WestJet vs. Air Canada
From the recent issue of plane business...an interesting comparison!!
First Quarter Operating Margin/Break Even Wrap-Up
Bryan Bedford should be one happy man.
The Chairman and CEO of Republic Holdings is running the airline that not only posted the highest operating margin for the quarter, it also posted the lowest break-even figure for the quarter.
Excellent job by the folks at Republic.
Rank Airline Op Margin
1 Republic 18.9%
2 Allegiant 16.9%
3 WestJet 13.7%
4 Skywest 10.1%
5 AC Jazz 9.9%
6 Northwest 7.0%
7 AMR 4.6%
8 US Airways 4.3%
9 Midwest 4.0%
10 Southwest 3.8%
11 Delta 3.7%
12 ExpressJet 3.5%
13 AirTran 2.7%
14 Industry Average: 2.5%
15 Continental 2.0%
16 ACE -1.1%
17 United -2.1%
18 JetBlue -2.1%
19 Alaska -2.4%
20 Air Canada -3.1%
21 Hawaiian -7.5%
22 Mesa -7.9%
Below is the ranking for break-even load factor for the quarter. It is a function of operating costs and revenue.
1 Republic 62.7%
2 Southwest 66.3%
3 ACJazz 66.7%
4 Allegiant 68.1%
5 Midwest 70.5%
6 AirTran 70.5%
7 Skywest 71.3%
8 WestJet 72.1%
9 Alaska 75.0%
10 USAirways 75.1%
11 AMR 77.4%
12 Delta 78.0%
13 IndustryAverage: 79.2%
14 Northwest 79.4%
15 Continental 79.9%
16 Mesa 82.0%
17 ACE 84.8%
18 United 85.3%
19 AirCanada 85.5%
20 JetBlue 89.2%
21 Hawaiian 96.7%
WestJet
Another quarter, another excellent performance turned in by WestJet.
The airline recently reported first-quarter net earnings of C$29.9 million ($27.4 million) - a 132% increase over the same period a year ago, when it reported a C$12.9-million profit. Earnings per share more than doubled to C$0.23 cents from C$0.10 cents.
The EPS of C$0.23 nicely beat the analyst consensus of C$0.19 a share.
Operating margin was a stunning 13.7%, ranking it number three in the total North American airline universe. (Well, except for Frontier, which still has not reported first quarter results.)
The airline said in its call that its revenue outlook remains "robust" and demand continues to be strong. Given these strong trends, WestJet will increase capacity by 16% in the June quarter.
In addition, the carrier will be shifting some 17% of its total capacity from transborder and charter operations back into its domestic Canadian markets in response to seasonal strength. This reflects the airline's now ongoing manipulation of its capacity -- increasing it on the transborder and charter operations in the winter, and then building up domestic capacity in the summer months.
You may recall that WestJet has also embarked over the last year on a campaign to increase its ancilliary revenues. For the first quarter, these revenues increased a whopping 66% from a year ago, representing an increase of C$7.20 per passenger.
And what about the hapless ongoing saga with the aiRES reservation system? The airline said that if it cannot reach some type of agreement in regard to the successful delivery of a new completed system by July 31, they will take a write-off on the project of approximately C$32 million. (Sorry Clive, I used the figure of C$38 million in my recent interview with US Airways CEO Doug Parker. Guess it's bad enough without me making it worse.)
Excellent, excellent job posted by the folks north of the border. Oh, and one last interesting tidbit from the earnings call. The airline now says that it estimates that 45% of its passengers are business fliers.
Air Canada
Another quarter, another confusing set of numbers from Air Canada.
I am still at a loss as to why the airline continues to issue its financials in dribs and drabs. But they did it again this quarter, with a preliminary set of numbers, followed by a more complete set of numbers.
You may also recall how confusing the airline's results were last quarter, and how the airline continued to refer to EBITDAR/EBIT throughout its release and in its earnings call.
This quarter, a subscriber sent me a note and asked, "So, how many times do you think we are going to hear EBIT or EBITDAR in the airline's press release?"
I can now tell you the answer -- 20. Net profit is not in the airline's vocabulary anymore.
For the quarter, the airline reported a much larger loss than anticipated, posting an EBIT loss of C$78 million, or C$(0.72.) per share. (This excludes a one time gain.) This compared quite badly to an analyst consensus loss estimate of C$(0.13).
Air Canada reported the third worst operating margin in North America, -3.08%. Only Hawaiian and Mesa did worse, and well, we all know they are locked in a brutal fare war over $19 inter-island fares.
Air Canada also posted the 3rd worst break-even load factor of publicly traded airlines at 85.5%, worse than last years 83.4% figure for the first quarter.
In what was a particularly nasty slap at the airline, Versant Partners announced Tuesday it was downgrading shares of the airline from "buy" to "hold" as analyst Cameron Doerksen wrote "Although we are not negative on Air Canada shares, we believe that WestJet shares are a better investment vehicle for playing the current strength in the Canadian airline industry."
Ouch.
Just another less than impressive performance by Air Canada.