WestJet Q1 Net Earnings Down Nearly 40%

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Celebrating its 20th year, WS has announced its 44th consecutive profitable quarter, with 1st quarter 2016 net earnings of $87.6 million. This compares with the all-time high quarterly net earnings of $140.7 million reported in the 1st quarter of 2015.

The airline is clearly suffering from economic weakness in Alberta, and lower pricing in Eastern Canada where it has shifted some capacity. Total revenues for the quarter were down 4.8% and the airline’s operating margin dropped from 18.2% to 12.0% year-over-year.

Based on the trailing 12 months, the airline achieved a return on invested capital of 12.8%, compared with the 15.3% reported in the previous quarter. By contrast, AC last week reported a Q1 ROIC of 17.4%.

On the positive side, WS’s load factor for Q1 was 82.1%, up 0.5 percentage points from the year-before period. It also achieved with an on-time performance rate of 83.0% in Q1, a significant year-over-year improvement of 5.0 percentage points.

"Although we continue to feel the impact of economic weakness in Alberta, the fundamentals of our business remain strong as demonstrated by our recent assignment of an investment grade credit rating by Moody's, and we are seeing positive trends as a result of adjustments we have made to our schedules and the strategic initiatives we are undertaking," said WS President & CEO Gregg Saretsky.

WS had announced yesterday that Moody's Investors Services has assigned it an investment grade 'Baa2' senior unsecured issuer rating and a 'Baa2' senior unsecured notes rating with a stable outlook.

This is the 2nd credit rating agency to assign WS with an investment grade corporate credit rating. In March, Standard & Poor's confirmed WS's corporate credit rating of 'BBB-' with a stable outlook.

WS has also announced its intention, upon the expiry of the 12 month period of its current normal course issuer bid, to make an application to the Toronto Stock Exchange to initiate a further normal course issuer bid to purchase up to 4,000,000 Common Voting and Variable Voting Shares.

TheWS Board of Directors declared a cash dividend of $0.14 per common voting share and variable voting share for the 2nd quarter of 2016, to be paid on 30JUN to shareholders of record on 15JUN16.

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