Westjet Q3 - $52.8 million profit

[dagger]

http://cnrp.ccnmatthews.com/client/westjet...06&releaseSeq=0

[Mitch Cronin]

We'll beat expectations and post a profit over $50M, IMO.

Not bad.

[CanadaEH]

UPDATE 1-WestJet flies to record quarterly profit

(Adds details, background)

MONTREAL, Oct 26 (Reuters) - WestJet Airlines Ltd.

said on Thursday that its third-quarter profit was its best for

any quarter, propelled by higher passenger traffic and revenues

and better cost controls.

Canada's second-largest carrier said it earned C$52.8

million ($46.7 million) or 41 Canadian cents a share in the

quarter, a 74.5 percent increase from a profit of C$30.3

million or 23 Canadian cents a share in the year earlier

period.

That handily beat the average profit estimate of 30

Canadian cents a share of analysts polled by Reuters

Estimates.

Revenues rose 24 percent to C$503 million from C$406

million, and the no-frills airline said key performance

measures improved over those for the 2005 quarter.

Load factor, the proportion of paid seats on the airline's

jets, rose to 80.5 percent from 78.6 percent. Yield, measured

as revenue for each revenue passenger mile flown, rose to 18.9

Canadian cents from 18.3 Canadian cents.

WestJet has been expanding its fleet of 62 jets and network

in the face of stiff competition with Air Canada, the country's

No. 1 airline and a unit of ACE Aviation Holdings Inc.

. It said third-quarter results were also helped by

better costs controls, even though jet fuel prices rose 9.3

percent from the 2005 quarter.

[CanadaEH]

Not bad. 

Not bad at all.

[Thebean]

Not bad at all.

An operating margin of almost 22%, double, SWA's.

Not bad at all.

It'll be amusing to see how the so called analysts start cra**ing" on a 22% operating margin, far and away the highest on the continenet.....

[Lakelad]

Not bad at all. 

Congrats - well done!

Of course that does push you into those socially irresponsible 'double-digit' profit levels (10.50%) occupied by similar pariahs such as Exxon (10.53%).

[Guest rattler]

Well done and I hope ACE, Skyservice etc. show similar strong returns for their 3rd quarters.

[Jumpy]

Profit sharing should equal about three weeks pay for each and every employee. Merry X-mas!!!!

[better4me]

An operating margin of almost 22%, double, SWA's.

Not bad at all.

It'll be amusing to see how the so called analysts start cra**ing" on a 22% operating margin, far and away the highest on the continenet.....

How do you get to 22% operating margins.

I get two numbers, 16% if you count profit sharing as part of the operations and 17.8% if you count oerating margin straight from the Westjet reports. I do not see how you get to a figure of 22%. I think your "Beans" need to be audited.

[Guest prob30]

Lakelad nice one.

Good job WJ.

[CanadaEH]

Airlines fly into the black

BRENT JANG AND TAVIA GRANT

Globe and Mail Update

Nearly full planes, tight cost controls and weakening oil prices have fuelled a long-awaited recovery at Canada's two main airlines.

WestJet Airlines Ltd. announced yesterday that it enjoyed a record quarterly profit, and analysts say Air Canada is also on a profitable path, with both carriers on track to finish 2006 with a flourish.

The profit bonanza is in sharp contrast to 2004, when Air Canada lost $880-million and WestJet posted a $17-million loss. The airlines bounced back last year with profitable performances, but 2006 is shaping up to be much better, and 2007 could also be respectable — a surprise to industry analysts, given that oil prices remain high, albeit down sharply from record levels in the summer.

Thursday, WestJet boss Clive Beddoe sang the praises of the Calgary-based carrier's record third-quarter profit, expressing confidence that a new trend of higher fares and softening fuel prices will continue.

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CanJet Airlines' exit on Sept. 10 from scheduled flights changed the country's aviation market for the better, allowing WestJet and Air Canada to market their services instead of resorting to deeply discounting tickets, Mr. Beddoe said.

The airlines, already sideswiped by 9/11, suffered again from reduced passenger loads in 2003-04 after the war in Iraq and the SARS outbreak.

The recovery at Canada's two largest carriers is tenuous because oil prices remain stubbornly high, but “the stars are all lined up for now,” said Rick Erickson, an aviation consultant who heads RP Erickson & Associates.

Air Canada, which emerged from bankruptcy protection two years ago, is firing on all cylinders because it has cut labour costs and is thriving with robust international and domestic traffic, he said. “I expect Air Canada to knock the ball out of the park, too.”

Mr. Erickson was referring to his expectations on Nov. 10, when parent ACE Aviation Holdings Inc. is scheduled to release its third-quarter results.

Industry observers say the U.S. airline sector is still struggling with too much seat capacity, but it is also poised for a recovery, if oil prices average less than $60 (U.S.) a barrel next year and most planes continue to fly at near-capacity levels.

Next year “should bring most North American carriers back into positive territory, but oil remains such a volatile commodity,” said Robert Kokonis, president of AirTrav Inc., an airline and travel management consulting firm based in Toronto. “Air Canada should also post a solid third quarter.”

WestJet easily beat analysts' expectations with a third-quarter profit of $52.8-million (Canadian), up 75 per cent from a year earlier and marking its highest quarterly profit since being founded in February, 1996. No single factor led to the stellar performance, but it helped to have a combination of higher air fares, fuller planes, more routes and increased revenue from buy-on-board sandwiches, liquor, in-flight movies and headsets. Lower maintenance costs also played a role as WestJet added new, fuel-efficient Boeing planes to its fleet.

Halifax-based CanJet halted scheduled service last month after four years in business, and is now preparing for winter charter flights. With CanJet's retrenchment, a survey this week by Desjardins Securities showed that WestJet's three-week advance fares rose 11 per cent from a year ago while Air Canada's climbed 10 per cent.

“Any time a competitor disappears from the market, two things happen. Capacity goes down and the psychology changes, and that's probably one of the most significant benefits that the industry sees today,” said Mr. Beddoe, WestJet chairman and CEO. “There's a greater economic reality. You can't expect to get ludicrously cheap fares on a continual basis.”

He said WestJet has decided to stay away from hedging its fuel bills, meaning that it's betting that in the coming quarters, it will be smarter to ride spot energy prices instead of locking in fuel bills.

Another help in the third quarter was the absence of the legal bills to fend off a high-profile lawsuit filed by Air Canada in 2004, said WestJet co-chief financial officer Derek Payne. The two airlines reached an out-of-court settlement in May, with WestJet admitting that it spied on Air Canada to obtain confidential data on passengers loads.

WestJet president Sean Durfy said the new WestJet Vacations division will be a key part of the company's growth strategy.

He said the carrier will attract more travellers because of good deals for those who combine their flight with a hotel room and car rental, for instance. WestJet already flies charters on behalf of Transat A.T. Inc. to many sun destinations, but WestJet Vacations wants to carve its own domestic niche and also fly to the Bahamas.

Mr. Durfy said more than 85 per cent of WestJet employees also own shares, and that ownership level means the airline enjoys a strong corporate culture, with so-called “WestJetters” being motivated to deliver friendly service to passengers. “That is our No. 1 differentiator, by far,” he said. “It's like inviting a guest into your home.”

Jennifer Dowty, an assistant vice-president and portfolio manager of Canadian equities with MFC Global Investment Management, said higher air fares boosted WestJet's fortunes in the third quarter, helped by CanJet's retrenchment.

“That was the key driver for this exceptional quarter,” Ms. Dowty said.

[dagger]

Erickson's smoking his socks again if he thinks ACE is going to "knock the ball out of the park." I'm as big a booster of ACE here as anyone, but ACE and AC before it never hits home runs. There will always be some unit - part of that great security blanket ACPA wants to hang onto - that will hold it back. ACE will have a decent quarter - they wouldn't be doing an AC IPO if the quarter was disappointing - but a homerun? Think not.

[groundeffect]

Right..ACE's woes are ACPA's doing...???

Oh yeah ,ACPA caused the airline to fail as well..forgot about that.

Dagger, your line needs some honing there buddy!

[dagger]

Right..ACE's woes are ACPA's doing...???

Oh yeah ,ACPA caused the airline to fail as well..forgot about that.

Dagger, your line needs some honing there buddy!

Not what I said. I said that some part of the operation will hold ACE back.

[groundeffect]

Dagger, if you'd like, I can bring back some of your more colurful quotations

re; ACPA over the last few months!

I realize you have some good insight into ACE's future..however, your obvious hatred, dare I say, of ACPA, discredits your opinion, from a lot of us on the front line as it were.

Not what I said. I said that some part of the operation will hold ACE back.

But you have said it..adnauseum, in the past!

[dagger]

Dagger, if you'd like, I can bring back some of your more colurful quotations

re; ACPA over the last few months!

I realize you have some good insight into ACE's future..however, your obvious hatred,  dare I  say, of ACPA, discredits your opinion, from a lot of us on the front line as it were.

Not what I said. I said that some part of the operation will hold ACE back.

But you have said it..adnauseum, in the past!

Don't bother. I won't disavow them. But as for your interjection about my thoughts on the quarter, I did not blame any union for what I anticipate will be less than homerun earnings.

I am happy to stand by what I say when I say it, but don't misrepresent what I do say.

And frankly, I don't care if my views discredit me in your eyes. Some of you on the front line are like the three monkeys - the airline world has changed, irrevocably, but you want to see no change, hear no change, and speak no change. Like King Canute, you think you can wish away these forces of change, but you can't. Ignore the messenger if you like, but you better heed the message because you will be the ones living the nightmare if you don't.

[groundeffect]

Oh well then!

How's the veiw from way up there?

[FA@AC]

I did not blame any union for what I anticipate will be less than homerun earnings.

Tone doesn't always convey well here, but I get the impression that you're expecting to be a little disappointed at AC's Q3 results. Are you? If so, to what--if anything--other than to fuel prices would you attribute results that are only decent?

[dagger]

Tone doesn't always convey well here, but I get the impression that you're expecting to be a little disappointed at AC's Q3 results. Are you? If so, to what--if anything--other than to fuel prices would you attribute results that are only decent?

No, I'm just saying ACE, with its higher cost structure relative to WS and the fact that part of the operation (ACTS) is not set up to be significantly profitable in the summer because AC flies its fleet flat out, will do less well than Erickson believes. It's always that way. Of course, ACE will have a nice bottom line with one-time gains like US Airways, it will have made money flying passengers, but it's not going to knock anybody's socks off. It won't be a disappointment to me, because this is what I expect. It may disappoint Erickson who put a lot of stock in Canjet stopping scheduled services, which only really impacted one month of the quarter.

[Thebean]

How do you get to 22% operating margins.

I get two numbers, 16% if you count profit sharing as part of the operations and 17.8% if you count oerating margin straight from the Westjet reports. I do not see how you get to a figure of 22%. I think your "Beans" need to be audited.

Remember that every other reporting airline does not include interest expense as an operating expense. WJ does.

To compare apples to apples with the rest of the industry, remove the interest expense from opertating expense. You'll find op margin is 21.54%

[Thebean]

Erickson's smoking his socks again if he thinks ACE is going to "knock the ball out of the park." I'm as big a booster of ACE here as anyone, but ACE and AC before it never hits home runs. There will always be some unit - part of that great security blanket ACPA wants to hang onto - that will hold it back. ACE will have a decent quarter - they wouldn't be doing an AC IPO if the quarter was disappointing - but a homerun? Think not.

Erickson loves the media, but knows bugger all about the airline business.

[Homerun]

ACTS isn't set up to be profitable in any quarter.

[Thebean]

CanJet operated the equivilent of 5 airplanes working hard. I'd suspect AC got at least 65% of their traffic, WJ maybe 35%. Erickson hasn't a clue about the nature of advance bookings. The amount of $ flowing to either AC or WJ as a result of Canjet v.2 shutting down borders on insignificant in 3Q.

Here is a ranking of the operating margins reported MTD for 3Q. For consistency sake, operating margins do not include interest expense, and WJ's includes provision for profit share.

1. WJA 19.6%

2. Republic 18.5%

3. Southwest 11.1%

4. JBLU 6.5%

5. Continental 5.5%

6. AMR 4.9%

7. Frontier 1%

8. US Airways .5%

9. Midwest .25%

10. Air Tran -.7%

11. Alaska -2.6%

Weighted Industry: 5%

For the record, Exxon Mobil's operating margin was 18.25% in 3Q.

[Homerun]

For consistency's sake, do all these airlines account for their maintenance the same way Wesjet does?

[better4me]

For consistency sake, operating margins do not include interest expense, and WJ's includes provision for profit share.

I was just going to retort to your response on the 22% margins and then notice you have all ready adjusted the figures to 19% to take into account profit sharing.

Not trying to rain on the best in class margins, but correct accounting is important to me.