WestJet sits on cash war chest as profit jumps

February 13, 2008

CALGARY, Alberta, Feb 13 (Reuters) - WestJet Airlines Ltd's fourth-quarter profit nearly tripled as strong domestic demand, lower nonfuel costs and a tax gain led to better than expected results, Canada's No. 2 air carrier said on Wednesday.

WestJet Chief Executive Sean Durfy also said the Calgary-based company will conserve its fast-mounting cash this year as weakening North American airline industry conditions may yield some opportunities for the no-frills flier.

Canada's airlines have so far skirted the U.S. downturn, which has led major carriers there to cut back on capacity and to start merger talks.

Last week, Air Canada, the country's biggest airline, also reported strong quarterly numbers and said its revenues in the coming months should stay positive.

WestJet reported a cash tally of C$654 million ($654 million) at the end of 2007, up 73 percent in a year.
"Our cash position is very strong and we'd like to keep our balance sheet strong given the uncertainty of 2008," Durfy told analysts. "And if there's uncertainty, and if something does happen, it also lends opportunity, right?"

He didn't detail what opportunities WestJet might see on the horizon, although some industry experts have said a U.S. downturn and consolidation may mean good deals on aircraft.

WestJet, which has been expanding its network in Canada, the United States and the Caribbean, earned C$75.4 million, or 57 Canadian cents a share, during the quarter, up from year-earlier C$26.7 million, or 21 Canadian cents a share.

Excluding a C$33.7 million tax adjustment, earnings rose 56 percent to C$41.7 million, or 32 Canadian cents a share.

That beat the average forecast of analysts polled by Reuters Estimates by 5 Canadian cents a share.
Revenue was C$553.4 million, up 22 percent from C$452.1 million in the fourth quarter of 2006.

Full-year earnings rose 68 percent to C$192.8 million, or C$1.47 a share, from C$114.7 million, or 88 Canadian cents a share. Revenue increased nearly 22 percent to C$2.15 billion.

WestJet shares jumped 60 Canadian cents, or more than 3 percent, to C$17.90 on the Toronto Stock Exchange. They had gained about 12 percent over the past year.

The company's higher load factor and falling costs, excluding fuel, are commendable, especially given a 15 percent increase in capacity in the quarter, UBS Securities analyst Fadi Chamoun wrote in a note to clients.

During the period, passengers filled nearly 78 percent of available seats, an increase of 2.2 percentage points.

Durfy said WestJet's capacity will increase by 18 percent in the current quarter and 16 percent in 2008, as it takes delivery of another seven Boeing 737 jets. That will boost its fleet to 77 aircraft.

In the fourth quarter, overall costs rose by 2.3 percent as oil prices headed toward $100 a barrel. Excluding fuel, costs fell 2.6 percent as WestJet lowered expenses for aircraft and flight operations, interest and leasing, the company said.

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