NEW AIRCRAFT AND INITIATIVES PLANE TALK DOLLARS & SENSE

NEW AIRCRAFT AND INIT IATIVES ■ PLANE TALK ■ DOLLARS & SENSE

SPOTLIGHT ON THE STARS OF THE AIRL INE INDUSTRY

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737-700 SERIES

3RD QUARTER REPORT

WESTJET’S SUCCESS (it’s the people!)

Flight Attendant Darryl White enjoys serving WestJet guests witha smile. Jetting around the country every day isn’t bad, either!

2 2003 WestJet Third Quarter Report

Brad Jacobson, First Officer, keeps flights fun for WestJet’sguests with his relaxed sense of humour.

4 Plane TalkFeedback from WestJet’s guests.

5 CrosswindsFrom the Cutting Room Floor, see the adsthat didn’t make the grade.

6 UP FRONTPresident’s Message to Shareholders. Clive tells it like it was.

9 DOLLARS & SENSEManagement’s Discussion and Analysis of Financial Results.

16 Figures in ReviewWestJet’s third quarter financial results.

20 Notes to FinancialStatementsAccountants speak out (with translation).

27 Who’s WhoThe Executive Team, Board of Directors, and corporate associates of WestJet.

On the cover: Ramel Gutierrez, Team Leader, Calgary Airport and Christine Jodoin, Team Leader, Montréal Airport.Melissa Heerebout, Flight Attendant. Barry Tawse, Manager, Western Sales.

WestJet Airlines Ltd. is Canada’s leading low-fare airline, and is based in Calgary, Alberta. Inthe third quarter of 2003, WestJet employed3,640 people and carried 2.0 million guests to its24 destinations of Victoria, Comox, Vancouver,Abbotsford/Fraser Valley, Prince George,Kelowna, Grande Prairie, Calgary, Edmonton,Fort McMurray, Saskatoon, Regina, Winnipeg,Thunder Bay, Windsor, London, Hamilton,Toronto, Ottawa, Montréal, Moncton, Halifax,Gander, and St. John’s. As at September 30,

2003, WestJet’s fleet consisted of43 Boeing 737 aircraft. WestJet

is publicly traded on theToronto Stock Exchangeunder the symbol WJA.

CORPORATE PROFILE

2003 WestJet Third Quarter Report 3

Isabel Martins-Salinger, Administrative Assistant,enjoys her role at WestJet’s Toronto base.

Kurtis Dikur, Victoria Customer Service Agent,is always happy to make WestJet guests smile.

Mike Parr,Planner, Avionics

Myrnie Sands-Malvin,Marketing Coordinator

Arild Aarflot, CustomerCare Representative

“The third quarter of 2003 marksWestJet’s 27th consecutive

quarter of profitability.”


Plan

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lkIN THE SKY YET DOWN TO EARTHI recently flew with WestJet and was very impressedwith the level of customer service I received. Thiswas my first experience flying with WestJet andwas very pleased with the down-to-earth attitudepresented by the flight crew. The camaraderiebetween the crewmembers during the flight andat the airport showed a level of enjoyment for theirjob, the company they work for, and the level ofservice that they are providing. The flightattendants and pilots told jokes during the flight,such as “How do you know when a pilot is at aparty? He will tell you.” Anyway, thanks frommaking my flight so enjoyable! Brett I., Beaverbank, Nova Scotia

I just booked a flight for my mother to fly toCalgary from Winnipeg. I dealt with a younglady by the name of Kathy and I want to say thatshe was an exceptional call centre representative.Her friendly and helpful attitude was a breath offresh air. In fact, all of your service reps that we(my wife and I) have dealt with in the past havebeen great and have made the task of booking aflight an absolute pleasure. Keep it up WestJet.You guys ROCK!Hans S., Winnipeg, Manitoba

I just wanted to comment on the helpfulness andcheerfulness of WestJet staff. It’s always a pleasureto fly with you! In particular, I would like toacknowledge Linda, who works at the Saskatoonairport. I currently live in Ottawa but I am fromSaskatoon, so I’ve made a number of flights toand from in the last couple of years. Every timeI pass through, Linda does all she can to makemy flight experience the best it can be. I reallyappreciate her thoughtfulness. It is the friendlinessof all WestJet staff that will keep me flying yourairline! (The low fares don’t hurt either!)Marg G., Ottawa, Ontario

I’ve been meaning to send you folks an email forweeks—in short, I absolutely LOVE you all. I amconstantly delighted by your service—you guys‘get it.’ From check-in to baggage pick up, andeverything in between, you consistently overdeliver. Of the many things you do right, the one

thing that makes the biggest difference to me isthe positive, upbeat, and friendly attitude of yourstaff. What a great corporate culture! You haveearned my business and then some. Keep up thegreat work—I look forward to my next trip. Mark J., Gander, Newfoundland

On a flight between Vancouver and Edmonton,I lost a pair of small, fold-up glasses. These aresmall prescription reading glasses, which are infact rather difficult to replace and are quiteexpensive. I was very impressed, after a couple ofdays of travelling by road around Alberta, toreturn to my sister’s home in Edmonton to finda message from WestJet telling me that the glasseshad been found and were waiting for me at theEdmonton baggage desk (i.e. my point of departurea few days later on my return flight). I hadn’teven yet discovered them missing! I appreciatedthis very much, and I also appreciated the pleasantpersonnel I spoke with over the phone and atthe airport when I went to retrieve them priorto my departure. I have told at least a dozenpeople as one more example of the service we canenjoy from WestJet. Thanks again.Allen C., Vancouver, British Columbia

This is just a note to thank each and every personinvolved in giving me the most wonderful flightI have ever had. Not only was the crew thefriendliest, but we were also blessed with a ‘singingpilot’ who did a wonderful job flying the planeas well. At my stopover, the attendants in theairport were all very friendly and helpful. I haveshared my experience with all my family andfriends. Thank you once again and whenever Ifly, it will be with you. Keith K., Calgary, Alberta

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GIVE US THE WORD...We welcome feedback and

suggestions on any aspect of your WestJet experience. You cancontact us through westjet.com –just click on Contact Us and enterour Interactive Feedback Corner. We can’t wait to hear from you!

Crosswinds

From the

FloorPeople love us for our way-

out-there advertising andpromotions, but sometimesthey’re just too way out there...



The third quarter of 2003 marks WestJet’s twenty-seventh consecutive quarter of profitability, with netearnings up 39.8% to $32.3 million compared with

the same period last year. These profits were achieved asa result of our significant reduction in costs, and our abilityto attract travellers to WestJet even in periods of intensecompetition. With these strong financial achievements,we have also announced and started to implement a numberof new initiatives, which will contribute to our continuedsuccess in the years ahead.

Up Front

President’s Messageto the ShareholdersPresident’s Messageto the Shareholders

Clive Beddoe, ExecutiveChairman, President and CEO.


Throughout this quarter, we have achieveda 15.9% reduction in cost per available seatmile to 10.6 cents, half of which came as aresult of the addition of Boeing Next-Generation737-700 aircraft to our fleet and our ongoingimplementation of new technologies. Theremaining half of our reduction in cost peravailable seat mile was a result of our increasingstage length. As our airline grows and the lengthof our flights increase, we will continue toexperience reductions in costs; however, thebenefits of this will be offset somewhat by anexpected reduction in our yield or revenue perrevenue passenger mile due to increased stage length.

In this quarter, our yield declined 9.8% to17.5 cents. In addition to our increasing stagelength, this yield decline can also be attributedto the sale of approximately 40.1% of our seatsat seat-sale fares in response to a highlycompetitive environment versus 12.7% of ourfares sold at seat-sale prices in the same periodof 2002. It is important to note however thatour costs in the quarter declined at a far greaterrate than our yields as our low-cost structureallows us to profitably respond aggressively tolow fares offered by other airlines.

Bookings completed online considerablyreduce our cost of sale. Our investment inwestjet.com continues to bear fruit with Internetbookings growing at an average rate of one percent per month. Our recent affiliation withAIR MILES® encourages even more of ourguests to book using this channel, as our offerof AIR MILES® is only available throughwestjet.com. Approximately 69% of WestJetbookings were completed on the Internet in thelast week of September, representing a six-percentage point increase in online bookingsfrom the week prior to the inception of theAIR MILES® program in June 2003.

The Canadian airline industry is undergoinga significant evolution, and we are very muchan engine of that change. Our arrival intomarkets dominated by the monopoly playerhas given travellers a financially viable choiceof air transportation, and we intend to continue

Up Frontour expansion with the addition of new citypairs and greater frequency on our existingroutes. A recent example of our airline’s growthcame since our commencement of service toToronto in May 2002. Since our service beganin this market, we have increased the numberof non-stop cities served from Lester B. PearsonInternational Airport from two to five.Furthermore, we have increased capacity fromToronto from 26 flights per week in May 2002to 77 flights per week by the end of the thirdquarter of this year.

We have also increased the number of non-stop cities served from one of our newestdestinations, Montréal, from one to four sincecommencement of service in April of this year.In the third quarter, we added non-stop servicefrom Montréal to Halifax, to Hamilton, and toVancouver, complementing our original non-stop service from Montréal to Calgary. Wehave also increased the number of flightsdeparting from Montréal from seven flightsper week in April 2003 to 40 flights per weekas at September 30, 2003.

Operationally, WestJet also achieved someremarkable results during the third quarter,posting on-time performances over the busiestthree months of the year that were the best inthe North American industry. This was asignificant achievement by our people as on-time performance is even harder to attain withthe higher load factors that we experienceduring the summer.

In this quarter, we also announced a numberof new initiatives for our 737-700 aircraft that willfurther enhance our guests’ experience onboard.These include the introduction of live seatbacktelevision (LiveTV) and enhanced legroom

“WestJet achieved…on-timeperformances over the

busiest three months of theyear that were the best in the

North American industry.”


resulting from reconfiguring these aircraft toremove four seats from the cabin. Guests travellingon longer-haul flights onboard our Next-Generation aircraft will now be even morecomfortable, and will soon enjoy 24 channels oflive satellite TV, while still paying low WestJetfares. In September, we also installed our firstset of blended winglets on our 700-series aircraft,and we expect this cost-savings product will beinstalled on all of our 737-700 aircraft beforeApril 2004, which will result in a reduction infuel burn while extending the life of our engines.

In September, we bolstered our balancesheet substantially with a successful shareissuance that increased our cash position by$144 million to bring our total cash on handto approximately $300 million. In August, wefinalised an agreement for an equity line withOntario Teachers’ Pension Plan that, if exercised,gives us access to a further $100 million. Thisprovides us with cash availability of approximately$400 million. We also signed a two-year charteragreement with Transat A.T. Incorporatedworth approximately $29 million in its firstwinter season alone. This deal provides anexcellent source of revenue for our airline andan enhanced utilization of our aircraft duringwinter months.

This quarter, we announced plans to purchasetwo additional Boeing 737-700 aircraft to bedelivered in June and August 2004 that areeligible for lower-cost financing supported bythe Export-Import Bank of the United States

(Ex-Im). On November 10, 2003, wealso announced plans to purchase sevenadditional Next-Generation Boeing 737-series aircraft in 2005. Financing forthese seven aircraft are subject to Ex-Im approval.

This brings the number of newaircraft to be added to our fleet in 2004to 11 and in 2005 to 12. We have nowconverted 13 options into firm ordersfrom our original 2000 agreement withBoeing, bringing the total number offirm purchases to 39, which leaves uswith 35 remaining options to purchase

additional aircraft before 2008.We also accepted accelerated deliveries of

two aircraft from Boeing this quarter to ensurewe maintain our capacity in the market as webegin the process of installing LiveTV andincreasing legroom in our aircraft.

With our declining cost structure, our strongbusiness plan, our new initiatives, and ourmotivated team of people, we are set to continueour profitable expansion. On behalf of WestJet’sBoard of Directors and our people, I wouldlike to welcome all of our new shareholdersand thank you all for your ongoing support.

Clive BeddoeExecutive Chairman, President and CEOWestJet Airlines Ltd.November 2003

“With our declining coststructure [and] our strongbusiness plan… we are

set to continue ourprofitable expansion.”

Blended winglet technology will help reduce fuelconsumption on our Next-Generation aircraft.

Up Front


The third quarter is typically WestJet’sstrongest period as a result of the higherdemand for our service during the busy

summer travel season of July and August. Thepositive results that we achieve in these twomonths, however, are somewhat offset by theslower demand that September brings.

Management’sDiscussion & Analysisof Financial Results

Management’sDiscussion & Analysisof Financial Results

Teresa Hoang, Trainer,enjoys sharing WestJet’sculture with the airline’snewest people.

Dollars &Sense


Dollars & SenseHIGHLIGHTS

This quarter, our total revenue of $253.9million was nearly $51.0 million or 25%higher than in the same three-month periodof 2002. Year to date, our revenues haveincreased by $127.3 million to $631.0 million,which also represents a 25% increase over thefirst three quarters of last year. This revenuegrowth came about from an increase in ourcapacity, or available seat miles (ASMs), of46% in the quarter with an increase of 50%during the first nine months ofthe year.

This year, we have continuedto add capacity to our system bygrowing our fleet by nine aircraft,which has allowed us to increasethe number of ASMs flown to5.0 billion so far in 2003. Thisgrowth has produced acompetitive response, which hascaused our load factor and yieldto be negatively impacted.Quarter over quarter and yearover year our load factors havedeclined by 3.8 and 4.3percentage points respectively.Our yield, as measured byrevenue per revenue passenger mile, has alsodeclined by 1.9 cents or 9.8% in the threemonths ended September 30, 2003, and 2.4cents or 11.8% for the first nine months of2003 compared to the same periods in 2002.

However, notwithstanding these negativepressures, our profit during this quarterincreased by 40% on a year-over-year basisas a result of a near-16% decline in cost perASM that we have been able to achieve.

One driver of this cost reduction is againour increasing stage length, which is theaverage length of a flight of an aircraft betweentwo points. During the third quarter, ouraverage stage length increased from 575 milesin the third quarter of 2002 to 679 miles inthe third quarter of 2003. Year to date, ouraverage stage length increased to 645 milesfrom 525 miles during the first three quartersof 2002. WestJet’s cost per ASM was down15.9% from 12.6 cents in the third quarter

of 2002 to 10.6 cents in the third quarter ofthis year. For the nine months endedSeptember 30, our cost per ASM decreasedsimilarly by 16.2% from 13.0 cents in 2002to 10.9 cents year to date. We estimatehowever that half of this decrease in costper ASM was attributable to this increasedstage length, while the remaining half wasprimarily due to our improved assetutilization, lower maintenance costs, thegreater fuel efficiency of our newer fleet,and our use of newer technologies.

Similarly, we have seen substantial increasesin average trip length, which is the averageone-way trip that a guest takes on our flightsfrom a point of origin to a final destination,

Aircraft Washer Don Home ensures WestJet puts its best wing forward every day.

“…our total revenue of $253.9 million was nearly

$51.0 million or 25% higher…”


which may include stopovers and/or transfersonto at least one other flight. Average triplength in the third quarter increased from 866miles in 2002 to 993 miles this quarter, whilefor the first nine months of the year, itincreased from 779 miles in 2002 to 927miles in 2003. In the same way that averagestage length affects costs, so averagetrip length influences yield.

Although the competitiveenvironment caused a portion ofour unit revenue decline, thebalance was caused by the naturaldilution of revenues over longertrip lengths. In the third quarter, we estimate that 6.5% of the 9.8%yield decline that occurred fromlast year to this year was related tothis increasing trip length. Similarincreases in trip length during thefirst nine months of 2003 led to7.5% of the 11.8% yield decline. Clearlythese yield declines, whether caused byincreased trip length or competitive pressures,were significantly less than our cost reductions.

DISTRIBUTIONOur commitment is to offer great service,

low fares, convenient schedules, and anexpanding route network, but our basicproduct remains a seat on our fleet of aircraft.

We operated 43 Boeing 737s as at September30, 2003 that collectively provided 5,720seats and flew a total of 1.9 billion ASMs inthe third quarter. To fill these seats withguests, we rely on various channels ofdistribution, which have changed dramaticallyin importance over the years.

The cost of each of these methods ofdistribution varies considerably depending onwhether the booking comes from a travelagent or directly to us. At the low end of therange, we estimate our basic cost of an averagebooking to be approximately $2, and at thehigh end to be about $20.

With an average ASM growth rate inexcess of 50% since start up in early 1996,it has been very important for us to offer asmany channels of distribution as possible forthe travelling public to access our product.Since we began operations, these channelshave included our Sales Super Centre (callcentre) in Calgary; dedicated phone lines fortravel agents; dedicated Specialty Salesnumbers for groups, where people can buygolf, ski, and hotel packages; and phoneaccess to our Customer Care Agents whohandle special customer care issues.

Where our call centre was once responsiblefor 100% of our bookings, now less thanone-third are completed through this channel

Dollars & Sense

Mike Drummond, Aircraft Materials Coordinator, enjoys working at WestJet’s state-of-the-art Calgary hangar.

Jerianne Matsumoto is always busy in WestJet’sMaintenance department but still takes time to smile.


as the Internet and Central ReservationSystems (CRSs) used by travel agents havegrown in popularity. While the call centre willalways be an important distribution channelfor us, it is nevertheless the most costly,which is why we have invested heavily inInternet technology and CRS access.Furthermore we provide incentives for ourguests and travel agent partners to use themost cost-effective channels. By booking onwestjet.com, travel agents receive highercommissions, and guests save $6.00 on round-trip fares and can now earn AIR MILES®

Reward Miles. These initiatives have resultedin a growing proportion of our bookingsbeing completed online from 0% in 1999, toapproximately 55% at year-end 2002, to 69%by the end of this quarter.

Travel agents bring in approximately 36%of our bookings, and their clients tend to bemore traditional business travellers who aregenerally higher-yielding guests to WestJet asthey are inclined to book closer to the dateof departure and thereby pay higher fares.The offset is that bookings made by travelagents typically cost WestJet more than thosemade directly because of the commission wepay and the cost of the CRS subscription.

However, their bookings do bring a net revenuebenefit to WestJet with the result that travelagents remain essential partners for our airlineand are a key component of our growth.

Our fully allocated reservations and salesand marketing unit costs continue to decline,in the third quarter representing 8.7% ofrevenues and year to date were 9.1%. Thiscompares with 9.3% during the third quarterof 2002 and 9.2% for the nine months endedSeptember 30, 2002. These savings were

achieved even though welaunched our first nationaltelevision advertisingcampaign with threenetworks during prime-time this quarter.

UTILIZATIONGenerally, most of our

unit costs continue todecline as a result ofproductivity and technologyadvances throughout theairline. The drivers behindthis are our longer stagelength and the introduction

of more new Next-Generation 737-700aircraft into our fleet. During the thirdquarter, we added three more of thesetechnologically advanced and more fuel-efficient aircraft to the fleet and we retiredone of our older 737-200 aircraft. Currentlythese Next-Generation aircraft have 140seats as compared with 125 on our 737-200aircraft, leading them to generate 12% morecapacity from this difference alone.

Stephanie Landry loves helping WestJet’s guests along their way as a Customer Service Agent in Calgary.

“During the third quarter, we added three more

technologically advancedand fuel-efficient aircraft…”

Dollars & Sense


Our 737-700 aircraft are alsosignificantly less costly to maintaindue to their average age of oneyear, compared with an averageage of 25.5 years for 737-200s.This means that they do notrequire three to four weeks ofannual downtime for heavymaintenance inspections, and donot require the same degree ofoperational spare support in theevent of mechanical delays.Collectively, these factors allowus to achieve an approximate30% increase in utilization overtheir older counterparts, andallow us the opportunity togenerate more ASMs.

There is also a significant upside to theoperational performance and reliability ofour 737-700s as they fly faster and further,opening up more opportunities for us to flylonger-haul flights across Canada. As newaircraft do not require the same dailymaintenance inspection time, they give us theopportunity for greater utilization duringeach day and therefore allow us to offer ‘red-eye’ flights, and even open opportunities forus to fly to sun destinations at off-peak times.

Throughout our history, we have operatedflights on a charter basis for many Canadiantour and vacation companies. These valuablecustomers bear all of the cost of distributionand pay us a fixed amount, in advance, forall of the seats on the aircraft. This improvesfleet utilization, which dilutes fixed costs,deploys assets and resources into serviceduring off-peak times, and improves marginsduring seasonally slower periods.

Our charter work was limited in our earlyyears because of the range capabilities of our737-200 aircraft and accounted on average for 2-2.5% of our total revenues. In this mostrecent quarter, however, our charter revenuesincreased to 3.4% of revenues. On a year-to-date basis, charter revenue was 4.3% of totalrevenue compared with 2.5% in the first ninemonths of 2002.

In August however, we announced asignificant enhancement to our charter businesswith the execution of a two-year agreement withTransat A.T. Incorporated. This agreementwill generate an estimated $29 million inrevenues to WestJet in its first winter seasonof flying to various sun destinations. As aconsequence, we estimate that our charterrevenues will comprise 6.3% of total revenuesover the next 12 months versus 4.3% for thenine months ended September 30, 2003.

PREPARATIONOur business plan is based on us being the

lowest-cost producer of airline seats in Canadaand being capitalized well enough to takeadvantage of the changing competitive

“…our charter revenuesincreased to 3.4% of

revenues.”

Enjoying time with WestJet’s guests comes naturally to people like Winnipeg Customer Service Agent Sherry Hicks.

Dollars & Sense


landscape. WestJet’s net earnings for thethird quarter of 2003 were $32.3 million, up39.8% from the $23.1 million earned in thethird quarter of 2002. For the nine monthsended September 30, 2003, our net earningsgrew at a slower rate of 12.5% due to ourlaunching into new markets during the weakerfirst half of the year. WestJet’s total retainedearnings are now $192.0 million and ourshare capital as at September 30, 2003 was$226.2 million. In anticipation of our planneddelivery of three more Next-Generationaircraft before the end of this fiscal year and11 new aircraft in 2004, we raised another$144 million in an equity financing in Octobersubsequent to this quarter end. This bringsour total shareholders’ equity to over $560 million, with access to another $100million through our equity line arrangementwith our largest shareholder, OntarioTeachers’ Pension Plan.

We continue to finance our Next-Generation aircraft purchases with

cost-effective, fixed-rate, twelve-year term,Canadian dollar debt which is supported bythe US Government’s Export Import Bankguarantee. This debt, which increased by$120.9 million during the quarter, accounts

for the vast majority of the $385.7 millionincrease in long-term debt year to date. Thisis the first year we have taken on this debtas all of our first 10 737-700 deliveries in2001 and 2002 were financed with fourteen-year operating leases, which are not reflectedon our balance sheet. Our total long-termdebt, including the $313.8 million of off-balance sheet leases, was $910.8 million or2.2 times shareholders’ equity at September30, 2003. This reflects a debt-to-equity ratioof approximately 1.6:1 with the Octobershare issue.

WestJet ended the third quarter with cashon hand of $145.9 million. We have generated$59.0 million in cash flow from operationsin the third quarter of 2003 and $175.3million during the nine-month period endedSeptember 30, 2003, with much of that cashbeing reinvested to fund our growth throughcapital assets and pre-delivery payments toBoeing. These deposits are paid accordingto a defined schedule and accumulate to 15%

of the total aircraftpurchase price one yearprior to delivery. Thesedeposits become the 15%equity in each aircraft,which together with theEx-Im Bank supporteddebt, fully funds each newaircraft purchase. As our737-700 aircraft areacquired in Americandollars, their actual priceto us fluctuates with the changing value of the Canadian dollar.However, once purchased,

our debt service cost remains fixed in Canadiandollars and our exposure to fluctuatingexchange rates decreases.

As at September 30, 2003, we had paidBoeing $118.9 million in deposits for aircraft

BeanLander Marguerite Sellick thrivesin WestJet’s challenging work environment.

Dollars & Sense


yet to be delivered in theremainder of 2003, 2004, 2005,and 2006. During the thirdquarter of 2003, we paid afurther $12.8 million to Boeingin pre-delivery payments, andwith our announcement inSeptember to acquire twoadditional 737-700s in June andAugust of 2004, we paidapproximately $14.0 millionmore in cash deposits. Assuminga US currency exchange rate of 1.40, WestJet’s current fleet growth commitments,including the seven additional Next-Generation Boeing 737 aircraft we intendto purchase in 2005 as announced onNovember 10, 2003, will necessitate furthercash deposits to be paid in the amounts of$36.9 million in the fourth quarter of 2003,$35.7 million in 2004, and $2.2 million in 2005.

For every aircraft we purchase, we mustalso invest in spare parts, hangars, trainingsimulators, ground service equipment,computer hardware, software, and all thefixed assets required to support our growingnumber of employees and our presence atmore airports. To support our fleet in the firstnine months of 2002, we incurred a costequivalent to 9% of the value of all aircraftadditions during this period. So far in 2003,our investments have amounted to $471.4million, of which $426.3 million was directlyattributable to aircraft acquisitions and thedeposits on future aircraft.

In the third quarter of 2003, we spent$15.9 million on sundry capital assets, of which$3.5 million was spent on our Hamilton hangar,$4.7 million on spare aircraft parts (rotables),$3.6 million on computers, and $3.9 millionon deposits for our LiveTV product. Thiscapital spending amounts to approximately

10% of our aircraft capital expenditures inthe quarter and is somewhat greater than theaverage that we would expect to outlay forsupporting assets in the future.

WestJet is now entering the seasonallyweakest part of the year with almost $300million in cash following the October equityissue, access to another $100 million withour equity line, and a strong balance sheetwith low-cost debt. We now have theyoungest fleet in Canada that is growing withthe addition of almost one new 737-700aircraft per month entering service. Like ourstellar customer service and on-time flightperformance, we stand in contrast to theother players in this evolving Canadianindustry.

“Like our stellar customerservice and on-time flightperformance, we stand in

contrast to the otherplayers in this…industry”

Tyra Skibington, Inflight Trainer, enjoys calling WestJet her home away from home.

Dollars & Sense

WestJet Airlines Ltd. Consolidated Balance Sheets

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September 30, 2003, December 31, 2002 and September 30, 2002 (Stated in Thousands of Dollars)

September 30 December 31 September 302003 2002 2002

(unaudited) (unaudited)AssetsCurrent assets:

Cash and cash equivalents $ 145,851 $ 100,410 $ 165,449Accounts receivable 7,123 20,532 10,059Prepaid expenses and deposits 10,563 19,759 10,120Inventory 3,516 2,314 2,555

167,053 143,015 188,183

Capital assets (note 1) 1,031,434 605,124 392,760

Other long-term assets 50,095 36,066 15,395

$ 1,248,582 $ 784,205 $ 596,338

Liabilities & Shareholders’ EquityCurrent liabilities:

Accounts payable and accrued liabilities $ 79,120 $ 67,008 $ 65,304Income taxes payable 8,216 7,982 6,964Advance ticket sales 72,655 44,195 59,345Non-refundable guest credits 18,917 15,915 13,510Current portion of long-term debt (note 2) 52,762 32,674 6,816 Current portion of obligations under capital lease (note 5) 6,536 7,290 7,176

238,206 175,064 159,115

Long-term debt (note 2) 528,734 198,996 36,554

Obligations under capital lease (note 5) 9,012 16,352 18,186

Future income tax 54,457 38,037 36,034830,409 428,449 249,889

Shareholders’ equityShare capital (note 4) 226,205 211,564 211,549Retained earnings 191,968 144,192 134,900

418,173 355,756 346,449

Subsequent events (note 7)$1,248,582 $ 784,205 $ 596,338

WestJet Airlines Ltd. Consolidated Statements of Earnings and Retained Earnings

Figures in Review


For the periods ended September 30, 2003 and 2002 (Unaudited)(Stated in Thousands of Dollars, Except Per Share Data)

Three Months Ended September 30 Nine Months Ended September 302003 2002 2003 2002

Revenues:Guest revenues $ 237,497 $ 192,351 $ 584,168 $ 477,495Charter and other 16,355 10,590 46,850 26,189

253,852 202,941 631,018 503,684

Expenses:Aircraft fuel 41,461 31,444 115,122 79,365Airport operations 29,827 22,797 82,954 63,789Flight operations and navigational charges 28,173 20,429 75,387 54,579Maintenance 19,053 19,148 57,779 61,443Amortization 17,357 14,114 46,415 39,613Aircraft leasing 10,745 9,790 33,830 23,975Sales and marketing 16,006 12,917 41,713 31,993General and administration 11,771 10,701 33,706 28,834Inflight 10,282 7,460 27,425 19,225Reservations 6,047 5,991 15,880 14,375Employee profit share (note 6) 9,888 10,258 13,136 15,221

200,610 165,049 543,347 432,412

Earnings from operations 53,242 37,892 87,671 71,272

Non-operating income (expense):Interest income 978 1,051 2,421 2,184Interest expense (7,036) (1,425) (16,611) (4,455)Gain (loss) on foreign exchange 2,001 (594) (47) 223Gain (loss) on disposal of capital assets 214 (22) 436 71

(3,843) (990) (13,801) (1,977)

Earnings before income taxes 49,399 36,902 73,870 69,295

Income tax expense (reduction):Current (1,692) 2,086 9,654 10,371Future 18,835 11,679 16,440 16,436

17,143 13,765 26,094 26,807

WestJet Airlines Ltd. Consolidated Statements of Earnings and Retained Earnings

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Net earnings 32,256 23,137 47,776 42,488

Retained earnings, beginning of period 159,712 111,763 144,192 92,412

Retained earnings, end of period $ 191,968 $ 134,900 $ 191,968 $ 134,900

Earnings per share (note 4(c)):Basic $ 0.43 $ 0.31 $ 0.63 $ 0.58Diluted $ 0.42 $ 0.30 $ 0.63 $ 0.57

Operating highlights:Available seat miles 1,900,486,662 1,305,629,722 4,981,041,679 3,315,372,381Revenue passenger miles 1,452,035,835 1,047,331,690 3,523,708,733 2,485,526,830Load factor 76.4% 80.2% 70.7% 75.0%Revenue per passenger mile (cents) 17.5 19.4 17.9 20.3Revenue per available seat mile (cents) 13.4 15.5 12.7 15.2Cost per passenger mile (cents) 13.8 15.8 15.4 17.4Cost per available seat mile (cents) 10.6 12.6 10.9 13.0Fuel consumption (litres) 109,673,410 84,630,649 288,244,265 222,446,823Fuel cost/litre (cents) 37.8 37.2 39.9 35.7Segment guests 1,991,486 1,666,037 5,122,749 4,337,245Average stage length 679.4 575.0 644.9 525.0Full-time-equivalent employees at quarter end 3,217 2,510 3,217 2,510Number of employees at quarter end 3,640 2,900 3,640 2,900Fleet size at quarter end 43 33 43 33


Figures in Review


WestJet Airlines Ltd. Consolidated Statements of Cash Flows



Cash flows from (used in):

Operations:Net earnings $ 32,256 $ 23,137 $ 47,776 $ 42,488Items not involving cash:

Amortization 17,357 14,114 46,415 39,613(Gain) loss on disposal of capital assets (214) 22 (436) (71)Issued from treasury stock — — 3,062 —Future income tax expense 18,835 11,679 16,440 16,436

68,234 48,952 113,257 98,466

(Increase) decrease in non-cash working capital (9,281) 4,395 62,056 64,648

58,953 53,347 175,313 163,114

Financing:Repayment of long-term debt (14,622) (2,173) (35,847) (6,405)Increase in long-term debt 120,862 — 385,673 —Decrease in obligations under capital lease (1,593) (1,711) (4,939) (4,346)Share issuance costs — 4 (55) (3,672)Increase in other long-term assets (5,117) (6,968) (14,955) (7,374)Issuance of common shares 7,405 — 11,614 84,619

106,935 (10,848) 341,491 62,822

Investing:Aircraft additions (156,353) (26,208) (446,048) (104,150)Other capital asset additions (11,889) (4,353) (26,801) (15,462)Other capital asset disposals 683 58 1,486 183

(167,559) (30,503) (471,363) (119,429)

Net change in cash (1,671) 11,996 45,441 106,507

Cash, beginning of period 147,522 153,453 100,410 58,942

Cash, end of period $ 145,851 $ 165,449 $ 145,851 $ 165,449

Cash interest and taxes paid during the nine months ended September 30, 2003 were$14,217,000 (2002 - $4,487,000) and $9,420,000 (2002 - $2,605,000) respectively.


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Notes to Consolidated Financial Statements

For the periods ended September 30, 2003 and 2002 (Unaudited)(Tabular Dollar Amounts are Stated in Thousands, Except Per Share Data)

The interim consolidated financial statements of WestJet Airlines Ltd. (“WestJet” or ”the Corporation“)have been prepared by management in accordance with accounting principles generally accepted in Canada.The interim consolidated financial statements have been prepared following the same accounting policiesand methods of computation as the consolidated financial statements for the fiscal year ended December31, 2002. The disclosures provided below are incremental to those included with the annual consolidatedfinancial statements. The interim consolidated financial statements should be read in conjunction withthe consolidated financial statements and the notes thereto in the Corporation’s annual report for theyear ended December 31, 2002.

The Corporation’s business is seasonal in nature, with the highest activity in the summer (third quarter)and the lowest activity in the winter (first quarter) due to the high number of leisure travellers and theirpreference to travel during the summer months.

1. Capital Assets:September 30, 2003 Accumulated Net book

Cost Depreciation valueAircraft - 700 series $ 648,626 $ 10,455 $ 638,171Aircraft - 200 series 168,588 72,538 96,050Aircraft under capital lease 31,093 15,424 15,669Spare engines and parts - 700 series 35,367 1,946 33,421Spare engines and parts - 200 series 26,925 10,871 16,054Ground property and equipment 87,744 19,861 67,883Buildings 39,772 1,603 38,169Leasehold improvements 4,901 2,105 2,796

1,043,016 134,803 908,213Deposits on aircraft 118,901 — 118,901Assets under construction 4,320 — 4,320

$ 1,166,237 $ 134,803 $ 1,031,434

December 31, 2002 Accumulated Net bookCost Depreciation value

Aircraft - 700 series $ 212,353 $ 786 $ 211,567Aircraft - 200 series 185,765 72,853 112,912Aircraft under capital lease 30,966 10,035 20,931Spare engines and parts - 700 series 19,593 1,071 18,522Spare engines and parts - 200 series 28,915 8,850 20,065Ground property and equipment 68,791 13,253 55,538Buildings 24,576 1,025 23,551Leasehold improvements 4,514 1,650 2,864

575,473 109,523 465,950Deposits on aircraft 131,464 — 131,464Assets under construction 7,710 — 7,710

$ 714,647 $ 109,523 $ 605,124


Figures in Review



1. Capital Assets (continued):September 30, 2002 Accumulated Net book

Cost Depreciation valueAircraft - 200 series $ 185,444 $ 66,261 $ 119,183Aircraft under capital lease 30,924 8,256 22,668Spare engines and parts - 700 series 19,100 843 18,257Spare engines and parts - 200 series 29,725 7,992 21,733Ground property and equipment 53,275 11,655 41,620Buildings 23,076 878 22,198Leasehold improvements 3,737 1,733 2,004

345,281 97,618 247,663Deposits on aircraft 142,830 — 142,830Assets under construction 2,267 — 2,267

$ 490,378 $ 97,618 $ 392,760

2. Long-term debt:September 30 December 31 September 30

2003 2002 2002$549,899,000 in 13 individual term loans, amortizedon a straight-line basis over a 12-year term, repayablein quarterly principal instalments ranging from $816,000to $955,000, including weighted average interest at5.54% guaranteed by the Ex-Im Bank and secured by13 aircraft

$16,000,000 term loan repayable in monthly instalmentsof $162,000 including interest at a floating rate at thebank’s prime plus 0.88% with an effective interest rateof 5.38%, maturing July 2013, secured by the firstNext-Generation flight simulator and cross-collateralizedby four aircraft and the second Next-Generation flightsimulator

$12,000,000 term loan repayable in monthly instalmentsof $108,000 including interest at 9.03%, maturing April2011, secured by the Calgary hangar facility

$28,573,000 in seven individual term loans, repayablein monthly instalments ranging from $25,000 to $133,000including weighted average interest at 8.42% withvarying maturities ranging between May 2004 throughOctober 2005, secured by five aircraft

$ 530,822 $ 178,777 $ —

14,443 15,058 15,221

11,425 11,620 11,679

10,586 14,626 16,470


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2. Long-term debt (continued):September 30 December 31 September 30

2003 2002 2002$10,000,000 term loan repayable in monthly instalmentsof $110,000 commencing July 2003, including floatinginterest at the bank’s prime plus 0.88% with an effectiveinterest rate of 5.38%, maturing April 2008, secured bythe second Next-Generation flight simulator and cross-collateralized by four aircraft and the first Next-Generationflight simulator

$4,550,000 term loan repayable in monthly instalmentsof $49,000 commencing May 2003,including floatinginterest at the bank’s prime plus 0.50%, with an effectiveinterest rate of 5.00%, maturing April 2013, securedby the Calgary hangar facility

$11,589,000 term loan repayable in monthly instalmentsof $1,311,000 including interest at 4.40% matured inSeptember 2003

581,496 231,670 43,370Less current portion 52,762 32,674 6,816

$ 528,734 $ 198,996 $ 36,554

Future scheduled repayments of long-term debt are as follows:2003 $ 13,2692004 52,4942005 53,8702006 48,7442007 48,9302008 and thereafter 364,189

$ 581,496

3. Financial instruments:(a) Foreign exchange risk management

At September 30, 2003, the Corporation had US dollar cash and cash equivalents totalling US$24,099,000.

At September 30, 2003, the Corporation had three outstanding foreign currency forward exchangecontracts that mitigated a portion of the exchange risk associated with US dollar denominatedexpenditures at various amounts and dates to November 2003. The total amount hedged is US $12million at a weighted average forward rate of $1.37 for the period August to November 2003. Thetotal estimated fair value of the forward contracts at September 30, 2003 is a loss of CDN $272,279.

9,815 — —

4,405 — —

— 11,589 —


Figures in Review



3. Financial instruments: (continued)(a) Foreign exchange risk management (continued):

The Corporation has entered into contracts to fix the exchange rates on the remaining future USdollar debt facilities for the purchase of its last two aircraft deliveries during the year. The totalamount of the debt facilities fixed is US $28 million per aircraft at a weighted average forwardrate of $1.38. The total estimated fair value of the contracts at September 30, 2003 is a loss ofCDN $1,660,000.

Gains and losses on contracts hedging anticipated foreign currency revenues and foreign currencycommitments are deferred until such revenues are recognized or such commitments are met, andoffset changes in the value of the foreign currency revenues and commitments.

(b) Ontario Teachers’ Financing Agreement

On June 26, 2003 WestJet entered into an agreement with Ontario Teachers’ Pension Plan Board(”Ontario Teachers”) for the right to require Ontario Teachers to purchase up to $100,000,000 ofcommon shares.

Formal documentation with Ontario Teachers (the ”Financing Agreement“) was executed effectiveAugust 29, 2003. The Financing Agreement is effective for a period of one year from August 29,2003 and gives WestJet the one-time right to require Ontario Teachers to purchase commonshares at 94% of the weighted average trading price for WestJet shares for the ten trading daysprior to WestJet’s notice of exercise to Ontario Teachers. The Financing Agreement is subject toseveral conditions, including that Ontario Teachers is not required to purchase common sharesunder the Financing Agreement which would cause their ownership to exceed 29.99% of the thenoutstanding common shares and a requirement that WestJet obtain all necessary regulatoryapprovals. WestJet will pay Ontario Teachers a standby fee of 1% per annum, payable quarterly,in advance, so long as WestJet has not exercised or cancelled its rights under the FinancingAgreement.

4. Share capital:

(a) Issued:

Three Months Ended Nine Months EndedSeptember 30, 2003 September 30, 2003

Number Amount Number Amount

Common shares:Balance, beginning of period 75,577,578 $ 218,800 74,899,609 $ 211,564Exercise of options 542,474 7,405 832,397 8,552Common shares issued from treasury — — 388,046 6,124Share issuance costs — (55)Tax benefit of issue costs — 20

Balance, end of period 76,120,052 $ 226,205 76,120,052 $ 226,205


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4. Share capital (continued):(a) Issued (continued):


Number Amount Number Amount

Common shares:Balance, beginning of period 74,893,984 $ 211,549 69,516,897 $ 129,268Exercise of options — — 873,394 2,119Common share issue — — 4,500,000 82,500Issued on rounding of stock split — — 3,693 —Share issuance costs — — (3,672)Tax benefit of issue costs — — 1,334

Balance, end of period 74,893,984 $ 211,549 74,893,984 $ 211,549

The Corporation has an Employee Share Purchase Plan (”ESPP”) whereby the Corporation matchesevery dollar contributed by each employee. Under the terms of the ESPP, the Corporation has theoption to acquire common shares on behalf of employees through open market purchases or fromtreasury at the current market price. For the period January to April 2003, shares under the ESPPwere issued from treasury at the current market price. Subsequent to this period, the Corporationelected to purchase these shares through the open market and will continue to review this optionin the future. Current market price is determined based on the weighted average trading price ofthe common shares on the Toronto Stock Exchange for the five trading days preceding the issuance.

(b) Stock option plan:Changes in the number of options, with their weighted average exercise prices, are summarized below:


Weighted WeightedNumber average Number average

of exercise of exerciseOptions price Options price

Stock options outstanding,beginning of period 7,365,466 $ 15.90 5,809,188 $ 14.99Issued 5,449 16.02 1,936,280 16.82Exercised (542,474) 13.65 (832,397) 10.27Cancelled (2,871) 19.79 (87,501) 15.82Stock options outstanding,end of period 6,825,570 $ 16.07 6,825,570 $ 16.07Exercisable, end of period 1,178,909 $ 13.65 1,178,909 $ 13.65


Figures in Review



4. Share capital (continued):(b) Stock option plan (continued):


Weighted WeightedNumber average Number average

of exercise of exerciseOptions price Options price

Stock options outstanding,beginning of period 5,796,152 $ 14.97 5,579,556 $ 11.85Issued 23,089 19.13 1,137,370 20.70Exercised — — (873,394) 2.42Cancelled — — (24,291) 14.16Stock options outstanding,end of period 5,819,241 $ 14.98 5,819,241 $ 14.98Exercisable, end of period 281,784 $ 3.46 281,784 $ 3.46

(c) Per share amounts:The following table summarizes the common shares used in calculating net earnings per common share:

Three Months Ended Nine Months EndedSeptember 30 September 30

2003 2002 2003 2002

Weighted average number of common shares outstanding - basic 75,807,525 74,893,984 75,444,675 73,620,810Effect of dilutive employee stock options 1,586,598 1,249,081 872,314 1,359,324Weighted average number of common shares outstanding - diluted 77,394,123 76,143,065 76,316,989 74,980,134

(d) Pro forma disclosure:The fair value of each option grant is estimated on the date of grant using the Black-Scholes optionpricing model. The weighted average fair market value of options granted during the period endedSeptember 30, 2003 and the assumptions used in their determination are as noted below:

2003Weighted average fair market value per option $ 5.69Average risk-free interest rate 3.9%Average volatility 40%Expected life Four years


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4. Share capital (continued):(d) Pro forma disclosure (continued):

Had compensation cost for the Corporation’s stock option plans been determined based on thefair value at the grant dates for options granted after January 1, 2002, consistent with the fairvalue based method of accounting for stock-based compensation, the Corporation’s netearnings and earnings per share (”EPS“) would have been reduced in the pro forma amountsindicated below. These pro forma earnings reflect compensation cost amortized over theoptions’ vesting period which varies from two to three years.

Three Months Ended Nine Months EndedSeptember 30 September 30

2003 2002 2003 2002

Net earnings As reported $ 32,256 $ 23,137 $ 47,776 $ 42,488Pro forma $ 29,906 $ 22,073 $ 42,466 $ 40,722

Basic EPS As reported $ 0.43 $ 0.31 $ 0.63 $ 0.58Pro forma $ 0.39 $ 0.29 $ 0.56 $ 0.55

Diluted EPS As reported $ 0.42 $ 0.30 $ 0.63 $ 0.57Pro forma $ 0.39 $ 0.29 $ 0.56 $ 0.54

5. Leasehold commitments:The Corporation has entered into capital leases relating to aircraft and operating leases for aircraft,buildings, computer hardware and software licenses. The obligations on a calendar-year basis are asfollows:

Capital OperatingLeases Leases

2003 $ 1,883 $ 19,1132004 7,473 66,7072005 5,341 54,3502006 2,486 49,4642007 — 48,8232008 and thereafter — 399,736Total lease payments 17,183 $ 638,193Less imputed interest at 7.84% (1,635)Net minimum lease payments 15,548Less current portion of obligations under capital lease (6,536)Obligations under capital lease $ 9,012

6. Employee profit share provision:The provision for employee profit share is estimated based on actual year-to-date earnings results.The actual employee profit share amount is to be determined by the Board of Directors based on auditedfinancial results at the completion of the financial year.

7. Subsequent events:Subsequent to quarter-end, the Corporation completed a public offering of 6,186,000 common sharesof the Corporation for net proceeds of approximately $144 million.


Who’s W

hoWESTJET EXECUTIVE TEAMClive J. BeddoeExecutive Chairman, President and Chief Executive Officer

Sandy CampbellSenior Vice President, Finance and Chief Financial Officer

Mark HillVice President, Strategic Planning

William (Bill) LambertonVice President, Marketing and Sales

Tim MorganSenior Vice President, Operations and Co-Chief Operating Officer

Donald BellSenior Vice President, Customer Service and Co-Chief Operating Officer

Fred RingVice President, People

BOARD OF DIRECTORSClive J. BeddoeExecutive Chairman, President and CEO, WestJet Airlines Ltd.

Thomas (Tim) MorganSenior Vice President, OperationsCo-Chief Operating OfficerWestJet Airlines Ltd.

James HomeniukAircraft Maintenance Engineer and P.A.C.T. Representative, WestJet

Ron Greene President, Tortuga Investment Corp.

Wilmot MatthewsPresident, Marjad Inc.

Murph N. HannonPresident, Murcon Development Ltd.

Allan JacksonPresident and CEO, Arci Ltd. President and CEO, Jackson Enterprises Inc.

Donald A. MacDonaldPresident, Sanjel Corporation

Larry PollockPresident and Chief Executive Officer, Canadian Western Bank and Canadian Western Trust

CORPORATE OFFICERSClive J. BeddoeExecutive ChairmanPresident and Chief Executive Officer

Alexander (Sandy) CampbellSenior Vice President, FinanceChief Financial Officer

Tim MorganSenior Vice President, OperationsCo-Chief Operating Officer

Donald BellSenior Vice President, Customer Service, Co-Chief Operating Officer

Transfer Agent and Registrar: CIBC Mellon Trust CompanyToll Free Phone Number in North America: 1-800-387-0825 Outside North America: 416-643-5500Email: [email protected] Web site: www.cibcmellon.com

Auditors: KPMG LLP, Calgary, AB

Legal Counsel: Burnet, Duckworth and Palmer LLP, Calgary, AB

Stock Exchange Listing: WestJet is publicly traded on the Toronto StockExchange under the symbol WJA.

Investor Relations Contact Information: Telephone: 1-877-493-7853 or 444-2252 in CalgaryEmail: [email protected]

WestJet Head Office: 5055 11 St. NE, Calgary, Alberta, T2E 8N4 Phone: (403) 444-2600 Fax: (403) 444-2301

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