International Accounting Standards Board (IASB) 30 Cannon Street London EC4M 6XH United Kingdom

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1 International Accounting Standards Board (IASB) 30 Cannon Street London EC4M 6XH United Kingdom Financial Accounting Standards Board (FASB) 301 Merritt 7 P.O. Box 5116 Norwalk, CT September 13, 2013 Re: Exposure Draft Leases ED/2013/06 To the Boards: Thank you for the opportunity to discuss our position on the revised Leases Exposure Draft. Please accept this submission as WestJet Airlines Ltd.'s ("WestJet", "our", "we") response to the newly proposed treatment of leases as well as our response to the specific questions posed by the Boards within this Exposure Draft. Overall, WestJet strongly supports the objectives of the IASB and the FASB to ensure users of financial statements have a clear and strong understanding of the impact of leasing arrangements on the financial condition and financial performance of an entity. WestJet believes these objectives can be achieved by adopting a more simplified approach to classifying, measuring and disclosing an entity's interest in lease arrangements. WestJet is particularly concerned with the cost implications associated with the level of complexity contemplated by the Exposure Draft and whether this level of complexity will lead to a lack of comparability and understandability amongst issuers. The following comment letter describes, in further detail, our assessment of the onerous costs related to applying the standards as proposed in the Exposure Draft as well as certain issues that we have with respect to measurement, presentation and disclosure as proposed in the new Exposure Draft. We have also noted where the Exposure Draft requires additional clarity and resolutions on the topics of lease classification, foreign exchange volatility, maintenance provision liabilities for leased aircraft and the componentization of the right-of-use asset. Given our significant investment in both aircraft and non-aircraft operating leases, WestJet is particularly interested and concerned about the future of lease accounting. We appreciate the Boards' ti me and effort to consider this comment letter and would welcome the opportunity to discuss these issues further should the Boards wish to do so. Please find our responses to the Boards' questions attached. sincerely, Candice Li Vice-President, Controller WestJet Airlines Ltd. About WestJet WestJet is a Canadian airline, offering scheduled service to 87 destinations in North America, Central America and the Caribbean utilizing a fleet of more than 100 Boeing Next-Generation 737 and Bombardier Q400 NextGen aircraft. WestJet is headquartered in Calgary, Alberta and is a publicly traded company listed on the Toronto Stock Exchange. WestJet employs more than 9,600 people across Canada. As at June 30, 2013, WestJet had consolidated assets of approximately $3.8 billion and consolidated revenues for the year ended December 31, 2012 was approximately $3.4 billion. 22 Aerial Place NE T Calgary, AB F Canada T2E 331 westjet com

2 To: International Accounting Standards Board & Financial Accounting Standards Board From: WestJet Airlines Ltd. ("WestJet", "we", "our") Date: September 13, 2013 Subject: Exposure Draft ED/2013/6 Comment Letter Air Question 1: Identifying a Lease Question 2: Lessee Accounting Do you agree that the recognition, measurement and presentation of expenses and cash flows arising from a lease should differ for different leases, depending on whether the lessee is. expected to consume more than an insignificant portion of the economic benefits embedded in the underlying asset? Why or why not? If not, what alternative approach would you propose and why? Westlet Response WestJet does not agree with the classification of leases into Type A and Type B. WestJet is concerned these distinctions add unnecessary cost and complexity while detracting from comparability and understandability. Specifically, the assessment of significance of economic life and economic benefits will very likely differ between entities making it difficult for readers to understand an entity's assessment of significance and difficult for readers to compare leases between entities. We recommend that all leases follow one set of accounting standards rather than classifying by type of lease. Continuous changes in an entity's internal and external environment may also change an entity's initial assessment of "insignificant portion". This may result in an entity assessing the classification of two similar leases differently due to changes in the internal and external environment. This reduces the comparability and understandability of leasing arrangements. One lease classification type would address this issue by reducing subjective judgment and enhancing comparability and understandability. WestJet is concerned about the cost, time and resources required to perform the following as this complexity leads to a lack of comparability and understandability: reassess all leases against the new definition of a lease reassess all leases for classification as Type A, Type B or short-term leases reassess and assess on an ongoing basis all lease terms and purchase options for significant economic incentives reassess all leases for potential variable lease payments and update the lease liability and right-ofuse asset for any changes to any variable lease payments based on an index or rate reassess and assess on an ongoing basis all leases for guaranteed residual values and changes thereto during the lease term perform new impairment tests on the right-of-use asset make new and ongoing adjustments to income tax assets and liabilities as a result of a new measurement basis for leases implement and maintain new systems and processes for monitoring lease agreements and reconfiguring current systems to automatically calculate depreciation of the right-of-use asset for Type B leases, and if not possible, the requirement to maintain manual calculations for these types of leases, which is more costly and subject to error if not automated train both internal and external prepares and users on a complex new accounting standard 1

3 The following areas require further clarification for Lessee accounting: Lease Classification Paragraph 28 states that a lease shall not be reclassified after the commencement date. It is not clear whether a lease with substantive changes (as defined in paragraph 36) would be allowed to be reclassified if it was considered a new contract. Foreign Exchange Revaluation of Lease Obligation Liabilities The introduction of a monetary liability (lease liability) and a non-monetary asset (right-of-use asset) under the new Exposure Draft will result in significant unrealized foreign exchange gains and losses being recorded on the statement of earnings where a lessee's lease payments are denominated in a currency other than its functional currency. This would create significant volatility in earnings and earnings per share impacting a financial statement user's ability to forecast future results. This is of particular concern in the airline industry where billions of dollars in aircraft leases may not be in an entity's functional currency. Accordingly, we suggest offsetting the revaluation of the lease liability against the right-of-use asset. This accounting would reflect the principle proposed in the Exposure Draft that the right-of-use asset match the lease liability. Maintenance Provision Liabilities Associated with Aircraft Lease Agreements Under current accounting standard IAS 37, a maintenance provision liability is created for the obligation to return an aircraft in a specified operating condition at the end of the lease term. While these terms form part of the lease contract, these liabilities are separate from the lease payments charged by the lessor. These estimated costs are composed of both internal costs as well as amounts paid to third party vendors for maintenance activities. It is not clear whether the intent of paragraph 39(d) of the Exposure Draft, which states amounts expected to be paid by a lessee under residual value guarantees should be included in the initial measurement of the lease liability, is intended to include liabilities associated with restoring assets to a specific condition at the end of a lease. Specifically, it is unclear under the Exposure Draft whether the accounting guidance considers returning a leased aircraft in a specified operating condition to be a form of guaranteeing some or all of the residual value of the aircraft. Further, it is uncertain whether paragraph 39(d) would treat usage and non-usage based maintenance requirements differently. It is unclear whether these liabilities would be considered part of the lease liability under this Exposure Draft or whether they would retain their current treatment under IAS 37. Componentization of the Right-of-Use Asset To date under IAS 16, assets are componentized with different useful lives. The Exposure Draft has not addressed whether the right-of-use asset should be componentized therefore impacting the amortization methodology of the right-of -use asset. Question 3: Lessor Accounting Westiet has no comment. 2

4 111/1/ABISTO1-1/r Question 4: Classification of Leases Do you agree that the principle on the lessee's expected consumption of the economic benefits embedded iii the underlying asset should be applied using the requirements set out in paragraphs 28 34, which differ depending on whether the underlying asset is property? Why or why not? If not, what alternative approach would you propose and why? WestJet does not support separating the classification of leases as Type A and Type B because it adds unnecessary cost and complexity while detracting from comparability and understandability. The assessment of insignificance, major part and substantially all will differ between entities leading to a lack of comparability. As well, a reader may not understand the methodology used by an entity in making these assessments this results in a lack of understandability. Accordingly, WestJet believes one accounting classification is most appropriate so that readers may better compare and understand an entity's lease arrangements. Question 5: Lease Term Do you agree with the proposals on lease term, including the reassessment of the lease term if there is a change in relevant factors? Why or why not? If not, how do you propose that a lessee and a lessor should determine the lease term and why? Similar to our response in Question #2 and #4, there are several subjective assessments relating to lease terms, in particular the assessment about significant economic incentives as well as complex judgments about contract-based, asset-based, entity-based and market-based factors. WestJet believes the cost and complexity of these assessments will lead to a lack of comparability and understandability for readers. Question 6: Variable Lease Payments Question 7: Transition Paragraphs C2 C22 state that a lessee and a lessor would recognise and measure leases at the beginning of the earliest period presented using either a modified retrospective approach or a full retrospective approach. Do you agree with those proposals? Why or why not? If not, what transition requirements do you propose and why? Are there any additional transition issues the boards should consider? If yes, what are they and why? Given the cost and complexity associated with this new standard, we ask the Boards to ensure sufficient time is provided for implementation. 3

5 Question 8: Disclosure Paragraphs and set out the disclosure requirements for a lessee and a lessor. Those proposals include maturity analyses of undiscounted lease payments; reconciliations of amounts recognised in the statement of financial position; and narrative disclosures about leases (including information about variable lease payments and options). Do you agree with those proposals? Why or why not? If not, what changes do you propose and why? WestJet notes that the reconciliation of opening and closing balances for lease liabilities in paragraph 61 is not consistent with the disclosures for other financial liabilities under IFRS 7. These disclosures would require costly additional resources and system modifications, which may outweigh the benefits. WestJet also views the narrative disclosures of paragraph 60 to be very onerous and overly detailed given the large number of leases entered into by many entities. Questions 9 11: FASB Related Topics Question 12: Consequential Amendments to IAS 40 4

Comment Letter on Financial Instruments Exposure Draft

International Accounting Standards Board (IASB) First Floor 30 Cannon Street London, EC4M 6XH United Kingdom 15 September, 2009 Comment Letter on Financial Instruments Exposure Draft Dear Board Members,