January 20, 2011 - WestJet2011 CIBC Institutional Investor Conference ... * 2010 revenue estimates...
Transcript of January 20, 2011 - WestJet2011 CIBC Institutional Investor Conference ... * 2010 revenue estimates...
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2011 CIBC Institutional Investor ConferenceJanuary 20, 2011
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FORWARD-LOOKING STATEMENT
2
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.
January 20, 2011
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Growth Story Continues
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-
1.0
2.0
3.0
4.0
5.0
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Mil
es (
bil
lio
ns)
0%
10%
20%
30%
40%
50%
60%
70%
80%
Lo
ad F
acto
r %
ASMs RPMs Load Factor %
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14 Years of Growth
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WestJet Destinations Served*
8 8 9 12 1520 21 24 24 23 23 26 28 30 31
7 11 1111
12
17 1724
6 6
5
7
1317
1
0
10
20
30
40
50
60
70
80
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Domestic Transborder Mexico Caribbean
*Destinations Served at Year-End
3134
35
44
51
66
71
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Recovering Economy = Pricing Power
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50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Q1
2008
Q2
2008
Q3
2008
Q4
2008
Q1
2009
Q2
2009
Q3
2009
Q4
2009
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Lo
ad F
acto
r %
10.00
12.00
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16.00
18.00
20.00
Yie
ld (
cen
ts)
Load Factor % Yield (cents)
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8.7 8.7 8.9 8.5 8.5 8.5
3.3 3.4 3.5 4.73.2 3.5
0.91.9 2.2
1.7
1.2 1.2
0
2
4
6
8
10
12
14
16
2005
2006
2007
2008
2009
9M 2
010
(cen
ts p
er A
SM
)
CASM (ex fuel) Fuel Op. Margin
• Excludes reservation system impairment of $31.9 million in 2007
Costs Remain Under Control
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0
5000
10000
15000
20000
25000
30000
35000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
ASMs (m
illions)
106 Aircraft 135 Aircraft
7
18% 3% 10 - 11%
132
88
44
97
54
43
102
58
44
108
64
44
76
52
24
86
53
33
91
53
38
135124114Total confirmed fleet
918070Owned
44 4444Leased
8
8
612-3-----Lease expiries
3106656510-Net change in aircraft
Measured Capacity GrowthFlexible fleet plan expansion until 2017
Compounded average annual growth rate:Min ~4%, Max ~ 7%
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Capital Structure
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200
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1000
1200
1400
2005 2006 2007 2008 2009 Q3 2010
$ m
illio
ns
0
1
2
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times
Cash Adj. net Debt/EBITDAR Adj. Debt/Equity
Note: All figures are full-year figures, except for 2010 data.Debt ratios include aircraft operating leases.
At September 30, 2010:- Cash of C$1,218 million- Cash to TTM of revenues ratio of 49%- Current ratio of 1.50x - Adjusted debt to equity ratio of 1.38x- Adjusted net debt to EBITDAR of 1.81x
Initiated a quarterly dividend- $0.05 per share for 1st quarterly payout- Record date Dec 15, 2010, paid out Jan 21, 2011
Normal Course Issuer Bid- TSX approved 7,264,820 shares or ~ 5%- 2,338,730 shares re-purchased to date for total price of ~ $31million- Program to run from Nov 5, 2010 to Nov 4, 2011- Purchase on open market and cancel
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Fireside ChatQuestions & Answers
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Appendix
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WHAT MAKES WESTJET STAND OUT?
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• Consistently one of the most profitable airlines in North America
-22 consecutive quarters of profitability
-Industry leading operating margins
• Consistently one of the lowest-cost operators in North America
• Planned profitable growth supported by a strong balance sheet
• Flexible fleet expansion plan and seasonal deployment strategy
• Provides a world-class guest experience
• One of Canada’s most admired corporate cultures
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By 2016, WestJet will be one of the five most successful international airlines in the world
Costsand
Margins
Peopleand
CultureRevenue
and Growth
GuestExperience
andPerformance
WestJetVacations
Businesstraveller
Rewardsprogram
Single fleettype
Cost efficiency
Riskmanagement
STRATEGY - Working since day one
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Building on our capabilities
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BUSINESS TRAVELLERBuilding strength in this high-yield market
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Opening the world up to our guests:
• Providing the business traveller with international travel options
• Incremental revenue opportunities• Select strategic carriers in each major world
region• Continue implementing new partnerships throughout 2011
Airline partnerships
Many items that we may choose to bundle together but yet to be determined:
• Refundable tickets• Pre-reserved seating• Waive change and cancel fees• Ability to early show• Buy-on-board• Lounge access• Other new initiatives
Business Fare Products
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Appeals to the mass market:
• Fully accretive to WestJet• Strong partnership with RBC for awareness• Simple and transparent• Two types of cards; different earning power• Uptake is in-line with expectations
REWARDS PROGRAMStraight to the bottom line
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Credit card
Appeals to the high frequency traveller:
• Simple and transparent program• Targeted at the traveller doing four to 40 trips per year
• Aims to capture additional high-yielding guests
• Uptake is in-line with expectations
Frequent Guest Program
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16 • Capacity-share calculation based on data from IATA-SRS.• Mexico / Caribbean capacity share does not include charters.
• Growing brand strength
• Guest experience
• Culture
• WestJet Vacations
• Rewards program
• Airline partnerships
• New destinations
• New non-stops
• Increased frequencies
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Mar
ket S
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e (%
)
Domestic Transborder International
MARKET SHARE GROWTH DRIVERSCurrently serving a portion of addressable market
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•One of the fastest growing vacation operators in Canada
•Large market opportunity available to capture
•Integrated approach with WestJet taps multiple demand streams
•Competitive advantage with flexible product combinations and scheduled service to all destinations allowing more booking options
WESTJET VACATIONSLeveraging our strengths in a new marketplace
Estimated leisure market size in Canada
$5.0
$5.0
$10.9
0
5
10
15
20
25
Outbound Domestic Market Size
$bn
ITC Market FIT Market Leisure Retail Market
WestJet Vacations addressable market segments are ITC and FIT
Outside of current scope; might be able to capture a small percentage of this segment
Source: internal estimatesFIT – Flexible itinerary travelITC – Inclusive
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One of the lowest-cost carriers in North America
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A single fleet and single class of service: • Simplifies operations • Enhances operational productivity • Offers an operating cost advantage• Provides more consistent guest experience
SINGLE FLEET – BOEING NG 737Keeping efficiency high
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Cost efficiencies have led to low break-even load factor
• Cost efficiencies are driven by:- High utilization of aircraft- High employee productivity- Single-fleet efficiencies- Ownership culture- Disciplined focus on expenditures
COST EFFICIENCYRemoving costs where possible
20Source: Internal estimates, company reports
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
Sou
t hw
est
We
stJe
t
JetB
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US
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Ala
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ited
Alle
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YTD Q3 2010 Load FactorYTD Q3 2010 Break-even Load Factor
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RISK MANAGEMENTProtecting against external volatility
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• Fuel price volatility- fuel is approximately 20% hedged for next 12 months
- combination of CAD$ 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%
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We have the financial strength to put our strategy into action
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8.7 8.7 8.9 8.5 8.5 8.5
3.3 3.4 3.5 4.73.2 3.5
0.91.9 2.2
1.7
1.2 1.2
0
2
4
6
8
10
12
14
16
2005
2006
2007
2008
2009
9M 2
010
(cen
ts p
er A
SM
)
CASM (ex fuel) Fuel Op. Margin
• Excludes reservation system impairment of $31.9 million in 2007
8.1%
6.8%
8.8%
12.04
13.20
YTD Q3
2010
11.0%11.6%7.8%
Return on Invested Capital (TTM)
7.9%9.0%6.0%Earnings Before Tax Margin
11.0%11.6%9.2%Operating Margin
12.2912.4311.77CASM (cents)
13.8714.1612.97RASM (cents)
5 yrAvg.2005-2009
FY 2009
3 yr Avg.2007-2009
PROFITABLE 54 OF 56 QUARTERSSome of the best margins in the industry
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Financially SoundAmong top performer in North American airline industry
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* 2010 revenue estimates per CIBC Nov 3, 2010 Institutional Equity Research Earnings Update report.
2005 to 2008 numbers restated.
Q3 YTD 2010Operating Margin
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Alle
gian
t
Ala
ska
JetB
lue
Wes
tJet
Sou
thw
est
Del
ta
US
Airw
ays
Uni
ted
Con
tinen
tal
Air
Tra
n
Air
Can
ada
Am
eric
an
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10*
Rev
enue
(m
illio
ns)
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Other Items
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• 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
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WE HAVE TAKEN OFF“Wheels Up”
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• We continue to be among top tier in earnings margins in the industry
• We are a well-positioned, low-cost and efficient carrier
• We have a very strong culture and highly engaged workforce
• We have a strong brand in the market place
• We have a highly attractive combination of planned growth and strong
balance sheet
• We have an attractive valuation relative to peer group
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For further information:Hugh HarleyDirector, Investor RelationsP: (403) 539-7594E: [email protected]: www.westjet.com