PowerPitch Presentation

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mruszczy NEED LOGOS!!
WestJet Airlines Ltd.
Sell Presentation
November 2005
Western Investment Club Created by Lorcan
Kilmartin Ron Mandel, Nov. 2005
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Company Overview

• Second largest airline in Canada behind ACE
  Aviation
• Canadian Low Cost Carrier
• following the Southwest Airlines Model
• Market Cap 1.35bn
• Revenue 873.8mm
• Employees 4778
• Based in Calgary, Alberta
• Main Hub in Toronto

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Westjet trending downwards
WESTJET AIRLINES LTD
Notice where Jetsgo went bankrupt
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Presentation Outline

• Industry Analysis
• Company Analysis
• Strengths
• Risks
• Financial Analysis
• Rationale for Selling
• Summary
• Recommendation
• Questions

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Airline Industry not ideal

• Deregulation has lowered barriers to entry
  competition lowers margins
• Although Aircraft manufacturers have done well,
  historically airlines have netted little overall
  gains
• Increased regulation and security costs due to
  terrorist threats
• Earnings inversely related to oil prices

Half of Americas major airlines are operating
under bankruptcy protection
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Reasons to continue to hold WestJet

• JetsGo bankruptcy ? less competition for now
• Transition to new-generation fleet of planes
• Improvements in service

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Demise of JetsGo

• Demise of JetsGo has decreased competitive
  pressures

WestJet has not fully capitalized on Jetsgos exit
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New Generation Fleet

• Migrating to New-Generation fleet of planes for
  significant cost savings

• Phasing out old Boeing 737-200s for
• 737-600s
• 737-700s
• 737-800s
• 737-700s vs. 737-200s
• 30 more fuel-efficient
• 88 less maintenance at first

High costs to finance new fleet
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Product Differentiation

• Introduction of fully automated self-serve
  check-in kiosks
• These kiosks speed up service and promote labour
  savings
• allow guests to check in at the airport
• choose their seats
• select the number of bags they would like to
  check
• Live seatback satellite television
• 24 channels of live Bell ExpressVu programming
• Exclusivity agreement for 5 years

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Holds positions CEO, President, and Chairman
Not ideal from a corporate governance point of
view
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Fuel

• Annual Report Our sensitivity to fuel price
  changes has increased by 44 year over year due
  to our growth
• We estimate the sensitivity of our exposure to
  changes in fuel costs to be approximately 4.9
  million in net earnings for every US 1.00 change
  in the price of crude compared to approximately
  3.4 million in 2003.
• Fuel cost comprises 25-28 of revenues
• If the price of oil continues to rise, earnings
  will suffer drastically
• Analysts constantly lowering EPS Estimates
  Price Targets as a result of increasing fuel
  costs

The price of fuel is very important in the
airlines industry
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Fueling Problems
Higher oil prices damage WestJets earnings
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Operating Costs

• Higher operating cost environment as a result of
  increases in
• Navigational charges
• - Cost per departure basis, navigational
  charges actually increased by 13.6
• Landing fees
• Terminal and airport improvement fees
• - Fee increases at Canadas airports averaged
  almost 9 in 2004
• - Departures at Pearson incr. by 212 in FY04.
  
• - Ever-shrinking amount of controllable costs
  out of our hands

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Future Risks

• Terrorism
• Potential new competitors
• While we attempted toreduce the number of
  discounted fares offered, we found this to be
  ineffective and our load factors suffered we
  have had to match the discounted fares that our
  competitors continued to offer. This resulted in
  our yield declining by 5.1 over 2003.

2004 could easily become the norm for WestJet
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Valuation
WestJet is currently overvalued
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Valuation
Overvalued with respect to competition
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Key Metrics
Unfavourable Trends
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Summary of selling rationale

• WIC should not be speculating on the price of
  oil
• Many operating costs are uncontrollable
• Terrorism potential competitors
• An average company in an unfavorable industry
• Although selling low does not sound great, we
  can achieve greater returns elsewhere

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Recommendation

• Sell All 150 WestJet Shares

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Questions?
Please ask us questions