2010 RBC Transportation and Industrials Conference December 1, 2010 - PowerPoint PPT Presentation

2010 RBC Transportation and Industrials Conference December 1, 2010

FORWARD-LOOKING STATEMENT Certain information in this presentation and oral statements made during this presentation, including any question and answer session, may contain forward-looking statements, including but not limited to our strategy, partnerships, business fare products, our rewards program including our credit card and frequent guest program, growth drivers and expansion plans for WestJet and WestJet Vacations Inc. (WVI), capacity growth and fleet expansion, fleet and cost efficiencies, hedging activities and risk management. These forward-looking statements are subject to, and may be affected by, numerous risks and uncertainties which may cause WestJet’s actual results may differ materially from a conclusion, forecast or projection expressed in or implied by such statements. Material risks and the material factors and assumptions applied in formulating these, and the material factors that could cause actual results to differ from the forward-looking statements, are discussed in our public reports and filings which are available under WestJet’s profile on SEDAR (www.sedar.com) and include, but are not limited to: changes in government policy, exchange rates, interest rates, disruption of supplies, volatility of fuel prices, terrorism, general economic conditions, the competitive environment and other factors. Forward-looking statements are subject to change and WestJet does not undertake to update or revise any forward-looking information as a result of any new information, future events or otherwise, except as required by applicable law. December 1, 2010 2

WHAT MAKES WESTJET DIFFERENT? • Consistently one of the most profitable airlines in North America • One of Canada’s most admired corporate cultures • Provides a world-class guest experience • Having fleet flexibility and seasonal deployment strategy • Scheduled service and vacation packages • Consistently one of the lowest- cost operators in North America 3

STRATEGY - Working since day one By 2016, WestJet will be one of the five most successful international airlines in the world People WestJet Single fleet Vacations and type Culture Revenue Costs Rewards and and Cost efficiency program Growth Margins Guest Experience Business and Risk traveller management Performance 4

Building on our capabilities

BUSINESS TRAVELLER Building strength in this high-yield market Airline partnerships Business Fare Products Many items that we may choose to bundle together but yet to be determined: Opening the world up to our guests: • Refundable tickets • Providing the business traveller with • Pre-reserved seating international travel options • Waive change and cancel fees • Incremental revenue opportunities • Ability to early show • Select strategic carriers in each major world • Buy-on-board region • Lounge access • Continue implementing new partnerships • Other new initiatives throughout 2011 6

REWARDS PROGRAM Straight to the bottom line Credit card Frequent Guest Program Appeals to the mass market: Appeals to the high frequency traveller: • Fully accretive to WestJet • Simple and transparent program • Strong partnership with RBC for awareness • Targeted at the traveller doing four to 40 • Simple and transparent trips per year • Two types of cards; different earning power • Aims to capture additional high-yielding • Uptake is in-line with expectations guests • Uptake is in-line with expectations 7

MARKET SHARE GROWTH DRIVERS Currently serving a portion of addressable market 50 • Growing brand strength 45 • Guest experience 40 • Culture 35 • WestJet Vacations ) % ( 30 e • Rewards program r a h 25 t S • Airline partnerships e k 20 r a • New destinations M 15 • New non-stops 10 • Increased frequencies 5 0 4 5 6 7 8 9 0 1 2 3 4 5 6 0 0 0 0 0 0 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 Domestic Transborder International • Capacity-share calculation based on data from IATA-SRS. 8 • Mexico / Caribbean capacity share does not include charters.

WESTJET VACATIONS Leveraging our strengths in a new marketplace Estimated leisure market size in Canada •One of the fastest growing vacation 25 operators in Canada 20 Outside of current •Large market opportunity available to scope; might be able to capture a $10.9 15 capture small percentage of $ b n this segment 10 •Integrated approach with WestJet taps $5.0 WestJet Vacations addressable market multiple demand streams 5 segments are ITC $5.0 and FIT 0 •Competitive advantage with flexible Outbound Domestic Market Size product combinations and scheduled ITC Market FIT Market Leisure Retail Market service to all destinations allowing more Source: internal estimates booking options FIT – Flexible itinerary travel ITC – Inclusive 9

MEASURED CAPACITY GROWTH Flexible fleet expansion until 2017 Compounded average annual growth rate: 35000 Min ~4%, Max ~ 7% 30000 25000 ) s n 3% 18% 10 - 11% o i 20000 l l m i ( s M 15000 S A 10000 5000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 106 Aircraft 135 Aircraft Leased 24 33 38 43 44 44 44 44 44 44 Owned 52 53 53 54 58 64 70 80 88 91 Total confirmed fleet 76 86 91 97 102 108 114 124 132 135 Net change in aircraft - 10 5 6 5 6 6 10 8 3 Lease expiries - - - - - 3 - 12 8 6 10

Becoming one of the lowest-cost carriers in North America

SINGLE FLEET – BOEING NG 737 Keeping efficiency high A single fleet and single class of service: • Simplifies operations • Enhances operational productivity • Offers an operating cost advantage • Provides more consistent guest experience 12

COST EFFICIENCY Removing costs where possible 90.0% Cost efficiencies have led to low 85.0% break-even load factor 80.0% 75.0% • Cost efficiencies are driven by: 70.0% 65.0% - High utilization of aircraft 60.0% - High employee productivity Air Tran Air Canada Southwest JetBlue American US Airways Delta United Allegiant WestJet Alaska - Single-fleet efficiencies - Ownership culture - Disciplined focus on expenditures YTD Q3 2010 Load Factor YTD Q3 2010 Break-even Load Factor Source: Internal estimates, company reports 13

RISK MANAGEMENT Protecting against external volatility • Fuel price volatility - fuel is approximately 20% hedged for next 12 months - combination of CAD$ WTI and USGC JET swaps, collars and call options - CAD$ is partially a natural hedge against WTI • Foreign exchange volatility - Aircraft debt repayments fixed in CAD$ for term of debt - Next 12 month aircraft US$ leasing costs approximately 90% hedged into CAD$ Interest rate volatility - Long-term aircraft debt has fixed interest rates averaging 5.3% 14

We have the financial strength to put our strategy into action

PROFITABLE 54 OF 56 QUARTERS Some of the best margins in the industry 16 YTD FY 3 yr 5 yr Q3 2009 Avg. Avg. 1.7 14 2.2 2010 2007- 1.9 2005- 1.2 (cents per ASM) 0.9 1.2 2009 12 2009 4.7 3.5 3.4 3.3 3.5 RASM 3.2 10 13.20 12.97 14.16 13.87 (cents) 8 CASM 12.04 11.77 12.43 12.29 (cents) 6 Operating 8.9 8.7 8.7 8.5 8.5 8.5 8.8% 9.2% 11.6% 11.0% 4 Margin 2 Earnings Before Tax 11.1% 6.0% 9.0% 7.9% 0 Margin 2005 2006 2007 2008 2009 9M 2010 Return on Invested 8.1% 7.8% 11.6% 11.0% Capital CASM (ex fuel) Fuel Op. Margin (TTM) • Excludes reservation system impairment of $31.9 million in 2007 16

FINANCIAL HIGHLIGHTS Among top performer in North American airline industry $3,000 Q3 YTD 2010 Operating Margin $2,500 18.00% 16.00% Revenue (m illions) $2,000 14.00% 12.00% $1,500 10.00% 8.00% $1,000 6.00% 4.00% $500 2.00% 0.00% WestJet Continental JetBlue Delta United Alaska Air Tran Air Canada American $0 Allegiant Southwest US Airways '01 '02 '03 '04 '05 '06 '07 '08 '09 '10* * 2010 revenue estimates per CIBC Nov 3, 2010 Institutional Equity Research Earnings Update report. 17 2005 to 2008 numbers restated.

FINANCIAL SECURITY Cash grows while net debt shrinks 1400 6 1200 5 At September 30, 2010: 1000 4 - Cash of C$1,218 million $ millions 800 times - Cash to trailing 12 months of revenues 3 600 ratio of 49% 2 - Current ratio of 1.50x 400 - Adjusted debt to equity ratio of 1.38x 1 200 - Adjusted net debt to EBITDAR of 1.81x 0 0 2005 2006 2007 2008 2009 Q3 2010 Cash Adj. net Debt/EBITDAR Adj. Debt/Equity Note: All figures are full-year figures, except for 2010 data. 18 Debt ratios include aircraft operating leases.

Dividend & NCIB Returning Capital to Shareholders Initiated a quarterly dividend • $0.05 per share for 1 st quarterly payout • S/H on record at Dec 15, 2010, paid out Jan 21, 2011 • Track record - consistent generation of positive Cash Flow NCIB / Share buy-back • TSX approved 7,264,820 shares or ~ 5% • Program to run from Nov 5, 2010 to Nov 4, 2011 • Purchase on open market and cancel 19

Other Items • IFRS conversion Jan 1, 2011 • Guidance: – Q4 2010: • ASM growth of 13 - 14% • CASM (ex-fuel and profit share) flat – FY 2011: • ASM growth of 6 - 8% • Capex of $110 – 130 million 20