Westjet 2001 Annual Report Download

Download and view the complete annual report

Please find the complete 2001 Westjet annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 60

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60

annual report
2001
WESTJET AIRLINES LTD. 2001 ANNUAL REPORT
THE HEART OF CANADA’S SKIES

Table of contents

  • Page 1
    T H E H E A R T O F C A N A D A ' S S K I E S a n n u a l r e p o r t 2001 W E S T J E T A I R L I N E S LT D . 2 0 0 1 A N N U A L R E P O R T

  • Page 2
    ... to Shareholders Community Giving Management's Discussion and Analysis Auditor's Report to the Shareholders Financial Statements Notes to Financial Statements 1 2-3 4-11 12-13 14-39 40 41-43 44-56 Lisa Marie Madhok and Trista Anderson Cover Customer Service Agents, Prince George, BC Lisa Marie...

  • Page 3
    ..., Thunder Bay, Ottawa, Hamilton, and Moncton. As of December 31, 2001, WestJet employed 2,327 people, and operated 27 Boeing 737 aircraft, featuring four Next-Generation 737-700 aircraft. WestJet is publicly traded on the Toronto Stock Exchange under the ticker symbol WJA. 01 Shelley Waddell Team...

  • Page 4
    HIGHLIGHTS 02

  • Page 5
    ... earnings per common share Basic Diluted Operating Highlights Revenue passenger miles Available seat miles Load factor Yield per revenue passenger mile (cents) Passenger revenue per available seat mile (cents) Operating cost per available seat mile (cents) Average stage length (miles) 2001 478.4 58...

  • Page 6
    MESSAGE TO SHAREHOLDERS Clive Beddoe, Executive Chairman, President and CEO 04 This year will undoubtedly be remembered in the airline industry as one of... year, I am very pleased to report WestJet has emerged from 2001 as not only a profitable, but also an expanding and financially strong airline.

  • Page 7
    ...amount of profit shared with our people for the year to $10.3 million. The strong support of our customers and our focus on low costs, ensured that WestJet did not need to lay-off any of our people despite the short-term decline in passenger traffic in September and October. We continue to build on...

  • Page 8
    MESSAGE TO SHAREHOLDERS 06 Martin Hatfield Captain, Calgary, AB It's a long way from Durban, South Africa to Calgary - but lucky for WestJet, Martin Hatfield made the trip. As a Captain, Martin's probably flown enough miles in his three years at WestJet to reach to his home and back dozens of ...

  • Page 9
    ... marked the first full year WestJetters occupied our new Calgary head office. This facility has allowed us to consolidate many of our departments under one roof, which were formerly housed in multiple buildings. This move has allowed people from different departments convenient access to each other...

  • Page 10
    ... the executive team at Boeing Field in Seattle for the ceremony. With their superior speed, comfort, capacity, reliability, and 30% greater fuel efficiency on a per ASM basis, our new Boeing 737-700 aircraft have surpassed expectations and are the ideal aircraft to facilitate WestJet's continued...

  • Page 11
    ... new, right off the Boeing assembly line in Seattle, Washington. There are now four 700-series jets in WestJet's fleet of 27. Agreements give WestJet the ability to acquire up to 94 additional 700-series jets over the next eight years. The 737, WestJet's one and only model, is the most successful...

  • Page 12
    MESSAGE TO SHAREHOLDERS 10 Marvin Black Customer Service Agent, Calgary, AB Working for WestJet has paid off in many ways for Marvin. The longtime hockey fan got his picture taken with the Stanley Cup when WestJet carried it from Calgary to Vancouver. Marvin cheers for the Calgary Flames - but he...

  • Page 13
    ... accomplished this while maintaining our profitability and conservative approach to financing our growth, ensuring our increasing customer base and financial stability will carry us far into the future. 11 (signed) Clive Beddoe Executive Chairman, President and CEO WestJet Airlines Ltd. March 2002

  • Page 14
    ... • The donation of over $25,000 to the Kids Cancer Care Foundation when 18 WestJetters shaved their heads to raise money for the charity. • A group of WestJetters donated their time this summer to join forces with Habitat for Humanity to build homes for families in financial need in Calgary. 12...

  • Page 15
    ... inner-city school's hot breakfast program, collected clothes for a women's shelter, and bought CFL tickets for foster children. WestJetters in Abbotsford participated in the Police Challenge Run and the Lions Club Putting Tournament, while our Grande Prairie team donated time and money to the Queen...

  • Page 16
    MANAGEMENT'S DISCUSSION AND ANALYSIS 14 Lin Tan Customer Service Agent, Calgary, AB Born in Cambodia, Lin Tan grew up in Saigon, Vietnam, before moving to Canada in 1989. She joined WestJet six months ago. An avid snowboarder, Lin is taking accounting courses in the evenings, and hopes to one day...

  • Page 17
    ...communities were welcomed into our network: Fort McMurray, Alberta; Comox, British Columbia; Thompson, Manitoba; and in Ontario, Sudbury and Sault Ste. Marie. We provided our unique 'Limited Addition' service again into Brandon, Manitoba from March to June, and announced our 21st destination, London...

  • Page 18
    ... to expense our growth costs in building for the future, and despite all of the challenges of 2001, measures of financial performance fared well and our earnings increased from the previous year. WestJet continued to produce profits in 2001 even with the high cost of jet fuel, and in spite of...

  • Page 19
    MANAGEMENT'S DISCUSSION AND ANALYSIS 17 Stuart Abercrombie Flight Attendant, Calgary, AB When he's not in the air with WestJet, Stuart is a professional dancer - you may have seen him in major events like the Calgary Stampede Grandstand show. With years of dance training, it's no wonder Stuart is...

  • Page 20
    ... BeanCounters, Calgary, AB With 21 straight quarters of profitability, it's no wonder Beanland WestJetters Rob, Lou and Joe are smiling. As part of WestJet's accounting and finance team, they work hard to make sure costs stay low and WestJet sticks to its business model, so the profits keep rising...

  • Page 21
    ...automatically reduces and self adjusts in negative times to avoid cost-cutting measures such as wage reductions and layoffs. Conversely, in good years, as was 2000 with its 19.9% margin, profit share will generously reward employees. An average WestJetter received approximately 37% of their base pay...

  • Page 22
    ..., the number is more like 97%. Approximately 2% of revenues relates to charter services, which are either ad hoc such as professional sports teams, or more scheduled and contracted services for vacation and tour companies to U.S. destinations such as Las Vegas. Cargo accounted for $1.6 million...

  • Page 23
    MANAGEMENT'S DISCUSSION AND ANALYSIS 21 Chris Maloney Senior Inspector, Calgary, AB Chris Maloney moved to Calgary from Newfoundland 14 years ago. A day-one WestJetter, Chris has been a part of the team for more than six years. The '64 Volkswagen Beetle he's restoring in his spare time may not be...

  • Page 24
    MANAGEMENT'S DISCUSSION AND ANALYSIS 22 Penny Paproski and Erin Miller Welcoming Team, Calgary, AB Guests, business associates, government officials and fellow WestJetters get the same welcoming smile from Penny and Erin at WestJet's head office. As part of the Welcoming Team, they make sure our ...

  • Page 25
    ... flight, the more seat miles over which we can spread out our costs. Particularly affected are the more fixed costs per flight like high fuel burn on take-off and landing fees. As stage length increases cost per ASM declines, as would unit measures of revenue. With an increasing mix of longer-haul...

  • Page 26
    ... these areas. Sales and marketing, and reservation expenses also showed marked declines in cost per ASM in 2001 at 9.1% and 14.3% respectively. Our Internet strategy continues to succeed, and by the end of the year approximately 40% of our general public and travel agency community sales 24 There...

  • Page 27
    ... AND ANALYSIS 25 Shawn Allaire Aircraft Maintenance Engineer, Calgary, AB Growing up in Kapuskasing, Ontario, Shawn Allaire spent a lot of time in garages, tinkering with muscle cars. Now, he spends his days in an even bigger garage working on even more powerful engines at the WestJet Hangar. He...

  • Page 28
    ... a bustling part of Vancouver Island, and the catchement area includes several major communities. With six flights a week non-stop from Calgary, Comox is quickly becoming a great getaway destination, with golf and skiing year round. WestJet has great support from the local community, and is pleased...

  • Page 29
    ... while it and its multiple components are under warranty. 27 Cost per available seat mile (ASM): Passenger services Fuel Maintenance Amortization Sales and marketing Flight operations General and administrative Reservations Aircraft leasing Inflight Employee profit share Total 2001 0.032 0.028...

  • Page 30
    ...a short taxi from the north end of the Calgary International Airport. The $22-million building covers 122,000 square feet. The building houses a sheet metal shop, an engine shop, a cabin trainer, two state-of-theart flight simulators, the entire WestJet flight operations centre and other offices. Of...

  • Page 31
    MANAGEMENT'S DISCUSSION AND ANALYSIS 29

  • Page 32
    MANAGEMENT'S DISCUSSION AND ANALYSIS 30 The offset to lower fuel and maintenance costs on the new aircraft is the ownership cost. All four 737-700s were acquired under operating leases in 2001, while only four of our 23 737200s are on operating leases. Consequently, most of our $8.5 million ...

  • Page 33
    MANAGEMENT'S DISCUSSION AND ANALYSIS particularly older jets like our 737-200 aircraft, and our appraisals conducted in fourth quarter 2001 have confirmed a substantial decline in market value and potential residual values at future retirement dates. Write-downs of WestJet's capital assets were not...

  • Page 34
    ...'S DISCUSSION AND ANALYSIS Financial Condition Maintaining a low-cost structure and a strong balance sheet are two important and related pillars of our business plan. We began the year with $181 million in shareholders' equity and $60.4 million in debt. Our debt to equity ratio on December 31...

  • Page 35
    ...'S DISCUSSION AND ANALYSIS 33 Ed Finley Customer Service Agent, Kelowna, BC Everyone loves Ed Finley. The WestJet culture drew Ed out of retirement - a lucky break for the Kelowna WestJetters with a sweet tooth, who love the cookies Ed often bakes for them. In his spare time, Ed's building an RV...

  • Page 36
    ... Miller Team Leader and Customer Service Agent, Sault Ste. Marie, ON The many aromas and flavours of Trish Gill's Italian cooking come together in perfect harmony - just like the WestJetters at the Sault Ste. Marie airport. Liana Miller's a key ingredient in the team. When Liana heard WestJet was...

  • Page 37
    ...New Destination YSB - Sudbury, Ontario 2000 2001 RETURN ON CAPITAL EMPLOYED WestJet's service to Sudbury, Ontario began December 10, 2001. About 165,000 people live in the Greater Sudbury area. Sudbury gives WestJet a presence in Northern Ontario between Thunder Bay and Hamilton, and it's located...

  • Page 38
    ... liability resulting from war and terrorist activities was cancelled. This coverage was later partially reinstated at a cost of $1.25 U.S. per guest segment, and is being recovered by WestJet through the implementation of a surcharge of $3.00 per oneway trip (which may be comprised of more than one...

  • Page 39
    ... WestJet hangar after a productive day. The two jet engines pictured here give the 700-series jet a much longer range, allowing WestJet to provide more non-stop, transcontinental flights. The Boeing 737-700 has the lowest operating costs in its class. It also gives WestJet increased fuel efficiency...

  • Page 40
    ...ascertainable life beyond the end of the fiscal year. As at December 31, 2001, foreign exchange losses of $490,000 had been deferred and included in long-term assets of the Corporation. 38 New Destination YTH - Thompson, Manitoba Service to Thompson, Manitoba began on December 14, 2001. The third...

  • Page 41
    ... a second 737-700 flight simulator. We have also taken steps to support these expansion plans and further strengthen our balance sheet through the planned issuance of an additional 2.5 million common shares of the Corporation for net proceeds of approximately $66 million. This equity issue, which is...

  • Page 42
    ... of WestJet Airlines Ltd. as at December 31, 2001 and 2000 and the consolidated statements of earnings and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on...

  • Page 43
    ... taxes payable Advance ticket sales Non-refundable passenger credits Current portion of long-term debt (note 4) Current portion of obligations under capital lease (note 5) Long-term debt (note 4) Obligations under capital lease (note 5) Future income tax (note 7) Shareholders' equity: Share capital...

  • Page 44
    CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS Years ended December 31, 2001 and 2000 (Stated in Thousands of Dollars, Except Per Share Data) 2001 Revenues: Passenger revenues Charter and other Expenses: Passenger services Aircraft fuel Maintenance Amortization Sales and marketing Flight...

  • Page 45
    CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2001 and 2000 (Stated in Thousands of Dollars) 2001 Cash provided by (used in): Operations: Net earnings Items not involving cash: Amortization Gain on disposal of capital assets Unrealized loss on foreign exchange Future income tax (...

  • Page 46
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars) 1. Significant accounting policies: (a) Basis of presentation: These consolidated financial statements include the accounts of the Corporation and its whollyowned ...

  • Page 47
    ...line Rate Hours flown Hours flown 40 years 10 and 25 years Over the term of the lease 5 years 5 years Over the term of the lease Over the term of the lease (i) Maintenance costs: Heavy maintenance ("D" check) costs incurred on aircraft are capitalized and amortized over the remaining useful service...

  • Page 48
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars) 1. Significant accounting policies (continued): (l) Stock-based compensation plans: The Corporation has stock option plans, which are described in note 6. No ...

  • Page 49
    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars) 2. Capital assets: 2001 Aircraft Spare engines and parts Buildings Flight simulators Aircraft under capital lease Computer hardware and software Equipment Leasehold...

  • Page 50
    ...CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars...retirement of the six crosscollateralized aircraft, maturing August 2016, secured by the new generation flight simulator...maturing November 2001 Less current portion $ 2000 $ ...

  • Page 51
    ... security agreement and an assignment of insurance proceeds. Cash interest paid during the year was $5,570,000, including imputed interest on capital leases of $1,293,000. Leases: The Corporation has entered into operating leases for aircraft, buildings, computer hardware and software licenses and...

  • Page 52
    ... FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars) 6. Share capital: The non-voting common shares and the non-voting preferred shares are subject to limitations to be fixed by the directors of the Corporation. (a) Authorized: Unlimited...

  • Page 53
    ... Thousands of Dollars) 6. Share capital (continued): (d) Stock Option Plan: The Corporation has a Stock Option Plan, whereby up to a maximum of 4,565,693 common shares may be issued to directors, officers and employees of the Corporation subject to the following limitations: (i) the number of common...

  • Page 54
    ... and shares may be withdrawn from the Plan after being held in trust for one year. Employees may offer to sell common shares, which have not been held for at least one year, on January 1 and July 1 of each year, to the Corporation for 50% of the then current market price. The Corporation's share of...

  • Page 55
    ... paid during the year were $25,700,000. The components of the net future income tax liability at December 31, 2001 is as follows: $ 25,445 459 (729) 251 (4,347) 21,079 $ 2000 23,718 35 (124) 170 475 (1,822) 22,452 $ 53 $ 1,127 22,060 20,933 Future income tax assets: Share issue costs...

  • Page 56
    ...has an employee profit sharing plan whereby eligible employees will participate in the pre-tax operating income of the Corporation. The profit share ranges from a minimum of 10% to a maximum of 20% of earnings before employee profit share and income taxes. The amounts paid under the plan are subject...

  • Page 57
    ... TO CONSOLIDATED FINANCIAL STATEMENTS Years ended December 31, 2001 and 2000 (Tabular Amounts are Stated in Thousands of Dollars) 9. Risk management: (a) Fuel risk management: The Corporation has managed its exposure to jet fuel price volatility through the use of long-term fixed price contracts...

  • Page 58
    ... being settled shortly after the sale. The Corporation manages the credit exposure related to financial instruments by selecting counter parties based on credit ratings, limiting its exposure to a single counter party and monitoring the market position of the program and its relative market position...

  • Page 59
    ... AB Stock Exchange Listing WestJet is publicly traded on the Toronto Stock Exchange under the symbol WJA. Investor Relations Contact Information Phone: 1-877-493-7853 or 444-2252 in Calgary Email: [email protected] 5055 11 St. NE, Calgary, Alberta, T2E 8N4 Telephone: (403) 444-2600 Fax...

  • Page 60
    WESTJET A N N UA L R E P O R T 2 0 0 1 5055 11 St. NE, Calgary, Alberta, T2E 8N4 Telephone: (403) 444-2600 Fax: (403) 444-2301 www.westjet.com