www.easyJet.com
Hangar 89
London Luton Airport
Luton
Bedfordshire
LU2 9PF
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Annual report and accounts 2011
easyJet plc
Annual report
and accounts 2011
Europe by easyJet
THANK YOU
We’d like to thank everyone who has helped to produce this report:
Paul Ablin, Charlotte Allin, Angela Bennett, Alita Benson, Warwick Brady, Mike Campbell,
Trevor Didcock, Peter Duffy, Joanne Flynn, Chris Gadsden, Paul Gibson, Lewis Girdwood,
Val Goldine, Adam Hughes, Bruce James, Chris Kennedy, Rachel Kentleton, Ken Lawrie,
Thomas Loizeau, Cath Lynn, Carolyn McCall OBE, Nicola McGarry, Shuhall Miah,
Paul Moore, Reg Otten, Chris Paull, Giles Pemberton, Sir Michael Rake, Tom Smethers,
Andrew Tempest, Helen Whittle and all of our employees across the network.
1 Overview
4 Corporate responsibility
Highlights
Chairman’s introduction
Turning Europe Orange
Our cause
2 Business review
Our long-term strategy
Chief Executive’s introduction
Strategic position
Strategy implementation
Market review
Looking forward to 2012
Key performance indicators
3 Performance and risk
Financial review
Introduction
Financial performance
Earnings per share
Cash flows and financial position
Going concern
Significant contracts and creditor policy
Principal risks and uncertainties
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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 2011.
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 62, 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.
Introduction
Safety
People
Environment
5 Governance
Chairman’s introduction
Board of directors
Executive management team
Corporate governance
Shareholder information
Report on Directors’ remuneration
Statement of Directors’ responsibilities
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6 Accounts & other information
Independent auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the accounts
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the Company accounts
Five year summary
Glossary
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OVERVIEW
OVERVIEW
01
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Highlights
Chairman’s introduction
Turning Europe Orange
Our cause
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easyJet plc
Annual report
and accounts 2011
Highlights
Our results
£3,452m
£248m
£248m
Total revenue
(2010: £2,973m) + 16.1%
Profit before tax – reported
(2010: £154m) +60.8%
Profit before tax – underlying1
(2010: £188m) +31.5%
7.2%
12.7%
52.5p
Pre-tax margin – underlying1
(2010: 6.3%) +0.9ppt
Return on Capital Employed
(2010: 8.8%) +3.9ppt
Basic earnings per share (pence)
(2010: 28.4p) +84.9%
10.5p
34.9p
Proposed dividend –
ordinary (pence per share)
(2010: nil)
Proposed dividend –
special (pence per share)
(2010: nil)
Operational highlights
– easyJet has made excellent progress over the past year
and has delivered a strong set of results with underlying
profit before tax up by £60 million to £248 million
despite a £100 million increase in unit fuel costs. This
strong performance is due to firm control of costs,
effective yield management, the strength of easyJet's
network and focus on customers
– Return on Capital Employed (ROCE) improved by
3.9 percentage points to 12.7%
– On time performance improved by 13 percentage
points to 79% with the strong performance across the
network leading to a six percentage point improvement
in customer satisfaction
– Total revenue per seat up 4.1% (3.4% at constant
currency) to £55.27, as capacity investments made
in FY’10 and the first half of FY’11 matured combined
with a strong performance from ancillary revenue, up
12.9% to £11.52 per seat following decisive management
action in the second quarter
– Passenger numbers rose 11.8% to 54.5 million and
load factor improved by 0.3 percentage points to
87.3%. Passengers originating outside of the UK now
account for 56%, an increase of 3 percentage points
compared to the prior year. Passengers travelling with
easyJet on business increased by almost one million to
9.5 million
– Underlying cost1 per seat (excluding fuel and currency
movement) fell by 1.3% for the full year and was flat on
a reported basis with strong performances in ground
handling, maintenance and disruption related costs
– The year saw strong operating cash generation of
£424 million, resulting in net cash of £100 million as at
30 September 2011
– The Board has recommended a one-off return to
shareholders, structured as a special dividend, of
£150 million. Taken together with the ordinary dividend
of 10.5 pence per share, this provides an estimated total
cash return to shareholders for the year of £195 million
or 45.4 pence per share to be paid on 23 March 2012
to those shareholders on the register at the close of
business on 2 March 2012 with an ex dividend date of
29 February 2012
– Earnings per share improved by 24.1 pence to
52.5 pence per share, of which around nine pence
resulted from changes in the UK corporation tax rate
and the resolution of various tax enquiries
– Forward bookings are in line with the prior year.
With around 45% of winter seats now booked, first half
total revenue per seat at constant currency is expected
to be up by mid single digits
Note 1: Underlying measures exclude £27 million of cost relating to
the volcanic ash cloud and £7 million loss on disposal of A321 aircraft
in 2010. There were no underlying adjustments in 2011.
Chairman’s introduction
easyJet plc
Annual report
and accounts 2011
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I am pleased to report that your Company has
delivered a good financial performance this year
and the business has strengthened.
Progress this year
In its first full year in charge the management team
has made excellent progress in implementing the
strategy laid out in last year’s annual report and driving
improvement in processes and capability.
As a result both unit revenues and costs have improved
to drive a substantial improvement in profitability and
returns.
We have refreshed the Board with the appointments
of Charles Gurassa as Deputy Chairman and Senior
Independent Director, Andy Martin and Adele Anderson
and strengthened the Board’s capabilities in the areas
of aviation, and risk and financial management.
Returns to shareholders
The Board is committed to delivering returns in excess
of the cost of capital and returning excess capital to
shareholders. In the past year, earnings per share has
increased by 24.1 pence to 52.5 pence and Return on
Capital Employed improved by 3.9 percentage points
to 12.7%.
The weak consumer environment with rising fuel costs
and taxation will continue to present challenges for the
aviation industry. We have proactively put in place
actions to ensure the business navigates a difficult
environment by maintaining a strong balance sheet
and by curtailing growth over winter 2012 and 2013.
This combined with our strong network and focus on
improving revenues and cost control means that
Sir Michael Rake
Non Executive Chairman
easyJet is well placed and the Board is confident in
confirming our first ever dividend of £45 million for
financial year 2011 and a special dividend of £150 million.
Industry regulation
It is important that our industry ensures that we play
our part in tackling climate change. However, if this is
done through only constraining demand the economic
and social benefits of travel will be put at risk. In the UK
alone aviation contributes £11 billion to GDP.
Environmental measures must deliver real gains in
environmental efficiency and cannot be used as a way
to simply tax passengers. easyJet continues to support
aviations’ entry to EU ETS, however we are disappointed
by the UK Government’s proposal to increase the tax on
short-haul travel and reduce it for long-haul travel. This
proposal will reduce growth and jobs, as the majority of
the UK’s tourists come from Europe, and it will increase
emissions, as long-haul flights are responsible for much
greater emissions than short-haul flights.
We are also concerned about the apparent lack of
Government commitment to expanding runway
capacity in the South East. This will have negative
consequences for the London and wider UK economy
and easyJet supports projects, such as a second
runway at Gatwick, the most congested runway
in Europe.
Finally, we call for the end of inconsistent application
of consumer rules across Europe. We are proud of
our commitment to ensuring our passengers receive
the support they deserve if they are disrupted, and
that our website provides clear and transparent
information on fares. easyJet led the way in Europe in
providing passengers with simple fares. However, we
have seen regulators across Europe applying the rules
in different ways, and making inconsistent demands on
us and so we are campaigning to ensure there is a level
playing field across Europe.
Conclusion
Finally I would like to thank all of easyJet’s people for
their efforts in the past year, their commitment and
enthusiasm is core to easyJet’s success.
Sir Michael Rake
Non Executive Chairman
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easyJet plc
Annual report
and accounts 2011
Turning Europe Orange
We continue to
grow our capacity
and improve our
load factor,
increasing the
number of people
flying with us by
11.8% in 2011.
We have increased
the number of
routes offered
to our passengers
and focused this
growth across
continental Europe.
In 2011 we started to implement our strategy to
“Turn Europe Orange”, expanding our network
and presence across Europe.
easyJet continues to grow its seats and passengers
Seats flown
million
62.5
Total number of
passengers million
54.5
Load factor
%
87.3
2011
2010
2009
2008
2007
87.3
87.0
85.5
84.1
83.7
2011
2010
2009
2008
2007
62.5
56.0
52.8
51.9
44.5
2011
2010
2009
2008
2007
Our network is truly pan-European
Number of routes
by country
Capacity growth
by country %
UK
300
Italy
Switzerland
France
Italy
Germany
Spain
72
67
59
30
19
France
Spain
Switzerland/Germany
London
UK regions
54.5
48.8
45.2
43.7
37.2
8.6
29.1
10.5
21.7
6.6
6.0
In 2011, 56% of our
customers did not
originate from the
UK, up 3 percentage
points from 2010.
We attract customers
from across Europe
We grow talent across Europe
Passengers by country 2011
%
Total headcount 2011
In 2011, we
have increased
our employee
numbers across our
network, with larger
increases across
continental Europe.
E
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B
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B
A UK
B Italy
C France
D Spain
E Switzerland/Germany
F Other Europe
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7
13
10
A UK
B Italy
C France
D Spain
E Switzerland/Germany
F Other Europe
5,116
797
774
614
986
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easyJet plc
Annual report
and accounts 2011
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bases
204*
aircraft
547
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22 aircraft
Number of routes
Lyon
Paris –
Charles de Gaulle
Paris – Orly
Switzerland
18 aircraft
Number of routes
Basel
Geneva
Germany
8 aircraft
Italy
21 aircraft
Number of routes
Berlin – Schöenefeld 24
Number of routes
Milan – Malpensa
Rome – Fiumicino
41
18
Spain
8 aircraft
Number of routes
Madrid
19
22
29
16
UK
120 aircraft
Number of routes
Belfast
Bristol
31
41
15
40
Edinburgh
Glasgow
Liverpool
London – Gatwick
17
12
32
90
London – Luton
London – Stansted
Manchester
Newcastle
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24
13
*7 of which are on
standby cover
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Our cause
We are using this cause as a test in our day-to-day
operations. It applies throughout the passengers’
journey with us – from end to end. If we get it right it will
enable us to deliver our ambition of becoming Europe’s
preferred short-haul airline making market leading returns.
We’re passionate about connecting people by making travel easy and affordable.
We’re on our customers’ side and our people make the difference.
We have a big ambition, to be Europe’s preferred short-haul airline, delivering market-leading returns.
BUSINESS
REVIEW
Our long-term strategy
Chief Executive’s introduction
Strategic position
Strategy implementation
Market review
Looking forward to 2012
Key performance indicators
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easyJet plc
Annual report
and accounts 2011 Our long-term strategy
Safe and sustainable
We will never compromise our commitment to safety, which is always the first priority
for all our people, and we continually strive to improve our sustainability.
Focus on customer
Focused on network development
We are focusing on improving our routes,
slots and bases to build on our leading
presence across Europe.
Improving our customer's experience
We are focused on improving the
experience of travelling with us for all
our passengers.
Operational excellence
We focus on maintaining a strong operation that delivers for our customers.
Where people make the difference
We are committed to ensuring high employee engagement levels across the business.
Financial discipline
We are committed to improving shareholder returns whilst remaining prudently
financed with a strong, liquid balance sheet.
Chief Executive’s introduction
easyJet plc
Annual report
and accounts 2011
Returns to shareholders
In light of the strong performance of the business over
the past 12 months, management’s current medium–
term expectations for easyJet’s financial performance
and a prudent approach to maintaining balance sheet
strength, the Board has recommended a one-off
return to shareholders, structured as a special dividend,
of £150 million or 34.9 per share. Taken together with
the ordinary dividend of 10.5 pence per share this
provides an estimated total cash return to shareholders
for the year of £195 million or 45.4 pence per share to
be paid on 23 March 2012 to those shareholders on the
register at the close of business on 2 March 2012 with
an ex dividend date of 29 February 2012. The special
dividend will be accompanied by an associated share
consolidation. The consolidation factor will be
announced in due course.
Operational performance
Investment in operational robustness has delivered a
strong improvement in easyJet’s On Time Performance
(OTP) with a 13 percentage point improvement across
the network across the year with an increase of 25% in
the fourth quarter and our performance is now in line
or ahead of our key competitors.
OTP % arrivals within 15 minutes
2010
2011
Q1
75%
65%
Q2
66%
81%
Q3
64%
84%
Q4
60%
85%
Full year
66%
79%
The focus of the operations team in the coming
financial year will be on maintaining the current
performance whilst at the same time reducing cost
through standardisation and simplification.
Carolyn McCall OBE
Chief Executive
Introduction
easyJet has made strong progress this year in the
execution of its strategy. Our strong operational and
financial performance is a result of the hard work and
commitment of easyJet’s people to make travel easy
and affordable for customers. The business has
strengthened despite the headwinds of fuel costs,
rising aviation taxes and a weak economy. The
management team has introduced an enhanced focus
on financial discipline, financial return and operational
performance and constantly takes a rigorous look at
the Company’s network and profitability.
Financial performance
easyJet delivered record profit before tax of £248
million up by £60 million from an underlying profit of
£188 million in 2010 despite a £100 million increase in
unit fuel costs. Underlying profit per seat (including fuel,
adjusting for last year’s volcano effect and loss on
disposal of A321 aircraft) rose by 61 pence to £3.97.
This strong performance was driven by:
– Passenger numbers rose 11.8% to 54.5 million and
load factor improved by 0.3 percentage points to
87.3%. Passengers originating outside of the UK now
account for 56%, an increase of 3 percentage points
compared to the prior year. Passengers travelling
with easyJet on business increased by almost
one million to 9.5 million
– Total revenue per seat up 4.1% (3.4% on a constant
currency basis) to £55.27 as capacity investments
made in 2010 and the first half of 2011 matured,
combined with a strong performance from ancillary
revenue up 12.9% to £11.52 per seat following decisive
management action in the second quarter
– Underlying cost per seat (excluding fuel and currency
movement) fell by 1.3% for the full year and was flat
on a reported basis with strong performances in
ground handling, maintenance and disruption related
costs
easyJet delivered ROCE of 12.7% in the year and
generated cash from operations of £424 million
resulting in net cash as at 30 September 2011 of
£100 million.
09
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easyJet plc
Annual report
and accounts 2011
Chief Executive’s introduction
Continued
Customer satisfaction
The improvement in operational performance has
been reflected in increased customer satisfaction.
Overall satisfaction was up by six percentage points to
79% compared with the same period last year.
easyJet continues to develop its end-to-end customer
proposition and announced on 15 November 2011 that
it will start trialing allocated seating on selected routes
from spring 2012.
Engagement
At easyJet people are at the heart of delivering for
our customers and executing the strategy to create
value for shareholders. Consequently improving
communication and engagement have been given a
high priority this year as the whole of the Executive
Management Team have travelled extensively across
the network.
europe by easyJet
easyJet has made good progress implementing its new
European structure. Country managers are now in
place in each of our key European markets and are
focused on improving the end to end customer
proposition driving better route decisions and better
engagement and lobbying with key regulatory and
governmental agencies.
In September easyJet launched its new advertising
campaign "europe by easyJet". We have seen
promising initial results from the campaign with a 250%
increase2 in customers describing themselves as “much
more likely to buy from easyJet”
Note 2: source – Gfk Brand tracking.
Strategic position
easyJet business strengths
easyJet is the fourth largest short-haul carrier in Europe
with a market share of 7.6%3. easyJet derives its
competitive advantage from the following attributes:
– leading short-haul network in Europe with the highest
number of market pairs within Europe’s top 100
market pairs3 and strong market shares in valuable
markets such as London Gatwick, Paris, Milan
Malpensa, Amsterdam and Geneva
– low cost and efficient business model derived from
scale and cost advantage, high asset utilisation, a
young efficient fleet with low cost of ownership and
industry leading load factors
– financial and balance sheet strength
Note 3: Market share data from OAG.
Competitive and regulatory environment
In the past year capacity in European short-haul grew
by 2.8%, and by 3.1% on easyJet’s routes3. It is expected
that due to higher fuel costs, rising airport costs,
taxation on air travel and a weak economic
environment that over the coming year capacity
growth will be at lower rate as carriers seeks to rebuild
margins.
A significant proportion of easyJet’s cost base is
determined by governments and regulators and
easyJet continues to constructively engage with them
on a number of issues that will impact easyJet’s cost
base in the future
Example only. Not a current offer.
Example only. Not a current offer.
easyJet remains concerned that monopoly
infrastructure providers across Europe, of both airports
and airspace, continue to impose higher charges,
despite the uncertain economic climate. Consequently
there is now an increased focus on regulated airport
charges, and easyJet has actively participated in the
regulatory dialogue for Spanish; French; UK; Dutch;
German; and Italian airports in 2011. Monopoly airports
need to become more efficient, with infrastructure and
associated charges built around the needs of
passengers on point-to-point carriers such as easyJet.
This will bring wider economic benefits by promoting
tourism and trade.
The UK Government has reversed its election promise
to turn Air Passenger Duty into a per plane tax. Instead
it is proposing to lower the tax on long-haul flights and
increase it on short-haul flights. Evidence shows this is
both economically and environmentally damaging.
Aviation’s entry into the European Union Emissions
Trading System means that there is no longer any
environmental case for taxes on aviation.
Pleasingly the European Commission is planning in 2012
to propose reforms to the consumer rules that govern
aviation. easyJet welcomes this announcement and will
be working to ensure the proposals give passengers
the rights they deserve, but do not expose airlines to
unmanageable risks of the type we saw arising from
the ash clouds of 2010. The Commission will also be
working on a reform of the slot regulation. We hope
this will give a renewed opportunity to ensure that slots
are allocated to airlines such as easyJet which will use
them efficiently.
Capacity planning and capital allocation
The Board is focused on driving returns for
shareholders and consistent with this focus has
outlined a clear set of financial objectives and metrics.
The Board’s objective is to achieve returns in excess
of the cost of capital and this will be measured by the
ROCE achieved within a financial year. The Board has
set a target of 12% ROCE through the five years
planning cycle and for the financial year ended 30
September 2011 easyJet achieved a ROCE of 12.7%.
After providing appropriate returns for shareholders,
capital is allocated to support the network. Capital
expenditure will be principally allocated to the following
activities:
– maintaining fleet size through the replacement
of leased aircraft as they exit the fleet and the
maintenance, repair and overhaul of engines
(an overhaul being required when an aircraft has
operated for between eight and nine years in easyJet
service in accordance with the manufacturer’s
maintenance programme)
– new network opportunities where the Board is
satisfied that they can deliver on-target returns within
a tight and defined timescale
In the past year, easyJet has implemented a new and
more rigorous approach to assessing network returns.
Routes are measured on the returns they are delivering
against the Company's 12% ROCE target. Capacity on
underperforming routes is reallocated, or performance
managed and profitability improved, to deliver an
appropriate return. In a dynamic market place,
profitability of routes can change over time and by
ensuring that route returns are continually monitored
the Company is most effectively able to drive ROCE.
Capacity is also principally deployed on routes which
operate on a year-round basis, with less than 5% of
easyJet’s capacity allocated to summer-only routes, all
of which are intended to deliver upper quartile ROCE
(on average delivering ROCE above 12%).
Fleet plan and growth
easyJet has built flexibility into its fleet planning
arrangements such that it can increase or decrease
capacity deployed, subject to the opportunities
available and prevailing economic conditions. The
Company also has flexibility to move aircraft between
routes and markets to improve ROCE.
easyJet plc
Annual report
and accounts 2011
12.7%
ROCE achieved in year
79%
13 ppt improvement
in OTP
11
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easyJet plc
Annual report
and accounts 2011
Chief Executive’s introduction
Continued
During the past financial year, the Company took
advantage of the agreement signed with Airbus in
2002 and converted 15 A320-family aircraft that had
been under option to the Company since June 2007
into firm orders for 15 A320 aircraft, primarily to replace
existing aircraft that will be retiring from the fleet in 2013.
In the year, easyJet took delivery of 13 A319 aircraft and
12 A320 aircraft under the terms of the Airbus easyJet
agreement. The two remaining Boeing 737-700s have
been withdrawn from service and will be returned to
their lessors in the first half of 2012.
The current contracted fleet plan over the period to
30 September 2013 as set out below:
easyJet
A320
family
Boeing
737-700
GB
Airways
A320
family4
Total
contracted
aircraft
202
213
216
2
–
–
–
–
2
204
213
218
At 30 September
2011
At 30 September
2012
At 30 September
2013
Note 4: To be delivered as part of a GB Airways commitment.
The total fleet at 30 September 2011 comprised 204
aircraft.
Fleet as at 30 September 2011:
easyJet A319
easyJet A320
Boeing 737-700
GB Airways A320
family
Owned
105
24
–
–
129
Operating
leases
56
6
2
–
64
Finance
leases
6
5
–
–
11
Total
167
35
2
–
204
Changes
in year
8
12
-6
-6
8
Future
committed
deliveries5
–
35
–
Unexercised
purchase rights
and options6
–
73
–
2
37
–
73
Note 5: The 35 future easyJet deliveries and 2 ex-GB Airways deliveries are anticipated to be delivered over the next three financial years; 20 in
2012, 12 in 2013 and 5 in 2014.
Note 6: Purchase options and rights may be taken on any A320 family aircraft and are valid until 2015.
A further 35 easyJet specification aircraft deliveries are currently planned for arrival over the next three years,
which will be offset by 24 planned exits from the fleet.
The high cost of jet fuel and uncertain consumer demand across Europe means that easyJet is taking a cautious
approach to capacity, utilising the flexibility in its fleet planning arrangements to ensure the fleet is held constant
for the next two winters at 204 aircraft, as announced on 10 May 2011.
Thereafter, the Company has sufficient flexibility in its fleet planning arrangements to adapt to market and
economic conditions, which the Board continues to keep under review.
easyJet plc
Annual report
and accounts 2011
+18.6%
Growth in mainland
Europe capacity
c£90m
Savings identified
for 2012
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Example only. Not a current offer.
Strategy implementation
easyJet has continued to make excellent progress in
executing the strategy as outlined in November 2010
to drive sustainable planning cycle. An update against
the pillars of the programme is set out below.
Network optimisation
easyJet’s goal is to improve the underlying ROCE of the
network through optimisation of the schedule and
route portfolio.
Progress in 2011
– Strong growth in mainland Europe with seats flown
up 18.6%
– Valuable peak times slots obtained at London
Gatwick, Paris Charles de Gaulle, Amsterdam
– Clinical approach to reviewing route performance
e.g. dropping Gothenburg from the network
– New capital allocation framework introduced
focusing on return on capital metrics by route
– Supporting business traveller strategy
Passengers travelling on business
easyJet’s goal is to drive additional contribution of £100
million from passengers travelling on business through
delivering improvements in product and distribution
Progress in 2011
– Frequency increased on key business routes such as
Gatwick to Milan Malpensa up from four to five times
a day
– Rollout of flexifare on easyJet.com
– Sales force starting to deliver, significant enterprise
contracts signed
– Agreements reached with travel management
companies
– Key business to business deals negotiated with
pipeline of corporate growth deals
– New commercial freedom in Global Distribution
System (GDS) contracts
easyJet lean
easyJet’s lean projects are set up under the
sponsorship of the Chief Financial Officer and the goal
is to maintain its cost advantage by ensuring below
inflation non-fuel cost per seat increases. This will be
achieved by driving cost efficiencies through best in
class procurement, leveraging our scale, tight control of
overhead costs, greater crew flexibility and improved
operational performance.
Progress in 2011
– Unit costs (excluding fuel) fell by 1.3% at constant
currency with strong performances in ground
handling, maintenance and disruption related costs
– Process re-engineering to deliver cost optimisation
e.g. de-icing in Malpensa; ground handling contracts
– Implemented plans to increase proportion of lower
unit cost A320 in the fleet
– Improvement in operational resilience. OTP improved
by 13 percentage points to 79%
– £92 million of savings identified in 2012 which will
partially offset inflationary increases and investment
in initiatives such as allocated seating
Market review
The UK macroeconomic environment remains difficult,
especially in the travel and tourism sector as the
number of UK residents taking an overseas holiday
over the three months to August 2011 fell by 4%
compared to the same period in 2010. The competitive
environment remained tough with capacity increases in
2011. Against this backdrop easyJet performed well
with total revenue per seat growth of mid single digits.
At London Gatwick easyJet significantly increased
frequency on many of the busiest business routes such
as Madrid, Milan, Rome and Amsterdam. easyJet also
increased its market share at bases such as Bristol as
carriers such as Ryanair retreated, and in Glasgow after
BMI withdrew services to Heathrow from the airport.
Despite the Euro-crisis German consumer confidence
remained positive. However, the introduction of APD in
Germany in January 2011 has damaged profitability
across all airlines operating in Germany. easyJet’s focus
in 2011 has been on maintaining our market leadership
on key city routes from Berlin with increased
frequencies on routes to London Gatwick,
Copenhagen, Basel and Barcelona. easyJet
14
easyJet plc
Annual report
and accounts 2011
Chief Executive’s introduction
Continued
Example only. Not a current offer.
has gained share on routes to London, Milan and
Madrid as competitors have retreated. Switzerland has
also seen a stable economic environment and easyJet’s
focus in 2011 has been on defending its leading position
at Basel and Geneva whilst increasing its focus on
passengers travelling on business.
Spain continues to be one of the most competitive
markets in Europe. In 2011 easyJet refocused capacity
to enable the network to improve profitability and
attract more passengers travelling on business. In Spain
more than 60% of air travel is purchased in offline
channels and consequently easyJet is implementing
measures to improve its presence in these areas.
Despite a difficult economic environment in Italy the
short-haul intra-European market remains buoyant
easyJet grew capacity by around 11% as it built its
presence in selected key Italian markets of Milan, Rome,
Naples and Venice. At Milan Malpensa easyJet further
consolidated its leading share as Lufthansa announced
the closure of its base.
easyJet consolidated its position as the number two
airline in France and increased its capacity by 29% as it
continued with its strategy to build its position as the
alternative airline to Air France in major French airports.
easyJet’s share of the French short-haul market is now
12%. easyJet also announced that it intends to open
bases in 2012 at Toulouse and Nice. easyJet already has
a 20% market share at these airports.
Looking forward to 2012
Hedging positions
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.
Therefore easyJet hedges forward, on a rolling basis,
between 65% and 85% of the next 12 months
anticipated fuel and currency requirements and
between 45% and 65% of the following 12 months
anticipated requirements.
Details of our current hedging arrangements are set
out below:
Percentage of anticipated requirement / surplus hedged
Six months ending 31 March 2012
Rate/$ per MT
Full year ending 30 September 2012
Rate/$ per MT
Full year ending 30 September 2013
Rate/$ per MT
Fuel requirement
80%
$950 per MT
73%
$956 per MT
49%
$979 per MT
US dollar requirement
80%
$1.60
69%
$1.59
46%
$1.61
Euro surplus sale
76%
€1.13
71%
€1.13
50%
€1.14
Sensitivities
– A $10 movement per metric tonne impacts the 2012
fuel bill by $5 million
in the first half of the year is planned to be flat
(adjusting for disruption in the first part of the prior
year), with growth of around 4% for the full year.
– A one cent movement in £/$ impacts the 2012 profit
before tax by £3 million
Outlook
The macroeconomic environment remains challenging
for all airlines as weak consumer confidence across
Europe slows the rate at which higher fuel prices and
increased taxation can be passed on to passengers.
Against this backdrop easyJet is taking a cautious
approach to capacity deployment. As a result, capacity
With around 45% of winter seats now sold, in line with
the prior year, first half passenger revenue per seat is
expected to grow by mid-single digits with planned
improvement in yields, bag charges and other ancillary
revenues.
Cost per seat excluding fuel and currency7 impact is
expected to grow by 2 to 3% for the full year and by
4% in the first half, assuming normal levels of disruption,
of the year driven by price increases at regulated
airports and investments in new revenue streams.
easyJet plc
Annual report
and accounts 2011
15
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At current fuel7 and exchange rates easyJet’s fuel bill is anticipated to increase by £220 million in 2012
compared to 2011.
Despite the headwinds of higher fuel costs and a weak and uncertain economic outlook, our focus on customers,
robust operational performance, the strength of easyJet's network combined with cost control and capital
discipline means that easyJet is well placed to succeed.
Note 7: Rates as at 14 November 2011: US$1.59/£, €1.17/£ and US$1,075 per metric tonne.
Financial objectives and metrics
Return targets
Objectives
– Earn returns in excess of cost of capital
through the cycle
– Invest in growth opportunities where returns
are attractive
Measures
– After tax ROCE of 12% through the cycle
– Improve profit before tax per seat to £5
Capital structure
and liquidity
– Ensure robust capital structure
– Maintain sufficient liquidity to manage through
the cycle and industry shocks
– Return excess capital to shareholders
– Maximum gearing of 50% (gearing meaning
debt plus seven times annual lease payments
less cash) divided by (shareholders’ equity plus
debt plus seven times annual lease payments
less cash)
– Cap of £10 million adjusted net debt per aircraft
Target £4 million cash per aircraft
– Target consistent and continuous dividend
– Five times cover, subject to meeting gearing
payout
and liquidity targets
– Annual payment based on full year profits after
tax; introduced for year ended 30 September
2011, payable 2012
– Consider returns over five times cover to
reduce excess capital
– Maintain flexibility around fleet deployment
– Target of 70% owned aircraft, 30% leased
and size
aircraft
– Insulate short-term operating performance
– 65%–85% of the next 12 months’ anticipated
against adverse movements in fuel price and
exchange rates
requirements
– 45%–65% of the following 12 months’
anticipated requirements
Dividend policy
Aircraft ownership
Fuel hedging
Carolyn McCall OBE
Chief Executive
16
easyJet plc
Annual report
and accounts 2011
Key performance indicators
We monitor the performance of the business and
performance against our strategic objectives using
the following key performance indicators.
Cost per seat excluding fuel (underlying)
£
Flat
2011
2010
2009
2008
2007
Return on capital employed
ppt
+3.9ppt
2011
2010
2009
2008
2007
Net cash
£ million
+£140m
2010
2009
2011
2008
2007
55.27
53.07
50.47
3.97
3.36
0.83
2.37
4.30
28
32
38
29
20
36.62
36.62
34.36
29.49
26.55
12.7
8.8
3.6
7.3
11.7
100
-40
-46
236
393
0.629
Financial
discipline
We are committed
to improving
shareholder returns
whilst remaining
prudently financed
with a strong, liquid
balance sheet.
Revenue per seat
£
+4.1%
2011
2010
2009
Profit before tax (underlying) / per seat
£
+17.9%
2011
2010
2009
2008
2007
Gearing
ppt
-4ppt
2011
2010
2009
2008
2007
Composite risk value (CRV) index
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Safe and
sustainable
No compromise
on safety
We will never
compromise our
commitment to
safety, which is always
the first priority for
all our people.
Control carbon
footprint
We control our fuel
usage on our flights.
Oct
08
Dec
08
Feb
09
Apr
09
Jun
09
Aug
09
Oct
09
Dec
09
Feb
10
Apr
10
Jun
10
Aug
10
Oct
10
Dec
10
Feb
11
Apr
11
Jun
11
Aug
11
Fuel burn
(USG/BH)
715
2011
2010
2009
715
715
715
easyJet plc
Annual report
and accounts 2011
Focus on
customer
Focused on network
development
We are focused
on improving our
routes, slots and
bases to build
on our leading
presence across
Europe.
Improving our
customers’ experience
We are focused
on improving
the experience
of travelling
with us for all
our passengers.
Operational
excellence
We have built a
strong operation,
that delivers for
our customers.
*2010 figure includes 7,314
flights cancelled due to
volcanic dust cloud
Where
people
make the
difference
We are committed
to ensuring
high employee
engagement across
the business.
Presence on top 100 routes
Ranked by primary airport
Airports where we are
No.1 or No.2 airline
easyJet
BA/Iberia
Lufthansa Group
Air France-KLM
Alitalia
Air Berlin – NIKI
SAS
Vuelling
Norwegian
Ryanair
Primary airports
Non-primary airports
Overall satisfaction on this occasion
%
2011
2010
2009
On time performance
%
2011
2010
2009
Flights cancelled on the day*
2011
2010
2009
Employee engagement (uSay)
%
2011
2010
2009
Attendance
%
2011
2010
2009
2011
2010
2009
Likely to recommend
%
2011
2010
2009
Bags shortshipped per thousand passengers
2011
2010
2009
Staff turnover
%
2011
2010
2009
19
19
18
82
80
89
0.9
1.0
1.0
9.7
7.6
6.9
49
41
40
23
19
15
14
13
15
42
79
73
85
79
66
80
4,703
15,976
1,102
40
35
66
96
95
95
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18
PERFORMANCE
OVERVIEW
AND RISK
Financial review
Introduction
Financial performance
Earnings per share
Cash flows and financial position
Going concern
Significant contracts and creditor policy
Principal risks and uncertainties
19
19
22
24
24
25
25
27
3
3
3
3
3
3
3
3
3
Financial review
easyJet plc
Annual report
and accounts 2011
19
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Introduction
easyJet produces a strong
financial performance despite
continuing pressures from the
macroeconomic environment.
2011
Pence
per ASK £ million
£ per
seat
2010
Pence
per ASK
£ per
seat
£ million
3,452 55.27
4.98
2,973 53.07
4.72
248
3.97
0.36
188
3.36
0.30
248
3.97
0.36
154
2.75
0.24
225
3.60
0.32
121
2.17
0.19
Total
revenue
Profit
before tax
(underlying)
Profit
before tax
(reported)
Profit
after tax
(reported)
During 2011 easyJet continued to grow its network
successfully with an increase in seats flown of 11.5%,
principally in London Gatwick, France and Switzerland.
Load factor was marginally higher at 87.3% and
passengers increased by 11.8% to 54.5 million.
Total revenue grew by 16.1% to £3,452 million resulting
in growth of 4.1% in revenue per seat, driven by
increases in ancillary revenue and maturing of capacity
investments made in previous years. This was achieved
despite a significant increase in passenger taxes, and
continuing economic uncertainty across Europe.
Excluding the impact of volcanic ash disruption and the
loss on the sale of four A321 aircraft in 2010, profit
before tax increased by £60 million (£0.61 per seat) to
£248 million. With the exception of external industrial
action in the first quarter and a period of severe winter
weather around Christmas, the business benefited
from significantly lower levels of operational disruption
than last year, with on the day cancellations and
overnight delays reducing by 46%.
Return on capital employed increased by 3.9
percentage points to 12.7%, driven by the improved
levels of profit. Gearing remains low at 28% and the
business had cash and money market deposits totalling
£1.4 billion at 30 September 2011.
After taking into consideration the level of liquidity in
the business, and contracted commitments to acquire
further aircraft, the Board is proposing to pay an
ordinary dividend of £45 million (10.5 pence per share)
and a special dividend of £150 million (34.9 pence per
share) and resolutions to this effect will be tabled at the
Annual General Meeting in February next year.
Chris Kennedy
Chief Financial Officer
Profit before tax per seat
%
5.5
5.0
4.5
4.0
3.5
3.0
1.80
1.59
0.88
3.97
3.36
0.07
0.41
Currency
impact
(exc fuel)
2010
PBT
per
seat
Revenue
Fuel
(inc
currency
impact)
Crew
Disruption
0.00
Other
costs
2011
PBT
per
seat
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£225m
Profit after tax for 2011
£195m
Proposed dividend
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20
easyJet plc
Annual report
and accounts 2011
Financial review
Continued
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
Return on capital employed
Underlying measures
Profit before tax per seat (£)
Profit before tax per ASK (pence)
Revenue
Revenue per seat (£)
Revenue per seat at constant currency (£)
Revenue per ASK (pence)
Revenue per ASK at constant currency (pence)
Costs
Per seat measures
Total cost per seat (£)
Total cost per seat excluding fuel (£)
Total cost per seat excluding fuel at constant currency (£)
Operational cost per seat (£)
Operational cost per seat excluding fuel (£)
Operational cost per seat excluding fuel at constant currency (£)
Ownership cost per seat (£)
Per ASK measures
Total cost per ASK (pence)
Total cost per ASK excluding fuel (pence)
Total cost per ASK excluding fuel at constant currency (pence)
Operational cost per ASK (pence)
Operational cost per ASK excluding fuel (pence)
Operational cost per ASK excluding fuel at constant currency (pence)
Ownership cost per ASK (pence)
2011
62.5
54.5
87.3%
69,318
61,347
1,110
393,147
761,708
204
198.8
197
185.4
11.3
547
123
2011
14.0%
12.7%
3.97
0.36
55.27
54.87
4.98
4.94
51.30
36.62
36.15
47.78
33.10
32.75
3.52
4.62
3.30
3.26
4.30
2.98
2.95
0.32
2010
56.0
48.8
87.0%
62,945
56,128
1,123
353,080
689,316
196
187.9
186
174.9
10.8
509
125
2010
8.6%
8.8%
3.36
0.30
53.07
53.07
4.72
4.72
49.71
36.62
36.62
46.13
33.04
33.04
3.58
4.43
3.26
3.26
4.11
2.94
2.94
0.32
Change
11.5%
11.8%
+0.3ppt
10.1%
9.3%
(1.2)%
11.3%
10.5%
4.1%
5.8%
5.9%
6.0%
4.2%
7.5%
(1.6)%
Change
+5.4ppt
+3.9ppt
17.9%
20.9%
4.1%
3.4%
5.4%
4.7%
3.2%
Flat
(1.3)%
3.6%
0.2%
(0.9)%
(1.6)%
4.2%
1.2%
Flat
4.7%
1.3%
0.3%
Flat
Example only. Not a current offer.
Total revenue
2011 currency split
A euro
B sterling
C other (principally
swiss franc)
44%
47%
9%
Total costs
2011 currency split
A euro
B sterling
C US dollar
D other (principally
swiss franc)
35%
24%
35%
6%
A
C
B
D
A
C
B
Exchange rates
Capacity growth in the year of 6.5 million seats flown,
around two-thirds was deployed in bases outside the
UK, resulting in the following exposures to foreign
currency:
Sterling
Euro
US dollar
Other
(principally Swiss franc)
Average exchange rates
Euro
US dollar
(sterling weaker)
Swiss franc
(sterling weaker)
2011
47%
44%
–
9%
Revenue
2010
48%
44%
–
8%
2011
24%
35%
35%
6%
Costs
2010
27%
34%
33%
6%
2011
€1.15
$1.61
CHF
1.45
2010
€1.15
Change
nil
$1.64
CHF
1.64
-1.8%
-11.6%
Although a substantial proportion of both revenue and
costs is denominated in euros, there was no change
year-on-year in the euro exchange rate, and hence no
impact on the reported result. The impact of changes
in the Swiss franc and US dollar were.
Favourable / (adverse)
Revenue
Fuel
Costs excluding fuel
Total
Swiss franc
£ million
24
–
(21)
3
US dollar
£ million
–
(17)
(8)
(25)
Total
£ million
24
(17)
(29)
(22)
easyJet plc
Annual report
and accounts 2011
21
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easyJet plc
Annual report
and accounts 2011
Financial review
Continued
Financial performance
Revenue
2011
Pence
per ASK £ million
£ per
seat
2010
Pence
per ASK
£ per
seat
£ million
Passenger
revenue
Ancillary
revenue
Total
revenue
2,733 43.75
3.94 2,402 42.87
3.81
719
11.52
1.04
571
10.20
0.91
3,452 55.27
4.98
2,973
53.07
4.72
Revenue per seat improved by 4.1% compared with last
year reflecting a strong summer performance from the
UK and the steady maturing of significant capacity
investments made in mainland Europe during the last
few years.
Passenger revenue contributed 2% of this increase,
held back by significant increases in APD, VAT and
similar taxes levied on passengers. Overall these taxes,
driven by a further increase in UK APD and the
introduction of APD in Germany, increased by 19.8%
to £6.26 per seat.
We remain convinced that taxes of this nature are a
blunt instrument that does not achieve their stated
objective and will continue to press our case for such
taxes to be levied on aircraft and not passengers.
Ancillary revenue grew strongly, up by 12.9% to £11.52 per
seat. This improvement was driven by the introduction
of higher charges for hold baggage on longer sectors,
and revised speedy boarding and booking fees.
Costs
£ per
seat
£ million
Underlying
costs *
Operating
costs
excluding
fuel
Fuel
Ownership
3.52
costs
Total costs 3,204 51.30
2,067
917
33.10
14.68
220
2011
Pence
per ASK £ million
2010
Pence
per ASK
£ per
seat
2.98
1.32
0.32
4.62
1,852 33.04
13.09
733
200
2,785
3.58
49.71
2.94
1.17
0.32
4.43
Total costs
excluding
fuel
2,287 36.62
3.30 2,052 36.62
3.26
* Underlying measures exclude (in 2010) costs of £27 million relating
to the volcanic ash cloud and a loss of £7 million on disposal of four
A321 aircraft. There are no underlying adjustments made in 2011.
Total cost per seat increased by 3.2% to £51.30;
however excluding fuel, cost per seat was flat at
£36.62, and down by 1.3% at constant currency. This
result was driven by savings from renegotiation of key
contracts with ground handlers and lower levels of
operational disruption, offset by some significant price
increases at regulated airports and planned investment
in crew standby levels.
Operating costs excluding fuel
Underlying
costs *
Ground
operations
Crew
Navigation
Maintenance
Selling and
marketing
Other costs
2011
Pence
per ASK £ million
£ per
seat
2010
Pence
per ASK
£ per
seat
£ million
923
407
285
179
14.79
6.51
4.56
2.86
102
171
1.64
2.74
2,067 33.10
1.33
0.58
0.41
0.26
0.15
0.25
2.98
805 14.36
6.00
336
4.57
256
3.16
177
92
186
1.64
3.31
1,852 33.04
1.28
0.53
0.41
0.28
0.14
0.30
2.94
Operating costs per seat excluding fuel increased by
0.2% to £33.10. At constant currency, operating costs
per seat excluding fuel fell by 0.9% to £32.75 per seat.
Ground operations cost per seat increased by 3.0% of
which around half was due to changes in exchange
rates. Good progress was made in renegotiating
contracts with ground handlers and reducing the use
of optional services at airports, however this was more
than offset by price increases at regulated airports,
easyJet plc
Annual report
and accounts 2011
23
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Fuel cost
£ million
1,100
1,000
900
800
700
600
72
733
292
186
917
6
to $818 per tonne; in sterling terms an increase of £63
to £508. Of the total increase in fuel costs of £184
million, £100 million (£1.59 per seat) is due to this
increase in fuel prices.
For the coming financial year we have hedged 73% of
our anticipated fuel requirements at $956 per tonne.
Ownership costs
2010
Volume
Market
price
Jet
hedging
Foreign
exchange
hedging
2011
notably London Gatwick and the AENA airports in
Spain. Successful delivery of easyJet’s strategy requires
the use of more expensive, often regulated, primary
airports, and we will continue to develop more efficient
ways of working to contain cost per seat in this area.
Crew cost per seat increased by 8.6%, driven by
continued growth of crew based in mainland Europe
and an overall increase in crew numbers of 19%. This
increase in headcount allowed us to increase the
number of standby crews and made the operation
more resilient during the summer, contributing to lower
disruption costs and significant improvements in on
time performance and customer satisfaction.
Navigation costs were flat at £4.56 per seat despite
regulated cost increases averaging 2%.
Continuing the improvement shown last year,
maintenance costs declined by 9.5% to £2.86 per seat,
with further cost initiatives offsetting supplier price
increases. However the benefits seen in prior years
from the reduction in the number of leased aircraft in
the fleet have now run their course, and it is likely that
cost savings will now level off.
Other costs were down 17.2% at £2.74 per seat, mainly
due to significantly reduced levels of operational
disruption.
Fuel
Underlying
costs *
Fuel
£ million
917
£ per
seat
14.68
2011
Pence
per ASK £ million
733
1.32
2010
Pence
per ASK
1.17
£ per
seat
13.09
The market price for jet fuel rose sharply over the year.
Our hedging activities shielded us from the full impact
of this rise and the average price paid increased by $86
Underlying
costs *
Aircraft dry
leasing
Depreciation
Amortisation
Interest
receivable
Interest
payable
and other
financing
charges
Net
exchange
losses
£ million
109
83
7
£ per
seat
1.75
1.33
0.12
2011
Pence
per ASK £ million
2010
Pence
per ASK
£ per
seat
0.16
0.12
0.01
102
72
6
1.82
1.29
0.11
0.16
0.12
0.01
(9)
(0.15)
(0.01)
(7)
(0.13)
(0.01)
24 0.38
0.03
20 0.36
0.03
6 0.09
220 3.52
0.01
0.32
7
200
0.13
3.58
0.01
0.32
Ownership costs declined slightly to £3.52 per seat;
continuing recent strong performance. This is particularly
pleasing given that changes in average exchange rates
increased total ownership cost per seat by £0.13.
The benefits seen in recent years from the move away
from more expensive leased Boeing aircraft are now
virtually all realised. The last two Boeing aircraft will be
withdrawn from service and returned to their lessors
during the first half of the coming year. We have
therefore now reached the objective of a standardised
fleet with two gauges of Airbus aircraft. Going forward
we will increase the proportion of A320 aircraft in the
fleet which will deliver an overall reduction in
depreciation and aircraft dry leasing cost per seat.
Interest rates continue at historically low levels; while
this adversely impacts interest income, we also benefit
from lower interest payable and, to an extent, lower
lease payments as 20 aircraft are subject to floating
rate lease arrangements. There is no immediate end in
sight to this period of exceptionally low interest rates.
Exchange losses arise from changes in the value of
monetary assets and liabilities denominated in
currencies other than sterling.
24
easyJet plc
Annual report
and accounts 2011
Financial review
Continued
Earnings per share
Profit after tax was £225 million (2010: £121 million)
resulting in basic earnings per share of 52.5 pence
(2010: 28.4 pence), an increase of 84.9%. The tax
charge was £23 million resulting in an effective tax rate
of 9% (2010: charge of £33 million and effective tax
rate of 21%.
The difference between the effective tax rate and
standard UK rate is principally driven by the reduction
in the UK deferred tax rate to 25% and the resolution
and reassessment of various tax matters following
discussions with the UK and European tax authorities.
Cash flows and financial position
Summary consolidated statement of cash flows
2011
£ million
2010
£ million
Change
£ million
Net cash generated from
operating activities
Net capital expenditure *
Net loan and lease finance
drawdown
Net (increase) / decrease in
money market deposits
Other including the effect of
exchange rates
Net increase in cash and cash
equivalents
Cash and cash equivalents
at beginning of year
Cash and cash equivalents
at end of year
Money market deposits
at end of year
Cash and money market deposits
at end of year
424
(478)
357
(38)
(77)
188
912
1,100
300
1,400
363
(482)
61
4
177
180
31
34
123
789
912
260
(69)
(111)
65
123
188
40
1,172
228
*stated net of disposal proceeds of £75 million in 2011.
In line with prior years, easyJet generated strong
operating cash flow in the year principally driven by
growth in forward bookings and revenue per seat.
Net capital expenditure principally comprises the
acquisition of 25 aircraft (13 A319 and 12 A320) and
payments in connection with the new order for aircraft
announced in January 2011; net of proceeds received
for the disposal of the remaining four A321 aircraft
acquired with GB Airways.
Cash flow
£ million
2,000
357 481
1,800
1,600
1,400
1,200
1,000
1,172
1
*
0
0
2
84
91
90
269
1,400
45
150
t
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o
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p
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P
d
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1,205
a
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1
1
0
2
Net loan and lease drawdown comprised proceeds
received from the sale and leaseback of 18 aircraft
(three on finance leases), and the mortgage of nine
aircraft, net of repayments on mortgages and finance
leases.
At 30 September 2011 easyJet had £1.4 billion of cash
and money market deposits. Board policy is to hold a
cash reserve of £4 million per aircraft, so £584 million is
available to finance committed aircraft orders and pay
the proposed ordinary and special dividends.
Summary consolidated statement of financial position
Goodwill
Property, plant and equipment
Net working capital
Restricted cash
Net cash / (debt)
Current and deferred taxation
Other non-current assets and
liabilities
Net assets
Opening shareholders’ equity
Profit for the year
Change in hedging reserve
Other movements
2011
£ million
365
2,149
(765)
123
100
(188)
(79)
1,705
1,501
225
(21)
–
1,705
2010
£ million
365
1,928
(590)
56
(40)
(176)
(42)
1,501
1,307
121
59
14
1,501
Change
£ million
–
221
(175)
67
140
(12)
(37)
204
194
104
(80)
(14)
204
easyJet plc
Annual report
and accounts 2011
25
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Example only. Not a current offer.
Net assets increased by £204 million over the year
driven by the profit for the year offset by a small net
change in the hedging reserve.
The net book value of property plant and equipment
increased by £221 million driven principally by the
acquisition of a net ten owned A320 family aircraft, and
advance payments under the new aircraft order
announced in January 2011.
Net working capital improved by £175 million to a net
negative £765 million. Passengers pay for their flights in
full when booking, therefore the key component of this
balance is unearned revenue, which increased by £115
million. The increase in restricted cash is connected
with this increase due to contractual arrangements
with certain card acquirers.
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
2011
£ million
1,100
300
1,400
2010
£ million
912
260
1,172
Change
£ million
188
40
218
(1,079)
(221)
(1,300)
(1,057)
(155)
(1,212)
(22)
(66)
(88)
Net cash / (debt)
100
(40)
140
easyJet ends the year with £1,400 million in cash and
money market deposits; an increase of £218 million
compared with 30 September 2010. Net borrowings
increased by £88 million. The majority of bank loans
and finance leases and all money market deposits are
denominated in US dollars and the sterling value of this
net liability increased by £8 million during the year as a
consequence of exchange rate changes.
Net cash at 30 September 2011 were £100 million
compared with net debt of £40 million at 30
September 2010. Strong operating cash flow and the
increase in net assets delivered a reduction in gearing
of five percentage points to 28% at 30 September 2011.
Going concern
easyJet’s business activities, together with factors likely
to affect its future development and performance, are
described in the business review on pages 8 to 17.
Principal risks and uncertainties are described on pages
27 to 30. Note 22 to the accounts sets out the Group’s
objectives, policies and procedures for managing its
capital and gives details of the risks related to financial
instruments held by the Group.
The Group holds cash and cash equivalents of £1.1
billion as at 30 September 2011. Total debt of £1.3 billion
is free from financial covenants, with £155 million due
for repayment in the year to 30 September 2012.
The business is exposed to fluctuations in fuel prices
and US dollar and euro exchange rates. The Group’s
policy is to hedge between 65% and 85% of estimated
exposures 12 months in advance, and 45% and 65% of
estimated exposures from 13 up to 24 months in
advance. The Group was compliant with this policy at
the date of this Annual report and accounts.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group will be
able to operate within the level of available facilities and
cash for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing
the accounts.
Significant contracts and
creditor policy
Significant contracts
easyJet operates a fleet constituted mainly of Airbus*
aircraft with two Boeings which will have left the fleet
by 30 September 2012. Engines are provided by CFM
International and the maintenance of the aircraft
and engines is undertaken by SRT, Virgin Atlantic
Engineering*, Aerotron*, GE, MTU, BF Goodrich and
Lufthansa Technik. The major lessors of aircraft to
easyJet are Amentum Capital, AWAS*, GECAS*,
Nomura Babcock & Brown*, Royal Bank of Scotland*,
Sumisho*, and Santander*. The major lenders to
easyJet for aircraft purchase are Alliance & Leicester*,
Bank of Tokyo-Mitsubishi*, BNP Paribas*, Calyon*,
Commerz, HSH Nordbank*, KfW*, Natixis*, PK
AirFinance*, Royal Bank of Scotland*, Sumitomo Mitsui
Banking Corporation* and WestLB*.
26
easyJet plc
Annual report
and accounts 2011
Financial review
Continued
Our main insurers are Global, La Reunion, AXA, Canada
Life, QBE and Houston Casualty Company Europe.
One of our biggest costs is fuel and our main suppliers
are Shell, Air BP, Exxon, Air Total 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 and our data network; Lufthansa Systems who
provide flight planning systems; SOPRA who develop
and support our reservations system and other areas
of system development; AD OPT Technologies who
provide our pairings and roster optimiser; and Agresso
who provide our accounting system.
As at 30 September 2011 easyJet had 19 bases and
they were operated by:
BAA
Global Infrastructure Partners
AdP
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
Aeroporti di Roma
At these airports our ground handling was carried
out by:
Menzies Aviation
Servisair
Group Europe Handling
Aviapartner
Swissport
SEA Handling
Globeground Berlin
Swissport Menzies
Gate Aviation
Aviation Service
Our main ancillary partners are Gate Gourmet, who
provide our in-flight merchandise, Europcar, who
provide car rental services, Hotelopia and Laterooms
who broker hotels, Low Cost Holidays who provide
accommodation and transfers for easyJet Holidays
and Alvia who, through the Mondial brand, provide
travel insurance.
Our credit card acquirers are Elavon, Lloyds TSB,
Barclays Merchant Services and American Express.
Our payment service providers are CyberSource.
The Company is regulated in the UK 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 employee unions we deal with in the UK are
BALPA, UNITE and Prospect; in France they are SNPL
and UNAC/SNPNC/CFTC; in Spain they are SEPLA,
STAVLA and CCOO; in Italy IPA, FIT-CISL and FILT-CGIL;
in Germany Ver.di; and in Switzerland SSP/VPOD.
We use contract pilots from Airline Recruitment and
Parc Aviation and flight simulation services from CAE.
We have a key relationship with easyGroup IP Licensing
who own the easyJet brand, and with Sir Stelios
Haji-Ioannou through the Agreement Letter.
* 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:
– Agree the terms of payment at the start of business
with the supplier
– Ensure that those suppliers are made aware of the
terms of the payments
– Pay in accordance with contractual and other legal
obligations
At 30 September 2011, the number of creditors days
outstanding for the Group was 8 days (2010: 6 days),
and for the Company was nil days (2010: nil days).
easyJet plc
Annual report
and accounts 2011
27
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Principal risks and uncertainties
The risks and uncertainties described below are considered to have the most significant effect on easyJet’s
business, financial results and prospects. This list is not intended to be exhaustive.
easyJet carries out a detailed risk management process, to ensure that risks are identified and mitigated where
possible, although many remain outside our full control, for example adverse weather, pandemics, acts of
terrorism, changes in government regulation and macroeconomic issues. A more detailed overview of the risk
management process and internal control can be found in our Corporate Governance section on pages 49 and 50.
The trend line highlighted represents the prevailing inherent risk trend being faced by easyJet. Inherent risk is
assessed prior to the determination of all current mitigation.
P
e
r
f
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a
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a
n
d
r
i
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k
Strategic
impact
Risk description and potential impact
Major safety incident / accident
Failure to prevent a major safety incident or deal with it
effectively.
This could adversely affect our reputation, operational and
financial performance.
p
Security and terrorist threat or attack
Failure to prevent a major security related threat or attack
from either internal or external sources or deal with it
effectively.
This could adversely affect our reputation, operation and
financial performance.
i
I
Y
T
E
F
A
S
N
O
E
S
M
O
R
P
M
O
C
O
N
Prevailing
inherent
risk trend Current mitigation
Our number one priority is the safety of our customers and
people. We operate a strong safety management system
through:
– Fatigue Risk Management System
– Incident reporting
– Safety Review Board
– Safety Action Group
Management and control system for our operations.
Weekly operations meetings and reporting.
Regular review by the Board of Directors.
We have response systems in place and provide training for
crisis management; combined with full crisis management
exercises performed at least three times a year.
Insurance is held which is believed to be in line with other
airlines.
Our number one priority is the safety, including security, of
our customers and people. We operate a strong safety
management system as set out above.
We constantly ensure that regulations required by relevant
governments are enforced. Crew are trained within the
current guidelines.
We have response systems in place and provide training for
crisis management; combined with full crisis management
exercises performed at least three times a year.
Insurance is held which is believed to be in line with
other airlines.
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28
easyJet plc
Annual report
and accounts 2011
Financial review
Continued
Strategic
impact
Risk description and potential impact
Financial impact of mass disruption in peak seasonal
months
Prevailing
inherent
risk trend Current mitigation
p
Processes in place to adapt to widespread disruption.
A full crisis management exercise is performed at least
three times a year and a business continuity programme
is in place.
Significant analysis and senior management focus has
resulted in additional crewing solutions being put into place
to further recognise the external factors and volatility that
impact the airline industry.
easyJet has a strong financial balance sheet allowing the
Company to be in a strong position to withstand potential
events that result in periods of reduced revenues.
The efficiencies achieved by operating a single fleet type
are believed to outweigh the risks associated with the
Company’s single fleet strategy.
A rigorous established maintenance programme is
followed.
Constant reviews of the second-hand market and
managing exit strategies for the aircraft. easyJet has a
number of different options when looking at exit strategies.
p
A number of factors can lead to widespread disruption to
our network, including epidemics / pandemics, forces of
nature (extreme weather, volcanic ash, etc), acts of
terrorism, union activity and strike action. Any widespread
disruption could adversely effect our reputation, operation
and financial performance.
If the widespread disruption occurred during our peak
summer months then easyJet’s financial results would be
significantly impacted. As load factors are also higher
during this period, it would potentially take longer to recover
from any significant disruption.
Single fleet risk
easyJet is dependent on Airbus as its sole supplier
for aircraft, with two aircraft types (A319 and A320).
All Boeing 737’s are planned to be exited by the end of 2012
There are significant cost and efficiency advantages in a
single fleet, however there are two main associated risks:
– Technical or mechanical issues that could ground the full
fleet or part of the fleet which could cause negative
perception by the flying public
– Valuation risks which crystallise on the ownership exit of
the aircraft. The main exposure is with the A319 fleet,
where we are reliant on the future demand for
second-hand aircraft
IT system failure
easyJet is dependent on a number of key IT systems and
processes operated at London Luton airport and other key
facilities.
A loss of systems and access to facilities could lead to
significant disruption and have an operational, reputational
and financial impact.
Dependence on third-party service providers
easyJet has entered into agreements with third-party
service providers for services covering a significant
proportion of its operation and cost base.
Failure to adequately manage third-party performance
would affect our reputation, operation and financial
performance. Loss of these contracts, inability to renew or
negotiate favourable replacement contracts could have a
material adverse effect on future operating costs.
Industrial action
Large parts of the easyJet workforce are unionised. Similar
issues exist at our key third-party service providers. If any
action was taken this could impact on easyJet’s ability to
maintain its flight schedule.
This could adversely effect our reputation, operation and
financial performance.
p A business continuity programme, including disaster
recovery, is in place and will be further developed over the
coming year. This covers alternative sites being available
should there be a need to relocate at short notice due to
loss of facilities.
i
Processes are in place to manage third-party service
provider performance.
Centralised procurement department that negotiates key
contracts.
Most developed markets have suitable alternative service
providers.
p Employee and union engagement takes place on a regular
basis.
Significant analysis and senior management focus has
resulted in additional crewing solutions being put into place
that recognises the external factors and volatility that
impact the airline industry.
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Prevailing
inherent
risk trend Current mitigation
Regular monitoring of competitor activity and potential
impact of any consolidation activity.
Rapid response in anticipation of, and to, changes.
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easyJet has a key role in influencing the future state of
regulations.
A Regulatory Affairs Group coordinates the work and effort
in this area.
Dedicated Investor Relations team, utilising a shareholder
engagement programme.
Significant Board and Senior management time dedicated
to engage with major shareholders.
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project teams have been set up to oversee delivery and
track the budget and benefits realisation of all projects.
Steering Group set up with full key senior management
involvement to ensure monitoring, challenge and key
decisions are being made at the appropriate level.
p Programme management office (PMO) and experienced
i Systems are secured and monitored against unauthorised
i easyJet has a strong ethical tone from the top.
access; this will receive continued focus.
Scanning software for fraudulent customer activity is
monitored and controlled by the Revenue Protection team.
Risks assessments have been completed and appropriate
actions taken where necessary.
General awareness training has been provided, with
additional targeted training given to higher risk groups.
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Strategic
impact
Risk description and potential impact
Competition and industry consolidation
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easyJet operates in competitive marketplaces against both
flag carriers and other low-cost airlines.
Industry consolidation will affect the competitive
environment in a number of markets.
This could cause a loss of market share and erosion of
revenue.
Regulator intervention
The airline industry is currently heavily regulated, with
expected increased regulator intervention; this includes
environmental, security and airport regulation in which
charges are levied by regulatory decision rather than by
commercial negotiation.
easyJet is exposed to various regulators across our network,
which will increase as the Company grows geographically.
This could have an adverse impact to our reputation, cost
base and market share. An inadequate knowledge or
misinterpretation of local regulations could result in fines or
enforcement orders.
Major shareholder / investor relationship issues
i
easyJet has a major shareholder (easyGroup Holdings
Limited) controlling over 25% of ordinary shares.
Shareholder activism could adversely impact the reputation
of the Company and cause a distraction to management.
easyJet does not own its company name or branding which
is licensed from easyGroup IP Licensing. As for all brand
licensees, the easyJet brand could be impacted through
actions of the easyGroup or other easyGroup licensees.
Ineffective or non delivery of the business strategy
i
A number of key projects have been set up to deliver key
elements of the strategy. If these projects do not deliver the
benefits and cost savings planned we could fall short of our
planned financial results.
Information security
easyJet faces external and internal information security
risks. The Company receives most of its revenue through
credit cards and operates as an e-commerce business.
A security breach could result in a material adverse impact
for the business and reputational damage.
Bribery Act 2010
The Bribery Act 2010 came into force in April 2011. To date
there are no precedents set in respect of how this will be
enforced. As with all companies, if we were found to be in
breach of the Act this could adversely affect us financially
and reputationally.
30
easyJet plc
Annual report
and accounts 2011
Financial review
Continued
Example only. Not a current offer.
Strategic
impact
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Risk description and potential impact
Missing optimisation opportunities for aircraft fleet and
network portfolio
easyJet has a leading presence on the top 100 routes in
Europe and positions at primary airports that are attractive
to time sensitive consumers. easyJet manages the
performance of its network by careful allocation of aircraft
to routes and optimisation of its flying schedule.
If we fail to continue to optimise our network and fleet plan
this will have a major impact on easyJet’s ability to grow and
gain the required yield. In addition, poor planning of the
correct number of aircraft to fly the schedule would have a
critical impact on the Company’s costs and reputation.
Exposure to fuel price fluctuations and other
macroeconomic shifts
Sudden and significant increases in jet fuel price and
movements in foreign exchange rates would significantly
impact fuel and other costs. Increases in fuel costs have a
direct impact on the financial performance of the Company.
If not mitigated, this could have a material adverse effect on
financial performance.
easyJet’s business can also be affected by macroeconomic
issues outside of its control such as weakening consumer
confidence, inflationary pressure or instability of the euro.
This could give rise to adverse pressure on revenue, load
factors and residual values of aircraft.
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. p
Prevailing
inherent
risk trend Current mitigation
A Network Portfolio Management Strategy is in place which
looks to take a balanced approach to the route portfolio that
we fly to ensure that we optimise each aircraft to get the
best return for each time of day, each day of the week.
Route performance is monitored on a regular basis and
operating decisions are made to improve performances
where required.
s
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Board approved hedging (jet fuel and currency) in place that
is consistently applied. Policy is to hedge within a percentage
band for rolling 24 month periods.
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.
A strong balance sheet supports business through
fluctuations in the economic conditions for the sector.
Regular monitoring of markets and route performance by
our network and fleet management teams.
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 68% to 32%).
All on balance sheet debt floating rate, repriced up to
six months.
None of the agreements contain financial covenants.
A portion of US dollar mortgage debt is matched with
US dollar money market deposits.
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.
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.
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).
p Board policy is to maintain an absolute minimum level of free
i Cash is placed on deposit with institutions based upon credit
rating with a maximum exposure of £100 million for AAA
ratings.
Chris Kennedy
Chief Financial Officer
CORPORATE
OVERVIEW
RESPONSIBILITY
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Introduction
Safety
People
Environment
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easyJet plc
Annual report
and accounts 2011
Corporate responsibility
Safety first and foremost
The safety of our customers and staff is easyJet’s
number one priority; it remains a core part of our DNA.
From all across the business, the boardroom to the
flight deck and the check-in desk to the maintenance
bay, safety informs everything we do and is the starting
point for every decision, at all times.
The evolution of our open and just culture continues
with easyJet being at the forefront of promoting open
reporting of all safety-related incidents, no matter how
minor they may appear at first glance. At easyJet, we
aim to maintain processes and structures to monitor
and manage safety related risk throughout the
business.
Our Chief Executive Officer, Carolyn McCall, and
Director of Group Operations, Warwick Brady, are
responsible for all aspects of safety delivery, including
our compliance obligations under the Air Operator’s
Certificate (AOC). The Accountable Safety Executive is
Carolyn McCall and she chairs our Safety Review Board
which meets monthly to assess reports from the Safety
Action Groups across the business. This review and
assessment process delivers monthly reports to both
the UK Civil Aviation Authority (UK CAA) and the
easyJet Board. In addition to our internal safety and
compliance oversight regime, our Director of Safety
and Security, Captain David Prior delivers an
independent safety report to the Board each month
which underlines how serious this issue is for our Board.
Safety is taken very seriously by the Board right down
to regular day-to-day communication. The Board even
has direct phone line through to our Director of Safety.
Any reported safety-related incidents are assessed and
categorised, with risk values assigned and aggregated
to form our Composite Risk Value (CRV) index. During
the year, the index showed a steady improvement,
continuing a long-term trend reducing risk to well within
the assigned boundary level.
At easyJet we view ourselves as a responsible
European airline. We want to achieve our ambition of
becoming Europe’s preferred short-haul airline and in
order to do so we are always looking at safer, more
sustainable and innovative ways of running things, but
place just as much importance on nurturing the
well-being and happiness of our people. As we
continue along the path of Turning Europe Orange
there is no substitute to having a responsible approach.
We know that that our success is inextricably linked to
the well-being of our customers, our people and the
communities in which we operate and work.
Our foremost responsibility is towards the safety of all
of our people, from our customers through to our hard
working staff both on the ground and onboard our
aircraft. This is core to the business and something we
communicate on at all times to all our partners and
stakeholders, be they European governments,
regulators, or other stakeholders central to our business
operations and commercial success.
But it is the strength of our people which above all
others marks us apart. Their passion, expertise and
commitment is at the heart of what we do. Over the
past year we have continued to build up connection
with our people. We’re evolving and changing the way
we communicate to them all across our European
operations. In turn, our long-term performance and
sustainability are dependent upon their understanding,
goodwill and active support so that they continue to
improve the experience for our customer.
We believe in the positive contribution flying brings to
Europe, particularly during these difficult economic
times, and is central to many Europeans’ businesses
and way of life. At easyJet we are rightly pursuing our
ambitious path towards minimising our environmental
footprint both in the air and on the ground. This is
central to the ongoing success and sustainable
development of the business. Operating across an
increasingly environmentally conscious Europe, we can
justly lay claim to having one of the youngest and most
fuel-efficient fleets around. We are proud of this, and
proud of our role in helping shape a greener future for
European aviation.
There is little doubt that by continuing to act in a
responsible manner this will help us to achieve our
ambition of becoming Europe’s preferred short haul
airline by making travel easy and affordable and
generating market leading returns.
Example only. Not a current offer.
easyJet plc
Annual report
and accounts 2011
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8,288
Number of people
across easyJet network
5,000
Number of Spirit
recognitions in first four
months since launch
The Safety Management System (SMS) launched in
2009 has continued to extend its influence across the
organisation to ensure that the highest standards of
safety risk management and oversight are embedded
in everything that we do. We have now successfully
embedded the concept of Operational Readiness and
this process now applies to all our major operational
initiatives such as the ground de-icing programme.
During 2011 we configured a number of SMS tools and
carried out a range of activities. We are in the process
of integrating our bespoke safety data system into our
operations. easyJet has developed the capability to
generate risk based safety oversight through the use of
intelligent systems. These new initiatives will deliver
further cost efficiencies whilst maintaining high levels
of safety.
As an acknowledged leader in the field of Fatigue Risk
Management Systems (FRMS) easyJet continues
to work with other world class entities to ensure
maximum benefit is gained in terms of cost efficiencies
and crew utilisation. In 2012 we will see FRMS linked as
an integral part of the operations team. In this position
the system will be well placed to deliver Quality
Assurance of roster delivery whilst maintaining strict
regulatory compliance.
easyJet is working closely with UK, EU and European
governments and agencies to ensure there is a
coordinated response to any future large scale air
traffic disruption caused by volcanic activity or weather
events. During this year’s Icelandic volcanic eruption
easyJet worked closely with the British authorities to
provide advice on the whereabouts of the latest ash
cloud. easyJet has since been appointed as one of the
Government’s strategic partners on this issue.
easyJet has also taken part in several international
exercises simulating the effects of large scale volcanic
eruptions. In parallel continued work alongside the
Norwegian Institute for Air Research, to support the
development of the innovative on board ash detection
radar AVOID, invented by Dr Fred Prata. AVOID
(Airborne Volcanic Object Identifier and Detector)
technology is a system which uses infrared technology
built on the aircraft, similar to weather detectors
currently used, to enable pilots and flight control to see
an ash cloud up to 100km ahead and at altitudes
between 5,000ft and 50,000ft, and to amend their
course to miss areas of ash cloud, and in effect open
up a larger area of airspace than might be available
using existing data methods alone.
easyJet has since become the first airline to start trials
of the AVOID.
The safety of our passengers once they have left the
aircraft is also important to us. Last year easyJet
worked with the EU to help raise awareness of the
pan-European emergency number 112. Several activities
were carried out including onboard announcements
and a permanent mention in the in flight magazine.
All of this to help our millions of customers feel safer
on their European travels.
Connecting with our customer is also core to the
easyJet strategy. The past year has seen a raft of
innovations introduced across the business to improve
the communication with the customer, from new
website information tools, an improved booking
process, an expanded customer experience team.
Throughout the disruptions, be it the bad winter, the
political and industrial unrest, and the latest Icelandic
eruption, we have been there for our customer
throughout. We spent the year introducing a raft of
new measures to help better deal with disruption,
including leaflets, improved accommodation and
catering support, and more efficient communication
tools. Throughout these events we also added rescue
flights to our schedule to ensure that our customers
reached their destinations as soon as possible.
Finally at easyJet we take the welfare of our
passengers extremely seriously whatever their needs
and disabilities. In 2010/2011 we carried over 350,000
passengers with reduced mobility from across Europe
and have worked closely with European disability
groups across various countries to improve our service
offering for this group of travellers, but without
compromising our safety.
Connecting with our people
Our people make the difference, across all areas of our
team, from cabin crew and pilots through to our
engineering teams and management and admin
teams. Our focus is to attract the right person
regardless of level within the business, and to keep
them engaged in making travel easy and affordable for
our passengers.
We also look for ways to operate more efficiently
across all areas of the business to provide the best
returns for our shareholders whilst maintaining the level
of service and satisfaction among our people to
provide a quality service to our customers.
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easyJet plc
Annual report
and accounts 2011
Corporate responsibility
Continued
2011 saw a lot of work on ensuring a stable and efficient
crew planning and rostering approach to ensure that
we could operate effectively through our busiest
summer months. We increased standby across the
network, resourced at a base level and not a network
level as in previous years and worked on the resource
planning and the rostering robustness. Given this
summer’s results, this has all been to good effect.
People strategy
We have continued to implement our three-part
strategy to find and retain the best people to deliver
our ambition of becoming Europe’s short-haul airline of
choice with market leading returns.
Talent
During the year we added to our existing talent pool by
recruiting some 1,371 cabin crew, 395 new pilots and
228 management and administrative staff.
Following the appointment of the new CEO towards
the end of the last financial year, we have grown and
developed our Executive Management Team (EMT),
with a new structure focused on building capability
across Europe, developing our business traveller
proposition and focusing on the customer. This resulted
in new roles for some of the existing EMT members
and the appointment of a new Group Director IT,
Group Director Marketing, Group Director
Communications, Group Director People and Group
Director Europe. In support of our strategy to become
Europe’s preferred short-haul airline, we have appointed
Senior roles in each of our European countries to help
us drive the implementation of our strategy and
maximise our potential in each of these countries.
This year we have also made three new Non Executive
appointments to our PLC Board.
We have spent time building our leadership teams and
capability, ensuring that our leaders understand the
evolving strategy, the associated business challenges
and their roles in leading and engaging their teams to
deliver on this.
And the talent development doesn’t only stop at the
top. As part of our plans to build a talent pool for the
future, 17 graduates from across Europe have been
recruited this year and a new graduate programme
introduced. As a result we plan to have introduced
approximately 100 highly capable graduates into our
management pipeline within the next five years.
In addition to this and to ensure that our people remain
at their highest level and support their progression, this
past year we have provided training at our bespoke
easyJet training Academy to ensure our crews are all
up-to-date on the latest industry developments.
Engagement
Recognising that there are proven links between an
engaged workforce and excellence in customer service
and business delivery, we have continued to focus on
the engagement of our people.
We have focused on making it easy for our people to
do their work and listened to their ideas and feedback
through various communication channels, including a
weekly CEO call, EMT base visits across the European
network, and web chats and videos directly to our
people.
We understand that good communication is vital within
a business – especially one which has such an
extensive and multinational staff base – to ensuring
that key issues and matters are discussed with staff
so that we can react quickly and ensure our people
remain engaged in the business. Communication is a
two way task, enabling us to both listen to our peoples’
views and disseminate messages to them, but also
respond to their concerns.
Our flat management structure enables us to pass
messages across the team, directly to our people.
In addition, through our company intranet, our people
have an opportunity to use the various forums to
highlight and discuss issues that affect them, and to
raise issues.
More formally, we communicate and discuss matters
with our employee representatives and partner a
number of trade unions across Europe, ensuring two
way communication across these partnerships.
All of our locations have funds allocated for the local
groups to support local engagement initiatives at base.
We have also begun a new redevelopment
programme of our main base crew rooms, including
the construction of new offices and rest facilities at
specified locations. As a part of this we have been
engaging with our people to ensure that the design
and refurbishment are reflective of what works well for
our teams locally, as well as meeting the needs of the
business going forward.
easyJet plc
Annual report
and accounts 2011
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uSay
For the second year running, we have conducted our
uSay staff survey, aimed at obtaining employee
feedback from everyone across our European
organisation as well as each of our main communities.
In 2011 our overall score has improved to 40%. We will
be using the results to identify improvement areas and
action on suggestions.
Organisation
To succeed in our corporate ambitions, we need to
have high quality people with the right skills in the right
place at the right time. Our aim is to ensure that our
people contribute more to our business than they
would for any other employer. We aim to ensure that
we continue to recruit the best people in the roles and
keep these people engaged in the business so that we
can achieve these objectives.
Following our strategic review we reshaped the
organisation around a few key principles:
– the customer is at the centre of all that we do; align
the structure around our product delivery, ensuring
robust tracking systems monitor and advise on that
needs to be achieved, ensuring clear accountability,
roles and responsibilities for our fundamental
processes, putting in place simplified structures and
processes to facilitate good coordination securing
the right people in the right places and improving
tools and processes across the organisation
This year we have looked to improve all our recruitment
programmes, placing emphasis on the candidate
experience and the assessment tools we use so that
we attract and retain the best.
We have also begun a programme of investment in the
relationships we have with our people forums, such
that we can have more of a partnership dialogue about
what is best for easyJet and our people. In addition we
are establishing a European Works Council which is
currently at the stage of electing appropriate
representatives across all countries.
As with all businesses there are levels of staff attrition
that will occur and in 2011 our overall unforced staff
turnover was 9.69%, which was a slight increase
on 2010.
Turning Europe Orange
Following the growth of our network, we continue to
grow our presence across Europe to continue to
strengthen our position as Europe’s only truly pan-
European air transport network.
As at 30 September 2011, easyJet employed 8,288
people (2010: 7,359), based throughout Europe as
illustrated below;
United Kingdom
Switzerland
France
Spain
Italy
Germany
Netherlands
Total
5,116
666
774
614
797
320
1
8,288
Equality and diversity
easyJet is an equal opportunities employer. We ensure
that our people 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 people 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.
We are pleased to report that our gender ratio across
the organisation is 51:49 (male : female) and in the last
year we have increased our female representation on
both the PLC Board and the EMT.
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 our people to
contribute towards achieving our strategic objectives.
Our UK people are also eligible to participate in a Group
personal pension towards which easyJet contributes to,
as well as having the option to make their own
contributions through salary sacrifice.
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easyJet plc
Annual report
and accounts 2011
Corporate responsibility
Continued
Share schemes
We once again offered all our people 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 our people on the UK
payroll. For our people 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 our
eligible people taking part in one or more of the plans.
Your benefits
Our UK people continued to be entitled to select from
a number of flexible benefits. This enables our people
to access programmes and savings which would not
be available to them on an individual basis. A “lifestyle
benefits” scheme also remained in the year offering
discounts on a wide range of products and services.
Our people 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.
easyJet Spirit Awards
In 2010 we launched a new employee awards scheme;
Spirit. This scheme rewards our people for their
commitment and hard work, and recognises where our
people go above and beyond to enable our business to
succeed. During the course of the year, we have
monthly, quarterly and annual recognising achievement
across the different communities within our business.
This year we also launched the easyJet Spirit Awards
Portal, a section of our intranet where employees can
recognise each other, and nominate their colleagues
for Spirit Awards. This has been really well received with
more than 5,000 nominations for Spirit Awards during
the first four months, representing an over 500%
increase on the number of our people formally
recognised during the previous year. We will be holding
our second annual awards event in February 2012.
Charitable donations
easyJet has continued to support the Alzheimer’s
Society as its European charity partner. Through
onboard collections we have managed to raise over
£800,000 for this charity.
Our charitable support also focuses on our employees
and their efforts to raise funds for local charities across
our pan-European bases. This has involved raising
funds for a number of different charities and has seen
our staff undertake numerous activities including, the
London and Paris marathons, and the Three Peaks
challenge to name a few.
Political donations
easyJet does not make 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. When required, 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.
easyJet and the environment
Efficiency is in our DNA and this applies to our
environmental impact as well. We believe the most
important environmental issue facing the industry is
climate change and addressing our environmental
impact is part of our responsibility as an airline. As an
airline easyJet is constrained in what it can do in the
area of CSR as we are heavily constrained by the
technology available to us, the development of which
is a highly regulated and lengthy process.
Fuel is our largest single cost item, so we are heavily
incentivised to minimise its use and therefore CO2
emissions
As we grow we are replacing less efficient operators
and therefore reducing emissions on routes where we
are replacing capacity.
Example only. Not a current offer.
Environment
The aim of our business is to be as efficient as we can
be – this applies to our environmental impact as well.
Our environmental policy is governed by three
promises:
– To be efficient in the air
– To be efficient on the ground
– To lead the move to more efficient flying
We have also focused on ensuring the industry plays its
role in tackling climate change. Our next financial year
is an important one for aviation and the environment as
it will encompass the first year aviation will play a full
role in the European Union's Emission Trading System
(ETS), ensuring that aviation emissions are part of
Europes efforts to tackle climate change.
To significantly reduce our environmental impact
further will require technological change across the
industry, so our environment policy focuses on these
long-term gains.
CO2/passenger Km
g
+0.2ppt
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
84.60
84.40
87.30
90.31
95.56
95.70
98.80
104.50
110.00
106.90
112.50
Progress over time and environmental data
– Over the last ten years easyJet has successfully
improved our CO2 efficiency every single year.
However, this year our CO2 efficiency declined
slightly. This is due to a number of factors including
shorter sector lengths, increased fuel burn in the first
half of the year due to winter weather and disruption.
Emissions per passenger km (the standard industry
measure of efficiency) increased in 2011 to 84.6g/km
from 84.4g/km in 2010. Emissions per passenger
journey also increased, rising from 82.3 kg per sector
to 84.6 kg. We redoubled our efforts to improve fuel
efficiency in the second half of the year and this will
continue to be a significant focus in 2012
Aviation and the environment
Aviation has three main environmental impacts:
On climate change
Aviation contributes to climate change through both
the direct emission of CO2 from fuel burn, and due to
other non-CO2 effects from the emission of Nitrogen
Oxides (NOx), particles and aerosols and cloud
formation. The science surrounding the impact of
aviation’s CO2 emissions is very well developed, while
the science surrounding non-CO2 effects remains
uncertain. It is clear however that the long-lasting
impact is from CO2 emissions.
On local air quality
Local air quality impacts arise from NOx emissions
during aircraft take-offs and landings. We have
upgraded 40% of our engines with the tech insertion
upgrade. This reduces emissions but also reduces NOx
emissions by 10%. These engines are the best in class
and help minimise our impact on local air quality.
On noise levels
Aircraft noise clearly has an impact on residents around
airports. easyJet complies with local rules that govern
noise at airports (such as curfews and routeings to
avoid built up areas). Our aircraft meet the tightest
international noise standards [ICAO chapter 4]. Our
focus on improving the efficiency of our flying has also
reduced our noise impact; by changing the flap
settings used for landings we have both improved fuel
efficiency and reduced noise levels at landing.
easyJet plc
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easyJet plc
Annual report
and accounts 2011
Corporate responsibility
Continued
We believe the most significant environmental impact
is on climate change. This is the dominant global
environmental issue, and it also is of long-term strategic
importance to the airline industry. We have therefore
focused our reporting and public policy work on this
issue.
Why the environment matters
Addressing our environmental impact is clearly part of
our responsibility as an airline. However, it is also a
business imperative. Environmental concerns have a
significant impact on public policy towards aviation,
from restrictions on airport expansion to passenger
taxes. It is therefore in our own interest to ensure that
both we and the wider industry properly address
environmental concerns. This is why we have focused
on considering public policy solutions to the challenges
the industry faces.
Long-term sustainability of the industry
Aviation emissions have increased steadily over time,
despite significant improvement in environmental
efficiency – the growth in air traffic has outweighed
the efficiency gains. Over the last ten years global
aviation traffic has grown by over 5% a year, while
efficiency gains have been about 2%. This has led to
concerns that aviation emissions will continue to grow
into the future, and that this will be inconsistent with
the overall reductions in greenhouse gas emissions
that are needed to limit the impact of climate change.
This is clearly unsustainable and needs to change
going forward.
We believe that the main environmental key challenge
facing the industry is to ensure that emissions are put
on a downwards path. There is a real risk that if the
industry does not achieve this on its own, it will have
growth constraints placed on it. We have already seen
suggestions of this in the UK, where the Committee
on Climate in its December 2009 report on aviation
emissions suggested the growth of the industry would
need to be limited to 60% over the next 40 years to
control UK emissions.
To ensure the industry does not face any artificial
constraints we need to significantly improve the
efficiency of flying, through step-changes in
technology, and the right incentives to ensure that
airlines and passengers fly as efficiently as possible.
Delivering our environmental promises
Our promises revolve around actions we can take in
the short term to directly improve the environmental
efficiency of our business, and at the same time
working to deliver a sustainable long-term outcome
for the industry. The latter involves changing the
framework within which the industry operates to
ensure it delivers sustainable outcomes.
Governance
Many people within easyJet help deliver our
environmental aims. Oversight of our environment
policy is carried out by a manager in our regulatory
team, and the EMT receives regular updates on
environmental policy as part of our reporting on
regulatory issues.
easyJet’s actions
How we fly our aircraft has an effect on the
environment and finding new innovative ways of doing
so continues to drive us.
We are continually working to improve the
environmental impact of our current operations,
by increasing fuel efficiency. We have a fuel efficiency
programme which is continually monitored, with new
measures being regularly implemented. While some of
these measures save relatively small amounts of CO2
per flight, as we have an average of over 1,000 flights a
day the total savings can be very large.
Examples of fuel efficiency programmes are:
– Ground power usage
We have instituted a policy of using ground based
power where possible (rather than the Auxiliary Power
Unit on the aircraft); this is considerably more efficient.
This saves 13 kg of CO2 per turnaround, and in total we
have saved 44,000 tonnes of CO2 over the year based
on current usage levels.
– Landing lights
We have lowered the height at which the landing lights
are lowered on landing (reducing drag). This saves
150 grams of CO2 per flight, and 550 tonnes of CO2
per year.
– One engine taxi on departure
– Aviation in ETS
Aviation entered the EU Emissions Trading Scheme (EU
ETS) in 2010, and airlines will have to surrender permits
in 2013 to cover their 2012 emissions. We were a strong
supporter of aviation’s entry and we continue to believe
that this is the best way to ensure aviation makes its fair
contribution to tackling climate change.
– Ensuring any taxes support environmental objectives
We do not support the imposition of aviation specific
taxes. However, where they are in place (such as the
UK) we believe they must be designed to provide
incentives for more environmentally efficient flying.
This means the tax base must be flights, not passengers.
– Minimum standards for aircraft
International minimum standards are needed to drive
the development of new technology aircraft.
Example only. Not a current offer.
We now use a single engine to taxi the aircraft before
departure at airports where it is possible to do this. This
saves 7.9 kg of CO2 per departure, and across the
network we have saved 1,380 tonnes of CO2 in the year
based on current usage.
New technologies and design
In 2011 we were the first commercial airline to trial a
revolutionary nano-technology coating on our aircraft
aimed at reducing drag and increasing fuel efficiency.
We are also regularly looking at ways to reduce weight
onboard and are currently looking at lighter seats in
the cabin.
Entry into ETS
Aviation entered ETS in 2010. In 2010 we were required
to report our CO2 emissions and the Revenue Tonne
Kilometres flown by easyJet. In 2012 we will be required
to surrender permits to cover CO2 emissions. ETS
compliance is overseen by our finance team. We have
put in place the appropriate mechanisms to monitor
and report the required data and to manage our
exposure to the carbon market.
Changing the industry framework
Achieving step change in the environmental efficiency
of aviation will require significant progress in the
development of next-generation aircraft. Without
significant improvements in fuel efficiency it will not be
possible to increase the rate of environmental
efficiency improvement.
While we have seen some progress in the short-haul
market, with the development of the Airbus A320 NEO
and Boeing B737 MAX, we remain concerned that the
current effective duopoly in the production of large
commercial aircraft is restricting the development of
next-generation aircraft. There has been limited
progress on the development of a next-generation
short-haul aircraft and it is clear that it will be many
years before there is a new short-haul aircraft. We are
continuing to push the manufacturers to develop a
next-generation short-haul aircraft.
It is also vital that the policy framework set out by
governments supports the objective of increasing the
environmental efficiency of aviation. We believe there
are three parts to this, only one of which is in place.
easyJet plc
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and accounts 2011
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GOVERNANCE
Chairman’s introduction
Board of directors
Executive management team
Corporate governance
Shareholder information
Report on Directors’ remuneration
Statement of Directors’ responsibilities
41
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Chairman’s introduction
easyJet plc
Annual report
and accounts 2011
41
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easyJet welcomes the introduction of the UK
Corporate Governance Code 2010 (“the Code”), which
has applied to the Company from 1 October 2010.
The Code gives me the opportunity to set out how, as
Chairman, I have been fulfilling my responsibility for
leadership and effectiveness of the Board.
In October 2010, easyJet signed an amended brand
licence with easyGroup IP Holdings Limited and a letter
of agreement with the Company’s founder, Sir Stelios
Haji-Ioannou. This has given us greater certainty and
freedom to pursue the Company’s strategy which was
explained to our stakeholders in November by our
Chief Executive Officer, Carolyn McCall. At the same
time the Relationship Agreement was terminated
which meant that easyGroup Holdings and Sir Stelios
no longer had the right to appoint two directors and Sir
Stelios no longer had the right to be chairman of
easyJet.
The strategy presented in November has been further
rigorously reviewed and challenged by the Board, in
June 2011 we had a two day session devoted to
debating and refining the strategy.
The Board also undertook a two day visit to easyJet’s
largest base at Gatwick which included a detailed
tour of the operations to assist the Non Executives’
understanding of the day-to-day operational issues
facing the Company. This was in addition to the
introduction of an enhanced induction programme for
our new non executive directors during the course of
the year.
There have been a number of changes to the Board
during the year with the addition of three new Non
Executive Directors and the resignation of Sir David
Michels and Sven Boinet. Further details of the
appointments are described in the section on the
Nominations Committee. The additions to the Board
have strengthened the Board in the areas of finance
and risk management and have added to the balance
of experience and skills on the Board. The diversity of
opinions, perspectives and insights given by the Non
Executives with their variety of backgrounds and
experience has inevitably benefitted the Executive
Management Team through the feedback gained from
having members of the management team attending
Board meetings.
I am satisfied that the members of the Board, in
particular the Non Executive Directors, have sufficient
time to undertake their roles at Board and Committee
level with the Company, so as to be able to discharge
their responsibilities effectively
The Company has carried out an in-depth review of
the quality and quantity of information provided to
the Board and, following input from all of the Directors,
is now providing information in an updated format. This
ensures a regular supply of tailored information allowing
the Directors to assess the performance of the
Company in the most efficient and effective manner.
The Board has appointed Lintstock to assist with an
external evaluation of the Board’s effectiveness to be
carried out over the next few months and we expect
that such an external review will be carried out every
three years. Between these external reviews, we will
use an external evaluation tool to carry out annual
Board performance review.
At our AGM in February 2011, we put all of our Directors
up for re-election in compliance with the Code and
anticipate continuing to put all Directors up for
re-election annually.
During the year the UK Bribery Act came into effect
and the Board has overseen a review of its
requirements to ensure that the Company is well
placed to adhere to it in full.
Sir Michael Rake
Non Executive Chairman
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easyJet plc
Annual report
and accounts 2011
Board of Directors
Sir Michael Rake
Non Executive Chairman (1948)
Charles Gurassa
Non Executive Deputy Chairman and
Senior Independent Director (1956)
Carolyn McCall OBE
Chief Executive (1961)
Chris Kennedy
Chief Financial Officer (1964)
Michael (1948) was appointed to the Board of easyJet as Deputy Chairman
on 1 June 2009 and became Chairman on 1 January 2010. He is Chairman
of BT Group plc, as well as a Non Executive 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 Europe and Senior Partner of KPMG in the UK.
Michael is a Governor of Wellington College, a Board member of Guards
Polo Club and is a member of the Prime Minister’s Business Advisory
Group.
Charles (1956) was appointed to the Board of easyJet as Independent Non
Executive Director on 27 June 2011 and became Deputy Chairman and
Senior Independent Director on 1 September 2011. He is currently Non
Executive Chairman of Tragus, MACH, Parthenon Entertainment and
Genesis Housing Association.
His career has been primarily in the travel, tourism and leisure industries in a
number of senior positions including Chief Executive of Thomson Travel
Group Plc, Executive Chairman TUI Northern Europe and Director
Passenger and Cargo at British Airways. Previously he was Non Executive
Chairman of LOVEFiLM, Phones4U, Virgin Mobile plc, Alamo/National Rent
a Car, 7Days and has been a Senior Independent Director of Merlin
Entertainments, a Non Executive Director at Whitbread plc and an advisory
Board member of Alpitour.
Carolyn (1961) joined easyJet on 1 July 2010 as Chief Executive and was
appointed to the Board. Prior to this, she was Chief Executive of Guardian
Media Group.
She was a Non Executive Director of Lloyds TSB from 2008 to 2009, Non
Executive Director of Tesco Plc from 2005 to 2008 and Non Executive
Director of New Look from 1999 to 2005. She was Chair of Opportunity
Now and a former President of Women in Advertising and
Communications London (WACL).
She was awarded the OBE for services to women in business in 2008. In
April 2008, she was named Veuve Clicquot Business Woman of the Year.
Carolyn graduated from Kent University with a BA in History and Politics
and from London University with a Masters in Politics.
Chris (1964) joined easyJet on 1 July 2010 as Chief Financial Officer and was
appointed to the Board. Chris joined easyJet from EMI Music where he has
had a successful career covering a range of international roles including
Chief Financial Officer. Chris has considerable experience of working within
a high profile international, fast changing consumer facing business, strong
financial skills and a demonstrable track record of delivering operational
improvement.
Adèle Anderson
Independent Non Executive Director (1965)
Adèle (1965) was appointed to the Board of easyJet on 1 September 2011.
She previously worked for KPMG and became a partner in 1997. She was
the youngest member of the KPMG UK Board when appointed in 2000
and was appointed CFO in 2001. She became Chief Executive Officer of
KPMG’s captive insurer in 2003 and in 2009 moved to KPMG Europe
where she was Head of Financial Analysis, Risk and Control and then
Europe Chief Financial Officer before leaving in July 2011.
Adèle graduated from Kent University with BSc Hons in Mathematics
& Computer Science.
David Bennett
Independent Non Executive Director (1962)
John Browett
Independent Non Executive Director (1963)
Professor Rigas Doganis
Independent Non Executive Director (1939)
Keith Hamill
Independent Non Executive Director (1952)
David (1962) was appointed to the Board of easyJet on 1 October 2005
and is Chairman of the Audit Committee. He is currently Chairman of
Pacnet, a Pan-Asian provider of telecommunications / internet systems
connectivity, and a Non Executive Director of CMC Markets plc, Jerrold
Holdings Ltd and Clarity Commerce, a software solutions provider.
He has had a long career in the financial services sector and was both
Group Finance Director and Group Chief Executive of Alliance & Leicester
plc until its sale to Santander in 2008. David has also held a number of
positions in Abbey, Cheltenham & Gloucester, Lloyds TSB and the National
Bank of New Zealand.
John (1963) was appointed to the Board of easyJet on 27 September
2007. He is currently Chief Executive Officer of Dixons Retail plc, a position
he has held since December 2007.
Prior to joining Dixons Retail, 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. Between 1993 and 1998, John was at the Boston Consulting
Group.
John is a graduate of Cambridge University and Wharton Business School.
Rigas (1939) was appointed to the Board of easyJet 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.
Keith (1952) was appointed to the Board of easyJet on 1 March 2009
and is Chairman of the Remuneration Committee. He has considerable
experience as a Director of listed companies and is currently the Chairman
of Tullett Prebon. He is also is Deputy Chairman of Travelodge, which he
previously chaired for eight years, and a Director of Samsonite.
He was previously Chairman of Go, prior to its acquisition by easyJet in
2002, Alterian, Collins Steward, Heath Lambert, Luminar, and Moss Bros
and Director of Electrocomponents, Cadmus Communications Corp. He
was Finance Director of WH Smith, Forte and United Distillers and a
partner in PricewaterhouseCoopers.
Keith is a Fellow of the Institute of Chartered Accountants and also chairs
the Board of the University of Nottingham.
Andy Martin
Independent Non Executive Director (1960)
Andy (1960) was appointed to the Board of easyJet on 1 September 2011.
He is currently Group Finance Director of Compass Group PLC.
Prior to joining the Compass Group in 2002, Andy was a partner with
Arthur Andersen and held senior financial positions with Forte PLC and
Granada Group PLC. Following the disposal of the Hotels Division in 2001,
Andy joined First Choice Holidays PLC (now TUI Travel PLC) as Group
Finance Director.
Andy graduated from Manchester University with a BA in Economics and
is a member of the Institute of Chartered Accountants of England & Wales.
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easyJet plc
Annual report
and accounts 2011
Executive Management Team
Alita Benson
People Director (1967)
Warwick Brady
Director of Group Operations (1964)
Mike Campbell
Europe Director (1957)
Alita (1967) joined easyJet in February 2011 as Head of HR Central Services
and in June 2011 was appointed as People Director.
Before joining easyJet, Alita was Head of HR Business Partners at T-Mobile
for nine years and led the T-Mobile UK HR input for the merger with
Orange.
Alita is a fellow of CIPD and graduated from Southampton University with
a BA (Hons) in English Literature and obtained a Post Graduate Diploma in
Personnel Development at Manchester Polytechnic.
Warwick (1964) joined easyJet in May 2009 as Procurement Director and
in October 2010 was appointed Director of Group Operations.
He has significant experience of leading low cost airlines in areas ranging
from high growth and restructuring, through to turnarounds.
Before joining easyJet, 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. He also spent two
years as Chief Operations Officer of Air Deccan. His role focused on
delivering high growth at the lowest cost and during this time he was
instrumental in listing the company on the Bombay stock exchange. Most
recently, Warwick was CEO at Mandala Airlines where he turned a legacy
brand into a modern, low cost carrier.
Mike (1957) joined easyJet in October 2005 as People Director and in April
2011 was appointed Europe 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.
Trevor Didcock
Chief Information Officer (1963)
Trevor (1963) joined easyJet in September 2010 as Chief Information
Officer.
Before joining easyJet, Trevor was CIO at Homeserve plc, The AA and RAC
Motoring Services and spent nine years in IT management roles at Mars,
Inc. His earlier career was in IT, Finance and Engineering roles at J P Morgan
and Esso.
Trevor has an MBA from Cranfield and a BSc in Mechanical Engineering
from Nottingham University.
Peter Duffy
Marketing Director (1966)
Peter (1966) joined easyJet in February 2011 as Marketing Director.
Before joining easyJet, he was Marketing Director for Audi in the UK where
he oversaw a period of rapid and profitable growth. Prior to that, Peter was
Marketing Services Director at Barclays.
Peter has a degree in Economics and an MBA.
Chris Kennedy
Chief Financial Officer (1964)
See Directors’ profiles.
easyJet plc
Annual report
and accounts 2011
45
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Cath Lynn
Customer and Revenue Director (1964)
Cath (1964) joined easyJet in 2002 following the merger with Go, in which
she played an active role. Cath has successfully carried out a number of
senior leadership roles at easyJet including Head of Ground Operations,
Head of Airport Development and Procurement and Head of Network
Development. In April 2011, she was appointed as Customer and Revenue
Director.
Before joining easyJet, Cath 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, ground operations and customer service.
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Carolyn McCall
Chief Executive Officer (1961)
See Directors’ profiles.
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Paul Moore
Communications Director (1962)
Giles Pemberton
General Counsel and Group
Company≈Secretary (1968)
Paul (1962) joined easyJet in November 2010 as Communications Director.
Before joining easyJet, Paul was Group Public Affairs and Communications
Director for FirstGroup, the world’s largest private sector transport
operator. Prior to that Paul worked for Virgin Atlantic Airways for ten years
as its Director of Corporate Affairs during a period when the airline
significantly grew its worldwide network while delivering award winning
customer service. Highlights included managing the communications of
several crises, winning PR Week Award for Crisis Communications in 2002,
coordinating the airline’s lobbying activities and organising several
successful world records.
Paul started his career as a civil servant and first joined the transport sector
with the Department of Transport.
Giles (1968) joined easyJet in April 2006 as General Counsel and Company
Secretary. He has been on the Executive Management Team since July 2010.
Before joining easyJet, Giles was Assistant General Counsel and Director
of Compliance at Cable & Wireless plc where he spent ten years as a legal
adviser within the UK and Australian operating divisions and then in its
head office. He is a qualified solicitor (England & Wales) who spent the
first four years of his career with the City law firm Freshfields.
Giles holds an LLB (Hons) degree from Nottingham University and
obtained his professional qualification from The Guildford College of Law.
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easyJet plc
Annual report
and accounts 2011
Corporate governance
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 without exception with the
provisions of the Code. The Code is issued by the
Financial Reporting Council and is available for review
on the Financial Reporting Council’s website
http://www.frc.org.uk/corporate/ukcgcode.cfm.
Leadership
As at 30 September 2011, the Board comprised eight
Non Executive Directors (including the Chairman) and
two Executive Directors.
The roles of Chairman and Chief Executive are
separated, clearly defined, and approved by the
Board.
Sir David Michels was, until 26 August 2011 the Senior
Independent Non Executive Director and held the
post of Deputy Chairman. Both posts are now filled by
Charles Gurassa.
The Board meets regularly, with 11 scheduled
meetings having been held during the year ended
30 September 2011 with a further four ad hoc
meetings. All members of the Board are supplied in
advance with appropriate information covering
matters which are to be considered. The Non
Executive Directors have met without any Executive
Directors present during the year from time to time,
usually prior to or immediately after Board meetings.
The matters reserved for the Board had originally
been drafted at the time of flotation and was
reviewed during the year. As a result, an updated
terms of reference was approved during the year to
bring it into line with current best practice as set out
by the Institute of Company Secretaries and
Administrators. It is available on easyJet’s website.
Day-to-day management responsibility rests with the
Executive Management Team (“EMT”), which
comprises ten Executives (including the Executive
Directors of the main operating company, easyJet
Airline Company Limited). The first reports of the EMT
then form the Executive Leadership Team.
Meetings attended during the financial year ended 30 September 2011 plc Board
Executive Directors
Chris Kennedy
Carolyn McCall OBE
Non Executive Directors
Sir Michael Rake
Charles Gurassa (joined 27 June 2011)
Sir David Michels (left 26 August 2011)
David Bennett
Keith Hamill
John Browett
Rigas Doganis
Sven Boinet (left 30 September 2011)
Adèle Anderson (joined 1 September 2011)
Andy Martin (joined 1 September 2011)
Scheduled
meetings
eligible to
attend
Scheduled
meetings
attended
Additional
meetings
eligible to
attend
Additional
meetings
attended
11
11
11
3
10
11
11
11
11
11
1
1
11
11
11
3
8
7
10
9
10
7
1
0
4
4
4
3
3
4
4
4
4
4
1
1
4
4
4
2
2
4
4
2
4
1
1
0
Board Committees
Executive Directors
Chris Kennedy
Carolyn McCall
Non Executive Directors
Sir Michael Rake
Charles Gurassa (joined 27 June 2011)
Sir David Michels (left 26 August 2011)
David Bennett
Keith Hamill
John Browett
Rigas Doganis
Sven Boinet (left 30 September 2011)
Adèle Anderson (joined 1 September 2011)
Andy Martin (joined 1 September 2011)
*By invitation.
Effectiveness
The Company regards David Bennett, Professor Rigas
Doganis, John Browett, Keith Hamill, Charles Gurassa,
Adèle Anderson and Andy Martin as Independent
Non Executive Directors and also considered
Sven Boinet and Sir David Michels as independent
during their tenure.
All new Directors are given a tailored induction upon
appointment which provides them with information
about the Company, the matters reserved for the
Board, minutes of Board and Committee meetings
and share dealing code. In addition, meetings are
arranged with key executives and managers within
the business. The Board are also kept up to date with
developments in law, regulation and best practice.
Directors and officers’ insurance cover has been
established for all Directors to provide cover against
their reasonable actions on behalf of the Company.
During the year, a performance review of the Board
was undertaken using an external evaluation tool
provided by a corporate advisory company. This
process involved a detailed questionnaire completed
by each of the Directors and one-on-one discussions
with individual Directors. The performance of the
Board (including the Chairman), the Board’s
Committees and also that of the individual Board
Directors was reviewed as part of the same process.
The Senior Independent Director led the Non
Executive Directors in a review of the Chairman’s
performance which also involved feedback from the
Executive Directors. The Company has now engaged
an independent external facilitator to carry out the
next review of the Board’s effectiveness in accordance
with the Code provision B 6.2. The facilitator has no
connection with the Company beyond evaluating
the Board.
Audit
Committee
Remuneration
Committee
Nominations
Committee
Litigation
Committee
3*
3*
n/a
n/a
n/a
3
2
2
n/a
n/a
n/a
n/a
2*
3*
1*
n/a
n/a
2
6
n/a
4
3
n/a
n/a
n/a
n/a
n/a
n/a
1
0
n/a
n/a
1
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
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.
The Chairman has made himself available for investor
meetings and questions, in person, during the year
and has updated the whole Board on the results of
these meetings and the opinions of investors.
The Senior Independent Non Executive Director has
also acted as an alternative point of contact and both
incumbents in the role during the year have 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 an annual basis.
Board Committees
Remuneration Committee
At 30 September 2011, the Remuneration Committee
comprised three Independent Non Executive
Directors, namely Keith Hamill (Chairman),
David Bennett and Professor Rigas Doganis. 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 two times during the year.
easyJet plc
Annual report
and accounts 2011
47
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easyJet plc
Annual report
and accounts 2011
Corporate governance
Continued
The Board has reviewed the composition of the
Remuneration Committee during the year and 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 four Non
Executive Directors, all of whom are independent.
At 30 September 2011, the Audit Committee
members were David Bennett (Chairman),
John Browett, Keith Hamill and Adèle Anderson.
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 three times during the course
of the year.
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:
–(cid:3) 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
–(cid:3) Review and appraise the audit efforts of the
external auditors
–(cid:3) Provide an open avenue of communication
among the external auditors, financial and senior
management and the Board
–(cid:3) 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)
–(cid:3) Review and ensure the effectiveness of the risk
management processes of the Company
–(cid:3) Review and monitor the effectiveness of the
internal audit function and management’s
responsiveness to any findings and
recommendations; and
–(cid:3) Assess potential conflicts of interest of Directors
on behalf of the Board
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 2011. In order to preserve auditor
objectivity and independence,
PricewaterhouseCoopers LLP will not be asked to
provide consulting services unless this is in the best
interests of the Company. The Audit Committee’s
terms of reference set out that they are responsible
for the formal policy on the award of non-audit work
to the auditors. The Audit Committee has, during the
year, updated the policy, which can be found in the
governance section of easyJet’s corporate website,
http://corporate.easyJet.com. The auditors are asked
on an annual 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,
which informs, on an annual basis, the Audit
Committee’s decision to recommend reappointment.
This included this year obtaining a report on the
auditors own quality control procedures and a
consideration of their annual quality and transparency
report. In the financial year, easyJet spent £nil million
with PricewaterhouseCoopers LLP (2010: £0.1 million)
in respect of non-audit services. There are no
contractual obligations which restrict the choice
of external auditors.
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 Directors being present at each Audit
Committee meeting.
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 has
previously been 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.
During the year the Audit Committee’s business has
included the following items:
–(cid:3) Half Year Results
–(cid:3) Annual Results
–(cid:3) Internal Audit Plan and Reports, including:
–(cid:3) key internal audit reports
–(cid:3) control themes
–(cid:3) follow ups
–(cid:3) programme assurance
–(cid:3) fraud prevention
–(cid:3) quality assurance
–(cid:3) internal controls
–(cid:3) Bribery Act compliance
–(cid:3) Business continuity and disaster recovery
–(cid:3) Matters reserved for the Board
–(cid:3) Delegated authorities
–(cid:3) Audit Committee terms of reference
–(cid:3) Non-audit services policy
–(cid:3) Whistleblower reports
–(cid:3) Internal audit effectiveness and independence.
The Board as a whole, including the Audit Committee,
debated risks and risk management on which basis we
believe that the Board has fulfilled its obligations under
the Code. Going forward the Audit Committee will
continue to be responsible for reviewing the adequacy
and effectiveness of the Company’s risk management
process.
Nominations Committee
The Nominations Committee comprises at least three
members. During the year, the Nominations
Committee members were Sir David Michels until his
resignation from the Board (Chairman), David Bennett
and Professor Rigas Doganis. Charles Gurassa and
Sir Michael Rake were appointed to the Committee
after the departure of Sir David Michels with Charles
Gurassa taking the Chair.
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 external recruitment consultants.
The Nominations Committee has met twice during the
year to deal with the appointments of Andrew Martin
and Adèle Anderson. The searches for the Non
Executive Directors involved the use of independent
recruitment consultants.
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 opportunity 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
formed a separate Litigation Committee to deal with
the proceedings and all matters related to them.
There have been no meetings of the Litigation
Committee during the year although it remains
validly constituted.
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 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.
This included systems and controls in relation to
financial reporting processes and in preparing the
accounts. No material failings or weaknesses were
identified during the course of this review.
easyJet plc
Annual report
and accounts 2011
49
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easyJet plc
Annual report
and accounts 2011
Corporate governance
Continued
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.
Risk management
The Board is responsible for determining the nature
and extent of the significant risks it is willing to take in
achieving its strategic objectives. During 2011, the risk
management process was refreshed; increasing the
level of rigour of risk identification, evaluation and
mitigation. This is combined with enhanced risk
reporting to the Executive Management Team and
the Board. The process is underpinned by rigorous
annual risk identification workshops completed by
both the functional managers and the Executive
Management Team. The process focuses on both
strategic and operational level risks. This process is
coordinated by the Risk Manager who reports to the
Head of Risk and Assurance. The Head of Risk and
Assurance reports to the Chief Financial Officer and
the Chairman of the Audit Committee.
To ensure that risk is effectively managed a number of
key activities are undertaken, as defined by the
Executive Directors:
–(cid:3) Ongoing assurance and risk management is
provided through the various monitoring reviews
and reporting mechanisms that are 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
–(cid:3) The Executive Management Team meets regularly
to consider significant risks. Individual department
and overall business performance is reviewed.
The reporting of significant risks to the Executive
Management Team and the Board has been
enhanced by the refined risk management
processes referred to above
–(cid:3) Internal Audit considers, reviews and tests internal
control and business risk matters as defined by its
risk based audit plan. Further details of the Internal
Audit function’s operations are set out below
The Directors review the effectiveness of internal
control, including operating, financial, compliance
and risk management controls, which mitigate the
significant risks identified. The mechanisms used by
the Directors to review the effectiveness of these
controls include:
–(cid:3) Reports from management. Reporting is
structured to ensure that key issues are escalated
through the management team and ultimately to
the Board as appropriate
–(cid:3) Discussions with senior personnel throughout the
Company
–(cid:3) Consideration by the Audit Committee of any
reports from internal and external auditors; and
–(cid:3) The controls, which mitigate or minimise the high-
level risks, are reviewed to ensure that they are in
operation. The results of this review are reported
to the Board which considers whether these high-
level risks are effectively controlled
Internal audit
Internal Audit’s work is designed to provide effective
risk based coverage over the internal control
environment. This is summarised in an audit plan,
which is approved by the Board and Audit Committee
and updated on a rolling quarterly basis.
The Internal Audit department reviews the extent to
which systems of internal control:
–(cid:3) are effective
–(cid:3) are adequate to manage easyJet’s risks; and
–(cid:3) safeguard the Company’s assets
Internal Audit’s 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. During the
year the effectiveness of the Internal Audit function
was confirmed through an independent external
quality assessment performed by Mazars LLP.
The Head of Internal Audit reports to the Head of Risk
and Assurance. The Risk and Assurance function was
formed in August 2011 which combines the
responsibilities for Internal Audit, risk management
coordination and fraud investigation into a single
function.
The Head of Internal Audit was invited to and
attended all of the Audit Committee meetings in the
year and reported regularly on Internal Audit reviews
at the Executive Management Team meetings during
the course of the year.
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. A formal
audit charter is in place.
Shareholder information
easyJet plc
Annual report
and accounts 2011
51
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Substantial interests
In accordance with the Disclosure and Transparency
Rules DTR 5, the Company as at 14 November 2011,
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
Prudential plc
MRG Investment Funds
Sanderson Asset Management
%
26.5
11.1
6.0
5.4
6.5
5.4
4.0
Registered office
Hangar 89
London Luton Airport
Luton
Bedfordshire
LU2 9PF
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
Share capital
Details of the movements in authorised and issued
share capital during the year are provided in note 17 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:
–(cid:3) certain restrictions which may from time to time
be imposed by laws or regulations such as those
relating to insider dealing
–(cid:3) pursuant to the Company’s code for securities
transactions whereby the Directors and
designated employees require approval to deal in
the Company’s shares
–(cid:3) 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
–(cid:3) 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; and
–(cid:3) 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.
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 Trusts
(the Trusts), which are 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 Trusts.
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easyJet plc
Annual report
and accounts 2011
Report on Directors’ remuneration
The Committee has also noted the consultation
document issued by the department of Business,
Innovation and Science. The Company’s remuneration
policies are in line with the guidance previously issued
by shareholder bodies and have been subject to
consultation with shareholders. In setting policy for the
current financial year, the Committee took into
account current issues highlighted by investors such
as quantum, employee alignment and the importance
of not placing too great a focus on the results of
periodic benchmarking. Accordingly, Executive
Director salary levels have not been increased for the
year ending 30 September 2012.
The performance of the year to 30 September 2011 in
achieving ambitious financial and operational targets
was strong in challenging circumstances, gives rise to
high levels of bonuses which the Committee considers
appropriate in light of the performance levels
achieved. The bonuses reflect management
performance against targets set at the start of the
financial year which has seen record profits and a
general strengthening of the business.
The Remuneration Report for the year ended
30 September 2010 was rejected by shareholders
at the last AGM because of objections to retention
arrangements relating to the previous Chief Executive,
which were one off and entered into in difficult and
unusual circumstances. Immediately following the
AGM, the Board issued a statement which
acknowledged the concerns expressed by
shareholders. The Committee stated in its last report
that it would not approve such arrangements in the
future. It is also aware of the importance in normal
circumstances of succession planning in avoiding the
need for retention arrangements.
Dear shareholder
easyJet’s remuneration policy is to pay the Executive
Directors and senior executives competitively against
the comparative market place, in order to recruit and
retain executives and ensure that they are properly
motivated to perform in the interests of the Company
and its shareholders.
The Company aims to provide competitive ‘total pay’
for ‘on target’ performance, with superior rewards for
exceptional performance. This includes an appropriate
level of fixed remuneration to recruit and retain
executives, which is broadly set at around median
levels for comparable businesses but also takes
account of experience and contribution. The
Company has low levels of contractual benefits,
including a defined contribution pension scheme with
a low contribution level and no continuing financial
exposure to the Company.
Remuneration is weighted towards variable pay,
comprising annual bonuses which are intended to
provide a clear incentive to achieve annual financial
and operational performance objectives and a long-
term incentive plan which is intended to reward
executives over the longer term, with recurring annual
grants and performance conditions which reflect the
stated strategic objective of the Company of return
on capital employed. Where practical the
performance targets of Executive Directors are
aligned with those of other managers and the
Committee considers the relationship between
executive remuneration and pay and changes in the
level of pay throughout the Company.
In common with many companies, the Committee’s
major challenge is setting performance conditions for
the long-term incentive plan which are stretching but
also which achieve the objectives of motivation and
retention, against a background of uncertainty about
future economic conditions and the relatively high
sensitivity of the airline sector to external factors.
The Committee keeps its remuneration policy and
approach to target setting under review. In reviewing
its policy, it takes due account of investors' best
practice guidance (including the recently published
ABI Principles of Remuneration). It intends to monitor
developing practice on long term incentive plans and
consider if amendments can be made which mitigate
some of the aspects of volatility while achieving a
satisfactory relationship with performance and
alignment with the interest of investors. Should it
be considered appropriate to make material
amendments to the remuneration structure for
future years, appropriate prior consultation with major
investors and shareholder representative organisations
will take place.
Membership and responsibilities of the
Committee
The responsibilities of the Committee are disclosed in
the Corporate governance section on pages 47 and
48. The members of the Committee are: Keith Hamill
(Chairman), David Bennett, Sven Boinet (until
30 September 2011) and Professor Rigas Doganis.
The Company appointed and continues to use Hewitt
New Bridge Street (“HNBS”) as remuneration advisers.
HNBS provides no other services to the Company.
Introduction
This report sets out details of the remuneration policy
for Directors, describes its implementation and
discloses the amounts paid relating to the year ended
30 September 2011.
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, in accordance with corporate governance
requirements, are identified below.
Included within the report, are the following areas:
–(cid:3) Membership and responsibilities of the Committee
–(cid:3) Remuneration policy
–(cid:3) Activities of the Committee
–(cid:3) Salary
–(cid:3) Bonus
–(cid:3) Achievement of bonus for 2011
–(cid:3) Long Term Incentive Plan
–(cid:3) Employee share plan participation
–(cid:3) Executive Director shareholding requirements
–(cid:3) Pension contributions
–(cid:3) External appointments
–(cid:3) Service contracts
–(cid:3) Non Executive Directors (NEDs)
–(cid:3) Total shareholder return
Tables and text summarising Directors’ emoluments
in 2011:
–(cid:3) Directors’ emoluments (audited)
–(cid:3) Directors’ interests
–(cid:3) Directors’ share awards (audited)
–(cid:3) Position against dilution limits
–(cid:3) Potential vesting of outstanding awards
easyJet plc
Annual report
and accounts 2011
53
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easyJet plc
Annual report
and accounts 2011
Report on Directors’ remuneration
Continued
easyJet’s current remuneration policies are summarised below:
Element
Salary
Purpose
–(cid:3) Reflect the value of the
individual and their role
Policy
–(cid:3) Reviewed annually, effective
1 October
–(cid:3) Reflect skills, experience over
Bonus
Long Term Incentive
Plan
Pension
time
–(cid:3) Provide an appropriate level
of basic fixed income
avoiding excessive risk
arising from over reliance
on variable income
–(cid:3) Incentivise annual delivery of
financial and operational
goals
–(cid:3) Relatively high potential
rewards for achieving
demanding targets
–(cid:3) Aligned to main strategic
objective
–(cid:3) Based on return on capital
employed (ROCE)
–(cid:3) Provide modest retirement
benefits
–(cid:3) Opportunity for Executive
to contribute to their own
retirement plan
–(cid:3) Agreed when results for the
previous year have been
finalised
–(cid:3) Takes account against
companies with similar
characteristics and sector
comparators
–(cid:3) Targeted at or around
median
–(cid:3) Major measure is profit
before tax
–(cid:3) Performance compared
with budget
–(cid:3) Operational measures based
on:
–(cid:3) Customer satisfaction
–(cid:3) Cost
–(cid:3) On time performance
–(cid:3) Performance measured
over three years
–(cid:3) Vests after three years
–(cid:3) Subject to 175% of salary
shareholding requirement
–(cid:3) Defined contribution
–(cid:3) HMRC approved salary
sacrifice arrangement
Other benefits
–(cid:3) Executives can pay for
–(cid:3) Company cars or cash
voluntary benefits, where
Company purchasing power
provides an attractive
advantage to employees
equivalents not provided
Delivery
–(cid:3) Cash
–(cid:3) Paid monthly
–(cid:3) Pensionable
–(cid:3) Paid as cash
–(cid:3) Not pensionable
–(cid:3) May defer up to half of
bonus into LTIP
–(cid:3) Annual grant of performance
shares
–(cid:3) Opportunity to defer bonus
and obtain future matching
share awards
–(cid:3) Monthly employer
contribution of 7% of basic
salary
–(cid:3) Non-contributory
–(cid:3) Salary sacrifice for employee
contribution
–(cid:3) As acquired
The balance between fixed and variable pay is shown in the charts below. A significant proportion of
remuneration is linked to performance, particularly at maximum performance levels.
Chief Executive
%
On target
Maximum
0%
Chief Financial Officer
%
On target
Maximum
50%
100%
0%
50%
100%
Basic
Bonus
LTIP
Benefits
Basic
Bonus
LTIP
Benefits
Activities of the Committee
The Committee has responsibility for determining the
specific remuneration packages for each of the
Executive Directors and the Chairman and also
reviewing and approving the remuneration of the
Company’s senior executives in consultation with the
Chief Executive. It is also responsible for approving
share schemes and their targets. The Committee is
also consulted in relation to significant changes in the
employee remuneration structure are also considered
by the Committee.
During the year ended 30 September 2011, the
Committee considered the following items of
business:
–(cid:3) Executive Director and senior executive
remuneration
–(cid:3) Annual bonus awards for the financial year ended
30 September 2010
–(cid:3) The structure and targets of the annual
bonus scheme for the financial year ended
30 September 2011
–(cid:3) Employee Save As You Earn scheme grants
–(cid:3) The performance targets and award levels
for grants during the financial year ended
30 September 2011 under the Long Term
Incentive Plan; and
–(cid:3) Testing of performance conditions and vesting
of Long Term Incentive Plan awards granted in
December 2007
In line with the Association of British Insurers’
Guidelines on Responsible Investment Disclosure, the
Committee considers whether the incentive policies
for Executive Directors and senior executives will raise
unacceptable environmental, social or governance
(“ESG”) risks by inadvertently motivating irresponsible
behaviour.
More generally, with regard to the overall
remuneration policies, 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 relating to risk
when structuring incentive policies to ensure that the
remuneration policies do not encourage inappropriate
risk-taking.
Salary
The basic salaries of the Executive Directors (Carolyn
McCall £665,000 and Chris Kennedy £400,000),
were set when they joined the Company in July 2010
and have not been changed.
Salaries are reviewed annually taking account of:
–(cid:3) practice adopted in companies of a broadly similar
size and characteristics, including a survey of thirty
companies larger and smaller than easyJet by
reference to comparative market capitalisation
–(cid:3) a formal appraisal of their contribution to the
business, involving the Chairman of the Board and
the Remuneration Committee
–(cid:3) the competitive environment; and
–(cid:3) general pay and employment conditions of
employees elsewhere within easyJet
Bonus
The maximum annual bonus opportunity during the
year was 200% of salary for the Chief Executive, with
100% of salary for the Chief Financial Officer. Other
senior executives also had a 100% maximum bonus.
The maximum bonus will remain at these levels for the
financial year ending 30 September 2012.
Bonus targets are based on annual financial plans
and specific targets around its key operational
performance indicators. Performance targets for
Executive Directors’ annual bonus opportunities in
the financial year ended 30 September 2011 were
as follows:
Measure
Profit before tax
Customer satisfaction targets
Operating costs (excluding fuel)
per seat at constant currency
On time performance
Departmental objectives
As percentage of maximum
bonus opportunity
Carolyn McCall Chris Kennedy
70%
10%
10%
10%
–
60%
10%
10%
10%
10%
Targets for the financial year ending 30 September
2012 will be on the same basis. The safety of our
customers and people underpins all of the operational
activities and is required to be achieved before any
bonus would be payable and therefore is not included
in the specific bonus targets.
easyJet plc
Annual report
and accounts 2011
55
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easyJet plc
Annual report
and accounts 2011
Report on Directors’ remuneration
Continued
Achievement of bonus for 2011
Achievement
%
A
B
C
D
E
60
100
86
26
60
A Profit before tax
B On time performance
C Customer satisfaction targets
D Operating costs (excluding fuel) per seat at constant currency
E Departmental objectives
The results for the year ended 30 September 2011
were above budget and expectations in spite of
demanding circumstances, achieving 60% of the
maximum profit related bonus. Performance against
the operational targets was also above expectations –
with 100% of available maximum achieved for record
On Time Performance and 86% for customer
satisfaction. The Committee believes that this
performance is in line with general improvements in
the strength of the business.
Accordingly, Carolyn McCall will be paid a bonus
of £840,000 (126% of salary) and Chris Kennedy
£253,000 (63% of salary) in the year ending
30 September 2012. They have both decided to defer
the maximum 50% of the above bonuses into the
Long Term Incentive Plan.
No bonuses were paid to Executive Directors for the
year ended 30 September 2010. The Executive
Management Team (including Carolyn McCall and
Chris Kennedy who joined the Company in July 2010)
informed the Board and the Committee that, in view
of operating problems over the summer in 2010 and
the resulting difficulties experienced by customers
and staff, they did not consider it appropriate for its
members to receive bonuses. Accordingly £474,000
which might have otherwise been paid to Executive
Directors for bonuses was not awarded in that year.
Long Term Incentive Plan
The Long Term Incentive Plan (“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.
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 earned into easyJet
shares, which are then matched on a 1:1 gross of tax
basis.
Performance and matching share awards vest three
years after grant, subject to continued employment
and the satisfaction of performance conditions (which
are now based on ROCE and until this year largely
related to return on equity).
LTIP awards granted in 2011
Awards granted in the year under review were subject
to the following performance targets relating to
easyJet’s ROCE in the year ending 30 September
2013:
Awards up to 100% of salary
Threshold
Target
Maximum
(25%
vests)
(50%
vests)
(100%
vests)
7.0%
8.5%
12.0%
Return on capital
employed
Awards between 100% and 200% of salary
Threshold
Target
Maximum
(25%
vests)
(50%
vests)
(100%
vests)
10.0%
12.0%
13.0%
Return on capital
employed
The lower levels of performance targets for awards
up to 100% of salary take account of the retention
objective of the plan.
Although the annual award limit of Performance
Shares is 200% of salary, the maximum award was
restricted to 175% of salary in the year under review.
The performance targets applying to the part of an
award over 100% of salary were set to be tougher in
lieu of the higher potential quantum available.
A full summary of the performance targets applying
to all subsisting LTIP awards are set out on page 61.
Employee share plan participation
easyJet encourages share ownership throughout the
Company by the use of Free Shares, 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.
They are summarised in the Corporate responsibility
section on page 36.
Executive Director shareholding
requirement
Executive Directors are required to retain all the shares
acquired on the vesting of LTIP awards (net of tax)
until they have a holding equivalent to 175% of salary.
Any shares owned will count towards this requirement,
as do shares bought by participants as “Investment
Shares” under the Matching Shares element of the
LTIP and any shares held on through participation in
the Company’s all-employee share plans. Any
unvested performance shares or matching shares
granted under the LTIP will not count since they are
subject to future performance.
The same requirements apply to members of the
Executive Management Team. For senior executives
who report to the Executive Management Team and
receive LTIP awards, a 50% share ownership guideline
applies.
Pension contributions
easyJet normally 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 6.9% of the amount exchanged).
Where an Executive Director has reached the lifetime
pension limit, a cash alternative may be paid with the
agreement of the Committee.
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. No such fees were
received by Executive Directors during the year
ended 30 September 2011.
Service contracts
Carolyn McCall’s contract provides for 12 months’
notice by either party. On termination by the
Company, she would continue to receive 12 monthly
instalments of basic salary and benefits which would
cease to the extent that commensurate alternative
employment was taken up. Alternatively, by mutual
consent, the Company may elect to make a payment
to the value of 12 months’ basic salary only.
Bonus payments would be included in a termination
payment, payable on a pro-rata basis, only for the
period of time served from the start of the financial
year to the date of termination and not for any
period in lieu of notice. Any bonus paid would be
subject to the normal bonus targets, tested at the
end of the year.
Chris Kennedy’s notice period is 12 months by either
party. There is no provision for bonus to be paid
on termination.
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
.
Details of the service contracts and letters of appointment currently in place for Directors who served during the
year are as follows:
Executive
Carolyn McCall OBE
Chris Kennedy
Non Executive
Date of current service contract
or letter of appointment
Unexpired term at
30 September 2011 Notice period
Provision for
compensation
1 July 2010
1 July 2010
n/a
n/a
12 months
12 months
12 months
12 months
Sir Michael Rake
Charles Gurassa (appointed 27 June 2011)
Sir David Michels (resigned 26 August 2011)
David Bennett
Keith Hamill
John Browett
Professor Rigas Doganis
Sven Boinet (resigned 30 September 2011)
Adele Anderson (appointed 1 September 2011)
Andy Martin (appointed 1 September 2011)
1 April 2010
27 June 2011
27 September 2010
27 September 2010
23 December 2008
27 September 2010
27 September 2010
11 February 2008
1 September 2011
1 September 2011
1 year 6 months
2 years 9 months
n/a
2 years
3 months
2 years
2 years
n/a
2 years 11 months
2 years 11 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
None
None
None
None
None
None
None
None
None
None
easyJet plc
Annual report
and accounts 2011
57
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easyJet plc
Annual report
and accounts 2011
Report on Directors’ remuneration
Continued
Non Executive Directors (NEDs)
The NEDs, including the Chairman, have letters of appointment which set out their duties and responsibilities.
The key terms of the appointments are set out in the table below:
Provision
Policy
Appointment letters
Period
Termination
Fees
Expenses
Time commitment
Aligned to the standard terms appended to the UK Corporate Governance Code. Copies of the
service contracts and letters of appointment are available on request from the Company Secretary
Three year term
By the Director or the Company at their discretion without compensation and with three months
notice
See below
Reimbursement of reasonable travel and other expenses incurred in the performance of their duties
Anticipated to be 12 days per annum depending on Board and Committee requirements and
corporate activity
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. When determining the
remuneration of Non Executive Directors, account is
taken of practice adopted in competitors and other
similar sized organisations, committees chaired and
anticipated time commitment. During the year under
review the NEDs (other than the Chairman and
Deputy Chairman) received a basic annual fee of
£55,000 in respect of their Board duties. A further fee
of £10,000 is paid in respect of Chairmanship of the
Audit Committee and the Remuneration Committee.
The annual fee for the Chairman was £300,000 and
for the Deputy Chairman was £90,000.
The current fee level of NEDs fees were agreed in
October 2010 and have remained unchanged
since then and are applicable for the year ending
30 September 2012.
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 graph shows 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 is the FTSE index in which the
Company resides. The group of European Airlines
comprises companies operating in a comparable sector.
Total shareholder return
£
140
120
100
80
60
40
20
0
30 Sep 06
easyJet
Source: Thomson Reuters
30 Sep 07
30 Sep 08
30 Sep 09
30 Sep 10
30 Sep 11
Comparator Airlines
FTSE 250 Index
This graph shows the value, by 30 September 2011 of £100 invested in easyJet on 30 September 2006 compared with the value of £100 invested in
the FTSE 250 Index or a comparator group of airlines. The other points plotted are the values at intervening financial year-ends.
Note 1: British Airways, Lufthansa, Air France-KLM and Iberia have all 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 2011 are as follows:
Figures stated in £’000s
Executive
Carolyn McCall OBE
Chris Kennedy
Andrew Harrison (resigned 30 June 2010)
Non Executive
Sir Michael Rake
Charles Gurassa (appointed 27 June 2011)
Sir David Michels (resigned 26 August 2011)
David Bennett
Keith Hamill
John Browett
Professor Rigas Doganis
Sven Boinet (resigned 30 September 2011)
Adele Anderson (appointed 1 September 2011)
Andy Martin (appointed 1 September 2011)
Bob Rothenberg (resigned 14 May 2010)
Salary/fee
2011
Bonus
2011
712
400
–
300
15
73
65
65
55
55
55
5
5
–
1,805
840
253
–
–
–
–
–
–
–
–
–
–
–
–
1,093
Total
2011
1,552
653
–
300
15
73
65
65
55
55
55
5
5
–
2,898
Total
2010
178
150
2,516
205
–
135
55
55
45
45
45
–
–
28
3,457
Pension contributions
2011
2010
–
28
–
–
–
–
–
–
–
–
–
–
–
–
28
–
–
47
–
–
–
–
–
–
–
–
–
–
–
47
There have been no gains as a result of the exercise of share schemes.
The annual salary of Carolyn McCall OBE shown above comprises £665,000, plus £47,000 as a cash alternative
to a contribution to a pension scheme made by the Company.
There was no increase to Executive Directors’ basic pay during the year under review.
Directors’ interests
The following current Directors hold direct interests in the share capital of easyJet:
Number
Carolyn McCall OBE
Chris Kennedy
Sir Michael Rake
Charles Gurassa
David Bennett
John Browett
Professor Rigas Doganis
Adele Anderson
30 September
2011
12,602
12,631
12,308
19,853
10,000
4,705
13,600
2,854
30 September
2010
6,141
6,141
6,200
–
10,000
4,705
13,600
–
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 and the Share Incentive Plan Trust
(the “Trusts”). At 30 September 2011, ordinary shares held in the Trusts were as follows:
Share Incentive Plan Trust (unallocated as employees are not entitled to these shares )
Total unallocated
Share Incentive Plan (allocated)
Total held by UK Trust (allocated)
Total held by Overseas Trust (allocated)
Total allocated
Number
2,113,423
2,113,423
742,017
6,995
60,155
809,167
2,922,590
easyJet plc
Annual report
and accounts 2011
59
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easyJet plc
Annual report
and accounts 2011
Report on Directors’ remuneration
Continued
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 tables:
Carolyn McCall OBE
No. of
shares/
options at
30 September
20101
Scheme
Share/
options
granted
in year
Shares/
options
lapsed
in year
Shares/
options
exercised
in year
A
A
B
C
335,096
–
– 344,405
–
–
880
349
–
–
–
–
–
–
–
–
Chris Kennedy
No. of
shares/
options at
30 September
20101
Scheme
Share/
options
granted
in year
Shares/
options
lapsed
in year
Shares/
options
exercised
in year
A
A
B
C
201,562
–
–
–
–
207,161
880
376
–
–
–
–
–
–
–
–
No. of
shares/
options at
30 September
20111
335,096
Exercise
price
(£)
Market price
on exercise
date
(£)
Date from
which
exercisable
Date of
grant
5 July
2010
344,405 31 March
2011
1 May
2011
880
–
–
–
–
5 July
2013
– 31 March
2014
1 May
2014
–
349
See note 2
No. of
shares/
options at
30 September
20111
201,562
Exercise
price
(£)
Market price
on exercise
date
(£)
Date from
which
exercisable
Date of
grant
5 July
2010
207,161 31 March
2011
1 May
2011
880
–
–
–
–
5 July
2013
– 31 March
2014
1 May
2014
–
376
See note 2
Expiry date
5 July
2020
31 March
2021
n/a
Expiry date
5 July
2020
31 March
2021
n/a
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 2011 was £3.44 and the range during
the year ended 30 September 2011 was £3.01 to £4.79.
Notes
A Long Term Incentive Plan – Performance Shares
B Share Incentive Plan – Free Shares
C 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. 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.
ABI Principles of Executive Remuneration
easyJet complies with the ABO Principles of Executive
Remuneration. These principles require that
commitments under all of the Company’s other share
ownership schemes, must not exceed 10% of the
issued share capital in any rolling 10 year period. The
requirement for shares under all current share
incentive schemes, (Long-term Incentive Plan,
Sharesave and Share Incentive Plan) will be satisfied
with shares purchases on the market. The remaining
three million options under the Discretionary Share
Option Schemes, when or if exercised, will continue
to be settled by the issue of new shares.
Potential vesting of outstanding awards
The extent of vesting is difficult to determine because
of the possible effect of economic uncertainty and
external factors of the remaining period to vesting.
If the record financial performance of the year ended
30 September 2013, 54% of the July 2010 grants and
94% of the March 2011 grants would vest. However,
current market forecasts consensus for future
performance would substantially reduce these
estimates the forecast vesting would be
approximately 15% and approximately 75% for the
July 2010 and March 2011 grants respectively.
On behalf of the Board
Keith Hamill
Remuneration Committee Chairman
14 November 2011
The potential vesting of outstanding awards if the
performance were based on that for the year under
review is as shown at the end of this section.
The performance criteria for vesting of these share
options and awards are as follows:
Long Term Incentive Plan (A)
Awards prior to those made during the year under
review were subject to the achievement of the
following Return on Equity targets:
Grant
date
5 July
2010
5 July
2010
Basis year
Threshold
(25% vests)
Target
(50% vests)
Maximum
(100% vests)
30 September
2012
30 September
2012
9.0%
12.0%
15.0%
11.0%
13.0%
15.0%
Straight-line vesting will occur between the threshold,
target and maximum targets set out above.
The targets that applied to the awards of
performance shares made to Executive Directors
during the year under review were subject to the
achievement of the following Return on Capital
Employed targets:
Grant date
31 March
2011
31 March
2011
Basis year
Threshold
(25% vests)
Target
(50% vests)
Maximum
(100% vests)
30 September
2013
30 September
2013
7.0%
8.5%
12.0%
10.0%
12.0%
13.0%
The comparison between ROCE and return on equity
depends on the capital structure. At the time that the
latest performance targets were set the same
performance would give rise to an ROCE approximately
.
two percent lower than return on equity
Matching Share Awards
Directors waived their bonuses for the year ended
30 September 2010, therefore no matching shares were
granted to Executive Directors in the year under review.
easyJet plc
Annual report
and accounts 2011
61
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easyJet plc
Annual report
and accounts 2011
Statement of Directors’ responsibilities
Each of the Directors, whose names and functions are
listed on pages 42 and 43 confirm that, to the best of
their knowledge:
–(cid:3) the Group accounts, which have been prepared in
accordance with IFRSs as adopted by the EU, give
a true and fair view of the assets, liabilities, financial
position and profit of the Group; and
–(cid:3) the Directors’ report includes a fair review of the
development and performance of the business
and the position of the Group, together with a
description of the principal risks and uncertainties
that it faces
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 62 was approved
by the Board of Directors and authorised for issue
on 14 November 2011 and signed on behalf of the
Board by:
Carolyn McCall OBE
Chief Executive Officer
Chris Kennedy
Chief Financial Officer
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 prepared the Group and 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 accounts, the Directors are required to:
–(cid:3) select suitable accounting policies and then apply
them consistently
–(cid:3) make judgements and accounting estimates that
are reasonable and prudent
–(cid:3) state whether applicable IFRSs as adopted by the
European Union have been followed, subject to
any material departures disclosed and explained in
the accounts
–(cid:3) prepare the accounts on the going concern basis
unless it is inappropriate to presume that the
Group and the 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.
ACCOUNTS
OVERVIEW
& OTHER INFORMATION
Independent auditors’ report
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the accounts
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the Company accounts
Five year summary
Glossary
64
65
66
67
68
69
70
98
99
100
101
103
104
3
3
3
3
3
3
3
3
3
3
3
3
3
63
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64
easyJet plc
Annual report
and accounts 2011
Independent auditors’ report
to the members of easyjet plc
We have audited the accounts of easyJet plc
for the year ended 30 September 2011 which
comprise the Consolidated income statement,
Consolidated statement of comprehensive
income, Consolidated statement of financial
position, Consolidated statement of changes in equity,
Consolidated statement of cash flows, Company
statement of financial position, Company statement
of changes in equity, Company statement of cash
flows, 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 Company accounts, as applied in
accordance with the provisions of the Companies
Act 2006.
Respective responsibilities of Directors
and auditors
As explained more fully in the Statement of Directors’
responsibilities set out on page 62, 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 and express an opinion on
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 Chapter 3 of Part 16 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 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. In addition, we read all the financial and
non-financial information in the Annual Report to
identify material inconsistencies with the audited
accounts. If we become aware of any apparent
material misstatements or inconsistencies we consider
the implications for our report.
Opinion on accounts
In our opinion:
−(cid:3) the accounts give a true and fair view of the state
of the Group’s and of the Company’s affairs as at
30 September 2011 and of the Group’s profit and
the Group’s and Company’s cash flows for the
year then ended
−(cid:3) the Group accounts have been properly prepared
in accordance with IFRSs as adopted by the
European Union
−(cid:3) the 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
−(cid:3) 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
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
−(cid:3) the part of the Report on Directors’ remuneration
to be audited has been properly prepared in
accordance with the Companies Act 2006; and
−(cid:3) the information given in the Directors’ report for
the financial year for which the accounts are
prepared is consistent with the accounts
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:
−(cid:3) adequate accounting records have not been kept
by the Company, or returns adequate for our
audit have not been received from branches not
visited by us; or
−(cid:3) the 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
−(cid:3) certain disclosures of Directors’ remuneration
specified by law are not made; or
−(cid:3) we have not received all the information and
explanations we require for our audit
Under the Listing Rules we are required to review:
−(cid:3) the Directors’ statement, set out on page 25, in
relation to going concern
−(cid:3) the parts of the Corporate Governance Statement
relating to the Company’s compliance with the
nine provisions of the UK Corporate Governance
Code specified for our review; and
−(cid:3) certain elements of the report to shareholders by
the Board on Directors’ remuneration
John Minards (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
St Albans, Hertfordshire
14 November 2011
Consolidated income statement
easyJet plc
Annual report
and accounts 2011
65
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Passenger revenue
Ancillary revenue
Total revenue
Ground operations
Fuel
Crew
Navigation
Maintenance
Selling and marketing
Aircraft wet leasing
Volcanic ash disruption
Royalty
Other costs
EBITDAR
Aircraft dry leasing
Depreciation
Amortisation of intangible assets
Loss on disposal of assets held for sale
Operating profit
Interest receivable and other financing income
Interest payable and other financing charges
Net finance charges
Profit before tax
Tax charge
Profit for the year
Earnings per share, pence
Basic
Diluted
Year ended
30 September
2011
£ million
Year ended
30 September
2010
£ million
Notes
25
26
8
7
2
3
5
6
2,733
719
3,452
2,402
571
2,973
(923)
(917)
(407)
(285)
(179)
(102)
–
–
(4)
(167)
468
(109)
(83)
(7)
–
269
9
(30)
(21)
248
(23)
225
52.5
52.0
(805)
(733)
(336)
(256)
(177)
(92)
(14)
(27)
–
(172)
361
(102)
(72)
(6)
(7)
174
7
(27)
(20)
154
(33)
121
28.4
28.0
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easyJet plc
Annual report
and accounts 2011
Consolidated statement
of comprehensive income
Profit for the year
Other comprehensive income
Cash flow hedges
Fair value gains in the year
Gains transferred to income statement
Related tax
Currency translation differences
Total comprehensive income for the year
Year ended
30 September
2011
£ million
Year ended
30 September
2010
£ million
Notes
225
121
5
122
(152)
9
(21)
–
204
91
(9)
(23)
59
1
181
Consolidated statement of financial position
easyJet plc
Annual report
and accounts 2011
67
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Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Derivative financial instruments
Loan notes
Restricted cash
Other non-current 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' equity
Share capital
Share premium
Hedging reserve
Translation reserve
Retained earnings
30 September
2011
£ million
30 September
2010
£ million
Notes
7
7
8
21
9
12
10
11
21
12
12
12
13
14
21
16
14
21
16
5
17
365
86
2,149
24
11
33
63
2,731
–
165
83
90
300
1,100
1,738
(916)
(155)
(52)
(9)
(45)
(1,177)
561
(1,145)
(27)
(59)
(177)
(179)
(1,587)
1,705
108
654
14
1
928
1,705
365
87
1,928
8
13
33
54
2,488
73
194
53
23
260
912
1,515
(829)
(127)
(10)
(28)
(71)
(1,065)
450
(1,085)
(4)
(56)
(144)
(148)
(1,437)
1,501
107
652
35
1
706
1,501
The accounts on pages 65 to 97 were approved by the Board of Directors and authorised for issue on
14 November 2011 and signed on behalf of the Board.
Carolyn McCall OBE
Director
Chris Kennedy
Director
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easyJet plc
Annual report
and accounts 2011
Consolidated statement of changes in equity
Hedging
reserve
£ million
Translation
reserve
£ million
Retained
earnings
£ million
At 1 October 2010
Total comprehensive income
Share incentive schemes
Proceeds from shares issued
Value of employee services
Related tax (note 5)
Purchase of own shares
At 30 September 2011
Share
capital
£ million
107
Share
premium
£ million
652
–
1
–
–
–
–
2
–
–
–
108
654
35
(21)
–
–
–
–
14
1
–
–
–
–
–
1
Share
capital
£ million
Share
premium
£ million
Hedging
reserve
£ million
Translation
reserve
£ million
Retained
earnings
£ million
At 1 October 2009
Total comprehensive income
Share incentive schemes
Proceeds from shares issued
Value of employee services
Related tax (note 5)
Purchase of own shares
At 30 September 2010
106
–
1
–
–
–
642
–
10
–
–
–
107
652
(24)
59
–
–
–
–
35
–
1
–
–
–
–
1
928
1,705
Total
£ million
1,501
204
3
6
(1)
(8)
Total
£ million
1,307
181
10
5
(1)
(1)
706
225
–
6
(1)
(8)
583
121
(1)
5
(1)
(1)
706
1,501
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 the year end.
Consolidated statement of cash flows
easyJet plc
Annual report
and accounts 2011
69
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Notes
19
Cash flows from operating activities
Cash generated from operations
Net interest and other financing charges (paid) / received
Net tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of assets held for sale
Purchase of other intangible assets
Redemption of loan notes
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
Proceeds from drawdown of finance leases
Repayment of capital elements of finance leases
Net proceeds from sale and operating leaseback of aircraft
Net (increase) / decrease in money market deposits
(Increase) / decrease in restricted cash
Net cash generated from financing activities
Effect of exchange rate changes
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Year ended
30 September
2011
£ million
Year ended
30 September
2010
£ million
449
(23)
(2)
424
(550)
75
(6)
3
(478)
3
(8)
172
(154)
71
(6)
273
(38)
(67)
246
(4)
188
912
365
12
(14)
363
(472)
–
(11)
1
(482)
10
(1)
213
(188)
47
(4)
109
31
16
233
9
123
789
912
Cash and cash equivalents at end of year
12
1,100
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easyJet plc
Annual report
and accounts 2011
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 Act 2006 applicable to companies reporting under IFRS.
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.
easyJet’s business activities, together with factors likely to affect its future development and performance, are
described in the business review on pages 8 to 15. Principal risks and uncertainties are described on pages 27 to
30. Note 22 to the accounts sets out the Group’s objectives, policies and procedures for managing its capital
and gives details of the risks related to financial instruments held by the Group.
The Group holds cash and cash equivalents of £1.1 billion as at 30 September 2011. Total debt of £1.3 billion is free
from financial covenants, with £155 million due for repayment in the year to 30 September 2012.
The business is exposed to fluctuations in fuel prices and US dollar and euro exchange rates. The Group’s policy
is to hedge between 65% and 85% of estimated exposures 12 months in advance, and 45% and 65% of
estimated exposures from 13 up to 24 months in advance. The Group was compliant with this policy at the date
of this Annual report and accounts.
After making enquiries, the Directors have a reasonable expectation that the Company and the Group will be
able to operate within the level of available facilities and cash for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the 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 three 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.
Aircraft maintenance provisions (note 16)
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 annually, 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.
Basis of consolidation
The consolidated accounts incorporate those of easyJet plc and its subsidiaries for the years ended
30 September 2010 and 2011.
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
Revenue comprises passenger revenue, being the value of airline services (net of air passenger duty, VAT and
discounts), and 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
recognised in the income statement when the service is provided.
Ancillary revenue primarily arises from the provision of checked baggage and speedy (priority) boarding services,
booking, credit card and change fees, and commissions earned from services sold on behalf of partners.
Ancillary revenue is recognised when the service is provided. This is generally when the related flight takes place,
but in the following cases revenue is recognised at the time of booking:
–(cid:3) Booking and credit card fees as they are contractually non-refundable
–(cid:3) Change fees as the service provided is that of allowing customers to change bookings
–(cid:3) Commissions earned from travel insurance as easyJet acts solely as appointed representative of the
insurance company
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 in prior years were 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. There have been no business
combinations since the effective date of IFRS 3 Business Combinations (Revised).
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.
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Annual report
and accounts 2011
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
1 Accounting policies continued
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 utlisation
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
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
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
Computer hardware
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. These amounts are not amortised.
Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are
recognised in the income statement.
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 the 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.
Non-derivative financial assets
Non-derivative financial assets are recorded at amortised cost and include loan notes, trade receivables, cash
and money market deposits. 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.
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. Interest income on cash and money market deposits
is recognised using the effective interest method.
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.
Non-derivative financial liabilities
Non-derivative financial liabilities are initially recorded at fair value less directly attributable transaction costs,
and subsequently at amortised cost. Interest expense on borrowings is recognised using the effective
interest method.
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.
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 other comprehensive income 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 other comprehensive income 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’ equity until the transaction takes place.
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Annual report
and accounts 2011
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
1 Accounting policies continued
When a hedged future transaction is no longer expected to occur, any related gains and losses previously
recognised in shareholders’ equity are immediately recognised in the income statement.
Financial guarantees
If a claim on a financial guarantee given to a third party becomes probable, the obligation is recognised at fair
value. For subsequent measurement, the carrying amount is the higher of initial measurement and best estimate
of the expenditure required to settle the obligation on the statement of financial position date.
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 other comprehensive income, in which case it is recognised in
other comprehensive income.
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:
–(cid:3) 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
–(cid:3) 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.
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. easyJet has no
further payment obligations once the contributions have been paid. 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 capital and dividend distribution
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary
shares or options are shown in equity as a deduction, net of tax, from the proceeds. Where any Group company
purchases the Company’s equity shares (treasury shares) the consideration paid and any directly attributable
incremental costs are deducted from equity until the shares are cancelled or reissued.
Dividend distributions to the Company’s shareholders are recognised as a liability in the period in which the
dividends are approved by the Company’s shareholders.
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 Share Incentive Plan 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’ equity. Where performance criteria attached to the share options and
awards are not met, any cumulative expense previously recognised is reversed. The social security obligations
payable in connection with grant of the share options is an integral part of the grant itself and the charge is
treated as a cash-settled transaction.
easyJet settles share awards under the Long Term Incentive, Sharesave and Share Incentive Plans by purchasing
its own shares on the market through employee share trusts. The cost of such purchases is deducted from
retained earnings in the period that the transaction occurs.
Segmental disclosures
easyJet has one operating segment, being its route network, based on management information provided
to the Executive Management Team; which is easyJet’s Chief Operating Decision Maker. Resource allocation
decisions are made for the benefit of the route network as a whole, rather than for individual routes within
the network. Performance of the network is assessed based on the consolidated profit or loss before tax for
the year.
Revenue is allocated to geographic segments on the following bases:
–(cid:3) Revenue earned from passengers is allocated according to the location of the first departure airport on each
booking
–(cid:3) Commission revenue earned from partners is allocated according to the domicile of each partner
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 less costs to sell. Depreciation
ceases at the point of their reclassification from non-current assets.
Impact of new standards and interpretations
The following standards and interpretations issued by the International Accounting Standards Board have been
implemented for the year ended 30 September 2011:
New and revised standards
IAS 24 Related Party Disclosures
Amendments to standards
IAS 32 Financial Instruments: Presentation (Classification of Rights Issues)
First-time Adoption of IFRS (Additional Exemptions for First-time Adopters)
IFRS 1
IFRS 1
Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters
IFRS 2 Share-based Payment (Group cash-settled share-based payment transactions)
Improvements to IFRS (2009) – items with an effective date of 1 January 2010
New and revised interpretations
IFRIC 14 Prepayments of a Minimum Funding Requirement
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
The adoption of these standards and interpretations has not led to any changes in accounting policies.
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
Presentation of Items of Other Comprehensive Income
First-time Adoption of IFRS (Hyperinflation and Removal of Fixed Dates for First-time Adopters
1 Accounting policies continued
New standard and interpretations not applied
The following standards and interpretations issued by the International Accounting Standards Board have not
been applied in preparing these accounts as their effective dates fall in periods beginning after 1 October 2011.
Effective for the year ending 30 September 2012
Amendments to standards and interpretations
IAS 1
IAS 12 Deferred Tax (Recovery of Underlying Assets)
IFRS 1
IFRS 7 Financial Instruments: Disclosures
Effective for the year ending 30 September 2013
New and revised standards
IAS 27 Separate Financial Statements
IAS 28
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11
IFRS 12 Disclosures of Interests in Other Entities
IFRS 13 Fair Value Measurement
Investments in Associates and Joint Ventures
Joint Arrangements
Amendments to standards and interpretations
IAS 19
Employee Benefits
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.
2 Net finance charges
Interest receivable and other financing income
Interest income
Interest payable and other financing charges
Interest payable on bank loans
Interest payable on finance lease obligations
Other interest payable
Net exchange losses (note 21)
2011
£ million
2010
£ million
(9)
(9)
20
5
(1)
6
30
21
(7)
(7)
21
3
(4)
7
27
20
Other interest payable includes a credit of £1 million (2010: £6 million) reversing previous interest accruals.
3 Profit before tax
The following have been included in arriving at profit before tax:
Depreciation of property, plant and equipment
Owned assets
Assets held under finance leases
Loss on disposal of property, plant and equipment
Operating lease rentals
Aircraft
Other assets
2011
£ million
2010
£ million
77
6
–
102
4
68
4
2
99
3
Auditors’ remuneration
During the year easyJet obtained the following services from easyJet’s auditors and their associates (including
foreign partners):
Group audit fee
Fees for other services (principally tax services)
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
Key management compensation was:
Short-term employee benefits
Share-based payments
2011
£ million
2010
£ million
0.3
–
0.3
2011
7,361
363
7,724
0.3
0.1
0.4
2010
6,577
310
6,887
2011
£ million
2010
£ million
350
48
28
6
432
300
39
23
5
367
2011
£ million
2010
£ million
6
2
8
6
2
8
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
2011
£ million
3
2010
£ million
4
Details of Directors’ remuneration are disclosed in the Report on Directors’ remuneration.
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Annual report
and accounts 2011
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
5 Tax charge
Tax on profit on ordinary activities
Current tax
United Kingdom corporation tax
Foreign tax
Prior year adjustments
Total current tax credit
Deferred tax
Temporary differences relating to property, plant and equipment
Other temporary differences
Prior year adjustments
Change in tax rate
Total deferred tax charge
Effective tax rate
2011
£ million
2010
£ million
5
9
(30)
(16)
54
(5)
7
(17)
39
23
9%
–
5
(18)
(13)
15
19
15
(3)
46
33
21%
2010
£ million
154
43
(2)
(6)
3
1
(18)
15
(3)
33
Reconciliation of the total tax 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 27% (2010: 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
Change in tax rate
2011
£ million
248
67
(1)
(4)
–
1
(30)
7
(17)
23
The prior year adjustments in 2011 and 2010 reflect the resolution and reassessment of various tax matters
following discussions with the UK and European tax authorities. This has resulted in the net credits to the prior
year current tax and debits to prior year deferred tax referred to above.
Current tax liabilities at 30 September 2011 amounted to £9 million (2010: £28 million), of which substantially all
relates to years prior to 2011 which remain open with the relevant tax authorities. As in prior years a significant
portion of this balance may not be settled in cash but accounted for as a movement in the deferred tax liability.
During the year ended 30 September 2011, net cash tax paid amounted to £2 million (2010: £14 million), which
principally comprises foreign taxes paid.
Tax on items recognised directly in other comprehensive income or shareholders’ equity
Credit / (charge) to other comprehensive income
Deferred tax credit / (charge) on fair value movements of cash flow hedges
Charge to shareholders’ equity
Current tax credit on share-based payments
Deferred tax charge on share-based payments
Deferred tax
The net deferred tax liability in the statement of financial position is as follows:
2011
£ million
2010
£ million
9
–
(1)
(1)
(23)
2
(3)
(1)
At 1 October 2010
Charged / (credited)
to income statement
Credited to other
comprehensive income
Charged to shareholders’ equity
At 30 September 2011
At 1 October 2009
Charged / (credited)
to income statement
Charged to other
comprehensive income
Charged to shareholders’ equity
At 30 September 2010
Accelerated
capital
allowances
£ million
Short-term
timing
differences
£ million
Tax losses
£ million
Fair value
(gains)/
losses
£ million
Share-
based
payments
£ million
Total
£ million
62
58
–
–
120
57
(18)
–
–
39
–
–
–
–
–
33
(1)
(9)
–
23
(4)
148
–
–
1
(3)
39
(9)
1
179
Accelerated
capital
allowances
£ million
Short-term
timing
differences
£ million
36
26
–
–
62
52
5
–
–
57
Fair value
(gains)/
losses
£ million
Share-based
payments
£ million
Total
£ million
10
–
23
–
33
(6)
(1)
–
3
(4)
76
46
23
3
148
Tax losses
£ million
(16)
16
–
–
–
It is estimated that deferred tax liabilities of approximately £5 million (2010: £12 million) will reverse during the
next financial year.
Deferred tax assets and liabilities have been offset where they relate to taxes levied by the same taxation
authority. As a result the net UK deferred tax liability is £190 million (2010: £148 million). The net overseas
deferred tax asset is £11 million (2010: £nil million).
No deferred tax liability has been recognised on the unremitted earnings of overseas subsidiaries as no tax is
expected to be payable in the foreseeable future based on the current repatriation policy of easyJet.
easyJet plc
Annual report
and accounts 2011
79
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easyJet plc
Annual report
and accounts 2011
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.
To calculate 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 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
Earnings per share
Basic
Diluted
2011
£ million
225
2011
million
429
4
433
2011
pence
52.5
52.0
2010
£ million
121
2010
million
427
6
433
2010
pence
28.4
28.0
A dividend in respect of the year ended 30 September 2011 of £195 million is to be proposed at the forthcoming
Annual General Meeting. These accounts do not reflect this dividend payable.
7 Goodwill and other intangible assets
Goodwill
£ million
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
Cost
At 1 October 2010
Transfer from property, plant and
equipment
Disposals
At 30 September 2011
Amortisation
At 1 October 2010
Charge for the year
Disposals
At 30 September 2011
Net book value
At 30 September 2011
At 1 October 2010
365
–
–
365
–
–
–
–
365
365
74
–
–
74
–
–
–
–
74
74
4
–
–
4
3
–
–
3
1
1
27
6
(8)
25
15
7
(8)
14
11
12
105
6
(8)
103
18
7
(8)
17
86
87
Cost
At 1 October 2009
Additions
Transfer from property, plant and
equipment
At 30 September 2010
Amortisation
At 1 October 2009
Charge for the year
At 30 September 2010
Net book value
At 30 September 2010
At 1 October 2009
Goodwill
£ million
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
365
–
–
365
–
–
–
365
365
74
–
–
74
–
–
–
74
74
3
1
–
4
2
1
3
1
1
17
–
10
27
10
5
15
12
7
94
1
10
105
12
6
18
87
82
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 calculations of the route
network.
Pre-tax cash flow projections have been derived from the strategic plan for the period up to 2015 approved by
the Board, using the following key assumptions:
Pre-tax discount rate (derived from weighted average cost of capital)
Fuel price (US dollars per metric tonne)
Exchange rates
US dollar
Euro
Swiss franc
9–10%
1,060
1.60
1.15
1.30
Both fuel price and exchange rates are volatile in nature, and the assumptions used represent management’s
view of reasonable average rates and are derived from recent market information. Operating margins are
sensitive to significant changes in these rates.
Cash flow projections beyond the forecast period have been extrapolated using 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 to the key assumptions above would result in the carrying value
of the cash-generating unit exceeding its recoverable amount.
easyJet plc
Annual report
and accounts 2011
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
8 Property, plant and equipment
Aircraft and
spares
£ million
Leasehold
improvements
£ million
Other
£ million
Total
£ million
Cost
At 1 October 2010
Additions
Aircraft sold and leased back
Transfer to intangible assets
Disposals
At 30 September 2011
Depreciation
At 1 October 2010
Charge for the year
Aircraft sold and leased back
Disposals
At 30 September 2011
Net book value
At 30 September 2011
At 1 October 2010
Cost
At 1 October 2009
Additions
Aircraft sold and leased back
Transfer to intangible assets
Disposals
At 30 September 2010
Depreciation
At 1 October 2009
Charge for the year
Disposals
At 30 September 2010
Net book value
At 30 September 2010
At 1 October 2009
2,129
519
(228)
–
(10)
2,410
216
80
(20)
–
276
2,134
1,913
13
–
–
–
(5)
8
8
1
–
(5)
4
4
5
29
9
–
(6)
(13)
19
19
2
–
(13)
8
11
10
2,171
528
(228)
(6)
(28)
2,437
243
83
(20)
(18)
288
2,149
1,928
Aircraft and
spares
£ million
Leasehold
improvements
£ million
Other
£ million
Total
£ million
1,747
442
(52)
–
(8)
2,129
154
68
(6)
216
1,913
1,593
13
–
–
–
–
13
7
1
–
8
5
6
30
10
–
(10)
(1)
29
17
3
(1)
19
10
13
1,790
452
(52)
(10)
(9)
2,171
178
72
(7)
243
1,928
1,612
The net book value of aircraft includes £164 million (2010: £153 million) relating to advance and option payments
for future deliveries. This amount is not depreciated.
Aircraft with a net book value of £1,206 million (2010: £1,108 million) were mortgaged to lenders as loan security.
Aircraft with a net book value of £159 million (2010: £105 million) are held under finance leases.
easyJet is contractually committed to the acquisition of 37 (2010: 47) Airbus A320 family aircraft, with a total
list price of US$ 1.9 billion (2010: US$2.2 billion) before escalations and discounts for delivery in the period to
March 2014.
easyJet plc
Annual report
and accounts 2011
83
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9 Loan notes
In 2001, easyJet in a 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.
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At 1 October
Interest receivable converted to loan notes
Redemption of loan notes
At 30 September
10 Other non-current assets
Recoverable supplemental rent (pledged as collateral)
Deposits held by aircraft lessors
Other
2011
£ million
2010
£ million
13
1
(3)
11
13
1
(1)
13
2011
£ million
2010
£ million
40
17
6
63
49
1
4
54
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Supplemental 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.
11 Trade and other receivables
Trade receivables
Less provision for impairment
Other receivables
Recoverable supplemental rent (pledged as collateral)
Prepayments and accrued income
2011
£ million
2010
£ million
84
(3)
81
27
11
46
165
77
(3)
74
31
13
76
194
Supplemental 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
2011
£ million
2010
£ million
3
–
–
3
3
1
(1)
3
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.
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
11 Trade and other receivables continued
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
2011
£ million
2010
£ million
31
10
41
22
–
22
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.
12 Cash and money market deposits
Cash and cash equivalents (original maturity less than three months)
Money market deposits (original maturity more than three months)
Current restricted cash
Non-current restricted cash
2011
£ million
2010
£ million
1,100
300
90
33
1,523
912
260
23
33
1,228
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:
Payment card acquiring
Aircraft operating lease deposits
Other
13 Trade and other payables
Trade payables
Unearned revenue
Accruals and deferred income
Other taxes and social security
Other creditors
2011
£ million
–
90
30
3
123
2010
£ million
18
5
30
3
56
2011
£ million
2010
£ million
90
472
280
13
61
916
79
357
328
9
56
829
14 Borrowings
At 30 September 2011
Bank loans
Finance lease obligations
At 30 September 2010
Bank loans
Finance lease obligations
Current
£ million
Non-current
£ million
Total
£ million
146
9
155
933
212
1,145
1,079
221
1,300
Current
£ million
Non-current
£ million
Total
£ million
122
5
127
935
150
1,085
1,057
155
1,212
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. None of the agreements contain financial
covenants to be met.
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 22.
15 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.
16 Maintenance provisions
At 1 October 2010
Exchange adjustments
Charged to income statement
Related to aircraft sold and leased back
Utilised
At 30 September 2011
Maintenance provisions are analysed as follows:
Current
Non-current
The provision for maintenance liabilities is expected to be utilised within eight years.
£ million
215
(1)
52
21
(65)
222
2011
£ million
2010
£ million
45
177
222
71
144
215
easyJet plc
Annual report
and accounts 2011
85
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
17 Share capital
Authorised
At beginning and end of the year; ordinary
shares of 25p each
Allotted, called up and fully paid
At 1 October
Issued during the year under share
incentive schemes
At 30 September
2011
million
Number
2010
million
2011
£ million
Value
2010
£ million
500
430
1
431
500
425
5
430
125
107
1
108
125
106
1
107
The weighted average share price for options exercised during the year was £4.31 (2010: £4.01).
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 year end (£ million)
2011
2010
2
7
7
1
6
5
18 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:
Grant date
Discretionary schemes
18 January 2001
19 January 2004
8 December 2004
1 December 2005
Long Term Incentive Plan
3 December 2007
29 February 2008
16 January 2009
16 December 2009
5 July 2010
31 March 2011
Sharesave
8 June 2007
6 June 2008
5 June 2009
10 June 2010
1 July 2011
Share incentive plan
1 October
2010
million
Granted
million
Forfeited
million
Exercised
million
Expired
million
30 September
2011
million
0.1
0.4
2.9
0.4
0.4
0.2
1.5
1.5
0.5
–
0.3
2.9
1.2
0.6
–
2.3
15.2
–
–
–
–
–
–
–
–
–
2.4
–
–
–
–
2.3
2.4
7.1
–
–
–
–
(0.4)
(0.2)
(0.3)
(0.6)
–
–
–
(0.1)
(0.1)
(0.2)
–
(0.1)
(2.0)
(0.1)
–
(0.3)
(0.4)
–
–
–
–
–
–
–
(1.8)
–
–
–
(0.3)
(2.9)
–
–
–
–
–
–
–
–
–
–
(0.3)
–
–
–
–
–
(0.3)
–
0.4
2.6
–
–
–
1.2
0.9
0.5
2.4
–
1.0
1.1
0.4
2.3
4.3
17.1
Weighted average exercise prices are as follows:
Discretionary schemes
Sharesave
1 October
2010
£
2.21
2.66
Granted
£
Forfeited
£
Exercised
£
Expired
£
–
2.88
2.80
2.87
2.77
2.40
–
4.79
30 September
2011
£
2.05
2.73
The exercise price of all awards save those disclosed in the above table is £nil.
The number of awards exercisable at each year end and their weighted average exercise price is as follows:
Discretionary schemes
Sharesave
Share incentive plan
2011
2.05
2.40
–
Price
£
2010
2.21
4.79
–
2011
3.0
1.0
0.7
4.7
The weighted average remaining contractual life for each class of share award at 30 September 2011 is
as follows:
Discretionary schemes
Long Term Incentive Plan
Sharesave
Share incentive plan
Number
million
2010
3.8
0.3
0.7
4.8
Years
3.1
8.7
2.6
2.2
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. All options expire ten years after grant.
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 or
return on capital employed targets being achieved.
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 on the Swiss payroll may save under similar terms and conditions, albeit without tax benefits.
easyJet plc
Annual report
and accounts 2011
87
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
18 Share incentive schemes continued
The fair value of grants under the discretionary and sharesave 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
1 December 2005
Long Term Incentive Plan
3 December 2007
29 February 2008
16 January 2009
16 December 2009 and 5 July 2010
31 March 2011
Sharesave
8 June 2007
6 June 2008
5 June 2009
10 June 2010
1 July 2011
Share
price
£
Exercise
price
£
Expected
volatility
%
Option life
years
Risk-free
interest rate
%
3.80
1.81
3.42
5.63
4.33
2.88
3.49
3.41
5.19
2.86
3.02
4.36
3.60
3.60
1.84
3.30
40%
42%
42%
–
–
–
–
–
4.79
2.40
2.43
3.49
2.88
–
–
–
–
–
32%
41%
53%
53%
46%
6.5
6.5
6.5
–
–
–
–
–
3.5
3.5
3.5
3.5
3.5
4.62%
4.45%
4.15%
–
–
–
–
–
5.76%
4.92%
2.52%
1.20%
1.45%
Fair
value
£
1.90
0.88
1.42
5.63
4.33
2.88
3.49
3.41
1.82
1.16
1.40
1.96
1.37
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, exercise price is set at a 20% discount from share price.
Expected volatility is based on historical volatility over a period comparable to the expected life of each type of
option.
Levels of early exercises and forfeitures are estimated using historical averages.
The weighted average fair value of matching shares granted under the share incentive plan during the year was
£3.81 (2010: £4.15).
19 Reconciliation of operating profit to cash generated from operations
Operating profit
Adjustments for non-cash items:
Depreciation
Loss on disposal of property, plant and equipment
Loss on disposal of assets held for sale
Amortisation of intangible assets
Share-based payments
Unrealised foreign exchange differences
Changes in working capital and other items of an operating nature:
Decrease in trade and other receivables
Increase in trade and other payables
Decrease in provisions
(Increase) / decrease in other non-current assets
(Increase) / decrease in derivative financial instruments
(Increase) / decrease in non-current deferred income
20 Reconciliation of net cash flow to movement in net cash / (debt)
Loan issue
costs
£ million
Exchange
differences
£ million
1 October
2010
£ million
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
Net (debt) / cash
(non-GAAP measure)
912
260
1,172
(1,057)
(155)
(1,212)
(40)
(4)
2
(2)
(5)
(1)
(6)
(8)
–
–
–
1
–
1
1
2011
£ million
269
2010
£ million
174
83
–
–
7
6
–
27
87
(5)
(9)
(2)
(14)
449
72
2
7
6
5
(3)
43
45
(1)
9
2
4
365
Net
cash flow
£ million
30 September
2011
£ million
192
38
230
(18)
(65)
(83)
147
1,100
300
1,400
(1,079)
(221)
(1,300)
100
easyJet plc
Annual report
and accounts 2011
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90
easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
21 Financial instruments
Carrying value and fair value of financial assets and liabilities
The fair values of financial assets and liabilities, together with the carrying value at each reporting date are
as follows:
At 30 September 2011
Loan notes
Other non-current assets
Trade and other
receivables
Trade and other payables
Derivative financial
instruments
Restricted cash
Money market deposits
Cash and cash equivalents
Borrowings
At 30 September 2010
Loan notes
Other non-current assets
Trade and other
receivables
Trade and other payables
Derivative financial
instruments
Restricted cash
Money market deposits
Cash and cash equivalents
Borrowings
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
Other
£ million
Carrying
£ million
Fair
value
£ million
11
59
130
–
–
123
300
1,100
–
–
–
(375)
–
–
–
–
–
(1,300)
–
–
–
–
20
–
–
–
–
–
–
–
–
8
–
–
–
–
–
4
35
(541)
–
–
–
–
–
11
63
165
(916)
28
123
300
1,100
11
63
165
(916)
28
123
300
1,100
(1,300)
(1,307)
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
13
50
130
–
–
56
260
912
–
–
–
–
(399)
–
–
–
–
(1,212)
–
–
–
–
48
–
–
–
–
–
–
–
–
(1)
–
–
–
–
Other
£ million
Carrying
£ million
–
4
13
54
Fair
value
£ million
13
54
64
(430)
194
(829)
194
(829)
–
–
–
–
–
47
56
260
912
47
56
260
912
(1,212)
(1,221)
Amounts disclosed in the “other” column are items that do not meet the definition of a financial instrument. They
are disclosed to facilitate reconciliation of the carrying values of financial instruments to line items presented in
the statement of financial position.
Fair value calculation methodology
Derivative financial instruments are forward contracts that are valued based on market rates and market-
accepted models. Fair value for financial instruments held at amortised cost has been estimated by discounting
cash flows at prevailing interest rates and by applying year end exchange rates.
Fair value of derivative financial instruments
At 30 September 2011
Designated as cash flow hedges:
US dollar
Euro
Swiss franc
Jet fuel
Designated as held for trading:
US dollar
At 30 September 2010
Designated as cash flow hedges:
US dollar
Euro
Swiss franc
Jet fuel
Designated as held for trading:
US dollar
Non-
current
assets
£ million
Quantity
million
Current
assets
£ million
Current
liabilities
£ million
Non-
current
liabilities
£ million
Total
£ million
2,157
501
140
2
1,240
18
3
1
2
–
24
23
8
1
43
8
83
(2)
–
(3)
–
–
(1)
(47)
(26)
–
(52)
–
(27)
39
11
(2)
(28)
8
28
Quantity
million
Non-current
assets
£ million
Current
assets
£ million
Current
liabilities
£ million
Non-current
liabilities
£ million
Total
£ million
911
263
69
2
1,055
2
2
–
4
–
8
14
12
–
27
–
53
(4)
–
(1)
(4)
(1)
(10)
(2)
–
–
(2)
–
(4)
10
14
(1)
25
(1)
47
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.
All derivative financial instruments are in level 2 of the IFRS 7 fair value hierarchy.
Derivatives designated as cash flow hedges
All derivatives to which hedge accounting is applied are designated as cash flow hedges.
Changes in fair value are recognised directly in other comprehensive income, to the extent that they are
effective, with the ineffective portion being recognised in the income statement.
Where the hedged item is a non-financial asset or liability, the accumulated gains and losses previously
recognised in other comprehensive income 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
item affects the income statement.
easyJet uses forward contracts to hedge US dollar transaction currency risk (comprising fuel, leasing and
maintenance payments), jet fuel price risk and euro and Swiss franc revenues. Where these hedges are
assessed as highly effective, gains and losses are deferred in other comprehensive income and transferred to
the income statement or cost of property, plant and equipment when the related cash flow occurs.
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Annual report
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
21 Financial instruments continued
The cumulative net gains / (losses) deferred in shareholders’ equity and their expected maturities are as follows:
At 30 September 2011
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
At 30 September 2010
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
Within 1 year
£ million
1–2 years
£ million
Total
£ million
25
(4)
21
21
(24)
(3)
46
(28)
18
(4)
14
Within 1 year
£ million
1–2 years
£ million
Total
£ million
20
24
44
2
2
4
22
26
48
(13)
35
Gains on cash flow hedges recycled from other comprehensive income in income
statement captions:
Revenue
Fuel
Maintenance
Interest payable and other financing charges
Aircraft lease costs
2011
£ million
2010
£ million
9
142
–
1
–
152
1
1
1
–
5
8
Derivatives designated as held for trading
easyJet has material net monetary liabilities denominated in US dollars 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 each balance sheet date were as follows:
Cash and money market deposits
Borrowings
Maintenance provisions
Other
Net monetary liabilities
Forward US dollar contracts
2011
$ million
673
(1,654)
(301)
73
(1,209)
1,240
31
2010
$ million
709
(1,571)
(299)
78
(1,083)
1,055
(28)
Amounts recorded in the income statement in respect of revaluation of monetary assets and liabilities and the
gains and losses on derivatives designated as held for trading are as follows:
Unrealised revaluation losses on non-derivative financial instruments
Realised foreign exchange gains on non-derivative financial instruments
Unrealised revaluation losses on other monetary assets and liabilities
Unrealised gains / (losses) on derivatives
Realised (losses) / gains on derivatives
Net (losses) / gains
Credited to other costs
Charged to net finance charges (note 2)
2011
£ million
2010
£ million
(7)
4
(1)
9
(11)
(6)
–
(6)
(6)
(7)
2
(3)
(15)
24
1
8
(7)
1
22 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 regularly reviewed to ensure best practice, however there have been no
significant changes during 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 net cash or debt position, together with the maturity profile of existing debt, is monitored to
ensure the continuity of funding. During the year funding totalling $278 million was put in place all of which was
utilised during the year.
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) to shareholders’
equity. Gearing decreased in the year from 32% to 28%, principally due to operating cash flow.
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.
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. Total cash (excluding restricted cash) and money market deposits at 30 September 2011
was £1,400 million (2010: £1,172 million). Surplus funds are invested in high quality short-term liquid instruments,
usually money market funds or bank deposits.
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and accounts 2011
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easyJet plc
Annual report
and accounts 2011
Notes to the accounts
Continued
22 Financial risk and capital management continued
The maturity profile of financial liabilities based on undiscounted gross cash flows and contractual maturities is as
follows:
At 30 September 2011
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
At 30 September 2010
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
Within
1 year
£ million
177
375
(2,887)
2,843
Within
1 year
£ million
148
399
(1,838)
1,844
1–2 years
£ million
2–5 years
£ million
169
–
(1,041)
1,031
584
–
–
–
1–2 years
£ million
2–5 years
£ million
159
–
(369)
391
444
–
–
–
Over
5 years
£ million
493
–
–
–
Over
5 years
£ million
573
–
–
–
The maturity profile has been calculated based on spot rates for the US dollar, euro, Swiss franc and jet fuel at
close of business on 30 September each year.
Credit risk management
easyJet is exposed to credit risk arising from cash and money market deposits, derivative financial instruments
and trade and other receivables. Credit risk management aims to reduce the risk of default through setting
credit exposure limits to counterparties based on their respective credit ratings. Credit ratings also determine
the maximum period of investment when placing funds on deposit. Credit risk is limited to the carrying value
amount in the statement of financial position at each year end date.
Counterparties for cash investments, currency forward contracts and jet fuel forward contracts are required
to have a credit rating of A or better at contract inception. Exposures to those counterparties are regularly
reviewed and, when the market view of a counterparty’s credit quality changes, adjusted as considered
appropriate. Accordingly in normal market conditions, the probability of material loss due to non-performance
by counterparties is considered to be low.
Disclosure relating to the credit quality of trade and other receivables is detailed in note 11.
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. 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 cash flow 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 US dollar loans by value 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 64 operating leases in place at 30 September 2011, 69% were based on fixed interest rates and 31%
were based on floating interest rates (2010: 66% fixed, 34% 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 11 aircraft were cash acquired (2010: nine aircraft).
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 65% and 85% (2010: between 50% and 80%) of estimated
exposures up to 12 months in advance, and to hedge between 45% and 65% (2010: between 20% and 50%)
of estimated exposures from 13 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 risk include borrowings, deposits, trade and other receivables, trade
and other payables and derivative financial instruments. The following 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 analysis reflects the impact on profit or loss after tax for the year and other comprehensive
income 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. Sensitivity is calculated based on all other
variables remaining constant. The analysis 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 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 reflecting stronger sterling.
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 impact of a 1% increase in interest rates and a 10% increase in the fuel price is disclosed. A corresponding
decrease results in an equal and opposite impact on the income statement and other comprehensive income
in both reporting periods.
Sensitivities are calculated based on a reasonably possible change in the rate applied to the value of financial
instruments held at each balance sheet date.
At 30 September 2011
Income statement impact: gain / (loss)
Impact on other comprehensive income:
increase / (decrease)
At 30 September 2010
Currency rates
US dollar
+10%
£ million
US dollar
-10%
£ million
Euro
+10%
£ million
Euro
-10%
£ million
Interest
rates
1% increase
£ million
Fuel price
10%
increase
£ million
19
(15)
3
108
(89)
(40)
(3)
25
(2)
–
–
84
Currency rates
US dollar
+10%
£ million
US dollar
–10%
£ million
Euro
+10%
£ million
Euro
-10%
£ million
Interest
rates
1% increase
£ million
Fuel price
10%
increase
£ million
Income statement impact: gain / (loss)
Impact on other comprehensive income:
increase / (decrease)
13
43
(15)
(4)
(52)
(14)
5
20
1
–
–
47
The market risk sensitivity analysis has been calculated based on spot rates for the US dollar, euro and jet fuel
at close of business on 30 September each year.
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Annual report
and accounts 2011
Notes to the accounts
Continued
23 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
2011
£ million
Aircraft
2010
£ million
2011
£ million
Other
2010
£ million
101
272
84
457
97
239
50
386
1
2
3
6
2
3
3
8
easyJet holds 64 aircraft (2010: 62 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.
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
2011
£ million
2010
£ million
13
139
105
257
(36)
221
10
41
129
180
(25)
155
easyJet holds 11 aircraft (2010: 8 aircraft) under finance leases with ten year initial terms. Further details are given
in notes 8 and 14.
24 Contingent liabilities
easyJet is involved in various disputes or litigation in the normal course of business. Whilst the results 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 2011 easyJet had outstanding letters of credit and performance bonds totalling £44 million
(2010: £32 million), of which £41 million (2010: £28 million) expires within one year. The fair value of these
instruments at each year end was negligible.
No amount is recognised on the statement of financial position in respect of any of these financial instruments
as it is not probable that there will be an outflow of resources.
25 Geographical revenue analysis
United Kingdom
Southern Europe
Northern Europe
Other
2011
£ million
2010
£ million
1,594
1,190
629
39
3,452
1,423
1,022
504
24
2,973
Southern Europe comprises countries lying wholly or mainly south of the border between Italy and Switzerland,
plus France.
easyJet’s non-current assets principally comprise its fleet of 140 owned and finance-leased aircraft. A further 64
aircraft are held under operating leases, giving a total fleet of 204 at 30 September 2011. All of these aircraft are
registered in the United Kingdom except for 15 registered in Switzerland. These assets are used flexibly across
the entire route network, and accordingly there is no suitable basis for allocating them to geographic segments.
26 Related party transactions
On 11 October 2010, easyJet announced that it had reached an agreement on its dispute with easyGroup IP
Licensing Ltd (“easyGroup”) and Sir Stelios Haji-Ioannou over the terms and operation of the easyJet brand
licence.
Under the agreement an annual royalty of 0.25% of total revenue (fixed at £3.95 million for the year ended
30 September 2011 and £4.95 million for the year ending 30 September 2012) is payable for a minimum term
of ten years.
A new brand protection protocol was also agreed. easyJet must meet the costs to protect the “easy” and
“easyJet” brands alongside easyGroup on a ratio of 10:1 respectively up to a combined cost of £1.1 million per
annum. Beyond the first £1.1 million of costs, easyJet can commit up to an aggregate £5.5 million annually to
meet brand protection costs, with easyGroup continuing to meet its share of costs on a 10:1 ratio. easyJet must
meet 100% of any brand protection costs it wishes to incur above this limit.
A separate agreement has been entered into with Sir Stelios Haji-Ioannou, for two years, where for an annual fee
of £300,000 he will not licence the “easy” brand to an ATOL holder in relation to the sale of airline seats, not to
sell the shares in easyGroup or the easyJet brand or to acquire an interest in any other airline for two years.
Further details of the agreement can be found in easyJet’s Annual report and accounts 2010.
The amounts included in the income statement for the year ended 30 September 2011 for these items were as
follows:
Annual royalty
Brand protection (legal fees paid through easyGroup to third parties)
Agreement with Sir Stelios Haji-Ioannou
2011
£ million
2010
£ million
4.0
0.7
0.3
5.0
–
–
–
–
easyJet plc
Annual report
and accounts 2011
97
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easyJet plc
Annual report
and accounts 2011
Company statement of financial position
Non-current assets
Investments in subsidiary undertakings
Current assets
Amounts due from subsidiary undertakings
Current liabilities
Amounts due to subsidiary undertakings
Net current assets
Net assets
Shareholders’ equity
Share capital
Share premium
Retained earnings
30 September
2011
£ million
30 September
2010
£ million
Notes
b
271
933
(31)
902
1,173
108
654
411
1,173
271
917
(40)
877
1,148
107
652
389
1,148
The accounts on pages 98 to 102 were approved by the Board of Directors and authorised for issue on
14 November 2011 and signed on behalf of the Board.
Carolyn McCall OBE
Director
Chris Kennedy
Director
Company statement of changes in equity
easyJet plc
Annual report
and accounts 2011
99
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At 1 October 2010
Total comprehensive income
Profit for the year
Share incentive schemes
Proceeds from shares issued
Movement in reserves for employee share schemes
At 30 September 2011
At 1 October 2009
Total comprehensive income
Profit for the year
Share incentive schemes
Proceeds from shares issued
Movement in reserves for employee share schemes
At 30 September 2010
Share
capital
£ million
107
Share
premium
£ million
652
Retained
earnings
£ million
389
Total
£ million
1,148
–
1
–
–
2
–
108
654
16
–
6
411
16
3
6
1,173
Share
capital
£ million
106
Share
premium
£ million
643
Retained
earnings
£ million
360
Total
£ million
1,109
–
1
–
–
9
–
107
652
24
–
5
389
24
10
5
1,148
The disclosures required in respect of share capital are shown in note 17 to the consolidated accounts.
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easyJet plc
Annual report
and accounts 2011
Company statement of cash flows
Cash flows from operating activities
Cash (used by) / generated from operations
Interest received
Dividends received
Net cash (used by) / generated from operating activities
Cash flows from investing activities
Investment in subsidiaries
Capital distributions
Net cash generated from / (used by) investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital
Cash and cash equivalents at beginning and end of year
Notes
c
Year ended
30 September
2011
£ million
Year ended
30 September
2010
£ million
(26)
14
3
(9)
–
6
6
3
–
156
14
20
190
(200)
–
(200)
10
–
Notes to the Company accounts
easyJet plc
Annual report
and accounts 2011
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a) Income statement and statement of total comprehensive income
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 £16 million (2010: £24 million).
Included in this amount are dividends received of £3 million (2010: £20 million), which are recognised when the
right to receive payment is established. The Company recognised no other income or expenses in either the
current or prior year.
The Company has eight employees at 30 September 2011 (30 September 2010: 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
Investment in subsidiaries
Capital contributions to subsidiaries
Capital distributions made by subsidiaries
At 30 September
2011
£ million
2010
£ million
271
–
6
(6)
271
66
200
5
–
271
Investments in subsidiaries are stated at cost, less any provision for impairment. Where subsidiary undertakings
incur charges for share-based payments in respect of share options and awards granted by the Company,
a capital contribution in the same amount is recognised as an investment in subsidiary undertakings with
a corresponding credit to shareholders’ equity.
The principal trading 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.
easyJet Airline Company Limited
England and Wales
easyJet Switzerland S.A.
Switzerland
Country of incorporation
Principal activity
Airline operator
Airline operator
easyJet Aircraft Company Limited
Cayman Islands Aircraft trading and leasing
easyJet Sterling Limited
easyJet Leasing Limited
Cayman Islands Aircraft trading and leasing
Cayman Islands Aircraft trading and leasing
Class and
percentage
of ordinary
shares held
100
49
100
100
100
The Company has a 49% interest in easyJet Switzerland S.A. with an option that expires in 2014 to acquire the
remaining 51%. easyJet Switzerland S.A. is consolidated as a subsidiary on the basis that the Company exercises
a dominant influence over the undertaking. A non-controlling 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.
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easyJet plc
Annual report
and accounts 2011
Notes to the Company accounts
Continued
c) Reconciliation of operating profit to cash generated from operations
Operating profit
Adjustments for non-cash items:
Unrealised foreign exchange differences
Changes in working capital:
(Increase) / decrease in amounts due from subsidiary undertakings
(Decrease) / increase in amounts due to subsidiary undertakings
2011
£ million
2010
£ million
2
1
(19)
(10)
(26)
8
12
112
24
156
d) 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 Airline Company Limited and easyJet
Leasing Limited, both subsidiary undertakings, 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.
No amount is recognised on the Company statement of financial position in respect to any of these guarantees
as it is not probable that there will be an outflow of resources.
e) 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.
For full details of transactions and arrangements with easyJet’s largest shareholder, see note 26 of the
consolidated accounts.
Five year summary
Year end to 30 September
easyJet plc
Annual report
and accounts 2011
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Income statement
Revenue
EBITDAR
Group operating profit (EBIT)
Profit before tax
Profit for the year
Profit before tax (underlying)
Earnings per share (basic)
Earnings per share (diluted)
Statement of financial position
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Net assets
Statement of cash flows
Operating activities
Investing activities
Financing activities
Effect of exchange rate changes
Increase / (decrease) in cash and
cash equivalents
Key performance indicators
Return on capital employed
Gearing
Net (cash) / debt
Profit before tax per seat (£)
Revenue per seat (£)
Cost per seat (£)
Cost per seat excluding fuel (£)
Seats flown (millions)
2011
£ million
2010
£ million
2009
£ million
2008
£ million
2007
£ million
3,452
2,973
468
269
248
225
248
52.5
52.0
2,731
1,738
(1,177)
(1,587)
1,705
424
(478)
246
(4)
188
12.7%
28%
(100)
3.97
55.27
51.30
36.62
62.5
361
174
154
121
188
28.4
28.0
2,488
1,515
(1,065)
(1,437)
1,501
363
(482)
233
9
123
8.8%
32%
40
2.75
53.07
50.32
37.23
56.0
2,667
225
2,363
249
60
55
71
44
16.9
16.6
2,191
1,482
(1,062)
(1,304)
1,307
134
(430)
440
12
91
110
83
123
19.8
19.4
1,681
1,415
(910)
(908)
1,278
296
(418)
6
29
1,797
298
172
202
152
191
36.6
35.6
1,350
1,166
(621)
(743)
1,152
271
(272)
(129)
(11)
156
(87)
(141)
3.6%
38%
46
1.04
50.47
49.43
34.16
52.8
7.3%
29%
(236)
2.12
45.51
43.39
29.74
51.9
11.7%
20%
(393)
4.54
40.42
35.88
26.31
44.5
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easyJet plc
Annual report
and accounts 2011
Glossary
Passengers
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 per seat
Profit before tax divided by seats flown.
Return on capital employed (ROCE)
Normalised profit after tax divided by average net
debt plus average shareholders’ equity.
Return on equity
Profit for the year divided by the average of opening
and closing shareholders’ equity.
Revenue
The sum of passenger revenue and ancillary revenue.
Revenue passenger kilometres (RPK)
Number of passengers multiplied by the number of
kilometres those passengers were flown.
Revenue per ASK
Revenue divided by available seat kilometres.
Revenue per seat
Revenue divided by seats flown.
Seats flown
Seats available for passengers.
Sector
A one-way revenue flight.
Aircraft dry / wet leasing
Payments to lessors under dry leasing arrangements
relate solely to the provision of an aircraft. Payments
to lessors under wet leasing arrangements relate to
the provision of aircraft, crew, maintenance and
insurance.
Aircraft owned / leased at end of year
Number of aircraft owned or on lease arrangements
of over one month’s duration at the end of the period.
Available seat kilometres (ASK)
Seats flown multiplied by the number of kilometres
flown.
Average fare
Passenger and ancillary revenue divided by
passengers.
Block hours
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.
Cost per ASK
Revenue less profit before tax, divided by available
seat kilometres.
Cost per seat
Revenue less profit before tax, divided by seats flown.
Cost per seat, excluding fuel
Revenue, less profit before tax, plus fuel costs, divided
by seats flown.
EBITDAR
Earnings before interest, taxes, depreciation,
amortisation, aircraft dry leasing costs, and profit or
loss on disposal of assets held for sale.
Gearing
Net debt (adjusted by adding seven times aircraft dry
leasing payments for the year and deducting
restricted cash) divided by the sum of shareholders’
equity and adjusted net debt.
Load factor
Number of passengers as a percentage of number of
seats flown. The load factor is not weighted for the
effect of varying sector lengths.
Operated aircraft utilisation
Average number of block hours per day per aircraft
operated.
Other costs
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.
easyJet plc
Annual report
and accounts 2011
Europe by easyJet
THANK YOU
We’d like to thank everyone who has helped to produce this report:
Paul Ablin, Charlotte Allin, Angela Bennett, Alita Benson, Warwick Brady, Mike Campbell,
Trevor Didcock, Peter Duffy, Joanne Flynn, Chris Gadsden, Paul Gibson, Lewis Girdwood,
Val Goldine, Adam Hughes, Bruce James, Chris Kennedy, Rachel Kentleton, Ken Lawrie,
Thomas Loizeau, Cath Lynn, Carolyn McCall OBE, Nicola McGarry, Shuhall Miah,
Paul Moore, Reg Otten, Chris Paull, Giles Pemberton, Sir Michael Rake, Tom Smethers,
Andrew Tempest, Helen Whittle and all of our employees across the network.
1 Overview
4 Corporate responsibility
Highlights
Chairman’s introduction
Turning Europe Orange
Our cause
2 Business review
Our long-term strategy
Chief Executive’s introduction
Strategic position
Strategy implementation
Market review
Looking forward to 2012
Key performance indicators
3 Performance and risk
Financial review
Introduction
Financial performance
Earnings per share
Cash flows and financial position
Going concern
Significant contracts and creditor policy
Principal risks and uncertainties
02
03
04
06
08
09
10
13
13
14
16
19
19
22
24
24
25
25
27
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 2011.
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 62, 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.
Introduction
Safety
People
Environment
5 Governance
Chairman’s introduction
Board of directors
Executive management team
Corporate governance
Shareholder information
Report on Directors’ remuneration
Statement of Directors’ responsibilities
32
32
33
36
41
42
44
46
51
52
62
6 Accounts & other information
Independent auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the accounts
Company statement of financial position
Company statement of changes in equity
Company statement of cash flows
Notes to the Company accounts
Five year summary
Glossary
64
65
66
67
68
69
70
98
99
100
101
103
104
This annual report is printed on Amadeus 100 Silk paper and board, produced using 100% deinked,
recycled fibre. Both the paper mill and the printer involved in this production hold ISO 14001
accreditation, which specifies a process for continuous environmental improvement, and both are
FSC® certified. If after reading, you no longer wish to retain this report, 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
Designed and produced
by Radley Yeldar
www.ry.com
www.easyJet.com
Hangar 89
London Luton Airport
Luton
Bedfordshire
LU2 9PF
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Annual report and accounts 2011