FOR IMMEDIATE RELEASE WestJet announces 18th consecutive quarter of profitability Airline reports third quarter net earnings of $31.4 million CALGARY, ALBERTA. November 4, 2009. WestJet (TSX:WJA) today announced third quarter results for 2009. The airline reported net earnings of $31.4 million or 24 cents per diluted share; this compared to the third quarter of 2008 net earnings of $57.9 million or 45 cents per diluted share. We are extremely happy to have once again turned a difficult economic period into another profitable quarter, said WestJet President and CEO Sean Durfy. For more than a year now, economic instability has been eroding consumer confidence. The third quarter saw continued scrutiny from price-sensitive Canadians, resulting in airlines stimulating demand through aggressive pricing. Regardless, we believe we will produce margins that are among the best in North America. Our success this quarter, and every quarter, is a direct result of the efforts and abilities of WestJetters who are committed to ensuring guests receive the best value for their hard-earned dollars. WestJet reported an operating margin of 12.8 per cent, compared to 14.0 per cent in the third quarter of 2008. WestJet s third quarter 2009 pre-tax margin was 8.3 per cent, compared to 11.5 per cent in the same 2008 period. Relief from significantly lower fuel costs, compared to the same period in 2008, considerably off-set our drop in revenue, added Sean Durfy. Our ability to successfully stimulate demand while keeping our controllable costs in line played an important part in our strong margins. Operating highlights (stated in Canadian dollars) Q3 2009 Q3 2008 Change Year-todate 2009 date 2008 Year-to- Change Net earnings (millions) $31.4 $57.9 (45.7%) $78.0 $136.5 (42.8%) Diluted earnings per share $0.24 $0.45 (46.7%) $0.61 $1.04 (41.3%) Revenue (millions) $600.6 $718.4 (16.4%) $1,711.1 $1,933.7 (11.5%) ASM (available seat miles) (billions) 4.503 4.551 (1.1%) 13.175 12.851 2.5% RPM (revenue passenger miles) (billions) 3.587 3.705 (3.2%) 10.374 10.402 (0.3%) Load factor 79.7% 81.4% (1.7 pts.) 78.7% 80.9% (2.2 pts.) Yield (revenue per revenue passenger mile) (cents) 16.74 19.39 (13.7%) 16.49 18.59 (11.3%) RASM (revenue per available seat mile) (cents) 13.34 15.78 (15.5%) 12.99 15.05 (13.7%) CASM (cost per available seat mile) (cents) 11.63 13.58* (14.4%) 11.66 13.23* (11.9%) CASM, excluding fuel and employee profit share (cents) 8.16 7.96* 2.5% 8.37 8.14* 2.8% *The 2008 comparatives have been restated due to a change in accounting policy. Throughout the quarter, we remained committed to our strategy, stated Sean Durfy. The recent successful cutover to our new reservation system was a major milestone for our airline. This transition from our old system to our new system has been difficult on our guests and our people. We are
extremely appreciative of our guests, who have shown tremendous loyalty and patience, as we implement changes that will enhance the benefits we can provide. We offer a heartfelt apology for this inconvenience and assure you that we will be back to our high standards of excellent service very soon. Sean Durfy continued, Our new reservation system provides the capabilities necessary to properly support our growing business and deliver on key strategic initiatives like attracting more business travellers, increasing ancillary revenue and enabling airline partnerships. Completing a project of this magnitude was no small feat, and it wouldn t have been possible without our hard-working team of WestJetters who are extremely invested in the success of our airline. In the third quarter, WestJet revised its aircraft delivery schedule and completed an equity offering that brought the airline s cash balance to $961.6 million. The challenges that we encountered leading up to the end of the third quarter are creating a lot of uncertainty around the remainder of 2009 and into 2010, explained Sean Durfy. We smoothed our aircraft delivery schedule, enhanced flexibility around our fleet and capacity, and added 14 more aircraft to our future growth plans. Our equity offering strengthened our balance sheet and provided an additional level of comfort for meeting our future growth commitments. Throughout the remainder of the year, WestJet will implement its Frequent Guest Program and cobranded credit card program; continue to grow its vacations business, which is already seeing year-todate revenue improvements of over 80 per cent; and take delivery of an additional five aircraft for an end-of-year fleet size of 86. Capacity for the fourth quarter is expected to increase two to three per cent, with all new capacity being deployed into our transborder and international markets, said Sean Durfy. We have enhanced our winter schedule with 10 new sun destinations, and bookings for WestJet Vacations remain strong. We are encouraged by talks of recovery, commented Sean Durfy. In the past six to eight weeks, we have seen indications that RASM declines have levelled off, and we are seeing signs of improvement from what we were previously experiencing. While it is still too early to predict the strength or speed of a potential recovery, we feel optimistic about the future and the continued success of our airline. WestJet also reported third quarter improvements for all three categories of operational performance. WestJet calculates its on-time performance and completion rate based on the U.S. Department of Transportation's standards. WestJet's baggage ratio represents the number of delayed or lost baggage claims made per 1,000 guests. The airline strives to be one of the top North American airlines for these three operational performance metrics. Q3 2009 Q3 2008 Change Year-todate 2009 Year-todate 2008 Change On-time performance 87.5% 83.8% 3.7 pts. 83.2% 79.7% 3.5 pts. Completion rate 99.5% 99.4% 0.1 pts. 98.9% 98.9% - Bag ratio 3.04 3.40 10.6% 3.32 3.94 15.7% Caution regarding forward-looking statements Certain information set forth in this press release, including but not limited to information regarding WestJet's operational plans for the remainder of 2009, capacity projections, new winter schedule, anticipated aircraft delivery schedule, implementation of strategic programs and projections as to RASM in the fourth quarter of 2009, contain 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 currently available implementation plans, agreements and bookings, but may vary due to factors including, but
not limited to, delay in aircraft delivery, change in customer demand, general economic conditions, H1N1 impact and availability of personnel and outside consultants. These and additional risk factors are discussed in WestJet's most recent Annual Information Form (AIF) and in other documents WestJet files from time to time with securities regulatory authorities, which are available through the Internet on WestJet's SEDAR 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 any forwardlooking statements, except as is required by law. The Management's Discussion and Analysis and Consolidated Financial Statements and Notes for the three and nine months ended, 2009, are available through the Internet on westjet.com or WestJet's SEDAR profile at www.sedar.com. Conference call WestJet will hold its quarterly analysts' conference call today at 9 a.m. MST (11 a.m. EST). WestJet President and CEO Sean Durfy, and Executive Vice-President of Finance and CFO Vito Culmone, will discuss WestJet's third quarter 2009 results and answer questions from financial analysts. The conference call is available by calling 1-416-644-3417 (in Toronto) or through the toll-free telephone number 1-800-733-7560. The call can also be heard live through an Internet webcast in the Media and Investors section of westjet.com. About WestJet WestJet is Canada's preferred airline, offering scheduled service throughout its 66-city North American and Caribbean network. Named one of Canada's most admired corporate cultures in 2005, 2006, 2007 and 2008, WestJet pioneered low-cost flying in Canada. WestJet offers increased legroom, leather seats and live seatback television provided by Bell TV on its modern fleet of 81 Boeing Next-Generation 737 aircraft. With future confirmed deliveries for an additional 54 aircraft through 2016, WestJet strives to be one of the five most successful international airlines in the world. For additional information, please contact: WestJet Media Relations 1-888-WJ 4 NEWS (1-888-954-6397) Email: ropalmer@westjet.com Website: www.westjet.com -30- WestJet Investor Relations 1-877-493-7853 Email: investor_relations@westjet.com
Consolidated Statement of Earnings (Stated in thousands of Canadian dollars, except per share amounts) Three months ended Nine months ended Revenues: Guest revenues $ 557,413 $ 656,782 $ 1,539,756 $ 1,739,787 Charter and other revenues 43,217 61,593 171,322 193,936 600,630 718,375 1,711,078 1,933,723 Expenses: Aircraft fuel 150,648 244,544 421,716 625,871 Airport operations 84,131 84,635 260,432 250,856 Flight operations and navigational charges 78,327 72,945 225,449 210,817 Marketing, general and administration 52,034 54,145 153,657 150,789 Sales and distribution 41,721 43,717 121,943 129,857 Depreciation and amortization 36,072 35,000 104,467 101,656 Inflight 26,155 27,018 85,338 79,404 Aircraft leasing 26,676 22,799 78,858 63,340 Maintenance 22,414 21,826 72,388 60,949 Employee profit share 5,476 11,453 12,378 26,787 523,654 618,082 1,536,626 1,700,326 Earnings from operations 76,976 100,293 174,452 233,397 Non-operating income (expense): Interest income 965 6,077 4,047 19,861 Interest expense (16,729) (18,947) (51,340) (57,628) Gain (loss) on foreign exchange (7,140) 6,249 (11,552) 10,246 Loss on disposal of property and equipment (140) (93) (853) (226) Loss on derivatives (4,329) (10,995) (989) (10,995) (27,373) (17,709) (60,687) (38,742) Earnings before income taxes 49,603 82,584 113,765 194,655 Income tax expense: Current 710 92 2,102 2,245 Future 17,475 24,616 33,660 55,930 18,185 24,708 35,762 58,175 Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480 Earnings per share: Basic $ 0.24 $ 0.45 $ 0.61 $ 1.06 Diluted $ 0.24 $ 0.45 $ 0.61 $ 1.04
Consolidated Balance Sheet (Stated in thousands of Canadian dollars), 2009 December 31, 2008 Assets Current assets: Cash and cash equivalents $ 961,648 $ 820,214 Accounts receivable 19,635 16,837 Future income tax 4,093 8,459 Prepaid expenses, deposits and other 42,068 53,283 Inventory 18,714 17,054 1,046,158 915,847 Property and equipment 2,320,989 2,269,790 Intangible assets 13,596 12,060 Other assets 58,246 71,005 $ 3,438,989 $ 3,268,702 Liabilities and shareholders equity Current liabilities: Accounts payable and accrued liabilities $ 198,995 $ 249,354 Advance ticket sales 301,581 251,354 Non-refundable guest credits 59,486 73,020 Current portion of long-term debt 165,107 165,721 Current portion of obligations under capital lease 555 395 725,724 739,844 Long-term debt 1,062,326 1,186,182 Obligations under capital lease 259 713 Other liabilities 17,393 24,233 Future income tax 276,052 241,740 2,081,754 2,192,712 Shareholders equity: Share capital 628,740 452,885 Contributed surplus 69,933 60,193 Accumulated other comprehensive loss (20,465) (38,112) Retained earnings 679,027 601,024 1,357,235 1,075,990 Commitments and contingencies $ 3,438,989 $ 3,268,702
Consolidated Statement of Shareholders Equity (Stated in thousands of Canadian dollars) Three months ended Nine months ended Share capital: Balance, beginning of period $ 453,862 $ 452,318 $ 452,885 $ 448,568 Issuance of shares pursuant to stock option plans 227 Stock-based compensation expense on stock options exercised 75 458 1,052 11,072 Stock-based compensation expense on executive share units exercised 569 569 Issued on public offering 172,463 172,463 Issuance of shares pursuant to employee share purchase plan 7,236 7,236 Share issue costs (7,456) (7,456) Tax effect of share issue costs 1,991 1,991 Shares repurchased (7,091) 628,740 452,776 628,740 452,776 Contributed surplus: Balance, beginning of period 65,000 55,394 60,193 57,889 Stock-based compensation expense 5,577 2,735 11,361 10,854 Stock-based compensation expense on stock options exercised (75) (458) (1,052) (11,072) Stock-based compensation expense on executive share unit settlement (569) (569) 69,933 57,671 69,933 57,671 Accumulated other comprehensive loss: Balance, beginning of period (18,534) (11,001) (38,112) (11,914) Other comprehensive income (loss) (1,931) 1,284 17,647 2,197 (20,465) (9,717) (20,465) (9,717) Retained earnings: Balance, beginning of period 647,609 515,735 611,171 455,365 Change in accounting policy (14,613) (10,147) (10,518) Shares repurchased (22,329) Net earnings 31,418 57,876 78,003 136,480 679,027 558,998 679,027 558,998 Total accumulated other comprehensive loss and retained earnings 658,562 549,281 658,562 549,281 Total shareholders equity $ 1,357,235 $ 1,059,728 $ 1,357,235 $ 1,059,728
Consolidated Statement of Comprehensive Income (Stated in thousands of Canadian dollars) Three months ended Nine months ended Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480 Other comprehensive income (loss), net of tax: Amortization of hedge settlements to aircraft leasing 350 350 1,050 1,050 Net unrealized gain (loss) on foreign exchange derivatives under cash flow hedge accounting (2009 net of tax $53 and $217; 2008 ($499) and ($779)) (138) 1,124 (294) 1,668 Reclassification of net realized gain on foreign exchange derivatives to net earnings (2009 net of tax nil and $1,576; 2008 $226 and $364) (506) (3,977) (837) Net unrealized gain (loss) on fuel derivatives under cash flow hedge accounting (2009 net of tax $2,493 and ($1,525)) (6,140) 316 3,443 316 Reclassification of net realized loss on fuel derivatives to net earnings (2009 net of tax ($1,673) and ($7,279)) 3,997 17,425 (1,931) 1,284 17,647 2,197 Total comprehensive income $ 29,487 $ 59,160 $ 95,650 $ 138,677
Consolidated Statement of Cash Flows (Stated in thousands of Canadian dollars) Three months ended Nine months ended Operating activities: Net earnings $ 31,418 $ 57,876 $ 78,003 $ 136,480 Items not involving cash: Depreciation and amortization 36,072 35,000 104,467 101,656 Amortization of other liabilities (860) (235) (1,749) (704) Amortization of hedge settlements 350 350 1,050 1,050 Unrealized loss on derivative instruments 2,653 402 1,020 402 Issuance of shares pursuant to employee share purchase plan 7,236 7,236 Loss on disposal of property and equipment 101 93 1,173 226 Stock-based compensation expense 5,577 2,735 11,361 10,854 Income tax credit receivable (1,952) Future income tax expense 17,475 24,616 33,660 55,930 Unrealized foreign exchange loss (gain) 7,985 (6,900) 7,121 (11,103) Change in non-cash working capital 24,811 (36,626) 12,705 98,243 132,818 77,311 254,095 393,034 Financing activities: Increase in long-term debt 33,835 101,782 Repayment of long-term debt (41,387) (54,945) (124,470) (137,827) Decrease in obligations under capital lease (99) (95) (294) (280) Issuance of shares 172,463 172,463 227 Share issue costs (7,456) (7,456) Shares repurchased (29,420) Increase in other assets (1,419) (4,084) Change in non-cash working capital 1,691 (689) 672 (2,895) 125,212 (23,313) 40,915 (72,497) Investing activities: Aircraft additions (24,065) (36,572) (108,261) (110,528) Other property and equipment and intangible additions (7,772) (27,285) (44,228) (63,497) Other property and equipment disposals 170 (31,837) (63,857) (152,489) (173,855) Cash flow from (used in) operating, financing and investing activities 226,193 (9,859) 142,521 146,682 Effect of foreign exchange on cash and cash equivalents (4,176) 4,382 (1,087) 6,273 Net change in cash and cash equivalents 222,017 (5,477) 141,434 152,955 Cash and cash equivalents, beginning of period 739,631 811,990 820,214 653,558 Cash and cash equivalents, end of period $ 961,648 $ 806,513 $ 961,648 $ 806,513 Cash interest paid $ 16,431 $ 18,849 $ 51,637 $ 57,822 Cash taxes paid $ 2,712 $ 428 $ 6,037 $ 1,790
Operating Highlights Three months ended Nine months ended 2009 2008 Change 2009 2008 Change ASMs 4,503,392,044 4,551,211,270 (1.1%) 13,175,067,069 12,850,828,937 2.5% RPMs 3,587,028,442 3,705,367,631 (3.2%) 10,373,856,153 10,402,104,231 (0.3%) Load factor 79.7% 81.4% (1.7 pts.) 78.7% 80.9% (2.2 pts.) Yield (cents) 16.74 19.39 (13.7%) 16.49 18.59 (11.3%) RASM (cents) 13.34 15.78 (15.5%) 12.99 15.05 (13.7%) CASM (cents) 11.63 13.58* (14.4%) 11.66 13.23* (11.9%) CASM, excluding fuel and employee profit share (cents) 8.16 7.96* 2.5% 8.37 8.14* 2.8% Fuel consumption (litres) 218,950,368 221,606,557 (1.2%) 642,244,113 629,609,487 2.0% Fuel costs per litre (dollars) 0.69 1.10 (37.3%) 0.66 0.99 (33.3%) Segment guests 3,654,097 3,749,679 (2.5%) 10,523,659 10,765,268 (2.2%) Average stage length (miles) 921 930 (1.0%) 922 918 0.4% Utilization (hours) 11.6 12.5 (7.2%) 11.8 12.4 (4.8%) Number of full-time equivalent employees at period end 6,062 6,275 (3.4%) 6,062 6,275 (3.4%) Fleet size at period end 81 76 6.6% 81 76 6.6% * Reconciliation of non-gaap measures to GAAP To supplement the consolidated financial statements presented in accordance with Canadian GAAP, WestJet uses various non- GAAP performance measures. These measures are provided to enhance the reader s overall understanding of WestJet s current financial performance and are included to provide investors and management with an alternative method for assessing the operating results in a manner that is focused on the performance of ongoing operations and to provide a more consistent basis for comparison between quarters. These measures are not in accordance with, or an alternative to, Canadian GAAP and do not have standardized meanings. Therefore, they are not likely to be comparable to similar measures presented by other entities. WestJet excludes the effects of aircraft fuel expense and employee profit share expense to assess the operating performance of the business. Fuel expense is excluded from operating results due to the fact that fuel prices are impacted by a host of factors outside WestJet s control, such as significant weather events, geopolitical tensions, refinery capacity and global demand and supply. Excluding this expense allows WestJet to analyze its operating results on a comparable basis. Employee profit share expense is excluded from operating results due to its variable nature and excluding this expense allows greater comparability. CASM, excluding fuel and employee profit share (Stated in thousands of Canadian dollars, except per unit amounts) Three months ended Nine months ended Operating expenses - GAAP $ 523,654 $ 618,082 $ 1,536,626 $ 1,700,326 Adjusted for: Aircraft fuel expense (150,648) (244,544) (421,716) (625,871) Employee profit share expense (5,476) (11,453) (12,378) (26,787) Operating expenses, excluding above items non-gaap $ 367,530 $ 362,085 $ 1,102,532 $ 1,047,668 ASMs 4,503,392,044 4,551,211,270 13,175,067,069 12,850,828,937 CASM, excluding above items (cents) non-gaap 8.16 7.96 8.37 8.14