DAHLMAN ROSE & CO, GLOBAL TRANSPORTATION …...WestJet IR Deck - Sept 5 DRose Author: rpuffalt...
Transcript of DAHLMAN ROSE & CO, GLOBAL TRANSPORTATION …...WestJet IR Deck - Sept 5 DRose Author: rpuffalt...
EXPANDING OUR REACH
September 5, 2012
DAHLMAN ROSE & CO, GLOBAL TRANSPORTATION CONFERENCE
FORWARD-LOOKING STATEMENT
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Certain information in this presentation and statements made during this presentation, including anyquestion and answer session, may contain “forward-looking information”, as defined under applicableCanadian securities legislation. Our actual results, performance or achievements could differmaterially from those expressed in, or implied by, this forward-looking information. We can give noassurance that any of the events anticipated will transpire or occur or, if any of them do, what benefitsor costs we will derive from them. By its nature, forward-looking information is subject to numerousrisks 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 andexternal sources, and additional risk factors discussed in other documents we file from time to timewith 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 areupdated quarterly and, except as required by law, we do not undertake to update any other forward-looking information.
September 2012
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WESTJET’S TRACK RECORD OF PROFITABILITY SINCE INCEPTION
Net Earnings (millions of dollars)
Note: figures reported in Canadian GAAP up to 2009 with 2005-2008 restatements. 2010 is restated under IFRS
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GOAL TO GENERATE SUSTAINABLE 12% ROIC
Return on Invested Capital*
Note: 2010-2011 calculated under IFRS; 2009 & prior are calculated under Canadian GAAP
* Based on trailing 12 month basis
Goal
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GROWTH AND STRONG FINANCIAL PERFORMANCE CONTINUES
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WESTJET A GROWTH STORY
Revenue (millions of dollars) Available Seat Miles (millions)
0
5,000
10,000
15,000
20,000
25,000
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110
500
1,000
1,500
2,000
2,500
3,000
3,500
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
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PRICING POWER MOMENTUM
10
12
14
16
18
20
50%
60%
70%
80%
90%
100%
Q1
2010
Q2
2010
Q3
2010
Q4
2010
Q1
2011
Q2
2011
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Yie
ld (c
ents
)
Load
Fac
tor %
Load Factor % Yield (cents)
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*IFRS basis Excludes reservation system impairment of $31.9 million in 2007
COSTS REMAIN UNDER CONTROL
8.6 8.3 8.5 8.8 8.9 9.0
3.5 4.7 3.2 3.5 4.3 4.6
2.2 1.7 1.2 1.0
1.2 1.6
0
2
4
6
8
10
12
14
16
18
2007 2008 2009 2010 2011 YTDQ2 2012
cents
per
AS
M
CASM (ex fuel and profit share) Profit Share Fuel Op. Margin
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MEASURED GROWTH - 737 FLEXIBLE FLEET PLAN
97 100 105 106 103 103 103 102
15 23 29 33
50
60
70
80
90
100
110
120
130
140
2011 2012 2013 2014 2015 2016 2017 2018
737 Committed Fleet Cumulative Lease Extension Options
109
118126
132135
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Q400 NEXTGEN FLEET PLAN ALSO BUILDS IN FLEXIBILITY
714
18 20 20 20
7
14 23 25
0
10
20
30
40
50
2013 2014 2015 2016 2017 2018
Q400 NextGen Committed Fleet Cumulative Purchase Options
16
25
34
4345
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OPERATING HIGHLIGHTS – YTD Q2 2012
YTD Q2 2012
YTD Q2 2011
Change
Net earnings (millions) $110.8 $73.9 50.0%
Diluted earnings per share $0.81 $0.52 55.8%
Total revenues (millions) $1,700.2 $1,514.7 12.2%
RASM (revenue per available seat mile) (cents)
15.35 14.47 6.1%
CASM, excluding fuel and employee profit share (cents)
9.03 8.81 2.5%
Fuel costs per litre (dollars) $0.94 $0.88 6.8%
Operating Margin 10.4% 8.7% 1.7 pts.
Record First Half Net Earnings - up 50%
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ANCILLARY REVENUE GROWTH
Ancillary revenue per guest
$8.10
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5
6
7
8
9
2006 2007 2008 2009 2010 2011 YTD Q22012
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PREMIUM ECONOMY SEATING
Reconfiguration expected to be complete by end of 2012
Gue
st s
eats
119 95136 112
166 15024
24
24
50
70
90
110
130
150
170
190
737-600Before
737-600 After
737-700Before
737-700 After
737-800Before
737-800After
Economy Premium Economy
119
136
174
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YTD Q2 2012 adjusted EBT Margin per reported results (adjusted for special items and non-op mark-to-market hedge gains/losses)
YTD Q2 2012 – ADJUSTED EBT MARGINWESTJET RANKS 4th BEHIND LEADING NORTH AMERICAN PEE RS
9.4%
-5%
0%
5%
10%
15%
20%A
llegi
ant
Spi
rit
Ala
ska
Wes
tJet
JetB
lue
Sou
thw
est
US
Airw
ays
Del
ta
Uni
ted
Air
Can
ada
Adj
uste
d E
BT
Mar
gin
BUILDING ON OUR CAPABILITIES
• 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
AIRLINE PARTNERSHIPS EXPANDING OUR NETWORK
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Expanded schedule
Toronto to Montreal
Montreal 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
1700 1810 1700 1815
1800 1910 1800 1915
1930 2040 1900 2015
2230 2340 2030 2145
Toronto to Ottawa
Ottawa to Toronto
Depart Arrive Depart Arrive
0700 0800 0700 0759
0800 0900 0800 0859
0900 1000 0930 1029
1200 1300 1200 1259
1400 1500 1400 1459
1600 1700 1600 1659
1730 1830 1700 1759
1830 1930 1800 1859
2230 2330 1930 2029
ENHANCED EASTERN TRIANGLE SCHEDULEIMPROVED VALUE FOR BUSINESS TRAVELERS
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INTRODUCTION OF SERVICE TO LAGUARDIABUILDS ON THE EASTERN TRIANGLE STRATEGY
Weekday Toronto to LaGuardia
Weekday LaGuardia to Toronto
7:00 6:30
9:30 7:55
12:30 9:30
14:30 12:00
16:00 14:55
17:30 16:45
19:30 18:30
20:30 19:50
Through our partnership with Delta, WestJet is able to operate with optimal slot times.
THE REGIONAL OPPORTUNITY
MARKET OPPORTUNITIESREGIONAL (50+ seats) = $2.1B – DOMESTIC + TRANSBORDE R
Source: Internal estimates using public capacity and traffic information22
SIGNIFICANT DOMESTIC OPPORTUNITYAC AND PARTNERS SERVE DOUBLE THE CANADIAN DESTINATI ONS vs WESTJET
CalgaryDeer LakeEdmontonFt. McMurrayGanderHalifaxKelownaMontreal
OttawaReginaSaskatoonSt. JohnsTorontoVancouverVictoriaWhitehorse
Winnipeg
Baie ComeauBathurstCalgaryCastlegarCharlottetownCranbrookDeer LakeEdmontonFrederictonFt. McMurrayFt. St. JohnGanderGaspeGoose BayGrande PrairieHalifaxIles De La MadeleineKamloopsKelownaKingstonLethbridgeLondonMedicine HatMonctonMont JoliMontrealNanaimoNorth BayOttawa
PentictonPrince GeorgePrince RupertQuebecReginaRouyn-NorandaSaguenaySandspitSarniaSaskatoonSault Ste. MarieSept-IlesSmithersSt. JohnSt. JohnsSudburySydneyTerraceThunder BayTimminsTorontoToronto-CityVal D'OrVancouverVictoriaWabushWhitehorseWindsorWinnipegYellowknife
AbbotsfordCalgaryCharlottetownComoxDeer LakeEdmontonFt. McMurrayGrande PrairieHalifaxHamiltonKamloopsKelownaKitchenerLondonMoncton
MontrealOttawaPrince GeorgeQuebecReginaSaskatoonSt. JohnsSydneyThunder BayTorontoVancouverVictoriaWindsorWinnipegYellowknife
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WESTJET’S REGIONAL AIRLINE 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 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
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CRITICAL SUCCESS FACTORS REMAIN THE SAME FOR A REGIONAL AIRLINE
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 culture
• Consistent WestJet guest experience
• Consistent WestJet values
• Maintain caring culture
• Engaged workforce
Guest experience and low cost
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WE HAVE THE FINANCIAL STRENGTHTO PUT OUR STRATEGY INTO ACTION
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*2010 and 2011 presented under IFRS.Note: All figures are full-year figures based on trailing twelve months.Debt ratios include aircraft operating leases.
At June 30, 2012:- Cash of C$1,264 million- Cash to TTM of revenues ratio of 39%- Adjusted net debt to EBITDAR of 1.30x
Initiated a quarterly dividend in November 2010- Increased to $0.06 from $0.05 in February 2012 - Increased to $0.08 from $0.06 in August 2012
Normal Course Issuer Bid- Completed prior NCIB on August 9, 2011 for $106 million or $14.59 per share- TSX approved 6.9 million share bid or ~ 5%, announced on February 8, 2012. - Repurchased 4.6 million shares YTD Q2 2012 for $68.7 million or $15.06 per share
CAPITAL STRUCTURE -EXCESS CASH HAS BEEN USED TOLOWER LONG TERM DEBT & BUY BACK STOCK
0
200
400
600
800
1000
1200
1400
2005 2006 2007 2008 2009 2010 2011 Q22012
$ m
illio
ns
0
1
2
3
4
5
6
times
Cash Adj. net Debt/EBITDAR Adj. Debt/Equity
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RELATIVE LIQUIDITY & LEVERAGE RATIOS – June 30, 2012Liquidity
Leverage
39%
0%
10%
20%
30%
40%
50%
Allegiant WestJet Alaska United Air Canada US Airways Southwest JetBlue Delta
Cash
/ L
TM R
even
ue
N/A
1.30
0
2
4
6
Allegiant Alaska WestJet Southwest Delta United US Airways Air Canada JetBlue
Adj.
Net
Deb
t / E
BITD
AR
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GUIDANCE
Q3/12 FY 2012
RASMModerately stronger than
growth in the first half of 2012
CASM (ex fuel & profit share)In line with increase in the
second quarter of 2012Up 3.0 – 3.5%
Fuel cost per litre$0.90 – $0.92
(based on $123USD jet/barrel and 1.02 FX)
Tax Rate 28% – 30%
Capital Expenditures $25 – $30M $270 – $280M
System capacity Up 2.0 – 3.0% Up 3.5 – 4.0%
Domestic capacity Down 1.0 – 2.0% Flat to down 1.0%
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• 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 market place and expanding airline partnerships
• Attractive combination of planned growth and a strong balance sheet
• Committed to generating value and returning value t o shareholders
SUMMARY - WHY INVEST IN WESTJET
For further information:Hugh HarleyDirector, Investor RelationsP: (403) 539-7594E: [email protected]: www.westjet.com