Westjet 2004 Annual Report Download - page 27

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WESTJET ANNUAL REPORT 2004
27
1 ® Trademarks of AIR MILES International Trading B.V. Used under license
by Loyalty Management Group Canada Inc. and WestJet.
2 ® Registered trademark of Bank of Montreal. Patent pending.
® *Bank of Montreal is a licensed user of the registered trademark and
design of MasterCard International Inc.
Vincent Spicer, Sales Super Agent
CASM by almost 1% for the 12 months ended
December 31, 2004.
However, these CASM decreases were a direct result of
stage length increases. When viewed on a cost per
departure basis, navigational charges actually increased by
13.6% for the year. Navigational cost increases were the
result of three key factors:
•The organization responsible for air navigational services
in Canada, Nav Canada, increased rates by 7.9% in
September 2004.
•Flights flown by our 737-700 aircraft increased by
more than 10% in 2004. This triggered an increase in
air navigational charges as a portion of this cost is
directly related to the greater maximum take-off weight
of the 737-700 aircraft.
•
An increase in charter flights from 3.6% to 6.7% of
total operations generated additional fees related to
navigational charges issued by the FAA in the United
States. Over-fly charges are issued to WestJet by the FAA
for navigational services when passing through American
airspace and landing in a country other than Canada
or the United States
.
Sales and Marketing
Our efforts to entice guests to book with WestJet are
the key drivers of sales and marketing costs. Sales and
marketing costs encompass a number of expenses such
as advertising, agency and credit card fees, global
distribution system costs, the AIR MILES® Reward
Program and promotional expenses.
With intense competition continuing during 2004, we
increased our focus on advertising and promotions in
order to increase our brand awareness. As a result, sales
and marketing has taken on a larger role and has
increased on a CASM basis by 11.2% from a year ago.
Our advertising efforts have almost doubled from the
previous year, which is one of the major contributors
to the increase in sales and marketing CASM. In the
spring and through the summer, we ran a large national
television and billboard advertising campaign.
Advertising has provided an opportunity to increase
awareness of our expansion in Eastern Canada and in
promoting our flights into the United States.
In May 2004, we strengthened our AIR MILES Reward
Program by launching the WestJet Mosaik®
MasterCard®* . The card offers many rewards to guests
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 further strengthened our distribution network by
establishing preferred agency agreements with the
largest chains of travel agencies in Canada which we
believe will help us grow again in 2005. We also improved