 2731 times:

Good news indeed. Westjet just continues to impress me. WJ Rocks!!


i'm from regina. Heard of it?
User currently offlineSamurai 777 From Canada, joined Jan 2000, 2458 posts, RR: 4
Reply 3, posted (10 years 4 months 5 days ago) and read 2712 times:

Andrew,

I like this article! I've been seeing this coming for a long time now. It's interesting that the 738s would go to flying charter and transborder flights. But it could also mean that several more 73Gs could be freed up to do charter/transborder service so that the 738s can be used on the busiest transcon routes within Canada.

I'm sure WS would add winglets to the new 738s, too.

AirbusfanYYZ,

WHAT!? Widebodies? No, WestJet will not order widebodies in the near future. It's just not in WestJet's scheme of things to come. Neither are transatlantic flights. But charter flights to Hawai'i using the 73Gs might not be out of the question, though.

[Edited 2004-04-28 17:37:09]

User currently offlineSlawko From Canada, joined May 1999, 3799 posts, RR: 9
Reply 4, posted (10 years 4 months 4 days 23 hours ago) and read 2621 times:

HAHAHAHA I have to laugh at this one...Man that Clive he is something else...while the 800 is no real surprise, and its a great move...am I the only one who remembers Clive talking about how the MD-80 with 160 seats was too bag an aircraft for low cost/charter flying...man that was one is his big points in a few of his competition bashing speeches...and now here he is getting 164 seats!! HAHA...oh well...Good on ya WJ...800's will be a nice addition to the fleet, and no they are not too big!  Big grin


"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
User currently offlineAirbusfanYYZ From Canada, joined Oct 2002, 1434 posts, RR: 25
Reply 5, posted (10 years 4 months 4 days 23 hours ago) and read 2586 times:

Although my Transatlantic and widebody aircraft was actually tongue-in-cheek... it's not beyond the realm of possibility depending on the fate of AC.

Cheers,
Kaz



t.dot photography
User currently offlineCanadaEH From Canada, joined Jul 2003, 1341 posts, RR: 4
Reply 6, posted (10 years 4 months 4 days 22 hours ago) and read 2541 times:

Finally the -800 rumour has been confirmed! The profit for the quarter wasn't what I was hoping for, but a profit is a profit..


EH.
User currently offlineCanadaEH From Canada, joined Jul 2003, 1341 posts, RR: 4
Reply 7, posted (10 years 4 months 4 days 22 hours ago) and read 2512 times:

The 5 -800's will be delivered in April (1), May (1), and June (3) of 2005. According to Clive on the conference call, they will be used on high density routes and charter flights. They have a CASM that is 12% less than the -700's.


EH.
User currently offlineYOW From , joined Dec 1969, posts, RR:
Reply 8, posted (10 years 4 months 4 days 20 hours ago) and read 2456 times:

Mike, no doubt the majority of scheduled 738 flights will be on the heavy transcons, YYZ-YVR/YYC. Hope we will get to see them in YOW at some point though.

User currently offlineCanadaEH From Canada, joined Jul 2003, 1341 posts, RR: 4
Reply 9, posted (10 years 4 months 4 days 20 hours ago) and read 2414 times:

You never know.. YVR-YOW starts this Saturday. That's going to be a very popular transcon flight.


EH.
User currently offlineFalcon Flyer From United States of America, joined Jul 2000, 1323 posts, RR: 0
Reply 10, posted (10 years 4 months 4 days 20 hours ago) and read 2362 times:

Didn't Westjet have a small amount of options on the -600 ? Any new information about that ?


My definition of cool ? Not trying so hard to be cool.
User currently offlineVonRichtofen From Canada, joined Nov 2000, 4627 posts, RR: 36
Reply 11, posted (10 years 4 months 4 days 19 hours ago) and read 2308 times:

Corporate taxes down to 11.5% from 12.5% in Alberta. I hear this is the lowest in the country. Anybody have stats on the other provinces corporate tax rates? I'm curious.


Word
User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 12, posted (10 years 4 months 4 days 18 hours ago) and read 2255 times:

The profit for the quarter wasn't what I was hoping for, but a profit is a profit..

Q1 is never the best for profits for any airline......



"Talk to me, Goose..."
User currently offlineDfwRevolution From United States of America, joined Jan 2010, 970 posts, RR: 51
Reply 13, posted (10 years 4 months 4 days 18 hours ago) and read 2228 times:

Didn't Westjet have a small amount of options on the -600 ? Any new information about that ?

Boeing typically gives all airlines the option of converting an order into any other 737-family type (i.e. 73G for 738), so long as the airline alerts Boeing within the contractual agreement. There was rumors of WJ adding smaller fleet types, including the 736 and Embraer family, but nothing ever came of this ASAIK.

Regards,
DFW


User currently offlineWhiteguy From Canada, joined Nov 2003, 783 posts, RR: 0
Reply 14, posted (10 years 4 months 4 days 16 hours ago) and read 2138 times:
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Wow this thread is really quiet. Is reality starting to sink in with westjetters.

User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 15, posted (10 years 4 months 4 days 16 hours ago) and read 2107 times:

Wow this thread is really quiet. Is reality starting to sink in with westjetters.

In reference to what? The fact that WestJet made less profit this quarter as compared with the twenty-eight quarters before?

I don't see why there'd be much to talk about, really. I'd be willing to bet that WestJetters that have been around the industry for any amount of time are aware that Q1 is the slowest time of the year, and that it happened the same way last year - a diminished profit in this part of the year. At least it's a profit, and not a loss..... more than anyone can say about AC.

And besides, it's more than likely that they'll probably be back in the million-dollar profits again next quarter......



"Talk to me, Goose..."
User currently offlineWhiteguy From Canada, joined Nov 2003, 783 posts, RR: 0
Reply 16, posted (10 years 4 months 4 days 16 hours ago) and read 2096 times:
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Just saw an interview with Clive stating that the high costs of landing fees in YYZ are partly to blame. The expansion into YYZ will be in the Q2 numbers. Sound to me like he is setting up for a not so great Q2. I guess we'll see.

User currently offlineGoose From Canada, joined Aug 2003, 1840 posts, RR: 15
Reply 17, posted (10 years 4 months 4 days 16 hours ago) and read 2079 times:

Just saw an interview with Clive stating that the high costs of landing fees in YYZ are partly to blame. The expansion into YYZ will be in the Q2 numbers. Sound to me like he is setting up for a not so great Q2. I guess we'll see.

*shrug* WS only shifted its hub and increased flights out of YYZ a couple of weeks ago. I can't see those increased costs having much effect - likely, it's just a slow quarter. That's the usual story in Q1 - the results last year are an indicator of that.

It might pay off next quarter - but you're right, it's wait and see.



"Talk to me, Goose..."
User currently offlineChock head From Samoa, joined May 2002, 148 posts, RR: 0
Reply 18, posted (10 years 4 months 4 days 15 hours ago) and read 2042 times:

Wow this thread is really quiet. Is reality starting to sink in with westjetters.

Have another glass of Haterade , maybe it will get you somewhere...


User currently offlineSlawko From Canada, joined May 1999, 3799 posts, RR: 9
Reply 19, posted (10 years 4 months 4 days 15 hours ago) and read 2018 times:

"Didn't Westjet have a small amount of options on the -600 ? Any new information about that ?"

The original order for NG's was for -600's the 700's are in fact all conversions.



"Clive Beddoe says he favours competition, but his actions do not support that idea." Robert Milton - CEO Air Canada
User currently offlineWhiteguy From Canada, joined Nov 2003, 783 posts, RR: 0
Reply 20, posted (10 years 4 months 4 days 14 hours ago) and read 1967 times:
Support Airliners.net - become a First Class Member!

There's no hatred here. Nice to see your sense of humour Chock Head.

User currently offlineCanadaEH From Canada, joined Jul 2003, 1341 posts, RR: 4
Reply 21, posted (10 years 4 months 4 days 11 hours ago) and read 1908 times:

The high costs at YYZ are not to blame. Between the time that we announced our move to YYZ from YHM and just before we actually DID move, booking slowed, especially in the weeks leading up to it. That is what contributed to some of the costs - the move to YYZ and the booking surrounding it.

Also, costs/expenses which affected profitability:

-As a result, in the first quarter of 2004,
WestJet incurred a non-cash expense of $2.5 million related to stock
options.

-In the first quarter of 2004, WestJet implemented a series of schedule
changes in both eastern and western Canada that in the short term
created a decline in revenues per revenue passenger mile. Schedule
changes, particularly of the magnitude implemented, create a dip in
revenues because bookings decline on the affected flights as the
changeover date approaches, while increases in bookings on the newly
created flights only gather momentum once the flights have commenced. In
order to help overcome this erosion of revenue during this period,
WestJet pursued a policy of deeper discounting through seat sales which
contributed to lower yields and revenues during the quarter.

-"We took advantage of this period, the weakest quarter of the year,
to reconfigure the cabins and to add blended winglets to our
Next-Generation aircraft. These initiatives to improve fuel efficiency
and to increase legroom for our guests were completed on March 19. The
practical timing of these improvements from an operational perspective
meant negligible disruption to our schedule but did keep three aircraft
out of revenue service on a rotating basis for the duration of the
quarter. The impact that this had on our earnings through reduced
revenues and increased costs was not insignificant. However, we are
confident that this investment will pay off significantly in the future.

Much like this period last year, a not-so-great Q1 was followed by two great quarters. One can only look ahead to the future, when initiatives such as winglets, LiveTV, and inproved legroom will really start to pay off.

And one can't forget the fact that we'll be getting some -800's..  Smile


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EH.
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