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2005 WESTJET ANNUAL REPORT
29
net income tax expense of $28.0 million for the year ended
December 31, 2005. Our effective tax rate realized on
earnings before income taxes for 2005 was higher than the
expected rate due to a number of factors, including the
addition of certain non-deductible expenses, non-deductible
stock-based compensation expense and the non-taxable
portion of capital gains. As well, offsetting our current tax
recovery is our provision for large corporation’s tax and
capital taxes of $5.0 million, an increase of $1.3 million
over 2004. The tax rate changes are primarily related to
non-capital losses being carried back to years in which the
tax rate was higher than the current expected tax rate.
Certain provincial rate reductions are also reflected as a
decrease to future tax expense as required under GAAP.
FOURTH QUARTER 2005
OPERATING RESULTS IN REVIEW
Total operating revenue increased by 34.4% to $367.9
million in the last three months of 2005 compared to
$273.7 million in same period in 2004. Operating expenses
for the fourth quarter amounted to $359.8 million, up
from $339.5 million in the fourth quarter of 2004.
Extremely high fuel prices and increasing landing,
terminal and airport improvement fees contributed to the
increase in costs from 2004 to 2005. Fuel costs represent
our largest expense and increased 20.7% on an ASM basis
in the fourth quarter of 2005 over the same period in 2004.
For the three months ended December 31, 2005, the
CASM for airport operations increased by 4.5% over the
same period in 2004. The fourth quarter per-ASM costs
are affected by the natural stage length dilution common
with longer trip lengths and actually increased 9.5% on a
per-departure basis.
The rise in unit costs for the quarter can be attributed
to three main changes in the fourth quarter of 2005 versus
the fourth quarter of 2004:
The weighted average airport rate and fees at
Canadian airports increased by approximately 6.0%.
Transborder and charter activity increased 21.6%,
increasing operations outside Canada as a percentage of
total departures. These activities generally incur higher
airport fees than domestic operations and additional costs
associated with US pre-clearance services.
The airport operations group incurred additional
costs associated with our buy-on-board snack and light
meal program.
Candice Li
Audit & Advisory Services Director
WestJetters have embraced and
benefited from our compensation
strategy of aligning corporate success
with personal success.