President’s message to shareholders
Since joining WestJet in 2009, I have enjoyed working with a tremendously hard-working team and seeing record results from work done by people who are passionate about their company, their co-workers and our guests. This teamwork is the foundation of our success and of the positive momentum we’ve built, all of which will carry us forward as we embark on exciting new initiatives in 2013 and beyond.
This year’s annual report has building momentum as its theme and I encourage you to view the online version of the report at westjet.com/buildingmomentum. In this report, you’ll discover some of the key elements of what makes us unique and appreciated by our guests, as well as seeing why we’re confident and excited about our future.
We have built on our long trend of profitable growth, and 2012 marks our eighth consecutive year of profitability and the 16th time we have reported an annual profit in our 17-year history. In fact, our diluted earnings per share for 2012 reached a record $1.78, a 67.9 per cent increase over 2011. We reported $3.4 billion in revenue, 11.6 per cent higher than in 2011, saw a 7.1 per cent increase in RASM for the year, and reached a return on invested capital of 13.7 per cent for the 12 months ending December 31, 2012, the second consecutive quarter in which we surpassed our target of 12 per cent.
In 2012, we reached a milestone when we took delivery of our 100th Boeing Next-Generation 737 aircraft. We flew more than 17.4 million guests in 2012, an 8.6 per cent increase over 2011, and achieved a record load factor of 82.8 per cent for the year as we increased our capacity by 4.1 per cent. We were also pleased to report an earnings before tax margin of 9.9 per cent in 2012, an increase of 3.1 percentage points over 2011, ranking us among the top airlines in North America.
We continued our network expansion, and now serve 85 destinations in 18 countries in North America, Central America and the Caribbean. Our growth in airline partnerships is helping us build a virtual global network. During 2012, we increased the total number of partnerships to 30, including eight code-share agreements as Delta Air Lines, Korean Air, China Eastern Airlines, and British Airways were added to our roster of code-share partners. We expect this momentum to continue in 2013 as we evolve two to four interline agreements into new code-shares and pursue a handful of new interline relationships.
Our loyalty program, WestJet Rewards, continued to evolve in 2012, with new opportunities for members to earn WestJet dollars by flying on American Airlines, and by making hotel and car rental bookings directly on our website. We increased the value offered to holders of the WestJet RBC World Elite MasterCard, including a welcome bonus of 250 WestJet dollars and an annual $99 round-trip companion flight, making this credit card even more competitive.
We also announced our new fare bundles in 2012 as part of our strategy to increase the options we provide our guests and to allow them to choose the comfort, convenience and flexibility that best matches their budget. Guests can now choose the bundle that provides them with the best value and amenities.
These initiatives will increase the added value we offer business travellers, which is part of our integrated strategy of capturing a greater share of the corporate travel market, while continuing to provide our leisure travellers with increased travel options.
A key foundational component of the successful launch of these initiatives is the significant investment of $40 million we’ve made in our IT systems over the last two years. I’m excited about these enhancements, which include a new digital storefront with increased customizability for guests as they book, improvements to our self-service kiosks and mobile flight notifications.
WestJetters’ tremendous efforts in preparing for the introduction of WestJet Encore, our new regional airline, have set the stage for a successful launch in June 2013. Our survey of WestJetters in early 2012 showed overwhelming support of the new airline. Since then, we’ve selected the Bombardier NextGen Q400 aircraft for the new fleet, and the focused dedication of the entire WestJet team make us confident that WestJet Encore will be a success. We look forward to bringing WestJet’s friendly, caring service and low fares to smaller communities. On February 11, 2013, we announced WestJet Encore’s first two communities – Nanaimo and Fort St. John, BC.
I’m confident that we are prepared to implement these exciting initiatives with the support and commitment of more than 9,000 proud WestJetters; 2012 was a great year for WestJet, and I expect to see more continued success in the years ahead. Our core values continue to remain the same – we are leveraging our strengths in continuing to bring low fares, with friendly and caring service to all of the communities we serve, while working hard to keep costs low. As part of that focus on low costs, we recently concluded a series of meetings with WestJetters across Canada, to present our business transformation initiative to reduce costs by $100 million over the next three years.
I’m proud of the recognition WestJetters have earned as a result of demonstrating the strength of our culture every day. In 2012, WestJet was once again ranked as Canada’s preferred airline by TNS Canada and as a top 10 international airline in Aviation Week. WestJet Vacations announced a Leger Marketing survey showing we have the highest guest satisfaction and loyalty among Canadian tour operators and in late 2012, WestJet was named one of Canada’s Top 100 Employers in Mediacorp’s annual study of Canada’s best workplaces. We also achieved an all-time high score in our internal “We Hear You” survey in 2012. Certainly these are recognitions that would not have been possible without the commitment to safety and care delivered by our over 9,000 WestJetters.
WestJetters also continued to give back in many ways, including our first two Hero Holidays in April and October 2012 where two groups of 50 WestJetters each built five homes for families living in extreme poverty in Puerto Plata, Dominican Republic. We also continued our focus on reducing our environmental footprint, and released our second corporate sustainability report in December.
We were pleased to continue returning value to shareholders in 2012. In February and August of 2012, we announced increases to our quarterly dividend from $0.05 to $0.06 and then to $0.08 per share. In February 2013, we announced our third increase, to $0.10 per share. In 2012, we also completed our second normal course issuer bid. Since we began paying a quarterly dividend in 2010, and including our two completed normal course issuer bids, we have returned more than $290 million to our shareholders as of the end of 2012. On February 14, 2013, the Toronto Stock Exchange approved our notice for a further normal course issuer bid that will allow us to purchase and cancel up to five per cent of our outstanding shares over the next year.
On behalf of the Board of Directors, the Executive team, and more than 9,000 WestJetters, thank you for your continued support of our airline.
President and Chief Executive Officer
March 19, 2013
Caution regarding forward-looking information
Certain information set forth in the above president’s message to shareholders, including without limitation information regarding our growth in airline partnerships for 2013, our service initiatives for 2013 and beyond, the launch of WestJet Encore, our initiative to reduce costs by over the next three years and the ability to purchase and cancel up to five per cent of our outstanding shares over the next year, contain certain forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond WestJet’s control. These forward-looking statements are based on our existing strategies, our implementation schedule for WestJet Encore, our long-term strategic plan and our current budget, but may vary due to factors including, but not limited to changes in fuel prices, changes in guest demand, general economic conditions, competitive environment, ability to effectively implement and maintain critical systems, ability to successfully negotiate and effectively implement new partnering relationships, regulatory approvals and requirements, and other factors described in WestJet’s public reports and filings, which are available on WestJet’s profile at www.sedar.com. Readers are cautioned that undue reliance should not be placed on forward-looking statements as actual results may vary materially from the forward-looking statements. WestJet does not undertake to update, correct or revise any forward-looking statements as a result of any new information, future events or otherwise, except as may be required by applicable law.