BUILDING MOMENTUM J.P. Morgan Aviation, Transportation & Defense Conference March 4, 2013
FORWARD-LOOKING STATEMENT Certain information in this presentation and statements made during this presentation, including any question and answer session, may contain forward-looking information, as defined under applicable Canadian securities legislation. Our actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information. We can give no assurance that any of the events anticipated will transpire or occur or, if any of them do, what benefits or costs we will derive from them. By its nature, forward-looking information is subject to numerous risks and uncertainties including, but not limited to, the impact of general economic conditions, changing domestic and international airline industry conditions, volatility of fuel prices, terrorism, pandemics, currency fluctuations, interest rates, competition from other airline industry participants (including new entrants, capacity fluctuations and the pricing environment), labour matters, government regulations, stock market volatility, the ability to access sufficient capital from internal and external sources, and additional risk factors discussed in other documents we file from time to time with securities regulatory authorities, which are available on SEDAR at sedar.com or, upon request, without charge from us. Our assumptions and estimates relating to the forward-looking information referred to above are updated quarterly and, except as required by law, we do not undertake to update any other forwardlooking information. March 2013 2
WESTJET S TRACK RECORD OF PROFITABILITY SINCE INCEPTION Net Earnings (millions of dollars) 250 200 150 100 50 0-50 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Reported in Canadian GAAP up to 2009 with 2005-2008 restatements. 2010-2012 reported under IFRS. 3
GOAL TO GENERATE SUSTAINABLE 12% ROIC Return on Invested Capital* 14% 13% 12% 11% Sustainable goal 10% 9% 8% 7% 6% 5% 2005 2006 2007 2008 2009 2010 2011 2012 4 Note: 2010-2012 calculated under IFRS; 2009 & prior are calculated under Canadian GAAP * Based on trailing 12 month basis before tax
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GROWTH AND STRONG FINANCIAL PERFORMANCE CONTINUES
WESTJET A GROWTH STORY Revenue (millions of dollars) Available Seat Miles (millions) 4,000 25,000 3,500 3,000 20,000 2,500 15,000 2,000 1,500 10,000 1,000 500 5,000 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 8
PRICING POWER MOMENTUM 20 18 16 14 12 10 9 100% 90% 80% 70% 60% 50% Yield (cents) Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Load Factor % Load Factor % Yield (cents)
COSTS REMAIN UNDER CONTROL 18 16 cents per ASM 14 12 10 8 2.2 1.7 3.5 4.7 1.2 3.2 1.0 3.5 1.2 4.3 1.7 4.5 6 4 8.6 8.3 8.5 8.8 8.9 9.1 2 0 2007 2008 2009 2010 2011 2012 CASM (ex fuel and profit share) Profit Share Fuel Op. Margin 10 *IFRS basis Excludes reservation system impairment of $31.9 million in 2007
MEASURED GROWTH - 737 FLEXIBLE FLEET PLAN 140 130 120 110 109 118 15 126 23 132 135 29 33 100 90 80 70 60 100 105 106 103 103 103 102 50 2012 2013 2014 2015 2016 2017 2018 737 Committed Fleet Cumulative Lease Extension Options 11
Q400 NEXTGEN FLEET PLAN ALSO BUILDS IN FLEXIBILITY 50 43 45 40 34 30 25 14 23 25 20 16 7 10 0 18 20 20 20 14 7 2013 2014 2015 2016 2017 2018 Q400 NextGen Committed Fleet Cumulative Purchase Options 12
OPERATING HIGHLIGHTS FY 2012 Net Earnings - up 63% Operating Margin Expansion of 2.6 points Full-Year 2012 Full-Year 2011 Change Net earnings (millions) $242.4 $148.7 63.0% Diluted earnings per share $1.78 $1.06 67.9% Total revenues (millions) $3,427.4 $3,071.5 11.6% RASM (revenue per available seat mile) (cents) CASM, excluding fuel and employee profit share (cents) 15.53 14.50 7.1% 9.12 8.85 3.1% Fuel costs per litre (dollars) 0.92 0.89 3.4% Operating Margin 11.0% 8.4% 2.6 pts 13
2012 ADJUSTED EBT MARGIN WESTJET RANKS 4th AMONG NORTH AMERICAN PEERS 15% 13.7% 12.7% 11.8% 10% 5% 10.1% 4.3% 4.2% 4.0% 3.9% 0% 1.6% 0.6% 0.3% Allegiant Spirit Alaska Adjusted EBT Margin WestJet Delta JetBlue Southwest US Airways United American Air Canada 14 2012 adjusted EBT Margin per reported results (adjusted for special items and non-op realized hedge gains/losses)
BUILDING ON OUR CAPABILITIES
AIRLINE PARTNERSHIPS EXPANDING OUR NETWORK 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 16
ENHANCED EASTERN TRIANGLE SCHEDULE IMPROVED VALUE FOR BUSINESS TRAVELERS Expanded schedule Toronto to Montreal Montreal to Toronto Toronto to Ottawa Ottawa to Toronto Depart Arrive Depart Arrive 0700 0810 0700 0815 0800 0910 0800 0915 0900 1010 0900 1015 1200 1310 1200 1315 1400 1510 1400 1515 1600 1710 1600 1715 1730 1845 1700 1815 1830 1945 1800 1915 2000 2115 1930 2045 2245 2359 2030 2145 Depart Arrive Depart Arrive 0700 0800 0700 0759 0800 0900 0845 0959 0900 1000 0945 1100 1200 1302 1200 1259 1400 1500 1345 1459 1615 1715 1600 1659 1730 1830 1700 1759 1830 1930 1800 1859 2245 2345 2015 2130 17
INTRODUCTION OF SERVICE TO LAGUARDIA BUILDS ON THE EASTERN TRIANGLE STRATEGY Weekday Toronto to LaGuardia Weekday LaGuardia to Toronto 7:00 6:30 9:30 7:45 12:30 9:30 14:30 11:55 16:00 14:45 17:30 16:55 19:30 18:20 20:30 19:50 Through our partnership with Delta, WestJet is able to operate with optimal slot times. 18
THE VALUE OF FARE BUNDLES Unbundled Bundled Low Price Segment Econo Mid-Value Oriented Flex High-Value Oriented Plus Low fare bundle Mid fare bundle High fare bundle Guest Mix 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. 19
PLUS FARE SEATING Reconfiguration expected to be complete by end of Q1 2013 170 150 136 174 24 Guest seats 130 110 90 70 119 119 24 95 136 24 112 166 150 50 737-600 Before 737-600 After 737-700 Before 737-700 After 737-800 Before 737-800 After Economy Plus 20
WESTJET ENCORE
MARKET OPPORTUNITIES REGIONAL (50+ seats) = $2.1B DOMESTIC + TRANSBORDER 22 Source: Internal estimates using public capacity and traffic information
AIR CANADA AND PARTNERS SERVE DOUBLE THE NUMBER OF CANADIAN DESTINATIONS VERSUS WESTJET 17 Destinations Calgary Deer Lake Edmonton Ft. McMurray Gander Halifax Kelowna Montreal Ottawa Winnipeg Regina Saskatoon St. Johns Toronto Vancouver Victoria Whitehorse 59 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 Regina 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 31 Destinations Abbotsford Calgary Charlottetown Comox Deer Lake Edmonton Ft. McMurray Grande Prairie Halifax Hamilton Kamloops Kelowna Kitchener London Moncton Montreal Ottawa Prince George Quebec Regina Saskatoon St. Johns Sydney Thunder Bay Toronto Vancouver Victoria Whitehorse Windsor Winnipeg Yellowknife 23
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 New destinations Join the dots Schedule improvements Description Flights to/from new destinations not currently served by the WestJet network Flights between existing destinations not currently flown by WestJet 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 24
CRITICAL SUCCESS FACTORS REMAIN THE SAME FOR WESTJET ENCORE Guest experience and low cost Guest experience and culture Consistent WestJet guest experience Consistent WestJet values Maintain caring culture Engaged workforce Low cost 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 25
WE HAVE THE FINANCIAL STRENGTH TO PUT OUR STRATEGY INTO ACTION
CAPITAL STRUCTURE - EXCESS CASH HAS BEEN USED TO LOWER LONG TERM DEBT & BUY BACK STOCK 1,800 6.0 1,500 5.0 $ million 1,200 900 600 4.0 3.0 2.0 Ratio 300 1.0 0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 Cash Adj. Net Debt/ EBITDAR Adj. Debt/ Equity At December 31, 2012 Net Cash C$1,408-mln Cash to TTM Revenues 41% Adj. Net Debt to EBITDAR 0.86 x *2010-2012 presented under IFRS. Note: All figures are full-year figures based on trailing twelve months. Debt ratios include aircraft operating leases. 27
28 RELATIVE LIQUIDITY & LEVERAGE RATIOS December 31, 2012 50% 40% 41% 39% 30% 20% 32% 27% 17% 17% 17% 17% 10% 9% 0% Leverage Liquidity WestJet Allegiant Spirit Alaska US Airways Southwest JetBlue Air Canada Delta Cash / LTM Revenue 6 4 2 3.88 3.39 3.01 1.98 1.42 0 0.86 0.53 N/A Allegiant Alaska WestJet Southwest Spirit Delta Air Canada US Airways Adj. Net Debt / EBITDAR
RETURNING VALUE TO SHAREHOLDERS Dividend & NCIB 145 $0.10 # Shares (mln) 140 135 130 $0.08 $0.06 $0.04 Dividend per share 125 $0.02 120 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13* $0.00 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 # Shares Dividend Normal Course Issuer Bid Completed first NCIB August 9, 2011 for $106 million or $14.59 per share Completed second NCIB November 26, 2012 for $112 million or $16.20 per share TSX approved up to 6.6 million share NCIB or ~5%, announced on February 14, 2013. 29 * Dividend payable on March 28 to shareholders of record on March 13, 2013.
GUIDANCE Q1/13 FY 2013 RASM Moderate Growth CASM (ex fuel & profit share) Up 2% to 3% Up 2% to 3% Fuel cost per litre 94 to 96 cents Tax Rate 27% to 29% Capital Expenditures $140 to $150 million $430 to $450 million System capacity Up 5% to 6% Up 7.5% to 8.5% Domestic capacity Down 2% to 3% Up 5% to 6% 30
Target to reduce costs by $100 million over the next 36 months Four key focus areas for cost transformation Aircraft utilization and channel efficiency Productivity Non-Operational Expenses People 31
SUMMARY WHY INVEST IN WESTJET Earnings margins are consistently among the top tier in the industry 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 value and returning value to shareholders 32
For further information: Hugh Harley - Director, Investor Relations P: (403) 539-7594 E: hharley@westjet.com