Scotiabank Transportation & Aerospace Conference November 19, 2013
CAUTION REGARDING FORWARD-LOOKING INFORMATION Certain statements set forth in this presentation and statements made during this presentation, including, without limitation, information respecting our ROIC target of a sustainable 12%; the expected future benefits of the 737 MAX and LEAP-1B engine to WestJet; our 737 and Q400 fleet plans; our goal for inflight entertainment and connectivity and the associated features; and future opportunities of WestJet Encore 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. November 2013 2
WESTJET S TRACK RECORD OF PROFITABILITY SINCE INCEPTION Net Earnings ($ millions) 250 200 150 100 50 0-50 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Reported in Canadian GAAP up to 2009 with 2005 to 2008 restatements. 2010 to 2012 reported under IFRS. 3
WESTJET S GOAL TO GENERATE 12% RETURN ON INVESTED CAPITAL Return on Invested Capital* 15% 14% 13.8% 13% 12% 11% Sustainable goal Goal 10% 9% 8% 7% 6% 5% 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Q2 2013 Q3 2013 Note: 2010 to 2013 presented under IFRS; 2009 and prior presented under previous Canadian GAAP. * Based on a trailing 12 month basis before tax. 4
WESTJET A PROFITABLE GROWTH STORY 20,000 17,500 15,000 12,500 10,000 7,500 5,000 2,500 0 Guests (thousands) Available Seat Miles (millions) 25,000 20,000 15,000 10,000 5,000 0 Revenues ($ millions) 5 2011 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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GROWTH AND STRONG FINANCIAL PERFORMANCE CONTINUES
OPERATING HIGHLIGHTS Q3 2013 Strong net earnings reported in the third quarter 2013 Q3 2013 Q3 2012 Change Net earnings (millions) $65.1 $70.6 (7.8%) Diluted earnings per share $0.50 $0.52 (3.8%) Total revenues (millions) $924.8 $866.5 6.7% RASM (revenue per available seat mile) (cents) 15.14 15.76 (3.9%) Fuel costs per litre (dollars) $0.92 $0.90 2.2% CASM, excl. fuel and employee profit share (cents) 8.96 9.10 (1.5%) Earnings before tax margin 9.8% 11.6% (1.8 pts) 10
YTD 2013 ADJUSTED EBT MARGIN WESTJET RANKS 4th AMONG LEADING NORTH AMERICAN PEERS 20% 18% 16% 17.7% 17.5% 15.7% 14% 12% 10% 10.1% 8% 6% 4% 2% 7.4% 7.4% 6.7% 5.0% 3.5% 2.7% 0% Spirit Alaska Allegiant WestJet Delta US Airways Southwest JetBlue American United YTD 2013 adjusted EBT Margin per reported results as at September 30, 2013 (adjusted for special items and non-op mark-tomarket hedge gains/losses). 11
COSTS REMAIN UNDER CONTROL 18 cents per ASM 16 14 12 10 8 6 4 2 0 1.70 1.70 1.65 2.20 1.21 1.00 1.20 4.50 3.50 4.70 4.32 4.32 3.50 3.20 8.57 8.29 8.45 8.80 8.85 9.12 8.99 2007 2008 2009 2010 2011 2012 YTD 2013 CASM (ex fuel and profit share) Profit Share Fuel Op. Margin 12 *IFRS basis Excludes reservation system impairment of $31.9 million in 2007
BUSINESS TRANSFORMATION INITIATIVE Original target to reduce costs by $100 million by the end of 2015 As of Q3 2013, identified and put into action measures that will enable us to reach this goal 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: Aircraft utilization and channel efficiency Productivity Non-Operational Expenses People 13
MODERNIZING OUR FLEET - SALE TO SOUTHWEST Selling 10 of our oldest Boeing 737-700s in 2014 & 2015 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 14
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 15
MEASURED GROWTH - 737 FLEXIBLE FLEET PLAN INCLUDING FLEET MODERNIZATION 175 150 125 100 105 105 1 110 117 122 13 21 27 141 129 36 31 147 152 157 162 42 42 39 42 4 11 23 29 34 39 44 16 75 50 25 0 105 104 97 96 91 87 82 79 76 76 76 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 737 NG Committed Fleet 737 MAX Committed Fleet Cumulative Lease Extension Options 120
Q400 NEXTGEN FLEET PLAN ALSO BUILDS IN FLEXIBILITY 50 43 45 40 30 20 25 5 34 14 23 25 10 0 16 20 20 20 20 8 2013 2014 2015 2016 2017 2018 Q400 NextGen Committed Fleet Cumulative Purchase Options 17
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 19
ENRICHING MORE LIVES ACROSS SEGMENTS Unbundled Bundled Low Price Segment Econo Mid-Value Oriented Flex High-Value Oriented Plus Guest Mix Low fare bundle Leisure Mid fare bundle Business/Leisure High fare bundle 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. 20
PLUS FARE SEATING Reconfiguration was completed end of Q1 2013 136 166 174 18 119 18 119 18 101 136 118 166 156 737-600 Before 737-600 After 737-700 Before 737-700 After 737-800 Before 737-800 After Plus Seats 21
22 OUR PLUS SEATING WITH EXTENDED LEGROOM
WESTJET ENCORE
MARKET OPPORTUNITIES REGIONAL (50+ seats) = $2.1B DOMESTIC + TRANSBORDER 24 Source: Internal estimates using public capacity and traffic information
Canadian Destinations Served 25 AIR CANADA AND PARTNERS SERVE DOUBLE THE NUMBER OF CANADIAN DESTINATIONS VERSUS WESTJET 60 50 40 30 20 10 0 17 Destinations Calgary Deer Lake Edmonton Ft. McMurray Gander Halifax Kelowna Montreal Ottawa Winnipeg Regina Saskatoon St. Johns Toronto Vancouver Victoria Whitehorse 60 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 WestJet Encore Nanaimo Fort St. John 31 Destinations Abbotsford Calgary Charlottetown Comox Deer Lake Edmonton Ft. McMurray Grande Prairie Halifax Hamilton Kamloops Kelowna Kitchener London Moncton Air Canada Mainline Air Canada Express WestJet Brandon Terrace Montreal Ottawa Prince George Quebec Regina Saskatoon St. Johns Sydney Thunder Bay Toronto Vancouver Victoria Whitehorse Windsor Winnipeg Yellowknife
WESTJET ENCORE: SIGNIFICANT NETWORK POTENTIAL YXT YXJ YQU YEG YCD YYJ YVR YYC YXE YQR YBR Encore launch: 30 departs at 9 stations Potential new stations Potential existing stations 26
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 27
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 28
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 1,500 5.0 $ million 1,200 900 600 4.0 3.0 2.0 300 1.0 0 0.0 2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013 Q2 2013 Q3 2013 Ratio Cash Adj. Net Debt/ EBITDAR Adj. Debt/ Equity At September 30, 2013 Net Cash C$1,233-mln Cash to TTM Revenues 34% Adj. Net Debt to EBITDAR 1.16x 30 *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.
31 RELATIVE LIQUIDITY & LEVERAGE RATIOS September 30, 2013 40% 30% 20% 10% 0% 34% Leverage Liquidity Spirit WestJet Allegiant US Airways Southwest JetBlue American United Delta Cash / LTM Revenue 6 4 2 1.16 0 Adj. Net Debt / EBITDAR Allegiant Alaska Southwest WestJet Spirit Delta Air Canada American US Airways United JetBlue
RETURNING VALUE TO SHAREHOLDERS Dividend & NCIB 145 $0.10 # Shares (mln) 140 135 130 125 $0.08 $0.06 $0.04 $0.02 Dividend per share 120 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 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 Q1/12 Q2/12 Q3/12 # Shares Dividend Q4/12 Q1/13 Q2/13 Q3/13 $0.00 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 TSX approved up to 6.6 million share NCIB or ~5%, announced on February 14, 2013. 32
GUIDANCE 1 Q4/13 FY 2013 FY 2014 RASM CASM (ex fuel & profit share) Fuel cost per litre Roughly flat compared with Q4 2012 90 to 92 cents Down approximately 0.5% Flat to up 1.0% Effective Tax Rate 27% to 29% 27% to 29% Capital Expenditures Approximately $720 million $580 to $600 million System capacity Up 7.0 to 7.5% Up 8.0% to 8.5% Up 4.0 to 6.0% Domestic capacity Up 4.0% to 4.5% Up 4.5% to 5.0% (1) Provided in conjunction with release of Q3 2013 results on November 5, 2013. 33
SUMMARY WHY INVEST IN WESTJET 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 34