Westjet 2011 Annual Report Download - page 45

Management’s Discussion and Analysis of Financial Results 2011
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Loss of contracts, changes to our pricing agreements or access to travel suppliers’ products and services could
have an adverse impact on WestJet Vacations.
We depend on third parties to supply us with certain components of the travel packages sold through WestJet Vacations. We
are dependent, for example, on a large number of hotels in our sun destinations in the United States, Mexico and the
Caribbean. In general, these suppliers can terminate or modify existing agreements with us on relatively short notice. The
potential inability to replace these agreements, to find similar suppliers or to renegotiate agreements at competitive rates
could have an adverse effect on the results of WestJet Vacations. Furthermore, any decline in the quality of products or
services provided by these suppliers, or any perception by travelers of such a decline, could adversely affect our reputation or
the demand for the products and services of WestJet Vacations.
As the airline industry is labour intensive, significant increases in labour costs could have an adverse impact on
WestJet.
The airline business is labour intensive. Salaries and benefits represented approximately 17 per cent of WestJet's operating
expenses for the year ended December 31, 2011. Employment-related issues that may impact WestJet's results of operations
include hiring/retention rates, pay rates, outsourcing costs and the costs of employee benefits. Significantly increased labour
costs, combined with curtailed growth, could negatively impact WestJet's competitive position.
Our business is subject to the effects of weather and natural disasters and seasonality, which can cause our
results to fluctuate.
Our results of operations will reflect fluctuations from weather, natural disasters and seasonality. Severe weather conditions
and natural disasters can significantly disrupt service and create air traffic control problems. These events decrease revenue
and can also increase costs. In addition, increases in frequency, severity or duration of thunderstorms, hurricanes or other
severe weather events, including from changes in the global climate, could result in increases in fuel consumption to avoid
such weather, turbulence-related injuries, delays and cancellations, any of which would increase the potential for greater loss
of revenue and higher costs.
There are risks associated with our presence in some of our international emerging markets, including political
or economic instability and failure to adequately comply with existing legal requirements.
Emerging markets are countries which have less developed economies that are vulnerable to economic and political problems,
such as significant fluctuations in gross domestic product, interest and currency exchange rates, civil disturbances,
government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by
governments. The occurrence of any of these events in markets served by us and the resulting instability may adversely affect
our business.
We continue to expand our service to countries in the Caribbean and Mexico, some of which have less developed legal
systems, financial markets, and business and political environments than the United States, and therefore present greater
political, economic and operational risks. We emphasize legal compliance and have implemented policies, procedures and
certain ongoing training of employees with regard to business ethics and many key legal requirements; however, there can be
no assurance that our employees will adhere to our code of business ethics, other Company policies, or other legal
requirements. If we fail to enforce our policies and procedures properly or maintain adequate record-keeping and internal
accounting practices to accurately record our transactions, we may be subject to sanctions. In the event that we believe or
have reason to believe that employees have or may have violated applicable laws or regulations, we may be subject to
investigation costs, potential penalties and other related costs which in turn could negatively affect our results of operations
and cash flow.
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