WestJet expects 10% to 12% operating margin in 2018-2020; ROIC to exceed 13%
WestJet provided (06-Dec-2017) 2018 to 2020 targets as follows:
- Annual operating margin: Between 10% and 12% in 2018 to 2020;
- ROIC: WestJet expects an improving annual ROIC to exceed 13% in 2020;
- Cash flow: From 2018 to 2020, WestJet expects to deliver cumulative free cash flow of CAD775 million (USD605 million) to CAD875 million (USD684 million), with capital expenditures of approximately CAD780 million (USD609 million) in 2018, peaking in 2019 at approximately CAD1 billion (USD781 million) and dropping to approximately CAD870 million (USD680 million) in 2020;
- Leverage rate: WestJet estimates its leverage ratio to be at 1.2 by the end of 2020 as measured by adjusted net debt over EBITDAR;
- Fleet: Expects to grow its number of unencumbered aircraft from 51 at the end of 3Q2017 to 96 in 2020.
WestJet believes its strategy to attract and retain premium travellers, combined with an enhanced revenue management system, with broadened fare products and growth in ancillaries represent an annual revenue opportunity of between CAD300 million (USD234 million) and CAD500 million (USD391 million) through to 2022. In addition, WestJet identified annual cost savings opportunities of CAD140 million (USD109 million) to CAD200 million (USD156 million) through 2022. These cost savings opportunities are spread over several initiatives that include fleet reconfigurations, airport operations cost savings, optimised maintenance plans, digital self service and sales and distribution channel efficiencies. WestJet president and CEO Gregg Saretsky also commented that the carrier will continue to invest in strategic initiatives that will support its "transition from a low-cost point-to-point model into a high value-based network airline with a global footprint". This is supported by network and schedule changes and deepening of the carrier's airline partnerships, with the carrier also broadening its fare products to not only defend and grow its leisure business but also to attract and retain premium travellers. [more - original PR]