- Annual operating margin of 10% to 12%
- Cumulative free cash flow of $775 to $875
million
- An improving annual ROIC that is expected to exceed 13 per
cent in 2020
- Leverage ratio of 1.2 by end of 2020
CALGARY, Dec. 6, 2017 /CNW/ - WestJet (TSX: WJA)
today provided 2018 to 2020 targets at its Investor Day being held
in Calgary from 8:30 a.m. MT (10:30 a.m.
ET) to 12:00 noon MT
(2:00 p.m. ET).
WestJet is targeting an annual operating margin of between 10
per cent and 12 per cent in 2018 to 2020 and an improving annual
return on invested capital (ROIC(1)) that is expected to
exceed 13 per cent in 2020. From 2018 to 2020, WestJet expects to
deliver cumulative free cash flow(1) of $775 to $875
million, with capital expenditures of approximately
$780 million in 2018, peaking in 2019
at approximately $1 billion and
dropping to approximately $870
million in 2020. In terms of its key credit metric, WestJet
estimates by the end of 2020 to be at 1.2 as measured by adjusted
net debt over EBITDAR(1), and it expects to grow its
number of unencumbered aircraft from 51 at the end of the third
quarter of 2017 to 96 aircraft in
2020.
"We continue to invest in strategic initiatives that will
support our transition from a low-cost point-to-point model into a
high value-based network airline with a global footprint," said
WestJet President and CEO Gregg
Saretsky. "We have been laying the foundation for this
transition by investing in our network and schedule, while
deepening our airline partnerships and broadening our fare products
to not only defend and grow our leisure business but also to
attract and retain premium travellers."
WestJet believes its strategy to attract and retain premium
travellers, combined with an enhanced revenue management system,
with broadened fare products and growth in ancillary represent an
annual revenue opportunity of between $300
million to $500 million
through to 2022. In addition, WestJet has identified annual cost
savings opportunities of $140 million
to $200 million through 2022. These
cost savings opportunities are spread over several initiatives that
include fleet reconfigurations, airport operations cost savings,
optimized maintenance plans, digital self service, and sales &
distribution channel efficiencies.
"The expansion of WestJet Encore, our growing WestJet Rewards
program and co-branded credit card, our penetration into the
business traveller segment, combined with the launching of Swoop in
the summer of 2018, and Boeing Dreamliner service commencing in
2019, give us great confidence in our ability to continue to
deliver sustainable profitable growth and an improving annual
return on invested capital that is expected to exceed 13 per cent
in 2020. This exciting transition is all underpinned by the
dedication and energy of our over 13,000 WestJetters who deliver
our award-winning brand of friendly, caring service," added Mr.
Saretsky.
In-person attendance at WestJet's Investor Day is by invitation
only and the media and other interested persons are welcome to
listen in via the webcast in the Media and Investor Relations
section of westjet.com
Caution regarding forward-looking information
Certain
information set forth in this news release, including, without
limitation, information regarding targeting an annual operating
margin of between 10 per cent to 12 per cent in 2018 to 2020, an
improving return on invested capital that is expected to exceed 13
per cent in 2020, delivering cumulative free cash flow of
$775 to $875
million from 2018 to 2020, expecting capital expenditures of
approximately $780 million in 2018,
approximately $1 billion in 2019 and
approximately $870 million in 2020,
by the end of 2020 reaching 1.2 in adjusted net debt over EBITDAR
ratio, growing the number of unencumbered aircraft to 96 in 2020,
an annual revenue opportunity of $300
million to $500 million
through to 2022, and an annual cost savings opportunity of
$140 million to $200 million through 2022, the information
underlying such targets, the launching of Swoop in the summer of
2018, the launching of Boeing Dreamliner service starting in 2019,
WestJet's ability to deliver sustainable profitable growth, is
forward-looking information within the meaning of applicable
securities laws. By its nature, forward-looking information is
subject to numerous risks and uncertainties, some of which are
beyond WestJet's control. The forward-looking information contained
in this news release is based on assumptions regarding the terms of
agreements which WestJet has entered into, WestJet's current
forecasts and strategy, the timing and impact of WestJet's
initiatives, the expected demand environment, access to financing
and to infrastructure, the fleet and its utilization and
operational performance, aircraft deliveries and option exercises,
the forward-curve for jet fuel price, the expected exchange rate of
the Canadian dollar to the U.S. dollar, agreements and bookings,
the assessment of labour and infrastructure requirements,
expectations around legislation and legislative changes, assessment
of legal proceedings, and other information underlying the targets
contained herein, but may vary due to factors including, but not
limited to, changes in guest demand, changes in fuel prices, delays
in aircraft delivery, general economic conditions, competitive
environment, ability to effectively implement and maintain critical
systems, material adverse regulatory changes, and other factors and
risks described in WestJet's public reports and filings which are
available under WestJet's profile at sedar.com. Readers are
cautioned that undue reliance should not be placed on
forward-looking information as actual results may vary materially
from the forward-looking information. WestJet does not undertake to
update, correct or revise any forward-looking information as a
result of any new information, future events or otherwise, except
as may be required by applicable law.
(1) Non-GAAP measures
This news
release contains disclosure respecting non-GAAP performance
measures. These measures are included to enhance the overall
understanding of WestJet's financial performance and to provide an
alternative method for assessing WestJet's operating results in a
manner that is focused on the performance of WestJet's ongoing
operations, and to provide a more consistent basis for comparison
between reporting periods. These measures are not calculated in
accordance with, or as an alternative to, GAAP and do not have
standardized meanings. Therefore, they may not be comparable to
similar measures provided by other entities. Readers are urged to
review the section entitled "Reconciliation of non-GAAP and
additional GAAP measures" in WestJet's management's discussion and
analysis of financial results for the three and nine months ended
September 30, 2017, which is
available under WestJet's profile on SEDAR at sedar.com, for a
further discussion of such non-GAAP measures and a reconciliation
of such measures to GAAP.
- Adjusted debt: The sum of long-term debt and off-balance-sheet
aircraft operating leases. Our practice, consistent with common
airline industry practice, is to multiply the trailing 12 months of
aircraft leasing expense by 7.5 to derive a present value debt
equivalent. This measure is used in the calculation of adjusted net
debt to EBITDAR, as defined below.
- Adjusted net debt: Adjusted debt less cash, cash equivalents
and marketable securities. This measure is used in the calculation
of adjusted net debt to EBITDAR, as defined below.
- EBITDAR: Earnings before net finance costs, taxes,
depreciation, amortization, aircraft rent and other items, such as
asset impairments, gains and losses on derivatives, and foreign
exchange gains or losses. Trailing 12 months EBITDAR is a measure
commonly used in the airline industry to evaluate results by
excluding differences in the method by which an airline finances
its aircraft.
- CASM, excluding fuel and employee profit share: CASM is a
common measure used in the airline industry to measure an airline's
cost structure and efficiency. We exclude the effects of aircraft
fuel expense and employee profit share expense to assess the
operating performance of our business. Fuel expense is excluded
from our operating results because fuel prices are affected by a
host of factors outside our control. Additionally, employee profit
share expense is excluded as it varies based on the outcome of our
net earnings. Excluding these expenses allows us to analyze our
operating results to those of other airlines.
- Return on invested capital: ROIC is a measure commonly used in
the airline industry to assess the efficiency with which a
company allocates its capital to generate returns. Return is
calculated based on our earnings before tax, excluding special
items, finance costs and implied interest on our off-balance-sheet
aircraft leases. Invested capital includes average long-term debt,
average finance lease obligations, average shareholders' equity and
off-balance-sheet aircraft operating leases.
- Free cash flow: Operating cash flow less capital expenditures.
This measure is used to calculate the amount of cash available that
can be used to pursue other opportunities after maintaining and
expanding the asset base.
Major Annual Assumptions
|
2018
|
2019
|
2020
|
GDP Canada
|
2%
|
2%
|
2%
|
Canadian dollar per
U.S dollar
|
1.29
|
1.30
|
1.32
|
Average Jet fuel
price (Canadian cents per litre)
|
67
|
68
|
68
|
About WestJet
WestJet is proud to be named Best
Airline in Canada and one of the
best Low Cost Airlines in North
America, based on authentic reviews from the travelling
public on Trip Advisor, the world's largest travel site. We are one
of very few airlines globally that does not commercially overbook.
Together with our regional airline, WestJet Encore, we offer
scheduled service to more than 100 destinations in North America, Central America, the Caribbean and Europe and to more than 175 destinations in
over 20 countries through our airline partnerships. WestJet
Vacations offers affordable, flexible vacations to more than 60
destinations and the choice of more than 800 hotels, resorts,
condos and villas. Members of the WestJet Rewards program
earn WestJet dollars on flights, vacation packages and more.
Members use WestJet dollars towards the purchase of flights and
vacations packages to any WestJet destination with no blackout
periods, and have access to Member Exclusive fares offering deals
to WestJet destinations throughout our network and those of our
partner airlines.
WestJet is publicly traded on the Toronto Stock Exchange (TSX)
under the symbol WJA. For more information about everything
WestJet, please visit westjet.com.
Recent recognition includes:
2017
Five-Star Airline in the Low-Cost Category (The Airline Passenger
Experience Association)
2017/2016 Canada's Most Trusted
Airline (Gustavson School of Business at the University of Victoria)
2017 Best Airline in Canada and
Travellers' Choice Winner Mid-Sized and Low Cost Airlines –
North America (TripAdvisor
Travelers' Choice awards for Airlines)
2016 Canada's most reputable
company for Corporate Social Responsibility (Reputation
Institute)
2016/2015/2014/2013/2012 Ranked top three for Canadian Brands
(Canadian Business Magazine)
2016/2015/2014/2013 WestJet RBC World Elite MasterCard ranked #1 in
Canada (MoneySense magazine)
2015/2011/2010/2008/2007/2006/2005 Canada's Most Admired Corporate Culture
(Waterstone Human Capital)
2015 Best Employers in Canada
(Aon Hewitt)
Connect with WestJet on Facebook at
facebook.com/westjet
Follow WestJet on Twitter at twitter.com/westjet
Subscribe to WestJet on YouTube at youtube.com/westjet
Read the WestJet blog at blog.westjet.com
SOURCE WestJet