Equity Valuation Report of WesJet Airlines Limited

Prepared for:

Farzana Lalarukh
Associate Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Prepared by:

Group No: 08
Department of Finance
University of Dhaka

October 16, 2020

 Group Profile
A cohesive effort of

SL No Name ID No Remarks

01 Sayed Muntasir 23-029

02 Tamanna Akter 23-021

03 Shuvo Roy 23-036

04 Nusrat Jahan 23-117

05 Shaikh Saifullah Khalid 23-160

 Letter of Transmittal

October 16, 2020

Ms. Farzana Lalarukh

Associate Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Subject: Submission of report

Dear Madam,

We consider ourselves very fortunate to prepare this report under your valuable guidance.
Working for this report was both a challenge and pleasure to us. We are indebted to you.
Your suggestion of the topic of our report “Equity Valuation of WestJet Airlines Limited” was
very appropriate. Your constant guidance helped us to apply our theoretical acquired in the
classroom to the practical world.
Thank you for giving this kind of challenging task.

Sincerely yours,

Shaikh Saifullah Khalid

Id No: 23-160
On behalf of Group 08
Table of Contents

Executive Summary ........................................................................................................ 1

Chapter 1: Case Epitome ................................................................................................ 2
Chapter 2: Investment Thesis ......................................................................................... 3
Valuation...................................................................................................................... 3
Asset Valuation ........................................................................................................ 3
Dividend Discount Model ......................................................................................... 4
Price/Earnings Method Valuation ............................................................................. 5
Earnings Yield Valuation .......................................................................................... 5
Discounted Cash Flow Valuation ............................................................................. 5
Major Events Before and After the Privatization .......................................................... 9
Why WestJet Decided to Become Private? .............................................................. 9
Benefits from Privatization ....................................................................................... 9
Reasons for Air Canada’s Opposition .................................................................... 10
Is WestJet Undervalued or Overvalued? ................................................................... 10
Chapter 3: WestJet’s Fundamental Analysis and Performance Review ........................ 11
Key Products Offering................................................................................................ 11
Key Financial Highlights ............................................................................................ 11
Shareholding Structure .............................................................................................. 12
Chapter 4: Canadian Aircraft Industry Review .............................................................. 13
Overview .................................................................................................................... 13
Major Competitors ..................................................................................................... 14
Chapter 5: Conclusion ................................................................................................... 15
Works Cited................................................................................................................... 15
Appendix A: WestJet’s Market Return, Premium and Beta Calculation......................... 16
Appendix B: Forecasted Financial Statements of 5 Years ............................................ 18
Forecasted Income Statement from 2019 to 2023 ..................................................... 18
Executive Summary

WestJet Airline Ltd (WestJet) is a Canadian low-cost carrier that provides scheduled
and chartered air service to destinations in Canada, the United States and Mexico.
Founded in 1996, it is publically traded on the Toronto Stock Exchange under symbol
“WJA”. WestJet continues to grow at a rapid pace, becoming a key player in the
Canadian and North American air service industry by building on its low-cost service
with a business model that focuses on efficiency. In its 17 year of operation, WestJet
has grown organically in the shadow of dominant industry mainstay, Air Canada.
WestJet currently operates in two models namely – WestJet and Encore. WestJet has
traditionally focused as a low cost carrier, over the years successfully improving
customer service as reflected in its increasing load factor. WestJet is placing greater
emphasis on business and frequent travelers, attracting them with its reputed customer
service and the recently implemented WestJet Dollars frequent flyer program. Encore
focused on offering value based service to rural locations that are currently serviced by
local charter airlines. One of the key motivators for expanded coverage and increased
capacity is to provide end-to-end flight connectivity to onboard passengers. This
improves customer retention and revenue.
However, there is an opposite side of the story, in 2 nd quarter of 2018 WestJet incurred
a tremendous loss which followed them over the next quarters. Their net earnings
dropped by a significant amount. Now, Onex Corp comes to the picture. Onex is
planning to buy WestJet and make it private. We will analyze the details of this deal to
find out whether it should be a win-win deal for both parties.

1
Chapter 1: Case Epitome

In 2019, WestJet Airways which was one largest airways company’s of Canada decided
to go private. They decided to act as a private firm under Onex Corp. The total deal was
valued at $% billion including debt. Why WestJet decided to be a private company?
Was it a win-win deal for both Onex Corp. and WesJjet? The WestJet Group of
Companies including regional airlines, WestJet Encore and WestJet Link and ultra-low-
cost carrier Swoop, offers scheduled service to more than 100 destinations in North
America. WestJet won the Best Airline in Canada Award in the last 3 years (2017-19).
However, in Q2 of 2018, WestJet faced their first loss in 13 years. The main reasons of
the loss are rising jet fuel costs, labor turmoil and growing competition in local market.
They failed to recover the pace of their revenue after the loss of Q2, 2018.
After the news of becoming private, WestJet’s stock price shots up to $30.03 from
$18.52. For Onex Corp, it was the first time they successfully managed to purchase a
airline company. More than 20 years ago, Onex made an attempt to take over AMR
Corp on $1.8 billion bid. Due to court restriction, the deal was revoked. Onex also failed
to be a part of the consortium of Australia’s Qantas Airways Ltd.
In this analytical report we will focus on these things:
 Finding the intrinsic value of WestJet
 Finding the value of this business, based on asset valuation, earnings valuation
and cash flow valuation
 Canadian airline industry valuation
 Finding out the impediments faced by Onex Corp. to acquire WestJet
 Financial performance of Onex in Q1, 2018 to Q3, 2018 and Q1 2019
 Forecasting the five years cash flows of WestJet

2
Chapter 2: Investment Thesis

Valuation
We tried to find the intrinsic value of WestJet based on various valuation models. Firstly,
we start from very basic valuation method.

Asset Valuation
We try to find the value of WestJet based on their statements of 2019, Q1. In most of
the cases, we try to use the fair value. In addition to that, we made some assumptions
to predict the fair values of WestJet assets. We will perform the asset valuation based
on book value and market or fair value.
i) Book Value basis: We took the book value of WestJet’s assets and
liabilities.
2019
Q1
Items Amount (in thousands)
Total assets 7,802,367
Less: Intangible assets 51,884
Total assets less intangible assets 7,750,483
Less: Current liabilities 2,774,167
Less: Non-current liabilities 2,754,957

Net asset value of equity 2,221,359

Table 1: WestJet’s value based on book value

ii) Fair value basis: We assume the market values of WestJet’s assets on the
basis of some factors. Here are the assumptions and factors:
 PPE market value will be 5%-6%1 less from current book value
 Fair market values of current assets such as cash and marketable
securities and current liabilities such as accounts payables are given in
the financial statement of last quarter
 Other current liabilities amount will be remained same
 Inventory and prepaid expenses will be 5% less from the book value
 Long term debt will be paid off fully

1
Guidelines for Determining Market Value & Market Rent of Airport Property, University of South Florida

3
 2019
Q1
Amount (in
Items thousands)
Assets
Current assets:
Cash and marketable securities 1,718,201
Restricted cash 103,411
Accounts receivable 126,467
Prepaid expenses, deposits and other 157,339
Inventory 44,615
2,150,033
Non-current assets:
Property and equipment 5,037,586
Intangible assets 51,884
Other assets 90,573
Total assets 7,330,075
Less: Intangible assets -51,884
Total assets less intangible assets 7,278,191
Less: Non-current liabilities 2,754,957
Less: Current liabilities
Accounts payable and accrued liabilities 719,981
Advance ticket sales 775,939
Deferred rewards program 227,803
Non-refundable guest credits 64,066
Current portion of maintenance provisions 35,860
Current portion of long-term debt 949,266
Total 2,772,915

Net asset value of equity 1,750,319

Table 2: WestJet’s value on the fair value of their asset

Dividend Discount Model

We try to find the based on dividend discount model. Here are the details
Given,
Last dividend declared in 2018, D0= $0.56
Number of share outstanding in 2018 = 114,052,889

4
Cost of equity, Ke= 8.01%2
Dividend growth rate, g= 0.5%3
Price per share, P0= D1/ (ke-g) = $0.56*1.005/ (0.0801-0.005) = $ 7.49
Total value, V0= Share price*Number of share = $ 7.49 * 114,052,889= $853,256,139
Price/Earnings Method Valuation

Price per share, P= $ 7.49 (Using the same price per share derived from DDM)
Earnings per share, EPS= $ 0.8
P/E ratio= $ 7.49/$ 0.8 = 9.36
Total value, V0= Total earnings*P/E ratio =$91,465,000* 9.36= $ 856,112,400
Earnings Yield Valuation

Earnings per share, EPS= $ 0.8

Price per share, P = $ 7.49
Dividend, D0= $0.56
Dividend yield= Dividend/price = $0.56/$ 7.49= 0.0748= 7.48%
Total value, V0= Total earnings*(1/dividend yield) =$91,465,000*(1/0.0748)=
$1,222,794,118
Value per share, P= EPS* (1/dividend yield) = $ 0.8*(1/0.0748)= $ 10.70
Discounted Cash Flow Valuation

Here is our most sophisticated valuation model. We try to project the cash flow of
upcoming 5 years. This approach is appropriate for WestJet Airlines Ltd. as the free
cash flow of this company has tended to grow at a constant rate and the historical
relationships between free cash flow and fundamental factors are expected to continue.

If depreciation reflects the annual cost for maintaining the existing capital stock, the
difference between fixed capital investment and depreciation- incremental FC-Inv-
should be related to the capital expenditures required for growth. In this case, the
following inputs are needed:

 Forecasts of dales growth rates;

 Forecasts of the after-tax operating margin (for FCFE forecasting);
 An estimate of the relationship of incremental FC-Inv to sales increases;

2
Appendix 1
3
WestJet paid similar cash dividends from 2014 to 2018. For DDM model, we are assuming a slight
growth rate of 0.5%

5
  An estimate of the relationship of W9CInv to sales increases;
 An estimate of DR.
We also prepared the forecasted income statement and balance sheet of WestJet.

Input
Target Capital Structure
Debt to Capital 39%
Equity to Capital 61%
Debt to Equity 63%

Risk Free Rate 1.52%

Market Risk Premium 8.378%
Levered Beta 0.774
Cost of Equity 8.01%

Cost of Debt 2.25%

Tax 28%
After Tax Cost of Debt 1.62%

WACC 5.55%
Table 3: WACC calculation (Appendix B)

Output
Enterprise Value
Present Value of Free
Cash Flow 5,005,455
Terminal Value $1,086,209.06
Discount Factor 35.00%
Preset Value of Terminal
Value $719,593
Enterprise Value $5,725,048
Less: Debt $1,442,913
Plus: Cash and Cash
Equivalents $1,185,806
Net Debt ($257,107)
Implied Equity Value $5,467,941
Outstanding Shares $79,124
Implied Share Price $69

Equity Value $5,467,940,742

In Billions Term $5.47
Table 4: Equity value calculation

6
 Actual CAGR
(14-
2014 2015 2016 2017 2018 18)
EBIT 390,307 520,258 416,233 404,135 135,882
Taxes 106,350 152,728 120,775 120,557 44,417
Depreciation 226,740 264,921 350,484 384,452 429,906
Capex 944,989 914,102 915,076 676,602
Increase/Decrease in NWC -1,288,516 -1,339,099 -1,180,307 -1,261,783
Unlevered Free Cash Flow 975,978 1,070,939 933,261 1,106,552

Forecast Period
2019 2020 2021 2022 2023
EBIT 142,858 150,192 157,903 166,009 170,989
Taxes 40,000 42,054 44,213 46,483 47,877
Depreciation 451,977 475,180 499,575 525,223 540,980
Capex 1,024,785 1,077,395 1,132,707 1,190,859 1,226,584

Increase/Decrease in NWC (1,427,367) (1,500,646) (1,577,686) (1,658,682) (1,708,443)

Unlevered Free Cash Flow 957,417 1,006,569 1,058,245 1,112,573 1,145,951

WACC
Discount Period 1 2 3 4 5
Discount Factor 0.055 0.055 0.055 0.055 0.055
Present Value of Free Cash
flow 907504.088 954093.915 1003075.59 1054571.907 1086209.06
Table 5: Free cash flow valuation

7
 Actual CAGR
2014 2015 2016 2017 2018 (14-18)

Δ Net Working Capital -1063494 -1288516 -1339099 -1180307 -1261783

% sales 0.26744124 0.319789341 0.32479864 0.262155289 0.26656663 28.68%

CAPEX Schedule
Net Increase in PPE 680068 563618 530624 246696
Depreciation 264921 350484 384452 429906
944989 914102 915076 676602
% sales 23.76% 22.69% 22.20% 15.03% 20.59%

Forecast Period
2019 2020 2021 2022 2023

Δ Net Working Capital -1427366.9 -1500645.673 -1577686.5 -1658682.38 -1708442.9

% sales

Total 1024784.53 1077395.348 1132707.12 1190858.519 1226584.27

Table 6: Capital expenditures and net working capital schedule

8
Major Events Before and After the Privatization
Some major incidents happened after Onex’s proposal to buy WestJet and make it
private. WestJet’s major competitor Air Canada heavily opposed the deal of Onex Corp.
In this we will discuss why WestJet decided to go private, what are the benefits of this
privatization and why Air Canada opposed the contract.

Why WestJet Decided to Become Private?

 WestJet incurred rare quarterly loss during the April to June period due to multi
pronged expansions that has caused some turbulence in the past 2 years and
comes as several employee groups have unionized.
 Over the last two years, industry analysts have criticized WestJet for having too
much on the go, adding capacity as its costs have climbed.
 Onex has deep pockets, meaning (WestJet) would have access to cash to do
some things that might have been harder to do before.
Benefits from Privatization

 They want to internationally and grow into an even larger competitor to the other
incumbent in Canada and they perceived it as a good thing.
 The bid, backed by WestJet’s board, would give investors a hefty 67% premium
to the company’s closing share price on Friday.
 They have an ambition to grow and they expect that noting thecompany will
remain based in Calgary.
 The airline is also extending its international reach, starting new non-stop service
this
 WestJet will be adding seven more of these wide-body planes in the next two
years as it looks to attract more premium and international travelers, expanding
into a market which has typically been Air Canada’s turf.
 They believe the deal will act as a catalyst for future growth.
 Onex see the opportunity for WestJet’s long-term strategic plan that we don’t
always get reflected in the relative short-termism of quarterly reporting.
 They are totally committed to the plan that management and they believe that
their price ascribes value to that plan.
 They expect that some of the near-term corporate initiatives will likely limit
WestJet’s financial performance for the next couple of years, but in longer term, it
will be a healthy company.
 They concern about how they can maximize their own value.
 For WestJet, a shift to become a private enterprise would come with some
advantages, letting it sets a long-term expansion course without having to worry
about the short-term impact on its share price.

9
Reasons for Air Canada’s Opposition

 Air Canada said in a letter to the Canadian Transportation Agency (CTA) that co-
investors in Kestrel Bidco Inc. the Onex subsidiary that is buying WestJet may
come from outside the country, amounting to a serious risk though some experts
view the filing as a delay tactic as the country’s biggest airline grapples with its
own regulatory gauntlet in a deal to acquire travel company Transat A.T. Inc.
 Federal legislation limits foreign ownership of a Canadian airline to 49 per cent,
with a maximum of 25 per cent for any one foreign investor. Onex, which
managed $23.2 billion of invested capital as of Dec. 31, is a private equity firm
whose funds include cash from foreign investors.
 The opaque nature and flexibility of the takeover’s private equity structure
introduces a significant risk that non-Canadian co-investors could have de facto
control of WestJet, Air Canada lawyer David Perez said in the Aug. 15 filing,
obtained by The Canadian Press.
 Though co-investors can hold only a minority stake, Onex lacks necessary
internal controls to ensure that WestJet remains Canadian, the letter states,
citing the possibility of shareholder veto rights, unanimous consent requirements
and corporate dependence on foreign financing — all of which can skew control.

Is WestJet Undervalued or Overvalued?

In Canadian airlines industry, the p/e ratio is -3.9 that is much lower than the p/e ratio of
WestJet 9.36, which we have calculated. We have evaluated the value of WestJet with
the help of a number of methods. Those methods are providing different results. We are
giving more importance on the value of $ 2.22 billion, calculated from book value asset
valuation model.

Onex Corp. made a deal of $5 billion ($1.5 billion of which is debt) that is pretty high
than the calculated $2.22 billion value. Onex paid $31 dollar per share, which is higher
than the intrinsic value $7.49 per share of WestJet. Onex made an over evaluation of
the net asset value of equity. WestJet is overvalued.

10
Chapter 3: WestJet’s Fundamental Analysis and Performance Review

WestJet is a Canadian airline, based in Calgary, Alberta. Through scheduled flights

across a growing network, WestJet also operates WestJet Vacations, which provides
air, hotel, car and excursion packages, WestJet Encore, a regional airline which
operates a fleet of turboprop aircraft in a network of destinations in Canada and the
United States, and Swoop, an ultra-low-cost carrier (ULCC), which was launched in
June 2018 to provide affordable air transportation to the most price-sensitive travellers.

Key Products Offering

WestJet’s mainly revenue sources are domestic and international flights provided to
individual and business consumers. In Q1 of 2019, WestJet’s 38.5% revenue comes
from domestic flights and rest 61.5% revenue comes from trans-border and international
flights.

Key Financial Highlights

We try to present a snapshot of the profitability and liquidity indicators of WestJet. The
YoY revenue growth from 2017 to 2018 was 5.13%. Their historical CAGR in the last 5
years was 5.27%.

Revenue Growth
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2014 2015 2016 2017 2018
Revenue Growth 8.58% 1.33% 2.32% 9.20% 5.13%

Table 7: Revenue growth of last 5 years

Profitability: Last 5 years CAGR in net profit is 6.30%. Their operating profit margin in
2018 is 3.28%. We found a decreasing rate in both of their profitability margin. Their
profit margin is decreasing over the last 4 years. Their net profit margin was lowest
among the last 5 years. In Q2 of 2018, WestJet faced a huge loss due to rising air fuel
price and labor turmoil. Their ROE and ROA both are decreasing in the last 5 years
which shows that their profitability in response to their operating assets and equity are
not satisfactory (Table 9).

11
 OPM and NPM Margin
Operating profit margin Net profit margin

14.14%
11.96%
10.67% 9.75%
9.12%
7.14% 7.17% 6.30%
3.28%
1.93%

2014 2015 2016 2017 2018

Table 8: Operating and Net Profit Margin

Liquidity and Solvency: WestJet failed to maintain optimum cash balance in 2018.
Moreover, their current and quick ratios are decreasing over the last 5 years. They
maintained stable debt to equity ratio over the 5 years.
Year 2014 2015 2016 2017 2018
Current ratio 1.29 0.97 1.21 1.04 0.78
Quick ratio 0.07 0.08 0.10 0.87 0.63
D/E ratio 1.61 1.62 1.99 1.94 1.94
Debt to capital ratio 0.62 0.62 0.67 0.66 0.66
Financial leverage 2.61 2.62 2.99 2.94 2.94
Return on assets 0.06 0.07 0.05 0.04 0.01
Return on equity 0.16 0.19 0.14 0.13 0.04
Table 9: Overall ratio analysis

Shareholding Structure
Onex paid $31 per share or $3.5 billion to buy WestJet. We are showing shareholder
numbers of WestJet of their first quarter of 2019.

Table 10: Total share outstanding of WestJet

12
Chapter 4: Canadian Aircraft Industry Review

Overview

We try to analyze the potentiality of Canadian aviation industry based on Porters five
forces model. Michael Porter’s five forces model is one of the most popular tools of
industry analysis. In the following, we will determine the competitive position of WestJet
airlines in Canadian airlines industry.
Threat of new entrants: For the high amount of investment in airlines industry, threat
of new entrants is not so high. The investments include leasing of the airfield, cost of
airport, high cost of raw materials and skilled labor, fuels and maintenance, insurance
etc. Other factors are government policy and access to distribution channels. The
industry is highly regulated by several organizations resulting in longer processing time
for new entrants to obtain carrier licenses while new entrants may struggle to convince
local partner to sell their tickets. Economies of scale are also high since the industry is
concentrated with few players, existing airline companies can temporarily reduce their
price to drive off new entrants.
Threat of substitutes: Threat of substitute increases when the price of substitutes is
cheaper, the switching cost for buyers is lower and quality and performance of
substitute are superior to existing products. Examples of substitute are other
transportations such as boat, ferry, train and car, etc. However, the threat of substitute
is considered moderate since the price of other transportations are not necessarily
cheaper than travelling by airplane. Switching cost depends on the context of buyers.
Most of buyers consider their time more valuable and thus prefer airplane for travelling.
Finally, airplane is more efficient way to travel than other transportations.
Bargaining power of suppliers: When suppliers have strong bargaining power, they
can increase their prices overtime. Thus, it costs more for the company to product
goods or services, increase competition and lower the profit. In the aviation industry,
bargaining power of suppliers is strong. Airplane manufacture is dominated by two
global corporations which are Boeing and Airbus. Companies in aviation industry rely
heavily on the two airplane manufacturer for supply and maintenance. Moreover, they
would incur enormous cost if they decide to switch since they have to train their
employees to be compatible with new operation system of other airplane supplier.
Bargaining power of customers: Customers can use other transportation methods
when traveling short distances, for example, buses, ferries, etc. Moreover, when
traveling, longer the distances, the option of using other methods not available or more
expensive than flying. Fixed cost of flight must be covered so there is not much room for
price change. Hence, bargaining power of customers can be considered medium.

13
Competition among existing firms: There are lot of global competition, as there are
hundreds international airlines and WestJet has limited international flights. There is
limited competition domestically – Air Canada for longer trips, and smaller companies
like Helijet for shorter trips. Also, the new airline NewLeaf, offers an ultra-low-cost travel
choice to select locations in Canada. Therefore, the competition among the existing
firms is medium.
Major Competitors

WestJet is the second largest Canadian airlines company. The largest Canadian air
carrier is Air Canada. There are a number of other air carriers in this industry. They are
in following.

1. Air Canada
2. Helijet
3. NewLeaf
4. Canadian North
5. Sunwing Airlines
6. Swoop
7. Air North
8. Pacific Coastal Airlines
9. Northwestern Air
10. Air Inuit
11. Central Mountain Air
12. Flair Airlines
13. Harbour Air Seaplanes

14
Chapter 5: Conclusion

When a company takes decision to go private or a company decides to buy another firm
and make it public, need to evaluate the company worth based on valuation methods.
We try to analyze the value of WestJet based on different valuation methods. From
cash flow analysis, we found that the value of WestJet is $5.47 billion. We found
different values in different methods.

Works Cited

ACCA Global. (2017, March 12). ACCA Global : Business Valuation Methods. Retrieved
October 14, 2020, from ACCA Global: https://www.accaglobal.com/ca/en/student/exam-
support-resources/fundamentals-exams-study-resources/f9/technical-articles/business-
valuations.html

Kaplan Financial. (2013, January 23). Kaplan Financial Knowledge Bank. Retrieved
October 13, 2020, from https://kfknowledgebank.kaplan.co.uk/financial-
management/mergers-and-acquisitions/business-valuations

15
Appendix A: WestJet’s Market Return, Premium and Beta Calculation

S&P/TSX Index (Market Index)

Date Price Open High Low Vol. Change %
19-Mar 16,102.09 16,086.29 16,275.31 15,891.94 5.68B 0.64%
19-Feb 15,999.01 15,562.27 16,115.83 15,483.40 4.75B 2.95%
19-Jan 15,540.60 14,163.92 15,564.61 14,112.84 5.22B 8.50%
18-Dec 14,322.86 15,358.94 15,378.90 13,776.88 5.58B -5.76%
18-Nov 15,197.82 15,032.79 15,393.05 14,810.56 5.58B 1.13%
18-Oct 15,027.28 16,152.28 16,193.06 14,639.70 6.14B -6.51%
18-Sep 16,073.14 16,276.26 16,300.67 15,975.75 4.80B -1.17%
18-Aug 16,262.88 16,383.82 16,494.09 16,075.34 4.37B -1.04%
18-Jul 16,434.01 16,332.35 16,586.46 16,227.25 3.51B 0.96%
18-Jun 16,277.73 16,075.78 16,489.46 16,037.97 4.44B 1.35%
18-May 16,061.50 15,592.52 16,238.81 15,548.70 4.53B 2.91%
18-Apr 15,607.88 15,351.18 15,702.59 14,991.21 4.12B 1.57%
18-Mar 15,367.29 15,452.72 15,791.15 15,150.54 4.56B -0.49%
18-Feb 15,442.68 15,920.00 15,922.59 14,785.78 4.45B -3.19%
18-Jan 15,951.67 16,213.37 16,421.42 15,898.74 4.64B -1.59%
. . . . . .
. . . . . .
. . . . . .
. . . . . .
14-Mar 14,335.31 14,209.67 14,406.86 14,139.29 3.66B 0.88%
14-Feb 14,209.59 13,694.94 14,280.85 13,450.31 3.65B 3.76%
14-Jan 13,694.94 13,621.40 14,002.39 13,473.23 3.96B 0.54%
13-Dec 13,621.55 13,395.40 13,644.28 13,059.74 3.05B 1.69%

Westjet (Share Price) return calculation

Date Price Open High Low Vol. Change %
19-Mar 19.43 20.89 21.2 18.55 9.87M -6.86%
19-Feb 20.86 19.99 21.85 19.99 7.79M 3.78%
19-Jan 20.1 17.89 20.26 17.48 6.98M 11.67%
18-Dec 18 20.43 20.87 16.71 9.13M -12.66%
18-Nov 20.61 19.25 20.68 17.7 10.62M 7.46%
18-Oct 19.18 20.43 20.96 17.03 10.29M -6.48%
18-Sep 20.51 18.82 20.86 18.59 7.76M 7.10%
18-Aug 19.15 18.41 19.8 17.12 10.40M 4.53%
18-Jul 18.32 17.94 20.33 17.5 9.14M 1.05%
18-Jun 18.13 20.01 20.29 16.82 8.67M -9.40%
18-May 20.01 22.74 22.95 19.18 10.27M -12.43%
18-Apr 22.85 23.57 23.99 22.15 8.35M -3.59%

16
 18-Mar 23.7 25.73 26.23 22.76 9.16M -8.32%
18-Feb 25.85 24.81 26.72 22.32 6.36M 5.04%
18-Jan 24.61 26.22 26.49 23.85 8.67M -6.64%
. . . . . .
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. . . . . .
. . . . . .
14-Mar 24.65 25.28 25.98 22.95 10.06M -3.48%
14-Feb 25.54 25.1 26.78 24.8 10.51M 1.55%
14-Jan 25.15 27.74 28 23.81 9.26M -9.69%
13-Dec 27.85 27.5 28.99 27.36 4.99M 0.91%

Beta Covariance Variance TSX Beta Calculated

0.774438247 0.000519703 0.000671071 0.774438247

Risk Free Rate (Prime Rate) CAPM Expected

5 years (61month) TSX Return 5yr Market Premium Retun
9.898% 1.52% 8.3778492165163900% 8.01%

Term Series Rate

3 month V39065 1.67
6 month V39066 1.66
1 year V39067 1.68
2 year V39051 1.55
3 year V39052 1.54
5 year V39053 1.52
7 year V39054 1.55
10 year V39055 1.62
Long Term (30 year) V39056 1.9
Table: Historical average risk free return calculation

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 Appendix B: Forecasted Financial Statements of 5 Years

Forecasted Income Statement from 2019 to 2023

Forecasted Income Statement

in thousands 2019(E) 2020(E) 2021(E) 2022(E) 2023(E)
Items
Revenue:
Guest
Other
Total Revenue 497,6470 5231,955 5500555 5782945 5,956,433
Operating expenses:
Aircraft fuel 1,294,862 1361.338 1.431.227 1.504.704 1,549,845
Salaries and benefits 1,050,688 1.104.628 1.161.338 1.220.959 1,257,588
Rates and fees 726,783 764.095 803.322 844.563 869,900
Sales and marketing 462,896 486.660 511.645 537.912 554,049
Depreciation and amortization 451,977 475.180 499.575 525.223 540,980
Maintenance 243,966 256.491 269.659 283.503 292,008
Aircraft leasing 146,875 154.415 162.343 170.677 175,798
Other 418,473 439.956 462.543 486.289 500,878
Employee profit share 16,755 17.615 18.520 19.470 20,055
Total 4,813,274 5.060.380 5.320.172 5.593.301 5,761,100
Earnings from operations 163,196 171.574 180.383 189.643 195,333
Non-operating income (expense):
Finance income 30,931 32.519 34.189 35.944 37,022
Finance cost -59,955 -63.033 -66.269 -69.671 -71,761
Gain/Loss on foreign exchange 3,118 3.278 3.447 3.624 3,732
Gain on disposal of property and
equipment 4,257 4.475 4.705 4.947 5,095
Gain (loss) on derivatives 1,310 1.377 1.448 1.522 1,568
-20,338 -21.382 -22.480 -23.634 -24.343
Earnings before income tax(EBIT) 142,858 150.192 157.903 166.009 170.989
Income tax expense:
Current 15,572 16.372 17.212 18.096 18.639
Deferred 31,125 32.723 34.403 36.169 37.254
Total 46,697 49.095 51.615 54.265 55.893
Net earnings 96,161 101.097 106.288 111.744 115.097

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