Westjet 2002 Annual Report Download

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COAST TO COAST ■NEW AIRCRAFT ■BETTER AND BIGGER ■PLANE TALK ■BEST FIGURES OF 2002
SPOTLIGHT ON THE STARS OF THE AIRLINE INDUSTRY ■THE UNSUNG HEROES OF WESTJET
FREE
737-700 SERIES
2002 ANNUAL REPORT
WESTJET’S SUCCESS (it’s the people!)

Table of contents

  • Page 1
    COAST TO COAST â- NEW AIRCRAFT â- BETTER AND BIGGER â- PLANE TALK â- BEST FIGURES OF 2002 FREE 737 - 700 SERIES WESTJET'S SUCCESS (it's the people!) 2002 ANNUAL REPORT SPOTLIGHT ON THE STARS OF THE AIRLINE INDUSTRY â- THE UNSUNG HEROES OF WESTJET

  • Page 2
    Test-ride one today. At airports across the country. Victoria Vancouver Abbotsford Kelowna Prince George Comox Grande Prairie Calgary Edmonton Winnipeg Thunder Bay Sudbury Sault Ste. Marie Windsor London Hamilton Toronto Ottawa Montréal

  • Page 3
    Fort McMurray Saskatoon Regina Moncton Halifax Gander St. John's

  • Page 4
    ... like Calgary Customer Service Agent Erin O'Sullivan made it a great year. 6 Plane Talk Feedback from WestJet's guests and beyond. 16 SpecTACular People WestJet's new Turn Around Crew show their WestJet pride. 8 2002 Highlights The fiscal year at a glance. 18 WestJet CARES! Get up to speed on...

  • Page 5
    ..., Kelowna, Calgary, Edmonton, Grande Prairie, Fort McMurray, Saskatoon, Regina, Winnipeg, Sudbury, Sault Ste. Marie, Thunder Bay, London, Ottawa, Hamilton, Toronto, and Moncton. As at December 31, 2002, WestJet's fleet consisted of 35 Boeing 737 aircraft. WestJet is publicly traded on the Toronto...

  • Page 6
    ... Specifically, the option to fly one way at an extremely reasonable rate makes travel planning so much more flexible. Other friendly policies include very low rates for changing departure dates and the option to exchange a ticket for a credit to be used within a year. Such policies are unheard of in...

  • Page 7
    Plane Talk THE BEST OF 2002 WestJet Airlines Ltd. Printed March 2003 Clive Beddoe Executive Chairman, President, and CEO Sandy Campbell Senior Vice President, Finance, and CFO Siobhan Vinish Director, Communications and Public Relations Jeremy Forrest Managing Editor Shirley Saputra Financial ...

  • Page 8
    ... 2002 0 1998 1999 2000 2001 2002 Revenue (Millions of dollars) Net Earnings (Millions of dollars) WestJet Fleet Plan 100 80 60 40 20 0 1996 1998 2000 2002 2004 2006 2008 â- 737-200 Series â- Next-Generation 737-700 Series Firm â- Next-Generation 737-700 Series Options 8 2002...

  • Page 9
    ...) Available Seat Miles (ASM) Load factor Yield per RPM (¢) Revenue per ASM (¢) Operating cost per ASM (¢) Average stage length (miles) Cost per passenger mile (¢) Segment passengers Fuel consumption (litres) Fuel cost per litre (¢) Number of full-time-equivalent employees at year end Fleet size...

  • Page 10
    ... the number of airplanes in our fleet to 35 Boeing 737s at year end. These acquisitions have allowed us to grow our airline by 55% on an Available Seat Mile (ASM) basis and to usher in the two new destinations of London and Toronto in 2002. 2002 WestJet Annual Report Both of these new cities have...

  • Page 11
    ... on short- to mid-haul flights, are not prepared to pay significantly more for a seat in order to obtain points from a reward program and possibly be served a meal, if a more affordable option is available. These additional services weigh heavily on the price of airfares, and the travelling public...

  • Page 12
    ...Ontario to Winnipeg and on to further western destinations. As well, we look forward to entering Québec on April 24 with flights into Montréal, and in mid-June, residents of Newfoundland will receive our unique brand of low-fare, friendly service for the first time as we begin flying to the cities...

  • Page 13
    ... flight attendant Winston Turpin sports a sweater cardigan that is as functional as it is fashionable. New Arrivals on the Runway Hamilton CSAs Patty Campbell, Collette Cumming and Karla Chipak model the latest in maternity wear. These comfortable, versatile pieces were especially popular this year...

  • Page 14
    ... purchased by WestJet and sent to Boeing for installation. These items are called Buyer Furnished Equipment, or BFEs." Ogle distributed copies of the binder to each team member, and they reviewed the choices, creating a wishlist of options. "After several months of discussion and price comparisons...

  • Page 15
    ... been called, Boeing will page the Customer Notification Dixie Dayka, Fleet Management Coordinator, and Hal Davidson, Director, Heavy Maintenance, check out the luxurious accommodations that WestJet guests' baggage can now experience in the airline's new BigBinsâ„¢. "...although the leather seats...

  • Page 16
    ... Canada certified Aircraft Maintenance 2002 WestJet Annual Report TAC Agent Kyle Lieske and crew ensure performance in Calgary is on time. Engineer and all-around nice guy, is quick to give credit to his team of TACticians for their part in making WestJet's newest team an unbridled success: "I am...

  • Page 17
    ... expanding and efficient team. "WestJet is here to provide affordable travel, please guests, and make a profit doing both," says Dale Tinevez, WestJet Director, Airports. "TAC fits perfectly in our model, and our TACticians are perfect models for other WestJetters." 2002 WestJet Annual Report 17

  • Page 18
    ...very proud supporter of Hope Air, donating more than $70,000 worth of flights to this wonderful organization that arranges free air transportation for Canadians who must travel to medical care, but can not afford the cost of airfare themselves. Pictured from left to right: Pam Minnema, Clive Beddoe...

  • Page 19
    WestJet CARES Station Samaritans Every year, WestJet provides its stations with hundreds of trips for two to distribute to local charities and fundraisers. However, teams at these stations are also involved on a more personal level, giving of their time and enthusiasm to participate in a variety of...

  • Page 20
    Sense Dollars & Management's Discussion & Analysis of Financial Results WestJet's seventh year of providing Canadian air travellers with low fares and friendly, no-hassle service brought stellar financial performance with profitability and growth throughout 2002 -- something that few airlines in ...

  • Page 21
    ... of facilities expansion for our company. We also expanded parking lots by 157% to accommodate a total of 1,524 stalls in Calgary at our hangar and head office buildings. These new parking spaces 2002 WestJet Annual Report Alan Mann keeps busy crunching numbers in BeanLand. BeanLander Shelly Loree...

  • Page 22
    .... During 2002, over 49,000 people applied for jobs at WestJet. Our People Department checked references on 10,000, and interviewed 5,000 potential WestJetters. As a result, we added 814 great new people to the WestJet team in 2002 for a total at year end of 3,120 talented individuals, or 2,710 FTEs...

  • Page 23
    .... As we expand, our declining costs, expanding network, and constantly improving connectivity and schedule, along with our numerous growth opportunities, are tremendous advantages for our airline in these uncertain economic times. Low-fare seat. First-class comfort. 2002 WestJet Annual Report 23

  • Page 24
    ... million to $680.0 million. Scheduled domestic travel accounted for 94.6% of our total revenue, and additional revenues derived from our domestic travel business such as fees for excess baggage, itinerary changes, and hotel packages, brings our revenue from scheduled domestic service to 96% of total...

  • Page 25
    ...levy for insurance, are included in our revenues to compensate for increased costs. As in the past, we continue to grow our capacity as we add new NextGeneration 737-700 aircraft to our fleet and build our network. In keeping with our strategy of increasing long-haul flying, our average stage length...

  • Page 26
    ... in flight stage length, our much improved cost performance on fuel and maintenance from our growing number of new 737-700 aircraft, and the significant increase again this year in guest and travel agent bookings through westjet.com. Because of our growth, a comparison of year-over-year costs is...

  • Page 27
    ... in our average stage length and the fact that a greater proportion of our fleet was made up of the more fuel-efficient Boeing 737-700. AIRPORT OPERATIONS 0 1998 1999 2000 2001 2002 Operating Cost per ASM (Cents) AIRCRAFT FUEL WestJet has a fixed price, fixed volume jet fuel supply arrangement...

  • Page 28
    ... operational and customer service performance by improving aircraft turn times and reducing incidents of lost or delayed baggage. over year as a result of a number of elements: there has been an excess supply of parts available, which has lowered the cost of parts; timing differences on due dates of...

  • Page 29
    ... systems such as Sabre, advertising and promotional costs, and credit card fees. Travel agency bookings account for approximately 38% of total sales, which is unchanged from 2001. Travel agents receive a 9% commission when booking flights through westjet.com, which results in a reduced percentage...

  • Page 30
    ... 40 guests. Although our 737-200 aircraft do have 125 seats, with only three flight attendants on board, we were only able to sell 120 of these seats. The 737-700 aircraft have 140 seats, and as such are crewed with RESERVATIONS Bookings on the Internet at westjet.com increased from 40% at the end...

  • Page 31
    ... 737-700 aircraft purchases in the fourth quarter of 2002. This deferred otherwise current taxes into future lower-rate periods, and for 2003, we expect this decreasing trend to continue to an effective rate of approximately 35.2%. EMPLOYEE PROFIT SHARE The WestJet profit share program continues...

  • Page 32
    ... Dollars & Karen Daley, Purchaser, Corporate Supplies and Services, has found exactly what she's looking for with WestJet. Financial Condition estJet started 2002 with $58.9 million in cash, and finished with an ample $100.4 million. At each of the three quarter ends during the year, we had in...

  • Page 33
    ... from the ExIm Bank for loan guarantees to support the acquisition of the remaining 15 Boeing 737-700 aircraft we have committed to purchasing prior to year-end 2006. Securing this financing and additional Ex-Im Bank guarantee has provided WestJet with the ability to expand our fleet of Next- 33

  • Page 34
    ... program, which protected 32% of our 2002 jet fuel purchases. WestJet also benefited throughout the year with the addition of more fuel-efficient Next-Generation 737-700 aircraft to our fleet. Despite the fact that WestJet will continue to benefit in 2003 from both our fuel-hedging program, as well...

  • Page 35
    ..., employees, and travellers are now far better served with low-cost airline models, offering high quality service at low airfares. We will be constantly looking for new opportunities to provide better service for our guests by adding more routes to our network, adding more frequency when required...

  • Page 36
    ... supported by an internal audit department whose functions include reviewing internal controls and their application. The Board of Directors is responsible for the overall stewardship and governance of the Corporation, including ensuring management fulfills its responsibility for financial reporting...

  • Page 37
    ...term assets (note 3) $ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities Income taxes payable Advance ticket sales Non-refundable guest credits Current portion of long-term debt (note 4) Current portion of obligations under capital lease (note 5) 2001...

  • Page 38
    ...,822 25,483 679,996 478,393 Expenses: Aircraft fuel Airport operations Maintenance Flight operations and navigational charges Amortization Sales and marketing General and administration Aircraft leasing Inflight Reservations Employee profit share (note 8(b)) 111,737 88,586 81,973 75,759 52,637 44...

  • Page 39
    ...term debt Issuance of common shares Share issuance costs Increase in other ...year Cash, end of year Cash is defined as cash and cash equivalents. See accompanying notes to consolidated financial statements. Denny Breau-Roberge, Team Leader, Hamilton Nancy McCallum and Laurel Troth, Customer Care

  • Page 40
    ... ticket sales under current liabilities. (d) Non-refundable guest credits: The Corporation, under certain circumstances, may issue future travel credits which are non-refundable and which expire one year from the date of issue. The utilization of guest credits is recorded as revenue when the guest...

  • Page 41
    Figures in Review Notes to Consolidated Financial Statements Years ended December 31, 2002 and 2001 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 1. Significant accounting policies (continued): (f) Inventory: Materials and supplies are valued at the lower of cost and ...

  • Page 42
    ...effect of accounting for these rewards under the fair value based method (see note 6(f)). (m) Financial instruments: The Corporation utilizes derivatives and other financial instruments to manage its exposure to changes in foreign currency exchange rates, interest rates and jet fuel price volatility...

  • Page 43
    ... to the facility for the purchase of 15 Boeing Next-Generation aircraft, security deposits on aircraft and other leaseholds of $7,701,000 (2001 - $4,748,000) and other amounts totaling $529,000 (2001 - $1,163,000). Monica Kretschmer and Abel Corpuz, Flight Attendants 2002 WestJet Annual Report 43

  • Page 44
    ... term loans, amortized on a straight-line basis over a 12-year term, repayable in quarterly principle instalments ranging from $913,000 to $955,000, including weighted average interest at 5.28%, guaranteed by the Ex-Im Bank and secured by four aircraft. The first quarterly payments commence February...

  • Page 45
    ..., Except Per Share Data) 4. Long-term debt (continued): The Corporation has a US $478 million facility with the ING Group which is supported by loan guarantees from the Export-Import Bank of the United States (Ex-Im) for US $478 million for the purchase of 15 Boeing Next-Generation 737-700 series...

  • Page 46
    ... common shares at any time. Stock options are granted at a price that equals the market value, have a term of four years and vest over a period of two to three years. Flight Attendants Tim MacRae and Marcela Jara find an entertaining use for air sickness bags. 46 2002 WestJet Annual Report

  • Page 47
    ... in Review Notes to Consolidated Financial Statements Years ended December 31, 2002 and 2001 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 6. Share capital (continued): (d) Stock Option Plan (continued): Changes in the number of options, with their weighted average...

  • Page 48
    ... 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 the contributions is recorded as compensation...

  • Page 49
    ...in Review Notes to Consolidated Financial Statements Years ended December 31, 2002 and 2001 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 7. Income taxes: Income taxes vary upon the amount that would be computed by applying the basic Federal and Provincial tax rate of...

  • Page 50
    ... Ex-Im Bank for loan guarantees to support the acquisition of the remaining 15 Boeing Next-Generation aircraft the Corporation has committed to purchase prior to February 2006. (b) Employee profit share: The Corporation has an employee profit sharing plan whereby eligible employees will participate...

  • Page 51
    ... of the Corporation's receivables result from tickets sold to individual guests through the use of major credit cards and travel agents. These receivables are short-term, generally being settled shortly after the sale. The Corporation manages the credit exposure related to financial instruments by...

  • Page 52
    ...company 3,000 strong gains immediate acceptance and loyalty from travellers in a city of 4.6 million right after launch of services. How was this achieved? While WestJet's reputation for low fares and friendly service often precedes its entrance into a new city, with a metropolis as large as Toronto...

  • Page 53
    ... store. Our computer people would hate me!" he says through a smile. NEW PLACES London Toronto On May 23, 2002, WestJet touched down in Toronto and began low-fare service between Pearson International Airport and Western Canada. Service into Toronto is a win-win for people in Edmonton, Calgary...

  • Page 54
    ... Alan Mendonca, IT Team. long with brand new made-toorder aircraft, WestJet spent much of 2002 researching and implementing advanced technology designed to reduce costs and enhance the WestJet travel experience. WestJet's Chief Information Officer, Gerry Hinds, kept the IT Department busy with two...

  • Page 55
    ... required to meet our guests' needs." And meeting guest needs is what WestJet is all about, especially in the age of information. During the year, WestJet's Marketing and Information Technology departments worked closely to create JetMail, an email seat sale notification service created out of guest...

  • Page 56
    ... stock of materials before sadly realising the Spruce Goose II would never be economical on short-haul flights. BOARD OF DIRECTORS Clive J. Beddoe Executive Chairman, President and CEO WestJet Airlines Ltd. Tim Morgan Senior Vice President, Operations WestJet Airlines Ltd. Allen Byl Boeing 737...

  • Page 57
    ... time with his people. Stock Exchange Listing: WestJet is publicly traded on the Toronto Stock Exchange under the symbol WJA. Investor Relations Contact Information: Telephone: 1-877-493-7853 or 444-2252 in Calgary Email: [email protected] Head Office: 5055 11 St. NE, Calgary, Alberta...

  • Page 58
    ...a WestJet plane Call sign for letter 'E' WestJet customers love to ____ WESTJET, Not west 23 24 25 WestJet POPQuiz BY THE NUMBERS Carolyn Denine, CSA, Hamilton has her style in the bag. Answers found throughout the Annual Report and on westjet.com. a. How many employees did WestJet start with...

  • Page 59
    On WestJet, even pretzels are fun. Comedian Jebb Fink - Knows how to make people smile and knows his pretzels. Snacks and non-alcoholic drinks are always free on WestJet.

  • Page 60
    Just fly. westjet.com