rotornut
4th Aug 2004, 11:44
WestJet CEO apologizes
By TERRY WEBER
Globe and Mail Update
UPDATED AT 4:24 PM EDT Tuesday, Aug 3, 2004
WestJet Airlines Ltd. chief executive officer Clive Beddoe apologized Tuesday for the circumstances that led to a lawsuit with rival Air Canada and said the carrier has introduced a "whistle-blower" policy to prevent a recurrence.
"Clearly I have to take responsibility for this event, as I should have known what [former WestJet executive] Mark Hill was doing, and no individual, including myself, should have the latitude to act irresponsibly," Mr. Beddoe told analysts and reporters during the carrier's second-quarter earnings conference call.
"Neither I nor our board condone this sort of activity, and (we) consider it to be wholly inappropriate."
Air Canada has accused Mr. Hill, a WestJet co-founder who resigned last month, of masterminding a scheme to siphon flight data from an Air Canada employee website. Air Canada is seeking $220-million in compensation and damages as part of a lawsuit over the claims. WestJet has countered that the information obtained from the website was neither confidential nor useful to the airline.
The resulting litigation, Mr. Beddoe told analysts, is unlikely to create any "material liability" for WestJet.
However, he said, the carrier has since taken steps — including introducing a whistle-blower policy and a process to allow anonymous reporting of inappropriate or illegal behaviour to an independent organization — to prevent similar situations from arising.
"I do feel that on behalf of the board, our executive team, and myself, I would like to apologize to our staff and to our shareholders for this event having occurred," Mr. Beddoe said.
Mr. Beddoe's comments came after WestJet — Canada's second biggest carrier — said second-quarter profit fell more than 48 per cent despite higher revenue as soaring fuel costs and airport fees ate into its bottom line.
For the quarter ended June 30, Calgary-based WestJet posted profit of $7.5-million or 6 cents a share fully diluted, compared with $14.7-million or 13 cents in the same period a year earlier.
WestJet's quarterly revenue rose to $257-million from last year's $206-million.
WestJet stock closed up 1.9 per cent or 25 cents to $13.55 in Toronto.
The carrier's capacity, measured by available seat miles, was up 28.8 per cent compared with last year's second quarter. For the year to date, available seat miles increased 31.9 per cent.
WestJet's load factor — the proportion of seats filled — fell to 67.5 per cent from 69.9 per cent in the same period a year earlier.
However, the carrier also said its costs per available seat-mile rose 7.1 per cent in the second quarter, mostly because of higher fuel costs and increased costs associated with moving some of its capacity to Toronto from Hamilton to launch Toronto-to-Ottawa and Toronto-to-Montreal routes.
"Although we are pleased to have achieved our 30th consecutive quarter of profitability during this period, it nevertheless remains a disappointing quarter," Mr. Beddoe said in Tuesday's report
"Despite our 29-per-cent increase in capacity and our 25-per-cent increase in revenue during this period, the increasing cost of fuel and airport landing and terminal fees has had a significant impact on our earnings."
Prices for West Texas intermediate crude touched a peak of $42.33 (U.S.) during the quarter. Average fuel costs for the period totalled $38.36.
"This sharp increase in the cost of fuel represented a 32-per-cent increase over the same period last year, and had an impact on our earnings before income taxes and profit share of $10.5-million (Canadian)," he said.
Had quarter fuel costs remained steady year over year, he added, WestJet estimated diluted earnings per share in the second quarter would have been 11 cents, rather than the 6 cents.
In addition to rising fuel costs, WestJet was also hit by landing and terminal fees which were 200 per cent higher in Toronto than they were in the carrier's original base, Hamilton.
"Our decision to reallocate some of our capacity from Hamilton to Toronto to launch the high-demand Toronto-to-Ottawa and Toronto-to-Montreal routes was necessary to meet the needs of travellers in Canada's largest market," he said.
In a separate announcement, WestJet also said its board has approved the purchase of six Boeing 737-600 jets. Three of those will be delivered in 2005 and the remaining three will be delivered the following year.
The agreement with Boeing Co. also carries an option for 12 more aircraft for delivery in 2006.
By TERRY WEBER
Globe and Mail Update
UPDATED AT 4:24 PM EDT Tuesday, Aug 3, 2004
WestJet Airlines Ltd. chief executive officer Clive Beddoe apologized Tuesday for the circumstances that led to a lawsuit with rival Air Canada and said the carrier has introduced a "whistle-blower" policy to prevent a recurrence.
"Clearly I have to take responsibility for this event, as I should have known what [former WestJet executive] Mark Hill was doing, and no individual, including myself, should have the latitude to act irresponsibly," Mr. Beddoe told analysts and reporters during the carrier's second-quarter earnings conference call.
"Neither I nor our board condone this sort of activity, and (we) consider it to be wholly inappropriate."
Air Canada has accused Mr. Hill, a WestJet co-founder who resigned last month, of masterminding a scheme to siphon flight data from an Air Canada employee website. Air Canada is seeking $220-million in compensation and damages as part of a lawsuit over the claims. WestJet has countered that the information obtained from the website was neither confidential nor useful to the airline.
The resulting litigation, Mr. Beddoe told analysts, is unlikely to create any "material liability" for WestJet.
However, he said, the carrier has since taken steps — including introducing a whistle-blower policy and a process to allow anonymous reporting of inappropriate or illegal behaviour to an independent organization — to prevent similar situations from arising.
"I do feel that on behalf of the board, our executive team, and myself, I would like to apologize to our staff and to our shareholders for this event having occurred," Mr. Beddoe said.
Mr. Beddoe's comments came after WestJet — Canada's second biggest carrier — said second-quarter profit fell more than 48 per cent despite higher revenue as soaring fuel costs and airport fees ate into its bottom line.
For the quarter ended June 30, Calgary-based WestJet posted profit of $7.5-million or 6 cents a share fully diluted, compared with $14.7-million or 13 cents in the same period a year earlier.
WestJet's quarterly revenue rose to $257-million from last year's $206-million.
WestJet stock closed up 1.9 per cent or 25 cents to $13.55 in Toronto.
The carrier's capacity, measured by available seat miles, was up 28.8 per cent compared with last year's second quarter. For the year to date, available seat miles increased 31.9 per cent.
WestJet's load factor — the proportion of seats filled — fell to 67.5 per cent from 69.9 per cent in the same period a year earlier.
However, the carrier also said its costs per available seat-mile rose 7.1 per cent in the second quarter, mostly because of higher fuel costs and increased costs associated with moving some of its capacity to Toronto from Hamilton to launch Toronto-to-Ottawa and Toronto-to-Montreal routes.
"Although we are pleased to have achieved our 30th consecutive quarter of profitability during this period, it nevertheless remains a disappointing quarter," Mr. Beddoe said in Tuesday's report
"Despite our 29-per-cent increase in capacity and our 25-per-cent increase in revenue during this period, the increasing cost of fuel and airport landing and terminal fees has had a significant impact on our earnings."
Prices for West Texas intermediate crude touched a peak of $42.33 (U.S.) during the quarter. Average fuel costs for the period totalled $38.36.
"This sharp increase in the cost of fuel represented a 32-per-cent increase over the same period last year, and had an impact on our earnings before income taxes and profit share of $10.5-million (Canadian)," he said.
Had quarter fuel costs remained steady year over year, he added, WestJet estimated diluted earnings per share in the second quarter would have been 11 cents, rather than the 6 cents.
In addition to rising fuel costs, WestJet was also hit by landing and terminal fees which were 200 per cent higher in Toronto than they were in the carrier's original base, Hamilton.
"Our decision to reallocate some of our capacity from Hamilton to Toronto to launch the high-demand Toronto-to-Ottawa and Toronto-to-Montreal routes was necessary to meet the needs of travellers in Canada's largest market," he said.
In a separate announcement, WestJet also said its board has approved the purchase of six Boeing 737-600 jets. Three of those will be delivered in 2005 and the remaining three will be delivered the following year.
The agreement with Boeing Co. also carries an option for 12 more aircraft for delivery in 2006.