WestJet to unveil Encore next week
Feb. 6, 2013, Calgary - WestJet Airlines will reveal on Monday whether its new regional Encore service will initially serve the East or the West when it starts flying in June with two Bombardier Q400s, the first time the company has used turboprops.
February 6, 2013 By The Canadian Press
Over time, WestJet plans to grow the Encore fleet to serve more of the country.
Next week's announcement, expected to reveal whether Calgary or Toronto will be the first base for Encore, follows a 2012 profit of $242.4 million, a WestJet record and up 63 per cent from the previous year.
"What a great year,'' president and CEO Gregg Saretsky said Wednesday during a conference call with analysts.
The year ended on a high note with $60.9 million or 46 per diluted share of net income in the fourth quarter ended Dec. 31, up more than 70 per cent from net earnings of $35.6 million or 26 cents per share a year earlier.
Revenue rose to $860.6 million from $781.5 million in the fourth quarter of 2011.
WestJet's 2012 full-year profit amounted to $1.78 per share with almost $3.43 billion in revenue.
The addition of Encore and a new fare structure that will be accompanied by a reconfiguration of its Boeing 737s to include "premium economy'' seating are meant to attract corporate and well-heeled travellers.
Saretsky said 2013 "promises to be another exciting year for WestJet as we launch WestJet Encore, add to and evolve our airline partnerships and enhance value to more business and leisure guests.''
The airline announced that it plans to renew its share buyback program and will raise its quarterly dividend by 25 per cent. The payout will increase 10 cents from eight cents effective March 28 to shareholders of record March 13.
It also unveiled a plan to cut $100 million of costs over 36 months to regain some of the cost advantage lost to Air Canada when its rival trimmed $530 million of costs.
"Even with Air Canada's transformation we believe our costs are still somewhere between 10 and 15 per cent lower than Air Canada's. This business transform is meant to create even a wider gap again,'' Saretsky said.
WestJet was expected to earn 41 cents per share on $856 million of revenues in the quarter, and $1.72 per share on $3.42 billion of revenues for the year, according to analysts polled by Thomson Reuters.
The airline flew 17.4 million passengers last year, up 8.6 per cent from 2011, including 4.3 million in the fourth quarter.
Saretsky said the decision to repurchase up to five per cent of WestJet's outstanding shares and raise its dividend signals its confidence in the business and commitment to return value to shareholders.
WestJet expanded its international network last year by implementing 13 new interline partnerships and augmenting four (Delta Air Lines, Korean Air, China Eastern Airlines and British Airways) into code-share relationships.
The airline expects moderate revenue per seat mile growth in the first quarter on top of a six per cent increase last year while costs, excluding fuel and employee profit sharing, should increase two to three per cent.
It ended the year with $1.4 billion in cash or 41 per cent of trailing twelve month revenue.
Analysts described WestJet's results as positive and further demonstrate the likelihood of strong results to come in 2013.
"Outlook is strong and we believe that 2013 will be another record year for WestJet earnings,'' wrote Jacques Kavafian of Toll Cross Securities.
He said demand for travel is strong and capacity growth is moderate which means earnings should continue to benefit from balanced supply and demand.
Walter Spracklin of RBC Capital Markets said the addition of premium economy seating and tiered pricing should boost
profitability above WestJet's near-term target of a sustainable 12 per cent return on invested capital.
"Both the dividend increase and (share buyback) are good indications that management is confident in their ability to
generate strong free cash flow growth and should benefit from positive investor sentiment.