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J.P. Morgan Aviation, Transportation & Industrials Conference
March 10, 2014
Caution regarding forward-looking information
Certain statements set forth in this presentation and statements made during this presentation,
including, without limitation, information respecting WestJet’s ROIC target of a sustainable 12%; our
Business Transformation Initiative; our 737 and Q400 fleet plans; the expected future benefits of the
737 MAX and LEAP-1B engine to WestJet; WestJet Encore’s future opportunities and network growth
plans; and the installation of our new in-flight entertainment system are forward-looking statements
within the meaning of applicable Canadian securities laws.
By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of
which are beyond WestJet’s control. 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
due to a number of factors including, without limitation, changes in consumer demand, energy prices,
aircraft deliveries, general economic conditions, competitive environment, regulatory developments,
environment factors, ability to effectively implement and maintain critical systems and other factors and
risks described in WestJet’s public reports and filings which are available under WestJet’s profile at
www.sedar.com.
Any forward-looking statements contained in this presentation and statements made during this
presentation represent WestJet’s expectations as of the date of this presentation and are subject to
change after such date. 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 law.
March 2014
2
Non-GAAP measures
This presentation contains disclosure respecting non-GAAP financial measures including, without
limitation, return on invested capital; CASM, excluding fuel and employee profit share; adjusted
earnings before tax margin; adjusted net debt to earnings before interest, taxes, depreciation and
aircraft rent (EBITDAR); adjusted net debt to equity; and net cash. These measures are included to
enhance the overall understanding of WestJet’s financial performance and to provide an alternative
method for assessing WestJet’s operating results in a manner that is focused on the performance of
WestJet’s ongoing operations, and to provide a more consistent basis for comparison between
reporting periods. These measures are not calculated in accordance with, or an alternative to, GAAP
and do not have standardized meanings. Therefore, they may not be comparable to similar measures
provided by other entities. Readers are urged to review the section entitled “Reconciliation of nonGAAP and additional GAAP measures” in WestJet’s management’s discussion and analysis of financial
results for the year ended December 31, 2013, which is available under WestJet’s profile at
www.sedar.com, for a further discussion of such non-GAAP measures.
3
WestJet’s track record of profitability since inception
Net Earnings ($ millions)
250
200
150
100
50
0
Reported in Canadian GAAP up to 2009 with 2005 to 2008 restatements. 2010 to 2013 reported under IFRS.
4
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
-50
WestJet’s goal to generate 12% return on invested capital
Return on Invested Capital *
15%
13.9%
14%
13%
Sustainable
goal
12%
11%
10%
9%
8%
7%
6%
5%
2005 2006 2007 2008 2009 2010 2011 2012 Q1 Q2 Q3 Q4
2013 2013 2013 2013
Reported in Canadian GAAP up to 2009 with 2005 to 2008 restatements. 2010 to 2013 reported under IFRS.
* Based on a trailing 12 month basis before tax .
5
WestJet a profitable growth story
Guests (thousands)
Available Seat Miles (millions)
20,000
17,500
15,000
12,500
10,000
7,500
5,000
2,500
0
25,000
20,000
15,000
10,000
5,000
2013
2012
2011
2010
2009
2008
2005
2013
2010
2009
2008
2007
2006
2005
2004
2003
2002
6
2001
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2007
2004
2012
Revenues ($ millions)
2006
2003
2011
2002
2001
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
7
8
9
Growth and strong financial
performance continues
Operating highlights – Q4 2013
Strong yield and earnings growth with higher margins
Q4 2013
$67.8
$0.52
$926.4
Q4 2012
$60.9
$0.46
$860.6
Change
11.3%
13.0%
7.6%
RASM (revenue per available
seat mile) (cents)
15.59
15.68
(0.6%)
Yield (revenue per revenue
passenger mile) (cents)
19.43
19.16
1.4%
Load Factor
80.3%
81.9%
(1.6 pts)
Fuel costs per litre (dollars)
$0.92
$0.91
1.1%
9.29
9.32
(0.3%)
10.2%
9.9%
0.3 pts
Net earnings (millions)
Diluted earnings per share
Total revenues (millions)
CASM, excl. fuel and
employee profit share (cents)
Earnings before tax margin
11
Operating highlights – Full-year 2013
Record net earnings and EPS reported in the full-year 2013
Net earnings (millions)
Diluted earnings per share
Total revenues (millions)
Change
10.9%
14.0%
6.9%
RASM (revenue per available
seat mile) (cents)
15.28
15.53
(1.6%)
Yield (revenue per revenue
passenger mile) (cents)
18.69
18.77
(0.4%)
Load Factor
81.7%
82.8%
(1.1 pts)
Fuel costs per litre (dollars)
$0.91
$0.92
(1.1%)
9.06
9.12
(0.7%)
10.2%
9.9%
0.3 pts
CASM, excl. fuel and
employee profit share (cents)
Earnings before tax margin
12
Full-year 2013 Full-year 2012
$268.7
$242.4
$2.03
$1.78
$3,662.2
$3,427.4
2013 – adjusted EBT margin
WestJet ranks 4th among leading North American peers
18%
17.1%
16%
14.7%
14%
11.9%
12%
10.2%
10%
8%
7.0%
6.8%
6%
5.1%
5.0%
4%
2.8%
2%
0.5%
2013 adjusted EBT Margin per reported results as at December 31, 2013 (adjusted for special items and non-op
mark-to-market hedge gains/losses).
13
Air Canada
United
American
JetBlue
Southwest
Delta
WestJet
Alaska
Allegiant
Spirit
0%
Costs remain under control
18
16
cents per ASM
14
2.20
1.67
3.50
4.32
4.50
4.34
1.21
1.20
12
10
1.70
1.70
1.00
3.50
4.70
8.57
8.29
8.45
8.80
8.85
9.12
9.06
2007
2008
2009
2010
2011
2012
2013
3.20
8
6
4
2
0
CASM (ex fuel and profit share)
Profit Share
*IFRS basis
Excludes reservation system impairment of $31.9 million in 2007
14
Fuel
Op. Margin
Business Transformation Initiative
•
•
•
Original target to reduce costs by $100 million by the end of 2015
As of the end of 2013, identified and put into action measures that we believe will
enable us to achieve this by the end of 2014, one year ahead of our original goal
Undertaking a longer term initiative to ensure our unit costs are competitive with
low cost North American airlines
Four key focus areas:
15
Aircraft utilization
and channel
efficiency
Productivity
Non-Operational
Expenses
People
Modernizing our fleet – sale to Southwest
• Selling 10 of our oldest Boeing 737-700s in 2014-15
• Buying 10 new Boeing 737-800s in 2014-15
• Deferring delivery of five 737-700s from 2014-15, to 2016-17
• Transaction creates value:
• Lowers CASM by effectively adding incremental capacity
• Benefits associated with a younger fleet
• Accelerates our move towards more optimal fleet mix
• Allows new planes to be financed in a low interest rate environment
• Assists transition to our long-term in-flight entertainment connectivity
strategy once finalized
• Maintains Fleet flexibility
16
737 Boeing MAX purchase agreement
Growing our fleet and improving costs
• WestJet announced in August 2013 an order for 65 Boeing 737 MAX
aircraft with delivery dates of Sep 2017 through 2027
• Converting 15 Next Generation 737 deliveries to 737 MAX for a net
increase of 50 firm commitments for 737 aircraft
• Key benefits of this order:
• Maintains the flexibility we have built into our fleet plan, including future
lease renewal options
– Boeing 737 fleet size between 120 and 162 aircraft by 2023
• Improved operational costs: CFM International LEAP-1B engines expected to
reduce fuel burn and CO2 emissions by 13% compared with today’s most
efficient single-aisle airplanes
• New Boeing Sky Interior will contribute to an enhanced guest experience
17
Measured growth - 737 flexible fleet plan
including fleet modernization
175
143
150
125
107
100
112
14
119
22
124
28
149
131
154
37
40
44
23
29
34
159
44
164
44
32
11
39
44
75
50
105
120
98
97
92
88
83
80
76
76
76
2017
2018
2019
2020
2021
2022
2023
25
0
2014
2015
2016
737 NG Committed Fleet
Cumulative Lease Extension Options
18
737 MAX Committed Fleet
Q400 NextGen fleet plan also builds in flexibility
50
43
45
40
34
30
25
23
25
14
5
20
10
16
20
20
20
20
2015
2016
2017
2018
8
0
2013
2014
Q400 NextGen Committed Fleet
19
Cumulative Purchase Options
Building on our capabilities
Airline partnerships: Expanding our network
•
•
•
•
21
Strategically selecting carriers in each major world region
Seamless access to more destinations
International travel options for the business traveller
Selective approach keeps costs in line
Enriching more lives across segments
Unbundled
Low Price Segment
Econo
Bundled Mid-Value Oriented
Flex
High-Value Oriented
Plus
Low fare bundle
Mid fare bundle
High fare bundle
Leisure
Business/Leisure
Business traveller primarily
Price
Lowest fare plus optional services
Low fare plus optional services
Higher fare with included
flexibility, conveniences, comfort
Product
Basic service from A to B, extras
for a fee
More value, some extras for a fee
Fully inclusive and fully flexible
Guest
proposition
Shop for the lowest price for VFR
or a low-cost vacation. Pay for
what you need.
You need some flexibility but are
still looking to save.
You don’t want to sweat the small
stuff. You need maximum
flexibility and a bit more room to
get the work done.
Guest Mix
22
Plus Fare seating
Reconfiguration was completed at the end of Q1 2013
166
136
119
174
18
18
18
166
119
136
101
737-600 737-600
Before
After
118
737-700 737-700
Before
After
Plus Seats
23
156
737-800 737-800
Before
After
Our Plus seating with extended legroom
24
The evolution of inflight entertainment
• February 2014: WestJet signed multi-year agreement with Panasonic for
new inflight entertainment & connectivity (IFEC) system
• New IFEC will feature wireless internet connectivity, live streaming
television, on-demand movies and more
• Installation to begin by the end of 2014 and installed on WestJet’s fleet
over next several years
• Key benefits include:
• Increased value proposition for business travellers – addition of Wi-Fi enables
guests to make their time in the air as productive as possible
• Increased efficiency – removing seatback monitors reduces aircraft weight and
increases fuel efficiency
• Guests can use their personal devices to access live and stored content, and
purchase packages
25
WestJet Encore
Market opportunities
Domestic + Transborder Regional (50+ seats) = $2.1b
Source: Internal estimates using public capacity and traffic information
27
Air Canada and partners serve double the number
of Canadian destinations versus WestJet
60
Canadian Destinations Served
50
40
30
20
10
Calgary
Deer Lake
Edmonton
Ft. McMurray
Gander
Halifax
Kelowna
Montreal
Ottawa Winnipeg
Regina
Saskatoon
St. Johns
Toronto
Vancouver
Victoria
Whitehorse
0
28
Air Canada Mainline (17
destinations)
Baie Comeau
Bathurst
Calgary
Castlegar
Charlottetown
Cranbrook
Deer Lake
Edmonton
Fredericton
Ft. McMurray
Ft. St. John
Gander
Gaspe
Goose Bay
Grande Prairie
Halifax
Iles De La
Madeleine
Kamloops
Kelowna
Kingston
Lethbridge
London
Medicine Hat
Moncton
Mont Joli
Montreal
Nanaimo
North Bay
Ottawa
Penticton
Prince George
Prince Rupert
Quebec
Red Deer
Regia
Rouyn-Noranda
Saguenay
Sandspit
Sarnia
Saskatoon
Sault Ste. Marie
Sept-Iles
Smithers
St. John
St. Johns
Sudbury
Sydney
Terrace
Thunder Bay
Timmins
Toronto
Toronto-City
Val D'Or
Vancouver
Victoria
Wabush
Whitehorse
Windsor
Winnipeg
Yellowknife
Air Canada Express (60
destinations)
WestJet Encore
Nanaimo
Fort St. John
Abbotsford
Calgary
Charlottetown
Comox
Deer Lake
Edmonton
Ft. McMurray
Grande Prairie
Halifax
Hamilton
Kamloops
Kelowna
Kitchener
London
Moncton
Brandon
Terrace
Montreal
Ottawa
Prince George
Quebec
Regina
Saskatoon
St. Johns
Sydney
Thunder Bay
Toronto
Vancouver
Victoria
Whitehorse
Windsor
Winnipeg
Yellowknife
WestJet (31 destinations)
WestJet Encore: significant network growth
YMM
YXJ
YQU
YXT
YXS
YEG
YXE
YVR
YCD
YYJ
YKA
YYC
YLW
August 2014:
100 departs at 18 stations
29
YQR
YWG
YBR
YQT
YYZ
WestJet Encore at maturity
•
•
•
Organizational structure: wholly owned subsidiary
Fleet size: up to 45 x 78-seat Q400 turboprop aircraft
Network and schedule
– National operation (Eastern and Western)
– Domestic and transborder operations
Type of flying
Description
New destinations
Flights to/from new destinations not currently served
by the WestJet network
Join the dots
Flights between existing destinations not currently
flown by WestJet
Schedule improvements
Flights on some existing short-haul routes that benefit
from increased frequency and higher load factors;
B737 flying will be redeployed to maximize the
network
30
Critical success factors remain the same
for WestJet Encore
Guest experience and low cost
31
Guest experience and culture
Low cost
• Consistent WestJet guest
experience
• Consistent WestJet values
• Maintain caring culture
• Engaged workforce
• Obtain meaningful and
sustainable cost advantage
vs. regional competitors
• Low fares to stimulate
demand and steal traffic
• Expand low-fare high-value
proposition to new markets
We have the financial strength
to put our strategy into action
Capital structure
1,500
6.0
5.0
4.0
3.0
2.0
1.0
0.0
$ million
1,200
900
600
300
0
2005
Cash
2006
2007
2008
Adj. Net Debt/ EBITDAR
2009
2010
2011
2012
2013
Adj. Debt/ Equity
At December 31, 2013
Net Cash
$1,256-mln
Cash to TTM Revenues
34%
Adj. Net Debt to EBITDAR
1.22x
*Note: 2010-13 presented under IFRS; 2009 and prior presented under previous Canadian GAAP.
Note: All figures are full-year figures based on trailing twelve months. Debt ratios include aircraft operating leases.
33
Ratio
Excess cash has been used to lower long term debt & buy back stock
34
Delta
American
Air Canada
American
Alaska
Spirit
JetBlue
0.0
Air Canada
1.0
United
1.53
JetBlue
3.0
Southwest
4.0
US Airways
Delta
Spirit
2.0
WestJet
Southwest
WestJet
Allegiant
Cash / LTM Revenue
Liquidity
40%
Alaska
Allegiant
Adj. Net Debt / EBITDAR
Leverage
Relative liquidity & leverage ratios – December 31, 2013
34.3%
30%
20%
10%
0%
# Shares
Initiated a $0.05 quarterly dividend,
November 2010; increased to:
$0.06 in February 2012
$0.08 in August 2012
$0.10 in February 2013
$0.12 in February 2014
35
Dividend per share
Q1/14
$0.00
Q4/13
120
Q3/13
$0.02
Q2/13
125
Q1/13
$0.04
Q4/12
130
Q3/12
$0.06
Q2/12
135
Q1/12
$0.08
Q4/11
140
Q3/11
$0.10
Q2/11
145
Q1/11
$0.12
Q4/10
150
Q3/10
# Shares (mln)
Returning value to shareholders – Dividend & NCIB
Dividend
Normal Course Issuer Bid
Completed first NCIB August 2011 for $106
million or $14.59 per share
Completed second NCIB November 2012 for
$112 million or $16.20 per share
Third bid expired February 18, 2014 – as of Dec.
31, 2013, repurchased over 70% of the 6.6 million
shares under the bid.
Summary – why invest in WestJet
•
•
•
•
•
36
Proven track record of profitable growth
Award-winning culture and highly engaged workforce
Strong brand in the marketplace and expanding airline partnerships
Attractive combination of planned growth and a strong balance sheet
Committed to generating and returning value to shareholders

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