Media Advisory - WestJet to make important announc

[dagger]

WJ did eliminate the fuel surcharge all together. That's pretty straight. The fares have stayed the same as they were, and when someone books a flight, they don't add a fuel surcharge. I don't see how that is mis leading.

Except that that's wrong. People have documented here and on FT that WS did raise base fares yesterday in a lot of situations, so that the all-in fare is pretty much the same without the surcharge.

[Thebean]

Except that that's wrong. People have documented here and on FT that WS did raise base fares yesterday in a lot of situations, so that the all-in fare is pretty much the same without the surcharge.

Consumers were getting fed up with a "fuel surcharge". Both airlines eliminated it. I'd be willing to bet that there may have been some gentle coersion from various levels of government along the lines of "remove it voluntarily, or we'll do it for you".

As far as I'm concerned, whether they eliminated it by adding it to the previous base fare or eliminated it and cut fares is immaterial. At the end of the day, the fares will be matched. It's a commodity business. That's what happens. Fuel is still $100 a bbl. Fares are going to be higher than when oil was $40 a bbl.

If the base fare is higher, so what? It's like the "rack rate" posted on the back of a hotel door. It is rarely paid.

The higher base fares allow for more interesting opportunities and marketing schemes we haven't seen for a while.

From a PR perspective, I think AC won this one hands down. Maybe I'm a little too close to it though, because the media hasn't really differentiated who led and who followed.

[Guest]

Except that that's wrong. People have documented here and on FT that WS did raise base fares yesterday in a lot of situations, so that the all-in fare is pretty much the same without the surcharge.

On the YYC-YXX route noted, I compared all 6 base fares pre and post surcharge. The fares are the same

They did adjust the seat sale fare (X fare) as of the 26th, but sale fares get adjusted fairly regularly.

[inchman]

Again, in these circumstances, I'd rather have WJ's costs of doing business rather than anyone elses out there.

I guess that depends on whether their costs are all properly reported.

[Thebean]

I guess that depends on whether their costs are all properly reported.

Back to that one, eh?

That would explain the huge black filing cabinet in the back corner of Beanland labelled "expenses not to be included in the P & L since 1996 so we can defraud Ontario Teachers Pension Fund, Fidelity Investments, the TSE, Boeing, GECAS, Singapore Leasing and all other investors and suppliers, and convince Southwest Airlines we have the financial covenant to enter their first international codeshare partnership ever".

I never could figure out what that was for. Thanks for sharing.

The funds to cover off those expenses are buried in a safe at the head office parking lot. Ever notice why the CFO always parks his car over in the NW corner of the lot and carries a big brief case back and forth to the car every day?

Give it a rest....

[CanadaEH]

That would explain the huge black filing cabinet in the back corner of Beanland labelled "expenses not to be included in the P & L since 1996 so we can defraud Ontario Teachers Pension Fund, Fidelity Investments, the TSE, Boeing, GECAS, Singapore Leasing and all other investors and suppliers, and convince Southwest Airlines we have the financial covenant to enter their first international codeshare partnership ever".

I never could figure out what that was for. Thanks for sharing.

The funds to cover off those expenses are buried in a safe at the head office parking lot. Ever notice why the CFO always parks his car over in the NW corner of the lot and carries a big brief case back and forth to the car every day?

Priceless....

[inchman]

Back to that one, eh?

That would explain the huge black filing cabinet in the back corner of Beanland labelled "expenses not to be included in the P & L since 1996 so we can defraud Ontario Teachers Pension Fund, Fidelity Investments, the TSE, Boeing, GECAS, Singapore Leasing and all other investors and suppliers, and convince Southwest Airlines we have the financial covenant to enter their first international codeshare partnership ever".

I never could figure out what that was for. Thanks for sharing.

The funds to cover off those expenses are buried in a safe at the head office parking lot. Ever notice why the CFO always parks his car over in the NW corner of the lot and carries a big brief case back and forth to the car every day?

Give it a rest....

Gee... I guess that no company has ever hidden costs from its shareholders before. Not Worldcom or Enron. They had their books audited ever year, too.

It wasn't too long ago that WestJet wasn't accruing D check costs on an ongoing basis, until someone forced them to do so. It wasn't too long ago that they were reporting profit sharing below the "costs" line.

So, don't try to throw around the high falutin' names of investment funds and suggest that just because they invest in a company that the company is necessarily doing everything on the level. I bet every one of those companies and funds held interest in Bear Stearns or one of the other investment banks that just went bankrupt, too.

[chockalicious]

I am eagerly awaiting your next post where you compare apples to skyscrapers.

Have another sip of Haterade.

[Thebean]

...And the ongoing expenses for the D checks were being paid out of the aforementioned secret slushfund of cash.....the source of which was a printing press located in a favela outside Rio.

The D Check is being performed by Ooompa Loompas, laid off from Willy Wonka's factory, all paid $1.50 an hour in flimflam currency.

Neeleman's Azul is a thinly disguised method of moving the cache of cash between North and South America....

Talk to your auditors about expensing something that hasn't occured. Other than leased equipment, who's owners require lessees with bad covenants or who have defaulted in the past to pay D reserves, they are expensed as incurred. Over time, they all balance out.

[Canus Chinookus]

I am eagerly awaiting your next post where you compare apples to skyscrapers.

Have another sip of Haterade.

hahaha, Haterade... funny AND accurate! Keep'em coming inchman, you're a riot!

[Fido]

Inchman:

You have run afoul of the Westjet Glee Club again.

[Thebean]

Inchman:

You have run afoul of the Westjet Glee Club again.

What's next? WJ expenses next quarters fuel bill in the third quarter to reduce 3Q profits, but increase 4Q profits?

Worldcom and Enron set up extremely sophisticated and complex sub corps and all kinds other other goofy instruments to play the games they did. They were there for everyone to see, but no one bothered to dig deep.

It's pretty tuff for a publicly traded airline....any publicly traded airline....to play those sorts of games. The only thing I've ever seen is methodology differences in the calculation of things like ASL's.

Privately held? Sure.....there are lots of ways to cook the books, mostly by capitalizing, instead of expensing, start up costs.

If you are expanding like some of the privately held airlines out there and adding new routes, you can capitalize pretty much the entire years route losses. It grossly under reports the expenses incurred, resulting in the appearance of "profitability". That scheme only works as long as there is lots of expansion into to new routes and markets. Once it slows down or stops, it's game over.

WJ has always expensed it's route start up costs, with the exception of the initial launch campaign in '96.

Oh, I forgot. WJ's costs are lower because they use counterfeit B737 NG's made in a basement in a suburb of Shanghai and assembled at an old Soviet era airfield in the Urals by another batch of recently laid off Ooompa Loompas. WestJet sneaks them into the country for about $59,000 a pop, camoflaged as Nintendo Wii units. But don't tell anyone.

[inchman]

What's next? WJ expenses next quarters fuel bill in the third quarter to reduce 3Q profits, but increase 4Q profits?

Worldcom and Enron set up extremely sophisticated and complex sub corps and all kinds other other goofy instruments to play the games they did. They were there for everyone to see, but no one bothered to dig deep.

It's pretty tuff for a publicly traded airline....any publicly traded airline....to play those sorts of games. The only thing I've ever seen is methodology differences in the calculation of things like ASL's.

Privately held? Sure.....there are lots of ways to cook the books, mostly by capitalizing, instead of expensing, start up costs.

If you are expanding like some of the privately held airlines out there and adding new routes, you can capitalize pretty much the entire years route losses. It grossly under reports the expenses incurred, resulting in the appearance of "profitability". That scheme only works as long as there is lots of expansion into to new routes and markets. Once it slows down or stops, it's game over.

WJ has always expensed it's route start up costs, with the exception of the initial launch campaign in '96.

Oh, I forgot. WJ's costs are lower because they use counterfeit B737 NG's made in a basement in a suburb of Shanghai and assembled at an old Soviet era airfield in the Urals by another batch of recently laid off Ooompa Loompas. WestJet sneaks them into the country for about $59,000 a pop, camoflaged as Nintendo Wii units. But don't tell anyone.

Boy, you seem to be awfully defensive about this one, Beano.

My guess is that once WestJet growth hits the top of the parabola, a lot of things are going to hit the fan. I don't know what costs are deferred, but I'm willing to bet that at least part of the super-duper CASM is because some of it is discounted due to growth. IMO, that's why, in the face of economic downturn and soaring fuel prices, WestJet continues to announce expansion... keep the denominator growing... riding that wave as far as possible.

We'll just have to wait and see... and IMO, we won't have to wait too long. Should be able to tell as insiders start to sell their shares.

[CanadaEH]

Boy, you seem to be awfully defensive about this one, Beano.

Any other conspiracy theories you want to throw out there?

[Fido]

There are many parts of an airlines balance sheet that must conform to standard accounting practice. Generally Accepted Accounting Principles or GAAP does not apply to many of the metrics reported. CASM is one of the metrics that has no compliance requirement in GAAP.

Not to say that Westjet is doing anything wrong with CASM because there is no right or wrong. Each airline has their own definition for reporting CASM and as such doing an across the board line item comparison has no validity.

[Thebean]

There are many parts of an airlines balance sheet that must conform to standard accounting practice. Generally Accepted Accounting Principles or GAAP does not apply to many of the metrics reported.  CASM is one of the metrics that has no compliance requirement in GAAP.

Not to say that Westjet is doing anything wrong with CASM because there is no right or wrong.  Each airline has their own definition for reporting CASM and as such doing an across the board line item comparison has no validity.

There is remarkable consistency amongst the publicly traded airlines as to how they report casm.

At one point, WJ included interest expense above the line, which made their expenses higher than they really were, when compared to the way every other carrier reported expenses. This caused their operating profit to be under-reported, not over-reported.

They changed that a few quarters ago to be consistent with the other 21 North American publicly traded airlines.

The theory that, after 12 years, WJ's success is based upon improper accounting is so absurd, it begs for equally absurd theories as to how they do it.

When you exert some grey matter to think about the theory, which is perpetually espoused by folks who are simply unwilling to admit the obvious, it's obvious that the theories are patently absurd, if not utterly ignorant and stupid.

You can either mess with the numerator or the denominator if you want to monkey with the casm.

The denominator is the asm calculation. I defy you to come up with a theory who this number is inflated, because in order to do it, WJ have to pull the wool over the eyes of every airport in Canada, the US and Caribbean as well as Nav Canada and the US ATC system.

I can just see it. "Umm...you know that flight from YQT that just landed in YYZ that off loaded 125 people? ? Umm...well, it actually came from YVR, so we are going to add all those asm's to our daily total so we can create a lower casm. But only charge us Nav Fees as if it came from YQT, and don't ask any of the passengers where they boarded please...."

If expenses are under reported, but being incurred, resulting in a lower reported casm, there'd be a the cash exodus to pay off the "mystery expenses" which is nowhere to be found. Indeed, WJ's cash situation steadily grows, even though there hasn't been an equity issue in about 6 years. Maybe all the cash is from cashing in empties at all the WJ profit share partys?

Is WJ benefitting from a young fleet that's on warranty? Sure it is. But so too are other airlines with large fleets of new 100 seaters and ultra long range aircraft as well as other various fleet types introduced over the last 15 years.

As they come off warranty, expenses go up, but the older ones will be turned back, (the first 10 are GECAS leases and are 8 years old). They'll be replaced by new ones. Ahh.. the joy of double digit margins and growth.

Then there are the terms of the EX-IM financing, which only get better over time, the net result being to reduce the combined maintenence / financing costs over time.

If you can't monkey with the casm, the next best thing to do is monkey with the ASL calculation. ASM's / departure/ weighted average seats per departure. That's how WJ reports their asl. So too just about all carriers n North America. But not all of them......

But keep on with the conspiracy theories. If that's the only way you can explain how WJ has grown from 3 to almost 80 aircraft over the past 50 months, with only 4 or 5 quarters of losses through the period, good on ya. They are very entertaining.

Maybe you can get together with the folks that believe the moon landing was a hoax, that KFC makes negros impotent and my, favorite, the Nazis had a moon base to trade other equally dumb theories.

[chockalicious]

My guess is that once WestJet growth hits the top of the parabola, a lot of things are going to hit the fan. I don't know what costs are deferred, but I'm willing to bet that at least part of the super-duper CASM is because some of it is discounted due to growth. IMO, that's why, in the face of economic downturn and soaring fuel prices, WestJet continues to announce expansion... keep the denominator growing... riding that wave as far as possible.

Great, everything is your guess and opinion because in your own words you don't know. When the facts are presented this is the best you can come up with?

What would you like to bet on the casm question because I will put up whatever stakes you want.

The assertions you throw around are wishful thinking.

I think this picture is representative of your weak ass points on this thread.

[inchman]

The denominator is the asm calculation.  I defy you to come up with a theory who this number is inflated, because in order to do it, WJ have to pull the wool over the eyes of every airport in Canada, the US and Caribbean as well as Nav Canada and the US ATC system.

...

Is WJ benefitting from a young fleet that's on warranty?  Sure it is. But so too are other airlines with large fleets of new 100 seaters and ultra long range aircraft as well as other various fleet types introduced over the last 15 years.

As they come off warranty, expenses go up, but the older ones will be turned back, (the first 10 are GECAS leases and are 8 years old).  They'll be replaced by new ones. Ahh.. the joy of double digit margins and growth. 

I don't think you're reading my posts clearly, Beaner.

I was pointing out that if some expenses are deferred to periods with increased ASMs, the CASM looks better. I never suggested that WestJet under-reported only that it is possible that some expenses might be accrued in subsequent periods and that increasing ASMs in an expanding company would make the CASM look better.

Nor did I suggest that they were fudging the ASMs, although in an industry as computerized and as well documented as airlines, I find it kind of interesting that WestJet does on a, how did you put that... average weighted departure something? Just report how many seats were on an aircraft and how many miles it flew. Throwing the hocus pocus in there just underlines why people like me wonder who's fudging what.

Unfortunately, virtually all Flight Ops charges, including fuel, nav charges and wages are rolled into one item line in the financial reports, so it's pretty hard to tell what goes where or, more importantly, when.

But now that you do mention it, while trying to sidestep the D check reporting policy, you seem to suggest that leasing is a good thing. I seem to recall that in some posts you boast the benefits of aircraft ownership.

Not really consistent there, but that, in itself, is consistent.

[CanadaEH]

But now that you do mention it, while trying to sidestep the D check reporting policy

Its been discussed ad naseum. Do a search and you can read up on the many topics where the issue was covered

[Thebean]

I don't think you're reading my posts clearly, Beaner.

I was pointing out that if some expenses are deferred to periods with increased ASMs, the CASM looks better. I never suggested that WestJet under-reported only that it is possible that some expenses might be accrued in subsequent periods and that increasing ASMs in an expanding company would make the CASM look better.

Nor did I suggest that they were fudging the ASMs, although in an industry as computerized and as well documented as airlines, I find it kind of interesting that WestJet does on a, how did you put that... average weighted departure something? Just report how many seats were on an aircraft and how many miles it flew. Throwing the hocus pocus in there just underlines why people like me wonder who's fudging what.

Unfortunately, virtually all Flight Ops charges, including fuel, nav charges and wages are rolled into one item line in the financial reports, so it's pretty hard to tell what goes where or, more importantly, when.

But now that you do mention it, while trying to sidestep the D check reporting policy, you seem to suggest that leasing is a good thing. I seem to recall that in some posts you boast the benefits of aircraft ownership.

Not really consistent there, but that, in itself, is consistent.

Try to get your accountant to expense items in the future and see how well that conversation works out. I'll give you a hint. It will fall on deaf ears. After a couple of requests, the auditors will suggest you take your business elsewhere.

You've been watching too many films and tv shows, my friend. Maybe in the US, but not in Canada.

Why would any business want to take the shine off their best quarter by deferring expenses into that quarter? That's just plain dumb.

If you are going to have a crappy quarter, its best to do the "kitchen sink" accounting and throw everything into that quarter. The US legacies did that earlier in the year, writing off all that "goodwill". They want the market to (hopefully), forget the previous quarter and save the best numbers for the quarter that everyone does well in. Do you want to be the CEO of the worst performing airline in the quarter that's supposed to be the best in the year?

Did you notice WJ took the huge writedown on the -200 fleet in the same quarter they went to the full court press with Jetsgo?

D check expenses are incurred in the period the D check occured. Period. Get over it.

You will notice that at least one legacy airline tends to defer maintainance out of the third quarter every year. That's why it is able to fly 23% more asm's in 3Q 2007 than the following quarter.

It's not to monkey with the metrics, it's because it's prudent to fly the snot out of the fleet when the sun is shining, and to do maintainance when it isn't. But that's not what WJ does. System asm's increase quarter after quarter due to organic growth that has dropped from about 40% per year down to the mid teens, but spiked in 2008 due to the bulk of the deliveries falling within a 120 day period.

The standard methodology for calculating an airlines asl is asms / departure / weighted average seats per departure. That's been industry / DOT standard for years, although I'm aware of at least one airline that doesn't report to the DOT that does it another way.

Leasing a good thing? Like everything, it is good in moderation. I'd never want more than 1/3rd of my fleet leased on an on-going basis.

For airlines with strong financial covenants, such as WJ, that have never stiffed a leasing company or have had to go cap in hand to renegotiate rates, it's rare to have to pay reserves.

For those who have to pay reserves, the expense would be incurred per block hour / cycle and would be paid per month and expensed then. For those that don't pay reserves, the expense is incurred when the check occurs.

Keep up the conspiracy theories though.

WJ success, growth and profitability couldn't possibly be because it's built a better, more efficient mouse trap that's been a hit with consumers coast to coast.

[Canus Chinookus]

Boy, you seem to be awfully defensive about this one, Beano.

My guess is that once WestJet growth hits the top of the parabola, a lot of things are going to hit the fan. I don't know what costs are deferred, but I'm willing to bet that at least part of the super-duper CASM is because some of it is discounted due to growth. IMO, that's why, in the face of economic downturn and soaring fuel prices, WestJet continues to announce expansion... keep the denominator growing... riding that wave as far as possible.

We'll just have to wait and see... and IMO, we won't have to wait too long. Should be able to tell as insiders start to sell their shares.

you and the rest of your choir have been saying this same crap for how many years now? 5 that I know of. Keep waiting.