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WestJet 2009 Annual Report 11
cent to 3.37 cents in the fourth quarter of 2009, as compared to
4.14 cents in the same period of 2008. Our fourth quarter fuel
costs, excluding hedging, were $0.67 per litre, which differs from
our previously disclosed estimate of a range between $0.69 and
$0.71 per litre due to lower-than-forecasted US-dollar West
Texas Intermediate (WTI) crude oil prices.
Marketing, general and administration
Marketing encompasses a wide variety of expenses, including
advertising and promotions, onboard products, live satellite
television licensing fees and catering. General and administration
costs consist of our corporate offi ce departments, professional
fees, insurance costs and transaction costs related to aircraft
acquisitions. During the fourth quarter of 2009, our marketing,
general and administration charge per ASM decreased by 12.7
per cent to 1.24 cents, compared to 1.42 cents in the same period
of 2008. This decrease was attributable mainly to higher costs
during the fourth quarter of 2008, as a result of a $4.3 million
payment incurred for the expiration of our previous reservation
system, as well as lower costs due to the discontinuation of
the sponsorship agreement with AIR MILES, which ended
our sponsorship in the AIR MILES Reward Program at the
end of 2008.
Sales and distribution
Commissions paid to travel agents and credit card fees comprise
a signifi cant portion of our sales and distribution expense. During
the fourth quarter of 2009, our sales and distribution expense per
ASM increased to 1.14 cents, up by 20.0 per cent from 0.95 cents in
the same quarter of 2008. This variance was primarily attributable
to higher travel agency commissions related to WestJet Vacations,
due to increased sales as a result of additional destinations over
the prior year, as well as WestJet Vacations sales growth through
increased distribution channels as a result of the implementation
of a new WestJet Vacations reservation system. Additionally, as
at December 31, 2009, we determined that $2.4 million of our
accounts receivable balance relating to our cargo operations was
doubtful due to a dispute with our cargo service provider. As a
result, we recorded a bad debt provision for this amount, refl ected
in the sales and distribution expense line item. The agreement with
the cargo service provider has since been terminated, and, as of
January 11, 2010, we have a new cargo service provider in place.
Revenue
During the quarter ended December 31, 2009, total revenues
decreased by 7.4 per cent to $570.0 million from $615.8 million
in the same period of 2008, largely attributable to the continued
weak economy. Our RASM decreased by 10.0 per cent for the
fourth quarter of 2009 to 12.92 cents, compared to 14.36 cents
in 2008. This change related primarily to a decline in yield of 11.0
per cent for the fourth quarter of 2009. The decrease in yield was
attributable to an increase in the practice of fare discounting
to stimulate air travel. Similarly, guest revenues from our
scheduled fl ight operations declined by 5.9 per cent during the
fourth quarter to $528.1 million, as compared to $561.5 million in
the fourth quarter of 2008. This decline was mitigated somewhat
by growth in WestJet Vacations air revenue, which is included
in guest revenues. For the fourth quarter of 2009, charter and
other revenues, which include charter, cargo, ancillary, WestJet
Vacations non-air and other revenue, decreased by 22.7 per
cent to $41.9 million. This decline was driven mainly by the
termination of our charter agreement with Transat, effective May
10, 2009, in favour of fl ying our own scheduled service to existing
and new sun destinations.
Expenses
For the fourth quarter of 2009, our CASM decreased by 6.8 per
cent as compared to the same quarter of 2008, due largely to
declines in aircraft fuel expense and marketing, general and
administration expense, offset somewhat by an increase in
sales and distribution expense. Our CASM, excluding fuel and
employee profi t share, remained relatively fl at at 8.67 cents.
Aircraft fuel
For the fourth quarter of 2009, year-over-year jet fuel prices
have stabilized from their previously elevated levels. As such,
we did not see the same substantial relief on costs during the
fourth quarter of 2009 as we did in the fi rst nine months of
the year. The average market price for jet fuel was US $84 per
barrel in the fourth quarter of 2009, versus US $79 per barrel
in the fourth quarter of 2008, representing an increase of 6.3
per cent. However, due to lower year-over-year refi ning costs
and a stronger Canadian dollar in the fourth quarter of 2009,
Canadian jet fuel prices declined during the quarter. We saw a
corresponding decrease in our fuel costs per ASM of 18.6 per