Westjet 2000 Annual Report Download - page 12

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interests with the airline and subscribed to the philosophy of shared success, as 81.4% of
our people participated in our Employee Share Purchase Plan.
Results of Operations
Earnings per share on a fully diluted basis increased to 69 cents in 2000, a 76.9% gain
from 39 cents in 1999. Despite an era of high-energy prices and their impact on WestJet’s
un-hedged fuel, the overall cost of operating WestJet increased only nominally.
Improvements in revenues and savings in a number of other cost categories have helped
offset the impact of fuel on WestJet’s bottom line.
During 2000, net earnings nearly doubled and cash generated through operations
provided $87.4 million to treasury, compared with $47.8 million in the previous year. Net
earnings amounted to 9.1% of revenues in 2000 compared with 7.8% in 1999. Our
operating margin was among the highest in the North American airline industry at 16.1%
of revenues, an improvement of more than one full percentage point over 1999’s result.
WestJet’s capacity grew by 52.6% over 1999 and revenue passenger miles outpaced
capacity growth increasing 60.9%. Costs increased by 61.2%, less than in 1999, con-
tributing to the improved operating margin.
Earnings before interest, income taxes, depreciation, and aircraft rent (EBITDAR) also
showed solid improvement, growing 86.1% from 1999’s $43.2 million to $80.4 million in
2000. WestJet’s EBITDAR margin improved to 24.2% in 2000 from 21.2% in 1999. It
should be noted that in 2000 we revised our estimates for depreciation to take into account
the potential for an earlier retirement of the 737-200 fleet.
Profit sharing is an integral and very important component of WestJet’s total
compensation philosophy for our people. The plan provides that a minimum of 10.0% up
to a maximum of 20.0% of the airline’s pre-tax and pre-profit share income is distributed
in cash to all employees based on a formula that matches margin to profit share. This
formula means that in an instance where the Corporation may have a doubling of margin
from 10.0% to 20.0%, WestJet’s people could see a quadrupling of their profit share. All
of WestJet’s cost and margin statistics previously mentioned include a provision for profit
share. The margin for purposes of this calculation achieved a record high in 2000 at
19.5%, compared with 17.5% in 1999. These financial results are a due to a number of
Page10
MANAGEMENT’S
DISCUSSION & ANALYSIS
OF FINANCIAL RESULTS