Hangar 89
London Luton Airport
Luton
Bedfordshire
LU2 9PF
www.easyJet.com
Annual report and accounts 2009
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q
nAvigAtiOn
01 Overview
01 2009 Business highlights
02
easyJet at a glance
04 Chairman’s statement
06 Business review
06
Strategy and KPIs
08 Review of strategy
16 Chief Executive’s statement
20
Financial review
30 Corporate responsibility
36 governance
36 Directors’ profiles
38 Executive management team
40 Corporate governance
44 Shareholder information
45 Report on Directors’ remuneration
55
Statement of Directors’ responsibilities
56 Accounts
56
Independent auditors’ report
to the members of easyJet plc
57 Consolidated income statement
58 Consolidated balance sheet
59 Consolidated cash flow statement
60
Consolidated statement of recognised
income and expense
61 Notes to the accounts
88 Company balance sheet
89 Company cash flow statement
90
Notes to the Company balance sheet
and cash flow statement
92 Other information
92 Glossary
Directors’ report
easyJet plc is incorporated as a public
limited company and is registered in
England with the registered number
3959649. easyJet plc’s registered office
is Hangar 89, London Luton Airport,
Bedfordshire LU2 9PF.
The Directors present the Annual
report and accounts for the year
ended 30 September 2009. References
to ‘easyJet’, the ‘Group’, the ‘Company’,
‘we’, or ‘our’ are to easyJet plc or to
easyJet plc and its subsidiary companies
where appropriate.
Pages 01 to 55, inclusive, of this Annual
report comprise the Directors’ report
that has been drawn up and presented
in accordance with English company
law and the liabilities of the Directors in
connection with that report shall be
subject to the limitations and restrictions
provided by such law.
thAnk yOu!
We’d like to thank everyone
who helped to produce
this report:
Mark Adams, Alexandra Barnes,
Angela Bennett, Chris Bennett,
Andy Berks, Henrietta Boulton,
Hal Calamvokis, Pritesh Dattani,
Chris Gadsden, Andrew Harrison,
Pamela Harrison, Andy Hodges,
Bruce James, Patrick Johnson,
Rachel Kentleton, Ken Lawrie,
Thomas Loizeau, Cath Lynn,
Sir David Michels, Captain Jim Pegram,
Giles Pemberton, Alexa Pickersgill,
Captain Dave Prior, Tom Smethers,
Andrew Tempest, Rui Vaz Fernandes,
Bunmi Williams and all of our employees
across our network.
This annual report is printed on Revive Pure white
silk, this paper is produced from 100% recycled
fibre. Both the paper mill and printer involved in
the production support the growth of responsible
forest management and are both accredited
to ISO 14001 which specifies a process for
continuous environmental improvement and both
are FSC certified. If you have finished reading this
report and no longer wish to retain it, please pass
it on to other interested readers or dispose of it in
your recycled paper waste.
This report is available at:
http://corporate.easyjet.com/investors/reports-
and-accounts.aspx
q
Overview
Business review
Governance
Accounts
Other information
01 easyJet plc
Annual report and accounts 2009
OVERVIEW
2009 BUSINESS HIGHLIGHTS
Results at a glance
Total revenue (£ million)
Profit before tax – underlying1 (£ million)
Profit before tax – reported (£ million)
Pre-tax margin – underlying1 (%)
Return on equity – reported (%)
Basic EPS – reported (pence)
Highlights
2009
2,667
43.7
54.7
1.6%
5.5%
16.9
2008
2,363
123.1
110.2
5.2%
6.8%
19.8
Change
12.9%
(64.5)%
(50.4)%
(3.6)ppt
(1.3)ppt
(14.6)%
q
Total revenue per seat up 10.9% (4.1% at constant currency),
driven by the strength of the easyJet network, competitor capacity
reduction of around 6%, strong ancillary revenue performance
and a 2.6% sector length increase
q
Passenger numbers up 3.4% to 45.2 million and load factor
improved by 1.4ppt to 85.5%
q
Underlying profit before tax
expectation. The £79.4 million reduction in underlying pre-tax profit
compared to the prior year is driven by a unit fuel cost increase
equivalent to £86.1 million and interest income lower by £30.5 million
1 of £43.7 million delivered in line with
q
2 per seat (excluding fuel and currency movement)
Operating costs
increased by 3.9% for the full year. Total underlying cost per seat1
(excluding fuel and currency movement) up 6.2% partly driven by
increased sector length, planned lower aircraft utilisation during
the winter and a £30.5 million reduction in interest income
q
Significant progress on cost reduction initiatives: 19 expensive
aircraft exited from the fleet; systems implemented; renegotiation
of our maintenance arrangements with SRT to deliver savings of
around £175 million over the 11 year life of the contract
q
easyJet’s position in European short-haul aviation has strengthened
with market share gains in a number of valuable markets such as
Paris, London Gatwick, Milan and Madrid and over a 10% increase
in slots at capacity constrained airports
q
Sufficient resources in place through a combination of undrawn
committed facilities and surplus cash to fund future aircraft
deliveries for at least the next 18 months
q
Forward bookings broadly in line with prior year
Note 1: Underlying financial performance excludes an £11.0 million profit on the disposal of three aircraft in 2009, and £12.9 million of costs associated
with the integration of GB Airways in 2008.
Note 2: Excludes interest income.
02 easyJet plc
q
Annual report and accounts 2009
easyJet AT A GLANCE
During 2009 we have
delivered a resilient financial
performance.
By building strong positions
at major airports in key
markets such as London
Gatwick, Milan, Madrid and
Paris we have developed
Europe’s premier air
transport network.
114 airports
27 countries
– Aberdeen
– Alicante
– Almeria
– Amsterdam
– Asturias
– Athens
– Barcelona
– Bari
– Basel-Mulhouse-
Freiburg
– Belfast
International
– Berlin
Schoenefeld
– Biarritz
– Bilbao
– Birmingham
– Bodrum
– Bordeaux
– Bournemouth
– Brindisi
– Bristol
– Brussels
International
– Bucharest
(Baneasa)
– Bucharest
(Otopeni)
– Budapest
– Cagliari (Sardinia)
– Casablanca
(Mohammed V)
– Catania (Sicily)
– Cologne / Bonn
– Copenhagen
– Corfu
– Corsica (Ajaccio)
– Corsica (Bastia)
– Crete (Heraklion)
– Cyprus (Larnaca)
– Cyprus (Paphos)
– Dalaman
– Dortmund
– Dubrovnik
– East Midlands
– Edinburgh
– Faro
– Fuerteventura
– Geneva
– Gibraltar
– Glasgow
– Gran Canaria
(Las Palmas)
– Grenoble
– Hamburg
– Helsinki
– Hurghada
– Ibiza
– Innsbruck
– Inverness
– Istanbul - Sabiha
Gökcen
– Jersey
– Kittila
– Krakow
– Kuusamo
– La Rochelle
– Lamezia
– Lanzarote
(Arrecife)
– Lisbon
– Liverpool
– Ljubljana
– London Gatwick
– London Luton
– London Stansted
– Lyon
– Madeira (Funchal)
– Madrid
– Majorca (Palma)
– Malaga
– Malta
– Manchester
– Marrakech
– Marseille
(Provence)
– Menorca (Mahon)
– Milan Linate
– Milan Malpensa
– Montpellier
– Munich
– Murcia
– Mykonos
– Nantes
– Naples
– Newcastle
– Nice
– Olbia (Sardinia)
– Palermo (Sicily)
– Paris Charles de
Gaulle
– Paris Orly
– Pisa (Tuscany)
– Porto
– Prague
– Rhodes
– Rome Ciampino
– Rome Fiumicino
– Rovaniemi
– Salzburg
– Santorini
– Sharm El Sheikh
– Sofia
– Split
– Stockholm
(Arlanda)
– Tallin
– Tangier
– Tenerife South
– Thessoloniki
– Toulouse
– Turin
– Valencia
– Venice Marco
Polo
– Vienna
– Warsaw
– Zurich
Over 52 million
seats flown
Consistently
high load
Present on the most
top 100 European routes
Seats flown million
Load factor %
Presence on top 100 routes
+1.8%
+1.4PPT
45 top routes
8
.
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5
9
.
1
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5
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4
9 4
.
8
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.
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.
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3
8
5
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6
3
9
7 2
2
3
2
9
1
6
5 1
1
1
1
2
1
We are present in 37 of the
top 50 European airports and
289 million people live within
60 minutes drive from an airport
served by easyJet.
We have presence on 45 of the
top 100 European routes, more
than any other carrier.
422 routes, 114 airports,
27 countries.
05 06 07 08 09
05 06 07 08 09
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03 easyJet plc
Annual report and accounts 2009
q Overview
Business review
Governance
Accounts
Other information
Focused on European
short-haul aviation
Increasing easyJet’s
geographic diversity
Non-UK passengers million
6.5% market share.
Passengers by country
Capacity growth at bases*
+13.9%
45 million passengers.
181 aircraft situated in 20 bases.
4
.
2
2
7
.
9
1
50% of passengers originate
outside the UK.
7
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1
9
.
2
1
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05 06 07 08 09
50%
UK
12%
Italy
11%
France
7%
Spain
Switzerland
7%
Other Europe 13%
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*Measured in seats flown.
04 easyJet plc
q
Annual report and accounts 2009
CHAIRMAN’S STATEMENT
In a tough economic
environment, our resilient
performance is a testament
to the quality of our
business model.
Dear Shareholder
I am pleased to report that your Company has delivered a resilient
performance in what has been one of the most challenging trading
environments for many years. Weak consumer confidence, combined
with fuel and currency volatility, has made for an uncertain business climate
in general this year, but especially so for airlines.
Against this backdrop, easyJet is one of the few airlines anywhere to remain
profitable this year with underlying pre-tax profits of £44 million, compared
to £123 million last year. These results were driven primarily through good
revenue performance offsetting the £86 million unit increase in fuel costs and
£31 million reduction in interest income. We also took advantage of capacity
cuts by other carriers to advance our position in the European short-haul
market, gaining share in important markets such as Milan, Paris, Madrid and
London Gatwick and increasing our slot portfolio at congested airports
by over 10%.
Business model and strategy
In a tough economic environment, easyJet’s continued resilient performance is
a testament to the quality of its business model. Europe’s premier air transport
network, our strong customer proposition and service delivery are linked to a
highly efficient operating model that is predicated on simplicity and low cost.
As part of the annual strategy process, easyJet’s Board has agreed a fleet plan
that will enable your Company to deliver growth of around 7.5% per annum1
over the next five years. This fleet plan gives easyJet the ability to take
advantage of the substantial commercial opportunities apparent in European
short-haul aviation, whilst maximising margins and delivering positive cash
generation beyond the period of the higher than normal capital expenditure
associated with the replacement of the more expensive Boeing subfleet.
The plan nevertheless retains sufficient in-built flexibility to allow a slowing
of growth should our margins come under pressure.
Whilst some of our strategic debate during the past 12 months was perhaps a
little too public, I believe that the subject matter and intensity of the discussion
around the most appropriate rate of growth for the Company evidences the
commitment of individual Board members to the Company’s cause. I am pleased
to report that the whole Board believes we have come to a sensible outcome.
05 easyJet plc
Annual report and accounts 2009
q Overview
Business review
Governance
Accounts
Other information
Board
At easyJet we believe that good corporate governance is vital. At the heart
of this is a strong Board team who both support and challenge the executive
management so that together, we can unlock easyJet’s huge potential, whilst
appropriately managing the risks associated with operating in such a volatile
industry. easyJet is an exciting business that readily attracts talent and hence
I am pleased to report on how we have been able to further strengthen the
Board in the past year.
Sir Michael Rake was appointed Deputy Chairman and Senior Independent
Director in June. Mike is an experienced international business leader and
is currently Chairman of BT Group plc prior to which he was Chairman
of KPMG International.
Keith Hamill joined the Board in February. Keith’s background as Chairman
of Travelodge and Chairman of Go Fly! Ltd, prior to its acquisition by easyJet
in 2002, is highly relevant and I have welcomed his robust and analytical
approach to the assessment of risk in our Board discussions.
Bob Rothenberg MBE, senior partner in the accountancy firm of Blick
Rothenberg, was appointed to the easyJet Board as a Non Executive Director
with effect from 1 August 2009. His appointment was made under the terms
of the Company’s Articles giving Sir Stelios Haji-Ioannou, the Company’s
founder, nominee director appointment rights on behalf of himself and
easyGroup Holdings Limited, his private investment vehicle and a shareholder
in easyJet plc. Bob’s appointment was formally endorsed by the members of
the Company’s Nominations Committee and he brings valuable financial
advisory and general business experience.
Sir Colin Chandler stepped down earlier in the year as Chairman after seven
years service to the Company. We thank him for his significant contribution
throughout his tenure, as he chaired the organisation during the period which
saw easyJet achieve its current leading position in the European market.
Jeff Carr, our Group Finance Director since 2005, also left to take on a larger
challenge and we thank him too for his contribution. Whilst we complete
the search process for Jeff’s successor, we are very pleased that Mark Adams
has joined us on an interim basis as Chief Financial Officer. Mark has held a
number of senior financial positions across a range of sectors and we welcome
his contribution during this interim period.
People
It has been a challenging year for easyJet’s people. I have spent a lot of time in
the past few months with the easyJet senior management population and can
testify to their exceptional level of passion for and belief in easyJet. In a tough
industry this level of engagement is a real differentiator to the performance of
the business. The commitment and enthusiasm of our crew continues to be a
key driver of our successful customer proposition and the whole Board is
grateful for the continued professionalism and commitment of all our people.
Industry regulation
The regulatory framework we operate in is crucial, as alongside ensuring that
we can operate in a safe environment, it has a significant effect on both our cost
base and the opportunities available for future growth. We are working across
Europe to persuade governments and the European Commission to deliver
regulation that provides stability, is sensible and allows us to compete fairly.
easyJet was born out of the liberalisation brought about by EU open skies
and has been at the forefront of promoting fair competition for the benefit of
consumers. We continue in that spirit with our campaign to ensure that local
airport monopolies are not able to capture monopoly rents. We also need
to ensure that easyJet continues to operate on a level cost playing field with
legacy European carriers absent protectionist measures imposed by national
governments. We have also committed to a greater focus on the remaining
structural inefficiencies, such as the management of airspace and its associated
charging mechanisms.
We know it is important that our industry addresses its wider responsibilities,
in particular to ensure we play our part in tackling climate change. We have
now taken the first steps towards aviation’s entry into the European Emissions
2
Trading System, where we will operate within a system that caps overall CO2
emissions, ensuring they are put on a downwards path towards agreed
targets. However, environmental measures must deliver real gains in
environmental efficiency, and cannot be used as a way to simply tax
passengers and so we are continuing to work for the reform of UK Air
Passenger Duty (APD) to operate as a genuine incentive to drive
environmental change rather than the current blunt instrument to swell
Government coffers.
Conclusion
As easyJet navigates what is still an uncertain and difficult landscape, I am
confident that easyJet’s strengths will continue to prevail and that it will
emerge as a clear winner in European short-haul aviation. I would also like in
particular to thank Andy Harrison and his executive team for so successfully
managing the Company during such a challenging year.
Sir David Michels
Non Executive Interim Chairman
Note 1: Measured in seats flown.
Note 2: Carbon dioxide.
06 easyJet plc
Annual report and accounts 2009
q
BUSINESS REVIEW
STRATEGY AND KPIs
We believe people make
the difference. It’s through
the efforts of all our people
to deliver our four strategic
priorities that we will realise
our vision: to become the
best low fares airline in
the world.
Financial KPIs
Total revenue
£ million
Profit before tax
(underlying) £ million
Return on equity
%
+12.9%
7
6
6
,
3 2
6
3
,
2
7
8
7
,
1
0
2
6
,
1
1
4
3
,
1
(64.5)%
1
9
1
9
2
1
3
2
1
3
8
4
4
(1.3)PPT
3
.
4
1
1
.
0
1
1
.
7
8
.
6
5
.
5
05
06
07
08
09
05
06
07
08
09
05
06
07
08
09
Earnings per share
(basic) pence
Cash flow from
operations £ million
Gearing
%
(14.6)%
6
.
6
3
2
.
3
2
8
.
4
1
8
.
9
1
9
.
6
1
(42.6)%
2
9
2
1
6
2
1
2
2
2
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8
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1
+8.9PPT
6
.
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2
05
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05
06
07
08
09
07 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Strategic KPIs
1
SAFETY IS OUR
NO.1 PRIORITY
We will never compromise our commitment
to safety, which is always the first priority for
all of our people.
Composite risk value (CRV) index
1.1
1.0
0.9
0.8
0.7
0.6
0.8 boundary
0.625
2007
2009
� The Composite risk value index is an internal benchmark
2008
to monitor the average risk value per sector flown over time.
� It is calculated by assigning a numerical weighting to every
safety occurrence report received. The total weighting for
the period is then normalised by the number of sectors
flown in the period.
� Management sets a nominal boundary of 0.8 which
assists monitoring of performance over time.
2
BUILD EUROPE’S No.1 AIR
TRANSPORT NETWORK
We are focusing on improving our routes,
slots and bases to build on our leading
presence across Europe.
Presence on top 100 routes
(ranked by primary airport)
Airports where we are
No.1 or No.2 airline
5
4
8
1
6
1
5
1
6
3
9
2
7
2
3
2
9
1
5
1
6
1
1
1
2
1
Ryanair
Vueling
SAS
Air Berlin
Iberia
Air France-KLM
Alitalia
Lufthansa-Swiss
BA
easyJet
Number of market pairs operated
between two primary airports
Non-primary airports
07
08
09
3
DEVELOP A WINNING
CUSTOMER PROPOSITION
We are continuing to refine our winning
proposition to a wide range of business
and leisure customers.
4
DELIVER LOW COST AND
MAXIMISE MARGINS
We are improving revenue and managing
costs in order to enhance our reputation as
Europe’s most efficient airline.
Likely to recommend
%
On time
performance* %
Revenue
per seat
Cost ex fuel
*
per seat
Profit before
tax per seat*
%
4
.
1
%9
5
.
9
8
%
8
.
8
8
%
5
.
9
7
%
7
.
6
7
%
4
.
5
7
7
4
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0
5
1
5
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4
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0
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.
9
2
5
5
.
6
2
0
3
.
4
7
3
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2
3
8
.
0
*Arrival within 15 minutes of scheduled arrival time.
07
08
09
07
08
09
07
08
09
07
08
09
08
07
09
*Underlying.
easyJet people make the difference
08 easyJet plc
q
Annual report and accounts 2009
REVIEW OF STRATEGY
1 Safety is our No.1 priority
Throughout the organisation – from the boardroom to our crew,
engineering and ground staff – the first priority for all of our people
is the pursuit of safety in all they do, for the benefit of customers,
colleagues and shareholders.
New Safety Management System
In our industry, risk is unavoidable. The key lies
in how this risk is identified and managed in a
transparent manner.
2009 saw the introduction of a new Safety
Management System, which provides a framework
for managing the two pillars of safety performance
and safety compliance at easyJet. Adopted by
the European Aviation Safety Agency’s European
Commercial Aviation Safety Team with our active
support, the SMS is a continuous improvement
process. It focuses on identifying hazards, assessing
the risks associated with those hazards, managing
these risks and then ensuring that any changes have
had the desired impact.
Safety: part of our DNA
Safety underpins everything we do. The organisation
is structured to focus on safety issues at all levels,
and it is the first agenda item at every Board
meeting. Our safety culture positively encourages
the reporting of all safety-related incidents and
events, through a range of reporting tools, no
matter how minor they may seem. These reports
are assessed and categorised, with risk values
assigned and aggregated to form our Composite
risk value (CRV) index. This process allows safety
trends to be identified and corrective action
implemented, as part of our Safety Management
System (SMS). Our CRV index showed a steady
improvement for the year under review as illustrated
on page 7. However, we are not complacent about
safety issues and continue to exercise vigilance in
order to continuously improve our safety performance.
As part of the feedback process to our crew,
we launched a new regular safety bulletin during
the year. This highlights and encourages best
practice, thus keeping our flight and cabin crews
fully engaged with safety improvement initiatives.
3.5 years
the average age of our fleet
We believe in the importance of a young
and reliable fleet, which leads to lower
maintenance and network disruption costs.
We currently fly 181 aircraft, with 35
new Airbus A320 family aircraft joining the
fleet during the year, as part of our plan to
operate an Airbus-only fleet from 2012.
09 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Rigorous safety processes
Andy Harrison, Chief Executive Officer, and
Operations Director, Cor Vrieswijk, are
responsible for all aspects of safety delivery,
including our compliance obligations under the
Air Operators Certificate (AOC). Andy Harrison,
the Accountable Safety Executive, chairs our Safety
Review Board. The Safety Review Board meets
monthly to assess reports from the Safety Action
Groups we have established across the business.
This review and assessment process delivers
monthly reports to both the UK Civil Aviation
Authority (UK CAA) and the easyJet Board. Our
Director of Safety and Security, Captain Dave Prior,
reports directly to the Board independently of the
Operations Director.
Our window on the operational
world – monitoring every second
of every flight
Flight management data recorded during 98%
of our flights is sent via a GPRS link direct to our
Luton base as soon as the aircraft has touched
down. Several thousand megabytes of data are
transmitted per flight, and all are analysed and fed
into the SMS within 24 hours.
Approval for our training
qualification
During the year, we became only the second UK
airline to be granted approval for managing our
in-house pilot training to ensure it meets our
specific training requirements.
Under the Alternative Training Quality Programme
(ATQP), we are now allowed to tailor one of the
two mandatory annual flight simulator sessions to
match our own training needs identified through
the SMS and the specific circumstances of our routes.
During 2009, our pilots undertook around 15,000
hours of simulator training, with the prime focus
on practising realistic scenarios.
Sessions are carried out in real time, with three
levels of threat introduced during the flight, to provide
valuable data on our pilots’ operational management
skills. In addition, the tailored sessions enable us to
increase pilot familiarity with new airports, which
are continually added to the network.
The excellence in service displayed by easyJet
cabin crew has its roots in the Academy, easyJet’s
dedicated aircrew training facility at Luton. It’s here
that cabin crew learn advanced first aid and how
to handle emergency situations. The syllabus
covers all aspects of the regulatory requirements
plus those elements of crew resource management
that make our cabin crew stand out from the
crowd. The technical training is enhanced through
the use of a dedicated cabin simulator and fire
fighting module.
Leading the way in
fatigue management
As we seek to optimise the use of our assets,
we need to be able to monitor and manage
crew performance effectively, ensuring that our
crew remain sufficiently alert at all times. In 2006,
we adopted an innovative approach, with the
introduction of a Fatigue Risk Management System
(FRMS) in conjunction with the UK CAA, to assess
the potential risks of pilot fatigue based on intensive
scheduling practices. This pioneering work has led to
easyJet being at the forefront of crew performance
management, in the pursuit of operational safety.
The FRMS enables us to monitor and understand
the relationships between rostering, operational
variables, crew performance and workload,
allowing procedures to be implemented or
strengthened.
As part of our continuous improvement
programme, we are working with the UK CAA,
the International Civil Aviation Organisation
(ICAO), the International FRMS forum and
organisations such as Imperial College London,
City University London and most recently NASA,
to further improve our understanding of fatigue.
This will allow us to develop more flexible roster
patterns and operational procedures to support
our expansion while also retaining the focus on
operational safety. Our work in the field of fatigue
has now gained worldwide recognition as industry
best practice and has inspired the introduction of
similar programmes across other airlines, with the
approval of the regulators.
Engineering
Improving our engineering function
Following the consolidation of easyTech and
GB Airways into the easyJet engineering function,
we insourced some of our technical services during
2009. This has given us more internal capacity and
control to ensure the safety and reliability of our
growing fleet.
10 easyJet plc
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Annual report and accounts 2009
REVIEW OF STRATEGY cONTINuED
2 Build Europe’s No.1
air transport network
We aim to fly the right routes at the right times to meet
the demands of our broad customer base. Last year
we flew 45.2 million customers on over 400 routes linking
114 airports, giving us a 6.5% share of the European market.
Pan-European strength
easyJet has a leading presence on Europe’s top
100 routes, with increasingly strong positions in
the key markets including London Gatwick, Milan,
Geneva and Paris. We focus on the routes our
customers find the most attractive, at convenient
times of the day, concentrating our efforts on the
most popular destinations and departure points
together with the routes that have the strongest
business links.
Customer and geographic diversity are core
easyJet advantages. We serve a broad a mix of
leisure and business travellers, and for the first time
this year saw half of our customers drawn from
outside the UK. Furthermore, nearly 40% of flights
did not touch the UK during 2009, reflecting an
increase of 16% in the number of our mainland
European routes.
No.1
We are the
leading airline at:
London Gatwick, Milan
Malpensa and Geneva.
18%
increase in Paris
seat capacity
Our seat capacity at
Paris has increased
by 18% since 2008.
Shaping the network
Almost 300 million potential passengers live within
an hour of airports served by easyJet. But to win
their business, we need to continually manage and
fine-tune our network. Put simply, we must give
customers the opportunity to fly where they want,
when they want.
There is significant scope to drive performance
forwards in three specific areas – routes, slots
and bases. One of easyJet’s strengths is its flexibility
in asset allocation; we can and do move aircraft
around our network to ensure we are generating
the best possible return on our investments.
Route management
Schedule quality is vital. Since 2006 we have
strengthened our position at London Gatwick,
Paris, Milan and Madrid by a combined total of
seven million departing seats. At London Gatwick,
we have increased our share of short-haul flights to
Europe and have significantly higher load factors
than our competitors.
While we continue to build frequency and stability
on our core routes, we also remain alert to
opportunities to refresh the route mix and offer
more choice. Market intelligence through customer
research, together with insight from regional
managers and a team of European market
managers, helps us to identify those opportunities.
For example, we announced the launch of
Düsseldorf flights during 2009, with daily return
flights from Rome, Basel and London. As business
demand falls away through the summer months,
we actively manage our schedule and move assets
onto leisure routes. We increased capacity into
several destinations including Turkey, Morocco and
Croatia, where we fly into Dubrovnik from five
airports across the continent.
39
Number of routes
between primary airports
We fly 39 routes between primary
airports across Europe. Our nearest
competitor is British Airways, with 29.
11 easyJet plc
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Slot management
Departure time is important to all our customers,
but particularly those on business trips and
weekend breaks.
Unlike some competitors, who use smaller,
more remote, and much less convenient airports,
over 90% of easyJet aircraft operate into and
out of congested airports. At these busy facilities,
where slots are at a premium, we work hard
to build our portfolio across Europe. Our slot
management team has considerable capability
and expertise, with over 60 years of combined
experience and extensive contacts at
European airports.
Base management
Overnight stops create unnecessary costs.
By managing the bases where we locate crew
and aircraft, we are able to improve efficiency
and maximise revenue. During summer 2009,
we flew over 1,000 sectors daily and only five
aircraft were located overnight at locations
other than our bases.
Base location is constantly under review.
For example, we have increased the number of
aircraft based in Italy from three to 16 since 2006
and in France from 11 to 14 in the last 12 months.
At the same time, we have reduced capacity at
under-performing bases such as Luton.
Number of aircraft by base
Manchester
3
Edinburgh
4
Luton
16
Stansted
12
East
Midlands
3
Newcastle
6
Overview
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Governance
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Other information
Gatwick
39
Berlin
9
Belfast
International
6
Glasgow
4
Liverpool
9
Bristol
11
Paris
charles de Gaulle
6
Paris
Orly
6
Lyon
2
Madrid
6
Basel
4
Geneva
8
Milan
Malpensa
13
Rome
Fiumicino
3
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REVIEW OF STRATEGY cONTINuED
3 Develop a winning
customer proposition
easyJet’s network, great schedule and industry-leading
distribution via easyJet.com appeals to a broad base
of both business and leisure customers. The easyJet
brand has pan-European reach and appeal throughout
27 countries. New initiatives are continuing to strengthen
our position as both a leading airline and an innovative
e-commerce business.
understanding our customers
We work hard to get close to our customers,
listening to their needs and evolving our schedule
and services to match. During the year, we
aggregated all our customer data into a single
location to give us a fast and intelligent view on
emerging trends in customer travelling habits.
easyJet is leading the way within the airline industry
on its use of social media to drive customer
engagement and improve the customer
experience – since its launch six months ago,
@easyJetcare on Twitter has proactively assisted
thousands of customers. easyJet also developed
the first airline iPhone application in Europe,
providing customers with real time data on the
arrivals and departures for flights to and from
our Swiss airports.
Ensuring that our customers arrive at their
destination on time is key to delivery of a winning
customer proposition, and at easyJet we continually
measure on time performance. In the year, our on
time performance (measured as percentage of
flights arriving within 15 minutes of scheduled
arrival time) improved from 75.4% to 79.5%.
The result? Continued strong appeal across the
four key customer groups: business people;
holidaymakers; customers visiting friends and
relatives; and second home owners. In fact, nearly
90% of customers surveyed during the year would
recommend easyJet to a friend.
£9
per bag
We only charge £9 each way for
a 20kg piece of hold luggage. Ryanair
charges £115 for the same luggage.
Bon appetit
croissant et café
Our inflight catering is now based on regional
preferences. Our customers can buy the food and
drink they prefer – with a greater choice of produce
sourced to cater for local tastes.
13 easyJet plc
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Overview
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Governance
Accounts
Other information
Building our appeal to
business travellers
In a tough economic environment, we have
increased our share of the business travel market in
the past year. We recognise that the business travel
segment, where revenue per seat can be around
20% higher than average, has different booking
requirements to other markets. In particular, large
corporates have strict travel management policies
in place and manage their travel requirements
through agents who often book through the
industry’s Global Distribution Systems (GDS)
such as Amadeus and Galileo.
Last year we made our schedule available via
the GDS and other aggregator systems, so we
are now listed in agents’ search results alongside
other carriers. By the end of the year, around
15% of business seats were already being booked
through this channel.
Business travellers, as well as leisure customers,
are also benefiting from our winning customer
experience initiatives. These include the ability
to check in online up to 60 days before a flight,
the opportunity to take an earlier flight for free,
an inflight magazine that is as good a read as it is
a promotional tool, and regionalised food and
drink menus. Speedy Boarding remains an attractive
customer proposition and we have been working
hard to improve delivery across the network.
In addition, this was the first full year for easyJet Plus!,
an annual Speedy Boarding pass. With over 20,000
members across Europe, the card has quickly become
a popular feature with easyJet’s frequent travellers.
Enhancing easyJet.com
As the UK’s most visited airline site, easyJet.com
remains our primary distribution channel and in
the last year we have commenced a major rebuild
and refresh. We consulted with our customers,
identifying what was and what was not liked about
the existing site, and also looked at a wide range of
top sites, both inside and outside the travel sector.
We have concentrated our initial energy on the
most important section: the booking funnel, where
five pages are responsible for delivering around
£2 billion in revenue. The site is built on a more
robust and scalable platform and is even easier
to use, with a wider template and a basket that
is visible at all times.
Improving our communications
The better we understand our customers,
the more accurately we can target our
communications. For example, with our new
customer database in place, we are now able to
tailor marketing emails to reflect the purchasing
patterns and preferences of individual customers.
To support a renewed focus on business travel,
we launched an online campaign targeted at
finance directors. “Keep the FD happy” is an
interactive video that takes a light-hearted look
at how easyJet can save a company money in
these tough times – but also highlights the serious
business benefits of flying with easyJet, such
as no weight restrictions on hand baggage and
the ability to book through their preferred travel
management channel. See the campaign at
http://www.keepthefdhappy.com/
Our iconic Objects campaign continues to run
across Europe, adapted to the needs of different
markets. The campaign uses iconic orange
“Objects” to represent the destinations to which
we fly or the type of trip customers are taking.
It delivers an energetic, exciting evocation of the
travel possibilities we provide and a clear focus
on the low price of the flight. Each easyJet
campaign runs across a broad variety of both
online and offline media.
Our public stance on climate change, such as
signing the Copenhagen Communiqué, sends
out an important message. Environmental matters
are important to us, as they are to our customers.
We have integrated a carbon calculator and
offsetting facility into our online reservation system,
with all investments made exclusively in United
Nations-certified offset projects. Since the
scheme was launched, easyJet customers have
to date offset over 194 million Kg of CO2.
Over £2m
in easyJet Plus! subscriptions
More than 20,000 customers have chosen
to pay around £100 each for easyJet Plus!,
our annual Speedy Boarding pass.
Winners!
and the winner is...
easyJet has won a number of industry
awards in the year, including Best European
Budget Airline (World Traveller Awards),
Best Airline Website (Travolution) and the
Condé Nast Traveller Best Low Cost Airline
award (for the 6th consecutive year).
11 months
schedule online
We now release our flight schedule up
to 11 months in advance, so customers
can plan and book well ahead.
14 easyJet plc
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Annual report and accounts 2009
REVIEW OF STRATEGY cONTINuED
4 Deliver low cost and
maximise margins
easyJet’s strategy is growth with margin improvement
and therefore the management team continually focuses
its efforts on all three drivers of margin: yield, ancillaries
and cost, with the aim of achieving a 15% return on equity
in the medium-term.
78%
Independent research*
proves that
we are the best value carrier
on 78% of all business itineraries
surveyed. Business travellers can
make savings of over £100 on
almost half of all occasions.
* ITM Research Fare Study
June-August 2008.
Improving yield
Through this recessionary period, our superior
network and competitive fares have enabled us
to win market share and drive the best revenue
performance of any European airline. Over the
past year, we have grown the number of business
passengers in spite of an overall decline in the
business travel market.
Our unique revenue management system delivers
transparent and simple pricing for our customers
while, at the same time, enabling us to capture the
maximum yield available in the market for each
route. Our aim is to be significantly cheaper than
our direct competitors on each route, thereby
allowing us to take market share.
Driving ancillary revenues
We see a number of opportunities to drive
continued growth in ancillary revenues by
introducing initiatives that add value to our
customer proposition.
In-flight services continue to deliver improving
revenue. The year saw wastage of fresh food
halved and the introduction of new localised
food and drink choices which better match the
expectations of customers on different routes.
For 2010, the emphasis will be on fresh food,
including a key country-specific bistro offering.
We have also expanded the number of partners
we work with to provide customers with services
including car hire, hotel rooms, coach and rail travel
and insurance. Agreements with new partners
such as Mondial Assistance and Laterooms.com,
together with renewed focus on long-term
partnerships with companies including Europcar
and Gatwick Express, will drive revenue through
easyJet.com
Customers of all airlines now accept that bag
charges are inevitable and during the year we
increased our “first bag” charges to £9. However,
we are committed to ensuring that our charges
remain competitive and support a strong customer
proposition. Therefore we recognise that future
opportunities to increase revenue in this area may
be limited.
15 easyJet plc
Annual report and accounts 2009
Overview
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Governance
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Other information
Fuel management system – case study
Fuel efficiency is very important to us at easyJet. It is our largest single cost and
also the most volatile. During 2009, we have made significant improvements to
our fuel efficiency, saving 1.2% of all the fuel we burn. We have achieved this
through the implementation of a new flight planning system, together with a
focus on fuel conservation both in the air and on the ground. Due to the high
number of sectors we operate each day, even a small fuel saving per flight adds
up to big financial gains.
The new flight planning system optimises every flight based on route, payload,
weather and fuel. It was introduced during the year, reaching full capability
towards the end of the period. This means we are well positioned in 2010
to receive the full year benefit of having the system in place plus identify other
areas of additional savings.
Fuel conservation in the air has been achieved through successful engagement
with our flight crews on a range of initiatives to optimise operating procedures.
On the ground, we have successfully reduced our reliance on auxiliary power
units in favour of ground power and operated an optimised aircraft schedule.
We remain firmly committed to fuel efficiency and have a range of further
initiatives in the pipeline for 2010, across all areas of our business from
engineering to flight operations.
Managing costs
It is vital that easyJet aggressively manages its cost
base so that it can continue to offer competitive
fares profitably. easyJet aims to deliver at least
£190 million of cost reduction initiatives by the end
of financial year 2012; this will enable us to offset
inflationary pressures and deliver a £1 per seat
benefit to the bottom line at current exchange
rates. There are clear opportunities in the
following areas:
Efficient fleet management
Aircraft ownership costs on aircraft is expected to
fall by £30 million per annum by the end of financial
year 2012, driven by the exit of our non-core fleet
of Boeing 737-700s and GB Airways aircraft.
The easyJet A320 family of aircraft are cheaper
to own and operate and the fleet rationalisation
programme will also remove the need for the
additional Boeing-specific training that we
currently carry out.
Leverage scale and recession to deliver
procurement efficiencies
Safety is always our No.1 priority and we
will never compromise that commitment.
In the last 12 months we have seen a successful
renegotiation of our maintenance contract
with SR Technics, a world-class provider.
The new arrangement is for 11 years and will
generate savings of around £35 million. We will
also maintain our policy of leveraging our scale and
buying power to challenge airports on the charges
they levy and aim to deliver savings of £60 million.
Systems implementation to drive efficiency
Fuel remains a major cost. We have targeted
a 3% improvement in fuel burn, some of which
has already been delivered during the year under
review and a further £20 million will be delivered
by 2012. However, there remains room for further
improvement, specifically through pilot technique
and a new fuel reporting system.
We have also set ourselves a goal of a 10%
improvement in crew efficiency, which will be
delivered through route and crew optimisation
tools and a new rostering system that goes live in
the coming year. These initiatives will deliver savings
of £35 million by 2012.
16 easyJet plc
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Annual report and accounts 2009
Chief exeCutive’s statement
this is an exceptionally
resilient performance, which
is a tribute to the strength
of our business model and
the quality of our people
and our network.
andrew harrison
Chief Executive
introduction
This has been an important year for easyJet. The business has traded resiliently
during a recession and easyJet was one of the few airlines globally to make a
profit this year with an underlying pre-tax profit of £43.7 million. Revenue
grew by 12.9% to £2,666.8 million, this strong performance partially offsetting
the £30.5 million reduction in interest income and the £86.1 million increase
in unit fuel costs (equivalent to £1.63 per seat).
We have strengthened the fundamentals of the business, with improvements
in network quality, lower cost deals with key suppliers and enhancements to
easyJet.com giving easyJet a great platform for profitable growth in the
medium-term from which to achieve a 15% return on equity. The Board has
also agreed a fleet plan which will deliver around a 7.5% growth per annum in
seats flown over the next five years. This fleet plan will enable easyJet to grow
its share of the European short-haul market from around 7% to 10%.
Our people
We have outstanding people, including our front line cabin crew and pilots
who are highly trained and professional. They all make a crucial contribution
to our success and help to create an easyJet personality which is an important
competitive advantage. I would like to thank them all for helping to deliver
such a resilient performance in very difficult economic circumstances. We aim
to have an open and egalitarian environment where everyone is valued for
their contribution to easyJet. We consider it important to protect and develop
this culture as the airline grows into a large pan-European business. Balancing
the imperative for cost efficiency and supporting our culture in a pressurised
and uncertain economic climate has been particularly challenging in 2009.
marketplace review
easyJet operates the leading network in European short-haul aviation,
measured by presence on the top 100 routes. Around 200 carriers compete
in the European short-haul market and the top five players, including easyJet,
account for around 60% of seats flown with the rest of the market being
highly fragmented.
Whilst the average growth of the market over the past 20 years or so has
been 4.5% per annum, in the past year overall capacity in the European
short-haul market shrank by around 5% as airlines sought to mitigate losses
driven by higher fuel costs and falling demand. easyJet continued its strategy
of carefully targeting growth in markets from which weaker competitors are
retreating in this period of recession. Thus easyJet is building strong,
defendable market positions that will ensure it is well positioned for profitable
growth once the European economy improves.
Consequently, easyJet gained market share in the year and passenger numbers
grew by 3.4% to 45.2 million and load factor improved by 1.4 percentage
points to 85.5%. easyJet strengthened its position in a number of valuable
markets including Paris, London Gatwick, Milan and Madrid, increasing its slots
at constrained airports by over 10% in the year.
Regulatory update
In March 2009, the UK Competition Commission confirmed that BAA would
be required to sell a number of its airports. Whilst easyJet welcomes the
break-up of BAA and the recently confirmed sale of Gatwick, the London
airports will continue to be monopolies, regardless of who owns them, due to
the lack of spare capacity in the market. The sale highlights the need for tough
and effective airport regulation to protect airlines and passengers from the
new owners exploiting their market power.
easyJet continues to advocate the immediate reform of UK Air Passenger
Duty (APD), which taxes passengers rather than flights, into an emissions-
based tax, and the phasing out of APD when aviation joins the European
Emission Trading Scheme (EU ETS) in 2012. easyJet was an early advocate of
aviation’s entry into the EU ETS as an international, market-based solution to
ensuring aviation addresses its climate change responsibilities. We now look to
17 easyJet plc
Annual report and accounts 2009
Overview
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Governance
Accounts
Other information
Competitive forces
acting on the european
airline industry
suppliers
Airports are natural monopolies and,
despite regulation, have passed on
higher charges to airlines over the last
two years. Airlines continue to have
little control over their fuel costs but
use hedging tools to lower volatility.
substitutes
High speed train development across
Europe has strong political backing
and will continue to replace flights
with short sector lengths. However
such development is only
economically viable on major trunk
routes under 1,000km that do not
cross water.
internal rivalry
Consolidation over the past year has
lowered the competitive pressures on
Europe’s leading airlines. easyJet and
Ryanair are increasingly dominant on
short-haul whilst long-haul travel is
increasingly dominated by just three
airlines: Air France-KLM, Lufthansa
and British Airways. Transatlantic joint
ventures between STAR and Skyteam
alliance members are also serving to
reduce internal rivalry.
new entrants
Access to financing has deteriorated
substantially over the last year which
makes it unlikely that we will see many
new entrants in the medium term.
Buyers
Consolidation of the network airlines
and the demise of the business class
only start-ups has diminished the
choice for consumers on long-haul.
On short-haul easyJet is now providing
consumers with an alternative to the
flag carrier at primary airports but the
reduction in capacity by the tour
operators and weaker airlines has
strengthened Ryanair and easyJet’s
bargaining position with consumers.
Source: Deutsche Bank
the Copenhagen Climate Summit in December to produce a sensible global
agreement on aviation and climate change. Such a global agreement should
recognise efficiency standards for aircraft, with the emphasis on planes utilising
modern, more environmentally friendly technology.
easyJet continued to actively manage its network by optimising routes. During
the past year, 28 underperforming routes were closed and 70 new routes
were launched. easyJet’s presence on the top 100 routes increased by six
following our entry onto routes such as Rome to Milan and Paris to Barcelona.
Business performance
easyJet delivered a resilient performance in a tough and uncertain macro
economic environment this year by continuing to focus on the four themes
we outlined in the Interim report:
q
q
q
q
Development of Europe’s No.1 air transport network
Focus on margins through driving revenue and managing costs
Management of cash, capital expenditure and fleet
Mitigation of risk from volatility of fuel prices and currency rates
Development of europe’s no.1 air transport network
easyJet’s unique differentiator is its network, with a leading presence on the
top 100 routes in Europe and positions at primary airports that are attractive
to time sensitive consumers. easyJet’s network has appeal across a broad
range of European consumers both leisure and business. Additionally, half
of easyJet’s passengers now originate from outside of the UK. This balanced
revenue base has protected easyJet from the worst effects of recession and
allowed us to win share from higher cost competitors.
Overall, easyJet’s capacity (measured in seats flown) grew by 1.8% during the
year, with an increase of 16% in mainland Europe, focused on France (up 30%),
Italy (up 78%) and Spain (up 16%). easyJet’s capacity at Gatwick grew by 12%,
partly driven by the full year effect of the GB Airways acquisition on 31 January
2008. Capacity was reduced in weaker performing markets such as Luton and
the UK regions.
uK
At Gatwick, easyJet is now the leading airline with 39 based aircraft and a 30%
share of the airport’s passengers and we continue to leverage that position to
absorb competitive pressures. Longer sector routes are performing well and
slots acquired with GB Airways were optimised in the period with business
orientated routes being allocated to peak slots and leisure routes moved to
later in the day. We are winning the competitive battle on traditional sun
routes with excellent load factors, albeit with weaker market pricing. easyJet
has also benefited from legacy competitor withdrawal on key business routes.
At Belfast, competitors are in retreat and both yields and load factors
improved towards the latter part of the year. We had a strong performance
at Manchester, where we now have three aircraft based. In addition, we have
proactively reduced capacity at other UK bases which deliver below Company
average margins.
18 easyJet plc
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Annual report and accounts 2009
Chief exeCutive’s statement COntinueD
northern europe
In Germany, we improved the schedule during the year. Additional additional
capacity has been added on routes to Milan, Copenhagen and Brussels from
our Berlin base, which has improved our appeal to business travellers.
We closed the base at Dortmund but profitable routes were retained.
easyJet celebrated its tenth birthday in Switzerland in the past year where
we have 12 aircraft based. easyJet’s position improved as competitors came
off key routes and we expanded flying between Switzerland and the French
regions and Scandinavia.
southern europe
easyJet has 13 based aircraft at Milan and we continue to outperform the
competition, with significantly stronger load factors. easyJet has opened
a base at Rome Fiumicino with three aircraft based there operating on both
intra-European and Italian domestic routes. Madrid delivered improvements
in load and profitability in the year as competitors continued to retreat and
we optimised our schedule. easyJet now has 14 aircraft based in France and
is France’s second largest airline with a 10% market share. France continues to
be an attractive market for easyJet as low cost carrier penetration is half the
European average and the market consequently has structurally higher fares.
easyJet has also leveraged its scale and the recession to renegotiate some key
contracts with suppliers. Overall capacity in the European short-haul market
is shrinking and as one of the few carriers in Europe growing capacity, easyJet
is well placed to secure better terms at airports.
Following a global tendering process, easyJet has selected Zurich-based SR
Technics for airframe maintenance support of easyJet’s core Airbus fleet for a
period of 11 years. The agreement, valued at more than $1.6 billion, provides
easyJet with a reduction in maintenance costs (excluding engines) of around
£175 million over the life of the contract. SR Technics will provide a range of
services including aircraft maintenance, component repair and overhaul, and
logistics management for easyJet’s core Airbus fleet.
A significant portion of our cost base is determined by governments and
regulatory bodies, in particular, navigation costs and charges at regulated
airports. We have increased our focus on these costs by constructively
engaging the governments and regulators that set them. Alongside our work
at Gatwick and Stansted, areas of particular focus have been the regulatory
charges at the Paris airports and Amsterdam, UK navigation charges and the
wider European approach to navigation costs. Looking forward, we will sustain
this involvement and seek to further develop our influence across Europe.
focus on margins through driving revenue
and managing costs
easyJet’s strategy is growth with margin improvement and therefore the
management team continually focuses its efforts on all three drivers of
margin, namely yield, ancillaries and costs.
Margins in the past two years have been severely impacted by higher fuel
prices with an aggregate £5.71 (£1.63 in 2009) increase in unit fuel costs,
albeit profit per seat has only declined by £3.47 due to the strength of the
revenue performance.
In the past year, easyJet’s industry leading revenue performance, has been
driven by proactive aircraft allocation into stronger markets such as Gatwick
and Milan, and good commercial management especially in pricing, promotion
and route selection.
In addition, easyJet is benefiting from its efforts to target the business travel
market with around 15% of business passengers now originating through
business orientated distribution channels. Business customers tend to book
later, paying around 20% more than the average fare for their easyJet flights.
Ancillary revenue income grew by 38% to £9.77 per seat. The checked bag
charge averaged £4.51 per seat, an increase of £1.73 per seat in the year and
other ancillary revenues grew by £0.97 to £5.26 per seat. Going forward,
easyJet’s in-flight revenues will benefit from the introduction of electronic
point of sale equipment onboard and food offerings tailored by market and
designed to appeal to a broader range of consumers. Improvements in
website presentation should also result in improved conversion rates for
car hire and hotels.
It is vital that easyJet aggressively manages its cost base so that it can continue
to offer competitive fares profitably. Operating costs excluding fuel6, per seat
rose 3.9% at constant currency in the year principally due to increased sector
length, the planned lower aircraft utilisation over the winter as we mitigated
margin dilution due to higher fuel costs and price increases at Gatwick which
have cost around £10 million this year.
In the second half of the year, we saw improvements in aircraft ownership and
maintenance costs. easyJet also delivered improvements in its operations
information technology infrastructure in the year and key systems to support
the crew efficiency programme have now been implemented. We have now
reviewed our progress against the £125 million cost savings target identified in
2008 and believe there is greater potential to take cost out of the business.
Based on the financial results for the year ended 30 September 2009, we have
updated our targets and now expect to deliver cost savings of £190 million by
the end of financial year 2012. After inflation and increases in regulated airport
charges this will equate to approximately £1 per seat profit improvement.
management of cash, capital expenditure and fleet
fleet plan
easyJet is making good progress towards its goal of operating a common
aircraft fleet. Eliminating the Boeing and GB Airways sub-fleets will take
cost out of the business and simplify our operations.
The intention is to exit all aircraft in the two sub-fleets by 2012 to complete
the realisation of ownership cost savings of around £40 million per annum.
12 Boeing 737s and four GB Airways A320s were returned to lessors in the
past year. The sale of the seven A321s from the GB Airways sub-fleet continues
to progress with three A321s disposed of in the year with an associated profit
on disposal of £11 million. It is anticipated that the remaining A321s will leave
the fleet by September 2010. The five A319s previously held for sale have
been returned to the fleet and will be used to support our mainland
European expansion plans in 2010.
In the past year, easyJet took delivery of 15 A320 aircraft and 20 A319 aircraft
under the terms of the Airbus easyJet agreement. Configured with 180 seats,
the A320 will enable us to increase our capacity at peak times at slot
constrained airports. Also, the aircraft operates with a cost per seat that is
around 6% lower than the A319.
The total fleet at 30 September 2009 comprised 181 aircraft. A further 70
easyJet specification aircraft deliveries are currently planned for arrival over the
next three years, a net increase of 26 aircraft over this period giving an expected
total number of aircraft of 207 by 2012. easyJet has a high degree of flexibility in
its fleet planning arrangements and thus is able to manage the total number of
aircraft in the fleet through a combination of deferrals and lease extensions.
Under
operating
lease
Under
finance
lease
Owned
Changes in
year
Total
Future
deliveries
(including
exercised
purchase
rights)
(note 1)
Un-
exercised
purchase
rights
(note 2)
easyJet
A320 family
Boeing
737-700
GB Airways
A320 family
103
–
4
107
46
17
5
68
6
–
–
6
155
35
17
(12)
9
181
(7)
16
72
–
2
74
88
–
–
88
Note 1: The 72 future easyJet deliveries are anticipated to be delivered over the next four
financial years, 27 in 2010, 22 in 2011, 21 in 2012 and 2 in 2013.
Note 2: Purchase rights may be taken on any A320 family aircraft and are valid until 2015.
19 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
The total fleet plan over the period to 30 September 20123 is as follows:
At 30 September:
2008
2009
2010
2011
2012
easyJet
A320
family
120
155
182
194
207
Boeing
737-
700
29
17
8
2
–
GB
Airways
A320
family
16
9
2
–
–
Total
aircraft
165
181
192
196
207
Note 3: Assumes assets held for sale are sold in financial year 2010.
Cash and capital expenditure
easyJet’s cash and money market deposits as at 30 September 2009
exceeded £1 billion reflecting continued strong cash flow generation;
additionally, easyJet has sufficient resources in place, through a combination of
undrawn committed facilities and surplus cash, to fund future aircraft deliveries
for at least the next 18 months. In the year, gearing increased from 29% to
38% reflecting increased debt-financed capital expenditure as we continue
the replacement of our Boeing sub-fleet.
mitigation of risk from volatility of fuel prices
and currency rates
easyJet operates under a clear set of treasury policies agreed by the Board.
The aim of easyJet’s hedging policy is to reduce short-term earnings volatility
and therefore the Company hedges forward, on a rolling basis, between 50%
and 80% of the next 12 months anticipated requirements and between 20%
and 50% of the following 12 months anticipated requirements. In the past year,
easyJet’s fuel hedging caused an adverse variance to market rates of around
£330 million, partially offset by a benefit of around £120 million from its US
dollar hedging. Details of our current hedging arrangements are shown below:
Percentage of anticipated requirement hedged
6 months ended 31 March 2010
Rate
6 months ended 30 September 2010
Rate
Year ended 30 September 2010
Rate
Year ended 30 September 2011
Rate
Fuel
require-
ment
72%
$769/MT
61%
$732/MT
66%
$750/MT
22%
$722/MT
US dollar
require-
ment
65%
$1.78
38%
$1.64
51%
$1.72
20%
$1.62
euro
surplus
sale
87%
€1.17
76%
€1.14
80%
€1.15
35%
€1.08
Outlook
Whilst economic conditions remain challenging for consumer facing
businesses and in particular airlines, easyJet’s scale, low cost and highly
efficient business model and strong financial position will ensure it is
able to take advantage of the current recessionary period by:
q
driving cost out of the business; and
q
carefully targeting capacity increases and share gains in valuable
markets across Europe ensuring that easyJet is well positioned
to exploit profitable growth opportunities when economic
conditions improve.
easyJet’s pre tax result in 2010 at current fuel prices4 and exchange rates5
will benefit by around £100 million from lower fuel prices as higher price
fuel hedges roll-off, slightly offset by a strengthening US dollar.
Capacity, measured in seats flown, for both the first half and the full
year is expected to increase compared to the prior year by around
10% as easyJet continues with its strategy of carefully targeting growth.
The current expectation is that competitor capacity on easyJet routes
will be down by low single digits.
Naturally, the impact of unemployment is expected to lead to some yield
deterioration over the winter. With over 45% of the available first half seats
now booked, total revenue per seat at constant currency in the first half of
the year is expected to decline by a few percentage points compared to the
prior year.
Total operating costs6 per seat, excluding fuel, at constant currency are
expected to be broadly flat for the full year and up low single digits in the
first half of the year compared to the prior period. Improvements in
maintenance, crew and overhead costs will offset the mix impact of
our continued growth in primary airports.
We expect a reduction in interest income of around £10 million compared
to the prior year due to continued lower interest rates, which will mainly
impact the first half result.
We see a tough winter ahead. We are focusing our efforts on further cost
savings and efficiency programmes, together with optimising route
profitability and aircraft allocation. We shall also benefit as our fuel hedges
adjust to market prices. Putting all this together, at current fuel prices4 and
currency rates5, we expect easyJet to make substantial profit improvement
during 2010.
Note 4: US$657 per metric tonne at 13 November 2009.
Note 5: US$1.67/£ and €1.12/£ at 13 November 2009.
Note 6: Excludes interest income.
andrew harrison
Chief Executive
20 easyJet plc
q
Annual report and accounts 2009
FINANCIAL REVIEW
The business continues to
generate strong operating
cash flow and ends the year
with over £1 billion in liquid
funds, a strong balance sheet
and significant undrawn
financing in place.
Mark Adams
Interim Chief Financial Officer
Reported profit before tax for the year ended 30 September 2009 was
£54.7 million including £11.0 million profit on the disposal of three Airbus
A321 aircraft, acquired as part of the GB Airways acquisition and sold during
the year. Excluding this profit on sale, the underlying profit before tax for the
year was £43.7 million; this compares to an underlying profit before tax in
2008, excluding the one-off costs associated with the integration of GB
Airways, of £123.1 million. GB Airways is now fully integrated into the easyJet
business and therefore its results are not separately identifiable. However, it
should be noted that the comparative period to these results includes only
eight months of GB Airways activity.
Results this year have been significantly impacted by the following factors:
q
Fuel prices and hedging
q
US dollar and euro exchange rates
q
Reduction in aircraft utilisation
Fuel prices and hedging
Total fuel cost amounted to £807.2 million in 2009, an increase of 13.9%
compared to 2008, equating to a cost per seat of £15.28, up £1.63 per seat or
11.9%. The average market price for jet fuel during 2009 was $595 per metric
tonne (excluding fees and taxes) compared to $1,070 in 2008, driven by the
extraordinary spike in fuel prices during that year. However, after taking
account of hedging taken out in 2008 during the period of high fuel prices,
easyJet’s effective price for 2009 was $951 per metric tonne compared to
$948 in 2008.
With the effective US dollar price broadly flat for 2009 compared to 2008,
the increase in fuel cost per seat is largely driven by the strengthening of the
US dollar against sterling, partly mitigated by US dollar hedging.
Despite the introduction of additional heavier A320 aircraft into the fleet and
an increase in the average load factor of 1.4ppt, average fuel burn for the year
was 715 US gallons per block hour compared to 717 in 2008, principally
reflecting the implementation of fuel conservation initiatives.
US dollar and euro exchange rates
The market rate for the US dollar strengthened by 22% from an average rate
of 1.99/£ in 2008 to 1.56/£ in 2009; after taking account of hedging, easyJet’s
effective rate strengthened from an average of 1.96/£ in 2008 to 1.78/£ in
2009. The business has no US dollar revenues but significant US dollar costs
for fuel, aircraft leases, maintenance and some loan interest and consequently
the 9% movement in the effective dollar rate had a significant impact on
financial performance.
The euro has strengthened by 12% from an average rate of 1.32/£ in 2008 to
1.16/£ in 2009. Approximately 42% of revenues and 31% of costs (principally
ground handling, airport and navigation charges and some crew costs) are
denominated in euro resulting in a net long position; the strengthening of the
euro, therefore, delivers a positive impact to the results. For the first time this
year some hedging of the euro surplus has also been undertaken.
21 easyJet plc
Annual report and accounts 2009
Currency impact
The following charts illustrate easyJet’s exposure to foreign currency
revenues and costs:
Currency split – total revenue
Currency split – total costs
euro
Swiss franc
sterling
other
42%
6%
49%
3%
euro
Swiss franc
sterling
other
US dollar
31%
4%
23%
1%
41%
Certain key measures are therefore significantly impacted by exchange
rate fluctuations. These measures on a constant currency basis are shown
in the adjacent table:
Reduction in aircraft utilisation
In response to the fuel price situation at the beginning of the year, the level
of flying activity during the first six months of 2009 was actively reduced;
however, utilisation returned to more normal levels for the summer.
So while total aircraft has increased by 16.0% from an average of 150.1
in 2008 to 174.1 in 2009, the number of seats flown has only increased
by 1.8%. Average aircraft utilisation, measured in terms of block hours
per operated aircraft per day, has fallen from 11.9 hours per day in 2008
to 11.0 hours in 2009.
As a result of this positive decision to reduce utilisation, and therefore
capacity flown, to protect profit margins, cost per seat measures are
adversely affected as non-variable costs are spread over relatively
fewer seats.
Overview
q
Business review
Governance
Accounts
Other information
Operational measures
Seats flown (millions)
Passengers (millions)
Load factor
Available Seat Kilometres (ASK)
(millions)
Revenue Passenger Kilometres
(RPK) (millions)
Average sector length (kilometres)
Sectors
Block hours
Number of aircraft owned/leased
at end of year
Average number of aircraft
owned/leased during year
Number of aircraft operated at
end of year
Average number of aircraft
operated during year
Operated aircraft utilisation
(hours per day)
Number of routes operated at
end of year
Number of airports served at end
of year
Financial measures
Return on equity
Per seat measures
(underlying)*
Profit before tax per seat (£)
Revenue per seat (£)
Revenue per seat at constant
currency (£)
Cost per seat (£)
Cost per seat excluding fuel (£)
Cost per seat excluding fuel at
constant currency (£)
Per ASK measures
(underlying)*
Profit before tax per ASK (pence)
Revenue per ASK (pence)
Revenue per ASK at constant
currency (pence)
Cost per ASK (pence)
Cost per ASK excluding fuel
(pence)
Cost per ASK excluding fuel at
constant currency (pence)
2009
52.8
45.2
85.5%
2008
51.9
43.7
84.1%
58,165
55,687
50,566
1,101
337,266
47,690
1,073
333,017
645,446
631,084
181
165
Change
1.8%
3.4%
1.4ppt
4.4%
6.0%
2.6%
1.3%
2.3%
9.7%
174.1
150.1
16.0%
170
161
5.6%
160.1
145.3
10.2%
11.0
422
114
2009
5.5%
0.83
50.47
47.36
49.64
34.36
11.9
380
100
2008
6.8%
2.37
45.51
45.51
43.14
29.49
(6.9)%
11.1%
14.0%
Change
(1.3)ppt
(65.1)%
10.9%
4.1%
(15.1)%
(16.5)%
31.32
29.49
(6.2)%
0.08
4.58
4.30
4.51
3.12
2.85
0.22
4.24
4.24
4.02
2.75
2.75
(66.0)%
8.1%
1.4%
(12.1)%
(13.6)%
(3.5)%
*Underlying measures exclude an £11.0 million profit on the sale of three aircraft in 2009 and
£12.9 million of costs associated with the integration of GB Airways in 2008 .
22 easyJet plc
q
Annual report and accounts 2009
FINANCIAL REVIEW CONTINUED
Total revenue
Total revenue in 2009 grew by 12.9% to £2,666.8 million which equates
to £50.47 per seat, representing a growth of £4.96 per seat or 10.9%.
On a constant currency basis, total revenue per seat grew 4.1%; after allowing
for the increase in sector length of 2.6%, this represents a strong underlying
performance, particularly in light of the difficult external economic conditions.
This result has been supported by the continuing strategy to increasingly
deploy capacity to the better located but more expensive airports preferred
by customers and thereby improve network mix.
Passenger revenue
Passenger revenue in 2009 grew by 7.8% to £2,150.5 million. Despite the
16.0% increase in average aircraft during the period, capacity in terms of seats
flown increased by only 1.8% as a result of the decision to reduce flying activity
particularly through the winter. Load factor improved 1.4ppt to 85.5%, the first
time since 2005 that the annual load factor has exceeded 85%. This resulted
in a 3.4% increase in passenger numbers to 45.2 million demonstrating a flight
to value as easyJet increased market share by attracting customers from
higher fare competitors.
The shift towards deploying relatively more capacity to European markets
continues. Capacity in total rose 1.8% in 2009 versus 2008; of this overall
increase, capacity at UK regional bases reduced by 8.4% whilst continental
European bases increased by 16.0% with most of this investment being
focused in Milan Malpensa, Paris Charles de Gaulle and Lyon. London bases,
in aggregate, reduced by 3.1% with Gatwick capacity up by 11.5% but Luton
and Stansted reducing by 18.3% and 16.3% respectively. The percentage of
revenues denominated in euros in 2009 was 42% with, in aggregate,
non-sterling revenues now accounting for 51% of total revenues.
Passenger revenue per seat increased by 5.9% to £40.70 but on a constant
currency basis fell by 1.9%. This reduction in revenue per seat in the current
economic environment, taking into account the expected dilution from an
increase in the checked bag charge, is testament to the strength of the
network. Passenger revenue per ASK, on a constant currency basis,
fell by 4.4%.
Ancillary revenue
Ancillary revenue increased by 40.6% to £516.3 million in 2009, driven mainly
by increases in the checked bag charge. Bag charge revenue delivered
£238.1 million in 2009, an increase of £94.0 million or 65.2% compared
to the previous year. As expected, this has been accompanied by a small
yield dilution, but with approximately 70% of passengers having checked
baggage, the net result is positive. Speedy Boarding continues to deliver
a strong performance.
Costs
Underlying costs*
Ground handling
Airport charges
Fuel
Navigation
Crew
Maintenance
Advertising
Merchant fees and
commissions
Aircraft and passenger
insurance
Other costs
Total operating costs
Net ownership costs
Total costs
Total operating costs
excluding fuel
Total costs
excluding fuel
2009
£ million
2009
per seat
2008
£ million
2008
per seat
255.9
481.5
807.2
232.3
306.6
161.6
47.0
4.84
9.11
15.28
4.40
5.80
3.06
0.89
212.2
397.2
708.7
195.7
263.2
147.5
46.5
33.5
0.64
33.7
11.3
104.8
2,441.7
181.4
2,623.1
0.21
1.98
46.21
3.43
49.64
9.1
87.5
2,101.3
138.4
2,239.7
4.09
7.65
13.65
3.77
5.07
2.84
0.90
0.65
0.17
1.68
40.47
2.67
43.14
1,634.5
30.93
1,392.6
26.82
1,815.9
34.36
1,531.0
29.49
*Underlying measures exclude the £11.0 million profit on disposal of assets held for sale in 2009
and £12.9 million of GB Airways integration costs in 2008.
Total costs
Total cost per seat excluding fuel was up 16.5% or £4.87 per seat to £34.36 in
2009, compared to 2008. In addition to the strengthening of the US dollar and
euro, the Swiss franc strengthened by 19%. As a significant proportion of the
cost base is denominated in these currencies, this has had a significant impact
on unit costs. Excluding the impact of exchange rates, cost per seat excluding
fuel was up 6.2% or £1.83 per seat compared to last year.
The impact of the reduction in global interest rates has had a significant impact
on interest income in the year; interest income in 2009 at £18.4 million was
£30.5 million lower than the £48.9 million reported in 2008. These changes in
interest rates are largely out of easyJet’s control so, excluding the impact of this
reduction, operating cost per seat (excluding fuel and at constant currency)
was up 3.9% compared to 2008. On a cost per ASK basis, excluding fuel,
costs increased by 13.6% but on a constant currency basis by just 3.5%.
Again, excluding the impact of interest income, this figure falls to 1.3%.
As a result of the reduction in winter flying activity and utilisation, unit cost
measures are adversely impacted as non-variable costs are spread over
relatively fewer units of production.
23 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Maintenance
Maintenance cost per seat at constant currency was down £0.12 or 4.1%
compared to 2008. The net reduction in unit cost mainly reflects the benefit
of the reduction in the number of leased aircraft as the Boeing 737-700s
have started to leave the fleet partly offset by the full year costs of the
new in-house maintenance planning function. During the year, 12 leased
Boeing 737-700s and four leased (ex GB) A320s were returned to lessors.
Approximately 35% of maintenance costs are denominated in US dollar
and 21% in euro.
At the end of the year, negotiations were completed with SR Technics
on a new maintenance contract which will deliver savings of around
£175 million over the 11 year life of the contract.
Insurance and other costs
Other costs per seat at constant currency were up £0.17 or 9.3% compared
to 2008. The main drivers of this per seat increase were reduced utilisation
and an increase in disruption costs (driven by bad weather in the winter)
partially offset by the profit on the Boeing spares optimisation project,
as reported in the first half of the financial year.
Ground handling
Ground handling cost per seat at constant currency was up £0.27 or 6.6%
compared to 2008. Approximately 61% of ground handling costs are now
denominated in euro, up 6ppt from 2008. The drivers of this increase include
airport mix, as presence continues to be increased in the top European
airports (estimated impact £0.14 per seat), the full year effect of PRM
(Passengers with Reduced Mobility) charges and increased adverse weather
related de-icing costs.
Airport charges
Airport cost per seat at constant currency was up £0.59 or 7.8% compared
to 2008. Approximately 58% of these costs are denominated in euro,
up 7 percentage points from 2008. The key driver of this increase has been
over-inflation price rises in airport passenger related charges at a number of
locations across the network, increasing costs by approximately £30 million.
Significant increases have occurred at Gatwick, Luton, Amsterdam and
at all Spanish and Italian airports. Mix continues to impact as we increase
our presence in the top European airports. In a specific response to the
uneconomic level of charges at Luton, easyJet announced in September
2009 that it would remove some flying for 2010 and redeploy aircraft
to more profitable activity elsewhere.
Crew
Crew cost per seat at constant currency was up £0.44 or 8.7% compared
to 2008. An increasing proportion of these costs are denominated in
non-sterling currencies as more overseas contracts are introduced and
approximately 25% of these costs are now denominated in euro and 9% in
Swiss franc. The increase in unit costs has been driven by last year’s crew pay
deal which was linked to August 2008 RPI, the increased costs associated with
the introduction of overseas contracts (a necessary part of the expansion
strategy into continental Europe) and maintaining higher than required crew
numbers over the winter, whilst there was reduced aircraft utilisation, as these
crew were required for the summer activity.
Crew costs continue to be a key area of management focus with significant
opportunities for efficiency improvement in the medium term.
24 easyJet plc
q
Annual report and accounts 2009
FINANCIAL REVIEW CONTINUED
Ownership costs
Net ownership costs, on a per seat basis at constant currency, were up
£0.52 or 19.4% compared to 2008. The average number of aircraft during
the year was 174.1, up 16.0% compared to the previous year. The number
of non-operational aircraft increased by nine compared to last year principally
due to aircraft held for sale and an increase in aircraft in maintenance as
easyJet prepared aircraft for return to lessors. There were 35 additions
during the year, 31 debt financed and four cash financed; 12 Boeing 737-700s
and four ex-GB A320s were returned to lessors and three ex-GB A321s
were sold.
Net ownership costs include interest income which has fallen from
£48.9 million in 2008 to £18.4 million in 2009, a fall of £30.5 million due to
the dramatic drop in market interest rates and despite cash balances and
money market deposits rising from £863 million at 30 September 2008 to
£1,075 million at 30 September 2009. Gross ownership costs i.e. excluding
the impact of interest income, on a constant currency basis, improved by
£0.13 per seat or 3.5%. This benefit is driven by the exit of higher cost leased
Boeing 737-700 aircraft and replacement by lower cost owned Airbus aircraft
and lower interest rates feeding into interest payable as rates are re-priced
to market.
Unit costs have been impacted by the reduced winter flying activity with costs
of the fleet that is, on average, 16.0% larger being spread over a similar amount
of seats flown as last year.
The exit of higher cost 737-700 aircraft is well under way and this, together
with the exit of higher cost aircraft acquired as part of the acquisition of GB
Airways, is expected to deliver the targeted benefits in aircraft ownership.
Changes in pre-tax profit per seat build up
High level profit per seat bridge
£ per seat
£1.85
£1.19
£0.07
£2.37
£0.64
£1.63
£0.83
2008 profit
before tax
per seat
Foreign
exchange
impact
Total
revenue
Costs
excl. fuel
excl. interest
Interest
Fuel
inc. foreign
exchange
impact
2009 profit
before tax
per seat
*Underlying number; excludes an £11 million profit on the sale of three aircraft in 2009 and
£12.9 million of one-off integration costs for GB Airways in 2008.
Headline profit before tax for 2009 was £54.7 million; after excluding the
one-off benefit of the profit on sale of three ex-GB A321s, underlying profit
before tax was £43.7 million. This is a fall of £79.4 million in underlying profit
before tax compared to 2008, despite the fuel bill rising £98.5 million. With
total revenue per seat increasing by 10.9% and total cost per seat increasing
by 15.1%, profit margin dropped by 3.6 percentage points to 1.6%.
Profit after tax and return on equity
At the end of 2009, favourable resolution was reached with HMRC on a
prior year tax matter resulting in the release of a provision. This release has
contributed to an effective tax credit rate for the year of 30.2% compared to
an effective tax charge rate of 24.5% in 2008. For 2010 the effective tax rate is
expected to be a charge of 25%.
The tax provision release also had a significant impact on the return on
equity in 2009. For the year it was 5.5% compared to 6.8% in 2008, a fall of
1.3 percentage points. Although underlying profit before tax fell by 64.5%,
retained profit, significantly impacted by the tax provision release, fell by only
14.4%. With shareholders’ funds broadly flat year on year, the resultant return
on equity is therefore only down by 1.3 percentage points.
Basic earnings per share, at 16.9 pence, is down 14.6% compared to 2008,
reflecting the significant drop in retained profit, being offset, to a large extent,
by the tax provision release.
In line with established policy, no dividends have been paid or proposed in the
year ended 30 September 2009 or during the comparative accounting period.
25 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Balance sheet and cash flow
As discussed in the Business Review, the industry has faced challenging
economic conditions in 2009. However, easyJet continued to generate
a strong operating cash flow and ended the year with over £1 billion in
cash and short-term liquid deposits, a strong balance sheet and significant
undrawn committed financing to fund future aircraft deliveries.
A clear focus on working capital and balance sheet management has
put easyJet in a strong position to withstand the current economic
climate and to emerge stronger.
Despite a significant tightening of credit in capital markets, easyJet
has capitalised on the strength of its business model and financial position
to secure additional debt and lease financing to add to that agreed in
December 2007.
Summary balance sheet
Goodwill
Property, plant and equipment
Other non-current assets
Net working capital
Cash and cash equivalents
Money market deposits
Borrowings
Other non-current liabilities
Net assets
Share capital and premium
Reserves
Shareholders’ funds
2009
£ million
365.4
1,612.2
213.2
2,190.8
(537.3)
788.6
286.3
(1,120.6)
(300.5)
1,307.3
748.5
558.8
1,307.3
2008
(restated)*
£ million
365.4
1,102.6
218.4
1,686.4
(306.5)
632.2
230.3
(626.9)
(337.3)
1,278.2
745.9
532.3
1,278.2
Change
£ million
–
509.6
(5.2)
504.4
(230.8)
156.4
56.0
(493.7)
36.8
29.1
2.6
26.5
29.1
*Fair value adjustments in respect of GB Airways, see note 23 to the accounts.
Shareholders’ funds increased by £29.1 million in the year, the profit after tax
being offset by a reduction in the fair value of the Group’s cash flow hedges
net of deferred tax. The strengthening of the US dollar and the euro against
sterling in the year has caused a significant reduction in the fair value of the
Group’s currency derivative portfolio; this was partially offset by a decrease
in the value of the jet fuel derivative liability as fuel prices fell. These fair value
gains and losses are deferred in equity and recycled to the income statement
in line with the underlying hedged transaction.
Goodwill was £365.4 million at 30 September 2009. Provisional fair values of
assets and liabilities acquired through a business combination may be adjusted
for 12 months following the acquisition date; for GB Airways this period ended
on 31 January 2009. Since 30 September 2008, the fair value of maintenance
provisions has been increased reflecting additional liabilities relating to
engines on aircraft held under operating leases. After allowing for tax relief,
goodwill relating to the GB Airways acquisition increased by £5.6 million
to £55.8 million. Comparative balances have been adjusted to reflect that
these liabilities were extant at the acquisition date.
The net increase in property, plant and equipment in the year was £509.6
million. Additions in respect of new aircraft delivered, pre-delivery deposits
for future deliveries and non-aircraft fixed assets totalled £515.0 million, this
was offset by depreciation charged in the year of £55.4 million and disposals
of £4.9 million. During the year, easyJet took delivery of an additional 20 A319
aircraft and the first 15 easyJet specification A320 aircraft. Three ex-GB
Airways A321 aircraft were sold generating a profit of £11.0 million.
These assets had been transferred to assets held for sale in 2008. Four A321
aircraft remain as assets held for sale at 30 September 2009. The five easyJet
specification A319 aircraft disclosed as assets held for sale at 30 September
2008 were taken off the market in the year and returned to property, plant
and equipment at their book value of £54.9 million. Potential purchasers have
found credit hard to obtain in the current market and the Board has agreed to
retain these owned aircraft to support the European expansion plans in 2010.
Net working capital improved by £230.8 million in the year. Assets held
for sale decreased by £121.7 million with three A321s sold and five A319s
returned to property, plant and equipment. Trade and other payables
increased by £97.7 million as a result of additional unearned income, the
increase in the size of the business and efficient working capital management.
Unearned income increased due to the strength of the euro against sterling
and as a result of the schedule now being on sale out for up to 11 months.
In addition, the fair value of short-term derivative balances decreased
£43.6 million year-on-year as the US dollar and euro strengthened
against sterling.
The total of cash and cash equivalents and money market deposits was
£1,074.9 million at 30 September 2009 up £212.4 million compared to
30 September 2008. Net cash of £134.5 million was generated from
operations as a result of cash received in advance from customers and strong
working capital management. £90.2 million was received from the sale of
three ex-GB A321 aircraft and other fixed assets in the year. The purchase
of aircraft in the year was funded predominantly by additional borrowings.
Of the 35 A320 family aircraft delivered in the year, 31 were mortgage
financed. Money market deposits are held partially in US dollars to provide
a match against US dollar denominated borrowings.
Excluded from the above total is £72.3 million of restricted cash disclosed
in other non-current assets and net working capital. These amounts relate
principally to operating lease deposits and customer payments for holidays.
The total of cash and cash equivalents, money market deposits and restricted
cash at 30 September 2009 was £1,147.2 million (30 September 2008:
£928.7 million).
As detailed above, most aircraft deliveries were funded from additional
borrowings. Total borrowings increased by £493.7 million in the year to
£1,120.6 million as a result of £468.2 million of new draw downs net of
repayments and foreign exchange movements of £25.5 million on the
retranslation of debt. Most borrowings are denominated in US dollars;
however some facilities were drawn in euros for the first time in the year.
The US dollar rate moved from 1.78 at 30 September 2008 to 1.60
at 30 September 2009.
Other non-current liabilities include maintenance provisions for work due
to be performed in more than one year of £168.6 million, deferred income
relating principally to the excess of sale price over fair value for aircraft subject
to sale and leaseback of £52.6 million, deferred tax liabilities of £76.7 million
and long-term financial instrument liabilities of £2.6 million.
Maintenance provisions have been impacted by the movement in the
US dollar and euro exchange rates in the year. Deferred tax liabilities have
decreased by £31.1 million since 30 September 2008 as a result of the
reduction in the value of cash flow hedges, reduced accelerated capital
allowances and the recognition of a deferred tax asset on losses; offset
by a charge for increased short-term operating timing differences.
26 easyJet plc
q
Annual report and accounts 2009
FINANCIAL REVIEW CONTINUED
Net (debt) / funds (excluding restricted cash)
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
2009
£ million
788.6
286.3
1,074.9
(1,010.7)
(109.9)
(1,120.6)
2008
£ million
632.2
230.3
862.5
(524.9)
(102.0)
(626.9)
Change
£ million
156.4
56.0
212.4
(485.8)
(7.9)
(493.7)
Net (debt) / funds (excluding
restricted cash)
(45.7)
235.6
(281.3)
The net of cash and cash equivalents, money market deposits and borrowings
(excluding restricted cash) at 30 September 2009 was a net debt position of
£45.7 million (30 September 2008: net funds of £235.6 million) following the
funding of capital expenditure through additional borrowings in the year.
Gearing increased in the year from 28.7% to 37.6%. The increase is a result of
additional borrowings relating to new owned aircraft and the movement in
the US dollar exchange rate. Gearing is consistent with that reported at the
half year. Additional debt drawdown in the second half of the year has been
offset by improved shareholders’ funds as a result of profits earned in the
summer and the reversal of fair value fuel hedge losses deferred in equity
at 31 March 2009.
Despite reduced profit levels in 2009, easyJet generated a positive operating
cash flow in 2009 of £134.5 million as a result of a strong improvement in
working capital.
Capital expenditure in the year was funded from further borrowings and is
shown net of the proceeds from the sale of the three A321 aircraft and other
assets in the year.
The value of cash holdings benefited from foreign exchange movements
following the strengthening of both the US dollar and the euro against sterling.
Improved cash position
High level cash flow bridge
£ million
£471
(£508)
(£10)
£61
£60
£78
£1,075*
£60
£863*
Summary cash flow
Cash generated from operations
Acquisition of GB Airways
Net capital expenditure
Net increase/(decrease) in loan
finance
Net increase in money market
deposits
Other including the effect of
exchange rates
Net increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at
end of year
2009
£ million
134.5
–
(430.3)
2008
£ million
296.2
(118.0)
(299.9)
Change
£ million
(161.7)
118.0
(130.4)
Cash at
O perating profit
30 Septe m ber 2008*
Tax, net interest, foreign
D epreciation and
N et w orking capital
exchange and other
am ortisation
Capital expenditure
Financing
Cash at
Aircraft sales
30 Septe m ber 2009*
*Includes money market deposits but excludes restricted cash.
470.1
(5.5)
475.6
Undrawn committed financing facilities
(29.0)
(8.7)
(20.3)
11.1
49.0
(37.9)
156.4
(86.9)
243.3
632.2
719.1
(86.9)
788.6
632.2
156.4
December 2007 facility
Revolving credit facility
Facilities at 30 September
Sale and leaseback finance secured
after the balance sheet date
Undrawn committed
financing facilities
2009
US$ million
2008
US$ million
Change
US$ million
278
250
528
222
750
885
250
1,135
(607)
–
(607)
–
222
1,135
(385)
Of the $937 million aircraft financing facility agreed in December 2007,
$52 million was drawn in the year ended 30 September 2008, an additional
$607 million was drawn in the current year, leaving $278 million for future
deliveries. Seven A320 deliveries in the year were funded from additional
mortgage finance secured in September 2009.
In addition to the undrawn December 2007 facilities of $278 million, easyJet
has an undrawn revolving credit facility in place for $250 million, giving total
undrawn facilities at 30 September 2009 of $528 million.
Subsequent to the year end in November 2009, easyJet secured $222 million
of additional sale and leaseback finance bringing total undrawn facilities to
$750 million. Future aircraft deliveries will be funded through a combination
of undrawn committed facilities and surplus cash.
27 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Our main ancillary partners are Gate Gourmet, who provide our in-flight
merchandise, Europcar, who provide car rental, Hotelopia and Laterooms
who broker hotels and Alvia who, through the Mondial brand, provide insurance.
Our credit card acquirers are Elavon, Lloyds TSB, Euroconnect, Barclays
Merchant Services and American Express. Our payment service providers
are CyberSource and Bibit.
The Company is regulated by the CAA and easyJet Switzerland is regulated
by FOCA. We have important relationships with NATS and Eurocontrol in
relation to air traffic services.
The main unions we deal with in the UK are BALPA, UNITE and ALAE;
in France they are SNPL and UNAC/CFTC; in Spain they are SEPLA and
CCOO; in Italy ANPAC CISL; and in Switzerland BALPA and ESPA.
We use training services from CTC and flight simulation services from CAE.
We have a key relationship with easyGroup IP Licensing who own
the easyJet brand.
*These contracts contain provisions giving the other party the right to terminate if there is a change
in control in easyJet.
Policy and practice on payment of creditors
easyJet aims to have partnership agreements with suppliers, which stresses
the importance of strong suppliers aligned to the success of easyJet as a
business. Many of our supply agreements are unique and tailored to the needs
of the business, to make sure that suppliers are rewarded appropriately for
delivering services which meet pre-agreed performance targets and align with
easyJet’s own internal performance goals. Our practice is to:
q
q
q
agree the terms of payment at the start of business with the supplier
ensure that those suppliers are made aware of the terms of payments
pay in accordance with contractual and other legal obligations
At 30 September 2009, the number of creditor days outstanding for the
Group was 15 days (2008: ten days), and for the Company was nil days
(2008: nil days).
Going concern
In adopting the going concern basis for preparing the accounts, the Directors
have considered the business activities as set out on pages 16 to 19 as well
as easyJet’s principal risks and uncertainties as set out on pages 28 to 29.
Based on easyJet’s cash flow forecasts and projections, the Board is satisfied
that easyJet will be able to operate within the level of its facilities and available
cash for the foreseeable future. For this reason, easyJet continues to adopt
the going concern basis in preparing its accounts.
Significant contracts
easyJet operates a fleet constituted mainly of Airbus* aircraft with some
Boeings which are being phased out. Engines are provided by CFM and IAE
and maintenance of aircraft and engines is undertaken by SRT, Virgin*,
Aerotron*, GE, MTU and Lufthansa. The major lessors of aircraft to easyJet
are AWAS*, BOC Aviation*, GECAS*, Nomura Babcock & Brown*, Royal
Bank of Scotland* and Sumisho*. The major lenders to easyJet for aircraft
purchase are Alliance & Leicester*, Bank of Tokyo-Mitsubishi*, BNP Paribas*,
Calyon*, HSH Nordbank*, KfW*, Natixis*, PK AirFinance*, Royal Bank of
Scotland*, Sumitomo Mitsui Banking Corporation* and WestLB*.
Our main insurers are Global, AIG, Kiln, Canada Life, QBE, Chubb, Ace
and Allianz.
One of our biggest costs is fuel and our main suppliers are Shell, Air BP, Exxon
and Q8. Our IT systems include agreements with AIMS, who provide crew,
aircraft and flight management control and operation software; SAVVIS who
provide data centre hosting facilities; Lufthansa who provide flight planning
systems; SOPRA who develop our reservations system; and Agresso who
provide our accounting system.
On 30 September 2009 the Company had 20 bases and they were
operated by:
BAA
AdP
Saint Louis – EuroAirport Basel-Mulhouse-Freiburg
Manchester Airports Group
South West Airports
Abertis
Peel Holdings
Aeroports de Lyon
Flughafen Berlin-Schoenefeld
Aeroporti Di Milano
Newcastle Airport
Geneva International Airport
AENA
At these airports our ground handling was carried out by:
Menzies Aviation
Servisair
Group Europe Handling
Aviapartner
Swissport
SEA Handling
Globeground Berlin
28 easyJet plc
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Annual report and accounts 2009
FINANCIAL REVIEW CONTINUED
Principal risks and uncertainties
This section describes the principal risks and uncertainties which may affect easyJet’s business, financial results and prospects.
Risk description
Potential impact
Mitigation
Safety and security
Safety/security incident: Failure to
prevent a safety or security incident or deal
with it effectively.
Adversely affect our reputation, operational and
financial performance.
Incident reporting;
Fatigue Risk Management System;
Our number one priority is the safety of our customers
and people. We operate a strong safety management
system through:
q
q
q
q
We also have response systems in place and provide
training for crisis management.
Safety Action Group;
Safety Review Board;
External risks
Economic demand for air travel:
easyJet’s business can be affected by macro
economic issues outside of its control such as
weakening consumer confidence or inflationary
pressures.
Competition: easyJet operates in competitive
marketplaces against both flag carriers and other
low-cost airlines.
Regulatory intervention: Many of the
airports which easyJet flies to are regulated, and
as such, charges are levied by way of regulatory
decision rather than by commercial negotiation.
Many airports are also slot constrained and
therefore also subject to regulation.
Adverse pressure on revenue, load factors
and potentially residual values of aircraft.
Regular monitoring of markets and route performance
by our network and fleet management teams.
Strong balance sheet supports business through
challenging economic conditions for the sector.
Appropriate mix of owned and leased aircraft reduces
residual value exposure.
Loss of market share and erosion of revenue.
Routine monitoring of competitor activity.
Rapid response in anticipation of and to changes.
Airport charges may rise. Furthermore, slots may
not become readily available. This may adversely
impact our cost base and require us to revise our
network development plan.
easyJet has a key role in influencing the future state of
regulations. One example of its pro-activeness is the
instigation of a judicial review of the Civil Aviation
Authority (CAA) which may lead to changes in the
economic regulation of increases to UK airport charges.
Environmental impact: Consumer
attitude to climate change.
Potential impact on consumer demand for
the core business.
Environmental Management Group that co-ordinates
environmental policy and public communications.
Regulation and oversight across Europe:
Retaining control and oversight of local
regulatory and management issues across the
network as the Company grows geographically.
Lack of awareness of local regulations or
management issues could have adverse
operational, reputational and financial
consequences.
Reputational risks
Business continuity: easyJet’s head office
is located at a major London airport.
IT security and fraud risk: easyJet
receives most of its revenues through credit
cards and as an e-commerce business, faces
external and internal IT security risks.
Brand ownership: The claim brought by
easyGroup IP Licensing Limited (‘Licensor’)
against the Company in the High Court for
clarification of certain terms of its Brand Licence
agreement with the Company continues.
A loss of facilities could lead to disruption.
A security breach could result in a material
adverse effect for the business and severe
reputational damage.
Earlier this year the Court held that some of
the Licensor’s requests for declarations about
interpretation of Brand Licence provisions could only
be tried if they were amended to breach of contract
claims. The Licensor subsequently amended its case
to claim specific breaches of contract and served a
number of notices of breach. However, the
substantive points of difference between the parties
remain materially unchanged.
easyJet operates modern, fuel-efficient aircraft
operating at high capacity and flies to conveniently
located airports.
Country oversight boards are being established for
our main markets.
Alternative site is in place should there be a need to
relocate at short notice due to loss of facilities.
Systems are secured and monitored against
unauthorised access.
Scanning software for fraudulent customer activity that is
monitored and controlled by Revenue Protection team.
It is now anticipated that the case will be heard in
the High Court during June 2010. The Company
remains confident that its response to the claims is
well founded.
29 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
Risk description
E-commerce risk
Dependence on technology: easyJet is
heavily dependent on the website easyJet.com
and three key systems in particular: eRes, which
is used to process seat purchases and manage
reservations; RMS which is used for yield
management; and AIMS, which is used to
manage operational data and crew positioning.
People risks
Industrial action: Large parts of the easyJet
workforce are unionised. The same applies to
our key third-party service providers, where
similar issues exist.
Retention of key management: Due to
easyJet’s lean business model, the Company is
reliant on certain key managers.
Key supplier risk
Dependence on third-party service
providers: easyJet has entered into
agreements with third-party service providers
for services covering a significant proportion of
its cost base. There can be no assurance that
contract renewals will be at favourable rates.
Financial risks
Fuel price and currency fluctuations:
Sudden and significant increases in jet fuel price
and foreign exchange rates would significantly
impact fuel costs and other foreign currency
denominated costs.
Potential impact
Mitigation
An outage of any of these key systems could have
a material adverse effect for the business.
Two server locations are run in parallel resulting
in a highly resilient system architecture which is
subject to review and testing.
easyJet has a comprehensive system of back-up
and protection.
If there is a breakdown in this process, then
operations could be disrupted with a resultant
adverse effect on the business.
Collective bargaining takes place on a regular basis.
Loss of key personnel could result in a short-term
lack of necessary expertise in certain positions.
Bi-annual talent management and succession
planning of key positions.
The loss of any of these contracts, any inability to
renew them or any inability to negotiate
replacement contracts could have a material
adverse effect on future operating costs.
Centralised procurement department that negotiates
key contracts.
Most developed markets have suitable alternative
service providers.
If not protected against, this would have a material
adverse effect on financial performance.
Policy to hedge within a percentage band for rolling
24 month period.
Financing and interest rate risk: All of
the Group’s debt is asset related, reflecting the
capital intensive nature of the airline industry.
Market conditions could change the cost of finance
which may have an adverse effect on the financial
performance.
Liquidity risk: The Group continues to hold
significant cash or liquid funds as a form of
insurance.
Lack of sufficient liquid funds could result in
business disruption and have a material adverse
effect on financial performance.
To provide protection, the Group uses a limited range
of hedging instruments traded in the over the counter
(OTC) markets, principally forward purchases, with
a number of approved counterparties.
Group interest rate management policy aims to
provide certainty in a proportion of its financing.
Operating lease rentals are a mix of fixed and floating
rates (currently 60% to 40%).
All on balance sheet debt floating rate, re-priced
up to six months.
A portion of US dollar mortgage debt is matched
with US dollar money market deposits.
Board policy is to maintain an absolute minimum level
of free cash and money market deposits.
Allows business to ride out downturns in business or
temporary curtailment of activities (e.g. fleet grounding,
security incident, extended industrial dispute at key
supplier).
Committed borrowing facilities of US$0.5 billion at
30 September 2009.
Credit risk: Surplus funds are invested in high
quality short-term liquid instruments, usually
money market funds or bank deposits.
Possibility of material loss arising in the event of
non-performance of counterparties given recent
turmoil in financial markets.
Cash is placed on deposit with institutions based
upon credit rating with a maximum exposure of
£100 million for AAA ratings.
30 easyJet plc
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Annual report and accounts 2009
CORPORATE RESPONSIBILITY
Corporate responsibility and
how we operate underpins our
long-term prospects and our
future financial performance.
Safety, customer satisfaction,
people and the environment all
matter to our business.
The
big 5
Our values:
Our employees are
driven by our core
values of safety,
teamwork, pioneering,
passionate and integrity.
Safety is our No.1 priority and a clear imperative
for every airline, including easyJet. We recognise
the risks associated with operating an airline and
work tirelessly to ensure the safety of our customers,
our people and our shareholders’ investments.
At easyJet we believe people make the difference;
by treating our people well, they will be more
customer-focused and better represent the easyJet
brand – and that in turn will drive greater customer
satisfaction.
In order for aviation to have a long-term future, we
must minimise our environmental impact, ensure
that environmental impacts and the evolving
regulatory environment are considered in all key
business decisions and continue to invest in a fleet
of young and fuel-efficient aircraft.
Safety and our customer proposition are key
strategic priorities and are covered in detail on
pages 8 to 9 and 12 to 13 of this publication and
therefore this Corporate Responsibility report
focuses on our approach to people and
environmental management.
People
Our business is only as good as the people that
we recruit, train and retain. Our people strategy
is underpinned by the cornerstones of talent,
engagement and organisational design and aims
to ensure that, through strong leadership, we have
the right skills in the right place at the right time,
thereby creating an environment where people
perform better for us than they would for anyone
else. We recognise that having the right skills,
experience and culture directly influences our
performance across all of our strategic objectives.
Our ethos is expressed through five values: safety
(our No.1 priority – no compromises), teamwork
(we’ll get there faster together), pioneering
(breaking the mould to find new ways and new
opportunities), passionate (we’re ambitious to be
the best we can be) and integrity (we mean what
we say, and do it!).
Recruitment
Our employer brand remains a key strength
– we received over 45,000 hits on our website
for opportunities which resulted in over 20,000
applications; the quality of these applications was
high and continues to ensure that we have buoyant
holding pools from which to source our
future employees.
We continue to focus on recruiting crew that live
and breathe our values and have, for the past few
years, changed the emphasis of our employment
model to match the seasonal peaks of our business.
We recruited 672 cabin crew in the year; our
strategy to employ on fixed term contracts and
invite people back year after year enables us to
manage our business flexibly whilst maintaining
our high standard of operation. We also operated
31 easyJet plc
Annual report and accounts 2009
Overview
q
Business review
Governance
Accounts
Other information
4 Me
Award-winning
share plan
Over 80% of
employees participate in
our multi award winning
easyJet Shares 4 Me.
Reward
easyJet offers a competitive rewards package
and reviews salaries annually in line with market
rates to ensure continued alignment to the
market. The rewards package includes an annual
performance-driven bonus, based on personal
and Company performance, which encourages
all employees to contribute towards achieving our
strategic objectives. Employees are also eligible to
participate in a Group personal pension towards
which easyJet contributes, as well as having the
option to make their own contributions through
salary sacrifice.
Share schemes
easyJet once again offered all employees the
opportunity to join its popular all-employee share
plan, easyJet Shares 4 Me. The plan has won five
major awards to date, and involves three elements:
Save As You Earn (SAYE); Buy As You Earn (BAYE)
and Free Shares. Each scheme is Her Majesty’s
Revenue & Customs (HMRC) approved and
is open to all employees on the UK payroll.
For employees who are on non-UK payrolls,
international schemes have been established with
similar terms and conditions to the UK scheme,
albeit without the UK tax benefits. Participation in
the scheme remains very strong, with over 80%
of eligible staff now taking part in one or more
of the plans.
also taking the opportunity to refresh our talent
mix from outside. Overall unforced staff turnover
has improved by 5.1 percentage points to 6.9%
since 2008, although understandably, the tough
economic environment may have also significantly
influenced employees’ decision to stay at easyJet.
Turning Europe Orange
In line with our quest to “Turn Europe Orange”
we have made significant progress in expanding
our employer presence across Europe. In 2009,
easyJet continued to grow its employee base in
Italy, Spain and France, strengthening our position
as a truly pan-European air transport network.
As at 30 September 2009, easyJet employed 6,666
people (2008: 6,107), based throughout Europe as
illustrated below:
United Kingdom
Switzerland
France
Spain
Italy
Germany
Total
4,473
498
435
432
521
307
6,666
Equality and diversity
easyJet is an equal opportunities employer.
We ensure that our employees and applicants
do not receive less favourable treatment on the
basis of their age, colour, creed, disability, full or
part time status, gender, marital status, nationality
or ethnic origin, race, religion or sexual orientation.
Applications from disabled employees are always
fully considered, bearing in mind the aptitudes
of the applicant concerned. In the event that
one of our people becomes disabled every effort
is made to ensure that their employment at
easyJet continues and training is arranged
where appropriate.
the Flexicrew scheme for our pilot requirements,
employing 92 pilots across seven bases for fixed
periods of time, to meet our operational needs.
Following the consolidation of easyTech and GB
into the easyJet engineering and maintenance
function, our focus has been on integration and
building talent for our future growth. We have
recruited 28 people into the function this year
following the in-sourcing of several activities
previously undertaken by a third party supplier.
This exercise has enabled us to manage the safety,
oversight, availability and reliability of the ever
growing fleet. This has been another positive step
forward in ensuring a world-class operation and a
fully integrated engineering and maintenance function.
Training
A wide variety of people joined easyJet through
the year. We have looked to continuously improve
our well-established and thorough induction
training programme for crew and are in the
process of refreshing our offering for those within
the Management and Administration (M&A)
population. This will ensure that all of our new
joiners understand the easyJet culture, what we
value, our strategic objectives and how they can
contribute to our success from day one. easyJet
wants people who are new to the organisation to
settle in as quickly and efficiently as possible and
will continue to invest in the induction process for
everyone’s benefit.
We continue to partner with leading schools such
as Cranfield University and London City University
to ensure our managers get high quality support in
developing both their technical and management
skills. We continue to build and maintain good
relationships with well regarded research and
advisory organisations and many of our senior
managers continue to represent easyJet at
numerous external events hosted by these
leading organisations.
Retention
easyJet targets a sensible balance of retention
and attrition, benefiting from our investment in
recruitment and training, combined with continual
injection of fresh thinking. Retention rates are
influenced by rewards (including pay, benefits
and career development opportunities) and
employee engagement.
We recognise that it is often beneficial to the
business to identify and develop talent internally
together with recruiting externally. Four years
ago, we developed our talent identification and
succession planning process, which is now
embedded in our organisation. As a result, we are
more effective at identifying and retaining a pool
of talent internally on which we can draw as key
roles become vacant or new roles are created.
Consequently, whilst we have experienced higher
than normal turnover among senior managers
this year, we have been able to source some
replacements from within our talent pool whilst
32 easyJet plc
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Annual report and accounts 2009
CORPORATE RESPONSIBILITY CONTINUED
Your benefits
In January 2009, we introduced “Your Benefits”
to UK staff. This enables employees to access
programmes and savings which would not be
available to them on an individual basis. The benefit
choices for 2009 included car breakdown cover,
childcare vouchers, a “cycle to work” scheme,
dental and optical insurance, Give As You Earn,
health screening, income protection insurance,
life assurance and private medical insurance. There
are also “lifestyle” products which offer discounts
on a wide range of products and services.
Employees make further savings in tax and
National Insurance for many of these benefits,
through salary sacrifice. easyJet’s National Insurance
savings contribute to the financing of the scheme,
which is fully outsourced.
Staff travel
Discounted staff travel continues to be a popular
benefit available to all easyJet employees.
Unlimited staff travel on the entire easyJet network
is available for easyJet employees, their dependants
and up to three nominated companions, subject
to availability. easyJet employees made 73,461
bookings using staff travel during the year, a total
of 126,562 seats flown. The most popular route
purchased by our employees was the London
Gatwick to Malaga route.
Employee engagement
Communication
easyJet is committed to ensuring high employee
satisfaction and engagement levels across its
business. Engaged and motivated employees are
a critical enabler for us to deliver on all of our
strategic objectives, for example by identifying ways
that we can improve our customer proposition,
decrease our cost base, and, operate safely at
all times.
One way in which we achieve these high levels of
employee advocacy and engagement is our ability
to underpin our cultural values in how we work
with our people through informing and consulting
with them. Our flat management structure enables
us to communicate directly with all our employees.
A number of communication forums are also in
place; in addition, easyJet is currently establishing
a European works council called the easyJet
European Forum. This representative group
provides a communication vehicle for information
and consultation at a European level for issues that
affect employees in more than one country.
The aim of this forum is threefold: to assist in
sharing best practice and communication across
the business, to raise awareness and understanding
of European-wide issues and how they affect us,
and to inform us on what we can do to ensure
we remain successful and true to our principle
of low cost.
We work with our employee representatives and
recognise a number of trade unions across Europe.
easyJet has not lost any days due to industrial
action during the year. In addition, we have joint
working groups actively engaged in improving
productivity in lifestyle related matters for our
crew; activities which are consistent with our brand
promise and cultural values. We survey opinion
directly with all our crew members to take
“temperature checks” on how we are progressing
and how their needs are changing.
Pulse
We monitor and identify ways to improve
employee satisfaction through our annual Pulse
survey, which all employees are encouraged to
participate in. This year, only 36% of employees
participated in Pulse – a disappointing response
rate which we believe may be due to our crew’s
perception that management would be unlikely
to put any suggestions into effect because of the
difficult economic environment. Of those that did
respond to the survey, however, 66% of our people
indicated they are either satisfied or very satisfied,
with high levels of both employer and service
advocacy helping us to deliver our customer
proposition. Summarised Pulse results are
shown below:
Response rate
Satisfaction
Service advocacy
Engagement
Great place to work
2009
36%
66%
70%
70%
60%
2008
Variance
72% (36)ppt
72%
72%
72%
69%
(6)ppt
(2)ppt
(2)ppt
(9)ppt
33 easyJet plc
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ETS
EU Emissions
Trading Scheme
We were leading
proponents for
aviation’s entry
into EU ETS.
Charitable donations
Our charity policy is to recognise and devote
efforts to a single charity each year. This year, our
chosen charity was The Anthony Nolan Trust.
easyJet has worked with The Anthony Nolan Trust
to help promote the charity, with activities including
onboard collections, a “click and give” campaign
from our website, fundraising activities initiated by
our people, a feature in the inflight magazine and
other public relations activities. £50,000 was
donated to The Anthony Nolan Trust by easyJet
as a corporate donation.
Political donations
easyJet does not make any donations to any
political party. This in not in line with our values
and would be deemed as inappropriate.
Gifts and gratuities
easyJet employees are sometimes sent gifts from
various companies throughout the year. In order
to provide clear guidance to employees and avoid
potential conflicts of interest, we have a strict
policy that prevents any employee accepting gifts
over a nominal value of £35. Every Christmas (and
less frequently, at various times through the year)
easyJet holds a staff raffle of all the gifts that are
received. Every employee across Europe is entered
into the draw and allocated a unique reference
number. Numbers are then drawn at random and
winners have the gifts sent directly to their home.
The executive management team expected that
the Pulse results would decline in 2009 because
of the unprecedented economic uncertainty and
significant pressure to reduce costs. However,
easyJet is focused on addressing any concerns
identified and, to this end, has made a commitment
to make a step change improvement in
communication processes and resource across the
business. In particular, there is a plan to re-energise
the base sponsorship programme around the
network for all members of the easyJet leadership
team. This will improve the understanding
between people based in the network and those
based in the central office at Hangar 89.
GEM awards
During the year, we have continued to promote
our values with our “Going the Extra Mile”
employee award programme. These awards are
designed to recognise employees who go beyond
what can rightly be expected of them in their role
in order to deliver business success. During the
year, our people have been submitting nominations
linked to our customer proposition and values,
together with revenue generation and cost
reduction recommendations.
Successful nominations by customer proposition
Low cost
12%
Care
60%
Convenience
28%
Successful nominations by easyJet value
Safety
Teamwork
Pioneering
Passionate
Integrity
20%
36%
5%
23%
16%
easyJet strives to ensure that our recognition
programmes continue to align employee
contribution with business results and, to that end,
the award programme will be revised during 2010.
easyJet and the
environment
Environmental issues are important to all of us,
and we are committed to ensuring that both
easyJet, and the industry as a whole, play our
part in meeting our environmental responsibilities.
Everyone at easyJet helps deliver on our
environmental commitments, from the cabin
crew who collect waste for recycling to the senior
management working with politicians on climate
change and manufacturers to push for next
generation aircraft.
Aviation contributes to climate change.
The long-term predominant effect is from
carbon dioxide (CO2) emissions, of which
aviation contributes around 3% of man-made
CO2 emissions. The overriding environmental
issue is tackling climate change.
The target for the industry must be to reduce
its emissions over time, and we welcome the
UK Government’s endorsement of this approach
when it set industry emissions targets last year.
The industry faces significant challenges; unlike many
other sectors, there are no carbon free solutions
on the horizon, and its high profile may put it at
significant risk of punitive measures. This is why we
have been at the forefront of efforts to put aviation
into the EU Emissions Trading Scheme (ETS), a
framework for reducing EU emissions, and driving
the development of next generation aircraft. Taking
responsible steps is not only the right thing to do,
but it also limits the risk of unreasonable measures
being imposed on the aviation industry. We are
pleased to report that aviation’s entry into EU ETS
is now definite. We took a lead role in this work,
and we are now working to ensure that easyJet
is ready for formal entry in 2012. Entry into EU ETS
carries both risks and opportunities. However,
we believe that due to our efficiency, we are
well placed relative to competitors.
34 easyJet plc
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Annual report and accounts 2009
CORPORATE RESPONSIBILITY CONTINUED
Our focus on efficiency is central to delivering our
environmental commitments, and means we are
significantly more environmentally efficient than
most other airlines. Over time this will also give
us a competitive advantage, as environmentally
inefficient flying will become increasingly
unsustainable.
The most significant effect of the emissions of
mono-nitrogen oxides (NOx) from aviation are
currently considered to be on local air quality
around airports. All of our aircraft deliveries since
February 2008 have been fitted with the new
CFM56 “Tech Insertion” engines that reduce
NOx emissions by 25% due to better combustion
processes – almost a quarter of our fleet are now
fitted with these more environmentally efficient
engines which are also expected to deliver a 1%
improvement in CO2 emissions.
At the airports we operate from, we also have a
local impact on the environment in the form of
noise. However, our business model ensures that
the impact of this on the local environment is less
than for many other carriers. Our new aircraft are
amongst the quietest in the industry and we have
very few operations at night (2300 hrs – 0600 hrs)
when noise is of the greatest concern. All of the
aircraft in our fleet are compliant with the latest
required international noise standards, known as
“Chapter 3”, but also with the latest more stringent
standard, known as “Chapter 4”.
Tackling climate change
The overwhelming majority of our greenhouse gas
emissions come from flying (we estimate less than
1% of our emissions are non-flying related), and it is
these emissions which we report on and focus our
efforts on reducing. We are working to be as
efficient as possible, in particular by flying new,
highly efficient aircraft, using our aircraft as
efficiently as possible, continually focusing on
reducing the emissions from each flight and
working to improve the efficiency of the airspace
we fly in. Due to this, we are the most efficient
airline on a significant majority of the routes we fly.
Our policy is to expand our fleet through the
acquisition of the latest technology aircraft, as
these are more fuel efficient than older models.
Our average fleet age is 3.5 years, broadly flat
compared to last year. We also use these aircraft
as efficiently as possible, by maximising load factors
and seating density (see “The easyJet efficiency
advantage”, right).
All aspects of our business model are designed
around safety and efficiency. This focus on
efficiency minimises the environmental impact of
each passenger flight. Our network development
has generally focused on substituting services in
500
Shaping the future:
Over 500 global
companies, including
easyJet, have signed
up to the Copenhagen
Communiqué on
Climate Change.
The easyJet efficiency advantage
An easyJet passenger is responsible for 22%
fewer emissions than a passenger on a traditional
airline to the same destination and using the
same plane
q
q
q
q
q
The typical seating configuration of an Airbus
A319 is 1241 seats. Our Airbus A319s fly with
156 seats which is 26% more seats than the
normal configuration
Our average load factor (percentage of seats
sold) in financial year 2009 was 85.5%; the
average load factor for European airlines in
2009 was 68.0%2
Therefore, we sell on average 133 seats per
flight; a typical European airline would sell
84 seats per flight
Each of our Airbus A319s therefore
potentially carries 58% more passengers
per flight than the European norm
Even taking the additional fuel burn into
account for the greater number of passengers,
we estimate that we burn 22% less fuel than
the typical European airline operating an
A319 on the same route
Note 1: Source: Airbus.
Note 2: Source: AEA for January–August 2009.
markets dominated by inefficient former
state-owned airlines with our more efficient
product – 80% of our capacity is deployed in
established markets. While we aim to grow these
markets through our low fares, when we enter
a market we often substitute for existing less
efficient services. The efficiency that we bring to
a market can even result an overall reduction in
emissions in absolute terms, even if total passenger
numbers increase.
Alongside our operating model we work every
day on improving the efficiency of our flying, and
in the last year implemented a number of fuel
saving initiatives (see page 15 for more detail).
Finally, by pushing for more efficient airspace use,
such as Continuous Decent Approaches, we are
demanding that our service providers match
our level of commitment.
Taking these together we have set a target
to reduce our CO2 emissions per passenger
Km by 3% by 2011.
g CO2/passenger Km
0
2
.
6
1
1
0
5
.
2
1
1
0
0
.
0
1
1
0
9
.
6
0
1
0
5
.
4
0
1
– (3.3)%
0
8
.
8
9
0
7
.
5
9
6
5
.
5
9
1
3
.
0
9
0
3
.
7
8
00
01
02
03
04
05
06
07
08
09
35 easyJet plc
Annual report and accounts 2009
Overview
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Other information
Alongside this we are involved in a range of bodies,
including the Sustainable Aviation group in the UK.
We also answered the Carbon Disclosure Project
Greenhouse Gas Emissions Questionnaire as part
of the latest Carbon Disclosure Project (CDP7).
Crucially, we believe it is important that consumers
are given full and accurate information on the
carbon impact of their flight. We have provided a
carbon calculator on our website, and consumers
are informed of the emissions they are responsible
for as they book and are given the opportunity to
offset the carbon emissions of their flights as part
of the booking process. Our offset scheme only
uses United Nations certified carbon credits.
easyJet leads the way
in shaping a greener future
easyJet believes that emissions from aviation will
need to fall in the long-term, but that achieving this
will require the industry and governments to work
together. It will require step changes in efficiency,
through new technologies, and the right policies
from governments.
We continue to actively engage with both airframe
and engine manufacturers in pursuit of this vision
by 2017, further developing the vision we outlined
in 2007 – the easyJet ecoJet. We have set out a
platform for an aircraft that is 25% quieter, emitting
50% less CO2 and 75% less NOx per passenger
Km than today’s aircraft.
We support efforts to include emissions from
international transport into a post-Kyoto climate
change agreement, and along with the business
leaders of over 500 global companies, we have
signed the Copenhagen Communiqué on Climate
Change. We are committed to working with policy
makers across Europe to help shape future policies.
In addition to our work on ETS, we are working to
improve the efficiency of airspace and are involved
in the SESAR (Single European Sky ATM Research)
programme, part of the implementation of the
EU’s Single European Sky (SES), which aims to
reduce emissions by at least 10% across Europe.
Reducing our emissions
During the year, efficiency improvements have
led to a significant reduction in emissions intensity.
In particular:
q
q
Total emissions from our operations continue
to grow at a slower rate than the total RPKs
flown, indicating improving environmental
efficiency
2 emissions from operations under
Total CO
our control grew by 2.5% from 4.3 million
tonnes to 4.4 million tonnes, less than the
6.0% increase in RPKs
CO q 2 emissions per booked passenger trip fell
by 0.9% from 98.6 Kg per passenger flight to
97.7 Kg per passenger flight, despite the 2.6%
increase in average sector length
q
2 emissions from our flights
Average CO
reduced by 3.3% from 90.3 g CO2 per
passenger kilometre to 87.3 g CO2 per
passenger kilometre
During the last nine years our emissions of CO2
per passenger kilometre have reduced by 25%.
22%
more efficient:
We estimate that we burn
22% less fuel than some of
our competitors on the
same route.
36 easyJet plc
Annual report and accounts 2009
q
GOVERNANCE
DIRECTORS’ PROFILES
01
04
03
02
05
01 Sir David Michels
Non Executive Interim Chairman
David (1946) was appointed to the Board on
6 March 2006 and became the Chairman of
easyJet on 1 July 2009. He is currently Deputy
Chairman of Marks and Spencer plc and is also
Non Executive director of Strategic Hotels &
Resorts, Inc and the Jumeirah Group. David has
held a number of senior management and plc
board positions in the leisure industry. He spent
15 years with Grand Metropolitan, mainly in sales
and marketing, which culminated in a board
position as Worldwide Marketing Director. In 1989,
he became Deputy Chairman of Hilton UK and
Executive Vice President, Hilton International.
He joined Stakis in 1991, as Chief Executive,
and became Group Chief Executive of the Hilton
Group (formerly Ladbroke Group) in June 2000,
a position he held until 2006. He was previously
Senior Independent Director at British Land Plc
and Arcadia Plc. He is the current President of the
British Hospitality Association and was knighted in
June 2006 for services to the hospitality industry.
02 Sir Michael Rake
Non Executive Deputy Chairman and
Senior Independent Director
Michael (1948) was appointed Deputy Chairman
on 1 June 2009. He is Chairman of BT Group plc,
The UK Commission for Employment and Skills,
as well as a Director of Barclays PLC, McGraw-Hill,
Inc and the Financial Reporting Council. He is also
Chairman of the private equity oversight
group, the Guidelines Monitoring Committee.
From May 2002 to September 2007, Michael
was Chairman of KPMG International. Prior to his
appointment as Chairman of KPMG International,
he was Chairman of KPMG in Europe and Senior
Partner of KPMG in the UK.
03 Andrew Harrison
Chief Executive Officer
Andrew (1957) became Chief Executive Officer
on 1 December 2005. He was previously the Chief
Executive of RAC plc prior to its acquisition by
Aviva plc in 2005. Andrew joined Lex Service plc in
1996 as Chief Executive and led its transformation
from a vehicle distribution company into RAC plc,
a strongly-branded, consumer-facing services
company with 6.5 million members. RAC plc
delivered strong growth in a variety of consumer
services, which included BSM, financial and legal
services, as well as good expansion in business
services, winning large contracts. The successful
integration of Lex and RAC resulted in a strong
rise in profits and a tripling of the share price during
Andrew’s tenure as Chief Executive. Andrew
was a Non Executive Director at Emap between
2000 and 2008 where he also chaired the Audit
Committee. Prior to Lex Service, Andrew was an
Executive Director of Courtaulds Textiles plc.
04 David Bennett
Independent Non Executive Director
David (1962) was appointed to the Board on
1 October 2005 and is Chairman of the Audit
Committee. He was recently appointed as a
Director of Pacnet Limited. Prior to this, David was
an Executive Director of Abbey National Plc and
was Group Chief Executive of Alliance & Leicester
plc having previously served as Group Finance
Director. David held a number of senior
management positions at Cheltenham &
Gloucester Building Society and Lloyds TSB. He
was also an Executive Director of the National
Bank of New Zealand Limited and is a member of
the Association of Corporate Treasurers.
05 Sven Boinet
Independent Non Executive Director
Sven (1953) was appointed to the Board of easyJet
in March 2008. A graduate of Stanford University,
he was previously CEO of Lucien Barrière Group
and was recently appointed CEO of Pierre &
Vacances/Center Parcs Group, a €1.5 billion
turnover company leader on the continent of
resort and leisure lodging. He previously held a
number of senior management roles over a 15 year
period at the French hotels group, Accor. He was
also a Non Executive Director of lastminute.com
from 2003 until its sale to Sabre in 2005.
37 easyJet plc
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06
09
07
08
10
06 John Browett
Independent Non Executive Director
John (1963) joined easyJet in September 2007.
He is currently Chief Executive Officer of DSG
International plc, a position he has held since
December 2007. Prior to joining DSG International,
John was the Operations Development Director
of Tesco plc. He joined Tesco as Group Strategy
Director in 1998 and held a number of Executive
Director positions in the company including
running Tesco.com from 2000 to 2004 where he
was responsible for formulating and delivering its
strategy from launch to profitability.
A graduate of Cambridge University and Wharton
Business School, John was at the Boston Consulting
Group between 1993 and 1998.
07 Professor Rigas Doganis
Independent Non Executive Director
Rigas (1939) was appointed to the Board on
1 December 2005. Rigas is an aviation consultant
and strategy adviser to airlines, airports, banks and
governments around the world. He is Chairman
of the European Aviation Club in Brussels and a
Non Executive Director of GMR Hyderabad
International Airport, India. He is a former
Chairman/CEO of Olympic Airways and was
formerly a Non Executive Director of South
African Airways. Rigas is also a visiting Professor
at Cranfield University and the author of books
on aviation economics and management.
08 Sir Stelios Haji-Ioannou
Non Executive Director
Stelios (1967) founded easyJet in 1995.
He was easyJet’s Non Executive Chairman until
November 2002 and was reappointed to the
Board in May 2005. A graduate of the London
School of Economics and City University Business
School, Stelios founded his first business, Stelmar
Tankers, in 1992. This shipping company listed on
the New York Stock Exchange in 2001 and was
sold in 2005 to OSG shipping group.
Since 1999 Stelios has set up some 16 other
“easy”-branded ventures, which are capitalised
and managed separately from easyJet within
easyGroup Holdings Ltd, Stelios’ private investment
vehicle. An up-to-date list of these businesses can
be found on www.easy.com. easyGroup owns
the “easy” brand and licenses it to the various
easy-branded ventures (including easyJet) and
is also a major shareholder in easyJet plc. Stelios
was knighted in November 2006 for services
to entrepreneurship.
09 Keith Hammil
Independent Non Executive Director
Keith (1952) was appointed to the Board on
1 March 2009. He is a Fellow of the Institute of
Chartered Accountants, is chairman of Travelodge
and was Chairman of Go, prior to its acquisition by
easyJet in 2002. He has considerable experience
as a Director of listed companies, is currently the
Chairman of Tullett Prebon and Alterian and was
Chairman of Luminar and Moss Bros. He is also a
Director of Collins Stewart and has previously
been a Director of Electrocomponents and
Cadmus Communications Corp. He was Finance
Director of WH Smith, Forte and United Distillers
and a Partner in PricewaterhouseCoopers. He also
chairs the board of the University of Nottingham.
10 Robert Rothenberg
Non Executive Director
Bob (1950), was appointed to the Board on
1 August 2009. He is Senior Partner in the
London-based accountancy firm of Blick
Rothenberg. Bob is a Governor of Highgate School
and a Trustee of The Prince’s Foundation for the
Built Environment. He was made an MBE in the
2007 New Year’s Honours List for services to
business and to the community in London.
The following Directors resigned during the year:
Dawn Airey (resigned 31 December 2008)
Sir Colin Chandler (resigned 1 July 2009)
Jeff Carr (resigned 25 September 2009)
38 easyJet plc
q
Annual report and accounts 2009
EXECUTIVE MANAGEMENT TEAM
01
02
03
04
01 Andrew Harrison
Chief Executive Officer
See Directors’ profiles.
02 Dana Dunne
Chief Commercial Officer
Dana (1963) joined easyJet in September 2009.
Before joining easyJet, Dana was CEO of AOL
Europe, one of the leading online companies
in Europe. Prior to that he was head of the
transformation of AOL in the US. Dana has held
a number of other senior positions in the telecom
and media industry. At Belgacom he was President
of one of their four business units, Retail Carrier
and Network Services, and prior to this was
MD of the Business Division. At US West, Dana
was Vice President of Strategy and Development
for US West, Inc. and President of US West
International. Prior to this Dana was at McKinsey
& Company, in their Madrid, Brussels, and London
offices where he was one of the leaders of their
telecoms practice. Dana has an MBA from the
Wharton School of Business, an MA from the
University of Pennsylvania, and a BA from
Wesleyan University.
03 Mike Campbell
People Director
Mike (1957) joined easyJet in October 2005
as People Director. Before joining easyJet Mike
worked at Wedgwood in a broad role as Director
of People and Brands and Managing Director for
Canada, Australia and Pan-Asia. Prior to that
Mike worked for 14 years at Fujitsu in a variety of
development and personnel roles across Europe,
Asia, Africa and the Middle East, ending up as
Chief Personnel Officer. His early career was
in education and research. Mike has a BSc in
Mathematics and Masters in Fluid Dynamics.
04 Tim Newing
IT Director
Tim (1959) joined easyJet in August 2006. He has
a wide range of experience across the technology
spectrum and has played a major role in the
development of the National Lottery over a
ten year period, first as Technical Manager for IT
supplier GTECH UK before joining Camelot as
Head of Projects and Networks in December
2000 and becoming IT Director in March 2002.
During this time, Tim successfully developed and
delivered a series of programmes that saw a period
of major technological innovation, significantly
enhancing the systems architecture and key
business processes within Europe’s biggest lottery
company, and, at the same time ensuring high
reliability and availability from the production
systems. His achievements saw him recognised as
the 2005 IT Director of the Year in the Jaeger-
LeCoultre Telegraph Business Awards.
39 easyJet plc
Annual report and accounts 2009
Overview
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q
Governance
Accounts
Other information
05
06
07
08
05 Cath Lynn
Director of Network Development and Planning
Cath (1964) spent 12 years in retail for J Sainsbury
before being head hunted in 1998 by Barbara
Cassani for the start up of Go where she was part
of the management buy out team and headed up
cabin services and on board product development
and later customer services. Cath played an active
role in the merger of Go into easyJet. Cath has
successfully carried out a number of senior
management roles at easyJet including Head
of Ground Operations, Head of Airport
Development and Procurement and Head
of Network Development.
06 Cor Vrieswijk
Operations Director
Cor (1958) joined easyJet in January 2007 from
Transavia.com which is a Dutch-based airline
where he was Chief Operations Officer for nine
years and brings 25 years’ experience in the airline
industry. His responsibilities at Transavia.com
included flight operations, cabin operations,
engineering and maintenance and ground handling,
together with relevant experience in marketing,
human resources and IT. Cor’s first degree was
in engineering followed up by a Masters Degree
in organisational sciences.
07 Warwick Brady
Procurement Director
Warwick (1964) became Procurement Director
on 5 May 2009. He has significant experience of
leading low cost airlines in areas ranging from high
growth and restructuring, through to turnarounds.
Warwick was Deputy Operations Director at
Ryanair from 2002 to 2005, where he held various
executive roles including Deputy CEO of Buzz,
following its acquisition from KLM. More recently,
he spent two years in India as Chief Operations
Officer of Air Deccan. Most recently, Warwick
was CEO at Mandala Airlines.
08 Mark Adams
Interim Chief Financial Officer
Mark (1964) joined easyJet in September 2009 as
Interim Chief Financial Officer. Mark is a Chartered
Accountant and has held a number of senior
finance roles across a range of sectors, including
most recently Helphire Group plc, Alpha Airports
Group plc and STA Travel Group.
1*
40 easyJet plc
Annual report and accounts 2009
CORPORATE GOVERNANCE
The Board meets regularly, with 12 meetings having been held during the
year ended 30 September 2009. All members of the Board are supplied in
advance with appropriate information covering matters which are to be
considered. It is standard practice for the Non Executive Directors to meet
without any Executive Directors present on a regular basis during the year,
usually prior to or immediately after each Board meeting.
The appointments of Keith Hamill and Sir Michael Rake during the year as
Non Executive Directors were the result of a search process carried out
using external recruitment consultants in accordance with longstanding Board
practice.
Meetings attended
Director
Sir Colin Chandler
(resigned 1 July 2009)
Andrew Harrison
Jeff Carr (resigned
25 September 2009)
Professor Rigas Doganis
Sir Stelios Haji-Ioannou
John Browett
Sir David Michels
David Bennett
Sven Boinet
Dawn Airey (resigned
31 December 2008)
Keith Hamill (appointed
1 March 2009)
Sir Michael Rake (appointed
1 June 2009)
Bob Rothenberg (appointed
1 August 2009)
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
9
12
12
10
12
10
11
11
9
1
8
3
2
n/a
3*
4*
n/a
n/a
4
2
4
n/a
n/a
2
1*
1*
2*
2*
1*
4
n/a
1*
4
4
3
n/a
1***
n/a
n/a
3
n/a
n/a
3
n/a
n/a
n/a**
3
n/a
n/a
n/a
n/a
n/a
* By invitation.
** Appointed Chairman of the Nominations Committee on 1 July 2009.
*** Appointed Chairman of the Remuneration Committee on 1 July 2009.
Sir Colin Chandler resigned during the year with effect from 1 July 2009 and,
after consideration by the Nominations Committee and the Board, Sir David
Michels was appointed Interim Chairman with Sir Michael Rake as Deputy
Chairman.
Bob Rothenberg was appointed by easyGroup Holdings Limited and Sir
Stelios Haji-Ioannou pursuant to the rights granted to them under Article 87
of the Company’s Articles of Association. The members of the Nomination
Committee also considered and approved his appointment. Separately, the
Board has taken advice during the year from expert management search and
development consultants with a view to both enhancing its development of
key managers and reviewing its succession planning for the top executive
roles in the Company.
Principles statement
easyJet is committed to meeting the required standards of corporate
governance.
Statement of compliance
During the year the Board considers that it and the Company have complied
with the best practice provisions of Section 1 of the Combined Code on
Corporate Governance of June 2008 without exception. The Combined
Code is issued by the Financial Reporting Council and available on the
Financial Reporting Council’s website, http://www.frc.org.uk/corporate.
Board of Directors
As at 30 September 2009, the Board comprised nine Non Executive
Directors (including the Interim Chairman) and one Executive Director.
The roles of Chairman (as fulfilled by Sir Colin Chandler and subsequently Sir
David Michels as Interim Chairman) and Chief Executive (Andrew Harrison)
are separated, clearly defined, and approved by the Board. Sir Michael Rake
is the Senior Independent Non Executive Director and holds the post of
Deputy Chairman.
The Company regards David Bennett, Professor Rigas Doganis, John
Browett, Sven Boinet and Keith Hamill as Independent Non Executive
Directors. Dawn Airey, who served for part of the year as Non Executive
Director, was also regarded as independent. Sir David Michels was also
regarded as independent until his appointment as Interim Chairman and
Sir Michael Rake is regarded as independent.
Sir Stelios Haji-Ioannou is not regarded as independent due to his significant
beneficial shareholding in the Company and his prior involvement in an
executive management capacity. Bob Rothenberg is not considered to be
independent due to his appointment by Sir Stelios Haji-Ioannou pursuant to
Article 87 of the Company’s Articles of Association, as set out below:
“87.1 For so long as the Controlling Shareholders directly or indirectly hold
in aggregate at least 25 per cent of the issued ordinary share capital of the
Company and the Company is entitled to continue to use the “easyJet”
brand under the terms of the easyJet Brand Licence, the Controlling
Shareholders (or either of them) shall be entitled to appoint any two
persons to be Non Executive Directors and in addition Sir Stelios Haji-
Ioannou shall be entitled to be the Chairman of the Board and of the
Company.
“87.2 For so long as the Controlling Shareholders directly or indirectly hold
in aggregate at least 10 per cent of the issued ordinary share capital of the
Company and the Company is entitled to continue to use the “easyJet”
brand under the terms of the easyJet Brand Licence, Sir Stelios Haji-Ioannou
shall be entitled to be the Chairman of the Board and of the Company.”
Board engagement with investors
The Board continues to consider that it is appropriate for the Chairman to
be the primary conduit with investors given his experience in liaising with
shareholders and relative longevity on the Board following his predecessor’s
departure.
Each Chairman of the Board has made himself available for investor meetings
and questions, in person, during the year and has updated the whole Board
on the results of his meetings and the opinions of investors. Each Senior
Independent Non Executive Director has also acted as an alternative point
of contact and attended meetings in order to help develop a balanced
understanding of the issues and concerns of major shareholders. Regular
feedback is provided to the Board on the opinions of shareholders and an
investor perception audit is carried out by an independent third party on
annual basis.
41 easyJet plc
Annual report and accounts 2009
Directors and officers insurance cover has been established for all Directors
to provide cover against their reasonable actions on behalf of easyJet. During
the year, the Interim Chairman undertook a performance review of the
Board using an external evaluation tool provided by a corporate advisory
company. The process involved a detailed questionnaire completed by each
of the Directors, one on one discussions with individual Directors and a
separate review of the outcome by the full Board in a plenary session.
The performance of the Board (including the Interim Chairman), the Board’s
Committees and also that of the individual Board Directors was reviewed
as part of the same process. The Board considered that given the short
period of time for which Sir David Michels had held the position of Interim
Chairman it would not be appropriate to have his performance reviewed
as Chairman by the Senior Independent Non Executive Director prior to
30 September 2009.
The Board regularly receives updates, via the Company Secretary, on
relevant legislation, regulation and governance best practice.
Board Committees
Remuneration Committee
At 30 September 2009, the Remuneration Committee comprised four
Independent Non Executive Directors, namely Keith Hamill (Committee
Chairman), David Bennett, Professor Rigas Doganis, and Sven Boinet.
This Committee, which meets at least twice per year, has responsibility
for making recommendations to the Board on the compensation of senior
executives and determining, within agreed terms of reference, the specific
remuneration packages for each of the Executive Directors and the
Chairman. In addition to meetings to allot shares under the Company’s
share option schemes, the Remuneration Committee has met four times
during the year.
The Board has reviewed the composition of the Remuneration Committee
during the year and at the end of June 2009, Sir David Michels stood down
as Chairman of the Committee in accordance with provision B.2.1 of the
Combined Code, simultaneously standing down as member. From 1 July
2009, Keith Hamill was appointed to the Remuneration Committee and to
act as its Chairman in place of Sir David Michels. The Board is satisfied that
the Directors who are currently members of this Committee are those who
are best able to contribute to the Committee’s objectives.
Shareholders are generally required to approve all new long term incentive
plans and significant changes to existing plans. Further details of these plans
can be found in the Report on Directors’ remuneration and the full text of
the terms of reference for the Remuneration Committee is available in the
governance section of easyJet’s corporate website,
http://corporate.easyJet.com.
Audit Committee
The Audit Committee comprises three Non Executive Directors, all of
whom are independent. As at 30 September 2009, the Audit Committee
members were David Bennett (Committee Chairman), John Browett and
Keith Hamill, who was appointed on 1 March 2009. On 30 June 2009
Sir David Michels stood down from the Audit Committee in accordance
with the provisions of the Combined Code. This Committee meets at least
three times per year.
The primary function of the Audit Committee is to assist the Board in
fulfilling its oversight responsibilities by reviewing the financial reports
and other financial information in advance of publication, reviewing
on a continuing basis the systems of internal controls regarding finance
and accounting that management and the Board have established and
reviewing generally the auditing, accounting and financial reporting processes.
The ultimate responsibility for reviewing and approving the annual and other
accounts remains with the Board. The Audit Committee has met four times
during the course of the year, including an additional meeting in September
2009 to review the accounting policy issues raised in the statement of
Sir Stelios Haji-Ioannou appended to the end of the preliminary results
announcement of 18 November 2008.
The Audit Committee is charged with reviewing the effectiveness of internal
control, approving and monitoring the internal audit work plan, considering
issues arising from internal audit’s work, reviewing management’s response
to internal control issues, approving the external audit fee, considering the
external audit strategy and plans, reviewing the external auditors’ reports and
reviewing and approving the annual accounts. Both internal and external
auditors are given the opportunity to meet privately with the Audit
Committee without any member of management present. It is standard
practice for the external auditors to meet with the Audit Committee
without the executive being present at each Audit Committee meeting.
The terms of reference of the Audit Committee are documented and
agreed by the main Board. The full text of the terms of reference is
available in the governance section of easyJet’s corporate website,
http://corporate.easyJet.com. The key terms set out that the Audit
Committee will:
Serve as an independent and objective party to monitor the quality and
timeliness of the financial reporting process and monitor the internal
financial control system
Review and appraise the audit efforts of the external auditors
Provide an open avenue of communication among the external auditors,
financial and senior management, and the Board
Confirm and assure the independence and objectivity of the external
auditors (in particular, in the context of the provision of additional
services to the Company)
Review and ensure the effectiveness of the risk management processes of
the Company
Review and monitor the effectiveness of the internal audit function and
management’s responsiveness to any findings and recommendations
Assess potential conflicts of interest of Directors on behalf of the Board
The Audit Committee recently reviewed its terms of reference in line with
the Financial Reporting Council’s 2008 Guidance on Audit Committees and
decided that no changes were required.
42 easyJet plc
Annual report and accounts 2009
CORPORATE GOVERNANCE CONTINUED
The Audit Committee has the responsibility for appointing the external
auditors. PricewaterhouseCoopers LLP were reappointed auditors of the
Group at the Annual General Meeting, held in February 2009. In order to
preserve auditor objectivity and independence, the Board has decided that
PricewaterhouseCoopers LLP will not be asked to provide consulting
services unless this is in the best interests of the Company. Clause 9 of
the Audit Committee’s terms of reference sets out the formal policy on
non-audit work. The auditors are asked on a regular basis to articulate the
steps that they have taken to ensure objectivity and independence. easyJet
monitors the auditors’ performance, behaviour and effectiveness during the
exercise of their duties. This included this year obtaining a report on the
auditors’ own quality control procedures and a consideration of their annual
audit, quality and transparency report. In the financial year, easyJet spent
£0.1 million with PricewaterhouseCoopers LLP (2008: £0.9 million) in
respect of non-audit services.
The Board is satisfied that the Directors who are currently members of this
Committee are those who are best able to contribute to the Committee’s
objectives. David Bennett has served as the Chairman of the Committee
during the year. David was until 31 July 2009 an Executive Director of Abbey
National plc prior to which he was Chief Executive Officer and Finance
Director of Alliance and Leicester plc, experience which the Board considers
to be recent and relevant for the purposes of undertaking the role as
Chairman of the Committee.
Nominations Committee
The Nominations Committee comprises at least three members. During
the year, the Nominations Committee members were Sir Colin Chandler
(Chairman until 30 June 2009), David Bennett, Professor Rigas Doganis,
Dawn Airey (until 31 December 2008) and Sir David Michels who took
over as Chairman on 1 July 2009. Sir Colin Chandler was not considered to
be independent as he was Chairman of the Group before his retirement.
However, the Board was satisfied that Sir Colin Chandler’s personal integrity
and experience made him a highly effective member of the Board and the
Nominations Committee. The Board is satisfied on the same grounds with
the appointment of Sir David Michels to the Nominations Committee.
This Committee is responsible for nominating candidates to fill Board
positions and for making recommendations on Board composition and
balance. In appointing Non Executive Directors, the Board’s practice is to
use an external recruitment agency.
The Nominations Committee has met three times during the year. The first
meeting was to consider and approve the appointment of Keith Hamill.
The second was to consider a long-term successor to Sir Colin Chandler as
Chairman of the Company and resulted in the recommendation to the
Board of Sir Michael Rake. The discussions at this meeting pertaining to the
appointment of Chairman were chaired by David Bennett, in accordance
with the provisions of the Combined Code. The third was to consider
and approve the appointment of Sir David Michels as Interim Chairman
and Sir Michael Rake as Deputy Chairman. The searches for Keith Hamill
and Sir Michael Rake both involved the use of independent recruitment
consultants. Sir David Michels was appointed Interim Chairman without the
involvement of independent recruitment consultants or open advertising
as his chairmanship is only intended to be short term until a new Chairman
is formally appointed. The Committee is utilising independent recruitment
consultants to identify a suitable successor to Jeff Carr as Group Finance
Director, and the search process is well advanced.
The terms of reference of the Nominations Committee are documented
and agreed by the main Board. The full text of the terms of reference is
available in the governance section of easyJet’s corporate website,
http://corporate.easyJet.com.
Before selecting new appointees, the Nominations Committee considers the
balance of skills, knowledge and experience on the Board to ensure that a
suitable balance is maintained. All job specifications prepared include details
of the time commitments expected in the role.
On joining the Board, new Board members receive a full and tailored
induction. Shareholders are offered the chance to meet new Directors.
Contracts and letters of appointment with Directors are made available at
the Annual General Meeting or on request.
Litigation Committee
As a result of the proceedings brought by easyGroup IP Licensing Limited
(a company under the ultimate control of Sir Stelios Haji-Ioannou) in 2008
in relation to the clarification of the brand licence, the Board continues to
operate a separate Litigation Committee to deal with the proceedings
and all matters related to them. Neither Sir Stelios Haji-Ioannou nor
Bob Rothenberg (as his nominee) sit on this Committee which comprises
every other Director of the Board. It is anticipated that the Committee shall
continue to exist until the proceedings and any related circumstances giving
rise to a conflict of interest between Sir Stelios Haji-Ioannou’s interests and
those of the Company have been resolved. In this respect, a date in or
around June 2010 for a High Court hearing to adjudicate the dispute is
expected to be confirmed in due course.
Relations with investors and the Annual General
Meeting (“AGM”)
The AGM gives all shareholders the opportunity to communicate directly
with the Board. There is also regular communication with institutional
investors on key business issues. easyJet has an investor relations department
which runs an active investor relations programme to facilitate engagement
with investors including one on one meetings, visits to easyJet’s operations
and presentations. The investor relations website was upgraded during the
year with the aim of improving the information available to shareholders
about easyJet. The website can be accessed at http://corporate.easyjet.com.
Internal control
The overall responsibility for easyJet’s systems of internal control and
for reviewing its effectiveness rests with the Directors of the Company.
The responsibility for establishing and operating detailed control procedures
lies with the Chief Executive. However, the internal control systems are
designed to manage rather than eliminate the risk of failure to achieve
business objectives and by their nature can only provide reasonable but
not absolute assurance against material misstatement or loss.
The Board has conducted an annual review of the effectiveness of the
system of internal control during the year under the auspices of the Audit
Committee. No significant failings or weaknesses were identified during the
course of this review.
The internal control regime is enhanced by the operation of a whistleblower
reporting function. The system is operated by a specialist external third-party
service provider and allows employees to report concerns in confidence on
a no-names basis. The Audit Committee has approved the processes and
reporting structure for the function and receives regular reports on the
operation of the function.
43 easyJet plc
Annual report and accounts 2009
Internal audit
Internal audit’s work is focused primarily on areas of greatest risk to easyJet,
as determined by management’s risk identification and assessment processes
as validated by Executive Directors. The output from this process is
summarised in an audit plan, which is approved by the Board and Audit
Committee, and updated on a rolling quarterly basis.
The Head of Internal Audit reports to the Group Finance Director and the
Chairman of the Audit Committee. The Head of Internal Audit was invited
to and attended all of the Audit Committee meetings in the year and has
reported regularly on internal audit reviews to the Executive Management
Team meetings during the course of the year. A formal audit charter is
in place.
The internal audit department reviews the extent to which systems of
internal control:
are effective;
are adequate to manage easyJet’s significant risks; and
safeguard the Company’s assets.
The key objectives are to provide independent and objective assurance on
risks and controls to the Board and senior management; and to assist the
Board with meeting its corporate governance and regulatory responsibilities.
The role of internal audit and the scope of its work continue to evolve to
take account of changes within the business and emerging best practice.
Risk management
A formal bi-annual process is in place to identify, evaluate, manage and
report upon significant risks faced by the Company and is operated
by the Company Secretary under the direction of the Risk Committee.
The process involves a rigorous mandatory reporting regime across
middle tier management with reporting of risks subject to review by a
cross-functional Risk Committee which produces consolidated risk reports
for the Board.
An ongoing process for the effective management of risk has been defined
by the Directors and has been adopted as follows:
Ongoing assurance and risk management is provided through the various
monitoring reviews and reporting mechanisms embedded into the
business operations. Key monitoring reviews include those conducted
continuously in weekly meetings. Operational meetings include the
Safety Audit Group which meets monthly to discuss safety, security and
environmental risks. The Safety Review Board meets monthly, or more
regularly where events require, to review safety performance. In addition,
there are regular Commercial, Financial and IT functional meetings;
The Executive Management Team meets monthly to consider significant
current risks. Individual department and overall business performance is
reviewed. The reporting of significant risks to Executive Management
Team and the Board of the Company has been enhanced by the risk
management processes referred to above. Individual department and
overall business performance is reviewed;
Written reporting of current significant risks is provided to the Board on
a monthly basis. Control weaknesses or failings are considered by the
Board if they arise;
Internal audit considers, reviews and tests internal control and business
risk matters throughout the Group. Further details of the internal audit
function’s operations are set out below;
As described above, a bi-annual risk and control identification process,
together with annual control effectiveness testing, is conducted. The key
risks are identified and the key controls to manage these risks to the
desired level are also identified;
Action plans are set to address any control weaknesses or gaps in
controls identified.
The Directors reviewed the effectiveness of internal control, including
operating, financial, compliance and risk management controls, which mitigate
the significant risks identified. The procedures used by the Directors to
review the effectiveness of these controls include:
Reports from management. Reporting is structured to ensure that key
issues are escalated through the management team and ultimately to the
Board as appropriate;
Discussions with senior personnel throughout the Company; and
Consideration by the Audit Committee of any reports from internal and
external auditors;
The controls, which mitigate or minimise the high-level risks, are tested to
ensure that they are in operation. The results of this testing are reported
to the Board which considers whether these high-level risks are effectively
controlled.
44 easyJet plc
Annual report and accounts 2009
SHAREHOLDER INFORMATION
Share capital
Details of the movements in authorised and issued share capital during the
period are provided in note 18 to the accounts.
The rights and obligations attaching to the Company’s Ordinary Shares are
set out in the Articles.
Voting rights and restrictions on
transfer of shares
None of the ordinary shares carry any special rights with regard to control of
the Company. There are no restrictions on transfers of shares other than:
Certain restrictions which may from time to time be imposed by laws or
regulations such as those relating to insider dealing
Pursuant to the Company’s code for securities transactions whereby the
Directors and designated employees require approval to deal in the
Company’s shares
Where a person with an interest in the Company’s shares has been
served with a disclosure notice and has failed to provide the Company
with information concerning interests in those shares
Where a proposed transferee of the Company’s shares has failed to
furnish to the Directors a declaration of nationality (together with such
evidence as the Directors may require) as required by the Company’s
Articles of Association
Substantial interests
In accordance with the Disclosure and Transparency Rules DTR 5, the
Company as at 13 November 2009, has been notified of the following
disclosable interests of 3% or more in its issued ordinary shares:
easyGroup Holdings Limited
(holding vehicle for Sir Stelios Haji-Ioannou)
Polys Holdings Limited
(holding vehicle for Polys Haji-Ioannou)
Standard Life Investments
Schroders plc
FMR LLC
Sanderson Asset Management
Financial calendar
Financial year end
Annual General Meeting
Announcement of 2010 results
Release of interim results to 31 March 2010
Results for the year to 30 September 2010
%
26.94
11.33
7.00
5.50
5.10
3.14
30 September 2009
18 February 2010
11 May 2010
16 November 2010
The powers given to the Directors by the Company’s Articles of
Association to limit the ownership of the Company’s shares by non UK
nationals and powers to enforce this limitation including the right to force
a sale of any affected shares.
The Company is not aware of any arrangements between shareholders that
may result in restrictions on the transfer of securities or voting rights.
Registered office
Hangar 89
London Luton Airport
Bedfordshire
LU2 9PF
Employee share schemes – rights of control
The trustee of the easyJet Share Incentive Plan (the Plan) will, on receipt of
any offer, compromise, arrangement or scheme which affects ordinary shares
held in the Plan, invite participants to direct the trustee on the exercise of
any voting rights attaching to the ordinary shares held by the trustee on their
behalf and/or direct how the trustee shall act in relation to those ordinary
shares. The trustee shall take no action in respect of ordinary shares for
which it has received no directions or ordinary shares which are unallocated.
Generally, on a poll the trustee shall vote in accordance with directions given
by participants. In the absence of directions or on a show of hands the
trustee shall not vote.
The trustee of the easyJet Employee Share Trust (the Trust), which is used in
connection with the easyJet Long-Term Incentive Plan, has the power to
vote or not vote at its discretion in respect of any shares in the Company
held in the Trust.
Company registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Auditors
A resolution to reappoint PricewaterhouseCoopers LLP as auditors of the
Company will be put to shareholders at the forthcoming Annual General
Meeting.
Company number
3959649
45 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION
Introduction
easyJet has produced a resilient performance in a very tough year. The airline
industry has faced many challenges from a combination of economic
slowdown, volatile fuel prices and currency fluctuations. The Company also
faced a number of other difficult issues.
This report includes two major issues arising during the year:
1) Setting robust long-term performance targets has been difficult in this
uncertain environment. As a result, following consultation with our larger
shareholders and shareholder protection bodies, the Remuneration
Committee made a change to the easyJet Long Term Incentive Plan’s
performance measures for awards during the year ended 30 September
2009. The change supported our strategy of creating sustainable returns for
our shareholders over the long-term but recognised the unusual short-term
challenges that required effective management at the time of the awards.
The Committee remains satisfied that, with this change, the overall packages
were appropriate during the year under review in light of the prevailing
economic circumstances. There were no increases to the Executive
Directors’ basic salaries and nor will there be for the 2010 financial year.
With regard to the Long Term Incentive Plan (LTIP), the performance
measures will revert to the format that operated in the financial year ended
30 September 2008 for the 2010 financial year (as agreed with investors
during consultation). Details of the performance conditions for awards made
during the year under review are set out on page 53.
2) The Company has experienced issues over the retention of members
of the Board and Executive Management Team. Accordingly, with effect
from 15 May 2009, a number of changes were made to the contractual
arrangements with the Chief Executive to facilitate retention and a period
of continuity.
The Corporate Governance section gives full details of the changes that
have taken place in the leadership team; these have included the need
for the appointment of an Interim Chairman (leading to a change of
Senior Independent Director), the appointment of a Deputy Chairman, the
resignation of the Group Finance Director and the need to replace a number
of key positions at the Executive Management Team level, including the
Chief Commercial Officer and the Procurement Director. The Company
and the Board have also been involved in a number of high profile issues
including: the accounts for the year ended 30 September 2008, strategy,
growth targets and the composition of the Board.
While these issues are now either resolved or subject to ongoing discussions,
it was considered at that time that it was appropriate and in the best
interests of easyJet and the shareholders to take action to ensure a period of
management continuity. This decision took account of the need to maintain
a management environment which was appropriate for the nature of the
Company’s operating activities.
With effect from 15 May 2009, amendments were made to the Chief
Executive’s terms to secure the retention of his services with easyJet.
Details of these arrangements are set out on page 49. They include a
potential lump sum payment equivalent to 12 months salary and on target
bonus at 100% of salary, which would not be subject to mitigation, in the
event of termination (other than for bad leaver reasons) or resignation after
31 March 2010.
easyJet has sought to maintain dialogue with shareholders and shareholder
protection bodies over its policies on remuneration. The Committee would
welcome feedback and questions from shareholders on the contents of this
report and the Company’s policies.
Directors’ remuneration
This report sets out the Company’s policy on Directors’ remuneration
and the details of remuneration paid to Directors in the year ended
30 September 2009. The report has been prepared in accordance with
the provisions of the Companies Act 2006 and Schedule 8 of the Large
and Medium Sized Companies and Groups (Accounts and Reports
Regulations) 2008. Those sections of the report that have been subject to
audit are identified below.
Membership and responsibilities of the
Remuneration Committee
The responsibilities of the Remuneration Committee are disclosed in the
Corporate Governance section on pages 40 to 43. The members of the
Committee are: Keith Hamill (member and Chairman from 1 July 2009),
Sir David Michels (Chairman until 30 June 2009), David Bennett,
Sven Boinet and Professor Rigas Doganis.
The Committee continues to use Hewitt New Bridge Street (‘HNBS’) as
remuneration advisers. Apart from advice regarding the design, establishment
and operation of remuneration arrangements, HNBS provides no other
services to the Company.
Activities of the Committee
The Committee has responsibility for determining, within agreed terms of
reference, the specific remuneration packages for each of the Executive
Directors and the Chairman, and making recommendations to the Board on
the remuneration of the Company’s senior executives.
During the year ended 30 September 2009, the Committee considered the
following items of business:
Executive Director and senior executive salary levels
Review of the Chairman’s fees
Annual bonus awards for the financial year ended 30 September 2008
The structure of the annual bonus scheme for the financial year ended
30 September 2009
All employee Save As You Earn scheme grants
The performance targets and award levels for grants during the financial
year ended 30 September 2009 under the easyJet LTIP
Testing of performance conditions and vesting of:
– LTIP awards granted in December 2005
– Share Options granted in December 2005
– Chief Executive’s Matching Award granted in February 2006
Remuneration arrangements for the Chief Executive and, in particular,
determining appropriate arrangements to facilitate a period of continuity.
Policy
easyJet’s remuneration policy is to reward the Company’s Executive
Directors and senior executives competitively against the comparative
market place, in order to recruit and retain Executive Directors and ensure
that they are properly motivated to perform in the best interests of the
Company and its shareholders. The Committee also oversees any significant
changes to easyJet’s employee remuneration structure and sets Directors’
remuneration in this context. The Company aims to provide competitive
‘total pay’ for ‘on target’ performance, with superior rewards for exceptional
performance.
The remuneration packages of the Executive Directors and senior executives
comprise a combination of basic salary, annual bonus, participation in share-
based long-term incentive plans, and a very low level of benefits provision.
easyJet has a ‘no frills’ approach to pension and benefit provision and does
not include, for example, company cars or final salary pensions as part
of the package. Therefore, performance related elements form a significant
proportion of the packages of the Executive Directors and senior executives.
Reflecting best practice, the Committee regularly reviews the structure of its
incentive arrangements and, in particular, the balance between short and
long-term incentives in light of the circumstances prevailing each year.
46 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
In response to the difficult trading conditions experienced in the airline industry during the financial year ended 30 September 2008, the Company
completed an extensive shareholder consultation prior to the 2009 Annual General Meeting to amend LTIP performance targets applying to future awards.
This enabled the LTIP to take into account the unique short-term challenges that required effective management at the same time as retaining a long-term
focus on return on equity (“ROE”) which remains a key long-term performance indicator at easyJet.
For the current financial year, the LTIP has again been amended with ROE once more becoming the sole measure of long-term performance as has been
the case prior to the financial year under review. Full details of the targets set for the year under review and those that will apply for awards made to the
senior executive team in the current financial year are set out below.
In line with the Association of British Insurers’ Guidelines on Responsible Investment Disclosure, the Committee will ensure that the incentive structure for
Executive Directors and senior executives will not raise environmental, social or governance (“ESG”) risks by inadvertently motivating irresponsible
behaviour. More generally, with regard to the overall remuneration structure, there is no restriction on the Committee which prevents it from taking into
account corporate governance on ESG matters and the Committee takes due account of issues of general operational risk when structuring incentives.
The Committee takes account of risk by regular liaison with the Audit Committee to ensure that the remuneration policies adopted do not encourage
inappropriate risk-taking.
When setting remuneration policy for the Executive Directors and senior executives for the current financial year, the Committee considered pay and
employment conditions elsewhere within easyJet. The Committee was informed of the proposed salary budget for easyJet as a whole and the changes to
pay practices and staffing levels that took place during the year. These factors were significant contributory factors when determining Executive Directors’ pay
packages for the current year. The Committee did not consider it appropriate, for example, to award any salary increases for Executive Directors when very
limited salary increases were given to other staff.
easyJet’s normal remuneration policies are summarised below:
Element
Basic salary
Purpose
Policy
• Reflect the value of the individual and
their role
Reflect skills and experience
•
• Reviewed annually, effective
1 October
• Agreed when previous results are
Annual bonus
• Incentivise year on year delivery of
short-term performance goals
Long Term Incentive Plan
Pension
• Aligned to business plan
• Incentivise long-term growth in
easyJet’s ROE
• Provide minimum retirement benefits
• Opportunity for Executive to
contribute to their retirement
finalised
• Benchmarked against similar sized
companies and industry comparators
• Targeted at or around median
• Considers individual contribution
• Major measure is profit before tax
aligned to long-term targets
• Other measures based on:
– Revenue
– Cost
– Operational excellence
• Subject to stretching ROE targets
• Subject to 175% of salary
shareholding requirement
• Defined contribution
• HMRC approved salary sacrifice
arrangement
Delivery
• Cash
• Paid monthly
• Pensionable
• Paid as cash
• Not pensionable
• May defer up to half of bonus into
LTIP
• Annual grant of performance shares
• Opportunity to defer bonus and
obtain future matching share awards
• Monthly employer contribution of
7% of basic salary
• Non contributory
• Salary sacrifice for employee
contributions
The Board as a whole determines the remuneration of the Company’s Non Executive Directors, with Non Executive Directors exempting themselves from
discussions and voting as appropriate. When determining the remuneration of Non Executive Directors, account is taken of practice adopted in other similar
organisations, committees chaired and anticipated time commitment.
47 easyJet plc
Annual report and accounts 2009
Basic salary
The basic salaries of the Executive Directors are reviewed annually and are set taking account of the salary required to deliver an overall total package that
reflects a number of factors including:
practice adopted in companies of a broadly similar size
a formal appraisal of their contribution to the business
the competitive environment
pay and employment conditions of employees elsewhere within easyJet
Annual bonus scheme
All Executive Directors participate in an annual bonus scheme. The maximum annual bonus opportunity of the Chief Executive during the year was
200% of salary, with a 100% of salary maximum for other senior executives. The maximum will remain at these levels during the financial year ending
30 September 2010.
Bonus targets are aligned with easyJet’s vision and values, with specific targets around easyJet’s key performance indicators. The performance targets that will
apply to Executive Directors’ annual bonus opportunities in the financial year ending 30 September 2010 are as follows:
Measure
Profit before tax
Customer targets
Operating costs
On time performance
% maximum bonus opportunity
75%
10%
10%
5%
Descriptions of the Executive Directors’ performance against the targets set for the year under review are set out in the emoluments table on pages 50
to 51.
Long term incentive plan
The easyJet LTIP provides for annual awards of performance shares and matching shares. The plan was approved by shareholders at the AGM in 2005 and
amended at the 2008 AGM with the performance targets further amended during the year under review.
The annual award limit for performance shares is 200% of basic salary.
Matching share awards are linked to the investment of up to 50% of annual bonus into easyJet shares, which are then matched on a 1:1 gross basis.
This is the same as in the financial year ended 30 September 2008. No matching awards were granted in the financial year ended 30 September 2009.
Performance and matching share awards vest three years after grant, subject to continued employment and the Company achieving the ROE targets.
This measure was chosen as it is a fundamental measure of financial performance and is linked to the generation of shareholder returns. The Board controls
the rate of capital growth and balance sheet gearing, which ensures that ROE remains an appropriate measure of long-term performance.
The targets that applied during the year under review were amended to include short-term targets which reflected current circumstances. This was
considered appropriate due to the difficulties that existed in relation to setting robust long-term targets at a time of exceptional fuel price volatility and
uncertain economic circumstances. easyJet’s major shareholders and the shareholder protection bodies were consulted on the revisions which are set out
under the Executive Directors’ Share Awards table on page 52.
48 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
LTIP awards to be granted in 2010
Since the Committee now considers it possible to set robust long-term ROE performance targets there will not be a short-term performance element to
the targets that will apply during the current financial year. Instead, the conditions will mirror the structure approved by shareholders at the 2008 AGM.
Reverting to the same structure of target as operated immediately following the 2008 AGM is consistent with the future award policy communicated to our
major shareholders during the 2009 consultation with the actual target ranges reflecting current economic conditions. The targets for awards to be made in
financial year 2010 (with a base year of 30 September 2009) will be:
Awards up to 100% of salary
Return on equity (year ending 30 September 2012)
Awards over 100% of salary
Return on equity (year ending 30 September 2012)
Threshold
(25% vests)
9.0%
Threshold
(25% vests)
11.0%
Target
(50% vests)
12.0%
Target
(50% vests)
13.0%
Maximum
(100% vests)
15.0%
Maximum
(100% vests)
15.0%
ROE continues to be the Committee’s preferred long-term performance measure for a number of reasons, including:
It is a fundamental measure of easyJet’s underlying performance and is directly linked to the generation of returns to shareholders
It is directly connected to the self-sustaining growth rate of the business and incentivises management to achieve the appropriate balance between
growth and returns, to deliver the best shareholder value
The performance targets detailed above that apply to the part of an award over 100% of salary are set to be tougher due to the higher potential quantum
available.
All employee share plan participation
easyJet encourages share ownership throughout the Company by the use of a Share Incentive Plan and a Sharesave Plan. Take-up of the schemes remains
very positive with over 80% of eligible staff now participating in one or more of the plans. Executive Directors may also participate in these plans which are
summarised in the Corporate Responsibility section on page 31.
Previous share awards
Executive Share Option Scheme
The LTIP replaced the existing Approved and Unapproved Executive Share Option Schemes (the ‘ESOS’) as the primary long term incentive arrangement
for the Executive Directors and other senior employees although the ESOS was retained for flexibility (e.g. options were granted to the Chief Executive
under the ESOS on his appointment in 2005). However, there were no grants during the year and there is no current intention to make regular grants of
options under the ESOS.
Shareholding guideline
Executive Directors are required to build up a shareholding equivalent to 175% of basic salary. This was increased from 100% of salary following
the 2008 AGM.
For senior executives who report to the Executive Management Team and receive LTIP awards, a 50% share ownership guideline will apply.
Pension contributions
easyJet makes a contribution for Executive Directors, to a defined contribution pension scheme, of 7% of basic salary. While individuals are not obliged
to make a contribution, easyJet operates a pension salary sacrifice arrangement where individuals can exchange their salary for Company paid pension
contributions. Where individuals exchange salary this reduces easyJet’s National Insurance contributions. easyJet credits half of this saving to the individual’s
pension (currently 6.4% of the amount exchanged).
External appointments
Executive Directors are permitted to accept one appointment on an external board or committee so long as this is not deemed to interfere with the
business of the Group. Any fees received in respect of these appointments are retained directly by the relevant Executive Director.
49 easyJet plc
Annual report and accounts 2009
Service contracts
The service contracts of the Executive Directors that served during the year were of no fixed term.
Andrew Harrison’s service contract is terminable by the Company giving 12 months notice or by Andrew giving six months notice.
Provisions applying to termination prior to 31 March 2010
On termination of Andrew’s employment he will receive a pro-rated bonus for the year of his termination based on performance up to the date of his
termination. In addition, the Company has the right to pay Andrew, in lieu of notice and on a monthly basis until he secures commensurate employment, an
amount equal to base salary, pension and bonus earned in the previous year.
Provisions applying to termination or resignation after 31 March 2010
In order to facilitate retention and a period of continuity, Andrew Harrison’s contractual provisions on termination and resignation were revised on 15 May
2009.
The revised terms provide that in relation to a termination by the Company (other than for certain defined bad leaver reasons) or on resignation, Andrew
Harrison has an entitlement to receive a payment in lieu of notice in respect of the full 12 month notice period with no obligation to mitigate the payment,
which would also be provided as a single lump sum. The payment in lieu of notice would include the value of 12 months’ basic salary, 12 months’ pension
contributions and the on target level of annual bonus of 100% of salary. Based on the current level of salary this would amount to £1,220,000. He would also
receive a pro-rated bonus for the year of his termination based on performance up to the date of his termination. In addition, it was agreed that Andrew
Harrison would be considered a good leaver for the LTIP award made in December 2007, subject to the usual pro-rating for performance and service.
This is explained on page 54.
Jeff Carr’s contract was changed during the year under review, in line with a new policy for Executive Directors, to be terminable on 12 months notice by
both parties (formerly six months). Jeff resigned during the year and his resignation was effective on 25 September 2009. There were no express provisions
for compensation on termination in Jeff’s service contract. No payment was made, or will be made, in relation to his departure.
The Company’s relationship with its Non Executive Directors is governed by letters of appointment. The Non Executive Directors are appointed for a
period not exceeding three years and their appointment may be terminated with three months notice without compensation.
Sir Stelios Haji-Ioannou does not have a letter of appointment and his appointment is of no fixed term. He is however subject to re-election by shareholders
every three years, and was last re-elected by shareholders in February 2009, although this does not prejudice his rights under the relationship agreement with
the Company disclosed at the time of the Company’s IPO, which are set out in the Corporate Governance section of this Annual report on page 40.
Details of the service contracts and letters of appointment currently in place for Directors who served during the year are as follows:
Date of current
letter of appointment
Unexpired term
Notice period
Executive
Andrew Harrison
15 September 2005
(amended 15 May 2009)
Jeff Carr (resigned 25 September 2009)
24 November 2004
n/a
n/a
12 months
(6 months
from executive)
(from
months
12
3 December 2008)
Non Executive
Sir Colin Chandler (resigned 1 July 2009)
Sir David Michels
Sir Michael Rake (appointed 1 June 2009)
Dawn Airey (resigned 31 December 2008)
David Bennett
Sven Boinet
John Browett
Professor Rigas Doganis
Sir Stelios Haji-Ioannou
Keith Hamill (appointed 1 March 2009)
Bob Rothenberg (appointed 1 August 2009)
26 September 2007
26 September 2007
17 April 2009
26 September 2007
26 September 2007
11 February 2008
27 September 2007
26 September 2007
n/a
23 December 2008
29 July 2009
n/a
12 months
2 years 9 months
n/a
12 months
1 year 5 months
12 months
12 months
n/a
2 years 5 months
2 years 10 months
Non Executive Directors’ letters of appointment are aligned to the standard terms appended to the Combined Code.
Copies of the service contracts and letters of appointment are available on request from the Company Secretary.
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
n/a
3 months
3 months
Provision for
compensation
12 months
6 months
None
None
None
None
None
None
None
None
n/a
None
None
50 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Total shareholder return
Given the nature of easyJet’s operations, the Committee does not consider that there is a suitable comparator group against which to measure total
shareholder return. However, for completeness, the following graphs show the Company’s performance compared with the performance of the FTSE 250
and that of a group of European Airlines1. The FTSE 250 has been chosen as it consists of companies of similar size to easyJet. The group of European
Airlines comprises companies operating in a comparable sector.
Note 1: British Airways, Lufthansa-Swiss, Ryanair, Air France-KLM and Iberia have been included in the comparative European Airlines group.
Directors’ emoluments (audited)
Details of emoluments, paid or payable by easyJet to the Directors of easyJet plc who served in the financial year ended 30 September 2009 are as follows:
Executive
Andrew Harrison
Jeff Carr (resigned 25 September 2009)
Non Executive
Sir Colin Chandler (resigned 1 July 2009)
Sir David Michels
Sir Michael Rake (appointed 1 June 2009)
Dawn Airey (resigned 31 December 2008)
David Bennett
Sven Boinet
John Browett
Professor Rigas Doganis
Sir Stelios Haji-Ioannou
Keith Hamill (appointed 1 March 2009)
Diederik Karsten (resigned 21 February 2008)
Bob Rothenberg (appointed 1 August 2009)
Salary/fee
2009
Bonus
2009
Total
2009
590
356
150
114
23
11
55
45
45
45
–
29
–
8
1,471
1,043
–
–
–
–
–
–
–
–
–
–
–
–
–
1,043
1,633
356
150
114
23
11
55
45
45
45
–
29
–
8
2,514
Total
2008
856
441
201
65
–
45
55
26
45
45
–
–
18
–
1,797
Pension contributions
2009
2008
53
27
–
–
–
–
–
–
–
–
–
–
–
–
80
41
25
–
–
–
–
–
–
–
–
–
–
–
–
66
The table above excludes gains as a result of the exercise of share options. Details of share options and share awards and any movements during the year
are shown on page 52.
Pension contributions for Andrew Harrison and Jeff Carr shown above are greater than 7% of salary as they include half of the National Insurance saving
resulting from employee contributions made through easyJet’s salary exchange scheme (equivalent to 6.4% of the sum sacrificed). Andrew Harrison
exchanged £195,000 for additional pension contributions in the year (2008: £187,000) and Jeff Carr exchanged a total of £27,000 (2008: £27,000).
There was a pay freeze in place during the year under review for Executive Directors and the wider senior management population. Andrew Harrison’s
salary remained at £590,000 and Jeff Carr’s salary remained at £360,000. It is not proposed that basic salary will be increased for Executive Directors in the
2010 financial year.
51 easyJet plc
Annual report and accounts 2009
Achievement of Bonus for 2009
Andrew Harrison will be paid a bonus of £1,042,530 (177% of salary) in the year ending 30 September 2010 to reflect performance in the year ended
30 September 2009 (2008: 45% of salary).
Jeff Carr resigned on 25 September 2009 and will not be paid a bonus for the year ended 30 September 2009.
This bonus was earned against challenging targets that were set at the start of the financial year under review. These targets reflected the key short-term
objectives of the business arising out of the exceptional fuel price volatility and economic uncertainty that was prevalent at the start of the financial year.
Performance over the year was stronger than the ‘target’ expectations set at the beginning of the year and resulted in the bonus earned being towards the
top end of the bonus range. In a difficult consumer environment, a strong revenue performance helped to offset an increase in unit fuel costs equivalent to
£86.1 million and the Committee is satisfied that easyJet’s performance is robust in relation to other airlines.
Bonuses were determined by the Remuneration Committee in light of the Company’s performance against a range of key financial and operational metrics.
Performance achievement against these key performance indicators is shown below:
Directors’ interests
The following Directors hold direct interests in the share capital of easyJet:
Sir David Michels
Sir Michael Rake
David Bennett
John Browett
Professor Rigas Doganis
Sir Stelios Haji-Ioannou
Andrew Harrison
30 September 2009
30 September 2008
12,100
3,100
10,000
4,705
13,600
66,076,451
442,711
12,100
–
10,000
4,705
13,600
66,076,451
682,616
The interests of Sir Stelios Haji-Ioannou are held through easyGroup Holdings Limited.
On 12 October 2009, Andrew Harrison purchased 31 partnership shares and was allocated 31 matching shares under the Share Incentive Plan.
On 10 November 2009, Andrew Harrison purchased 34 partnership shares and was allocated 34 matching shares under the Share Incentive Plan.
52 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
Executive Directors are deemed to be interested in the shares held by the easyJet UK Employee Share Ownership Trust, the easyJet Overseas Employee
Share Ownership Trust, the Long Term Incentive Plan and the Share Incentive Plan Trust (the “Trusts”). At 30 September 2009, ordinary shares held in the
Trusts were as follows:
Share Incentive Plan Trust (unallocated as employees are not entitled to these shares
until the performance conditions attached to them are met)
Total unallocated
Long Term Incentive Plan (allocated)
Share Incentive Plan (allocated)
Total held by UK Trust (allocated)
Total held by Overseas Trust (allocated)
Total allocated
Number
1,883,799
1,883,799
292,012
150,872
9,229
44,872
496,985
2,380,784
Directors’ share awards (audited)
Details of share options and share awards under the schemes described above granted to the Directors of the Company and any movements during the
year are shown in the following table:
Andrew Harrison
No. of shares/
options at
30 September
20081
Scheme
Shares/options
granted in year
Shares/options
lapsed in year
Shares/options
exercised in year
No. of shares/
options at
30 September
20091
Date of grant
Exercise
price (£)
A
B
C
C
C
C
D
D
E
F
G
G
H
736,153
9,095
90,756
104,796
102,135
–
75,630
88,529
267,109
3,589
612
487
838
–
–
–
–
–
358,818
–
–
–
–
–
–
499
338,630
4,183
–
–
–
–
–
–
111,294
–
–
–
–
–
–
–
–
–
–
–
–
155,815
3,589
–
–
–
397,523
4,912
90,756
104,796
102,135
358,818
75,630
88,529
–
–
612
487
1,337
1 Dec 2005
1 Dec 2005
1 Dec 2006
3 Dec 2007
29 Feb 2008
16 Jan 2009
1 Dec 2006
3 Dec 2007
8 Feb 2006
2 Jun 2006
1 Dec 2006
1 Dec 2007
3.30
3.30
–
–
–
–
–
–
–
2.61
–
–
Market
price on
exercise
date (£)
–
–
–
–
–
–
–
–
3.02
3.02
–
–
Date from which
exercisable
1 Dec 2008
1 Dec 2008
1 Dec 2009
3 Dec 2010
28 Feb 2011
16 Jan 2012
1 Dec 2009
3 Dec 2010
8 Feb 2009
1 Aug 2009
1 Dec 2009
1 Dec 2010
Expiry date
1 Dec 2015
1 Dec 2015
1 Jun 2010
3 Jun 2011
28 Aug 2011
16 Jul 2012
1 Jun 2010
3 Jun 2011
8 Aug 2009
1 Feb 2010
n/a
n/a
See note 2 below
Jeff Carr
No. of shares/
options at
30 September
20081
Scheme
Shares/options
granted in year
Shares/options
lapsed in year
Shares/options
exercised in year
A
B
C
C
C
C
C
D
G
108,079
12,928
75,793
50,420
63,943
62,320
–
8,881
487
–
–
–
–
–
–
218,939
–
–
–
–
25,264
–
–
–
–
–
–
108,079
12,928
50,529
–
–
–
–
–
–
No. of shares/
options at
25 September
2009*
Date of grant
Exercise
price (£)
–
–
–
50,420
63,943
62,230
218,939
8,881
487
2 Jun 2005
2 Jun 2005
1 Dec 2005
1 Dec 2006
3 Dec 2007
29 Feb 2008
16 Jan 2009
3 Dec 2007
1 Dec 2007
2.32
2.32
–
–
–
–
–
–
–
Market
price on
exercise
date (£)
3.31
3.31
2.98
–
–
–
–
–
–
Date from which
exercisable
2 Jun 2008
2 Jun 2008
1 Dec 2008
1 Dec 2009
3 Dec 2010
28 Feb 2011
16 Jan 2012
3 Dec 2010
1 Dec 2010
Expiry date
2 Jun 2015
2 Jun 2015
1 Jun 2009
1 Jun 2010
3 Jun 2011
28 Aug 2011
16 Jul 2012
3 Jun 2011
n/a
* Jeff Carr’s outstanding share awards were forfeited on his resignation effective 25 September 2009.
No Non Executive Director has been granted any share options or awards.
The closing share price of the Company’s ordinary shares at 30 September 2009 was £3.79 and the range during the year ended 30 September 2009 was
£2.06 to £4.04.
53 easyJet plc
Annual report and accounts 2009
Notes
A Non-Approved Discretionary Share Option Scheme
B Approved Discretionary Share Option Scheme
C Long Term Incentive Plan – Performance Shares
D Long Term Incentive Plan – Matching Shares
E Chief Executive Officer Recruitment Award
F Sharesave (SAYE) scheme
G Share Incentive Plan – Free shares
H Share Incentive Plan – Matching Shares
Note 1: The number of shares are calculated according to the scheme rules of individual plans based on the middle-market closing share price of the day prior to grant (except for the June 2005 ESOS
award which was based on the previous practice of the average middle-market price of the five days prior to grant). As is usual market practice, the option price for SAYE awards is determined by the
Committee in advance of the award, by reference to the share price following announcements of results.
Note 2: Participants purchase shares monthly under the plan and the company provides one matching share for each share purchased. These are first available for vesting three years after purchase.
The potential vesting of outstanding awards if the performance were based at the end of the year under review is shown at the end of this section.
The performance criteria for vesting of these share options and awards are as follows:
Discretionary Share Option Schemes (A&B)
Based on the average annual growth in earnings per share (EPS), where no shares vest if EPS growth is less than RPI plus 5%, 30% vest where EPS growth is
RPI plus 5% and 100% vest where EPS growth is RPI plus 20%. Straight-line vesting will occur between these points.
In relation to the provision, the Committee agreed on 15 May 2009 to facilitate Andrew Harrison’s continued service at easyJet and agreed to exercise its
discretion to extend the period for which his vested share options can be exercised to six months from the termination date.
Long Term Incentive Plan (C&D)
Awards prior to those made during the year under review were subject to the achievement of the following ROE targets:
Grant date
December 2005
December 2006
December 2007
February 2008
Basis year
Threshold
(25% vests)
Target
(50% vests)
Maximum
(100% vests)
30 September 2006
30 September 2007
30 September 2008
30 September 2009
30 September 2010
30 September 2010
8.4%
11.8%
12.5%
12.5%
12.5%
13.5%
8.8%
12.4%
13.2%
14.0%
14.0%
15.5%
10.0%
13.0%
15.0%
16.5%
16.5%
17.5%
Straight-line vesting will occur between the threshold, target and maximum targets set out above. The returns on equity shown for the February 2008 grant
relate to awards in excess of 100% of basic salary.
The December 2006 award is due to vest in December 2009. The award has performance targets relating to return on equity achieved in the year ended
30 September 2009. However, the targets have not been met and the award will not vest.
The performance conditions that applied to the awards made during the year under review retained ROE as the primary measure of long-term
performance. However, to enable the LTIP to take into account the unique short-term challenges that the airline industry was subject to during the year
under review, additional short-term targets were also set for part of the awards.
The actual targets set reflected the extensive discussions that were undertaken with easyJet’s major shareholders and the shareholder protection bodies.
Both the range of ROE targets set and the short-term targets were felt to take full account of both (i) the exceptional volatility in the price of oil and (ii)
economic uncertainty triggered by the banking crisis.
54 easyJet plc
Annual report and accounts 2009
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
The actual targets that applied to the awards of performance shares made to Executive Directors during the year under review were as follows:
Awards up to 100% of salary
Return on equity (year ending 30 September 2011)
Awards between 100% and 175% of salary
Threshold
(25% vests)
7.0%
Target
(50% vests)
10.0%
Maximum
(100% vests)
13.0%
Vesting will take place based on the satisfaction of both of the following two targets:
The award is subject to scale-back to the extent that a range of performance targets relating to the year ended 30 September 2009 are not met.
Achievement of these targets, at 88.35%, was equal to the percentage of bonus payable, and so the award has been scaled back by 11.65%.
ROE for the year ending 30 September 2011 must be at least 10% in order for the remaining award to vest.
No matching shares were granted in the year under review.
To facilitate a period of continuity and the retention of Andrew Harrison’s services to the Company, in May 2009 it was agreed that Andrew Harrison would
be treated as a ‘good leaver’ in respect of the LTIP award (performance and matching shares) granted in December 2007 upon his departure from easyJet,
provided his service is to continue to 31 March 2010. The maximum number of performance and matching shares covered by this change is 193,325.
Any vesting would be subject to pro-rating for both performance and service. Based on performance for the year ended 30 September 2009, none of
these shares would vest.
With regard to future long-term incentive plan targets, it was agreed with investors during consultation that easyJet would revert to using ROE as the
sole performance metric as soon as it was felt practicable to do so (e.g. once fuel price volatility had returned to more ‘normal’ levels). As a result, the
performance targets that are to apply to awards made in the current year will be based on challenging ROE targets alone. These targets are considered
to take into full account the current economic environment.
Chief Executive Officer Recruitment Award (E)
50% of the award is based on the average annual growth in EPS. No shares vest if EPS growth is less than RPI plus 5%, 30% vest where EPS growth is RPI
plus 5% and 100% vest where EPS growth is RPI plus 20%. Straight-line vesting occurs between these points.
Potential vesting of outstanding awards
The table below shows how vesting of outstanding share awards plans would take place if the performance was based on that for the year under review.
Actual basis year
30 September 2009
30 September 2010
30 September 2010
30 September 2011
Vesting
0%
0%
0%
0%
Grant date
December 2006
December 2007
February 2008
January 2009
On behalf of the Board
Keith Hamill
Remuneration Committee Chairman
55 easyJet plc
Annual report and accounts 2009
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report, the report on
Directors’ remuneration and the accounts in accordance with applicable law
and regulations.
Company law requires the Directors to prepare accounts for each financial
year. Under that law the Directors have elected to prepare the Group
and parent company accounts in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. Under
company law the Directors must not approve the accounts unless they are
satisfied that they give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and
prudent;
state whether applicable IFRSs as adopted by the European Union have
been followed, subject to any material departures disclosed and explained
in the accounts; and
prepare the accounts on the going concern basis unless it is inappropriate
to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the accounts and the report
on Directors’ remuneration comply with the Companies Act 2006 and, as
regards the Group accounts, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of the
Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of accounts may differ from legislation in
other jurisdictions.
Each of the Directors, whose names and functions are listed on pages 36
and 37 confirm that, to the best of their knowledge:
the Group and Company accounts, which have been prepared in
accordance with IFRS as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit of the Group and
Company; and
the Directors’ report includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties that they face.
In the case of each Director in office at the date the Directors’ report is
approved, and in accordance with Section 418 of the Companies Act 2006:
(a) so far as the Director is aware, there is no relevant audit information
of which the Company’s auditors are unaware; and
(b) he has taken all the steps that he ought to have taken as a Director
in order to make himself aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
The Annual report on pages 1 to 55 was approved by the Board of
Directors and authorised for issue on 16 November 2009 and signed
on behalf of the Board.
Sir David Michels
Director
Andrew Harrison
Director
56 easyJet plc
Annual report and accounts 2009
ACCOUNTS
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF easyJet PLC
We have audited the accounts of easyJet plc for the year ended
30 September 2009 which comprise the Consolidated income statement,
Consolidated balance sheet, Consolidated cash flow statement, Consolidated
statement of recognised income and expense, Company balance sheet,
Company cash flow statement, and the related notes. The financial reporting
framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the
European Union and, as regards the parent company accounts, as applied
in accordance with the provisions of the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
the part of the Report on Directors’ remuneration to be audited has
been properly prepared in accordance with the Companies Act 2006;
and
the information given in the Directors’ report for the financial year for
which the accounts are prepared is consistent with the accounts.
Respective responsibilities of Directors
and auditors
As explained more fully in the Statement of Directors’ responsibilities set
out on page 55, the Directors are responsible for the preparation of the
accounts and for being satisfied that they give a true and fair view.
Our responsibility is to audit the accounts in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been prepared for and only for the
Company’s members as a body in accordance with Sections 495 to 497 of
the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Scope of the audit of the accounts
An audit involves obtaining evidence about the amounts and disclosures in
the accounts sufficient to give reasonable assurance that the accounts are
free from material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are appropriate
to the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the Directors; and the overall
presentation of the accounts.
Opinion on accounts
In our opinion:
the accounts give a true and fair view of the state of the Group’s and
of the parent company’s affairs as at 30 September 2009 and of the
Group’s profit and Group’s and parent company’s cash flows for the
year then ended;
the Group accounts have been properly prepared in accordance with
IFRSs as adopted by the European Union;
the parent company accounts have been properly prepared in
accordance with IFRSs as adopted by the European Union and as applied
in accordance with the provisions of the Companies Act 2006; and
the accounts have been prepared in accordance with the requirements
of the Companies Act 2006 and, as regards the Group accounts, Article
4 of the lAS Regulation.
Matters on which we are required to report
by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches
not visited by us; or
the parent company accounts and the part of the Report on Directors’
remuneration to be audited are not in agreement with the accounting
records and returns; or
certain disclosures of Directors’ remuneration specified by law are not
made; or
we have not received all the information and explanations we require for
our audit.
Under the Listing Rules we are required to review:
the Directors’ statement, set out on page 27, in relation to going concern;
and
the parts of the Corporate governance statement relating to the
Company’s compliance with the nine provisions of the June 2008
Combined Code specified for our review.
Roger de Peyrecave (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
St Albans, Hertfordshire
16 November 2009
57 easyJet plc
Annual report and accounts 2009
CONSOLIDATED INCOME STATEMENT
Passenger revenue
Ancillary revenue
Total revenue
Ground handling
Airport charges
Fuel
Navigation
Crew
Maintenance
Advertising
Merchant fees and commissions
Aircraft and passenger insurance
Other costs
GB Airways integration costs
EBITDAR
Depreciation
Profit on disposal of assets held for sale
Amortisation of intangible assets
Aircraft lease costs
Operating profit
Interest receivable and other financing income
Interest payable and other financing charges
Net finance (charges) / income
Profit before tax
Tax credit / (charge)
Profit for the year
Earnings per share, pence
Basic
Diluted
Year ended
30 September
2009
£ million
Year ended
30 September
2008
£ million
Notes
2,150.5
516.3
2,666.8
(255.9)
(481.5)
(807.2)
(232.3)
(306.6)
(161.6)
(47.0)
(33.5)
(11.3)
(104.8)
–
225.1
(55.4)
11.0
(4.4)
(116.2)
60.1
22.5
(27.9)
(5.4)
54.7
16.5
71.2
16.9
16.6
1,995.7
367.1
2,362.8
(212.2)
(397.2)
(708.7)
(195.7)
(263.2)
(147.5)
(46.5)
(33.7)
(9.1)
(87.5)
(12.9)
248.6
(44.4)
–
(2.5)
(110.7)
91.0
53.2
(34.0)
19.2
110.2
(27.0)
83.2
19.8
19.4
8
11
7
2
3
5
20
6
6
58 easyJet plc
Annual report and accounts 2009
CONSOLIDATED BALANCE SHEET
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Derivative financial instruments
Loan notes
Restricted cash
Other non-current assets
Deferred tax assets
Current assets
Assets held for sale
Trade and other receivables
Derivative financial instruments
Restricted cash
Money market deposits
Cash and cash equivalents
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Maintenance provisions
Net current assets
Non-current liabilities
Borrowings
Derivative financial instruments
Non-current deferred income
Maintenance provisions
Deferred tax liabilities
Net assets
Shareholders’ funds
Share capital
Share premium
Hedging reserve
Translation reserve
Retained earnings
30 September
2009
£ million
Notes
30 September
2008
£ million
(Restated)
(note 23)
7
7
8
24
9
13
10
5
11
12
24
13
13
13
14
15
24
17
15
24
16
17
5
18
20
20
20
20
365.4
81.7
1,612.2
7.8
12.6
48.0
62.7
0.4
2,190.8
73.2
241.8
68.0
24.3
286.3
788.6
1,482.2
(750.7)
(117.6)
(91.1)
(57.7)
(45.1)
(1,062.2)
420.0
(1,003.0)
(2.6)
(52.6)
(168.6)
(76.7)
(1,303.5)
1,307.3
106.0
642.5
(23.9)
(0.4)
583.1
1,307.3
365.4
80.6
1,102.6
21.3
12.0
42.9
61.1
0.5
1,686.4
194.9
236.9
96.5
23.3
230.3
632.2
1,414.1
(653.0)
(56.7)
(76.0)
(73.2)
(55.9)
(914.8)
499.3
(570.2)
(0.3)
(68.8)
(160.4)
(107.8)
(907.5)
1,278.2
105.7
640.2
27.6
0.1
504.6
1,278.2
The accounts on pages 57 to 87 were approved by the Board of Directors and authorised for issue on 16 November 2009 and signed on behalf
of the Board.
Sir David Michels
Director
Andrew Harrison
Director
59 easyJet plc
Annual report and accounts 2009
CONSOLIDATED CASH FLOW
STATEMENT
Cash flows from operating activities
Cash generated from operations
Net interest and other financing charges (paid) / received
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash and cash equivalents acquired
Purchase of property, plant and equipment
Proceeds from sale of assets held for sale
Proceeds from sale of property, plant and equipment
Purchase of other intangible assets
Redemption of loan notes
Proceeds from sale of investment in associate
Net cash used by investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital
Purchase of own shares for employee share schemes
Proceeds from drawdown of bank loans
Repayment of bank loans
Repayment of capital elements of finance leases
Net increase in money market deposits
(Increase) / decrease in restricted cash
Net cash generated from financing activities
Effect of exchange rate changes
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Year ended
30 September
2009
£ million
Year ended
30 September
2008
£ million
164.5
(20.6)
(9.4)
134.5
–
(515.0)
77.8
12.4
(5.5)
0.3
–
(430.0)
2.6
(1.6)
543.1
(69.4)
(3.6)
(29.0)
(1.9)
440.2
11.7
156.4
632.2
788.6
290.4
20.0
(14.2)
296.2
(118.0)
(324.0)
30.0
0.5
(6.4)
–
0.3
(417.6)
6.9
(4.6)
40.2
(43.0)
(2.7)
(8.7)
17.8
5.9
28.6
(86.9)
719.1
632.2
Notes
21
23
13
60 easyJet plc
Annual report and accounts 2009
CONSOLIDATED STATEMENT OF
RECOGNISED INCOME AND EXPENSE
Cash flow hedges
Fair value (losses) / gains in year
Losses / (gains) transferred to income statement
Gains transferred to property, plant and equipment
Related tax
Translation differences on foreign currency net investments
Net (expense) / income recognised directly in shareholders’ funds
Profit for the year
Total recognised income and expense attributable to shareholders
Notes
20
20
20
20
20
Year ended
30 September
2009
£ million
Year ended
30 September
2008
£ million
(214.3)
228.8
(85.9)
19.9
(0.5)
(52.0)
71.2
19.2
143.6
(87.6)
(0.3)
(14.4)
0.1
41.4
83.2
124.6
61 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS
1 Accounting policies
Statement of compliance
easyJet plc (the “Company”) and its subsidiaries (“easyJet” or the “Group” as applicable) is a low cost airline carrier operating principally in Europe.
The Company is a public limited company whose shares are listed on the London Stock Exchange under the ticker symbol EZJ and is incorporated
and domiciled in the United Kingdom. The address of its registered office is Hangar 89, London Luton Airport, Bedfordshire LU2 9PF.
The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, taking into account
International Financial Reporting Interpretations Committee (IFRIC) interpretations and those parts of the Companies Acts 1985 and 2006 applicable to
companies reporting under IFRS. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the International Accounting Standards Board
(IASB). References to IFRS hereafter should be construed as references to IFRS as adopted by the EU.
Basis of preparation
The accounts are prepared based on the historical cost convention except for certain financial assets and liabilities including derivative financial instruments
that are measured at fair value.
The accounting policies set out below have been applied consistently to all years presented in these accounts.
In adopting the going concern basis for preparing the accounts, the Directors have considered the business activities as set out on pages 16 to 19 as well as
easyJet’s principal risks and uncertainties as set out on pages 28 to 29. Based on easyJet’s cash flow forecasts and projections, the Board is satisfied that easyJet
will be able to operate within the level of its facilities and available cash for the foreseeable future. For this reason easyJet continues to adopt the going
concern basis in preparing its accounts.
Significant judgements, estimates and critical accounting policies
The preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the accounts and the reported amounts of income and expenses during the reporting period.
Although these estimates are based on management’s best knowledge of the amount, events or actions may mean that actual results ultimately differ
from those estimates, and these differences may be material. The estimates and the underlying assumptions are reviewed regularly.
The following four accounting policies are considered critical accounting policies as they require a significant amount of management judgement and the
results are material to easyJet’s accounts.
Goodwill and landing rights (note 7)
Goodwill and landing rights are tested for impairment at least annually. easyJet has one cash-generating unit, being its route network. In making this
assessment, easyJet has considered the manner in which the business is managed including the centralised nature of its operations and the ability to open or
close routes and redeploy aircraft and crew across the whole route network. The value in use of the cash-generating unit is determined by discounting future
cash flows to their present value. When applying this method, easyJet relies on a number of estimates including its strategic plans, fuel prices, exchange rates,
long-term economic growth rates for the principal countries in which it operates and its pre-tax weighted average cost of capital.
Assets held for sale (note 11)
When an aircraft is held for sale, the carrying value of the asset is assessed by comparison with its fair value less costs to sell the asset. The underlying market
for aircraft is conducted in US dollars. In the current economic environment, where the market for used aircraft is thin, there are few transactions against
which a market comparison of fair value can be made. In these circumstances easyJet uses data available from third party agencies and indications of interest
from prospective purchasers to estimate the fair value at the balance sheet date. The time it will take to sell the aircraft held for sale is also uncertain, and
asset values in sterling could rise or fall before a sale is completed.
Aircraft maintenance provisions (note 17)
easyJet incurs liabilities for maintenance costs in respect of aircraft leased under operating leases during the term of the lease. These arise from legal and
constructive contractual obligations relating to the condition of the aircraft when it is returned to the lessor. To discharge these obligations, easyJet will also
normally need to carry out one heavy maintenance check on each of the engines and the airframe during the lease term.
A charge is made in the income statement based on hours or cycles flown to provide for the cost of these obligations. Estimates required include the likely
utilisation of the aircraft, the expected cost of the heavy maintenance check at the time it is expected to occur, the condition of the aircraft and the lifespan
of life-limited parts. The bases of all estimates are reviewed once each year, and also when information becomes available that is capable of causing a material
change to an estimate, such as renegotiation of end of lease return conditions, increased or decreased utilisation, or changes in the cost of heavy
maintenance services.
Tax (note 5)
In drawing up the accounts, estimates are made of current and deferred tax assets and liabilities for each jurisdiction in which easyJet operates. These
estimates are affected by transactions and calculations where the ultimate tax determination was uncertain at the time the accounts were finalised. The issues
involved are often complex and may take an extended period to resolve. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the current and deferred tax assets and liabilities in the period in which such determination is made.
62 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies (continued)
Basis of consolidation
The consolidated accounts incorporate those of easyJet plc and its subsidiaries for the years ended 30 September 2008 and 2009.
A subsidiary is an entity controlled by easyJet. Control exists when easyJet has the power, directly or indirectly, to govern the financial and operating policies
of an entity so as to benefit from its activities.
Intragroup balances, transactions and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the consolidated
accounts.
Foreign currencies
The primary economic environment in which a subsidiary operates determines its functional currency. The consolidated accounts of easyJet are presented in
sterling, which is the Company’s functional currency and the Group’s presentation currency. Certain subsidiaries have operations that are primarily influenced
by a currency other than sterling. Exchange differences arising on the translation of these foreign operations are taken to reserves until all or part of the
interest is sold, when the relevant portion of the exchange gains or losses is recognised in the income statement. Profits and losses of foreign operations are
translated into sterling at average rates of exchange during the year, since this approximates the rates on the dates of the transactions.
Transactions arising in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into sterling using the rate of exchange ruling at the balance sheet date and (except where the asset or
liability is designated as a cash flow hedge) the gains or losses on translation are included in the income statement. Non-monetary assets and liabilities
denominated in foreign currencies are translated into sterling at foreign exchange rates ruling at the dates the transactions were effected.
Revenue recognition
Revenues comprise the invoiced value of airline services, net of air passenger duty, VAT and discounts, plus ancillary revenue.
Passenger revenue arises from the sale of flight seats and is recognised when the service is provided. Unearned revenue represents flight seats sold but not
yet flown and is included in trade and other payables until it is realised in the income statement when the service is provided.
Ancillary revenue is generally recognised when the flight to which it relates departs. Certain types of ancillary revenue are recognised at the time the benefit
of the service provided passes to the customer. Ancillary revenue in the form of fixed annual fees is recognised evenly throughout the year.
Amounts paid by “no-show” customers are recognised as passenger or ancillary revenue as appropriate when the booked service is provided as such
customers are not generally entitled to change flights or seek refunds once a flight has departed.
Business combinations
Business combinations are accounted for by applying the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given and liabilities incurred or assumed plus any costs directly attributable to the business combination. The acquiree’s identifiable
assets and liabilities are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at
cost, being the excess of the cost of the business combination over easyJet’s interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities recognised.
Goodwill and other intangible assets
Goodwill is stated at cost less any accumulated impairment losses. It has an indefinite expected useful life and is tested for impairment at least annually
or where there is any indication of impairment.
Landing rights are stated at cost less any accumulated impairment losses. They are considered to have an indefinite useful life as they will remain available
for use for the foreseeable future provided minimum utilisation requirements are observed, and are tested for impairment at least annually or where there
is any indication of impairment.
Other intangible assets are stated at cost less accumulated amortisation, which is calculated to write off their cost, less estimated residual value, on a
straight-line basis over their expected useful lives. Expected useful lives and residual values are reviewed annually.
Computer software
Contractual rights
Expected useful life
3 years
Over the length of the related contracts
63 easyJet plc
Annual report and accounts 2009
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated to write off the cost, less estimated residual value,
of assets on a straight-line basis over their expected useful lives. Expected useful lives are reviewed annually.
Aircraft
Aircraft spares
Aircraft improvements
Aircraft – prepaid maintenance
Leasehold improvements
Fixtures, fittings and equipment
Computer hardware
Expected useful life
23 years
14 years
3–7 years
3–10 years
5–10 years or the length of lease if shorter
3 years or length of lease of property where equipment is used if shorter
5 years
Items held under finance leases are depreciated over the shorter of the lease term and their expected useful lives, as shown above.
Residual values, where applicable, are reviewed annually against prevailing market rates at the balance sheet date for equivalently aged assets and
depreciation rates adjusted accordingly on a prospective basis. The carrying value is reviewed for impairment if events or changes in circumstances indicate
that the carrying value may not be recoverable.
An element of the cost of a new aircraft is attributed on acquisition to prepaid maintenance and is depreciated over a period ranging from three to ten years
from the date of manufacture. Subsequent costs incurred which lend enhancement to future periods, such as long-term scheduled maintenance and major
overhaul of aircraft and engines, are capitalised and depreciated over the length of period benefiting from these enhancements. All other maintenance costs
are charged to the income statement as incurred.
The cost of new aircraft comprises the invoiced price of the aircraft from the supplier less the estimated value of other assets received by easyJet for
nil consideration. These other assets principally comprise cash (recognised as an asset) and aircraft spares and service credits.
Pre-delivery and option payments made in respect of aircraft are recorded in property, plant and equipment at cost.
Impairment of non-current assets
An impairment loss is recognised to the extent that the carrying value exceeds the higher of the asset’s fair value less cost to sell and its value in use.
Impairment losses recognised on assets other than goodwill are only reversed where changes in the estimates used result in an increase in recoverable
amount. Impairment losses recognised on goodwill are not reversed.
Leases
Non-contingent operating lease rentals are charged to the income statement on a straight-line basis over the life of the lease. A number of operating leases
require easyJet to make contingent rental payments based on variable interest rates; these are expensed as incurred.
easyJet enters into sale and leaseback transactions whereby it sells to a third party rights to acquire aircraft. On delivery of the aircraft, easyJet subsequently
leases the aircraft back, by way of an operating lease. Surpluses arising on disposal, where the price that the aircraft is sold for is above fair value, are
recognised in deferred income and amortised on a straight-line basis over the lease term of the asset.
Finance leases, which transfer to easyJet substantially all the risks and benefits incidental to ownership of the leased item, are recognised at the inception
of the lease at the fair value of the leased asset, or, if lower, at the present value of the minimum lease payments. Any directly attributable costs of entering
into financing sale and leasebacks are included in the value of the asset recognised. Lease payments are apportioned between the finance charges and the
reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are included in interest
payable and other financing charges.
Financial instruments
Financial instruments are recognised when easyJet becomes a party to the contractual provisions of the relevant instrument and derecognised when it ceases
to be a party to such provisions.
Where market values are not available, the fair value of financial instruments is calculated by discounting cash flows at prevailing interest rates and by applying
year end exchange rates.
64 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies (continued)
Non-derivative financial assets
Non-derivative financial assets are recorded at amortised cost and include loan notes, trade receivables, cash and money market deposits. Restricted cash
comprises cash deposits which have restrictions governing their use and is classified as a current or non-current asset based on the estimated remaining
length of the restriction. Cash and cash equivalents comprise cash held in bank accounts with no access restrictions and bank or money market deposits
repayable on demand or maturing within three months of inception.
Impairment losses are recognised on financial assets carried at amortised cost where there is objective evidence that an impairment loss has been incurred.
The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of future cash flows, discounted at the
original effective interest rate. If, subsequently, the amount of the impairment loss decreases, and the decrease can be related objectively to an event that
occurred after the impairment was recognised, the appropriate portion of the loss is reversed. Both impairment losses and reversals are recognised in the
income statement as components of net finance (charges) / income.
Investments in equity instruments are carried at cost where fair value cannot be reliably measured due to significant variability in the range of reasonable fair
value estimates.
Interest income on cash and money market deposits is recognised using the effective interest method.
Non-derivative financial liabilities
Non-derivative financial liabilities are initially recorded at fair value less directly attributable transaction costs, and subsequently at amortised cost.
Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the balance
sheet date.
Interest expense on loans is recognised using the effective interest method.
Derivative financial instruments
Derivative financial instruments are measured at fair value.
Derivative financial instruments designated as cash flow hedges are used to mitigate operating and investing transaction exposures to movements in jet fuel
prices and currency exchange rates. Hedge accounting is applied to these instruments.
Changes in intrinsic fair value are recognised in shareholders’ funds to the extent that the cash flow hedges are determined to be effective. All other changes
in fair value are recognised immediately in the income statement. Where the hedged item results in a non-financial asset or liability, the accumulated gains
and losses previously recognised in shareholders’ funds form part of the initial carrying amount of the asset or liability. Otherwise accumulated gains and
losses are recognised in the income statement in the same period in which the hedged items affect the income statement.
Hedge accounting is discontinued when a hedging instrument is derecognised (e.g. through expiry or disposal), or no longer qualifies for hedge accounting.
Where the hedged item is a highly probable forecast transaction, the related gains and losses remain in shareholders’ funds until the transaction takes place.
When a hedged future transaction is no longer expected to occur, any related gains and losses previously recognised in shareholders’ funds are immediately
recognised in the income statement.
Tax
Tax expense in the income statement consists of current and deferred tax. The charge for current tax is based on the results for the year as adjusted for
income that is exempt and expenses that are not deductible using tax rates that are applicable to the taxable income. Tax is recognised in the income
statement except when it relates to items credited or charged directly to shareholders’ funds, in which case it is recognised in shareholders’ funds.
Deferred tax is provided in full on temporary differences relating to the carrying amount of assets and liabilities, where it is probable that the recovery
or settlement will result in an obligation to pay more, or a right to pay less, tax in the future, with the following exceptions:
where the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities
in a transaction that affects neither taxable income nor accounting profit.
deferred tax arising on investments in subsidiaries is not recognised where easyJet is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which recovery of assets and settlement
of liabilities are expected to take place, based on tax rates or laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets represent amounts recoverable in future periods in respect of deductible temporary differences, losses and tax credits carried forward.
Deferred tax assets are recognised to the extent that it is probable that there will be suitable taxable profits from which they can be deducted.
Deferred tax liabilities represent the amount of income taxes payable in future periods in respect of taxable temporary differences.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and it is the
intention to settle these on a net basis.
65 easyJet plc
Annual report and accounts 2009
Aircraft maintenance provisions
The accounting for the cost of providing major airframe and certain engine maintenance checks for owned and finance leased aircraft is described in the
accounting policy for property, plant and equipment.
easyJet has contractual obligations to maintain aircraft held under operating leases. Provisions are created over the term of the lease based on the estimated
future costs of major airframe checks, engine shop visits and end of lease liabilities. These costs are discounted to present value where the amount of the
discount is considered material.
A number of leases also require easyJet to pay supplemental rent to the lessor. Payments may be either a fixed monthly sum up to a cap or are based
on usage. The purpose of these payments is to provide the lessor with collateral should an aircraft be returned in a condition that does not meet the
requirements of the lease. Supplemental rent is either refunded when qualifying maintenance is performed, or is offset against end of lease liabilities. Where
the amount of supplemental rent paid exceeds the estimated amount recoverable from the lessor, provision is made for the non-recoverable amount.
Employee benefits
easyJet contributes to defined contribution pension schemes for the benefit of employees. The assets of the schemes are held separately from those
of easyJet in independently administered funds. easyJet’s contributions are charged to the income statement in the year in which they are incurred.
The expected cost of compensated holidays is recognised at the time that the related employees’ services are provided.
Share-based payments
easyJet has a number of equity settled share incentive schemes. The fair value of share options is measured at the date of grant using the Binomial Lattice
option pricing model. The fair value of awards under the Long Term Incentive Plan and awards of free shares is the share price at the date of grant. The fair
value of the estimated number of options and awards that are expected to vest is expensed to the income statement on a straight-line basis over the period
that employees’ services are rendered, with a corresponding increase in shareholders’ funds. Where performance criteria attached to the share options and
awards are not met, any cumulative expense previously recognised is reversed.
Segmental disclosures
easyJet has one business segment: the provision of a low cost airline service. easyJet has one geographical segment relating to the origin of its turnover which
is Europe.
Investments in subsidiaries
Investments in subsidiaries are stated at cost, less any provision for impairment, in the entity accounts.
Assets held for sale
Where assets are available for sale in their current condition, and their disposal is highly probable, they are reclassified as held for sale and are measured
at the lower of their carrying value and the fair value less costs to sell. Depreciation ceases at the point of their reclassification from non-current assets.
Impact of new International Financial Reporting Standards
The following interpretations are required to be implemented for the year ended 30 September 2009:
IFRIC 12 Service Concession Arrangements
IFRIC 13 Customer Loyalty Programmes (IAS 18)
IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (IAS 19)
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
The adoption of these interpretations has had no impact on these accounts.
66 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies (continued)
New standards and interpretations not applied
The IASB and IFRIC have issued the following standards and interpretations that have not been applied in preparing these accounts as their effective dates fall
in periods beginning after 1 October 2008. At 30 September 2009, items indicated below with an asterisk had not been adopted by the European Union.
International Accounting Standards Board
New and revised standards
IAS 27 Consolidated and Separate Financial Statements (Revised)
IFRS 1 First-time Adoption of IFRS (Revised)*
IFRS 3 Business Combinations (Revised)
IFRS 8 Operating Segments
IAS 1 Presentation of Financial Statements (Revised)
IAS 23 Borrowing Costs (Revised)
IAS 27 Consolidated and Separate Financial Statements (Revised)
Amendments to standards
IAS 1 Presentation of Financial Statements (Puttable Financial Instruments and Obligations Arising on Liquidation)
IAS 32 Financial Instruments: Presentation (Puttable Financial Instruments and Obligations Arising on Liquidation)
IAS 32 Financial Instruments: Presentation (Classification of Rights Issues)*
IAS 39 Financial Instruments: Recognition and Measurement (Eligible Hedged Items)
IAS 39 Financial Instruments: Recognition and Measurement (Embedded Derivatives)*
IFRS 1 First-time Adoption of IFRS (Investment in Subsidiaries)
IFRS 1 First-time Adoption of IFRS (Additional Exemptions for First-time Adopters)*
IFRS 2 Share-based Payment (Vesting Conditions and Cancellations)
IFRS 2 Share-based Payment (Group cash-settled share-based payment transactions)*
IFRS 7 Financial Instruments: Disclosures (Improving Disclosures about Financial Instruments)*
Improvements to IFRS (2007)
Improvements to IFRS (2009)*
International Financial Reporting Interpretations Committee
IFRIC 9 Reassessment of Embedded Derivatives (Amended)*
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 17 Distribution of Non-Cash Assets to Owners*
IFRIC 18 Transfers of Assets from Customers*
Applies to periods
beginning on or after
1 July 2009
1 July 2009
1 July 2009
1 January 2009
1 January 2009
1 January 2009
1 July 2009
1 January 2009
1 January 2009
1 February 2010
1 July 2009
30 June 2009
1 July 2009
1 January 2010
1 January 2009
1 January 2010
1 January 2009
1 January 2009
1 July 2009 and
1 January 2010
30 June 2009
1 January 2009
1 July 2009
1 July 2009
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on easyJet’s accounts. Certain of these
standards and interpretations will, when adopted, require addition to or amendment of disclosures in the accounts.
Under IFRS 8 Operating Segments, the Directors have determined that easyJet continues to operate in one business segment, namely the provision of a low
cost airline service.
2 Net finance charges / (income)
Interest receivable and other financing income
Interest income
Net exchange gains on financing items (note 24)
Interest payable and other financing charges
Interest payable on bank loans
Interest payable on finance lease obligations
Other interest payable
Other interest payable in 2009 includes a credit of £3.3 million reversing a previous interest accrual.
2009
£ million
2008
£ million
(18.4)
(4.1)
(22.5)
26.2
3.9
(2.2)
27.9
5.4
(48.9)
(4.3)
(53.2)
27.9
4.2
1.9
34.0
(19.2)
67 easyJet plc
Annual report and accounts 2009
3 Profit before tax
The following have been included in arriving at profit before tax:
Employee costs (note 4)
Depreciation of property, plant and equipment
Owned assets
Under finance leases
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
Operating lease rentals
Aircraft
Other assets
Auditors’ remuneration
During the year easyJet obtained the following services from easyJet’s auditors and their associates (including foreign partners):
Group audit fee
Audit of GB Airways purchase accounting
Total audit fee
Fees for other services
GB Airways acquisition and integration
Other
4 Employees
The average number of persons employed by easyJet was:
Flight and ground operations
Sales, marketing and administration
Employee costs for easyJet were:
Wages and salaries
Social security costs
Pension costs
Share-based payments
2009
£ million
342.9
52.0
3.4
4.4
7.5
125.1
2.7
2008
£ million
291.2
41.1
3.3
2.5
0.1
104.9
2.7
2009
£ million
2008
£ million
0.3
–
0.3
–
0.1
0.4
2009
6,186
292
6,478
2009
£ million
279.2
33.8
22.5
7.4
342.9
0.3
0.1
0.4
0.7
0.1
1.2
2008
5,985
390
6,375
2008
£ million
238.2
27.2
21.6
4.2
291.2
68 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
4 Employees (continued)
Key management compensation was:
Short-term employee benefits
Pension costs
Payments for loss of office
Share-based payments
2009
£ million
2008
£ million
4.5
0.2
–
0.7
5.4
3.5
0.4
0.1
0.5
4.5
The Directors of easyJet plc and the other members of the Executive Management Team are easyJet’s key management as they have collective authority and
responsibility for planning, directing and controlling the business.
Emoluments paid or payable to the Directors of easyJet plc were:
Remuneration
Gains made on the exercise of share options
Pension costs (two Directors)
Details of directors’ remuneration are disclosed in the Report on Directors’ Remuneration.
5 Tax (credit) / charge
Tax on profit on ordinary activities
Current tax
United Kingdom corporation tax
Foreign tax
Prior year adjustments
Deferred tax
Temporary differences relating to property, plant and equipment
Other temporary differences
Prior year adjustments
Effective tax rate
2009
£ million
2008
£ million
2.5
0.1
0.1
2.7
1.8
–
0.1
1.9
2009
£ million
2008
£ million
6.9
12.1
(27.4)
(8.4)
(13.1)
9.3
(4.3)
(8.1)
(16.5)
(30.2)%
14.8
6.0
(23.1)
(2.3)
(2.4)
11.3
20.4
29.3
27.0
24.5%
During the year, agreement was reached with Her Majesty’s Revenue & Customs on certain tax issues. This has resulted in the release to the income
statement of £30.7 million relating to current tax liabilities provided for in prior years. In addition, easyJet has reassessed certain other open tax matters.
The net impact of these has been classified as prior year current and deferred tax adjustments. The prior year adjustments in 2008 include a reclassification
of £16.9 million from current tax to deferred tax.
Tax on items recognised directly in shareholders’ funds
Deferred tax credit / (charge) on share-based payments
Deferred tax credit / (charge) on fair value movements of cash flow hedges
Current tax credit on share-based payments
2009
£ million
1.1
19.9
0.4
21.4
2008
£ million
(7.3)
(14.4)
2.0
(19.7)
69 easyJet plc
Annual report and accounts 2009
Reconciliation of the total tax (credit) / charge
The tax for the year is lower than the standard rate of corporation tax in the UK as set out below:
Profit on ordinary activities before tax
Tax charge at 28%
Attributable to rates other than standard UK rate
Income not chargeable for tax purposes
Expenses not deductible for tax purposes
Share-based payments
Adjustments in respect of prior years – current tax
Adjustments in respect of prior years – deferred tax
Deferred tax
The net deferred tax liability included in the balance sheet is as follows:
At 1 October 2008 – originally reported
Adjustment re acquisition of GB Airways
(note 23)
At 1 October 2008 – restated
Charged / (credited) to the income statement
Transfer from current tax liabilities
Credited to shareholders’ funds
At 30 September 2009
At 1 October 2007
Charged / (credited) to the income statement
Acquisition of GB Airways (note 23)
Charged to shareholders’ funds
At 30 September 2008
Accelerated
capital
allowances
£ million
49.7
Short-term
timing
differences
£ million
30.6
–
49.7
(14.2)
–
–
35.5
(0.3)
30.3
23.3
(1.9)
–
51.7
Accelerated
capital
allowances
£ million
Short-term
timing
differences
£ million
51.9
1.5
(3.7)
–
49.7
(1.8)
35.6
(3.2)
–
30.6
Tax losses
£ million
–
–
–
(16.0)
–
–
(16.0)
Tax losses
£ million
–
–
–
–
–
2009
£ million
54.7
15.3
(1.3)
(2.5)
2.5
1.2
(27.4)
(4.3)
(16.5)
Share-based
payments
£ million
(3.8)
–
(3.8)
(1.2)
–
(1.1)
(6.1)
Fair
value
(gains)/losses
£ million
31.1
–
31.1
–
–
(19.9)
11.2
Fair
value
(gains)/losses
£ million
Share-based
payments
£ million
(3.7)
(8.5)
28.9
14.4
31.1
(11.8)
0.7
–
7.3
(3.8)
2008
£ million
110.2
30.9
(1.5)
(0.2)
0.3
0.2
(23.1)
20.4
27.0
Total
£ million
107.6
(0.3)
107.3
(8.1)
(1.9)
(21.0)
76.3
Total
£ million
34.6
29.3
22.0
21.7
107.6
Of the total net deferred tax liability of £76.3 million at 30 September 2009, it is estimated that assets of approximately £7.4 million will reverse during the
year ending 30 September 2010. Deferred tax assets and liabilities have been offset where they relate to income taxes levied by the same taxation authority.
As a result the net UK deferred tax liability is £76.1 million (2008: £107.8 million). The net overseas deferred tax liability is £0.2 million (2008: asset of
£0.5 million). There are no unrecognised deferred tax assets.
70 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
6 Earnings per share
Basic earnings per share has been calculated by dividing the profit for the year by the weighted average number of shares in issue during the year after
adjusting for shares held in employee share trusts.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential shares.
Share options granted to employees where the exercise price is less than the average market price of the Company’s ordinary shares during the year are
considered to be dilutive potential shares. Where share options are exercisable based on performance criteria and those performance criteria have been
met during the year, these options are included in the calculation of dilutive potential shares.
Earnings per share is based on:
Profit for the year
Weighted average number of ordinary shares in issue during the year used to calculate basic earnings per share
Weighted average number of dilutive share options
Weighted average number of ordinary shares used to calculate diluted earnings per share
2009
£ million
71.2
million
421.9
6.4
428.3
2009
pence
16.9
16.6
2008
£ million
83.2
million
419.4
9.2
428.6
2008
pence
19.8
19.4
Earnings per share
Basic
Diluted
7 Goodwill and other intangible assets
Cost
At 1 October 2008 – originally reported
Adjustment re acquisition of GB Airways (note 23)
At 1 October 2008 – restated
Additions
At 30 September 2009
Amortisation
At 1 October 2008
Charge for the year
At 30 September 2009
Net book value
At 30 September 2009
At 1 October 2008 – restated
Goodwill
£ million
359.8
5.6
365.4
–
365.4
–
–
–
365.4
365.4
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
72.6
–
72.6
1.4
74.0
–
–
–
74.0
72.6
2.5
–
2.5
–
2.5
0.7
1.0
1.7
0.8
1.8
12.6
–
12.6
4.1
16.7
6.4
3.4
9.8
6.9
6.2
87.7
–
87.7
5.5
93.2
7.1
4.4
11.5
81.7
80.6
71 easyJet plc
Annual report and accounts 2009
Cost
At 1 October 2007
Acquisition of GB Airways (note 23)
Additions
At 30 September 2008
Amortisation
At 1 October 2007
Charge for the year
At 30 September 2008
Net book value
At 30 September 2008
At 1 October 2007
Goodwill
£ million
309.6
55.8
–
365.4
–
–
–
365.4
309.6
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
–
72.4
0.2
72.6
–
–
–
72.6
–
–
2.5
–
2.5
–
0.7
0.7
1.8
–
6.4
–
6.2
12.6
4.6
1.8
6.4
6.2
1.8
6.4
74.9
6.4
87.7
4.6
2.5
7.1
80.6
1.8
easyJet has one cash-generating unit, being its route network. The recoverable amount of goodwill and other assets with indefinite expected useful lives has
been determined based on value in use of the route network.
Pre-tax cash flow projections have been derived from the five-year strategic plan approved by the Board in June 2009, using the following key assumptions:
Pre-tax discount rate (derived from weighted average cost of capital)
Fuel price, per metric tonne, in US dollars
Exchange rates
US dollar
Euro
Swiss franc
10.69%
775
1.55
1.20
1.70
Both fuel price and exchange rates have been volatile during the past year, and the assumptions used represent management’s view of reasonable average
rates. Operating margins are sensitive to significant changes in these rates.
Cash flow projections beyond the forecast period have been extrapolated using real growth rate scenarios ranging from zero up to an estimated average
of long-term economic growth rates for the principal countries in which easyJet operates. No impairment resulted from any of these scenarios.
No reasonably possible combination of changes in the key assumptions above would result in the carrying value of the cash-generating unit exceeding
its recoverable amount.
8 Property, plant and equipment
Cost
At 1 October 2008
Additions
Transfer from assets held for sale
Disposals
At 30 September 2009
Depreciation
At 1 October 2008
Charge for the year
Transfer from assets held for sale
Disposals
At 30 September 2009
Net book value
At 30 September 2009
At 1 October 2008
Aircraft
£ million
Leasehold
improvements
£ million
Other
£ million
Total
£ million
1,177.8
511.5
67.9
(10.1)
1,747.1
93.1
52.4
13.0
(5.2)
153.3
1,593.8
1,084.7
12.5
–
–
–
12.5
6.4
0.7
–
–
7.1
5.4
6.1
26.6
3.5
–
–
30.1
14.8
2.3
–
–
17.1
13.0
11.8
1,216.9
515.0
67.9
(10.1)
1,789.7
114.3
55.4
13.0
(5.2)
177.5
1,612.2
1,102.6
72 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
8 Property, plant and equipment (continued)
Cost
At 1 October 2007
Acquisition of GB Airways (restated – note 23)
Additions
Transfer to assets held for sale (restated – note 23)
Disposals
At 30 September 2008
Depreciation
At 1 October 2007
Charge for the year
Transfer to assets held for sale
Disposals
At 30 September 2008
Net book value
At 30 September 2008
At 1 October 2007
Aircraft
£ million
987.8
82.5
319.5
(211.3)
(0.7)
1,177.8
68.2
41.6
(16.4)
(0.3)
93.1
1,084.7
919.6
Leasehold
improvements
£ million
Other
£ million
Total
£ million
12.2
–
0.3
–
–
12.5
5.6
0.8
–
–
6.4
6.1
6.6
22.4
–
4.2
–
–
26.6
12.8
2.0
–
–
14.8
11.8
9.6
1,022.4
82.5
324.0
(211.3)
(0.7)
1,216.9
86.6
44.4
(16.4)
(0.3)
114.3
1,102.6
935.8
At 30 September 2009, easyJet is contractually committed to the acquisition of 74 (2008: 109) Airbus A320 family aircraft with a total list price of
US$3.4 billion (2008: US$5.1 billion) before escalations and discounts, for delivery in the period to October 2013.
The net book value of aircraft at 30 September 2009 includes £148.5 million (2008: £188.1 million) relating to advance and option payments for future
delivery of aircraft. This amount is not depreciated.
The net book value of aircraft held under finance leases at 30 September 2009 was £71.1 million (2008: £74.5 million). £3.4 million of the related
accumulated depreciation was charged in the year ended 30 September 2009 (2008: £3.3 million).
At 30 September 2009, aircraft with a net book value of £984.5 million (2008: £610.9 million) were mortgaged to lenders as loan security.
9 Loan notes
In 2001, easyJet in consortium with six other UK airlines formed The Airline Group Limited in order to acquire a minority interest in NATS, the company
that owns the UK air traffic control system. easyJet’s investment is principally in the form of unsecured loan notes bearing interest at a fixed rate of 8%.
Interest receivable is settled by the issue of additional loan notes. Redemption is governed by a priority agreement among the consortium members.
At 1 October
Interest receivable converted to loan notes
Redemption of loan notes
At 30 September
10 Other non-current assets
Recoverable supplemental rent on leased aircraft (pledged as collateral)
Deposits held by aircraft lessors
Other
2009
£ million
12.0
0.9
(0.3)
12.6
2009
£ million
57.3
2.3
3.1
62.7
2008
£ million
11.1
0.9
–
12.0
2008
£ million
54.2
3.6
3.3
61.1
Supplementary rent is pledged to lessors to provide collateral should an aircraft be returned in a condition that does not meet the requirements of the lease
and is refunded when qualifying heavy maintenance is performed, or is offset against the costs incurred at the end of the lease.
73 easyJet plc
Annual report and accounts 2009
11 Assets held for sale
At 1 October 2008 – originally reported
Adjustment re acquisition of GB Airways (note 23)
At 1 October 2008 – restated
Disposals
Transfer to property, plant and equipment
At 30 September 2009
£ million
195.8
(0.9)
194.9
(66.8)
(54.9)
73.2
During 2008, seven Airbus A321 and five Airbus A319 aircraft, measured at carrying value which is considered to be less than current market value,
were reclassified from property, plant and equipment to assets held for sale. This carrying value was subsequently restated (see note 23).
During the year, three Airbus A321 aircraft have been sold, realising a net profit of £11.0 million. easyJet continues to market the remaining four A321
aircraft, and although the period over which the asset is classified as held for sale exceeds one year, the Directors consider that this classification remains
appropriate.
In view of current market conditions and the challenges for potential purchases in arranging finance, the five A319 aircraft have been transferred back
to property, plant and equipment, with a corresponding catch-up of related depreciation charged to the income statement.
12 Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Other receivables
Recoverable supplemental rent on leased aircraft (pledged as collateral)
Prepayments and accrued income
2009
£ million
158.4
(2.9)
155.5
22.8
4.5
59.0
241.8
2008
£ million
142.1
(2.6)
139.5
27.1
20.6
49.7
236.9
Supplementary rent is pledged to lessors to provide collateral should an aircraft be returned in a condition that does not meet the requirements of the lease
and is refunded when qualifying heavy maintenance is performed, or is offset against the costs incurred at the end of the lease.
Allowance for credit losses
Movements in the provision for impairment of trade receivables are shown below:
At 1 October
Increase in provision (included in “Other costs”)
Amounts written off
At 30 September
2009
£ million
2008
£ million
2.6
0.9
(0.6)
2.9
1.2
2.2
(0.8)
2.6
Trade receivables are monitored and allowances are created when there is evidence that amounts due, according to the terms of the receivable, may not
be collected.
The following amounts of trade and other receivables are past due but not impaired:
Up to three months past due
Over three months past due
2009
£ million
21.1
0.3
21.4
2008
£ million
13.4
1.7
15.1
With respect to trade receivables that are neither impaired nor past due, there are no indications at the reporting date that the payment obligations will not
be met. Amounts due from trade receivables are short term in nature and largely comprise credit card receivables due from financial institutions with credit
ratings of at least A and, accordingly, the possibility of significant default is considered to be unlikely.
74 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
13 Cash and money market deposits
Cash and cash equivalents (original maturity less than three months)
Money market deposits (original maturity over three months)
Current restricted cash
Non-current restricted cash
2009
£ million
788.6
286.3
24.3
48.0
1,147.2
2008
£ million
632.2
230.3
23.3
42.9
928.7
Interest rates on money market deposits and restricted cash are repriced within 185 days based on prevailing market rates of interest. Carrying value is not
significantly different from fair value.
Restricted cash comprises:
Customer payments for packaged holidays
Pledged as collateral to third-parties:
Aircraft operating lease deposits
Aircraft mortgage collateral
Other
14 Trade and other payables
Trade payables
Other taxes and social security
Other creditors
Unearned revenue
Accruals and deferred income
15 Borrowings
At 30 September 2009
Bank loans
Finance lease obligations
At 30 September 2008
Bank loans
Finance lease obligations
2009
£ million
23.4
44.4
2.7
1.8
72.3
2009
£ million
99.2
7.8
63.6
324.3
255.8
750.7
Current
£ million
113.8
3.8
117.6
Non-current
£ million
896.9
106.1
1,003.0
Current
£ million
Non-current
£ million
53.5
3.2
56.7
471.4
98.8
570.2
2008
£ million
23.3
37.2
4.0
1.7
66.2
2008
£ million
77.5
10.2
41.8
286.2
237.3
653.0
Total
£ million
1,010.7
109.9
1,120.6
Total
£ million
524.9
102.0
626.9
Bank loans, which bear interest at variable rates linked to LIBOR, were drawn down to finance the acquisition of aircraft that have been mortgaged to the
lender to provide security.
Finance lease obligations relate to aircraft and bear interest partly at fixed rates and partly at variable rates linked to LIBOR.
The maturity profile of borrowings is set out in note 25.
75 easyJet plc
Annual report and accounts 2009
16 Non-current deferred income
Deferred income principally comprises the non-current excess of sale proceeds over fair value of aircraft that have been sold and leased back under
operating leases. This balance will be realised in the income statement over the next eight years.
17 Maintenance provisions
At 1 October 2008 – originally reported
Adjustment re acquisition of GB Airways (note 23)
At 1 October 2008 – restated
Exchange adjustments
Charged to income statement
Utilised in the year
At 30 September 2009
Maintenance provisions are analysed as follows:
Current (restated – note 23)
Non-current
The provision for maintenance liabilities is expected to be utilised within eight years.
18 Share capital
Authorised
At beginning and end of the year, ordinary shares of 25 pence each
Allotted, called up and fully paid
At 1 October
Issued during the year under share incentive schemes
At 30 September
2009
million
500.0
422.7
2.2
424.9
The weighted average share price for options exercised during the year was £3.09 (2008: £4.72).
easyJet’s employee share trusts hold the following shares. The cost of these has been deducted from retained earnings:
Number of shares (million)
Cost (£ million)
Market value at 30 September (£ million)
2009
2.0
9.7
7.5
£ million
209.4
6.9
216.3
21.6
41.2
(65.4)
213.7
2008
£ million
55.9
160.4
216.3
Value
2008
£ million
2009
£ million
45.1
168.6
213.7
Number
2008
million
2009
£ million
500.0
125.0
125.0
419.1
3.6
422.7
105.7
0.3
106.0
104.8
0.9
105.7
2008
1.9
10.3
5.6
76 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
19 Share incentive schemes
easyJet operates the following share incentive schemes, all of which are equity settled. The change in the number of awards outstanding and weighted
average exercise prices during the year, and the number exercisable at each year end were as follows:
1 October
2008
million
Granted
million
Forfeited
million
Lapsed
million
Exercised
million
Expired
million
30 September
2009
million
Awards by grant date
Pre-flotation scheme
29 February 2000
26 September 2000
Discretionary schemes
18 January 2001
19 January 2004
8 December 2004
2 June 2005
1 December 2005
Sharesave
29 June 2005
2 June 2006
8 June 2007
6 June 2008
5 June 2009
Share incentive plan
Long term incentive plan
1 December 2005
1 December 2006
3 December 2007
29 February 2008
16 January 2009
Chief Executive recruitment award
3.6
0.5
0.1
0.5
4.6
0.4
0.7
0.6
0.5
0.5
3.5
–
1.9
0.5
0.7
0.9
0.4
–
0.3
20.2
–
–
–
–
–
–
–
–
–
–
–
1.4
0.3
–
–
–
–
2.4
–
4.1
–
–
–
–
(0.1)
–
–
–
(0.1)
(0.2)
(0.4)
–
–
–
(0.1)
(0.2)
(0.2)
(0.3)
–
(1.6)
Weighted average exercise prices
Pre-flotation scheme
Discretionary schemes
Sharesave
1 October
2008
£
1.66
2.20
2.59
Granted
£
–
–
2.43
Forfeited
£
–
2.39
3.02
The exercise price of all awards save those disclosed in the above table is £nil.
Number of awards exercisable
Pre-flotation scheme
Discretionary schemes
Sharesave
Share incentive plan
–
–
–
–
–
–
(0.3)
–
–
–
–
–
–
(0.2)
–
–
–
–
(0.1)
(0.6)
Lapsed
£
–
3.30
–
(0.3)
–
–
–
(0.7)
(0.4)
–
(0.5)
(0.2)
–
–
–
–
(0.3)
–
–
–
–
(0.2)
(2.6)
Exercised
£
1.62
2.03
2.08
–
–
–
–
–
–
–
(0.1)
–
–
–
–
–
–
–
–
–
–
–
(0.1)
Expired
£
–
–
1.86
2009
million
3.8
4.8
0.2
0.2
9.0
3.3
0.5
0.1
0.5
3.8
–
0.4
–
0.2
0.3
3.1
1.4
2.2
–
0.6
0.7
0.2
2.1
–
19.4
30 September
2009
£
1.66
2.16
2.56
2008
million
4.1
5.6
0.6
–
10.3
77 easyJet plc
Annual report and accounts 2009
Pre-flotation scheme
Options vested in tranches of 25% ending on the third anniversary of easyJet’s admission to the Official List on 22 November 2000, and expire ten years
after grant.
Discretionary schemes
Options awarded in 2001 in connection with easyJet’s admission to the Official List had a three-year vesting period and no performance conditions.
All other awards have a three-year vesting period and performance conditions based on growth in earnings per share. During the year 54% of the options
granted in December 2005 vested.
Sharesave
Sharesave is open to all employees on the UK payroll. Participants may elect to save up to £250 per month under a three-year savings contract. An option is
granted by the Company to buy shares at a discount of 20% from market price at the time of the grant. At the end of the savings period, a tax-free bonus is
applied to the savings and the option becomes exercisable for a period of six months. Employees who are not paid through the UK payroll may save under
similar terms and conditions, albeit without tax benefits.
Share incentive plan
The share incentive plan is open to all employees on the UK payroll. Participants may invest up to £1,500 of their pre-tax salary each year to purchase
partnership shares in easyJet. For each partnership share acquired easyJet purchases a matching share. Employees must remain with easyJet for three years
from the date of purchase of each partnership share in order to qualify for the matching share, and for five years for the shares to be transferred to them tax
free. The employee is entitled to dividends and to vote at shareholder meetings. Employees who are not paid through the UK payroll may save under similar
terms and conditions, albeit without tax benefits.
In October 2006 and December 2007, easyJet also awarded free shares to all employees under the share incentive plan.
Long term incentive plan
The plan is open, by invitation, to Executive Directors and senior management, and provides for annual awards of performance shares worth up to 200%
of salary each year and matching shares linked to the investment of up to 50% of annual bonus in easyJet shares. The vesting of these awards is dependent
on return on equity targets being achieved.
Chief Executive recruitment award
In December 2005, on Andrew Harrison acquiring and retaining £1,000,000 worth of easyJet shares using his own funds, he was granted an equal number
of shares with a three-year vesting period. Half of the award is subject to performance conditions relating to the growth in EPS over the three years to
September 2008. The other half is subject to the same return on equity targets as the 2005 long term incentive plan award. During the year 50% of the
award related to growth in EPS and 67% of the award related to return on equity vested.
The weighted average remaining contractual life for each class of share award is as follows:
Pre-flotation scheme
Discretionary schemes
Sharesave
Share incentive plan
Long term incentive plan
In accordance with the provisions of IFRS 2, fair values have not been calculated for grants of share options that occurred before 8 November 2002.
Exercise prices for these options lie between £1.61 and £3.65.
Years
0.5
5.1
2.5
3.0
2.2
78 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
19 Share incentive schemes (continued)
The fair value of other grants under the discretionary and sharesave schemes is estimated by applying the Binomial Lattice option pricing model using the
following key assumptions. The fair value of grants under all other schemes is the share price on the date of grant.
Grant date
Discretionary Schemes
19 January 2004
8 December 2004
2 June 2005
1 December 2005
Sharesave
29 June 2005
2 June 2006
8 June 2007
6 June 2008
5 June 2009
Share incentive plan
Long term incentive plan
1 December 2005
1 December 2006
3 December 2007
29 February 2008
16 January 2009
Chief Executive recruitment award
Share
price
£
3.80
1.81
2.25
3.42
2.45
3.66
5.19
2.86
3.04
2.62–7.27
3.42
5.95
5.63
4.33
2.88
3.76
Exercise
price
£
Expected
volatility
%
Option
life
(years)
Risk-free
interest rate
%
3.60
1.84
2.32
3.30
1.86
2.61
4.79
2.40
2.48
–
–
–
–
–
–
–
40%
42%
42%
42%
42%
42%
32%
41%
53%
–
–
–
–
–
–
–
6.5
6.5
6.5
6.5
3.5
3.5
3.5
3.5
3.5
–
–
–
–
–
–
–
4.62%
4.45%
4.20%
4.15%
4.09%
4.68%
5.76%
4.92%
2.52%
–
–
–
–
–
–
–
Fair
value
£
1.90
0.88
1.08
1.42
1.12
1.79
1.82
1.16
1.40
2.62–7.27
3.42
5.95
5.63
4.33
2.88
3.76
The weighted average fair value of shares issued under the share incentive plan during the year was £3.00 (2008: £5.46).
Share price is the closing share price from the last working day prior to the date of grant. Exercise price for the discretionary schemes was determined using
a five-day weighted average price. For the Sharesave scheme, a 20% discount has been given between share price and exercise price.
Expected volatility is based on historical volatility over a period comparable to the expected life of each type of option.
In all cases the assumed dividend yield is zero as easyJet does not pay dividends.
Levels of early exercises and lapses are estimated using historical averages.
20 Shareholders’ funds
At 1 October 2008
Profit for the year
Cash flow hedges
Fair value losses
Losses transferred to income statement
Gains transferred to property, plant and equipment
Related tax (note 5)
Share incentive schemes
Proceeds from shares issued
Value of employee services
Related tax (note 5)
Purchase of own shares
Currency translation differences
At 30 September 2009
Share
capital
£ million
105.7
–
–
–
–
–
0.3
–
–
–
–
106.0
Share
premium
£ million
640.2
–
–
–
–
–
2.3
–
–
–
–
642.5
Hedging
reserve
£ million
27.6
–
(214.3)
228.8
(85.9)
19.9
–
–
–
–
–
(23.9)
Translation
reserve
£ million
0.1
–
–
–
–
–
–
–
–
–
(0.5)
(0.4)
Retained
earnings
£ million
504.6
71.2
–
–
–
–
–
7.4
1.5
(1.6)
–
583.1
Total
£ million
1,278.2
71.2
(214.3)
228.8
(85.9)
19.9
2.6
7.4
1.5
(1.6)
(0.5)
1,307.3
79 easyJet plc
Annual report and accounts 2009
At 1 October 2007
Profit for the year
Cash flow hedges
Fair value gains
Gains transferred to income statement
Gains transferred to property, plant and equipment
Related tax (note 5)
Share incentive schemes
Proceeds from shares issued
Value of employee services
Related tax (note 5)
Purchase of own shares
Currency translation differences
At 30 September 2008
Share
capital
£ million
104.8
–
–
–
–
–
0.9
–
–
–
–
105.7
Share
premium
£ million
633.9
–
–
–
–
–
6.3
–
–
–
–
640.2
Hedging
reserve
£ million
(13.7)
–
143.6
(87.6)
(0.3)
(14.4)
–
–
–
–
–
27.6
Translation
reserve
£ million
–
–
–
–
–
–
–
–
–
–
0.1
0.1
Retained
earnings
£ million
427.4
83.2
–
–
–
–
(0.3)
4.2
(5.3)
(4.6)
–
504.6
Total
£ million
1,152.4
83.2
143.6
(87.6)
(0.3)
(14.4)
6.9
4.2
(5.3)
(4.6)
0.1
1,278.2
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to highly probable
transactions that are forecast to occur after year end.
21 Reconciliation of operating profit to cash generated from operations
Operating profit
Adjustments for non-cash items:
Depreciation
Profit on disposal of property, plant and equipment
Profit on disposal of assets held for sale
Amortisation of intangible assets
Share-based payments
Derivative financial instruments – time value
Unrealised foreign exchange differences
Changes in working capital and non-current deferred income:
Decrease in trade and other receivables
Increase in trade and other payables
(Decrease) / increase in provisions
Increase in other non-current assets
Increase in derivative financial instruments
Decrease in non-current deferred income
2009
£ million
60.1
2008
£ million
91.0
55.4
(7.5)
(11.0)
4.4
7.4
0.3
(6.2)
3.2
104.9
(27.8)
(1.6)
(0.9)
(16.2)
164.5
44.4
(0.1)
–
2.5
4.2
2.6
(3.4)
10.1
112.9
49.8
(0.3)
(5.3)
(18.0)
290.4
80 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
22 Reconciliation of net cash flow to movement in net funds / (debt)
Exchange
differences
£ million
1 October
2008
£ million
Loan issue
costs
£ million
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
632.2
230.3
862.5
(524.9)
(102.0)
(626.9)
11.7
27.0
38.7
(14.0)
(11.5)
(25.5)
Net funds / (debt) (non-GAAP measure)
235.6
13.2
–
–
–
1.9
–
1.9
1.9
Cash flows
£ million
144.7
29.0
173.7
(473.7)
3.6
(470.1)
30 September
2009
£ million
788.6
286.3
1,074.9
(1,010.7)
(109.9)
(1,120.6)
(296.4)
(45.7)
23 Acquisition of GB Airways
On 31 January 2008, easyJet acquired 100% of the share capital of and voting rights in GB Airways. At 30 September 2008 the fair values of assets acquired
and liabilities assumed were determined on a provisional basis. These provisional fair values and subsequent adjustments made are as follows:
Provisional
fair value
£ million
Adjustments
£ million
Fair value
£ million
Landing rights
Other intangible assets
Property, plant and equipment
Other non-current assets
Assets held for sale
Current assets excluding cash and cash equivalents
Cash and cash equivalents
Current liabilities, excluding borrowings and overdrafts
Overdrafts
Borrowings
Deferred tax liabilities
Maintenance provisions
Net assets acquired
Goodwill
Purchase consideration
Initial consideration paid
Deferred consideration paid
Direct acquisition costs
Cash and cash equivalents acquired
Overdrafts acquired
Net cash outflow
72.4
2.5
83.4
2.7
30.0
55.6
15.1
(91.6)
(3.7)
(59.1)
(22.0)
(6.1)
79.2
50.2
129.4
–
–
(0.9)
–
–
–
–
1.9
–
–
0.3
(6.9)
(5.6)
5.6
–
72.4
2.5
82.5
2.7
30.0
55.6
15.1
(89.7)
(3.7)
(59.1)
(21.7)
(13.0)
73.6
55.8
129.4
103.5
21.6
4.3
129.4
(15.1)
3.7
118.0
Adjustments made since 30 September 2008, but within twelve months of the acquisition date, principally relate to maintenance provisions in respect
of leased aircraft. Fair values are now final and no further adjustments may be made.
81 easyJet plc
Annual report and accounts 2009
To report these adjustments in accordance with the provisions of IFRS 3 “Business Combinations”, the consolidated balance sheet at 30 September 2008
has been restated as follows:
Goodwill
Assets held for sale (included on acquisition as property, plant and equipment)
Current tax liabilities
Maintenance provisions (current portion)
Deferred tax liabilities
Previously
reported
£ million
359.8
195.8
(75.1)
(49.0)
(108.1)
Adjustments
£ million
5.6
(0.9)
1.9
(6.9)
0.3
Restated
£ million
365.4
194.9
(73.2)
(55.9)
(107.8)
24 Financial instruments
Carrying value and fair value of financial assets and financial liabilities
The fair values of financial assets and liabilities, together with the carrying value at each reporting date are as follows:
At 30 September 2009
Financial assets
Loan notes
Restricted cash
Other non-current assets
Derivative financial assets
Trade and other receivables
Cash and money market deposits
Financial liabilities
Trade and other payables
Borrowings
Derivative financial liabilities
At 30 September 2008
Financial assets
Loan notes
Restricted cash
Other non-current assets
Derivative financial assets
Trade and other receivables
Cash and money market deposits
Financial liabilities
Trade and other payables
Borrowings
Derivative financial liabilities
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
Non-financial
instruments
£ million
Carrying
value
£ million
Fair
value
£ million
12.6
72.3
59.6
–
193.1
1,074.9
–
–
–
–
–
–
–
–
–
338.6
1,120.6
–
–
–
–
63.1
–
–
–
–
93.7
–
–
–
12.7
–
–
–
–
–
–
–
3.1
–
48.7
–
412.1
–
–
12.6
72.3
62.7
75.8
241.8
1,074.9
750.7
1,120.6
93.7
12.9
72.3
62.7
75.8
241.8
1,074.9
750.7
1,132.3
93.7
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
Non-financial
instruments
£ million
Carrying
value
£ million
Fair
value
£ million
12.0
66.2
60.0
–
187.5
862.5
–
–
–
–
–
–
–
–
–
304.1
626.9
–
–
–
–
116.4
–
–
–
–
76.3
–
–
–
1.4
–
–
–
–
–
–
–
1.1
–
49.4
–
348.9
–
–
12.0
66.2
61.1
117.8
236.9
862.5
653.0
626.9
76.3
12.3
66.2
61.1
117.8
236.9
862.5
653.0
627.8
76.3
Fair value calculation methodology
Derivative financial instruments comprise forward contracts and (in the comparative period only) zero cost collars, and are valued based on market rates at
each year end. Where carrying value does not equal fair value, the fair value has been estimated by discounting cash flows at prevailing interest rates and by
applying year end exchange rates. For all other financial instruments fair value approximates to carrying value.
Non-financial instruments represent amounts recognised in the balance sheet for the line items disclosed above that do not meet the definition of a financial
instrument and are disclosed to permit reconciliation of the carrying values of financial instruments to line items presented in the balance sheet.
82 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
24 Financial instruments (continued)
Fair value of derivative financial instruments
At 30 September 2009
Designated as cash flow hedges
Forward US dollar contracts
Forward euro contracts
Forward jet fuel contracts
Designated as held for trading
Forward US dollar contracts
Less non-current portion:
Forward contracts
Current portion
At 30 September 2008
Designated as cash flow hedges
Forward US dollar contracts
Forward euro contracts
Forward Swiss franc contracts
Zero cost US dollar collars
Forward jet fuel contracts
Designated as held for trading
Forward US dollar contracts
Less non-current portion:
Forward contracts
Current portion
Quantity
million
Assets
£ million
Liabilities
£ million
874.2
200.0
1.2
825.0
39.9
0.1
23.1
12.7
75.8
7.8
68.0
(6.9)
(15.4)
(71.4)
–
(93.7)
(2.6)
(91.1)
Quantity
million
Assets
£ million
Liabilities
£ million
1,876.2
440.0
100.0
72.0
0.7
318.0
100.7
3.4
–
0.6
11.7
1.4
117.8
21.3
96.5
–
(1.1)
(0.1)
–
(75.1)
–
(76.3)
(0.3)
(76.0)
For currency contracts, quantity represents the nominal value of currency contracts held, disclosed in the contract currency. For jet fuel contracts, quantity
represents contracted metric tonnes.
83 easyJet plc
Annual report and accounts 2009
Derivatives designated as cash flow hedges
All derivatives to which hedge accounting is applied are designated as cash flow hedges, with only the intrinsic value being designated for option instruments.
Changes in fair value are recognised directly in shareholders’ funds, to the extent that they are effective, with the ineffective portion being recognised in the
income statement. Where the hedged item results in a non-financial asset or liability, the accumulated gains and losses previously recognised in shareholders’
funds are included in the carrying value of that asset or liability. Otherwise accumulated gains and losses are recognised in the income statement in the same
period in which the hedged items affects the income statement.
easyJet uses forward contracts and zero cost collars to hedge transaction currency risk, jet fuel price risk and surplus euro and Swiss franc monetary balances.
Transaction currency risk includes capital expenditure, lease payments, debt repayments and fuel payments. Where these hedges are assessed as highly
effective, gains and losses are deferred in shareholders’ funds and transferred to the income statement or cost of property, plant and equipment when
the related cash flow occurs. The cumulative net gains / (losses) deferred in shareholders’ funds and their expected maturities are as follows:
At 30 September 2009
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
Net losses
At 30 September 2008
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
Net gains
The amount deferred and recognised in shareholders’ funds during each financial year is disclosed in note 20.
Amounts recorded in the income statement were as follows:
Gains / (losses) on cash flow hedges recycled from shareholders’ funds into income statement captions:
Revenue
Fuel
Maintenance
Other costs
Profit on disposal of assets held for sale
Aircraft lease costs
Undesignated portion of losses on cash flow hedges (time value)
Within 1 year
£ million
1–2 years
£ million
13.4
(53.1)
(39.7)
1.8
4.7
6.5
Within 1 year
£ million
1–2 years
£ million
86.0
(67.3)
18.7
15.7
3.8
19.5
Total
£ million
15.2
(48.4)
(33.2)
9.3
(23.9)
Total
£ million
101.7
(63.5)
38.2
(10.6)
27.6
2009
£ million
2008
£ million
(30.5)
(209.3)
1.3
1.4
(4.4)
13.2
(0.3)
(228.6)
–
88.4
(0.2)
–
–
(2.2)
(2.6)
83.4
The amount transferred to property, plant and equipment from shareholders’ funds during the period is a gain of £85.9 million (2008: gain of £0.3 million).
Changes in the fair value of options attributable to time value represent the undesignated portion of the gain or loss and are charged directly to the
income statement.
84 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
24 Financial instruments (continued)
Derivatives designated as held for trading
easyJet has US dollar net monetary liabilities at the balance sheet date of £518.7 million (2008: £181.0 million). easyJet has no other significant currency net
monetary exposure at each balance sheet date. In accordance with IAS 21, monetary assets and liabilities are revalued using exchange rates at the balance
sheet date. This exposure is managed by the use of forward foreign exchange contracts.
Net US dollar monetary liabilities at the balance sheet date were as follows:
Cash and money market deposits
Borrowings
Maintenance provisions
Other
2009
£ million
559.7
(935.9)
(180.8)
38.3
(518.7)
2008
£ million
432.5
(453.5)
(101.9)
(58.1)
(181.0)
Amounts recorded in the income statement in respect of revaluation of the monetary assets and liabilities and the gains and losses on derivatives designated
as held for trading are as follows:
Operating profit
Unrealised revaluation gains on non-derivative financial instruments
Unrealised revaluation losses on other monetary assets and liabilities
Realised foreign exchange losses on financial instruments
Unrealised gains on derivatives
Realised gains on derivatives
Net finance (charges) / income
Unrealised revaluation gains on other financial instruments
Unrealised gains on derivatives
Realised (losses) / gains on derivatives
Net gains
2009
£ million
2008
£ million
30.9
(26.0)
(16.4)
1.3
16.6
6.4
12.8
10.1
(18.8)
4.1
10.5
15.5
(13.5)
(6.7)
1.4
10.8
7.5
0.7
0.3
3.3
4.3
11.8
25 Financial risk and capital management
easyJet is exposed to financial risks including fluctuations in exchange rates, jet fuel prices and interest rates. Financial risk management aims to limit these
market risks with selected derivative hedging instruments being used for this purpose. easyJet policy is not to trade in derivatives but to use the instruments
to hedge anticipated exposure. As such, easyJet is not exposed to market risk by using derivatives as any gains and losses arising are offset by the outcome
of the underlying exposure being hedged. In addition to market risks, easyJet is exposed to credit and liquidity risk.
The Board is responsible for setting financial risk and capital management policies and objectives which are implemented by the treasury function on
a day-to-day basis. The policy outlines the approach to risk management and also states the instruments and time periods which the treasury function is
authorised to use in managing financial risks. The policy is under ongoing review to ensure best practice in light of developments in the financial markets.
There have been no changes to the policy in the current year.
Capital management
The objective of capital management is to ensure that easyJet is able to continue as a going concern whilst delivering shareholder expectations of a strong
capital base as well as returning benefits for other stakeholders and optimising the cost of capital.
easyJet manages its capital structure in response to changes in both economic conditions and strategic objectives. The cash and net debt position, together
with the maturity profile of existing debt, is monitored to ensure the continuity of funding. During the year, funding totalling $217 million for seven A320
aircraft was put in place and utilised. On 16 November 2009 lease funding for a further six A320 aircraft totalling $222 million was agreed.
The principal measure used by easyJet to manage capital risk is the gearing ratio of debt (defined as debt plus seven times aircraft operating lease payments
less cash, including money market deposits and restricted cash) to shareholders’ funds. Gearing increased in the year from 28.8% to 37.6%, principally due to
the acquisition of new aircraft and the strengthening of the US dollar against sterling.
85 easyJet plc
Annual report and accounts 2009
Liquidity risk management
The objective of easyJet’s liquidity risk management is to ensure sufficient cash resources and the availability of funding as required. easyJet holds financial
assets either for which there is a liquid market or which are expected to generate cash inflows that are available to meet liquidity needs. In addition, easyJet
has committed undrawn bank facilities of $528 million (2008: $1,135 million), being a $250 million revolving credit facility and a remaining $278 million from
facilities of $937 million put in place in December 2007. The cash, cash equivalent, restricted cash balances and money market deposits at 30 September
2009 totalled £1,147.2 million (2008: £928.7 million). easyJet continues to hold significant cash and liquid funds to mitigate the impact of potential business
disruption events with Board approved policy stating an absolute minimum level of liquidity that must be maintained at all times. Surplus funds are invested,
in line with Board approved policy, in high quality short-term liquid instruments, usually money market funds or bank deposits.
The maturity profile of easyJet’s financial liabilities based on the remaining contractual maturities is set out below. The analysis represents undiscounted gross
anticipated future cash flows.
30 September 2009
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
30 September 2008
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
Within
1 year
£ million
138.5
338.6
(1,482.2)
1,541.3
Within
1 year
£ million
85.5
304.1
(1,759.9)
1,729.6
1–2 years
£ million
150.5
–
(217.7)
232.8
1–2 years
£ million
96.9
–
(336.9)
310.3
2–5 years
£ million
418.9
–
–
–
2–5 years
£ million
291.2
–
–
–
Over
5 years
£ million
525.1
–
–
–
Over
5 years
£ million
296.0
–
–
–
Credit risk management
easyJet is exposed to credit risk arising from liquid funds, derivative financial instruments and trade and other receivables. Credit risk management aims
to reduce the risk of counterparty default through limiting aggregate credit exposure to any one individual counterparty, based on its credit rating. Such
counterparty exposures are regularly reviewed and adjusted as necessary. Accordingly, the possibility of material loss arising in the event of non-performance
by counterparties is considered to be unlikely.
Credit risk is limited to the carrying amount recognised at the balance sheet date. Disclosure relating to the credit quality of trade and other receivables is
detailed in note 12. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks
with high quality external credit ratings. For deposits with financial institutions, internal limits are placed on the maximum exposure to individual
counterparties and a minimum external credit rating of A is required.
Foreign currency risk management
The principal exposure to currency exchange rates arises from fluctuations in both the US dollar and euro rates which impact operating, financing and
investing activities. The aim of foreign currency risk management is to reduce the impact of exchange rate volatility on the results of easyJet. Foreign exchange
exposure arising from transactions in various currencies is reduced through a policy of matching, as far as possible, receipts and payments in each individual
currency. Any remaining significant anticipated exposure is managed through the use of forward foreign exchange contracts and zero cost collars. No new
zero cost collars were put in place during the year ended 30 September 2009, and all existing positions matured prior to 30 September 2009. In addition,
easyJet has substantial US dollar balance sheet liabilities, partly offset by holding US dollar cash; any residual net liability is managed through the use of forward
foreign exchange contracts.
Financing and interest rate risk management
Interest rate cashflow risk arises on floating rate borrowings and cash investments.
Interest rate risk management policy aims to provide certainty in a proportion of financing while retaining the opportunity to benefit from interest rate
reductions. Interest rate policy is used to achieve the desired mix of fixed and floating rate debt. All borrowings are at floating interest rates repricing every
three to six months. A significant proportion of the US dollar loans are matched with US dollar cash, with the cash being invested to coincide with the
repricing of the debt. Operating leases are a mix of fixed and floating rates. Of the operating leases in place at 30 September 2009 approximately 60%
of lease payments were based on fixed interest rates and 40% were based on floating interest rates (2008: 60% fixed, 40% floating).
All debt is asset related, reflecting the capital intensive nature of the airline industry and the attractiveness of aircraft as security to lenders. These factors are
also reflected in the medium-term profile of easyJet’s borrowings and operating leases. During the year four aircraft were cash acquired (2008: 13 aircraft).
Committed financing is in place for up to 21 of the 27 aircraft due to be delivered during the year to 30 September 2010.
86 easyJet plc
Annual report and accounts 2009
NOTES TO THE ACCOUNTS CONTINUED
25 Financial risk and capital management (continued)
Fuel price risk management
easyJet is exposed to fuel price risk. The objective of the fuel price risk management policy is to provide protection against sudden and significant increases
in jet fuel prices thus mitigating volatility in the income statement in the short term. In order to manage the risk exposure, forward contracts are used in line
with Board approved policy to hedge between 50% and 80% of estimated exposures up to 12 months in advance, and to hedge a smaller percentage of
estimated usage up to 24 months in advance. In exceptional market conditions, the Board may accelerate or limit the implementation of the hedging policy.
Market risk sensitivity analysis
Financial instruments affected by market risks include borrowings, deposits, trade receivables, trade payables and derivative financial instruments. The
following sensitivity analysis illustrates the sensitivity of such financial instruments to changes in relevant foreign exchange rates, interest rates and fuel prices.
It should be noted that the sensitivity analysis reflects the impact on profit or loss after tax for the year and shareholders’ funds on financial instruments held
at the reporting date. It does not reflect changes in revenue or costs that may result from changing currency rates, interest rates or fuel prices. Each sensitivity
is calculated based on all other variables remaining constant. The analysis below is considered representative of easyJet’s exposure over the 12 month period.
The currency sensitivity analysis is based on easyJet’s foreign currency financial instruments held at each balance sheet date taking into account forward
exchange contracts and zero cost collars that offset effects from changes in currency exchange rates. The increased sensitivity in the US dollar and euro rate
represents sterling weakening against each variable currency with the –10% sensitivity showing a stronger sterling sensitivity. The interest rate analysis assumes
a 1% change in interest rates over the reporting year applied to end of year financial instruments. The fuel price sensitivity analysis is based on easyJet’s fuel-
related derivative financial instruments held at the end of each reporting period. The sensitivity applied to both currency rates and the fuel price is based
on a reasonably possible change in the rate applied to the value of financial instruments at the balance sheet date.
At 30 September 2009
Income statement impact: gain/(loss)
Impact on shareholders’ funds: increase/(decrease)
US dollar +10%
£ million
US dollar –10%
£ million
Euro +10%
£ million
Euro –10%
£ million
Interest rates
1% increase
£ million
Fuel price
10% increase
£ million
17.9
44.9
(13.8)
(37.6)
(1.1)
(14.5)
0.9
12.0
0.4
–
–
31.4
Currency rates
At 30 September 2008
Income statement impact: gain/(loss)
Impact on shareholders’ funds: increase/(decrease)
US dollar +10%
£ million
US dollar –10%
£ million
Euro +10%
£ million
Euro –10%
£ million
(3.6)
86.8
2.9
(70.5)
2.3
(27.1)
(1.9)
22.1
Interest rates
1% increase
£ million
Fuel price
10% increase
£ million
2.4
–
–
27.6
The impact of a 1% increase in interest rates and a 10% increase in the fuel price is disclosed above. A corresponding decrease in each of the rates results in
an equal and opposite impact on the income statement and shareholders’ funds in both reporting periods.
Currency rates
26 Leasing commitments
Commitments under operating leases
Total commitments under non-cancellable operating leases due:
Not later than one year
Later than one year and not later than five years
Later than five years
2009
£ million
101.0
223.0
37.9
361.9
Aircraft
2008
£ million
118.2
267.7
72.8
458.7
2009
£ million
Other assets
2008
£ million
2.3
3.7
3.5
9.5
2.5
4.4
4.1
11.0
easyJet holds 68 aircraft (2008: 84 aircraft) under operating leases, with initial lease terms ranging from seven to ten years. easyJet is contractually obliged
to carry out maintenance on these aircraft, and the cost of this is provided based on the number of flying hours and cycles operated. Further details are given
in the critical accounting policies section of note 1.
87 easyJet plc
Annual report and accounts 2009
Commitments under finance leases
Minimum lease payments fall due as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Future finance charges on finance leases
Carrying value of finance lease liabilities
2009
£ million
2008
£ million
6.6
28.7
92.3
127.6
(17.7)
109.9
6.9
28.5
91.4
126.8
(24.8)
102.0
easyJet holds six aircraft under finance leases with ten year initial lease terms. Further details are given in note 15.
27 Contingent liabilities
easyJet is involved in various disputes or litigation in the normal course of business. Whilst the result of such disputes cannot be predicted with certainty,
management considers that the ultimate resolution of these disputes will not have a material effect on easyJet’s financial position, results or cash flows.
At 30 September 2009 easyJet had outstanding letters of credit and performance bonds totalling £29.4 million of which £28.7 million expires on or before
30 September 2010. The fair value of these instruments was approximately equal to their carrying value.
88 easyJet plc
Annual report and accounts 2009
COMPANY BALANCE SHEET
Non-current assets
Investments in subsidiary undertakings
Current assets
Amounts due from subsidiary undertakings
Current liabilities
Amounts due to subsidiary undertakings
Current tax liabilities
Other payables
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Retained earnings
30 September
2009
£ million
30 September
2008
£ million
Notes
b
65.7
700.2
1,049.0
362.4
(1.7)
(2.8)
(1.7)
(6.2)
1,042.8
1,108.5
106.0
642.5
360.0
1,108.5
(227.7)
–
–
–
134.7
834.9
105.7
640.2
89.0
834.9
c
c
c
The accounts on pages 88 to 91 were approved by the Board of Directors and authorised for issue on 16 November 2009 and signed on behalf of
the Board.
Sir David Michels
Director
Andrew Harrison
Director
89 easyJet plc
Annual report and accounts 2009
COMPANY CASH FLOW STATEMENT
Cash flows from operating activities
Cash used by operations
Interest received
Net cash used by operating activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital
Net movement in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
d
Year ended
30 September
2009
£ million
Year ended
30 September
2008
£ million
(4.6)
2.0
(2.6)
2.6
–
–
–
(12.5)
5.3
(7.2)
7.2
–
–
–
90 easyJet plc
Annual report and accounts 2009
NOTES TO THE COMPANY BALANCE
SHEET AND CASH FLOW STATEMENT
a) Income statement and statement of recognised income and expense
In accordance with section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own income statement.
The Company’s profit for the year was £263.6 million (2008: £15.2 million). Included in this amount are dividends received of £261.7 million (2008: £nil).
The Company recognised no other income or expenses in either the current or prior year.
The Company has eight employees at 30 September 2009 (2008: seven). These are the Non Executive Directors of easyJet plc; their remuneration is paid
by easyJet Airline Company Limited. The Executive Directors of easyJet plc are employed and paid by easyJet Airline Company Limited. Details of Directors’
remuneration are disclosed in the Report on Directors’ remuneration and in note 4 to the consolidated accounts.
b) Investments in subsidiary undertakings
Investments in subsidiary undertakings were as follows:
At 1 October
Capital contributions to subsidiaries
Capital distributions made by subsidiaries
At 30 September
2009
£ million
700.2
7.4
(641.9)
65.7
2008
£ million
694.6
5.6
–
700.2
During the year a group reorganisation was effected whereby a number of subsidiaries distributed their retained earnings and the majority of their share
capital to easyJet plc. These distributions, being satisfied by the transfer of amounts due from another subsidiary undertaking, are non-cash transactions and
have therefore been excluded from the Company cash flow statement.
The principal subsidiary undertakings, all of which are included in the consolidated accounts, are shown below. A full list of Group companies will be included
in the Company’s next annual return, in accordance with Section 410 of the Companies Act 2006.
Country of incorporation
Principal activity
Class and percentage of ordinary shares held
easyJet Airline Company Limited
easyJet Switzerland S.A.
easyJet Aircraft Company Limited
easyJet Sterling Limited
easyJet Leasing Limited
easyJet Malta Limited
England and Wales
Switzerland
Cayman Islands
Cayman Islands
Cayman Islands
Malta
Airline operator
Airline operator
Aircraft trading and leasing
Aircraft trading and leasing
Aircraft trading and leasing
Aircraft trading and leasing
100%
49%
100%
100%
100%
100%
The Company has a 49% interest in easyJet Switzerland SA with an option that expires in 2014 to acquire the remaining 51%. easyJet Switzerland SA is
consolidated as a subsidiary on the basis that the Company exercises a dominant influence over the undertaking. A minority interest has not been reflected
in the accounts on the basis that holders of the remaining 51% of the shares have no entitlement to any dividends from that holding and the Company has
an option to acquire those shares for a predetermined consideration.
91 easyJet plc
Annual report and accounts 2009
c) Reconciliation of movement in shareholders’ funds
At 1 October 2008
Profit for the year
Share incentive schemes
Proceeds from shares issued
Movement in reserves for employee share scheme
At 30 September 2009
At 1 October 2007
Profit for the year
Share incentive schemes
Proceeds from shares issued
Movement in reserves for employee share scheme
At 30 September 2008
Share
capital
£ million
105.7
–
0.3
–
106.0
Share
capital
£ million
104.8
–
0.9
–
105.7
Share
premium
£ million
640.2
–
2.3
–
642.5
Share
premium
£ million
633.9
–
6.3
–
640.2
The disclosures required in respect of share capital are shown in note 18 to the consolidated accounts.
d) Reconciliation of operating profit to cash generated from operations
Operating profit
Adjustments for non-cash items:
Unrealised foreign exchange differences
Dividends received from subsidiary undertakings
Changes in working capital:
Decrease in amounts due from subsidiary undertakings
Increase in amounts due to subsidiary undertakings
Retained
earnings
£ million
89.0
263.6
–
7.4
360.0
Retained
earnings
£ million
68.2
15.2
–
5.6
89.0
2009
£ million
264.4
(8.5)
(261.7)
217.0
(215.8)
(4.6)
Total
£ million
834.9
263.6
2.6
7.4
1,108.5
Total
£ million
806.9
15.2
7.2
5.6
834.9
2008
£ million
9.9
(10.1)
–
538.2
(550.5)
(12.5)
e) Guarantees and contingent liabilities
The Company has given a formal undertaking to the Civil Aviation Authority to guarantee the payment and discharge of all liabilities of easyJet Airline
Company Limited, a subsidiary of the Company. The guarantee is required for that company to maintain its operating licence under Regulation 3 of the
Licensing of Air Carriers Regulations 1992.
The Company has issued a guarantee in favour of easyJet Airline Company Limited, a subsidiary undertaking, in relation to the processing of credit card
transactions, and also in respect of hedging transactions carried out according to treasury policy.
The Company has guaranteed the contractual obligations of easyJet Leasing Limited, a subsidiary undertaking, in respect of its contractual obligations to
Airbus SAS in respect of the supply of Airbus 320 family aircraft.
The Company has guaranteed the repayment of borrowings that financed the acquisition of aircraft by subsidiary undertakings. The Company has also
guaranteed the payment obligations for the lease of aircraft by subsidiary undertakings.
The Company has guaranteed certain letters of credit which have been issued by a bank on behalf of subsidiary undertakings.
f) Related party transactions
Transactions with subsidiary undertakings, which principally relate to the provision of funding within the Group, are carried out on an arm’s-length basis.
Outstanding balances are placed on intercompany accounts with no specified credit period, are unsecured, and bear market rates of interest.
In addition, easyJet has a key relationship with easyGroup IP Licensing, which owns the easyJet brand.
91
92 easyJet plc
Annual report and accounts 2009
GLOSSARY
Aircraft owned/leased at end of period
Available Seat Kilometres (ASK)
Average fare
Block hours
Cost per ASK
Cost per seat
Cost per seat, excluding fuel
EBITDAR
Load factor
Operated aircraft utilisation
Other costs
Passengers
Profit before tax per seat
Return on equity
Revenue
Revenue passenger kilometres (RPK)
Revenue per ASK
Revenue per seat
Seats flown
Sector
Number of aircraft owned or on lease arrangements of over one month’s duration at the end of
the period.
Seats flown multiplied by the number of kilometres flown.
Passenger and ancillary revenue divided by passengers.
Hours of service for aircraft, measured from the time that the aircraft leaves the terminal at the
departure airport to the time that it arrives at the terminal at the destination airport.
Revenue less profit before tax, divided by available seat kilometres.
Revenue less profit before tax, divided by seats flown.
Revenue, less profit before tax, plus fuel costs, divided by seats flown.
Earnings before interest, taxes, depreciation, amortisation, aircraft lease costs, and profit or loss on
disposal of aircraft.
Number of passengers as a percentage of number of seats flown. The load factor is not weighted
for the effect of varying sector lengths.
Average number of block hours per day per aircraft operated.
Administrative and operational costs not reported elsewhere, including some employee costs,
compensation paid to passengers, exchange gains and losses and the profit or loss on the disposal
of property plant and equipment.
Number of earned seats flown. Earned seats comprises seats sold to passengers (including no-
shows), seats provided for promotional purposes and seats provided to staff for business travel.
Profit before tax divided by seats flown.
Profit for the year divided by the average of opening and closing shareholders’ funds.
The sum of revenue from ticket sales and ancillary revenue.
Number of passengers multiplied by the number of kilometres those passengers were flown.
Revenue divided by available seat kilometres.
Revenue divided by seats flown.
Seats available for passengers.
A one-way revenue flight.
q
nAvigAtiOn
01 Overview
01 2009 Business highlights
02
easyJet at a glance
04 Chairman’s statement
06 Business review
06
Strategy and KPIs
08 Review of strategy
16 Chief Executive’s statement
20
Financial review
30 Corporate responsibility
36 governance
36 Directors’ profiles
38 Executive management team
40 Corporate governance
44 Shareholder information
45 Report on Directors’ remuneration
55
Statement of Directors’ responsibilities
56 Accounts
56
Independent auditors’ report
to the members of easyJet plc
57 Consolidated income statement
58 Consolidated balance sheet
59 Consolidated cash flow statement
60
Consolidated statement of recognised
income and expense
61 Notes to the accounts
88 Company balance sheet
89 Company cash flow statement
90
Notes to the Company balance sheet
and cash flow statement
92 Other information
92 Glossary
Directors’ report
easyJet plc is incorporated as a public
limited company and is registered in
England with the registered number
3959649. easyJet plc’s registered office
is Hangar 89, London Luton Airport,
Bedfordshire LU2 9PF.
The Directors present the Annual
report and accounts for the year
ended 30 September 2009. References
to ‘easyJet’, the ‘Group’, the ‘Company’,
‘we’, or ‘our’ are to easyJet plc or to
easyJet plc and its subsidiary companies
where appropriate.
Pages 01 to 55, inclusive, of this Annual
report comprise the Directors’ report
that has been drawn up and presented
in accordance with English company
law and the liabilities of the Directors in
connection with that report shall be
subject to the limitations and restrictions
provided by such law.
thAnk yOu!
We’d like to thank everyone
who helped to produce
this report:
Mark Adams, Alexandra Barnes,
Angela Bennett, Chris Bennett,
Andy Berks, Henrietta Boulton,
Hal Calamvokis, Pritesh Dattani,
Chris Gadsden, Andrew Harrison,
Pamela Harrison, Andy Hodges,
Bruce James, Patrick Johnson,
Rachel Kentleton, Ken Lawrie,
Thomas Loizeau, Cath Lynn,
Sir David Michels, Captain Jim Pegram,
Giles Pemberton, Alexa Pickersgill,
Captain Dave Prior, Tom Smethers,
Andrew Tempest, Rui Vaz Fernandes,
Bunmi Williams and all of our employees
across our network.
This annual report is printed on Revive Pure white
silk, this paper is produced from 100% recycled
fibre. Both the paper mill and printer involved in
the production support the growth of responsible
forest management and are both accredited
to ISO 14001 which specifies a process for
continuous environmental improvement and both
are FSC certified. If you have finished reading this
report and no longer wish to retain it, please pass
it on to other interested readers or dispose of it in
your recycled paper waste.
This report is available at:
http://corporate.easyjet.com/investors/reports-
and-accounts.aspx
Hangar 89
London Luton Airport
Luton
Bedfordshire
LU2 9PF
www.easyJet.com
Annual report and accounts 2009
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