j.p. morgan aviation, transportation & industrials …• buying 10 new boeing 737-800s in...
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J.P. Morgan Aviation, Transportation & Industrials Conference
March 10, 2014
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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%; ourBusiness Transformation Initiative; our 737 and Q400 fleet plans; the expected future benefits of the737 MAX and LEAP-1B engine to WestJet; WestJet Encore’s future opportunities and network growthplans; and the installation of our new in-flight entertainment system are forward-looking statementswithin the meaning of applicable Canadian securities laws.
By their nature, forward-looking statements are subject to numerous risks and uncertainties, some ofwhich are beyond WestJet’s control. Readers are cautioned that undue reliance should not be placed onforward-looking statements as actual results may vary materially from the forward-looking statementsdue 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 andrisks described in WestJet’s public reports and filings which are available under WestJet’s profile atwww.sedar.com.
Any forward-looking statements contained in this presentation and statements made during thispresentation represent WestJet’s expectations as of the date of this presentation and are subject tochange after such date. WestJet does not undertake to update, correct or revise any forward-lookingstatements as a result of any new information, future events or otherwise, except as may be requiredby law.
March 2014
Caution regarding forward-looking information
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This presentation contains disclosure respecting non-GAAP financial measures including, withoutlimitation, return on invested capital; CASM, excluding fuel and employee profit share; adjustedearnings before tax margin; adjusted net debt to earnings before interest, taxes, depreciation andaircraft rent (EBITDAR); adjusted net debt to equity; and net cash. These measures are included toenhance the overall understanding of WestJet’s financial performance and to provide an alternativemethod for assessing WestJet’s operating results in a manner that is focused on the performance ofWestJet’s ongoing operations, and to provide a more consistent basis for comparison betweenreporting periods. These measures are not calculated in accordance with, or an alternative to, GAAPand do not have standardized meanings. Therefore, they may not be comparable to similar measuresprovided by other entities. Readers are urged to review the section entitled “Reconciliation of non-GAAP and additional GAAP measures” in WestJet’s management’s discussion and analysis of financialresults for the year ended December 31, 2013, which is available under WestJet’s profile atwww.sedar.com, for a further discussion of such non-GAAP measures.
Non-GAAP measures
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Reported in Canadian GAAP up to 2009 with 2005 to 2008 restatements. 2010 to 2013 reported under IFRS.
-50
0
50
100
150
200
250
19
96
19
97
19
98
19
99
20
00
20
01
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02
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20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Net Earnings ($ millions)
WestJet’s track record of profitability since inception
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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 .
13.9%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
2005 2006 2007 2008 2009 2010 2011 2012 Q1
2013
Q2
2013
Q3
2013
Q4
2013
Return on Invested Capital *
Sustainable goal
WestJet’s goal to generate 12% return on invested capital
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0
2,500
5,000
7,500
10,000
12,500
15,000
17,500
20,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
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Guests (thousands)
WestJet a profitable growth story
0
5,000
10,000
15,000
20,000
25,000
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
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Available Seat Miles (millions)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
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01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
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Revenues ($ millions)
77
88
99
Growth and strong financial performance continues
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Operating highlights – Q4 2013
Q4 2013 Q4 2012 Change
Net earnings (millions) $67.8 $60.9 11.3%
Diluted earnings per share $0.52 $0.46 13.0%
Total revenues (millions) $926.4 $860.6 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%
CASM, excl. fuel and employee profit share (cents)
9.29 9.32 (0.3%)
Earnings before tax margin 10.2% 9.9% 0.3 pts
Strong yield and earnings growth with higher margins
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Operating highlights – Full-year 2013
Full-year 2013 Full-year 2012 Change
Net earnings (millions) $268.7 $242.4 10.9%
Diluted earnings per share $2.03 $1.78 14.0%
Total revenues (millions) $3,662.2 $3,427.4 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%)
CASM, excl. fuel and employee profit share (cents)
9.06 9.12 (0.7%)
Earnings before tax margin 10.2% 9.9% 0.3 pts
Record net earnings and EPS reported in the full-year 2013
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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).
17.1%
14.7%
11.9%
10.2%
7.0% 6.8%
5.1% 5.0%
2.8%
0.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%S
pir
it
All
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JetB
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can
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Air
Ca
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2013 – adjusted EBT marginWestJet ranks 4th among leading North American peers
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Costs remain under control
8.57 8.29 8.45 8.80 8.85 9.12 9.06
3.50 4.70 3.20
3.50 4.32 4.50 4.34
2.20 1.70
1.20 1.00
1.21 1.70 1.67
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 2012 2013
cen
ts p
er
ASM
CASM (ex fuel and profit share) Profit Share Fuel Op. Margin
*IFRS basis
Excludes reservation system impairment of $31.9 million in 2007
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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
Aircraft utilization
and channel
efficiency
Productivity
Non-Operational
ExpensesPeople
Four key focus areas:
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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
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737 Boeing MAX purchase agreement
• 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
Growing our fleet and improving costs
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105 98 97 92 88 83 80 76 76 76
11 23 29 34 39 4414 22 28
32 37
40 44 44
44
107 112 119
124 131
143 149 154
159 164
0
25
50
75
100
125
150
175
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
737 NG Committed Fleet 737 MAX Committed Fleet
Cumulative Lease Extension Options
Measured growth - 737 flexible fleet planincluding fleet modernization
120
19
8
1620 20 20 20
5
14
23 25
0
10
20
30
40
50
2013 2014 2015 2016 2017 2018
Q400 NextGen Committed Fleet Cumulative Purchase Options
25
34
43 45
Q400 NextGen fleet plan also builds in flexibility
Building on our capabilities
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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
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Enriching more lives across segments
Low Price SegmentEcono
Mid-Value OrientedFlex
High-Value OrientedPlus
Guest MixLow 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
Guestproposition
Shop for the lowest price for VFRor 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.
� Unbundled Bundled�
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119101
136118
166 156
18
18
18
737-600
Before
737-600
After
737-700
Before
737-700
After
737-800
Before
737-800
After
Plus Seats
119136
166174
Plus Fare seating
Reconfiguration was completed at the end of Q1 2013
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Our Plus seating with extended legroom
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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
WestJet Encore
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Market opportunitiesDomestic + Transborder Regional (50+ seats) = $2.1b
Source: Internal estimates using public capacity and traffic information
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Air Canada and partners serve double the number of Canadian destinations versus WestJet
0
10
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Air Canada Mainline (17
destinations)
Air Canada Express (60
destinations)
WestJet (31 destinations)
Ca
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est
ina
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ns
Se
rve
d
CalgaryDeer LakeEdmontonFt. McMurrayGanderHalifaxKelownaMontreal
OttawaReginaSaskatoonSt. JohnsTorontoVancouverVictoriaWhitehorse
Winnipeg
Baie ComeauBathurstCalgaryCastlegarCharlottetownCranbrookDeer LakeEdmontonFrederictonFt. McMurrayFt. St. JohnGanderGaspeGoose BayGrande PrairieHalifaxIles De La MadeleineKamloopsKelownaKingstonLethbridgeLondonMedicine HatMonctonMont JoliMontrealNanaimoNorth BayOttawa
PentictonPrince GeorgePrince RupertQuebecRed DeerRegiaRouyn-NorandaSaguenaySandspitSarniaSaskatoonSault Ste. MarieSept-IlesSmithersSt. JohnSt. JohnsSudburySydneyTerraceThunder BayTimminsTorontoToronto-CityVal D'OrVancouverVictoriaWabushWhitehorseWindsorWinnipegYellowknife
AbbotsfordCalgaryCharlottetownComoxDeer LakeEdmontonFt. McMurrayGrande PrairieHalifaxHamiltonKamloopsKelownaKitchenerLondonMoncton
MontrealOttawaPrince GeorgeQuebecReginaSaskatoonSt. JohnsSydneyThunder BayTorontoVancouverVictoriaWhitehorseWindsorWinnipegYellowknife
NanaimoFort St. John
BrandonTerrace
WestJet Encore
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WestJet Encore: significant network growth
YXT
YCD
YYJ
YLW
YKA
YXS
YXJ
YQU
YEG
YMM
YXE
YQRYBR
YWG
YQT
YYZAugust 2014:
100 departs at 18 stations
YYCYVR
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WestJet Encore at maturity
Type of flying Description
New destinationsFlights to/from new destinations not currently served by the WestJet network
Join the dotsFlights 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
• 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
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Critical success factors remain the same for WestJet Encore
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
Guest experience and low cost
We have the financial strengthto put our strategy into action
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Capital structureExcess cash has been used to lower long term debt & buy back stock
0.0
1.0
2.0
3.0
4.0
5.0
6.0
0
300
600
900
1,200
1,500
2005 2006 2007 2008 2009 2010 2011 2012 2013
Ra
tio
$ m
illio
n
Cash Adj. Net Debt/ EBITDAR 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.
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Relative liquidity & leverage ratios – December 31, 2013
34.3%
0%
10%
20%
30%
40%
Alle
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We
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sh /
LT
M R
eve
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1.53
0.0
1.0
2.0
3.0
4.0
Alle
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Air
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et
De
bt
/ E
BIT
DA
R
Liquidity
Leverage
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Returning value to shareholders – Dividend & NCIB
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
120
125
130
135
140
145
150Q
3/1
0
Q4
/10
Q1
/11
Q2
/11
Q3
/11
Q4
/11
Q1
/12
Q2
/12
Q3
/12
Q4
/12
Q1
/13
Q2
/13
Q3
/13
Q4
/13
Q1
/14
Div
ide
nd
pe
r sh
are
# S
ha
res
(mln
)
# Shares Dividend
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
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.
36
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