2014 Second Quarter Report

 

ManagementFor the t

t’s Discussionthree and six

n and Analysimonths ende

is of Financiaed June 30, 2

al Results 2014

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CONTENTS

Overview .........

Discussion of O

Summary of Qu

Guest Experienc

Liquidity and Ca

Fleet ...............

Off Balance She

Related Party T

ADVISORIES

The following Macautionary statemstatements and nand notes theretaccordance with otherwise statedsubsidiaries and periodic quarterlySEDAR at sedar.c

Cautionary statThis MD&A connformation typicproject” or othe

by, this forward-lwhat benefits or ncluding, but novolatility of fuel including new enhe ability to acceime to time with

The disclosure fo2014 and the yeooking informatioof WestJet’s futurunder the headinstatement. Pleasestimates used inn conjunction wiooking informatio

Non-GAAP and Certain measuresherefore, are co

performance or cour operating rescomparison betwTherefore, they m

Please refer to paand employee prshare and for a raxes, depreciatio

Definitions Various terms use

......................

Operations .......

uarterly Results

ce ..................

apital Resource

......................

eet Arrangeme

Transactions ....

S

nagement’s Discment regarding notes thereto for to, for the yearInternational F

. References toconsolidated struy and annual repcom and our web

tement regarditains “forward-l

cally contains ther similar terms. ooking informaticosts we will de

ot limited to, theprices, terrorism

ntrants, capacityess sufficient capsecurities regula

und under the hear ended Decemon, including anyre plans, operati

ng “Outlook”, cone refer to pagen its developmenth filing our quaon.

additional GAAs in this MD&A dnsidered non-GA

current financial sults in a manneeen periods. The

may not be comp

age 26 of this MDrofit share; returreconciliation of on and aircraft re

ed throughout th

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nts .................

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cussion and Analyforward-lookingthe three and s

rs ended Deceminancial Reportin

o “WestJet,” “theuctured entities, orts and Annual

bsite at westjet.c

ing forward-looooking informate words “anticipOur actual resulton. We can giveerive from theme impact of genm, pandemics, y fluctuations andpital from internaatory authorities,

heading “Outlookmber 31, 2014 my financial outlooons and expecte

ntained in this M 23 of this MD&

nt. Our assumptiorterly and annua

AP measures o not have any sAAP measures. Tcondition. They

er that is focusedese measures areparable to similar

D&A for a reconcn on invested caadditional GAAP

ent (EBITDAR).

his MD&A are def

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ysis of Financial g information beix months ended

mber 31, 2013ng Standards (Ie Corporation,”unless the contInformation Forom.

oking informattion” as definedpate,” “believe,” ts, performance no assurance th

m. By its nature, neral economic ccurrency fluctuad the pricing enval and external so, which are availa

k” in this MD&A, may contain forwok, contained in ed results. The foD&A may not be&A for further ions and estimateal MD&A and, ex

standardized meaThese measures are included to pd on the performe not in accordanr measures prese

ciliation of non-Gapital (ROIC); fremeasures, inclu

fined at page 26

2

4

1

2

2

7

8

8

Share

Outlo

Accou

Contr

Forw

Defin

Non-

Results (MD&A),elow, as well ad June 30, 2014 and 2012. The FRS). All amoun“the Company”

text otherwise rems (AIF), filed w

tion d under applica“estimate,” “intor achievements

hat any of the evforward-looking

conditions, changations, interest vironment), laboources, and addiable on SEDAR a

including the guward-looking infothis MD&A, is p

orward-looking ine appropriate fornformation on oes relating to thexcept as required

aning as prescribare provided to provide investors

mance of our ongnce with, or an aented by other en

GAAP measures, ee cash flow; freding adjusted de

under the title “

e Capital ........

ook ................

unting ...........

rols and Proced

ward-Looking In

nition of Key Op

GAAP and Add

, dated July 28, 2s the unauditedand 2013, and tconsolidated fin

nts in the follow”, “we,” “us” orequires. Additionwith Canadian sec

able Canadian tend,” “expect,” s could differ ma

vents anticipated information is sging domestic arates, competiti

our matters, govitional risk factorat sedar.com or,

uidance summaryformation that coprovided to assistnformation, inclur other purposes our forward-looke forward-lookingd by law, we do

bed by generallyenhance the rea

s and managemegoing operationsalternative to, GAntities.

including cost peee cash flow perebt-to-equity; ad

“Definition of Key

.....................

.....................

.....................

dures .............

nformation ......

perating Indica

ditional GAAP M

2014, should be d condensed cothe audited consonancial statemewing MD&A are r “our” mean Wnal information recurities regulator

securities legisla“may,” “will,” “

aterially from tho will transpire orsubject to numeand internationaon from other

vernment regulatrs discussed in oupon request, w

y for the three monstitutes a finat investors in unuding without lim

and is expresslyking informationg information renot undertake to

y accepted accouader’s overall unent with an alters and to provideAAP and do not h

er available seatr share; and diludjusted net debt

y Operating Indic

WestJet Second Qu

......................

......................

......................

......................

......................

ators ...............

Measures .........

read in conjunctonsolidated interolidated financiants have been in Canadian do

WestJet Airlines elating to WestJry authorities, is

ation. This forw“should,” “potentose expressed inr occur or, if any erous risks and ul airline industryairline industry

tions, stock markother documents without charge fro

months ended Seancial outlook. Tnderstanding our mitation, the discy qualified by thi including assumferred to above o update any oth

unting principles nderstanding of ornative method f a more consistehave standardize

t mile (CASM), exuted operating cat to earnings bef

cators”.

uarter 2014│1

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tion with the rim financial l statements prepared in

ollars unless Ltd. and its et, including available on

ward-looking tial,” “plan,” n, or implied of them do,

uncertainties y conditions,

participants ket volatility, we file from om us.

eptember 30, The forward- assessment losure found is cautionary mptions and are updated her forward-

(GAAP) and, our financial for assessing ent basis for

ed meanings.

xcluding fuel ash flow per fore interest,

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OVERVIEW

Our 2014 seconquarter net earper cent year oyield.

n the second qflights in centraof banks and oplan to take the

We also took deconverted an acontinued to exon cost-saving

We returned asecond quarter Our 12-month represents a sli

Second quarte

Recogof 201

Increa

Increa

Experi

Realizequarte

Realizeof 201

Realizesecond

Record2013.

Recordsecond

Reportsecond

Reportquarte

Please refer to

Quarter 2014

nd quarter finarnings of $51.8over year to e

quarter of 2014al Canada, we n July 23, 201e next steps to

elivery of threedditional five o

xpand our netwmeasures iden

pproximately $of 2014. SinceROIC of 13.7 pght decrease o

er overview

nized total rev13.

ased capacity, m

ased traffic, me

enced an incre

ed revenue peer of 2013.

ed cost per ava13.

ed CASM, excld quarter of 20

ded an operati

ded an earningd quarter of 20

ted record secod quarter of 20

ted diluted eaer of 2013.

page 26 of this

ancial results re8 million and dind the quarter

4, we began ouwere successfu4 we completebegin operatin

e Bombardier Qof our remaininwork by enterintified in 2013 a

$20.2 million te these programper cent at Junof 0.2 percenta

venues of $930

measured in av

easured in reve

ease in yield by

er available sea

ailable seat mil

uding fuel and013.

ng margin of 8

gs before tax (013.

ond quarter ne013.

rnings per sha

s MD&A for a r

epresent our 3iluted earningsr at $930.3 mi

ur first transatlaul at obtaining ed a bond offeng four wide-bo

Q400 aircraft anng 20 purchaseng into three neas part of our b

to our sharehoms began we hne 30, 2014 coge points comp

0.3 million, an i

vailable seat m

nue passenger

y 4.5 per cent o

at miles (RASM

les (CASM) of 1

d employee pr

8.4 per cent, u

(EBT) margin o

et earnings of $

are of $0.40, a

econciliation of

37th consecutivs per share of $llion driven ma

antic flights to new financingring through aodied aircraft B

nd two Boeing e options with ew airline partbusiness transf

olders throughhave returned nontinues to surpared to our 20

increase of 10.

iles (ASMs), by

r miles (RPMs),

over the second

M) of 15.02 cen

13.76 cents, up

rofit share, of

up 0.5 percenta

of 7.7 per cent

$51.8 million, a

an increase of

f the non-GAAP

ve quarter of re$0.40. During ainly by increa

Dublin, Irelandg by entering ina private placemBoeing 767-300

NG 737 aircrafBombardier tonerships and w

formation initia

h our dividendnearly five hunrpass our goal 013 full-year R

.3 per cent fro

y 5.2 per cent o

, by 5.5 per cen

d quarter of 20

nts, up 4.8 pe

p 4.2 per cent

9.23 cents, u

age points from

t, up 0.4 perce

an increase of

f 17.6 per cen

P measures and

eported profitathe quarter, re

ases in traffic a

d, we launchednto a credit agment. On July 0ERW series air

ft and subsequo firm orders fowe continued totive.

and share budred million doof a sustainab

ROIC of 13.9 pe

om $843.7 milli

over the second

nt over the sec

013.

er cent from 14

from 13.20 ce

p 1.9 per cent

m 7.9 per cent

entage points

15.9 per cent

nt from $0.34

d additional GA

ability with recoevenue increasand improveme

d our first Westreement with a7, 2014 we anrcraft.

uent to June 30or Q400 aircrao implement a

uy-back prograollars to our shable 12 per center cent.

ion in the seco

d quarter of 20

cond quarter of

4.33 cents in t

nts in the seco

t from 9.06 ce

t in the second

from 7.3 per c

from $44.7 mi

per share in t

AAP measures.

ord second sed by 10.3 ents in our

tJet Encore a syndicate nnounced a

0, 2014, we ft. We also nd execute

ams in the areholders. t ROIC and

ond quarter

013.

f 2013.

the second

ond quarter

ents in the

quarter of

cent in the

illion in the

the second

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IIsm

AOcM

ACa

Operational o

ASMs RPMs Load factor Yield (cents) RASM (cents) CASM (cents) CASM, excluding

profit share (ceFuel consumptioFuel costs per litSegment guests Average stage leUtilization (hoursNumber of full-ti

employees at pFleet size at peri

WestJetters

WestJetters acrstrong quarterlsegment guestswere honoured

In May In Jun

Brandsvalued

In Junthe Wworld’s

These accompliday basis.

Network expa

On July 7, 2014operating four wreplace the serv

n June 2014, wreland. Due to

service providemarkets.

Also in June 20Ontario and Tocelebration of WMaritime destin

As of the date oCentral Americaand increased f

overview

g fuel and employents) on (litres) tre (cents)

ength (miles) s) ime equivalent (Fperiod end iod end

ross our netwoly results. For s, an increase to have receiv

y 2014, our Chne 2014, we ws report. This wd brands. ne 2014, we weWestJet Christm

s best creative

ishments are a

ansion

4, with the supwide-body aircvice currently o

we achieved a o the popularitys a great oppo

014, we launchoronto, OntariWestJet Encorenation, Frederic

of this MD&A, a, the Caribbeafrequency of se

T20

6,192,8 4,930,2

yee

292,8

4,7

FTE)

ork are commithe three mo

of 6.2 per cenved several reco

airman of the Bwere named onwas the first tim

ere awarded twmas Miracle: R

communicatio

a result of the c

pport from the raft. We initialloperated by Th

major milestony of the route, ortunity for us

hed service beto representing

e’s inaugural yecton, New Brun

WestJet, includan and most reervice across ou

Three months e14 2880,483 5,88298,683 4,67

79.6% 18.87 15.02 13.76

9.23 845,582 27

94 772,324

918 11.7

8,320 120

itted to the ononths ended Jnt over the samognitions:

Board of Directne of Canada’sme the brand c

wo Bronze LionReal Time Givinons and this wa

commitment an

WestJet Pilot Aly expect to de

homas Cook via

ne in our operawe extended tto expand and

tween Winnipeg WestJet Encear of successfuswick, with ser

ding WestJet Eecently in Europur scheduled n

ended June 302013 Ch88,165,679 75,382,234

79.4% 0 18.05 14.33 13.20

9.06 78,664,127

87 4,493,271

978 11.9

8,051 105

ngoing successune 30, 2014

me period of th

tors, Clive Bedds most valued consultancy ha

s from the 201ng video releaas the first Cann

nd care deliver

Association, weeploy these airca two Boeing 75

ational history he service perid bring our low

eg, Manitoba acore’s first twoul operations, orvice from Toro

Encore, offers spe. We continuetwork.

hange 2

5.2% 12,705.5% 10,34

0.2 pts. 4.5% 4.8% 4.2%

1.9% 5.1% 608.0% 6.2%

(6.1%) (1.7%)

3.3% 14.3%

s of our airline, we welcomehe prior year.

doe, was inducbrands by Int

as included We

14 Cannes Lionased in Decemnes Lions awar

red by approxim

e announced ocraft on routes 57-200 series a

with our first siod by three ww fares and gu

and Thunder Bao central Canaon July 21, 201onto, Ontario b

scheduled servue to strategica

Six months2014 07,465,553 11,46,527,086 9,

81.4% 19.06 15.52 13.87

9.26 08,425,149

92 9,579,009

955 12.0

8,320 120

e and are at thed on board aDuring the sec

cted to Canadaterbrand CanadestJet in its ann

ns Internationamber 2013. Thrd for WestJet.

mately 10,000

our plan to takbetween Alber

aircraft.

scheduled transeeks to Octobe

uest experience

ay, Ontario anada destination14 we announcbeginning on Ap

ice to 90 destinally grow our a

WestJet Second Qu

s ended June 32013

,920,261,749 ,763,284,294

81.9% 18.55 15.19 13.52

9.00 569,436,396

90 8,986,595

1,007 12.3

8,051 105

he core of ourapproximatelycond quarter o

’s Aviation Hallda’s 2014 Besnual list of Can

al Festival of Cris festival cele

WestJetters on

e the next steprta and Hawaii

satlantic flightser 25, 2014. Tre to new route

nd between Thns. Followingced WestJet Enpril 15, 2015.

nations in Nortirline through

uarter 2014│3

30 Change

6.6% 6.0%

(0.5 pts.) 2.7% 2.2% 2.6%

2.9% 6.8% 2.2% 6.6%

(5.2%) (2.4%)

3.3% 14.3%

r continued 4.8 million f 2014, we

l of Fame. t Canadian

nada’s most

reativity for ebrates the

n a day-to-

ps to begin in order to

s to Dublin, ransatlantic es and new

under Bay, our recent

ncore’s first

th America, new routes

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We entered intpartnership agrand these partn

Guest experie

We announced devices (PEDs) This announcemsafety conditionon our Bombard

n May 2014, wo the mobile a

functionality ancheck in for upc

DISCUSSION

Revenue

$ in thousands) Guest Other

RASM (cents)

Both our guestsecond quarterquarter of 201compared to $1revenues assoco the three and

One of our key hree months e

six months endsame period ofyear-over-year slight improvem2.7 per cent dro

The flexibility oprofitable flyinghigh-demand tr

Quarter 2014

to three additreements to 37nerships enable

ence

on June 2, 20during all pha

ment followed ns, to allow gudier Q400s.

we launched a app we releasend features relecoming flights

N OF OPERA

t and other revof 2014, total3. For the six1,810.9 millionciated with our d six months e

revenue measended June 30,ded June 30, 2f the prior yeaincrease in yie

ment in load faove our increas

of our fleet deg. During the pransborder and

tional interline 7 as of the date our guests to

014 that guestases of flight, ia recent Tranests access to

WestJet iPhoned to the Googevant to everyand get flight s

ATIONS

201 84 8

93

venue increasel revenue increx months enden in the same pincrease in tranded June 30,

surements is RA, 2014, revenu2014, revenue r. In the seconeld, as a resultactor. Similarly,se in RASM.

eployment strateak winter mo

d international m

agreements dte of this MD&

o access over 1

ts on our Boeinincluding taxi-i

nsport Canada their PEDs. As

e app availablegle store at they traveller, inclstatus informat

Three months 14 2047,454 782,886 30,340 8 15.02

ed year over yeeased by 10.3ed June 30, 2period of 2013ffic and in yield2013.

ASM, which take increased to on an ASM band quarter of 2t of a strong d, for the six m

tegy allows usnths, we allocamarkets.

during the sec&A. Establishing50 destinations

ng NG 737 aircn and out, takexemption thas of the date o

e for free downe end of 2013uding the abiltion.

ended June 30013 Ch768,612 75,082

843,694 14.33

ear for the thrper cent to $9

2014 total reve3. These improd and in other

kes into conside15.02 cents frsis increased b2014, the overdemand enviroonths ended J

s to react to dated more than

cond quarter og strong airlines via WestJet.

craft will have ke-off and landat enables airliof this MD&A, w

nload from the3, will enhanceity to book ne

0 hange 2

10.3% 110.4% 10.3% 14.8%

ree and six mo930.3 million coenue increased

ovements were revenue due t

eration load facrom 14.33 centby 0.33 cents trall increase in

onment, succesune 30, 2014,

demand changen half of our sy

of 2014, whiche partnerships

full access to ding in non-tranes, once theywe continue te

e Apple App Ste overall guest ew flights, mod

Six month2014 1,784,283 188,147

1,972,430 15.52

onths ended Juompared to $8d by 8.9 per largely attribu

to increased an

ctor and yield. ts in the sameto 15.52 cents

n RASM was drssful revenue g the year-over

es by adjustinystem capacity

h brings our tis a key strate

their personansmitting or fly have met allesting the impa

ore. This app, experience by

dify existing re

s ended June 32013 1,648,006 162,930

1,810,936 15.19

une 30, 2014. 843.7 million incent to $1,97

utable to growtncillary revenue

On an ASM bae quarter of 20s from 15.19 criven by the 4.growth initiativr-year increase

g our scheduleoutside of Can

total airline egy of ours

l electronic ight mode. l necessary act of PEDs

in addition y delivering eservations,

30 Change

8.3% 15.5% 8.9% 2.2%

During the n the same 72.4 million th in guest e compared

asis, for the 13. For the ents in the .5 per cent

ves and the in yield of

e for more nada to the

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The following ta

Domestic Transborder and Total

Domestic Transborder and Total

For the three aover the same period in 2013series aircraft. second quarterepresents a 6.June 30, 2014,per cent increa

During the secrelatively in lin6.9 per cent ovhe six monthso the 6.2 per

which is in line2013.

Other revenue

ncluded in othcargo operationrespectively, toThese increases

Ancillary revenuprofits through with additional $47.8 million, ao improvement

sales as well asquarter increas30, 2013. For tcent from $75.June 30, 2014 mainly attributaaunched our Pncreases to cepart of our prod

WestJet Vacationon-air compon

able depicts ou

international

international

and six monthperiods in 20

has grown asOur domestic

r of 2014, 41.2 per cent inc, 50.6 per centse in capacity

cond quarter oe with the 4.5ver the second ended June 3cent increase

e with the incr

ue

her revenue arens. During the o $82.9 million s were driven m

ue, which incluthe sale of higproducts and

an increase of ats associated ws continued peed by $1.50 orhe six months 3 million in theincreased by $able to the timPlus product inrtain change aduct offering.

ons continues tnent, which m

ur capacity alloc

s ended June 013. Our overas a result of tc to transbord1.6 per cent ocrease in ASMst of ASMs werein those mark

of 2014 our d5 per cent incred quarter of 2030, 2014, domee in capacity. Orease in capac

e amounts relathree and six mand $188.1 m

mainly by incre

udes service feegher-margin goservices to meapproximately with an increasenetration of or 17.6 per centended June 30e same period$1.90 cents or ming of when n the third quand cancel fees

to be successfumainly includes

cation between

ASMs 3,617,490,22,575,390,26,192,880,4

ASMs 6,281,1096,426,356

12,707,465

30, 2014, ourall capacity fortaking deliveryder and internof ASMs weres in those marke allocated to ets compared

domestic trafficease in capaci013, as compaestic traffic, mOur transbord

city to these a

ated to ancillarymonths ended million from $7eases in ancillar

es, onboard saoods and serviceet their needs24.8 per cent fe in the numbeur WestJet RBt to $10.04 pe0, 2014 ancillar of the prior y22.7 per centwe introduced

uarter of 2013s and pre-reser

ul in generatinhotels, attrac

n our domestic

Thr2014

% of to241 242 483 1

Si2014

% of9,161 6,392 5,553

r overall capacr the three moy of three Bomnational capace allocated to kets versus thethe transbordeto the same p

c, measured ity. Our transbred to the increasured in RPer and internareas of 7.0 pe

y revenue, WeJune 30, 2014

75.1 million anry revenue.

les, and prograces while enhan. For the threefrom $38.3 miler of guest booC MasterCard r guest, from $ry revenue wasyear. On a per to $10.28 per

d our fare bun3. Under this nrved seating fe

g additional rections and car

and transbord

ree months end

otal A58.4% 3,4641.6% 2,42

100.0% 5,88

ix months ende

total A49.4% 5,950.6% 6,00

100.0% 11,92

city increasedonths ended Jmbardier Q400ity mix remaithe transbord

e second quarer and internaeriod in 2013.

n RPMs, increborder and interease in capac

PMs, increased ational marketer cent compa

estJet Vacation4, other revenud $162.9 millio

am revenue, pncing our overae months endellion in the samokings, pre-resprogram. On a$8.54 per guess $98.5 millionr guest basis, ar guest from $

ndles in late Mnew structure ees and offered

evenue and suprentals, is rep

der and interna

ded June 30 2013

ASMs %63,161,383 25,004,296 88,165,679

ed June 30 2013

ASMs 14,129,651 06,132,098 20,261,749

by 5.2 and 6.June 30, 2014,0 aircraft and ned relatively der and interrter of 2013. Ftional markets

eased by 4.4 ernational marcity to these a4.2 per cent y

ts saw RPMs ired to the six

ns’ non-air reveue increased byon in the com

provides an oppall guest experd June 30, 201

me quarter of tserved seating a per guest bast during the t

n, an increase oancillary fees f

$8.38 per guestMarch 2013 and

we have impd Plus-seating

pporting WestJported on the

WestJet Second Qu

tional markets

% of total 58.8% 41.2%

100.0%

% of total 49.6% 50.4%

100.0%

6 per cent, re, compared totwo Boeing NGunchanged. D

national markFor the six mons, which repres

per cent year rkets, RPMs increas of 6.2 peyear over yearncrease by 7.months ended

enue and our cy 10.4 and 15.parable period

portunity to maience by provid14, ancillary rethe prior year, and Plus seatin

asis, ancillary fethree months eof approximatefor the six mont in 2013. Thisd when we coplemented yeaupgrade oppo

Jet’s overall necondensed co

uarter 2014│5

:

Change 4.5% 6.2% 5.2%

Change 6.2% 7.0% 6.6%

espectively, o the same G 737 800 During the

kets, which nths ended sents a 7.0

over year creased by

er cent. For r compared 6 per cent d June 30,

charter and 5 per cent,

ds of 2013.

aximize our ding guests evenue was mainly due ng upgrade ees for the ended June ely 30.8 per nths ended s change is ommercially r-over-year rtunities as

etwork. The onsolidated

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6 | WestJet Second

statement of eagrew, however same period in revenue collecte

Expenses

Aircraft fuel Airport operationFlight operations Sales and distribuMarketing, generDepreciation andAircraft leasing Inflight Maintenance Employee profit sTotal operating eTotal, excluding f

During the threcent year-over-aircraft fuel expby a decrease i

On an ASM basdue mainly to tnflight expense30, 2014 to 9.2

The increase indisclosed guidaechnical opera

since our prior f

Aircraft fuel Airport operationFlight operations Sales and distribuMarketing, generDepreciation andAircraft leasing Inflight Maintenance Employee profit sTotal operating eTotal, excluding f

During the six 2013 primarily dyear as well asrecovery. Accor2013. Excludinghe same period

Quarter 2014

arnings at the this growth wathe prior year.ed in Canadian

ns and navigationa

ution ral and administrd amortization

share expenses fuel and profit sh

ee months end-year increase pense, marketin inflight expen

sis, operating ethe year-over-ye. Excluding fu23 cents as com

n CASM, excludance of an incrtion cost recovforecast.

ns and navigationa

ution ral and administrd amortization

share expenses fuel and profit sh

months endeddriven by the 6s the increase rdingly, on an g fuel and empd in 2013.

net amount reas offset by the. The majority n dollars.

al charges

ration

hare

ed June 30, 20in capacity, t

ng, general annses.

expenses increayear increase inuel and emploympared to 9.06

ding fuel and erease of 3.0 toveries, a chang

al charges

ration

hare

June 30, 20146.6 per cent yein depreciationASM basis, op

ployee profit sh

eceived. In thee weaker Canaof the land co

ExpensThree mo

2014 274,861 121,436 110,585 86,524 61,162 54,402 44,714 42,108 50,755 5,351

851,898 571,686

014, operating the devaluationnd administratio

ased by 4.2 pen aircraft fuel eyee profit share

cents in the th

employee profo 4.0 per cente in planned a

ExpensSix mon

2014 559,697 248,797 226,730 187,834 113,383 115,424 93,822 86,810

103,550 26,349

1,762,396 1,176,350

4, operating exear-over-year inn and amortizaperating expenhare, CASM inc

e first half of 2adian dollar thrmponents are

se ($ in thousaonths ended Ju

2013 241,204 111,273 102,434 82,730 54,485 49,154 43,884 48,974 40,253 2,834

777,225 533,187

expenses incrn of the Canadon, depreciatio

er cent to 13.7expense and me, CASM increahree months en

fit share, for tht. This was madvertising spen

se ($ in thousanths ended Jun

2013 512,252 226,548 204,309 174,040 104,000 97,173 91,393 95,293 79,950 27,145

1,612,103 1,072,706

xpenses increancrease in capaation expense, nses increased creased by 2.9

2014, WestJetroughout the firpaid in US doll

ands) une 30

Change 14.0% 9.1% 8.0% 4.6%

12.3% 10.7% 1.9%

(14.0%) 26.1% 88.8% 9.6% 7.2%

reased by 9.6 pdian dollar yea

on and amortiz

76 cents from 1maintenance exased by 1.9 pended June 30,

he second quaainly driven bynd, and the im

ands) ne 30

Change 9.3% 9.8%

11.0% 7.9% 9.0%

18.8% 2.7%

(8.9%) 29.5% (2.9%)

9.3% 9.7%

ased by 9.3 peacity, the devaand maintenaby 2.6 per ce

9 per cent to 9

Vacations’ nonrst six months lars, which are

CAThree mon

2014 4.44 1.96 1.78 1.40 0.99 0.88 0.72 0.68 0.82 0.09

13.76 9.23

per cent primaar-over-year a

zation and main

13.20 cents in xpense, partialler cent in the t2013.

arter of 2014 wy lower cost ofpact of a stren

CASix mont

2014 4.40 1.96 1.79 1.48 0.89 0.91 0.74 0.68 0.81 0.21

13.87 9.26

er cent comparluation of the C

ance expense, ent to 13.87 ce.26 cents as co

n-air revenue cof 2014 compa

e netted agains

ASM (cents) nths ended Jun

2013 4.10 1.89 1.74 1.41 0.93 0.83 0.75 0.83 0.68 0.04

13.20 9.06

rily driven by tas well as an ntenance expe

the same perily offset by a dthree months e

was below our f sales, lower

ngthening Cana

ASM (cents) ths ended June

2013 4.30 1.90 1.72 1.46 0.87 0.81 0.77 0.80 0.67 0.22

13.52 9.00

red to the samCanadian dollapartially offsetents from 13.5ompared to 9.0

component ared to the st the gross

ne 30 Change

8.3% 3.7% 2.3%

(0.7%) 6.5% 6.0%

(4.0%) (18.1%)

20.6% 125.0%

4.2% 1.9%

the 5.2 per increase in

enses offset

od in 2013 decrease in ended June

previously negotiated

adian dollar

e 30 Change

2.3% 3.2% 4.1% 1.4% 2.3%

12.3% (3.9%)

(15.0%) 20.9% (4.5%)

2.6% 2.9%

e period in r year over t by a VAT 52 cents in 00 cents in

Itooacin

A

Fstpo

Frpiny

Optt$m

FpJst

Ain

Focof

Ofe

M

Mominmraw

ncluded in opeo the years 20

operations expeof 2014, this authorities. Exccent and CASMncreases are d

Aircraft fuel

Fuel remains ousix months endhe three mont

per cent to $55our overall fuel

Fuel cost per representing a per ASM excludncrease of 8.8 year basis.

Our fuel costs pper cent to 94 he second quahree months e

$134 per barremarket price wa

For the six monper barrel in thJune 30, 2014, same period ofhe weaker yea

As at June 30, n fuel prices an

For 2014, we eone US-dollar cchanges in fueone-cent changfuel costs.

On a go-forwarfuel, effective Sexodus of Cana

Marketing, ge

Marketing largeof corporate ofmarketing, genncrease, respemillion relating recorded for tamounts, the ywith the overal

erating expense09 through to ense), which wrecovery was

cluding the VATM, excluding fueriven largely by

ur most significed June 30, 20

ths ended June59.7 million com

consumption r

ASM for the year-over-year

ding the VAT rper cent. Thes

per litre for thecents and 92 carter of 2014 vended June 30el from $121 pas further com

nths ended Junhe first half of

the average mf 2013 as the 0ar-over-year Ca

2014, we havend may re-visit

estimate our sechange per bal pricing to be

ge in the value

rd basis, we arSeptember 1, adians to U.S. b

eneral and ad

ely consists of effice departmenneral and admctively, from thto a pending

he reimbursedyear-over-year l growth in ou

es for the six mthe end of 201

was recorded inrecorded base

T recovery, for el and profit shy increases in m

cant cost, repr014. Aircraft fue 30, 2014, andmpared to the related to our c

three and six r increase of 8recovery was 4se increases w

e three and sixcents per litre, versus US $11, 2014, the av

per barrel in thpounded by th

ne 30, 2014, t2013, a slight

market price fo0.8 per cent denadian dollar.

e no fuel derivaour hedging s

ensitivity of fuearrel of West T

approximatelyof the Canadia

re disappointed2014, when h

border airports.

dministration

expenses such nts, professioninistration exphe comparablesettlement wit

d relocation coincreases werer business, hig

months ended 13 of $20.1 miln the first threeed on the outthe six monthshare would hamaintenance co

resenting approuel expense for d for the six msame period ofcapacity growth

months ende8.3 and 2.3 per4.68 cents, com

were driven by t

x months enderespectively. O

7 per barrel inverage market he second quare weaker year-

he market pric decrease of 0r jet fuel increa

ecrease in the

ative contracts trategy as chan

el costs to chanTexas Intermey $12 million foan dollar versu

d in the Ontarigh provincial .

as advertising al fees and ins

pense was $61e periods of 20th a vendor wosts associatede attributable tgher share-bas

June 30, 2014lion ($17.6 mil

e months of 20tcome of prevs ended June 3ve increased bosts, and depre

oximately 32 pthe second qu

months ended Jf 2013. These h and the incre

ed June 30, 2r cent. Howevempared to 4.30the increase in

ed June 30, 20On average, thn the second qprice for jet furter of 2013 as-over-year Can

ce for jet fuel w0.8 per cent. Oased by 5.5 peaverage US do

outstanding. Wnging markets

nges in crude oediate (WTI) cor every one-c

us the US dolla

io provincial gofuel taxes are

and sponsorshsurance costs. 1.2 million and13. In the secohile in the samd with WestJeto an increase ed payment ex

4, is a VAT recollion in aircraft 14. As was disviously filed cl30, 2014, total by 3.1 per ceneciation and am

per cent of totauarter increaseJune 30, 2014,increases were

eased price of j

2014, was 4.4er, for the six 0 cents in the n the Canadian

14, increased he market pricequarter of 2013uel in Canadians the 5.1 per

nadian dollar.

was, on averagOn a Canadian er cent to $134ollar market pri

We will continuand competitiv

oil to be approxcrude oil. Additcent change per will have an

overnment’s dealready a sign

hip costs. GeneFor the three

d $113.4 millioond quarter of

me period of 2et’s move to in salaries an

xpenses (as di

overy from a fofuel expense a

sclosed in the Mlaims with theCASM would ht over the sam

mortization exp

al operating exed by 14.0 per , aircraft fuel ee a result of yejet fuel.

44 cents and months endedsame quarter market price

year over yeare for jet fuel w3, an increase n dollars increacent increase

ge, US $123 pdollar basis, f

4 per barrel froice for jet fuel

ue to monitor ave conditions w

ximately $8.0 tionally, we eser litre of fuel.approximate im

ecision to add nificant contrib

eral and adminiand six month

on, a 12.3 pef 2014, we reco2013 there wasa multi-base d consulting coscussed under

WestJet Second Qu

oreign jurisdictand $2.5 millioMD&A for the fe foreign jurishave increased me period in 20pense on an AS

xpenses for thecent to $274.9expense increaear-over-year in

4.40 cents, red June 30, 201

of 2013 repreof jet fuel on a

r by 8.0 per cewas US $123 pe

of 5.1 per ceased by 10.7 pin the average

er barrel versufor the six monom $127 per bawas more tha

and adjust to mwarrant.

million annuallstimate our se. We estimate mpact of $10.2

yet more tax butor to the cr

istration expenhs ended Juner cent and 9.0orded an amous a $5.2 millionsystem. Excluosts, primarily r the section tit

uarter 2014│7

tion related n in airport irst quarter

sdiction tax by 3.8 per 013. These SM basis.

e three and 9 million for ased by 9.3 ncreases in

espectively, 14 fuel cost esenting an a year over

ent and 2.2 er barrel in nt. For the per cent to e US dollar

us US $124 nths ended arrel in the n offset by

movements

y for every ensitivity to

that every 2 million on

to aviation ross-border

nses consist e 30, 2014, 0 per cent unt of $5.3 n provision ding these associated

tled Share-

8

bin

Minms

D

Dmmafoe

I

ImcrApconmOh

M

Mpeoc2tp

AEmeimt

8 | WestJet Second

based paymentncreased year

Marketing, genncrease of 6.5marketing, gensame period in

Depreciation

Depreciation anmillion, respectmillion in the coand amortizatiofrom 0.83 centsour fleet growtearly overhaul o

Inflight

nflight expensemonths ended compared to trepresenting anASM was 0.68 period of the prcent from 0.80 one flight attennon-recurring $migration to a October 1, 201has had an ove

Maintenance

Maintenance exper cent increasexpense was $1of 2013. Our mcent from 0.68 20.9 per cent too an increase

provision for lea

As our fleet conEncore, our flemaintenance prengines, lower mpact. Our proiming, total cos

Quarter 2014

t plans, found to date earning

neral and adm5 per cent fromeral and adminthe prior year.

and amortiza

nd amortizatioively, a $5.2 momparable peron expense wass and 0.81 cenh, the additionof certain engin

e is comprised June 30, 201

the same perion $8.5 million ocents in the srior year. On a cents in the sadant for every

$3.2 million pro1:50 flight att3, which has le

erall favorable i

xpense for the se from $40.3 103.6 million, w

maintenance cocents in the sao 0.81 cents frin the numbe

ased aircraft.

ntinues to groweet type has rovision for leadiscount rates

ovision is calcust and discount

on page 10 ofgs.

inistration cosm 0.93 cents inistration costs

ation

n expense for million and $18.iods of 2013. Fs 0.88 cents ants compared to

n of WestJet Ennes recorded in

mainly of sala4, inflight expod of 2013. For 8.9 per centecond quarter year-to-date b

ame period of t50 seats onbo

ovision for flightendant ratio. ed to cost-savimpact on inflig

three months million in the cwhich represen

ost per ASM waame period of trom 0.67 centsr of maintenan

w and mature, expanded requ

ased aircraft waand, as most lated based ont rates.

f this MD&A) a

sts per ASM wn the same peper ASM was 0

the three and3 million or 10For the three and 0.91 cents, o the same perncore in late Jun the first quart

aries and benefense was $42

For the six mot decrease comof 2014, repr

basis our inflighthe prior year.

oard an aircraftht attendants wWe worked inngs through a

ght expense thr

ended June 30comparable pents a $23.6 milas 0.82 cents ithe prior year. s in the first hance events, th

we performeduiring new maas mainly driveof our liabilitie

n the best infor

and an increase

were 0.99 centeriod of the p0.89 cents, wh

d six months e0.7 per cent andand six monthsrespectively, re

riods of 2013. Tune 2013 and ter of 2014.

fits, travel cost2.1 million, reponths ended J

mpared to the sesenting a decht cost per ASMThese decreas(1:50 flight at

who accepted tn cooperation w

reduction in ovroughout the fi

0, 2014, was $riod of 2013. Flion or 29.5 pen the second qSimilarly, our y

alf of 2013. Thee addition of W

more maintenaintenance supen by change is are in US dormation availab

e in our Owne

ts for the secprior year. For hich represents

ended June 30d 18.8 per cen

s ended June 3epresenting a These year-oveaccelerated de

ts and training presenting a $June 30, 2014six month endcrease of 18.1 M was 0.68 censes are primarittendant ratio).he voluntary ewith our flight verall salaries irst half of 2014

$50.8 million, wFor the six moner cent increasequarter of 2014year-to-date mese year-over-WestJet Encor

nance on our apport. As welln timing and s

ollars, an unfavble to us and in

er’s Performanc

cond quarter othe six month a slight increa

0, 2014 was $nt increase from30, 2014, on an6.0 per cent aner-year increasepreciation exp

for our flight 6.9 million or 4, inflight exped June 30, 20per cent from

nts, representinily attributable . The second qearly resignatio

attendants toand benefits a4.

which representnths ended June from $80.0 m4, representing

maintenance co-year increasesre and an incre

aircraft and witl, the year-ovscope of maintevorable year-ovncludes estimat

ce Reward accr

of 2014, reprehs ended Junease from 0.87 c

$54.4 million am $49.2 millionn ASM basis, dnd 12.3 per ceses were mainlypense associate

attendants. Fo14.0 per cent

pense was $86013. Our inflig

m 0.83 cents inng a decrease to operating auarter of 2013n package rela

o implement thnd other trave

ts a $10.5 millne 30, 2014, mmillion in the sag an increase oosts per ASM ins were mainly aease in our m

h the addition ver-year increaenance for cer

ver-year foreigntes on mainten

rual due to

esenting an e 30, 2014, cents in the

and $115.4 n and $97.2 epreciation nt increase y driven by ed with the

or the three t decrease, 6.8 million, ht cost per n the same of 15.0 per

at a ratio of included a

ating to our his ratio on el costs and

ion or 26.1 maintenance

ame period of 20.6 per

ncreased by attributable

maintenance

of WestJet ses in our

rtain leased n exchange nance cycle

C

Owea

(SEES AFSMIME

S

SDtdt2o

E

Tsaswpa2$p

E

Aeaapyp

Compensation

Our compensatwhereby a portemployees to baccomplishmen

($ in thousands) Salaries and beneEmployee share pEmployee profit sShare-based paym

Airport operationFlight operations Sales and distribuMarketing, generInflight Maintenance Employee profit s

Salaries and b

Salaries and beDuring the threo $154.2 millio

due to an increhe end of the

2013 as a resuoperating expen

Employee sha

The ESPP encosignificantly enagreement, be shares of Westwithin the ESPPparticipated in acquire voting s2014, our matc$18.4 million aparticipating co

Employee pro

All employees aemployees receand adjusted inan 88.8 per ceprofit share expyear decrease wprior year.

on

tion philosophytion of our expbecome ownerts.

efits purchase plan share ment plans

s and navigationa

ution al and administra

share

benefits

enefits are detee and six monon and $315.4 ase in our totasecond quartelt of our growtnse line item, a

are purchase

ourages emplonhance their e

eligible to contJet at the curP for a period the ESPP, conshares on behaching expense and $35.6 mi

ompared to the

ofit share

are eligible to eive larger awan less profitablent increase fropense was $26was directly at

y is designed topenses are varrs in WestJet,

l charges

ation

ermined via a nths ended Junmillion from $1

al number of fur of 2014, the th. Salaries andas presented in

plan (ESPP)

oyees to becomearnings. Undentribute up to rent fair markeof one year. Atributing an avalf of employeewas $19.3 millllion in the saprior year.

participate in ards when we e periods. Our om $2.8 million6.3 million, a dettributable to lo

o align corporaiable and are twhich creates

Three 2014 154,18519,3485,3525,904

184,789

26,77560,46417,57426,40032,80815,4165,352

184,789

framework of ne 30, 2014, sa149.1 million anull-time-equivaltotal number o

d benefits expen the table abov

me owners of er the terms a maximum ofet value. The c

As at June 30, verage of 13.7es through opelion and $38.1ame periods o

the employeeare more profprofit share ex

n in the same ecrease of 2.9ower earnings

te and personatied to our finaa personal ve

months ended2013

5 149,0888 18,4392 2,8344 3,4799 173,840

5 24,1604 54,8684 16,3970 22,4858 39,1816 13,9152 2,8349 173,840

job levels basalaries and bennd $295.9 millioent (FTE) empof FTE employeense for each dve.

WestJet shareof the ESPP, f 10 per cent ocontributions a2014, approxim

7 per cent of then market purcmillion, respec

of 2013, drive

profit sharingfitable. Conversxpense for the period of the per cent from margin eligibl

al success. Weancial results. Oested interest i

d June 30 Change

3.4% 4.9%

88.8% 69.7% 6.3%

10.8% 10.2% 7.2%

17.4% (16.3%)

10.8% 88.8% 6.3%

sed on internanefits increasedon in the same

ployees and ourees was 8,320department is

es and providWestJetters m

or 20 per centare matched bmately 83.7 peheir gross salachases. For thectively, a 4.9 pen largely by

g plan. As the sely, the amouthree months prior year. For$27.1 million e for profit sh

e have created Our compensain our financia

Six mon2014 315,365 38,145 26,349 9,762

389,621

52,911 124,717 35,845 51,123 68,083 30,593 26,349

389,621

l experience ad by 3.4 and 6e periods of 20r annual marke, an increase fincluded in the

es employees may, dependet of their grossby WestJet ander cent of our aries. Under the three and sixper cent and 7.

the increased

profit share sunt distributed ended June 30r the six monthin the first halfare in the first

WestJet Second Qu

a compensatioation strategy eal results and o

nths ended Jun2013 295,893 35,591 27,145 7,054

365,683

47,228 112,015 32,285 44,970 74,739 27,301 27,145

365,683

nd external ma6.6 per cent, re13. These increet and merit infrom 8,051 frome respective de

with the oppnt on their es salary to acqd are required eligible active e terms of thex months ende.2 per cent incd number of

system is a varto employees

0, 2014, was $hs ended Junef of 2013. The t half of 2014

uarter 2014│9

on program encourages operational

ne 30 Change

6.6% 7.2%

(2.9%) 38.4% 6.5%

12.0% 11.3% 11.0% 13.7% (8.9%) 12.1% (2.9%)

6.5%

arket data. espectively, eases were creases. At m June 30, epartment’s

portunity to mployment

quire voting to be held employees

e ESPP, we ed June 30, crease from employees

riable cost, is reduced 5.4 million,

e 30, 2014, year-over-versus the

1

S

Wpecbtyac

FpPata

F

Ttmmmcypa(ta

Wecmdtoein

Tcc

(S

10 | WestJet Second

Share-based p

We have threeperformance shequity-settled, compensation ebased on the notaled $5.9 mi

year. This increand to a revisicriteria.

For the six monper cent over $PSU vesting estabove. Share-bhe expense re

administration e

Foreign excha

The gain or loshe effect of th

mainly of monmaintenance remaintenance prcompared to $0year end is largpayable balancea foreign excha($1.7 million gahe appreciation

asset and liabili

We periodicallyexchange rate contracts for amillion at a wedesignated the he effective po

of the derivativearnings as a cneffective.

The following tcondensed conconsolidated sta

($ in thousands) Statement of Fin

Fair value Fair value Unrealized gain

d Quarter 2014

payment plan

e equity-settledhare units (PSshare-based

expense with aumber of awarllion, represent

ease relates prion in the num

nths ended Ju$7.1 million rectimates as wel

based payment lated to seniorexpense.

ange

ss on foreign ee changes in t

netary assets eserves paid torovisions. At Ju0.3 million in ngely due to thees. For the threange loss of $ain and $1.8 mn of the Canadty balances co

y use financial on a portion on average of Ueighted averagforward contra

ortion of the chve instrument,component of a

table presents nsolidated stateatement of ear

ancial Position:

n (loss)

ns

d share-based SUs) may be apayments are correspondingrds expected toting an increasimarily to a gre

mber of PSUs

ne 30, 2014, scognized in thel as the impacexpense relate

r executives’ an

xchange includthe value of ouof US-dollar

o lessors, offseune 30, 2014, Unet monetary lie increase in USee and six mon1.0 million, res

million gain for dian dollar sincembined with th

derivatives tof our US-dollarUS $13.3 millioge contract priacts as effectivhange in the fa, the effective aircraft leasing

the financial ement of finanrnings for the t

St PrAcH

payment planawarded to pie measured atg increase in eqo vest. For these of 69.7 per ceater number expected to v

share-based pae same period ct from more ped to pilots’ awnd certain non-

ded in our conur US-dollar-decash and cas

et by monetaryUS-dollar-denomabilities at DecS-dollar cash anths ended Junspectively, on the three and e the first quarhe relative over

o manage our r-denominated on per month ice of 1.0832ve cash flow hair value of the

gains and losg expense. At J

impact and stncial position ahree and six m

tatement prese

repaid expenses,ccounts payable edge reserves (b

ns whereby eitlots, senior ext the fair valquity reserves o three months cent over the $of pilots electinest in early 20

ayment expensin the prior yeilots electing s

wards is include-executive emp

densed consolinominated neth equivalents,

y liabilities of Uminated net mcember 31, 201nd accounts ree 30, 2014, wethe revaluationsix months en

rter of 2014, wrall weakness o

exposure to faircraft lease for the period Canadian dollaedges for accohedging instru

sses previouslyJune 30, 2014,

tatement preseat June 30, 20

months ended J

entation

, deposits and otand accrued liab

before tax)

ther stock optxecutives and lue of the inon a straight-liended June 3

$3.5 million recng to receive s015 due to th

se was $9.8 mear. This increastock options ined in flight opeployees’ award

idated statemet monetary ass, security depUS-dollar accou

monetary assets13. The increaeceivable balane reported a fon of our US-donded June 30, while the six moof the Canadian

foreign exchanpayments, we of July 2014 ars to one USounting purposument is recogy recognized i, no portion of

entation of ou014 and Decemune 30, 2014 a

ther bilities

tions, restrictecertain non-exstrument granine basis over t0, 2014, sharecognized in thestock options t

he achievemen

million, represenase relates primn the second qerations and nads is included in

ent of earningssets. These netposits on variounts payable as totaled approse in net mone

nces and decreoreign exchangollar-denomina2013). The thonth loss is dun dollar since D

nge risk. At Juentered into fto June 2015

S dollar. Upon ses. Under cashnized in hedgen hedge reserf the forward c

ur foreign exchmber 31, 2013and 2013.

June 30 2014

87(2,69(1,81

ed share units xecutive emplonted and recothe related ser

e-based paymee same period than previouslyt of certain pe

nting an increamarily to a reviquarter of 2014avigational chan marketing, g

s is mainly attrt monetary assous leased airnd accrued liaximately US $1etary assets coase in US-dollae gain of $0.5

ated net moneree-month gai

ue to fluctuatingDecember 31, 2

une 30, 2014, foreign exchanfor a total of proper qualifi

h flow hedge ae reserves. Uporves are recorcontracts was

hange derivativ3 and on the

Decem20

76 2) 6)

(RSUs) or oyees. Our ognized as rvice period nt expense in the prior y estimated erformance

ase of 38.4 sion to our 4, as noted rges, while

general and

ributable to sets consist rcraft, and bilities and

14.3 million ompared to ar accounts million and tary assets n is due to g US-dollar 2013.

to fix the ge forward US $159.6 ication, we accounting, on maturity ded in net considered

ves on the condensed

mber 31 13

4,187 (29)

4,158

(S

(S

Tpc

Fam

I

Oct

S

(TNBD

(TNBD

Oinfs

($ in thousands) Statement of Ear

Realized gain

($ in thousands) Statement of Ear

Realized gain

The fair value position is meacounterparty, w

For 2014, we eapproximate immillion related t

Income taxes

Our effective cconsistent with o 28 per cent.

SUMMARY O

($ in thousands, Total revenue Net earnings Basic earnings peDiluted earnings

($ in thousands, Total revenue Net earnings Basic earnings peDiluted earnings

Our business is n the summer first quarters). seasonality on o

rnings:

rnings:

of the foreignasured based owhich can be ob

estimate that mpact of $12.8 to other US-do

s

consolidated inthe same peri

OF QUARTER

except per share

er share per share

except per share

er share per share

seasonal in namonths (seconWith our tran

our net earning

St A St A

n exchange foron the differenbserved and co

every one-cenmillion on our

llar-denominat

come tax rateods of 2013. F

RLY RESULT

e data)

e data)

ature with varynd and third qunsborder and ings.

tatement prese

ircraft leasing

tatement prese

ircraft leasing

rward contractsce between th

orroborated in t

t change in thr annual unheded operating e

e for the threeFor 2014, we an

S

ying levels of acuarters) and mnternational de

entation

entation

s presented onhe contracted rthe marketplac

he value of thdged operatingxpenses).

e and six monnticipate that o

Jun. 30 2014

930,340 51,762

0.41 0.40

Jun. 30 2013

843,694 44,735

0.34 0.34

ctivity throughomore demand foestinations, we

n the condensrate and the cce.

e Canadian dog costs (approx

nths ended Junour annual effe

Three mMar. 31

2014 1,042,09

89,29 0. 0.

Three mMar. 31

2013 967,24 91,0

0. 0.

out the year. Wor sun destinate have been a

W

Three mont2014

2,85

Six month2014

5,70

sed consolidateurrent forward

ollar versus thximately $10.2

ne 30, 2014, rective tax rate

months ended Dec. 3

201390 9291 670 69

months ended Dec. 3

201243 8673 669 68

We experience tions over the wable to partially

WestJet Second Qua

ths ended June20

56

hs ended June 3

20

05

ed statement od price obtaine

e US dollar wmillion for fue

remained at 2will be in the r

31 3

Se2

26,417 67,807

0.52 0.52

31 2

Se2

60,640 60,944

0.46 0.46

increased domwinter period (y alleviate the

arter 2014│11

e 30 13

477

30 13

467

of financial d from the

will have an el and $2.6

7 per cent range of 27

ept. 30 2013

924,844 65,107

0.50 0.50

ept. 30 2012

866,537 70,648

0.53 0.52

mestic travel (fourth and e effects of

1

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12 | WestJet Second

GUEST EXPE

At WestJet, wecommitted to dcompletion.

Key performa

On-time performeasurement fwithin 15 minurepresents the delayed, lost, a

On-time performCompletion rate Bag ratio

For the three mJune 30, 2014, ncidents. For thperiod in 2013.experienced at

During the threrespectively, cofocus as well completion ratehighlighting oufocus and effort

LIQUIDITY A

Liquidity

The airline indumperative to aWe completed $1,256.0 millionexpenditures, $our dividend anfinancing inflow

Part of our casbalance at Junecash and cash stressed conditsales balance.

We monitor caequity and adjadditional GAAPmeasure commcent at June 30This decrease icash equivalentook into consi

d Quarter 2014

ERIENCE

e are focused delivering a po

ance indicator

rmance and cofor the North Ates of their scpercentage of

nd beginning i

ance

months ended Jcompared to t

he six months As previously one of our key

ee and six monompared to theas improved e for both ther commitment ts on safely pe

AND CAPITA

ustry is highly an airline’s succ

the second qn at Decembe

$115.6 million ond share buy-b

ws of $181.2 m

sh and cash eqe 30, 2014, wasequivalents on

tions. At June

pital on a numusted net debP measures). C

monly used in t0, 2014 compais in-line with ts and an increderation $1,33

on meeting thositive guest ex

rs

ompletion ratesAmerican airlinheduled time, f flights compn the second q

Thr2014

84.599.2

3.

June 30, 2014, the same perioended June 30disclosed, this

y domestic airp

nths ended June second quarteweather conde three and sand ability to

rforming on tim

AL RESOURC

sensitive to uncess. Our consquarter of 201r 31, 2013. Thon the repaymeback programsillion during the

quivalents balas $572.4 million hand to hav30, 2014, we

mber of measubt to EBITDARCash to TTM rthe airline induared to 34.3 peour expectatioease in the TT35.6 million in

he needs of oxperience at ev

s are calculatene industry. Onis a key factorleted from flig

quarter of 2014

ree months end2013

5% 812% 9998 4

our bag ratiood in the prior y0, 2014, our bas negative increorts earlier in 2

e 30, 2014, ouer of 2013, dueitions experien

six months eno complete ourme.

CES

npredictable cirsistent and stro4 with a cashhe decrease inent of debt and

s, partially offsee second quart

ance relates to n, an increase

ve sufficient liqhad cash on h

ures, including R (please referrevenue ratio,ustry to compaer cent at Decens and capital

TM revenue. Ouoff-balance-sh

ur guests whilvery stage of o

ed based on tn-time performr in measuringghts originally 4, also damaged

ded June 30 Chang

.0% 3.

.0% 0.4.11

saw a positive year. The bag ag ratio negativease is mainly 2014, which lea

ur on-time perfe to fewer late nced across oded June 30, r flights as orig

rcumstances anong financial reh and cash eqn our cash posd cash interestet by our positer.

cash collectedof 3.9 per cent

quidity to meethand of 1.88 (D

cash to trailinr to page 26 defined as cas

are liquidity posember 31, 201management

ur adjusted deheet aircraft op

le maintaining our service, fro

the US Departmance, indicating our guest expscheduled. Oud or pilfered ba

ge 205 pts. 2 pts. 3.2%

decrease by 3ratio improvemvely increased attributable to ad to a high vo

formance increarrival delays

our network. W2014, as com

ginally schedu

nd, as such, mesults enable uquivalents balasition was a ret paid, and a ctive cash flow

d with respect t from $551.0t these liabilitiDecember 31,

g 12 months (of this MD&A sh and cash esitions. Our ca

13, representinstrategy and

ebt-to-equity raperating leases

the highest som the time t

tment of Transng the percentperience. The ur bag ratio reaggage claims

Six months 014 2

76.4% 98.4%

5.00

3.2 per cent forment was a resby 10.9 per ce the extreme wolume of displa

eased by 3.5 anas a result of oWe also saw mpared to theled. We contin

maintaining a stus to maintain ance of $1,076esult of $367.6combined total

from operatio

to advance timillion at Decees, when due,2013 – 2.28)

(TTM) revenuefor a reconci

equivalents oveash to TTM revng a decrease ois the result ofatio at June 30s. Our adjuste

safety standardhe flight is bo

sportation’s sttage of flights completion ratepresents the made per 1,00

ended June 302013 C

73.9% 98.3%

4.51

r the three monsult of fewer losent compared towinter weatheraced baggage.

nd 2.5 percentaour significant oan improvem

e same periodnue to place o

trong financial a healthy bala

6.7 million, co6 million spent of $60.2 millio

ons of $177.8

cket sales, forember 31, 2013, under both ntimes our adv

e ratio, adjusteliation of non-

er the TTM revvenue ratio waof 6.1 percentaf a decrease in0, 2014, was 1ed debt-to-equ

ds. We are oked to its

andards of that arrive

te indicator number of

00 guests.

0 Change

2.5 pts. 0.1 pts.

(10.9%)

nths ended st baggage o the same r conditions

age points, operational ent in our s in 2013,

our internal

position is ance sheet. ompared to t on capital on spent on million and

r which the 3. We have normal and vance ticket

ed debt-to--GAAP and venue, is a as 28.2 per age points. n cash and 1.38, which ity ratio of

1d2df

OD

S

(CL

CEN CC (CL

CEN CC

O

Dmo(ina

Fmoy

AWwf

1.38 at June 30debt from stro2014, our adjusdue to a larger facility compare

Our current raDecember 31, 2

Select cash flo

($ in thousands) Cash provided byLess:

Cash used by iCash used by f

Cash flow from oEffect of foreign Net change in ca

Cash and cash eqCash and cash eq

($ in thousands) Cash provided byLess:

Cash used by iCash used by f

Cash flow from oEffect of foreign Net change in ca

Cash and cash eqCash and cash eq

Operating cas

During the secomillion in the soperations incr(please refer toncrease was maccrued liabilitie

For the six monmillion in the soperations decryear-over-year

At June 30, 20WestJet Vacatiowith U.S. regulfacility charges.

0, 2014, remaing net earningsted net debt increase in ad

ed to a relative

tio, defined as2013, a decrea

low informati

y operating activ

nvesting activitiefinancing activitieoperating, investiexchange on cassh and cash equ

quivalents, beginquivalents, end o

y operating activ

nvesting activitiefinancing activitieoperating, investiexchange on cassh and cash equ

quivalents, beginquivalents, end o

sh flows

ond quarter ofame quarter oeased 34.3 peo page 26 of thmainly the resues.

nths ended Juname period of reased 29.6 pedecrease is pre

014, restricted ons; $8.9 millioatory requirem.

ns unchanged gs and additioto EBITDAR ra

djusted net debly smaller incre

s current assese of 8.3 per c

ion

ities

es es ng and financingsh and cash equiuivalents

nning of period of period

ities

es es ng and financingsh and cash equiuivalents

nning of period of period

f 2014, our casof the prior yeaer cent to $0.9his MD&A for ault of an incre

ne 30, 2014, ca2013. Similarl

r cent to $1.38edominantly du

cash consistedon (December

ments, $1.0 mil

from Decembenal borrowingsatio of 1.52 incbt from lower cease in EBITDA

ets over currencent due mostly

g activities valents

g activities valents

sh from operaar. Similarly, on90 per share ca reconciliationase in non-cas

ash from operaly, on a per sh8 per share comue to an increa

d of $24.8 mill31, 2013 – $8

llion (Decembe

er 31, 2013, dus under our necreased by 24.cash balances aAR over the sam

nt liabilities, wy to a decrease

tions increasedn a per share compared to $0n of non-GAAP sh working cap

tions decreasehare basis, for mpared to $1.9se in cash taxe

ion (Decembe8.3 million) forer 31, 2013 –

ue to equal incew revolving c6 per cent comand higher borme period.

was 1.00 at Jue in cash and ca

Th2014

115,5

(220,970,8

(34,54(1,26

(35,8

1,112,41,076,6

S2014

177,8

(367,594,9

(184,75,4

(179,3

1,256,01,076,6

d 28.7 per cenbasis, for the 0.67 per shareand additiona

pital, most not

ed 31.9 per centhe six month

96 per share ines paid.

r 31, 2013 – $r security on le$1.3 million) f

W

creases in adjucredit facility, rmpared to 1.22rrowings under

ne 30, 2014, ash equivalent

hree months e201

547

36) (17841 (648) (1465) 13) (14

484 1,3671 1,2

Six months end201

846 2

98) (32984 (1368) (19434 34) (18

005 1,4671 1,2

nt to $115.5 msecond quartee in the same al GAAP measutably, related

nt to $177.8 mhs ended June n the same peri

$48.5 million) etters of guarafor cash not ye

WestJet Second Qua

usted equity anrespectively. A2 at Decemberr our new revo

as compared ts.

nded June 303 Ch89,773

73,110) 62,908) 46,245)

5,043 41,202)

364,800 223,598

ded June 30 3 Ch

261,027

21,581) 31,433) 91,987)

7,386 84,601)

408,199 223,598

million comparer of 2014, ourperiod of the

ures). This yeato accounts pa

illion compared30, 2014, our iod of the prior

for cash held ntee; and, in a

et remitted for

arter 2014│13

nd adjusted At June 30, r 31, 2013, lving credit

to 1.09 at

hange 25,774

(47,826) 133,749 111,697 (6,308)

105,389

(252,316) (146,927)

hange (83,181)

(46,017) 136,417

7,219 (1,952)

5,267

(152,194) (146,927)

ed to $89.8 r cash from prior year r-over-year ayable and

d to $261.0 cash from r year. This

in trust by accordance passenger

1

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14 | WestJet Second

Investing cas

For the three anrespectively, convesting activitBombardier Q4aircraft. Year too the schedule

Financing cas

For the three mhe same quart

our new revolvborrowings of Bombardier Q4repayments, $9pursuant to our

For the six monsame period of from our new rmillion from oufinancing outflodividends paid a

Free cash flow

Free cash flow maintain or exactivities relatenegative $105.million in the s$1.47 per shareper share in thargely due to sactivity. In the expenditures, wequivalents. Honvesting activit

Please refer to

Aircraft financ

We have grownhree Bombardi

purchase price 2014, which wBombardier Q4on any US-dollafinanced with requirements apooled asset coCorporation has

To mitigate theswap agreemen

d Quarter 2014

sh flows

nd six months ompared to $1ties during the

400 aircraft as o date, we haved future aircra

sh flows

months ended ter of 2013. Ouving credit facil$48.8 million

400 aircraft. T9.6 million for r new normal c

nths ended Jun2013. For the

revolving credir existing EDC ows of $95.8 mand $29.6 milli

w

is a measure xpand its assetd to property 4 million and

same periods oe for the three e same periodsignificant capshort-term, w

we expect to owever, over a ties.

page 26 of this

cing

n through acquier Q400 aircraof the aircraft

we funded with00 and Boeingar-denominatea remaining d

associated withoverage ratio os met both rati

e earnings impants to fix the i

ended June 30173.1 million ae second quartwell as additioe taken deliverft deposits prev

June 30, 2014ur financing infllity establishedfrom our exist

These financingcash interest

course issuer bi

ne 30, 2014, fisix months ent facility used facility for the

million for repon for share re

that representt base. It is aand equipmennegative $189

of the prior yeaand six months of the prior yital spending o

when capital anhave negativelonger period

s MD&A for a r

uisitions of Boeaft deliveries wt. We also tookh cash from d 737 NG aircrad debt. At Jundebt balance h our term loaof 1.5 to 1, anos.

act of changingnterest rates o

0, 2014, cash uand $321.6 mter of 2014 reonal deposits fry of two Boeinviously noted a

4, financing inflows for the sed in June 2014ting Export Deg inflows were

paid, $15.3 mid approved in

nancing inflowded June 30, 2for general co

e financing of fayments of loepurchased und

ts the cash thaa calculation ofnt. Our free ca9.8 million, resar. On a per s

hs ended June 3year. These incon new aircraftnd investing ace free cash flof time, we ex

econciliation of

eing 737 NG anere financed bk delivery of twrawing on our

aft debt is finanne 30, 2014, wof $963.8 mi

ans. Our revolnd (ii) minimum

g interest ratesover the term

used for investiillion in the salated to the defor future Boeng 737 NG 800as well as expe

lows totaled $7econd quarter r4, described unevelopment Cae partially offsmillion for dividMay 2014.

ws totaled $5.0 2014, our finanrporate purpos

five Bombardieng-term debt, der our Februa

at a company f operating cash flow for the

spectively, comshare basis, thi30, 2014, compcreases in negt, scheduled dectivities are explow, which wexpect our opera

f non-GAAP an

nd Bombardier y secured termwo Boeing 737r new unsecurnced in Canadia

we had 59 Boeillion, net of tlving credit facm fixed charge

s on our variabof the loans. U

ng activities toame periods oelivery of two ing 737 NG, B

0 aircraft and fienditures for ow

70.8 million corelated mainlynder the Aircraanada (EDC) tset by outflowdends paid an

million compancing inflows wses, including fr Q400 aircraft$19.8 million

ary 2013 and M

is able to geneash flow, less e three and six

mpared to negais equated to pared to negat

gative cash floweposits on futupected to be he are able to ating cash flow

d additional GA

Q400 aircraft. m loans with ED7 NG 800 seriered revolving can dollars, eliming 737 NG airtransaction cocility contains e coverage rat

ble rate term loUpon proper q

otaled $220.9 mof the prior yeBoeing 737 N

Boeing 737 MAve Bombardierwned engine ov

ompared to outo the borrowi

aft Financing hterm facility fo

ws of $48.1 mnd $4.9 million

red to outflowwere the result o

funding aircraft. Partially offsin cash intere

May 2014 norma

erate after methe amount ox months endeative $83.3 minegative $0.82tive $0.62 per sw and negativeure aircraft andhigh due to air

manage throws to sufficientl

AAP measures.

During the seDC for approximes aircraft durincredit facility a

minating the forcraft and 13 Bosts. There ar

two financial tio of 1.25 to

oans, we have qualification, we

million and $36ear. The majo

NG 800 aircraftAX and Bombar Q400 aircraft verhauls.

tflows of $62.9ng of $100.0 meading below,

or the financinillion for long-

n for shares re

s of $131.4 miof $100.0 millioft acquisitions, etting these inest paid, $30.6al course issue

eeting its requiof cash used ined June 30, 20illion and nega2 per share anshare and negae cash flow perd owned enginrcraft and aircrough our cashly fund all our

.

cond quarter omately 80 per ng the second as described b

oreign exchangBombardier Q4re no financiacovenants: (i)

1. At June 30,

entered into ine designated t

7.6 million, ority of our t and three rdier Q400 in addition

9 million in million from

as well as ng of three -term debt epurchased

illion in the on in funds and $81.2

nflows were 6 million in er bids.

rements to n investing 014, was a ative $60.6 nd negative ative $0.45 r share are

ne overhaul raft related and cash capital and

of 2014 our cent of the quarter of

below. Our e exposure 400 aircraft l covenant ) minimum , 2014, the

nterest rate the interest

rs

Tcc

(SFFFU (S

(S

Tfc

Irfbcdlo2etin

WEc2y

Dcoinrawc

OTc

rate swap contswap agreemen

The following tcondensed conconsolidated sta

($ in thousands) Statement of FinFair value Fair value Fair value Unrealized gain (

($ in thousands) Statement of Ear

Realized loss

($ in thousands) Statement of Ear

Realized loss

The fair value oforward curve corroborated in

n June 2014, revolving $250funding of futubasis. Funds frcalculated by redebt rating. At oan with a 3.702014, the undisequivalents rephrough a privandebtedness u

We also have aEncore financincent per annum2018. The expeyears, payable

During the firscorporate crediopinion about antended to precommendatioa particular invewill not be revcustomary fee t

On July 23 201The notes bear commencing on

racts as effectnts was conside

table presents nsolidated stateatement of ear

ancial Position:

(loss)

rnings:

rnings:

of the interest for the appli

the marketpla

we entered in.0 million syndre aircraft acqrom the credit eference to theJune 30, 20140 per cent intesbursed portionpresents total ate placement (nder our revolv

an $820.0 millig support for t

m on the undisected amount ain quarterly ins

st quarter of 2t rating with aan obligor’s ovprovide investons to buy, sellestor. There isvised or withdrto S&P for cred

14, we successinterest of 3.2

n January 23, 2

ive cash flow hered ineffective

the financial iement of finanrnings for the t

St AcOOH St Fi St Fi

rate swap agrecable floating

ace.

nto a credit agdicated credit uisitions, and mfacility can be

e applicable ba, we have drawrest rate. We an of the credit liquidity of $1(discussed in mving credit faci

on guaranteedthe purchase obursed portionavailable for eastalments. At Ju

2014, Standarda stable outlookverall creditwortors with an

or hold our seno assurance

rawn entirely dit rating servic

fully completed287 per cent pe2015 and will m

hedges for acce.

mpact and stancial position ahree and six m

tatement prese

ccounts payable Other long-term liOther long-term a

edge reserves (b

tatement prese

inance costs

tatement prese

inance costs

eements is meainterest rates

greement withfacility. The cmatures in June drawn in Caase rate for thewn $100.0 millialso pay a stanfacility was $15

1,226.7 million.more detail belolity.

d loan agreemef Bombardier Q

n of the commiach aircraft is uune 30, 2014,

d & Poor’s Ratk. S&P’s issuerrthiness but doexternal mea

ecurities and dothat our ratingby S&P in theces.

d a private plaer year with semmature on July

ounting purpos

atement presenat June 30, 20

months ended J

entation

and accrued liababilities

assets before tax impact

entation

entation

asured based os obtained fro

h a syndicate oredit facility is

ne 2017 with aanadian or US e chosen instruion from the redby fee for the50.0 million. T. Subsequentlyow) and used p

ent with EDC pQ400s. We are tment. Availab

up to 80 per cewe have $607.

ting Services (r credit ratingso not apply toasure of our o not address tg will remain ine future if, in

cement offerinmi-annual intery 23, 2019. The

ses. At June 3

ntation of the 014 and Decemune 30, 2014 a

bilities

ct)

on the differencom the count

of banks whers available for an option to ex

funds throughument plus an evolving credit e undisbursed phe undrawn poy, on July 23, part of the net

pursuant to whcharged a non

bility of any unnt of the net p.8 million undra

(S&P) assigneds range from ao any specific f

overall credthe market pricn effect for anyits judgment,

ng of $400.0 mrest payments ese unsecured

W

0, 2014, no po

interest rate smber 31, 2013and 2013.

June 30 2014

(3,05(1,57

(4,63

Three mont2014

80

Six month2014

1,63

ce between theterparty, which

reby we have general corpo

xtend the threeh various debtapplicable pricfacility in the fportion of the cortion combine 2014, we coproceeds to re

hich EDC will mn-refundable codrawn amount

price with a termawn under the

d WestJet an a high of AAA tfinancial obligaditworthiness. ce or suitabilityy given period circumstances

million 3.287% on January 23 notes rank eq

WestJet Second Qua

ortion of the in

swap agreeme3 and on the

Decem20

7)

75)

2)

ths ended June20

02

hs ended June 3

20

31

e fixed swap rah can be obs

access to an orate purposese-year term ont instruments. cing margin baform of a Canacredit facility. A

ed with our casmpleted a bonepay the $100.

make available ommitment feet will expire at m to maturity oloan agreeme

issuers 'BBB-'to a low of D aation. Our credCredit ratings

y of a specific sof time or that

s so warrant.

Senior Unsecu3 and July 23 ofqually in right o

arter 2014│15

nterest rate

ents on the condensed

mber 31 13

(3,220)

4,103

883

e 30 13

159

30 13

326

ate and the served and

unsecured s, including n an annual

Interest is sed on our

adian prime At June 30, sh and cash nd offering 0 million of

to WestJet e of 0.2 per the end of of up to 12 nt.

long-term and are an dit rating is s are not security for t our rating We paid a

ured Notes. f each year of payment

1

wsn

Atyfwop

Af

Wc

C

Ah

(i

(i

Opwar

C

Wmf

16 | WestJet Second

with all our othsecured debt tonew source of f

At our option, whe Canada Yie

yield on a non-face amount, towill be cancelleoption of the hprincipal plus ac

A portion of thefacility and with

We continue tocapital structure

Contractual o

At June 30, 20have been conv

($ in thousandsLong-term debt Operating leasePurchase obligaTotal contractua

i) Relates to oper

ii) Relates to oblig

Our future US-dplan to meet owith cash flowsassess financinreasonably expe

Contingencies

We are party management tfinancial positio

d Quarter 2014

her existing ano the extent of financing for W

we may redeemeld Price, defin-callable Goverogether, in eaced and may noolder, any parccrued and unp

e net proceeds h the balance to

evaluate the oe as well as the

obligations an

014, our contraverted at the pe

) repayments

es and commitmetions(ii) al obligations

rating leases and co

gations for our conf

dollar-denominur contractual s from operatiog alternatives ect, adverse ch

s

to legal procehat the ultima

on, results of op

nd future unsuthe value of th

WestJet which a

m the notes, ined as the pricnment of Canach case, with aot be reissued.t of the holderpaid interest, if

from the sale o be used for g

optimum balane external envi

nd commitme

actual obligatioeriod-end closi

ents(i)

ommitments for air

firmed purchased a

ated purchase obligations anons and futureavailable to us

hanges to our f

eedings and cate outcome operations or ca

bordinated debhe assets secu

adds considerab

whole or in pace calculated toada bond with any accrued an. In the event r’s notes, at a f any, to the da

of these notesgeneral corpora

ce and sourcesronment for ai

ents

ons and commng exchange r

Total 963,845 968,789

4,375,312 6,307,946

rcraft, land, building

aircraft deliveries fo

commitments,d commitmente sources of as for our futurfuture ability to

claims that ariof these and aash flows.

bt, but are effring such debtble flexibility in

art, at any timeo provide a yiean equal term

nd unpaid inteof a change ipurchase price

ate of purchase

s was used to rate purposes, i

s of financing arcraft financing

itments are inate and presen

Within 1 yea 185,28 251,01 485,03 921,33

gs, equipment, com

or Boeing 737s, Bom

, including certts through our ircraft financinre aircraft delivo access similar

ise during theany outstandin

fectively subordt. The unsecuren the funding of

e, at a redempeld to maturity

m to maturity arest, if any. Ann control, we e equal to 101 e.

repay existing ncluding the fu

available to us g.

ndicated in thented in Canadia

ar 1 - 3 yea85 35912 35639 74936 1,465

mputer hardware, s

mbardier Q400s an

tain aircraft, arcurrent cash a

ng. We continuveries. At this r or different so

e ordinary coug matters will

dinate to all oed bond markef our fleet plan

ption price equay, compoundednd (ii) par or 1ny notes redeeare required t per cent of th

indebtedness uunding of futur

based on our i

e following taban dollars in th

ars 3 - 5 y9,770 6,175 9,347 95,292 1,3

software licenses a

nd spare engines.

re exposed to fand cash equivuously monitortime, we are ources of liquid

urse of businel not have a m

of our existing et represents an going forward

al to the greated semi-annually100 per cent oemed or purchto purchase allhe aggregate o

under our revore aircraft acqu

nternal require

le. All US-dollae table.

years Ove158,775 197,070 949,806 305,651

nd inflight entertai

foreign exchangvalents balancer the capital mnot aware of, dity.

ess. It is the material effect

and future a significant d.

er of the (i) y, equal to

of the initial ased by us l, or at the outstanding

lving credit isitions.

ements and

ar amounts

er 5 years 260,015 164,532

2,191,120 2,615,667

nment.

ge risk. We e combined

markets and nor do we

opinion of t upon our

F

Da23

Ao2ssr1ain

Latpd2

B

7

7

7

7

7

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FLEET

During the secoaircraft to end 2014, we annou300ERW series

As previously dorders for Q4002014. On July 2scheduled for dseries aircraft brecording a non10 aircraft. Weaccounting guidn the Canadian

Looking forwaraircraft and an he sale of the

provides us witdecisions to exe2014 and Dece

Boeing(i)

737-600 NG

737-700 NG(iv)

737-800 NG(v)

737 MAX 7(ii)(vi)

737 MAX 8(ii)(vi)

Disposals(vii)

Total Boeing 737sease renewals

Lease expiries

Total Boeing 737sease expiries

Bombardier

Q400 NextGen(viii)

Total Fleet withrenewals Total Fleet withexpiries

i) On July 28, 20firm commitm

ii) We have optioiii) We have an oiv) At June 30, 20v) At June 30, 20vi) WestJet’s Boevii) Sale of 10 of oviii) We have optio

ond quarter ofthe quarter wunced our planaircraft.

disclosed in the0 aircraft and w28, 2014, we cdelivery in 201beginning in thn-cash book lose anticipate a sdelines. As prevn dollar since th

rd, we have firadditional 17 B 10 Boeing 73th the flexibilitercise lease renmber 31, 2013

Dec.20

13

69

23

―

―

10

―

s with 10

―

s with 10

) 8

h lease 11

h lease 11

014, we entered inment has not been rons to purchase anoption to convert an014, of the 69 Boei014, of the 25 Boeieing 737 MAX 7 andour Boeing 737 NGons to purchase an

f 2014, we tooith a registered

n to take the ne

e 2014 first quwe extended aconverted an ad6. We continu

he second halfss in the range significant portviously disclosehe aircraft were

rm commitmenBombardier Q437 NG 700 serity at the end onewals. The fo as well as our

31, 13

Jun. 302014

3 13

9 69

3 25

― ―

― ―

05 107

― ―

05 107

― ―

05 107

8 13

13 120

13 120

nto an agreement wreflected in the flee additional 10 Boei

ny of these Boeing ing 737 NG 700 airing 737 NG 800 aird MAX 8 aircraft ord 700 aircraft to Sou additional 15 Bom

ok delivery of td fleet of 120ext steps to be

uarter MD&A, wll three Boeingdditional five oe to expect to

f of 2014 with of $50 million

tion of this lossed, a significane originally pur

nts to take de400 aircraft. Thies aircraft to of 2027 to havollowing table ir firm commitm

, 2014 2

―

―

5

―

―

5

(5)

―

―

―

3

3

3

with Boeing giving et table above. ng 737 MAX aircraf737 NG 700 futurecraft in our fleet, 3craft in our fleet, 1ders can each be suthwest Airlines.

mbardier Q400 aircra

two Boeing 73aircraft with a

egin operating

we converted fg 737 NG 700 aof the remainingo deliver to Sou

the final delivto $60 million

s will be recornt portion of thirchased in 2002

livery of an adhe combinationSouthwest, heve a fleet size llustrates our B

ments by year to

2015 2016

― ―

5(iii) 7(iii)

5 ―

― ―

― ―

10 7

(5) ―

5 7

(12) (8)

(7) (1)

9 5

14 12

2 4

us the option to e

ft between the yeae commitments to B30 are leased (Dece14 are leased (Deceubstituted for the o

aft between the ye

7 NG 800 serian average agewide-body airc

five of our puraircraft leases,g 20 purchase uthwest Airlinevery expected calculated with

rded in the thiris anticipated b2 and 2003.

dditional 23 Bon of our firm coelp us to optim

between 171Boeing 737 ando 2027:

2017 2

―

1(iii)

―

―

4

5

―

5

(6) (

(1)

―

5

(1)

either lease or purc

ars 2020 and 2021.Boeing 737 NG 800ember 31, 2013 – 3ember 31, 2013 – 1other model of airc

ears 2015 and 2018

W

es aircraft ande of 6.9 years.craft and have

rchase options previously schoptions with B

es 10 of our olin the first halh a foreign excrd quarter of 2book loss is dri

oeing 737 NG ommitments, th

mize the size aand 215 aircr

d Bombardier Q

018-20

2021-23

― ―

― ―

― ―

6 4

19 11

25 15

― ―

25 15

(13) (5)

12 10

― ―

25 15

12 10

chase four Boeing 7

0 aircraft. 30) and 39 are own14) and 11 are owncraft, or for Boeing

8.

WestJet Second Qua

d three Bomba. Subsequent tselected the B

with Bombardheduled to be Bombardier to fldest Boeing 7lf of 2015. Wechange rate of 2014, in accordiven by the stre

aircraft, 65 Bhe lease renewnd age of our raft, dependingQ400 fleet as a

2024-27 To

― ―

― 1

― 1

15 2

6 4

21 8

― (1

21 7

― (4

21 3

― 1

21 9

21 5

767-300ERW series

ned (December 31,ned (December 31,737 MAX 9 aircraft

arter 2014│17

ardier Q400 to June 30, Boeing 767-

dier to firm returned in firm orders 37 NG 700

e anticipate 1.09 for all dance with engthening

Boeing MAX wal options,

fleet. This g on future at June 30,

otal 2027

― 13

13 82

10 35

25 25

40 40

88 195

10) (10)

78 185

44) (44)

34 141

17 30

95 215

51 171

s aircraft. This

, 2013 – 39). , 2013 – 4). t.

1

O

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Wacoler

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18 | WestJet Second

OFF BALANC

Aircraft opera

We currently haircraft totaled cash from operon our condenseasing expenseratios discussed

Fuel and de-ic

We are a contracontract in fuelservices at majbasis. The purpo the contracti

and pricing ovecing facility corcing facility arearrangements ade-icing facility otal assets of a

RELATED-PA

At June 30, 20Related Party Dheir employme

d Quarter 2014

CE SHEET AR

ating leases

ave 44 BoeingUS $543.5 mill

rations. Althougsed consolidatee in assessingd previously.

cing facility c

acted party to facility corporjor Canadian a

pose of these cng airlines, inc

er non-participarporations are e not consolidatand we remaincorporation, in

approximately $

ARTY TRANS

014, we had noDisclosures, excent or directors

RRANGEMEN

g 737 aircraft lion at June 30gh the current ed statement o our overall le

corporations

11 fuel facility rations and a dand U.S. airpororporations is tcluding the leasating entities. Tshared pro ratted within our

ned as sole mencluding debt s$494.3 million

SACTIONS

o transactions cept those per

ship agreement

NTS

under operatin0, 2014 (Decem

obligations reof financial poseverage throug

arrangements de-icing corporrts. The fuel fato own and finsing of land rigThe operating

ta among the caccounts. In th

ember, we wouservice requiremand liabilities o

with related prtaining to trants.

ng leases. Futumber 31, 2013 –lated to our aisition, we inclugh our adjuste

and one de-iciration, along wacility and de-ance the syste

ghts, while provcosts, includin

contracting airlihe remote evenuld be responsments. At May of approximate

parties as definnsactions with k

ure cash flow – US $590.6 mrcraft operatin

ude an amounted debt-to-equ

ing facility arrawith other airlin

icing facility coems that distribviding the contng the debt seines. The 11 funt that all othesible for the co31, 2014, the

ely $458.3 millio

ned in Internakey manageme

commitments million) which wng lease agreemt equal to 7.5 ity and adjuste

angement whernes, to obtain forporations op

bute fuel and dtracting airlinesrvice requiremuel facility corper contracting aosts of the fuelfuel facility coron.

ational Accountent personnel

in connection we expect to fuments are not times our anned net debt to

reby we particifuel services an

perate on a cose-icing fluid, res with preferen

ments, of the fuporations and tairlines withdral facility corporrporations have

ting Standard in the ordinary

with these nd through recognized ual aircraft o EBITDAR

ipate under nd de-icing st-recovery espectively, ntial service uel and de-the one de-w from the rations and e combined

(IAS) 24 – y course of

S

O

O

I

TV

TT

Q

Ofd3pa

N

ASoSppt

Da$a

Ir

Aco

SHARE CAPI

Outstanding s

Our issued and

Issued and outst

Common votinVariable voting

Total voting sharVoting shares po

Stock options RSUs – Key emRSUs – ExecutPSUs – Execut

Total voting sharTotal outstanding

Quarterly divi

Our dividend isfinancing policideclared our 2030, 2014 to shpaid during theand is consisten

Normal cours

As previously dStock Exchangeopen market. UShares (represeperiod of May purchased undehe time of the

During the threamount represe$4.9 million. That the time of t

n the six monrepurchased an

A shareholder contacting the or by faxing a w

ITAL

share data

outstanding vo

tanding: g shares

g shares res issued and outentially issuable

mployee and pilottive share unit plaive share unit plares potentially issg and potentially

idend policy

s reviewed ages, cash flow 014 third quartareholders of r

e second quartent with our obje

e issuer bid

isclosed, our pe (TSX) acceptUnder this bid enting approxi8, 2014 to Maer the bid are transaction. Sh

ee months endents 9.6 per cehese shares wehe transaction.

nths ended Junnd cancelled un

of WestJet mCorporate Secr

written request

oting shares, a

utstanding e:

t plan an an suable issuable voting

ainst the Corprequirements

ter dividend of record on Septer of 2014. Weective of creati

previous normated our notice

we are authomately 1.6 pe

ay 7, 2015 or purchased on thares acquired

ded June 30, 2ent of the maxiere purchased o.

ne 30, 2014, wnder the previo

ay obtain a coretary of WestJt to (403) 444-2

long with votin

shares

poration’s dividand other fac$0.12 per com

tember 17, 20 believe this deing and returni

al course issuerto make anoth

orized to purchr cent of our until such timethe open markunder the bid

2014, we repumum number oon the open m

we repurchaseus bid as disclo

opy of the noJet at 22 Aeria2604.

ng shares poten

dend policy onctors deemed mmon voting sh14. This remaiemonstrates oung value to ou

r bid expired onher normal couhase up to 2,0issued and oue as the bid isket through thewill be cancelle

rchased and cof shares we a

market through

ed and cancelleosed in the first

otice filed withal Place N.E., C

ntially issuable

n a quarterly brelevant. On hare and variains consistent ur confidence ir shareholders

n February 18,urse issuer bid000,000 Commutstanding shas completed ore facilities of thed.

cancelled 192,1are authorized tthe facilities of

ed 1,146,964 t quarter of 20

h the TSX in rCalgary, Alberta

W

, are as follows

July 25 2014

109,271,18,366,

127,638,

4,630,394,185,307,

5,517,133,156,

basis in light July 28, 2014ble voting shawith the $0.12n delivering co

s.

, 2014 and on to purchase o

mon Voting Shares at the timr terminated ahe TSX at the p

124 shares undto repurchase, f the TSX at th

shares which 014.

relation to thea T2E 3J1 (tele

WestJet Second Qua

s:

Jun20

,579 10,883 1,462 12

,348 ,440 ,846 ,074 ,708 ,170 13

of our financia4, the Board ore payable on2 per share deontinued profita

May 5, 2014 toutstanding shaares and Varia

me of the bid) at our option. Aprevailing mark

der the currenfor total consi

he prevailing m

included 954,8

e bid, free of ephone: (403)

arter 2014│19

ne 30 014

09,441,694 18,163,325 27,605,019

4,778,568

394,440 185,846 307,074

5,665,928 33,270,947

al position, of Directors September

eclared and able results

he Toronto ares on the able Voting during the Any shares ket price at

nt bid. This deration of

market price

840 shares

charge, by 444-2600)

2

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20 | WestJet Second

OUTLOOK

Our profitable gmillion and grefully diluted shexceeded our 1passenger milencrease in load

We have built fBombardier Q4Q400s to our fle737 NG 800 ser2014, we will d17.

For the full-yeahe 5.0 to 6.0 p

demand envirohe full year 20

cent year over strong traffic anfrom the year-o

For the third quover year. In teand 2.0 per cequarter, due to

We expect fuel year change offuel prices of Udollar.

For the full yeahe Southwest

deposits on fuexpenditures to

Guidance sum

RASM

Fuel cost per litrCASM, excludingSystem capacityDomestic capacEffective tax ratCapital expendit

d Quarter 2014

growth continuw our net earn

hare. Our seco12.0 per cent tas grew 5.5 per

d factor of 0.2 p

flexibility into o00 aircraft, alloeet for a total ories aircraft in tdispose of five

ar 2014, we noper cent changnment. We co014. In terms oyear, and dom

nd revenue groover-year RASM

uarter of 2014erms of full yeaent year over y

our continued

costs to rangef down 1.1 to uUS $118 per b

r 2014, we fortransaction, ofture aircraft a

o range betwee

mmary

re g fuel and profit y ity te tures

ed for the 37th

nings per sharond quarter ROarget. We increr cent and ourpercentage poi

our fleet plan thowing us to aligof 13, and will the second quaof our oldest

w expect betwge previously dntinue to anticof the third qumestic capacityowth and positM growth we ex

, we expect CAar 2014, we noyear, an improcost discipline

e between 91 aup 1.1 per cenarrel and an a

recast capital ef approximatelyand overhauls en approximate

Pomodeexpe

share

h consecutive qe by 17.6 per OIC of 13.7 peased our revenr system-wide cints.

hrough lease regn our growth add three morarter, and will Boeing 737 NG

ween 6.0 and 7disclosed in thecipate domesticuarter of 2014, y to grow betwtive year-over-xperienced in t

ASM, excludingow expect CASovement from te and a stronge

and 93 cents pnt. The third quaverage foreign

expenditures, ny $620 million ton owned en

ely $140 and $1

Three moSeptembe

sitive year-over-yerating from the erienced in the se

91 to 9Flat to

Up 6.5%Up 4.5%

$140 to $

quarter, as we cent to our hi

per cent reprenue by 10.3 pecapacity increa

enewal options with market c

re before the eadd another fiv

G 700 series ai

.0 per cent yeae first quarter, c capacity growwe expect sys

ween 4.5 and 5year RASM gro

the second qua

g fuel and empSM, excluding fthe up 2.0 to

er Canadian to

per litre for theuarter 2014 exn exchange rat

et of the proceto $640 million

ngines. For the150 million.

nths ended er 30, 2014 year growth, thoyear-over-year gecond quarter of93 cents up 1.0%

% to 7.0% % to 5.0%

$150 million

achieved recorighest ever for

esented the eiger cent as our yased 5.2 per ce

and our abilityconditions. In tnd of 2014. Weve through theircraft, as desc

ar-over-year gras we have adwth between 5stem-wide cap5.0 per cent yeowth in the thiarter of 2014.

ployee profit shfuel and emplo2.5 per cent cUS dollar exch

e third quarter xpected fuel cote of approxim

eeds from the n with spendinge third quarte

ough growth f 2014

rd second quarr a second quaghth consecutyield increasedent year over

y to deploy a mhe second quae also took del

e rest of the yecribed under th

rowth in systemdded capacity i5.0 and 6.0 pepacity to grow ear over year. ird quarter of 2

hare, to be flatoyee profit shachange previouange rate than

of 2014, whichosts are based mately 1.09 Ca

sale of the firsg related prima

er of 2014, we

YeaDecem

Up 1.Up 6.Up 5.27.0%

$620 to

rter net earningarter, reportingive quarter in by 4.5 per cenyear, resulting

mix of Boeing 7arter we addedlivery of two mear. In the seche heading Fle

m-wide capacitin response tor cent year ovbetween 6.5 aWe anticipate

2014, though m

t to up 1.0 pere, to be up beusly disclosed n previously for

h represents a on current fornadian dollars

st five aircraft parily to aircrafte expect our

ar ended ber 31, 2014

.5% to 2.0% 0% to 7.0% 0% to 6.0% % to 28.0% o $640 million

gs of $51.8 g $0.40 per

which we nt, revenue in a slight

737 NG and three new

more Boeing cond half of eet on page

ty, up from the robust

ver year for and 7.0 per e continued moderating

r cent year etween 1.5 in the first

recast.

year-over-ecasted jet to one US

pursuant to t deliveries, net capital

A

C

Cd2bjuhJat

F

Thcs

PsIFI

IRCC

MW

ACCOUNTIN

Critical accou

Critical accountdescribed in W2013 and 2012both judgmentsudgments and have been no June 30, 2014, a foreign jurisdhree and six m

Future accoun

The Internationhave issued theconsolidated insubsequent to t

Proposed standard FRS 9 –

Financial nstruments

FRS 15 – Revenue from Contracts with Customers

Management haWe do not antic

NG

nting judgme

ting judgmentsWestJet’s 2013

. The preparats and estimatesestimates may

material changother than the

diction (please months ended J

nting pronou

nal Accounting e following stanterim financiathe current rep

DescriptioA single finastandard admeasureme(Phase II) aIII). A new standthat containto contractsapproachespoint in tim

as not yet evalcipate early ado

ents and estim

and estimatesannual MD&A

tion of consolids that could may change in lighges to our critie change in est

refer to Note une 30, 2014 a

ncements

Standards Boandards that hal statements a

porting period.

on ancial instrumeddressing: classent (Phase 1), iand hedge acco

dard on revenuns a single mods with customes to recognizinge or over time.

luated the impopting these st

mates

s used in prepaand annual co

dated financial aterially affect ht of new factscal accountingtimate for our a1 in the cond

and 2013).

ard (IASB) and ave not been aand notes ther

ent accounting sification and mpairment ounting (Phase

ue recognition del that appliesrs and two

g revenue; at a.

act of these netandards.

aring our unaudonsolidated finstatements in the amounts rs and circumstag estimates andallowance for ddensed consolid

International Fapplied in prepreto, as their

Previous s

e

IAS 39; IASFinancial InRecognitionPresentatio

s

IAS 11 - Cocontracts; IIFRIC 13 -ProgrammeAgreementConstructioIFRIC 18 -from CustoRevenue - Involving A

ew standards o

dited condensenancial statemeconformity wit

recognized in thances in the ind judgments ddoubtful accoudated interim

Financial Reporparing our 2014effective date

standard S 32; IFRS 7 –nstruments: n and Measureon; Disclosures

onstruction IAS 18 – RevenCustomer Loyaes; IFRIC 15 - ts for the on of Real EstatTransfers of As

omers; SIC-31 -Barter Transac

Advertising Serv

on financial sta

W

ed consolidatedents for the yeth GAAP requirhe financial stanternal and exteduring the thrents relating to financial state

rting Interpreta4 second quar

es fall within a

Effec

ment;

The edeferJanuafinalizimpa

nue; alty

te; ssets - ctions vices

Effecbegin1, 20perm

atement measu

WestJet Second Qua

d financial stateear ended Decres managemeatements. By thernal environmee and six monvalue-added taments and no

ations Committrter unauditedannual periods

ctive date

effective date hrred, tentativelyary 1, 2018, pezation of the stirment requiremtive for annual

nning on or afte017. Early adopmitted.

urements and d

arter 2014│21

ements are cember 31, nt to make heir nature, ment. There nths ended ax (VAT) in tes for the

tee (IFRIC) condensed

s beginning

has been y to ending the tandard’s ments. periods er January

ption is

disclosures.

2

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D

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22 | WestJet Second

CONTROLS A

Disclosure co

DC&P are designcluding the chcan be made re

An evaluation oCFO. Based onNational Instrum

Internal contr

CFR is designfinancial statem

Our ICFR includransactions are

receipts and exmaintenance ofand are designedisposition of o

Because of its iFurthermore, pnadequate becdeteriorate.

Management, uestablished in the Treadway C

our ICFR (as de30, 2014 that h

d Quarter 2014

AND PROCE

ntrols and pr

gned to providhief executive oegarding public

of our DC&P wn this evaluatioment 52-109 C

rol over finan

ed to providements in accord

des policies ane recorded as

xpenditures aref records that ed to provide rur assets that

nherent limitatrojections of acause of chan

under the supthe 1992 InterCommission (Cefined in NI 52

have materially

DURES

ocedures (DC

e reasonable aofficer (CEO) ac disclosure.

was conducted, on, the CEO anCertification of D

ncial reportin

reasonable aance with GAA

d procedures tnecessary to p

e being made oin reasonable

reasonable assucould have a m

tions, ICFR cann evaluation o

nges in conditi

ervision of thernal Controls – OSO). Based o2-109) was effaffected, or ar

C&P)

assurance thatnd the chief fin

as at June 30nd the CFO haDisclosure in Is

g (ICFR)

assurance regaAP. Managemen

that pertain to permit preparaonly in accordandetail accurateurance regardin

material effect o

n provide only rof effectivenessions, or that t

e CEO and theIntegrated Fra

on this evaluatifective. There wre reasonably li

all relevant innancial officer

0, 2014, by maave concluded ssuers’ Annual

arding the reliant is responsibl

the maintenantion of the finance with authoely and fairly reng prevention oon our condens

reasonable asss to future perithe degree of

e CFO, has evamework, issuon, the CEO anwere no changikely to materia

nformation is g(CFO), on a tim

anagement undthat, as at Juand Interim Fi

ability of finane for establishi

nce of records ancial stateme

orizations of maeflect our transor timely detecsed consolidate

surance and maiods are subjecf compliance w

valuated our Ied by the Comnd the CFO hages in our ICFRally affect, our

gathered and rmely basis so t

der the supervune 30, 2014, ilings (NI 52-10

ncial reportinging and mainta

that provide reents in accordaanagement andsactions and dction of unauthed interim finan

ay not prevent ct to the risk thwith the polici

ICFR using themmittee of Spoave concluded tR during the inICFR.

reported to mathat appropriat

vision of the CEour DC&P, as

09), was effecti

and the prepaining adequate

easonable assuance with GAAPd directors; perdispositions of ohorized acquisitncial statement

or detect misshat controls mies and proce

e framework aonsoring Organthat as at Junenterim period e

anagement, te decisions

EO and the defined in

ive.

paration of e ICFR.

urance that P, and that rtain to the our assets; tion, use or ts.

statements. ay become dures may

and criteria nizations of e 30, 2014, ended June

F

TinwrphmffCcadepeofQcmCueumwgtwQQsbotahRqpoobfto22inp

FORWARD-L

This MD&A ofnformation” aswill continue toreferred to undprices and mayheading Aircrafmillion annuallyfuel pricing of afluctuations in Canadian dollarcent change in annual unhedgdenominated opeffective tax ratpage 11; our exexpenditures aoperating cash flow on page 1Q400 aircraft, changes to ourmeeting our cCommitments oupon our financexpectations wunder the headmillion calculatewe anticipate aguidelines, refehrough cash fr

will pay a dividQuarterly DividQuarterly Divideseries aircraft tbetween 6.0 anour expectationhe heading Ou

and domestic Aheading OutlooRASM growth iquarter of 2014profit share, to on page 20; ouover year, for tbetween 91 anforecast of caphe Southwest

our expectation2014, referred 28.0%, referrenstrument stanpage 21.

LOOKING IN

ffers our asses defined undeo strategically ger the heading

y re-visit our heft Fuel on pagey for every oneapproximately foreign excha

r versus the USthe value of th

ged operating perating expente will be in thxpectation thatnd that we wflows will suffi

14; that we exreferred to unr future ability contractual obon page 16; thcial position, reith respect to

ding Outlook oned with a foreiga significant poerred to under rom operationsend on Septem

dend Policy on dend Policy on to our fleet bend 7.0 per centn of domestic Autlook on page ASM to grow beok on page 20in the third qu4, referred to ube flat to up 1

ur expectation ohe full-year 20

nd 93 cents peital expenditurtransaction, of

n that net capitto under the d to under thndard nor the

NFORMATIO

essment of Wr applicable Cagrow our airlineg Network Expaedging stratege 7; our estime US-dollar cha$12.0 million fonge rates to S dollar, all refhe Canadian docosts, (appro

nses), referred e range of 27 t, in the short-till have negaticiently fund alpect to receiveder the headinto access simi

bligations and at the future oesults of operafuture aircraft n page 20; ourgn exchange raortion of this lothe heading F

s, referred to umber 30, 2014 page 19; our page 19; our eefore the end ot year-over-yeaASM growth bet20; our expectetween 4.5 an

0; our expectatuarter of 2014,under the head1.0 per cent yeof CASM, exclu

014, referred toer litre for theres for the full-f approximatelytal expenditureheading Outlo

he heading Ounew revenue

ON

WestJet’s futureanadian securite through new

ansion on page y as changing

mate of our senange per barrelor every one-cbe approximatferred to underollar versus theoximately $10.to under the hper cent to 28term, capital anive free cash fl our capital ane financing frong Aircraft Finailar or different

commitmentsoutcome of ourations or cash f

acquisitions anr expectation oate of 1.09 for oss will be rec

Fleet on page 1under the headto shareholdeconfidence in expectation thaof 2014, referar growth in sytween 5.0 and tation of systemd 5.0 per centtion of continu, though mode

ding Outlook onear over year fuding fuel and o under the heae third quarter -year 2014, ney $620 million es will range beook on page 20utlook on page

standard, refe

e plans, operties legislation, w and increased

3; that we wilmarkets and c

nsitivity of fuell of WTI crudeent change petely $10.2 milr the heading Ae US dollar wil.2 million for

heading Foreign8 per cent for 2nd investing acflow, and our nd investing acm EDC for up ancing on pagt sources of liqs, referred tor current legal pflows, referred nd dispositionsof recording a n

all 10 aircraft,corded in the t17; that we exding Aircraft Oprs of record ondelivering contat we will add red to under t

ystem-wide ASM6.0 per cent y

m-wide ASM grt year over yeaued strong traferating from thn page 20; ourfor the third quemployee profading Outlook of 2014 refer

t of the proceeto $640 million

etween approx0; our expectae 20; that we erred to under

rations and o including withd frequency ofl continue to mcompetitive co costs to chan

e oil, and our eer litre of jet fulion for every Aircraft Fuel onl have an apprfuel and $2.

n Exchange on 2014, referred ctivities will be expectation th

ctivities, each rto 80 per cene 14; our expquidity than wo under the proceedings anto under the h

s, described unnon-cash book, referred to unthird quarter opect to fund fu

Operating Leasen September 1tinued profitabthree more Q4the heading OM, referred to uyear over year frowth of betwear for the thirdffic and revenhe year-over-yr expectation thuarter of 2014,fit share, to be

k on page 20; orred to under eds from the sn, referred to uimately $140 aation of an eff

do not anticir the heading

W

outlook and chout limitation:f service acrossmonitor and adjonditions warranges in crude oestimate of ourel and our estione-cent cha

n page 7; our roximate impac.6 million relapage 10; that to under the hhigh due to ai

hat, over a lonreferred to undnt of the net pectation that t

we historically hheading Cont

nd claims will nheading Continnder the headik loss in the rannder the headinof 2014, in accuture aircraft oes on page 18;17, 2014, referrble results, as r400s and five m

Outlook on pagunder the headfor the full-yea

een 6.5 and 7.0 quarter of 20ue growth and

year growth exhat CASM, exc, referred to une up between 1ur expectation the heading O

sale of the firstunder the headand $150 milliofective tax rateipate early adFuture Accoun

WestJet Second Qua

ontains “forwa: our expectatis our schedulejust to moveme

ant, referred tooil of approximr sensitivity to imate of our se

ange in the vaestimate that

ct of $12.8 milated to other we anticipate

heading Incomeircraft and aircnger period of

der the headingprice for each Bthere will not bhave, for the ptractual Obliganot have a matngencies on pang Fleet on pange of $50 milng Fleet on pagcordance with operating lease; our expectatired to under threferred to undmore Boeing 7e 20; our expding Outlook oar 2014, referre0 per cent year14, referred tod positive yeaxperienced in tluding fuel andnder the headi1.5 and 2.0 pethat fuel costs

Outlook on pagt five aircraft pding Outlook oon for the thirde of between 2opting the new

nting Pronounc

arter 2014│23

ard-looking on that we

ed network, ents in fuel

o under the mately $8.0 changes in

ensitivity to alue of the every one-lion on our US-dollar-

our annual me Taxes on

raft related f time, our g Free cash Bombardier be adverse

purposes of ations and terial effect age 16; our age 17 and lion to $60 ge 17; that accounting

e payments on that we he heading der section

737 NG 800 pectation of on page 20; ed to under r over year, o under the r-over-year the second d employee ng Outlook r cent year s will range ge 20; our pursuant to n page 20;

d quarter of 27.0% and w financial

cements on

2

Rinrt

24 | WestJet Second

Readers are canformation, altreliance shouldhis MD&A, we

Our expegrow our of servicecurrent ne

Our experisk of mmanagemhedging policies an

Our estimfuel priceexisting sCanadian-the curren

Our estimCanadian forecasteddollars, exhedged uwell as assumptio

Our expecon currenof when ttax bases

Our expeinvesting aircraft rnegative fa longer sufficientlbased onstrategy;

Our expec80 per ceaircraft is

Our expeoptimum us is basstructure financing;

Our expecto our ffinancing aircraft de

d Quarter 2014

autioned that though conside not be placedhave made the

ectation that wairline throug

e across our schetwork and stra

ectation that wovements in f

ment strategy program is band ongoing cos

mated sensitivites is based onschedule and h-US dollar exchnt exchange ra

mated sensitivitdollar versus

d operating xcluding a por

under foreign ethe Canadi

on based on th

cted annual efft legislation, antemporary diffewill occur;

ectation that, activities will

elated expendfree cash flow,period of timey fund all our

n based on ou

ctation to receent of the net based on our a

ectation that balance and s

sed on our intas well as the ;

ctation that thfuture ability

is based on elivery schedule

our expectatiered reasonabd on forward-loe following key

we will continuh new and incheduled netwoategic plan;

we will continufuel prices throand that we ased on our st monitoring;

ty to fuel costn our fuel conhistorical fuel bhange rate asste;

ty to the changs the US doexpenses dention of aircraftexchange forwan-US dollar e current exch

fective tax ratend expectationerences betwee

in the short-tbe high due

ditures and th, and our expee, our operatincapital and invur current cap

ive financing frprice for each agreement wit

we continue sources of finaternal requiremexternal enviro

ere will not beto access soour current

e and strategic

ons, estimatesble at the timeooking statem

y assumptions:

ue to strategiccreased frequerk is based on

ue to mitigate ough our revemay re-visit

risk managem

ts and changensumption for burn, as well aumption based

ge in value of llar is based

nominated in t leasing expenward contracts,

exchange ange rate;

e for 2014 is bas about the timen accounting

term, capital e to aircraft hat we will hectation that, ong cash flows vesting activitiepital managem

rom EDC for upBombardier Qh EDC;

to evaluate ancing availablements and caponment for airc

e adverse chanources of aircfinancial posit

c plan;

s, projections e of preparatioents. With res

cally ency our

the enue

our ment

s in our

as a d on

the on US

nses , as rate

ased ming and

and and

have over will

es is ment

p to Q400

the e to pital craft

nges craft tion,

Ouin teffcaspro

Ouacqthe

Oulosbasexcbe net

Oucomou

OuSeSeterDir

Ouovedoyeacurpla

Ou6.5to theforde

Ougrothifor

Ouemovecur

Oupro

and assumption, may prove spect to forwar

ur assessment the normal coufect on our finash flow is boceedings by m

ur expectationquisitions and e applicable ag

ur anticipated ass on the salesed on a 1.09change rate, oconsidered rea

t book value at

ur expectation mmitments thrr current strate

ur expectationptember 30, ptember 17, 2rms of the drectors;

ur expectation er-year growthmestic ASM gar over year frrent demand ans and aircraft

ur expectation o5 and 7.0 per cgrow betweene third quarterrecast and on liveries;

ur expectation owth and positrd quarter of recast;

ur expectationmployee profit ser year for therrent third qua

ur expectation ofit share, to be

ions used in to be imprecrd-looking info

that the outcourse of businesancial position

based on a rmanagement an

ns with respdispositions ar

greements;

amount and time of 10 Boeing9 Canadian doour assessmentady for immedt that time;

that we will furough cash fromegic plan, budg

n that we w2014 to sha

2014, is baseddividend decla

of between 6.h in system-w

growth betweefor the full-yeaforecast and

t deliveries;

of system-widecent year over 4.5 and 5.0 per of 2014 is baour current ne

of continued stive year-over-y2014 is based

n that CASMshare, to be flae third quarter rter forecast;

of CASM, excle up between

the preparatiocise and, as surmation contai

ome of legal pss will not have, results of opreview of curnd legal counse

pect to futurre based on th

ming of a nong 737 NG 700ollar to US dolt of when the aiate sale and th

und operating m operations iget and forecas

will pay a divreholders of

d on the declaared by our

0 and 7.0 per wide ASM anden 5.0 and 6.0ar 2014 is bason our curren

e ASM growth or year, and domer cent year ovased on curreetwork plans a

strong traffic anyear RASM gro

d on our curre

M, excluding at to up 1.0 pe

of 2014 is ba

uding fuel and1.5 and 2.0 pe

on of such uch, undue ined within

proceedings e a material perations or rrent legal el;

re aircraft he terms of

-cash book aircraft is llar foreign aircraft will he aircrafts

leases and s based on st;

vidend on record on

aration and Board of

cent year-d that our 0 per cent sed on our nt network

of between mestic ASM ver year for nt demand and aircraft

nd revenue owth in the nt demand

fuel and er cent year sed on our

d employee er cent year

over yearour curren

Our expeand 93 cebased on per barreapproxima

Our forec2014, netaircraft p

r, for the full-ynt full-year fore

ctation that fuents per litre fcurrent foreca

el and an aveately 1.09 Cana

cast of capitalt of the proceepursuant to t

year 2014 is baecast;

uel costs will rfor the third qasted jet fuel perage foreign adian dollars to

l expenditureseds from the sathe Southwes

ased on based

range betweenquarter of 201prices of US $exchange rateo one US dollar

for the full-yale of the first t transaction,

d on

n 91 4 is

$118 e of r;

year five

of

appou

Oubetthifor

OuFinCoaccsta

proximately $6r 2014 capital f

ur expectation tween approxird quarter of recast and cont

ur expectationsnancial Instrumontracts with counting policandards on our

W

620 million to forecast and co

that net capitaimately $140 af 2014 is basetractual commi

s that we will nments and IFRCustomers is cies and ther policies.

WestJet Second Qua

$640 million isontractual com

al expendituresand $150 millied on our 20itments; and

not early adopRS 15 – Rev

based on oe assessment

arter 2014│25

s based on mmitments;

s will range ion for the 014 capital

pt IFRS 9 – venue from our current

of those

2

D

O

F

Sa

AI

Ag

Rs

Lm

Yr

R

C

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U

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Ais

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26 | WestJet Second

DEFINITION

Our key operati

Flight leg: A s

Segment gueassigned to the

Average stagnternational Ai

Available seatguest use in an

Revenue passstage length.

Load factor: Amiles.

Yield (revenurevenue passen

Revenue per a

Cost per avail

Cycle: One flig

Utilization: Op

NON-GAAP A

The following n

Adjusted debtOur practice, coby 7.5 to derivadjusted net de

Adjusted equs used in the c

Adjusted net debt to EBITDA

EBITDAR: Eargains and lossendustry to eval

Cash to the trcommonly used

CASM, excludshare expense because fuel pensions, refine

on a comparaband excluding t

Return on invcapital to gene

d Quarter 2014

N OF KEY OP

ing indicators a

egment of a fli

est: Any persoe flight.

ge length: Thir Transport As

t miles (ASM aircraft by sta

senger miles

A measure of

e per revenunger mile.

available sea

lable seat mil

ht, counted by

perating hours

AND ADDITI

non-GAAP and a

t: The sum of onsistent with ve a present vebt to EBITDAR

ity: The sum oalculation of ad

debt: AdjusteAR, as defined b

rnings before nes on derivativluate results by

railing 12 mod in the airline

ding fuel and to assess the

prices are affecery capacity, anble basis. Emplothis expense al

vested capitarate returns. R

PERATING IN

are airline indu

ight involving a

on who has be

he average disociation (IATA

): A measure oage length.

(RPM): A me

total capacity

e passenger

t mile (RASM

le (CASM): Op

y the aircraft lea

per day per op

IONAL GAAP

additional GAA

long-term debcommon airlinevalue debt equR, as defined be

of share capitadjusted debt-to

ed debt less cabelow.

net finance coses, and foreigny excluding diff

onths of revenindustry to com

employee pr operating percted by a hostnd global demaoyee profit shalows for greate

l: ROIC is a meReturn is calcula

NDICATORS

stry metrics, w

a stopover, cha

een booked to

stance of a nA) guidelines.

of total guest c

asure of guest

utilization, calc

mile): A meas

M): Total reven

perating expen

aving the grou

perating aircraf

P MEASURES

P measures are

bt, obligations ue industry pracuivalent. This melow.

al, equity resero-equity.

ash and cash e

sts, taxes, depn exchange gaferences in the

nue: Cash as mpare liquidity

rofit share: Wrformance of ot of factors ouand and supplyare expense is er comparability

easure commoated based on

S

which are usefu

ange of aircraft

occupy a sea

non-stop flight

capacity, calcu

t traffic, calcula

culated by divi

sure of unit rev

ue divided by a

nses divided by

nd and landing

ft.

S

e used to moni

under finance lctice, is to multmeasure is us

ves and retain

equivalents. Th

reciation, aircrains or losses.

method by wh

a percentage opositions.

We exclude theour business. Futside our cony. Excluding thexcluded from

y.

only used to asour earnings

l in assessing t

t or change of a

at on a flight

t leg between

lated by multip

ated by multipl

iding revenue

venue, calculat

available seat m

available seat

g.

itor our financi

leases and off-tiply the trailinged in the calc

ned earnings, e

his measure is

raft rent and oEBITDAR is a

hich an airline f

of the trailing t

e effects of airFuel expense trol, such as s

his expense allom our operating

sess the efficiebefore tax, exc

the operating p

airline from on

leg and is not

n take-off and

plying the num

lying the numb

passenger mile

ted as the gros

miles.

miles.

al performance

-balance-sheet g 12 months oculation of adju

excluding hedg

used in the ca

other items, sumeasure com

finances its airc

twelve months

rcraft fuel expeis excluded frosignificant weaows us to analg results becau

ency with whiccluding special

performance of

e landing site t

t a member o

d landing as d

mber of seats av

ber of segment

es by total ava

ss revenue gen

e:

aircraft operatof aircraft leasinusted debt-to-

e reserves. Th

alculation of ad

ch as asset immonly used in craft.

s of revenue is

ense and emplom our operatather events, glyze our operatuse of its varia

h a company a items, finance

f an airline.

to another.

of the crew

defined by

vailable for

t guests by

ailable seat

nerated per

ting leases. ng expense -equity and

is measure

djusted net

mpairments, the airline

a measure

oyee profit ting results geopolitical ting results able nature

allocates its e costs and

imle

Fa

F

O

R

Tit

C

(OAE

O

AC

C

(CTC

(

A

(LOATAAA

(

(

(

mplied interestease obligation

Free cash floavailable that c

Free cash flow

Operating cas

Reconciliation

The following ptems presented

CASM, exclud

$ in thousands) Operating expensAircraft fuel expeEmployee profit s

expense Operating expens

adjusted

ASMs CASM, excluding

items (cents)

Cash to trailin

($ in thousands) Cash and cash eqTrailing 12 monthCash to trailing 1

i) At June 30, 201

Adjusted debt

($ in thousands) Long-term debt(i)

Off-balance-sheeAdjusted debt Total shareholdeAdd: Hedge reseAdjusted equity Adjusted debt-to

ii) At June 30, 201$778,560 (Dece

iii) Off-balance-shemonths of aircr

iv) At June 30, 201

t on our off-bans, average sha

ow: Operating an be used to

w per share: F

sh flow per sh

n of non-GAA

provides a recod throughout th

ding fuel and e

ses nse share

ses,

6above

ng 12 months

quivalents hs revenue 12 months revenu

14 and December 3

bt-to-equity

) et aircraft leases(

rs’ equity rves

-equity(iii)

14, long-term debt ember 31, 2013 – $

eet aircraft leases araft leasing costs to

14 and December 3

alance-sheet aareholders’ equ

cash flow lespursue other o

Free cash flow

hare: Cash flow

AP and additio

onciliation of nhis MD&A.

employee pro

Three m2014

851,898 (274,861)

(5,351)

571,686

6,192,880,483

9.23

s revenue

ue (i)

31, 2013, the Corpo

ii)

includes the curren$689,204).

are calculated by motaled $178,075 (De

31, 2013, the Corpo

ircraft leases. uity and off-bala

ss capital expeopportunities af

divided by the

w from operati

onal GAAP me

non-GAAP and

ofit share

months ended J2013

777,225 (241,204)

(2,834)

533,187

5,888,165,679

9.06

oration met its inte

nt portion of long-t

multiplying the trailinecember 31, 2013

oration met its inte

Invested capitance-sheet airc

enditures. Thisfter maintaining

e diluted weight

ons divided by

easures

additional GAA

June 30 Change

74,6 (33,65

(2,51

38,4

5.2

1.9

J

rnal guideline of a

J

term debt of $185,2

ng 12 months of ai– $175,646).

rnal guideline of an

tal includes avcraft operating

s measure is ug and expandin

ted average nu

y diluted weight

AP measures to

2014673 1,7657) (559

17) (26

499 1,17

2% 12,707,46

9%

June 30 2014

1,076,671 3,823,691

28.2%

cash to trailing 12

June 30 2014

963,845 1,335,563

2,299,408 1,662,271

7,690 1,669,961

1.38

285 (December 31,

ircraft leasing expe

n adjusted debt-to-

W

verage long-ter leases.

used to calculng the asset ba

umber of share

ted average sh

o the nearest

Six months e4 2062,396 1,9,697) (5

6,349)

76,350 1,

65,553 11,920,

9.26

December 32013

1,256,3,662,

34

months revenue o

December 32013

878,1,317,

2,195,1,589,

(1 1,589,

1

, 2013 – $189,191)

ense by 7.5. At Jun

-equity measure of

WestJet Second Qua

rm debt, avera

ate the amouase.

es outstanding.

hares outstandi

measure unde

ended June 30013 C,612,103 512,252)

(27,145)

,072,706

,261,749

9.00

31 Cha

,005 ,197 .3%

of approximately 30

31 Cha

,395 ,345 ,740 ,840 105) ,735 1.38

) and long-term de

e 30, 2014, the tra

f less than 2.50.

arter 2014│ 27

age finance

nt of cash

ng.

er GAAP for

Change 150,293

(47,445)

796

103,644

6.6%

2.9%

ange (179,334)

161,494 (6.1 pts.)

0 per cent.

ange 85,450 18,218

103,668 72,431 7,795

80,226 0.0%

ebt of

ailing 12

2

A

(ALANA EA

(

(

(

R

(EA I R

(

(

(

O

(CWD (CWD

28 | WestJet Second

Adjusted net

($ in thousands) Adjusted debt Less: Cash and cAdjusted net debNet earnings Add: Net finance c Taxes Depreciation Aircraft leasin Other(ii)

EBITDAR Adjusted net deb

i) At June 30, 201of finance cost

ii) At June 30, 201

iii) At June 30, 201

Return on inv

($ in thousands) Earnings before iAdd: Finance costs Implicit interes

Invested capital: Average long-t Average shareh Off-balance-sh

Return on investe

i) Interest implicitnecessarily repr

ii) Average long-te

iii) Off-balance-shemonths of aircr

Operating cas

($ in thousands, Cash flow from oWeighted averagDiluted operating

($ in thousands, Cash flow from oWeighted averagDiluted operating

d Quarter 2014

debt to EBIT

cash equivalents bt

osts(i)

and amortizationng

bt to EBITDAR(iii)

14, net finance costof $45,544 (Decem

14, other includes t

14 and December 3

vested capital

income taxes

st in operating lea

term debt(ii) holders' equity eet aircraft lease

ed capital

t in operating leaseresent actual for an

erm debt includes t

eet aircraft leases araft leasing costs to

sh flow per sh

except per shareoperating activitiege number of shag cash flow per s

except per shareoperating activitiege number of shag cash flow per s

TDAR

n

ts includes the trailmber 31, 2013 – $4

the trailing 12 mon

31, 2013, the Corpo

l

ases(i)

es(iii)

es is equal to 7.0 peny given period.

the current portion

are calculated by motaled $178,075 (De

hare

e data) es ares outstanding share

e data) es ares outstanding share

ling 12 months of f43,447).

ths foreign exchan

oration met its inte

er cent of 7.5 times

and long-term por

multiplying the trailinecember 31, 2013

- diluted

- diluted

J

finance income of $

ge loss of $1,585 (

ernal guideline of an

J

s the trailing 12 mo

rtion.

ng 12 months of ai– $175,646).

June 30 2014

2,299,408 (1,076,671) 1,222,737

273,967

28,749 105,183 219,091 178,075

1,585 806,650

1.52

$16,795 (Decembe

(December 31, 201

n adjusted net deb

June 30 2014

379,150

45,544 93,489

518,183

826,732 1,607,883 1,335,563

3,770,178 13.7%

onths of aircraft lea

ircraft leasing expe

Three2014

115,547 128,750,999

0.90 Six m

2014 177,846

129,001,840 1.38

December 32013

2,195,(1,256,0

939, 268,

25,103,200,175,(1,1

773,1

er 31, 2013 – $17,8

13 – gain of $1,136

bt to EBITDAR meas

December 32013

372,

43,92,

507,

808,1,531,1,317,

3,657,13

ase expense. 7.0 pe

ense by 7.5. At Jun

e months ended2013

89, 133,381,

0months ended

2013 261,

133,498, 1

31 Cha

,740 005) ,735 ,722

,599 ,363 ,840 ,646 136) ,034 1.22

848) and the trailing

6).

sure of less than 2

31 Cha

,085

,447 ,214 ,746

,722 ,073 ,345 ,140 .9%

er cent is a proxy a

e 30, 2014, the tra

d June 30 Cha

,773 ,502 (0.67 June 30

Cha,027 ,880 (1.96

ange 103,668 179,334 283,002

5,245

3,150 1,820

18,251 2,429 2,721

33,616 24.6%

g 12 months

.50.

ange 7,065

2,097 1,275

10,437

18,010 76,810 18,218

113,038 (0.2 pts.)

and does not

ailing 12

ange 25,774

4,630,503) 34.3%

ange (83,181)

4,497,040) (29.6%)

F

(CA

WD (CA

WD

Free cash flow

($ in thousands, Cash flow from oAdjusted for:

Aircraft additioOther property

Free cash flow Weighted averagDiluted free cash

($ in thousands, Cash flow from oAdjusted for:

Aircraft additioOther property

Free cash flow Weighted averagDiluted free cash

w

except per shareoperating activitie

ons y and equipment

ge number of shah flow per share

except per shareoperating activitie

ons y and equipment

ge number of shah flow per share

e data) es

and intangible a

ares outstanding

e data) es

and intangible a

ares outstanding

additions

- diluted

additions

- diluted

Three2014

115,547

(201,114) (19,822)

(105,389) 128,750,999

(0.82) Six m

2014 177,846

(338,019) (29,579)

(189,752) 129,001,840

(1.47)

W

e months ended2013

89,

(156,8 (16,2 (83,3

133,381, (0

months ended 2013

261,

(282,3 (39,2 (60,5

133,498, (0

WestJet Second Qua

d June 30 Cha

,773

864) 246) 337) ,502 (

0.62) June 30

Cha,027

345) 236) 554) ,880 (

0.45)

arter 2014│ 29

ange 25,774

(44,250) (3,576)

(22,052) 4,630,503)

32.3%

ange (83,181)

(55,674)

9,657 (129,198) 4,497,040)

226.7%

Condensed Consolidated Interim Financial Statements and Notes For the three and six months ended June 30, 2014 and 2013

WestJet Second Quarter 2014 | 31

Condensed Consolidated Statement of Earnings (Stated in thousands of Canadian dollars, except per share amounts) (Unaudited)

Note Three months ended

June 30 Six months ended

June 30 2014 2013 2014 2013 Revenue: Guest 847,454 768,612 1,784,283 1,648,006

Other 82,886 75,082 188,147 162,930 930,340 843,694 1,972,430 1,810,936 Operating expenses:

Aircraft fuel 274,861 241,204 559,697 512,252 Airport operations 121,436 111,273 248,797 226,548 Flight operations and navigational charges 110,585 102,434 226,730 204,309 Sales and distribution 86,524 82,730 187,834 174,040 Depreciation and amortization 54,402 49,154 115,424 97,173 Marketing, general and administration 61,162 54,485 113,383 104,000 Maintenance 50,755 40,253 103,550 79,950 Aircraft leasing 44,714 43,884 93,822 91,393 Inflight 42,108 48,974 86,810 95,293 Employee profit share 3 5,351 2,834 26,349 27,145

851,898 777,225 1,762,396 1,612,103 Earnings from operations 78,442 66,469 210,034 198,833 Non-operating income (expense):

Finance income 3,772 4,438 8,129 9,182 Finance cost 12 (11,390) (10,263) (23,058) (20,961) Gain (loss) on foreign exchange 517 1,672 (970) 1,751 Loss on disposal of property and equipment (56) (762) (45) (1,780)

(7,157) (4,915) (15,944) (11,808) Earnings before income tax 71,285 61,554 194,090 187,025 Income tax expense (recovery):

Current 22,775 15,795 67,469 62,448 Deferred (3,252) 1,024 (14,432) (11,231)

19,523 16,819 53,037 51,217 Net earnings 51,762 44,735 141,053 135,808 Earnings per share:

Basic 0.41 0.34 1.10 1.03 Diluted 0.40 0.34 1.09 1.02

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

32 | WestJet Second Quarter 2014

Condensed Consolidated Statement of Financial Position (Stated in thousands of Canadian dollars) (Unaudited)

Note June 30

2014 December 31

2013 Assets Current assets:

Cash and cash equivalents 4 1,076,671 1,256,005 Restricted cash 5 34,704 58,106 Accounts receivable 56,421 42,164 Prepaid expenses, deposits and other 104,221 133,263 Inventory 35,423 36,722

1,307,440 1,526,260 Non-current assets:

Property and equipment 6 2,746,785 2,487,734 Intangible assets 62,914 58,691 Other assets 62,341 70,778

Total assets 4,179,480 4,143,463 Liabilities and shareholders’ equity Current liabilities:

Accounts payable and accrued liabilities 407,753 543,167 Advance ticket sales 572,436 551,022 Non-refundable guest credits 44,582 46,975 Current portion of maintenance provisions 7 95,623 76,105 Current portion of long-term debt 8 185,285 189,191

1,305,679 1,406,460 Non-current liabilities:

Maintenance provisions 7 133,500 142,411 Long-term debt 8 778,560 689,204 Other liabilities 10,181 8,834 Deferred income tax 289,289 306,714

Total liabilities 2,517,209 2,553,623 Shareholders’ equity:

Share capital 9 600,070 603,861 Equity reserves 71,095 69,079 Hedge reserves (7,690) 105 Retained earnings 998,796 916,795

Total shareholders’ equity 1,662,271 1,589,840 Total liabilities and shareholders’ equity 4,179,480 4,143,463

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

WestJet Second Quarter 2014 | 33

Condensed Consolidated Statement of Cash Flows (Stated in thousands of Canadian dollars) (Unaudited)

Note Three months ended

June 30 Six months ended

June 30 2014 2013 2014 2013 Operating activities: Net earnings 51,762 44,735 141,053 135,808 Items not involving cash:

Depreciation and amortization 54,402 49,154 115,424 97,173 Change in maintenance provisions 9,650 4,296 10,082 13,378 Change in other liabilities (152) 2,388 (227) 2,181 Amortization of hedge settlements 350 350 700 700 Loss on disposal of property and equipment 56 762 45 1,780 Share-based payment expense 9 5,904 3,479 9,762 7,054 Deferred income tax (3,252) 1,024 (14,432) (11,231) Unrealized foreign exchange gain (2,318) (3,160) (5,126) (4,285)

Change in non-cash working capital 48,546 (4,659) 80,458 100,821 Change in restricted cash 11,843 13,104 23,402 14,603 Change in other assets (19,974) (808) (11,423) (2,747) Cash interest received 4,127 4,540 8,619 9,893 Cash taxes paid (40,412) (20,331) (170,074) (97,514) Purchase of shares pursuant to compensation plans (4,985) (5,101) (10,417) (6,587) 115,547 89,773 177,846 261,027 Investing activities: Aircraft additions (201,114) (156,864) (338,019) (282,345) Other property and equipment and intangible additions (19,822) (16,246) (29,579) (39,236) (220,936) (173,110) (367,598) (321,581) Financing activities: Increase in long-term debt 148,756 33,074 181,186 33,074 Repayment of long-term debt (48,127) (41,325) (95,801) (82,565) Shares repurchased (4,851) (32,549) (29,575) (36,613) Dividends paid 10 (15,312) (13,161) (30,637) (26,392) Issuance of shares pursuant to compensation plans 40 33 Cash interest paid (9,616) (8,845) (19,802) (18,413) Change in non-cash working capital (9) (102) (427) (557) 70,841 (62,908) 4,984 (131,433) Cash flow from operating, investing and financing activities (34,548) (146,245) (184,768) (191,987) Effect of foreign exchange on cash and cash equivalents (1,265) 5,043 5,434 7,386 Net change in cash and cash equivalents (35,813) (141,202) (179,334) (184,601) Cash and cash equivalents, beginning of period 1,112,484 1,364,800 1,256,005 1,408,199 Cash and cash equivalents, end of period 1,076,671 1,223,598 1,076,671 1,223,598

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

34 | WestJet Second Quarter 2014

Condensed Consolidated Statement of Changes in Equity For the six months ended June 30 (Stated in thousands of Canadian dollars) (Unaudited)

Note 2014 2013 Share capital:

Balance, beginning of period 9 603,861 614,899 Issuance of shares pursuant to compensation plans 9 1,600 6,712 Shares repurchased 9 (5,391) (7,416)

600,070 614,195 Equity reserves:

Balance, beginning of period 69,079 69,856 Share-based payment expense 9 9,762 7,054 Issuance of shares pursuant to compensation plans (7,746) (10,788)

71,095 66,122 Hedge reserves:

Balance, beginning of period 105 (5,746) Other comprehensive income (7,795) 7,887

(7,690) 2,141 Retained earnings:

Balance, beginning of period 916,795 793,296 Dividends declared 10 (30,637) (26,392) Shares repurchased 9 (24,184) (29,197) Purchase of shares pursuant to compensation plans (4,231) (2,478) Net earnings 141,053 135,808

998,796 871,037 Total shareholders’ equity 1,662,271 1,553,495

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

WestJet Second Quarter 2014 | 35

Condensed Consolidated Statement of Comprehensive Income (Stated in thousands of Canadian dollars) (Unaudited) Three months ended

June 30 Six months ended

June 30 2014 2013 2014 2013 Net earnings 51,762 44,735 141,053 135,808 Items to be reclassified to net earnings: Other comprehensive income, net of tax: Amortization of hedge settlements to aircraft leasing 350 350 700 700 Net unrealized gain (loss) on foreign exchange derivatives(i) (4,713) 4,191 (199) 6,039 Reclassification of net realized gain on foreign exchange derivatives(ii) (2,111) (353) (4,218) (346) Net unrealized gain (loss) on interest rate derivatives(iii) (1,867) 1,349 (5,284) 1,253 Reclassification of net realized loss on interest rate derivatives(iv) 593 118 1,206 241 (7,748) 5,655 (7,795) 7,887 Total comprehensive income 44,014 50,390 133,258 143,695

(i) Net of income taxes of $1,661 and $71 (2013 – $(1,482) and $(2,128)). (ii) Net of income taxes of $745 and $1,487 (2013 – $124 and $121). (iii) Net of income taxes of $658 and $1,862 (2013 – $(474) and $(440)). (iv) Net of income taxes of $(209) and $(425) (2013 – $(42) and $(85)).

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

36 | WestJet Second Quarter 2014

1. Statement of significant accounting policies

The condensed consolidated interim financial statements of WestJet Airlines Ltd. (the Corporation) for the three and six months ended June 30, 2014 and 2013, were authorized for issue by the Board of Directors on July 28, 2014. The Corporation is a public company incorporated and domiciled in Canada. The Corporation provides airline service and travel packages. The Corporation’s shares are publicly traded on the Toronto Stock Exchange (TSX) under the symbols WJA and WJA.A. The principal business address is 22 Aerial Place N.E., Calgary, Alberta, T2E 3J1 and the registered office is Suite 2400, 525 - 8 Avenue S.W., Calgary, Alberta, T2P 1G1.

(a) Basis of presentation

These condensed consolidated interim financial statements and notes thereto have been prepared in accordance with IAS 34 – Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the 2013 consolidated annual financial statements. There have been no changes to the Corporation’s significant accounting policies from those disclosed in the 2013 consolidated annual financial statements.

(b) Seasonality

The airline industry is sensitive to general economic conditions and the seasonal nature of air travel. The Corporation experiences increased domestic travel in the summer months and more demand for transborder and international travel over the winter months, thus reducing the effects of seasonality on net earnings.

(c) Change in estimate

For the six months ended June 30, 2014, the Corporation revised its estimate for its allowance for doubtful accounts relating to value-added tax (VAT) in a foreign jurisdiction. The effect of recording this change in estimate for the six months ended June 30, 2014, is a reduction to Aircraft fuel and Airport operations expense on the condensed consolidated statement of earnings by $20,234 and $2,869, respectively. The Corporation’s change in estimate is based on the successful outcome of filed VAT returns. The Corporation has no remaining VAT amounts recorded in its allowance for doubtful accounts.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 37

2. Capital management

The Corporation’s policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence and to sustain the future development of the airline. The Corporation manages its capital structure and makes adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets.

In order to maintain the capital structure, the Corporation may, from time to time, purchase shares for cancellation pursuant to normal course issuer bids, issue new shares, pay dividends and adjust current and projected debt levels.

In the management of capital, the Corporation includes shareholders’ equity (excluding hedge reserves), long-term debt, cash and cash equivalents and the Corporation’s off-balance-sheet obligations related to its aircraft operating leases, all of which are presented in detail below.

The Corporation monitors its capital structure on a number of bases, including cash to trailing 12 months revenue, adjusted debt-to-equity and adjusted net debt to earnings before net finance cost, taxes, depreciation and amortization and aircraft leasing (EBITDAR). EBITDAR is a non-GAAP financial measure commonly used in the airline industry to evaluate results by excluding differences in tax jurisdictions and in the method an airline finances its aircraft. In addition, the Corporation will adjust EBITDAR for non-operating gains and losses on derivatives and foreign exchange. The calculation of EBITDAR is a measure that does not have a standardized meaning prescribed under IFRS and therefore may not be comparable to similar measures presented by other issuers. The Corporation adjusts debt to include its off-balance-sheet aircraft operating leases. To derive a present-value debt equivalent, common industry practice is to multiply the trailing 12 months of aircraft leasing expense by a multiplier. The Corporation uses a multiplier of 7.5. The Corporation defines adjusted net debt as adjusted debt less cash and cash equivalents. The Corporation defines equity as total shareholders’ equity, excluding hedge reserves.

June 30

2014 December 31

2013 Change Cash to trailing 12 months revenue Cash and cash equivalents 1,076,671 1,256,005 (179,334) Trailing 12 months revenue 3,823,691 3,662,197 161,494 Cash to trailing 12 months revenue(v) 28.2% 34.3% (6.1pts) Adjusted debt-to-equity

Long-term debt(i) 963,845 878,395 85,450 Off-balance-sheet aircraft leases(ii) 1,335,563 1,317,345 18,218

Adjusted debt 2,299,408 2,195,740 103,668 Total shareholders’ equity 1,662,271 1,589,840 72,431 Add: Hedge reserves 7,690 (105) 7,795

Adjusted equity 1,669,961 1,589,735 80,226 Adjusted debt-to-equity(v) 1.38 1.38 0.0% Adjusted net debt to EBITDAR Adjusted debt (as above) 2,299,408 2,195,740 103,668 Less: Cash and cash equivalents (1,076,671) (1,256,005) 179,334 Adjusted net debt 1,222,737 939,735 283,002 Net earnings 273,967 268,722 5,245 Add:

Net finance cost(iii) 28,749 25,599 3,150 Taxes 105,183 103,363 1,820 Depreciation and amortization 219,091 200,840 18,251 Aircraft leasing 178,075 175,646 2,429 Other(iv) 1,585 (1,136) 2,721

EBITDAR 806,650 773,034 33,616 Adjusted net debt to EBITDAR(v) 1.52 1.22 24.6%

(i) At June 30, 2014, long-term debt includes the current portion of long-term debt of $185,285 (December 31, 2013 – $189,191) and long-term debt of $778,560 (December 31, 2013 – $689,204).

(ii) Off-balance-sheet aircraft leases is calculated by multiplying the trailing 12 months of aircraft leasing expense by 7.5. At June 30, 2014, the trailing 12 months of aircraft leasing costs totaled $178,075(December 31, 2013 – $175,646).

(iii) At June 30, 2014, net finance cost includes the trailing 12 months of finance income of $16,795 (December 31, 2013 – $17,848) and the trailing 12 months of finance cost of $45,544 (December 31, 2013 – $43,447).

(iv) At June 30, 2014, other includes the trailing 12 months foreign exchange loss of $1,585 (December 31, 2013 – gain of $1,136).

(v) The Corporation has internal guidelines for a cash to trailing 12 months revenue of approximately 30 per cent, an adjusted debt-to-equity measure of less than 2.50 and an adjusted net debt to EBITDAR measure of less than 2.50. The Corporation’s internal guidelines are not related to any covenants.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

38 | WestJet Second Quarter 2014

3. Employee counts and compensation

The Corporation employed 8,320 full-time equivalent employees at June 30, 2014 (June 30, 2013 – 8,051). The following table reconciles the Corporation’s compensation expense items to where the amounts are presented on the condensed consolidated statement of earnings:

Three months ended

June 30 Six months ended

June 30 Note 2014 2013 2014 2013

Salaries and benefits(i) 154,186 149,088 315,365 295,893 Employee share purchase plan(i) 19,348 18,439 38,145 35,591 Employee profit share 5,351 2,834 26,349 27,145 Share-based payment expense(i) 9 5,904 3,479 9,762 7,054

184,789 173,840 389,621 365,683 Airport operations 26,775 24,160 52,911 47,228 Flight operations and navigational charges 60,465 54,868 124,717 112,015 Sales and distribution 17,574 16,397 35,845 32,285 Marketing, general and administration 26,400 22,485 51,123 44,970 Maintenance 15,416 13,915 30,593 27,301 Inflight 32,808 39,181 68,083 74,739 Employee profit share 5,351 2,834 26,349 27,145 184,789 173,840 389,621 365,683

(i) Classified in the condensed consolidated statement of earnings based on the related nature of the service performed.

4. Cash and cash equivalents

June 30

2014 December 31

2013 Bank balances(i) 433,745 394,984 Short-term investments(i) 642,926 861,021

1,076,671 1,256,005

(i) Included in these balances, at June 30, 2014, the Corporation has US-dollar cash and cash equivalents totaling US $116,270 (December 31, 2013 – US $106,749).

5. Restricted cash

June 30

2014 December 31

2013 Cash held in trust for WestJet Vacations Inc. 24,784 48,530 Security on facilities for letters of guarantee 8,882 8,322 Passenger facility charges 1,038 1,254

34,704 58,106

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 39

6. Property and equipment

January 1

2014 Net

additions Depreciation Transfers June 30 2014

Aircraft(i) 1,747,319 182,329 (94,465) 81,494 1,916,677 Ground property and equipment 62,547 6,232 (7,058) (91) 61,630 Spare engines and rotables 130,202 8,753 (6,153) 9,350 142,152 Deposits on aircraft 418,348 167,205 − (85,484) 500,069 Buildings 112,450 245 (1,720) − 110,975 Leasehold improvements 11,371 242 (1,015) 301 10,899 Assets under development 5,497 4,456 − (5,570) 4,383 2,487,734 369,462 (110,411) − 2,746,785

January 1

2013 Net

additions Depreciation Transfers December 31

2013 Aircraft 1,477,388 304,479 (162,128) 127,580 1,747,319 Ground property and equipment 57,115 14,958 (14,088) 4,562 62,547 Spare engines and rotables 101,709 32,840 (10,391) 6,044 130,202 Deposits on aircraft 208,602 327,244 − (117,498) 418,348 Buildings 115,899 (42) (3,436) 29 112,450 Leasehold improvements 11,002 157 (1,751) 1,963 11,371 Assets under development 13,884 14,293 − (22,680) 5,497 1,985,599 693,929 (191,794) − 2,487,734

June 30, 2014 Cost Accumulated depreciation

Net book value

Aircraft 3,199,793 (1,283,116) 1,916,677 Ground property and equipment 161,019 (99,389) 61,630 Spare engines and rotables 203,411 (61,259) 142,152 Deposits on aircraft 500,069 − 500,069 Buildings 136,156 (25,181) 110,975 Leasehold improvements 19,139 (8,240) 10,899 Assets under development 4,383 − 4,383 4,223,970 (1,477,185) 2,746,785

December 31, 2013 Cost Accumulated depreciation

Net book value

Aircraft 2,985,722 (1,238,403) 1,747,319 Ground property and equipment 154,986 (92,439) 62,547 Spare engines and rotables 185,308 (55,106) 130,202 Deposits on aircraft 418,348 − 418,348 Buildings 135,910 (23,460) 112,450 Leasehold improvements 18,597 (7,226) 11,371 Assets under development 5,497 − 5,497 3,904,368 (1,416,634) 2,487,734

(i) Aircraft includes (a) aircraft (b) engine, airframe and landing gear core components (c) engine, airframe and landing gear overhaul components, and (d) live satellite television equipment. For the three and six months ended June 30, 2014, total aircraft depreciation expense was $43,863 and $94,465 (June 30, 2013 – $50,543 and 79,010). For the three and six months ended June 30, 2014, depreciation for overhaul components was $12,713 and $33,688 (June 30, 2013 – $12,634 and $28,467).

The net book value of the property and equipment pledged as collateral for the Corporation’s long-term debt was $1,732,077 at June 30, 2014 (December 31, 2013 – $1,640,952).

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

40 | WestJet Second Quarter 2014

7. Maintenance provisions and reserves

The Corporation’s operating aircraft lease agreements require leased aircraft to be returned to the lessor in a specified operating condition. The maintenance provision liability represents the present value of the expected future cost. A maintenance expense is recognized over the term of the provision based on aircraft usage and the passage of time, while the unwinding of the present value discount is recognized as a finance cost. The majority of the Corporation’s maintenance provision liabilities are recognized and settled in US dollars. Where applicable, all amounts have been converted to Canadian dollars at the period end foreign exchange rate.

June 30

2014 December 31

2013 Opening balance 218,516 179,791 Additions 17,643 32,740 Change in estimate(i) 3,684 (1,055) Foreign exchange 960 12,115 Accretion(ii) 1,168 1,990 Settled (12,848) (7,065) Ending balance 229,123 218,516 Current portion (95,623) (76,105) Long-term portion 133,500 142,411

(i) Reflects changes to the timing and scope of maintenance activities and the discount rate used to present value the liability.

(ii) At June 30, 2014, the Corporation’s aircraft lease maintenance provisions are discounted using a weighted average risk-free rate of approximately 0.82% (December 31, 2013 – 0.99%) to reflect the weighted average remaining term of approximately 28 months (December 31, 2013 – 27 months) until cash outflow.

A certain number of operating aircraft leases also require the Corporation to pay a maintenance reserve to the lessor. Maintenance reserves are either refunded when qualifying maintenance is performed or offset against end of lease obligations for returning leased aircraft in a specified operating condition. Where the amount of maintenance reserves paid exceeds the estimated amount recoverable from the lessor, the non-recoverable amount is recorded as maintenance expense in the period it is incurred. Non-recoverable amounts previously recorded as maintenance expense may be recovered and capitalized based on changes to expected overhaul costs and recoverable amounts over the term of the lease. The Corporation’s maintenance reserves are recognized and settled in US dollars. All amounts have been converted to Canadian dollars at the period end foreign exchange rate.

At June 30, 2014, the current portion of maintenance reserves included in prepaid expenses, deposits and other is $46,582 (December 31, 2013 – $49,810) and the long-term portion of maintenance reserves included in other assets is $5,525 (December 31, 2013 – $11,851).

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 41

8. Long-term debt

June 30

2014 December 31

2013 Term loans – purchased aircraft(i) 430,850 510,764 Term loans – purchased aircraft(ii) 228,613 238,964 Term loans – purchased aircraft(iii) 204,382 128,667 Revolving credit facility(iv) 100,000 963,845 878,395 Current portion (185,285) (189,191) 778,560 689,204

(i) 52 individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totaling $40,676, at an effective weighted average fixed rate of 5.94%, maturing between 2014 and 2020. These facilities are guaranteed by Export-Import Bank of the United States (Ex-Im Bank) and secured by one 800-series aircraft, 38 700-series aircraft and 13 600-series aircraft. No changes from December 31, 2013, other than weighted average fixed interest rate of 5.95%. There are no financial covenants related to these term loans.

(ii) Seven individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totaling $5,576, in addition to a floating rate of interest at the three month Canadian Dealer Offered Rate plus a basis point spread, with an effective weighted average floating interest rate of 2.86% at June 30, 2014, maturing between 2024 and 2025. The Corporation has fixed the rate of interest on these seven term loans using interest rate swaps. These facilities are guaranteed by Ex-Im Bank and secured by seven 800-series aircraft. No changes from December 31, 2013, other than weighted average floating interest rate of 2.85%. There are no financial covenants related to these term loans.

(iii) 13 individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totaling $3,638, at an effective weighted average fixed rate of 3.95%, maturing in 2025 and 2026. Each term loan is secured by one Q400 aircraft. At December 31, 2013 – eight individual term loans, amortized over a 12-year term, repayable in quarterly principal instalments totaling $2,231, at an effective weighted average fixed rate of 4.02%, maturing in 2025. There are no financial covenants related to these term loans.

(iv) $250,000 unsecured, revolving credit facility maturing in June 2017. At June 30, 2014, the Corporation has $100,000 (December 31, 2013 – not applicable) drawn on the facility in the form of a Canadian dollar prime loan with an effective interest rate of 3.70% (December 31, 2013 – not applicable) payable quarterly. Principal repayments due upon credit facility maturity in June 2017. This credit facility contains two financial covenants: (i) minimum pooled asset coverage ratio of 1.5 to 1, and (ii) minimum fixed charge coverage ratio of 1.25 to 1. At June 30, 2014, the Corporation has met both covenants.

Future scheduled repayments of long-term debt at June 30, 2014 are as follows:

Within 1 year 185,285 1 – 3 years 359,770 3 – 5 years 158,775 Over 5 years 260,015 963,845

The Corporation has an $820,000 loan agreement with Export Development Canada for the future purchase of Bombardier Q400 NextGen aircraft. The Corporation is charged a non-refundable commitment fee of 0.2 per cent per annum on the undisbursed portion of the loan. The undisbursed portion of the loan at June 30, 2014, is $607,787 (December 31, 2013 – $688,973). Availability of any undrawn amount expires on December 31, 2018. The expected amount available for each aircraft is up to 80 per cent of the net price with a term to maturity of up to 12 years, repayable in quarterly instalments, including interest at a floating or fixed rate, determined at the inception of the loan.

In June 2014, the Corporation entered into a credit agreement with a syndicate of banks whereby the Corporation has access to an unsecured, revolving $250,000 syndicated credit facility. The credit facility is available for general corporate purposes, including the funding of future aircraft acquisitions, and matures in June 2017 with an option to extend the three year term on an annual basis. Funds from the revolving credit facility can be drawn by way of: (i) Canadian dollar prime loans, (ii) US dollar base rate loans, (iii) US dollar LIBOR loans, (iv) Canadian dollar bankers’ acceptances, and (v) Canadian or US dollar fronted letters of credit. Interest is calculated by reference to the applicable base rate plus an applicable pricing margin based on the Corporation’s debt rating. The Corporation also pays a standby fee for the undisbursed portion of the revolving credit facility. At June 30, 2014, the undisbursed portion of the revolving credit facility was $150,000.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

42 | WestJet Second Quarter 2014

9. Share capital

(a) Issued and outstanding

June 30 2014

December 31 2013

Number Amount Number Amount Common and variable voting shares: Balance, beginning of period 128,625,420 603,861 132,256,794 614,899 Issuance of shares pursuant to compensation plans 126,563 1,600 1,086,336 11,027 Shares repurchased (1,146,964) (5,391) (4,717,710) (22,065) Balance, end of period 127,605,019 600,070 128,625,420 603,861

At June 30, 2014, the number of common voting shares outstanding was 109,441,694 (December 31, 2013 – 107,062,008) and the number of variable voting shares was 18,163,325 (December 31, 2013 – 21,563,412).

On May 5, 2014, the Corporation filed a notice with the TSX to make a normal course issuer bid to purchase outstanding shares on the open market. As approved by the TSX, the Corporation is authorized to purchase up to 2,000,000 common voting shares and variable voting shares (representing approximately 1.6 per cent of the Corporation’s issued and outstanding shares at the time of the bid) during the period May 8, 2014 to May 7, 2015, or until such time as the bid is completed or terminated at the Corporation’s option. Any shares purchased under this bid are purchased on the open market through the facilities of the TSX at the prevailing market price at the time of the transaction. Common voting shares and variable voting shares acquired under this bid are cancelled.

On February 14, 2013, the Corporation filed a notice with the TSX to make a normal course issuer bid to purchase outstanding shares on the open market. As approved by the TSX, the Corporation was authorized to purchase up to 6,616,543 common voting shares and variable voting shares (representing approximately five per cent of the Corporation’s issued and outstanding shares at the time of the bid) during the period February 19, 2013, to February 18, 2014, or until such time as the bid was completed or terminated at the Corporation’s option. Any shares purchased under this bid were purchased on the open market through the facilities of the TSX at the prevailing market price at the time of the transaction. Common voting shares and variable voting shares acquired under this bid were cancelled. The bid expired on February 18, 2014, with the Corporation purchasing and cancelling a total of 5,672,550 shares out of a possible 6,616,543 shares.

During the six months ended June 30, 2014, the Corporation purchased and cancelled 192,124 shares under the May 2014 bid and 954,840 shares under February 2013 bid for a total of 1,146,964 shares (12 months December 31, 2013 – 4,717,710) under both normal course issuer bids for total consideration of $29,574 (12 months December 31, 2013 – $112,362). The average book value of the shares repurchased was $4.70 per share (12 months December 31, 2013 – $4.68) and was charged to share capital. The excess of the market price over the average book value, including transaction costs, was $24,184 (12 months December 31, 2013 – $90,297) and was charged to retained earnings.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 43

9. Share capital (continued)

(b) Stock option plan

The fair value of options granted and the assumptions used in their determination are as follows:

Three months ended

June 30 Six months ended

June 30 2014 2013 2014 2013

Weighted average fair value per option 4.53 4.52 4.53 4.52 Weighted average risk-free interest rate 1.5% 1.3% 1.5% 1.3% Weighted average expected volatility 26.5% 28.6% 26.5% 28.6% Expected life of options (years) 3.8 3.9 3.8 3.9 Weighted average dividend yield 1.6% 1.6% 1.6% 1.6%

Changes in the number of options, with their weighted average exercise prices, are summarized below:

Three months ended June 30 2014 2013

Number of options

Weighted exercise price

Number of options

Weighted exercise price

Stock options outstanding, beginning of period 2,759,353 19.37 3,182,676 14.22 Granted 2,313,464 23.87 1,680,602 21.93 Exercised (293,174) 17.54 (984,142) 14.28 Forfeited (1,075) 23.87 Expired – – (6) 12.49 Stock options outstanding, end of period 4,778,568 21.66 3,879,130 17.55 Exercisable, end of period 1,951,561 19.48 1,643,780 14.53

Six months ended June 30 2014 2013

Number of options

Weighted exercise price

Number of options

Weighted exercise price

Stock options outstanding, beginning of period 2,834,639 19.20 3,850,898 14.45 Granted 2,324,001 23.88 1,684,990 21.93 Exercised (377,923) 16.84 (1,623,521) 14.05 Forfeited (2,149) 22.90 (32,222) 12.89 Expired – – (1,015) 14.86 Stock options outstanding, end of period 4,778,568 21.66 3,879,130 17.88 Exercisable, end of period 1,951,561 19.48 1,643,780 14.53

Under the terms of the Corporation's stock option plan, with the approval of the Corporation, option holders can either (i) elect to receive shares by delivering cash to the Corporation in the amount of the exercise price of the options, or (ii) choose a cashless settlement alternative, whereby they can elect to receive a number of shares equivalent to the market value of the options over the exercise price. For the three and six months ended June 30, 2014, option holders exercised 293,174 and 375,191 options (three and six months ended June 30, 2013 – 984,142 and 1,620,965 options) on a cashless settlement basis and received 87,322 and 123,831 shares (three and six months ended June 30, 2013 – 381,477 and 628,696 shares). For the three and six months ended June 30, 2014, zero and 2,732 options were exercised on a cash basis (three and six months ended June 30, 2013 – nil and 2,556 options) and option holders received zero and 2,732 shares (three and six months ended June 30, 2013 – nil and 2,556 shares).

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

44 | WestJet Second Quarter 2014

9. Share capital (continued)

(c) Key employee plan

Changes in the number of units, with their weighted average fair value, are summarized below:

Three months ended June 30 2014 2013

Number of units

Weighted fair value

Number of units

Weighted fair value

Units outstanding, beginning of period 474,182 17.45 463,069 14.31 Granted 125,324 23.87 163,543 21.93 Units, in lieu of dividends 1,845 25.53 2,103 22.52 Settled (205,865) 15.05 (153,045) 14.18 Forfeited (1,046) 18.22 Units outstanding, end of period 394,440 20.77 475,670 17.01

Six months ended June 30 2014 2013

Number of units

Weighted fair value

Number of units

Weighted fair value

Units outstanding, beginning of period 476,103 17.39 465,417 14.52 Granted 125,913 23.88 164,789 21.93 Units, in lieu of dividends 4,236 24.49 3,988 23.42 Settled (210,597) 15.08 (153,045) 14.18 Forfeited (1,215) 18.74 (5,479) 13.67 Units outstanding, end of period 394,440 20.77 475,670 17.28

(d) Executive share unit plan

Changes in the number of units, with their weighted average fair value, are summarized below:

Three months ended June 30 2014 2013

RSUs PSUs RSUs PSUs

Number of units

Weighted fair value

Number of units

Weighted fair value

Number of units

Weighted fair value

Number of units

Weighted fair value

Units outstanding, beginning of period 132,281 17.93 177,757 18.05 166,244 14.69 205,871 14.51

Granted 53,027 23.87 128,303 23.87 42,916 21.93 73,250 21.93 Units, in lieu of dividends 538 25.53 1,014 25.53 – – – –Settled – – – – (12,628) 12.77 (16,837) 12.77 Units outstanding, end of period 185,846 19.65 307,074 20.51 196,532 16.39 262,284 16.69

Six months ended June 30 2014 2013

RSUs PSUs RSUs PSUs

Number of units

Weighted fair value

Number of units

Weighted fair value

Number of units

Weighted fair value

Number of units

Weighted fair value

Units outstanding, beginning of period 192,084 17.35 243,567 17.18 214,168 14.54 254,515 14.41

Granted 55,104 23.95 131,765 23.93 42,916 21.93 73,250 21.93 Units, in lieu of dividends 848 24.85 1,455 24.97 – – – –

Settled (62,190) 16.43 (69,713) 14.55 (60,552) 13.77 (65,481) 13.67 Units outstanding, end of period 185,846 19.65 307,074 20.51 196,532 16.39 262,284 16.69

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 45

9. Share capital (continued)

(e) Share-based payment expense

The following table summarizes share-based payment expense for the Corporation’s equity-based plans:

Three months ended

June 30 Six months ended

June 30 Note 2014 2013 2014 2013 Stock option plan 4,184 2,090 6,097 3,777 Key employee plan 733 1,233 1,551 1,890 Executive share unit plan 987 156 2,114 1,387 Total share-based payment expense 3 5,904 3,479 9,762 7,054

Flight operations and navigational charges 2,981 1,895 4,942 3,631 Marketing, general and administration 2,923 1,584 4,820 3,423 Total share-based payment expense 3 5,904 3,479 9,762 7,054

10. Dividends

On May 5, 2014, the Corporation’s Board of Directors declared the 2014 second quarter dividend of $0.12 per common voting share and variable voting share. For the three and six months ended June 30, 2014, the Corporation paid dividends totaling $15,312 and $30,637, respectively (three and six months ended June 30, 2013 – $13,161 and $26,392).

11. Earnings per share

The following reflects the share data used in the computation of basic and diluted earnings per share:

Three months ended

June 30 Six months ended

June 30 2014 2013 2014 2013 Weighted average number of shares outstanding – basic 127,711,520 132,033,038 127,920,445 132,183,392Effect of dilution 1,039,479 1,348,464 1,081,395 1,315,488Weighted average number of shares outstanding – diluted 128,750,999 133,381,502 129,001,840 133,498,880

For the three and six months ended June 30, 2014, 1,839,484 and 1,825,583 employee stock options (three and six months ended June 30, 2013 – 1,274,630 and 1,282,166 options) were not included in the calculation of dilutive potential shares as the result would have been anti-dilutive.

12. Finance cost

Three months ended June 30

Six months ended June 30

2014 2013 2014 2013 Finance cost:

Interest on term loans and finance leases(i) 10,843 9,821 21,890 20,040 Accretion on maintenance provisions 547 442 1,168 921 11,390 10,263 23,058 20,961

(i) Relates to the sum of the current portion of long-term debt of $185,285 (June 30, 2013 – $167,603) and long-term debt of $778,560 (June 30, 2013 – $522,016).

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

46 | WestJet Second Quarter 2014

13. Financial instruments and risk management

Fair value of financial assets and financial liabilities

The Corporation’s financial assets and liabilities consist primarily of cash and cash equivalents, accounts receivable, derivatives designated in an effective hedging relationship, interest bearing deposits, accounts payable and accrued liabilities and long-term debt. The following tables set out the Corporation’s classification and carrying amount, together with the fair value, for each type of financial asset and financial liability at June 30, 2014 and December 31, 2013:

Fair value Amortized cost Total

June 30, 2014 Through profit

or loss Derivatives Loans and receivables

Other financial liabilities

Carrying amount

Fair value

Asset (liability): Cash and cash equivalents(i) 1,111,375 1,111,375 1,111,375Accounts receivable 56,421 56,421 56,421Foreign exchange derivatives(ii) (1,816) (1,816) (1,816)Interest rate derivatives(iii) (4,632) (4,632) (4,632)Deposits(iv) 30,284 30,284 30,284Accounts payable and accrued

liabilities(v) (332,773) (332,773) (332,773)Long-term debt(vi) (963,845) (963,845) (1,004,150)

1,141,659 (6,448) 56,421 (1,296,618) (104,986) (145,291)

Fair value Amortized cost Total

December 31, 2013 Through profit

or loss Derivatives Loans and receivables

Other financial liabilities

Carrying amount

Fair value

Asset (liability): Cash and cash equivalents(i) 1,314,111 – – – 1,314,111 1,314,111Accounts receivable – – 42,164 – 42,164 42,164Foreign exchange derivatives(ii) – 4,158 – – 4,158 4,158Interest rate derivatives(iii) – 883 – – 883 883Deposits(iv) 32,021 – – – 32,021 32,021Accounts payable and accrued

liabilities(v) – – – (480,836) (480,836) (480,836)Long-term debt(vi) – – – (878,395) (878,395) (924,570)

1,346,132 5,041 42,164 (1,359,231) 34,106 (12,069)

(i) Includes restricted cash of $34,704 (December 31, 2013 – $58,106).

(ii) Includes $876 (December 31, 2013 – $4,187) classified in prepaid expenses, deposits and other, and $2,692 (December 31, 2013 – $29) classified in accounts payable and accrued liabilities.

(iii) Includes $3,057 (December 31, 2013 – $3,220) classified in accounts payable and accrued liabilities and $1,575 classified in other long-term assets (December 31, 2013 – $4,103).

(iv) Includes $17,584 (December 31, 2013 – $19,355) classified in prepaid expenses, deposits and other, and $12,700 (December 31, 2013 – $12,666) classified in other long-term assets.

(v) Excludes deferred WestJet Rewards program revenue of $69,231 (December 31, 2013 – $59,082), foreign exchange derivative liabilities of $2,692 (December 31, 2013 – $29), and interest rate derivative liabilities of $3,057 (December 31, 2013 – $3,220).

(vi) Includes current portion of long-term debt of $185,285 (December 31, 2013 – $189,191) and long-term debt of $778,560 (December 31, 2013 – $689,204).

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

WestJet Second Quarter 2014 | 47

13. Financial instruments and risk management (continued)

Fair value of financial assets and financial liabilities (continued)

The following items shown in the condensed consolidated statement of financial position at June 30, 2014 and December 31, 2013, are measured at fair value on a recurring basis using level 1 or level 2 inputs. The fair value of the financial assets and liabilities at June 30, 2014, using level 3 inputs, was $nil (December 31, 2013 $nil).

June 30, 2014 Level 1 Level 2 Total Asset (liability):

Cash and cash equivalents 1,111,375 1,111,375 Foreign exchange derivatives (1,816) (1,816) Interest rate derivatives (4,632) (4,632) Deposits 30,284 30,284

1,141,659 (6,448) 1,135,211

December 31, 2013 Level 1 Level 2 Total Asset (liability):

Cash and cash equivalents 1,314,111 − 1,314,111 Foreign exchange derivatives − 4,158 4,158 Interest rate derivatives − 883 883 Deposits 32,021 − 32,021

1,346,132 5,041 1,351,173

During the three and six months ended June 30, 2014, and the year ended December 31, 2013, there were no transfers between level 1, level 2 and level 3 financial assets and liabilities measured at fair value.

Cash and cash equivalents: Consist of bank balances and short-term investments, primarily highly liquid instruments, with terms up to 91 days. Classified in level 1 as the measurement inputs are derived from observable, unadjusted quoted prices in active markets. Interest income is recorded in the condensed consolidated statement of earnings as finance income. Due to their short-term nature, the carrying value of cash and cash equivalents approximates their fair value.

Foreign exchange derivatives: Consist of foreign exchange forward contracts where the fair value of the forward contracts is measured based on the difference between the contracted rate and the current forward price obtained from the counterparty. Classified in level 2 as the significant measurement inputs used in the valuation models are observable in active markets. At June 30, 2014, the weighted average contracted rate on the forward contracts was 1.0832 (December 31, 2013 – 1.0425) Canadian dollars to one US dollar, and the weighted average forward rate used in determining the fair value was 1.0718 (December 31, 2013 – 1.0683) Canadian dollars to one US dollar.

Interest rate derivatives: Consist of interest rate swap contracts that exchange a floating rate of interest with a fixed rate of interest. The fair value of the interest rate swaps is determined by measuring the difference between the fixed contracted rate and the forward curve for the applicable floating interest rates obtained from the counterparty. Classified in level 2, as the significant measurement inputs used in the valuation models are observable in active markets. At June 30, 2014, the Corporation’s swap contracts have a weighted average fixed interest rate of 2.60% (December 31, 2013 – 2.59%). The June 30, 2014, weighted average forward interest rate curve for the three month Canadian Dealer Offered Rate over the term of the debt was 2.29% (December 31, 2013 – 2.76%).

Deposits: Relate to purchased aircraft and airport operations and earn a floating market rate of interest. Classified in level 1 as the measurement inputs are unadjusted, observable inputs in active markets.

Accounts receivable and accounts payable and accrued liabilities: The Corporation designates accounts receivable and accounts payable and accrued liabilities as loans and receivables and other financial liabilities, respectively. These items are initially recorded at fair value and subsequently measured at amortized cost. Due to their short-term nature, the carrying value of accounts receivable and accounts payable and accrued liabilities approximate their fair value.

Long-term debt: The fair value of the Corporation’s fixed-rate long-term debt is determined by discounting the future contractual cash flows under the current financing arrangements at discount rates presently available to the Corporation for loans with similar terms and remaining maturities. At June 30, 2014, the rates used in determining the fair value ranged from 1.29% to 3.74% (December 31, 2013 – 1.28% to 4.10%). The fair value of the Corporation’s floating-rate debt approximates its carrying value.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2014 and 2013 (Stated in thousands of Canadian dollars, except percentage, ratio, share and per share amounts) (Unaudited)

48 | WestJet Second Quarter 2014

14. Commitments

(a) Purchased aircraft and spare engines

At June 30, 2014, the Corporation is committed to purchase 13 737-700 and 10 737-800 Next Generation aircraft for delivery between 2014 and 2017 as well as 25 737 MAX 7 and 40 737 MAX 8 aircraft for delivery between 2017 and 2027. The Corporation is also committed to purchase 12 Q400 NextGen aircraft for delivery between 2014 and 2015 and a total of 11 Boeing and Bombardier spare engines for delivery between 2014 and 2026.

The remaining estimated amounts to be paid in deposits and purchase prices for the 100 aircraft and 11 spare engines are presented in the table below. Where applicable, US dollar commitments are translated at the period end foreign exchange rate.

Within 1 year 485,039 1 – 3 years 749,347 3 – 5 years 949,806 Over 5 years 2,191,120 4,375,312

(b) Operating leases and contractual commitments

The Corporation has entered into operating leases and other contractual commitments for aircraft, land, buildings, equipment, computer hardware, software licenses and inflight entertainment. At June 30, 2014, the future payments under these commitments are presented in the table below. Where applicable, US dollar commitments are translated at the period end foreign exchange rate.

Within 1 year 251,012 1 – 3 years 356,175 3 – 5 years 197,070 Over 5 years 164,532 968,789

(c) Letters of guarantee

At June 30, 2014, the Corporation has a revolving letter of credit facility with a Canadian Chartered Bank totaling $30,000 (December 31, 2013 – $30,000). The facility requires funds to be assigned and held in cash security for the full value of letters of guarantee issued by the Corporation. At June 30, 2014, $8,882 (December 31, 2013 – $8,322) letters of guarantee were issued under the facility by assigning restricted cash of $8,882 (December 31, 2013 – $8,322).

15. Subsequent Event

(a) Senior Notes

On July 23, 2014, the Corporation successfully completed a private placement offering for $400,000 3.287% Senior Unsecured Notes. The notes bear interest of 3.287% per year with semi-annual interest payments on January 23 and July 23 of each year commencing January 23, 2015, and will mature on July 23, 2019. The notes rank equally in right of payment with all other existing and future unsubordinated debt of the Corporation, but are effectively subordinate to all of the Corporation’s existing and future secured debt to the extent of the value of the assets securing such debt. The Corporation has used a portion of the net proceeds from the sale of these notes to repay existing indebtedness under its revolving credit facility with the balance to be used for general corporate purposes, including the funding of future aircraft acquisitions.