Westjet 2004 Annual Report Download

Download and view the complete annual report

Please find the complete 2004 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 64

  • 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
  • 61
  • 62
  • 63
  • 64

2004 ANNUAL REPORT
BUILDING A BETTER AIRLINE

Table of contents

  • Page 1
    BUILDING A BETTER AIRLINE 2004 ANNUAL REPORT

  • Page 2
    ... of Victoria, Comox, Vancouver, Abbotsford/Fraser Valley, Prince George, Kelowna, Grande Prairie, Calgary, Edmonton, Fort McMurray, Saskatoon, Regina, Winnipeg, Thunder Bay, Windsor, London, Hamilton, Toronto, Ottawa, Montréal, Moncton, Halifax, Gander and St. John's, and its seven American...

  • Page 3
    ... WestJet's Calgary hangar. 4 Financial Overview 8 President's Message to Shareholders 12 WestJet Cares 2004 16 Management's Discussion and Analysis of Financial Results 42 Management's Report to the Shareholders 43 Auditors' Report to the Shareholders 44 Financial Statements 47 Notes to Financial...

  • Page 4
    ... Yield (¢) Revenue per ASM (¢) Operating cost per ASM (¢) (1) Average stage length (miles) Cost per passenger mile (¢) (1) Segment guests Fuel consumption (litres) Fuel cost per litre (¢) Number of full-time-equivalent employees at year end Fleet size at year end 2004 2003 2002 2001 2000...

  • Page 5
    ... Respected Corporations Survey' by Ipsos-Reid." Clive Beddoe, President and CEO, WestJet. 2004 2000 2001 2002 2003 Revenue (Millions of dollars) 1,000 800 656.7 760.1 Operational Terms Explained 600 400 200 0 419.2 458.4 551.8 Revenue Passenger Miles 2000 2001 2002 2003 2004 Average Stage...

  • Page 6
    ... airline's 737-200 aircraft, WestJet's Next-Generation aircraft are 30% more fuel efficient on an available seat mile basis, while offering guests greater legroom, a quieter ride and leather seats. WestJet will integrate Boeing Next-Generation 737-600 and 737-800 models into the current fleet of 737...

  • Page 7
    ... expenses and increased fuel efficiency of the Boeing 737-600, -700 and -800 series aircraft will bring a smile to the faces of our shareholders, their greater range, leather seats, increased legroom and live satellite television are sure to keep our guests smiling too. WESTJET ANNUAL REPORT 2004

  • Page 8
    8 President's Message to Shareholders We are disappointed with our financial performance in 2004. This was an extremely challenging year for our airline and for our industry as a whole as we had to deal with record high fuel prices, rising operating costs and fierce competition. Despite these ...

  • Page 9
    9 WESTJET ANNUAL REPORT 2004

  • Page 10
    ... November bookings by a total of approximately $15 to $20 million for the two months. In September 2004, we launched scheduled transborder service from Canada to the seven American cities of Los Angeles and San Francisco, California; Phoenix, Arizona; New York, New York; Orlando, Fort Lauderdale and...

  • Page 11
    ...ongoing support. On behalf of the Board, Clive Beddoe Executive Chairman, President and Chief Executive Officer WestJet Airlines Ltd. March 2005 ® Trademarks of AIR MILES International Trading B.V. Used under license by Loyalty Management Group Canada Inc. and WestJet. WESTJET ANNUAL REPORT 2004

  • Page 12
    ... has managed to locate and bring many children home." In 2004, MCSC investigators travelled from their Calgary office more than 70 times to work on cases across the country. It is estimated that WestJet has saved the Society well over $40,000 on air travel since 2003. For more information about...

  • Page 13
    ... official airline of many worthwhile community events and festivals such as the WestJet Festival of Friends (Hamilton), The International Busker Festival (Halifax), The Fringe Festival (Edmonton and Vancouver), The Gold Medal Plates in support of Olympic athletes (Toronto, Montréal, Ottawa, Halifax...

  • Page 14
    ... check in at the airport, choose their seats and even select the number of bags they would like to check. boarding pass dispenser T ouch-screen ins tant feedback 16.75" Not only do self-serve check-in kiosks reduce waiting times for guests, but they are also a low-cost way for WestJet to increase...

  • Page 15
    ... time you're checking in, check out our new automated system - now serving WestJet's guests in Vancouver, Calgary, Edmonton, Winnipeg, Toronto, Ottawa and Montréal. It puts you in charge with a quick and easy touch-screen interface that gets you to your seat faster than you can say "boarding pass...

  • Page 16
    ... from those expressed in, or implied by, these forward-looking statements or if any of them do so, the benefits that WestJet will derive there from. James Scharfl, Intermediate Accountant Jessica Ryan, Team Leader, Sales Super Centre Sean Jones, Business Analyst WESTJET ANNUAL REPORT 2004

  • Page 17
    ... WestJet, including Annual Information Statements and financial statements, is located on SEDAR at www.sedar.com. To supplement our consolidated financial statements presented in accordance with Canadian generally accepted accounting principles ("GAAP"), the Company uses various non-GAAP performance...

  • Page 18
    ... With industry dynamics changing, we decided to revisit our growth plans over the next few years and increase our focus on efficiency in operations, lowering unit costs and enhancing our customer service. In December 2004, we elected to accelerate the replacement of our older 737-200 fleet which we...

  • Page 19
    ... ability to manage this escalating cost. To combat the rising price of fuel, we have improved the efficiency of our aircraft by adding blended winglet technology to all of our Next-Generation 737-series aircraft. Blended winglets save fuel by increasing lift, which decreases the fuel required to get...

  • Page 20
    ... beverages onboard our flights. As our average stage length continues to grow and guests are spending more time in the air, we began to sell food onboard flights lasting over two hours and 30 minutes on July 1, 2004. Buy on Board (B.O.B.) food items range in price WESTJET ANNUAL REPORT 2004

  • Page 21
    ... accepted accounting principles and are reported in Canadian dollars. This information should be read in conjunction with the consolidated financial statements for the year ended December 31, 2004 and related notes thereto. Annual audited financial information (in millions except per share data...

  • Page 22
    ... includes guest revenues, charter and other and interest income, surpassed $1 billion..." Patrick Sabbag, Customer Service Agent Cost per Available Seat Mile (CASM) in cents Aircraft fuel Airport operations Flight operations and navigational charges Amortization (1) Sales and marketing Maintenance...

  • Page 23
    ... to reduce the number of surcharges and taxes associated with air travel. Aircraft Fuel The results of our operations are highly vulnerable to changes in fuel costs. In addition to replacing our fleet with more fuel-efficient Next-Generation aircraft at a faster pace, we also manage this expense...

  • Page 24
    ...are only so interesting. In July 2004, WestJet received regulatory approval to fly its first Boeing Next-Generation 737-700 aircraft equipped with live seatback satellite television. Guests travelling on aircraft equipped with this product can now enjoy 24 channels of live Bell ExpressVu programming...

  • Page 25
    25 JUST LIKE HOME. Live satellite TV in every single seatback? Well, we're almost there thanks to the ongoing installation of live satellite TV onboard our new aircraft. We're making our guests feel right at home while high above the clouds. WESTJET ANNUAL REPORT 2004

  • Page 26
    ... that are required to fly our aircraft such as pilot and flight crew compensation, training, dispatch, operations control and crew-scheduling. In 2004, cost per ASM related to flight operations increased by 21.9% over 2003. This increase is primarily a result of stock-based-compensation expense...

  • Page 27
    ... who spend with our airline and other retail businesses. Three levels of credit cards (Bronze, Silver and Gold) offer guests opportunities to earn AIR MILES reward miles faster, redeem flights on WestJet sooner, and bank with fewer fees than any other travel rewards credit card in the industry. We...

  • Page 28
    ... preferred booking channel. The combination of these agencies strategies has already shown positive results. While total bookings increased by 13.4% in the fourth quarter of 2004 versus the fourth quarter of 2003, agency sales increased 22.5% over the same time period. Our Internet technology has...

  • Page 29
    ... lower time required for maintenance. Our investment in blended winglets provides us not only with fuel efficiencies, but also maintenance cost savings. This is achieved from reduced engine wear due to lower thrust/power settings. In 2004, 20 737-700s were removed from service for an average period...

  • Page 30
    ... to upgrade our website capabilities to create a more user-friendly site that accommodates our current guests' needs while attracting new travellers to WestJet. Use of the Internet as a booking tool has provided us with cost savings with respect to distribution of our product. Increased booking...

  • Page 31
    ... customer service costs per unit. In 2004, WestJet's on-time performance ("OTP"), a measure of the reliability of an air carrier, remained strong compared to other reporting airlines in North America. During 2004, 81% of our flights arrived within 15 minutes of their scheduled arrival time compared...

  • Page 32
    ...eighth American destination, Palm Springs, in January 2005. Fort McMurray Prince George Grande Prairie Comox Edmonton Vancouver Victoria Kelowna Abbotsford Calgary Saskatoon Regina Winnipeg Thunder Bay And you thought WestJet was warm and friendly before. St. John's Toronto Hamilton London...

  • Page 33
    33 NEW US DESTINATIONS. NEW STATE OF MIND. With our launch of transborder service in the third quarter of 2004, we gave our guests bliss ...and other great states to experience with the launch of our sunny service south of the border. WESTJET ANNUAL REPORT 2004

  • Page 34
    34 Roz Goldsworthy, Flight Attendant Vince Lamb, Sales Super Agent Income Taxes "We ended 2004 with a solid cash position of $148.5 million..." Our expenditures denominated in US dollars primarily relate to certain maintenance costs, jet fuel and aircraft lease payments. In order to minimize our...

  • Page 35
    ... months ended December 31, 2004, our airport operations expanded to include seven destinations in the United States (service to our eighth United States destination, Palm Springs, began on January 7, 2005). Additionally, our people opened facilities for our guests in 15 additional charter cities...

  • Page 36
    ...' operations. The accounts of the special purpose entities are included in our consolidated financial statements. A Fresh as Amended Statement of Claim was filed by Air Canada and ZIP Air Inc. in the Ontario Superior Court on December 23, 2004 against the Corporation, two officers, two employees...

  • Page 37
    ... in accounting for our liability related to certain types of non-refundable guest credits. We may issue future travel credits related to guest compensation for flight delays, missing baggage and other inconveniences as a gesture of good faith. These types of credits are non-refundable and expire one...

  • Page 38
    38 Larry Richards, Engine Shop Technician the period the credit is issued. The utilization of guest credits is recorded as revenue when the guest has flown or upon expiry. The Company uses the liability method of accounting for future income taxes. This methodology requires a significant amount of...

  • Page 39
    ..., Flight Attendant effective date of the amendments consistent with the effective date of the final amendments to Statement of Financial Accounting Standards No. 128, Earnings per Share (FAS 128), as proposed by the US Financial Accounting Standards Board. Corporate Governance Throughout 2004...

  • Page 40
    ... for domestic operations, WestJet has improved its earnings potential during this time with the introduction of transborder markets and increased charter flying. International charter flights generally operate during off-peak hours to ensure that scheduled domestic and transborder services are not...

  • Page 41
    41 WESTJET TOURS THE WORLD. Now it truly is WestJet's world. In addition to our regularly scheduled flights across Canada and into the United States, WestJet now serves 27 charter destinations in three regions: Mexico, the Caribbean and the United States. WESTJET ANNUAL REPORT 2004

  • Page 42
    ..., Sales Super Agent Above: Doran Hanert, Project Manager, Airports Clive J. Beddoe, Executive Chairman, President and Chief Executive Officer Calgary, Alberta February 10, 2005 Alexander (Sandy) J. Campbell, FCGA Executive Vice-President, Finance, and Chief Financial Officer WESTJET ANNUAL REPORT...

  • Page 43
    ... financial position of the Corporation as at December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. Chartered Accountants Calgary, Canada February 10, 2005 WESTJET ANNUAL REPORT...

  • Page 44
    ... 25,493 5,382 195,075 1,601,546 80,733 $ 1,877,354 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...

  • Page 45
    ... Statements of Earnings (Loss) and Retained Earnings WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Stated in Thousands of Dollars, Except Per Share Data) 2004 Revenues: Guest revenues Charter and other Interest income Expenses: Aircraft fuel Airport operations Flight operations...

  • Page 46
    46 Consolidated Statements of Cash Flows WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Stated in Thousands of Dollars) 2004 Cash provided by (used in): Operating activities: Net earnings (loss) Items not involving cash: Amortization Gain on disposal of property and equipment Stock-...

  • Page 47
    ... of Dollars, Except Per Share Data) 1. Significant accounting policies: (a) Basis of presentation: These consolidated financial statements include the accounts of WestJet Airlines Ltd. (the "Corporation") and its wholly owned subsidiaries, as well as the accounts of two special-purpose entities...

  • Page 48
    ... Notes to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 1. Significant accounting policies (continued): (h) Deferred costs: Sales and marketing and customer service expenses...

  • Page 49
    ...Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 1. Significant accounting policies (continued): (m) Stock-based compensation plans: On January 1, 2004 the Corporation changed its accounting...

  • Page 50
    ... to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 2. Property and equipment: 2004 Aircraft - 700 series Aircraft - 200 series Ground property and equipment Spare engines and...

  • Page 51
    51 Notes to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 3. Other assets: Included in other assets are financing fees of $34,870,000 (2003 - $22,588,000), net of ...

  • Page 52
    ... to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 4. Long-term debt (continued): The net book value of the property and equipment pledged as collateral for the Corporation...

  • Page 53
    53 Notes to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 6. Leases: The Corporation has entered into operating leases and agreements for aircraft, buildings, computer ...

  • Page 54
    ... Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 7. Share capital (continued): (b) Issued: 2004 Number Common shares: Balance, beginning of year Common share issue Exercise of options Stock...

  • Page 55
    ...the Corporation elected to purchase these shares through the open market and will continue to review this option in the future. Current market price for common shares issued from treasury is determined based on the weighted average trading price of the common shares on the Toronto Stock Exchange for...

  • Page 56
    ... to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 7. Share capital (continued): (f) Stock-based compensation: The fair value of each option grant is estimated on the date of...

  • Page 57
    ... Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 9. Commitments and contingencies: (a) Aircraft: Under the terms of the 10 Boeing Next-Generation aircraft lease agreements, the Corporation...

  • Page 58
    ... WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 9. Commitments and contingencies (continued): (c) Contingencies: A Fresh as Amended Statement of Claim was filed by Air Canada and ZIP Air Inc. in the Ontario...

  • Page 59
    59 Notes to Consolidated Financial Statements WESTJET AIRLINES LTD. Years ended December 31, 2004 and 2003 (Tabular Amounts are Stated in Thousands of Dollars, Except Per Share Data) 10. Financial instruments and risk management (continued): (c) Interest rate risk: The Corporation is exposed to ...

  • Page 60
    ... Officer Alexander (Sandy) J. Campbell, FCGA Executive Vice-President, Finance, Chief Financial Officer Thomas (Tim) Morgan Executive Vice-President, Operations Donald Bell Executive Vice-President, Customer Service Sean Durfy Executive Vice-President, Marketing and Sales WESTJET ANNUAL REPORT 2004

  • Page 61
    ..., Duckworth and Palmer LLP, Calgary, AB 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...

  • Page 62
    ...WESTJETTITUDE." The "can-do" attitude of WestJetters, mixed with our strong corporate culture, is one of our key competitive advantages, and a major reason more and more travellers choose WestJet. This WestJettitude is the fuel that will carry WestJet far into the future. WESTJET ANNUAL REPORT 2004

  • Page 63
    63 WESTJET WESTJETANNUAL ANNUAL REPORT REPORT 2004 2004

  • Page 64
    WESTJET HEAD OFFICE: 5055 - 11 St. NE, Calgary, Alberta, Canada T2E 8N4 Phone: Toll-free 1-888-293-7853, Calgary (403) 444-2600 Fax (403) 444-2301