Annual report and accounts 2012
easyJet plc
Annual report and accounts 2012
Overview
europe by easyJet
Overview
02
easyJet at a glance
Key performance indicators
Chairman’s introduction
s
02
04
06
PERFORMANCE
AND RISK
Governance
18
s
19
Key performance indicators
21
Exchange rates
21
Financial performance
23
Cash flows and financial position
25
Going concern
Significant contracts and creditor policy 25
26
Principal risks and uncertainties
BUSINESS REVIEW CORPORATE
07
Strategic framework
Performance during the year
Market overview
Strategic progress
Looking forward
RESPONSIBILITY
31
Introduction
Safety first
Our people
easyJet and the environment
easyJet actions
s
08
09
12
13
16
s
32
32
33
36
37
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 2012. 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.
38
Chairman’s statement on
corporate governance
Board of Directors
Executive Management Team
Corporate governance
Shareholder information
Directors’ remuneration report
Statement of Directors’ responsibilities
s
39
40
42
44
49
50
62
Accounts &
other information
63
s
67
66
64
65
Independent auditors’ report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement
of financial position
Consolidated statement of
68
changes in equity
69
Consolidated statement of cash flows
70
Notes to the accounts
98
Company statement of financial position
Company statement of changes in equity 99
100
Company statement of cash flows
101
Notes to the Company accounts
103
Five year summary
104
Glossary
Overview
easyJet at a glance
Key performance indicators
Chairman’s Introduction
02
04
06
02
easyJet plc
Annual report and accounts 2012
Overview
easyJet at a glance
easyJet continues to grow
its seats and passengers
Seats flown
million
65.9
Number of passengers
million
58.4
We continue to grow our capacity and
improve load factor, increasing the number
of people flying with us by 7.1% in 2012.
51.9
52.8
56.0
62.5
65.9
43.7
45.2
48.8
54.5
58.4
Our network is truly
pan-European
We have increased the number of routes
offered to our passengers and focused
this growth across continental Europe.
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Number of routes by country
340
151
130
125
97
55
40
144
64
United
Kingdom
France
Italy
Spain
Switzerland Germany
Portugal
Other EU
Non EU
Capacity growth by country
%
9.3
8.2
7.2
4.7
2.3
We attract customers
across Europe
In 2012, 56% of our customers did not
originate from the UK.
Passengers by country 2012
%
UK
France
SWZ/GER
Italy
Spain
Other
44
14
14
13
7
8
Italy
France
SWZ
UK
Other
Presence on top 100 routes
Ranked by primary airport
49
36
26
25
19
14
17
13
18
38
easyJet
IAG
Lufthansa
Group
Air France
-KLM
Alitalia
Air Berlin
– NIKI
SAS
Vuelling
Norwegian Ryanair
Primary airports
Non-primary airports
Our presence
across Europe
easyJet plc
Annual report and accounts 2012
03
23
Bases
214
Aircraft
605*
Routes
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Switzerland
Number of routes
Geneva
Basel
Zurich
56
39
2
Germany
Number of routes
Berlin
Others
41
14
Italy
Number of routes
Milan Malpensa
Rome Fiumicino
Sardinia
Venice
Naples
Sicily
Others
44
25
17
15
14
9
19
France
Number of routes
Paris Charles
de Gaulle
Lyon
Nice
Paris Orly
Toulouse
Bordeaux
Corsica
Others
36
29
24
19
17
11
11
27
UK
Number of routes
98
London Gatwick
44
Bristol
38
London Luton
30
Edinburgh
29
Manchester
London Stansted 26
26
Liverpool
23
Belfast
15
Glasgow
13
London Southend
13
Newcastle
16
Others
Spain
Number of routes
Balearic Islands
Malaga
Madrid
Barcelona
Canary Islands
Alicante
Others
41
15
14
14
12
12
17
Portugal
Number of routes
Lisbon
Faro
Others
21
11
9
Canary Islands
* The number of routes as at 30 September 2012 is 605. The above map reflects
the number of routes which touch each location.
04
easyJet plc
Annual report and accounts 2012
Overview
Key performance indicators
Composite risk value (CRV) index
1.2
1.0
0.8
0.6
0.4
0.2
0.0
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
Oct
11
Dec
11
Feb
12
Apr
12
Jun
12
Aug
12
Sep
12
Overall satisfaction
on this occasion
%
85
85
73
On time performance
%
79
82
75
80
66
79
88
Safety first
No compromise on safety
We will never compromise our commitment
to safety, which is always the first priority
for all our people.
32–37
See Corporate responsibility
for more information
Focus on our customers
Focused on network development
We are committed to making travel easy
and affordable and provide friendly service
to our customers.
08–17
See Business review
for more information
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Likely to recommend
%
90
89
80
82
84
2008
2009
2010
2011
2012
Focus on our network
development
We are focused on improving our routes, slots
and bases to build on our leading presence
across Europe.
Airports where we are
No.1 or No.2 airline
Market share of airports
%
16
18
19
19
21
46
38
37
13
11
08–17
See Business review
for more information
2008
2009
2010
2011
2012
London
Gatwick Geneva
Milan
Malpensa Lisbon
Paris CDG
easyJet plc
Annual report and accounts 2012
05
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Staff turnover
%
40
37
12
6.9
7.6
9.7
7.5
Employee engagement
(uSay)
%
72
23*
66
Focus on our people
We are committed to listening to our people
and engaging with them to improve what we
do and how we do it.
Note, from 2010, we moved from measuring
satisfaction to measuring engagement.
32–37
See Corporate responsibility
for more information
2008
2010
* 2010: Satisfaction was 35%, engagement was 23%
2009
2012
2011
2008
2009
2010
2011
2012
Financially strong
We are committed to improving shareholder
returns whilst remaining prudently financed
with a strong, liquid balance sheet.
Revenue per seat
£
+5.9%
Cost per seat excluding fuel
£
-1.0%
45.51
50.47
53.07
55.27
58.51
29.49
34.37
36.62
36.62
36.25
19–30
See Performance and risk
for more information
2008
2009
2010
2011
2012
Profit before tax /
per seat
£
2.37
0.83
3.36
+21.3%
3.97
4.81
2010*
2009*
2008*
* underlying
ROCE (including operating
leases adjustment)
%
5.7
6.9
3.6
2011
2012
+1.5ppt
9.8
11.3
2010*
2011
2012
2008
2009
2010
2011
2012
2008*
* underlying
2009*
Gearing
%
29
38
32
28
29
+1ppt
Dividends and basic
earnings per share
pence
0
19.8
16.9
0
0
28.4
45.4
52.5
21.5
62.5
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
DPS
EPS
Special dividend
06
easyJet plc
Annual report and accounts 2012
Overview
Chairman’s introduction
Our ambition is to be Europe’s
preferred short-haul airline,
delivering market leading returns.
Sir Michael Rake
Non Executive Chairman
Dear Shareholder,
I am pleased that your Company has delivered continued strong
results this year despite the economic headwinds that we face.
Progress this year
The strength of easyJet’s business model is based around a pan
European network to primary airports, delivered with friendly service,
efficiency and at the lowest cost. This has enabled it to thrive,
evidenced by the 27.9% increase in pre-tax profit to £317 million.
Return to shareholders
Due to the strength of the performance this year, and the Board’s
confidence in the strength of easyJet business model, strategy
and people, the Board has recommended increasing the level of
ordinary dividend paid annually from a ratio of five times cover to
three times cover. Consequently an ordinary dividend of 21.5 pence
per share will be paid in respect of the financial year ended
30 September 2012, an increase of 11 pence per share compared
to the prior year.
Making a strong business stronger
The easyJet team has also taken proactive steps this year to further
strengthen the business. Steps have been taken to ensure that
returns are maximised from the capital deployed in our aircraft. As a
consequence the base in Madrid is being closed. The Company has
redeployed the capacity released to more profitable opportunities in
France, Switzerland, UK and Italy where the potential for shareholder
value is improved. To ensure easyJet remains competitive on cost
and aircraft performance the team are well advanced in its technical
and commercial evaluation of the next generation narrow body
aircraft and engine technology. The Company has stepped up
investment in leadership development and succession planning
ensuring it has the capabilities necessary to deliver superior returns
in the future against a challenging environment.
Regulatory environment
It is vital that aviation operates within a regulatory environment that
rewards efficient behaviour and guards against protectionism which
still shields airports, airlines and ground handling from true and full
competition. In particular, the European Union must now press
ahead with reform of the allocation of slots at airports to enable
new entrants to build up enough frequencies to mount serious
challenges to the legacy operators and overhaul the practices
around ground handling to ensure there is real competition at
every airport. These reforms will benefit the European economy
as consumers will benefit from more new routes, more services
and affordable fares.
easyJet welcomes the Davies Commission as easyJet believes
that the UK aviation sector needs a coherent roadmap for aviation
capacity and infrastructure that integrates air, road and rail links
and ensures we have a thriving and robust aviation sector centred
around customer needs. However any investment in infrastructure
must be cost effective and focused on delivering the level of service
that customers need.
Conclusion
Finally the hard work and commitment of all of easyJet’s people has
been instrumental to its success this year and I would like to thank
them for making 2012 such a successful year.
Sir Michael Rake
Non Executive Chairman
Business
review
Strategic framework
Performance during the year
Market overview
Strategic progress
Looking forward
08
09
12
13
16
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easyJet plc
Annual report and accounts 2012
Business review
Strategic framework
AMBITION
Europe’s preferred
short-haul airline,
delivering market
leading returns
CAUSE
To make travel easy and affordable
STRATEGIC INTENT
Leverage easyJet’s cost advantage, leading
market positions and brand to deliver point-to-point
low fares with operational efficiency and friendly
service for our customers
GUIDING PRINCIPLES
(cid:3)(cid:65) Operational excellence
(cid:3)(cid:65) Efficient asset
utilisation
(cid:3)(cid:65) We are an online
business
SAFETY
FIRST
(cid:3)(cid:65) Aim to be No 1 or
No 2 in the market
with significant share
(cid:3)(cid:65) Focus on large
volume markets
(cid:3)(cid:65) Aim for at least 30% –
40% cost advantage
ENABLERS
(cid:3)(cid:65) Low cost production model
with simple, defined processes
and organisation
(cid:3)(cid:65) Culture of engagement
and going the extra mile
(cid:3)(cid:65) Strong balance sheet and
flexible fleet arrangements
(cid:3)(cid:65) Driving demand through
targeted marketing and
excellent customer insight
(cid:3)(cid:65) Converting demand at net unit
revenue through effective RMS
(cid:65)(cid:3) Safety
(cid:65)(cid:3) Pioneering
(cid:65)(cid:3) One team
(cid:65)(cid:3) Passion
(cid:65)(cid:3) Integrity
(cid:65)(cid:3) Simplicity
OUR VALUES
Chief Executive’s introduction
easyJet plc
Annual report and accounts 2012
09
Our cause is to make travel easy
and affordable.
Carolyn McCall OBE
Chief Executive
£317m
Profit before tax
(2011: £248m) +27.9%
21.5 pence per share
Proposed ordinary dividend
(2011: 10.5 pence per share) +104.8%
Performance during the year
This has been a strong performance and I would like to thank all the
easyJet team for their hard work in delivering this.
Financial performance
easyJet delivered record profit before tax of £317 million up by
£69 million from 2011. The result was delivered despite headwinds
from a £182 million increase in unit fuel costs and ongoing consumer
pressure from the weak European economy combined with a
£50 million increase in Air Passenger Duty charges in UK, France and
Germany. Profit per seat (including fuel) rose by 84 pence to £4.81.
This performance was driven by:
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(cid:3)(cid:65) 5.5% capacity growth and a 1.4 percentage point improvement
in load factor to 88.7%. Passenger numbers rose 7.1% to
58.4 million.
(cid:3)(cid:65) Total revenue per seat grew by 5.9% (7.5% at constant
currency) to £58.51, driven by improved load factors; the
annualisation of changes to fees and charges made in 2011;
the careful targeting of capacity to markets with the strongest
returns potential; improvements to easyJet.com; the success
of the “europe by easyJet” campaign and from competitor
capacity constraint in the market.
(cid:3)(cid:65) Cost per seat excluding fuel fell by 1% for the full year (and
grew by 1.8% at constant currency). Unit cost increases were
driven by increased charges at regulated airports especially
in Spain and Italy and higher load factors. Cost pressures
were partially offset by shorter average sector lengths,
the easyJet Lean programme delivering significant savings
in ground handling and non-regulated airport charges, by
the increased proportion of larger A320 aircraft in the fleet
and by the exceptionally low levels of disruption in
comparison to previous years.
easyJet generated operating cash (excluding dividend payments)
of £457 million in the year. In light of the continued strong
financial performance and cash generation of easyJet and the
robustness of the easyJet balance sheet, the Board has decided
to reduce the level of dividend cover from five times to three
times and consequently the Board has recommended paying
an ordinary dividend of 21.5 pence a share or £85 million.
Return on Capital Employed
easyJet is committed to driving improved returns and growth for
shareholders and so uses a Return on Capital Employed (ROCE)
metric to enable transparent and consistent communication of
this goal for shareholders.
easyJet’s returns have improved year-on-year and its ROCE
continues to be in excess of the Company’s cost of capital.
ROCE – excluding operating
leases adjustment
ROCE – including operating
leases adjustment
2012
2011
Change
14.5%
12.7%
+1.8ppt
11.3%
9.8% +1.5ppt
When easyJet introduced ROCE as a key performance indicator in
2010, the decision was taken not to adjust the calculation for leases
in the expectation that the International Accounting Standards
Board (IASB) would shortly be concluding a review of the most
appropriate accounting treatment of lease financing.
10
easyJet plc
Annual report and accounts 2012
Business review
Chief Executive’s introduction
continued
Example only. Not a current offer.
Over the last year it has become clear that the process is far from
complete and the accounting position is not expected to change
before 2016 at the earliest. As a consequence of the delay and
following shareholder consultation, easyJet has decided to amend
its ROCE methodology to reflect the impact on returns of aircraft
held under operating leases by capitalising them at seven times the
annual lease rental in line with market practice.
Robust operations
easyJet’s strong operational and cost performance is built around
ensuring aircraft depart and arrive on time. This both minimises the
costs of disruption, and improves customer satisfaction and repeat
purchase, which in turn increases revenue. easyJet experienced
considerably less disruption from weather and industrial action than
in previous years. In total, fewer than 1,000 flights were cancelled in
the year to 30 September 2012 compared to over 4,000 flights in
the year to 30 September 2011.
Although predominantly driven by external factors, the reduced level
of cancellations and delays is also as a result of the investment in
easyJet’s operations control centre (OCC). Initiatives launched to
drive operational performance and minimise disruption included the
easyJet turn project, the ongoing twice daily operational calls and
temporarily basing MET Office forecasters in easyJet’s head office
during the course of the Olympics.
On-time performance (OTP) improved again in the year with a 9
percentage point improvement across the network and an increase
of 3 percentage points in the fourth quarter (1). easyJet’s OTP is
now best in-class within the industry (2).
OTP % arrivals within
15 minutes
2011
2012
Q1
65%
88%
Q2
81%
90%
Q3
84%
87%
Q4
Full year
85%
88%
79%
88%
The focus of the operations team in the coming financial year will
be on aircraft turn time during the roll-out of allocated seating whilst
continuing to control cost through standardisation and simplification.
Customer satisfaction
The strong operational performance was reflected in improvements
in customer satisfaction, with a 3 percentage point year-on-year
improvement satisfaction to 82%(3) and a 2 percentage points
improvement in the likelihood to recommend score to 84%.
easyJet closely monitors customer satisfaction and strives to
maintain or grow its customer satisfaction scores through making
travel easy and affordable for its customers. easyJet made further
improvements to its end-to-end customer experience such as the
decision to roll-out allocated seating across the network following its
successful trial this summer. The decision to trial allocated seating
was prompted by scores for the boarding experience which were
lower than the other categories monitored.
Country review
UK
easyJet is the largest carrier in the UK with a market share of
around 20%(4) in the total intra-European market and around 35%
share in easyJet’s markets. easyJet has further increased its total
UK market share by around 1% in the last year, largely due to other
carriers reducing capacity. easyJet saw growth at Gatwick and in its
new base at Southend, while bases in Stansted and Liverpool were
reduced. easyJet is the number one carrier in nine out of eleven UK
easyJet bases with the total number of UK based aircraft at 122.
easyJet plc
Annual report and accounts 2012
11
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(1) Source: On-time performance as measured by internal easyJet system.
(2) Source: On-time performance as measured by flightstats.com.
(3) Source: customer satisfaction data from GfK Customer Satisfaction Tracker.
Time period: FY 2012 versus FY 2011. Data updated October 2012.
(4) Market share data from OAG. Size of European market based on internal easyJet
definition. Historic data based on the 12 month period from October 2011 to end
September 2012. Forward looking data based on available OAG information to
the end of March 2013 with assumptions made on Ryanair growth.
(5) Brand consideration scores from GfK ascent.
Switzerland
Switzerland continues to be a focus market for easyJet. With 7.2%
capacity growth, easyJet has consolidated its leadership position
in both Geneva with around 37% market share and Basel with 43%
market share(4). The capacity increase has enabled easyJet to
launch 7 new routes and add frequencies on core routes such as
Berlin, Barcelona and London. easyJet now operates 19 aircraft out
of its Swiss bases.
France
easyJet grew capacity in France by 8.2% in the year and is the
second largest carrier in France with over 12% market share(4)
and bases 24 aircraft in France. A key part of easyJet’s strategy
in France is to address regional demand for both domestic and
international flights and to become the alternative carrier to Air
France. Capacity growth was focused on the French regions driven
by 11 new routes from its new bases in Nice and Toulouse which
opened in March. This brings the total number of routes touching
these two bases to 41.
Brand consideration(5) and customer satisfaction scores have
increased in the year. Since April 2012, easyJet.com is the
most visited airline website in France.
Italy
easyJet is the third largest carrier in Italy, with a market share of
11%(4). easyJet has 23 aircraft based in Italy with a number 1 share (4)
in its main Milan Malpensa base and a strong presence in Rome
Fiumicino, Venice and Naples.
The easyJet brand is increasing its profile in Italy with the recent
launch of easyJet’s first television advertising campaign. Brand
consideration(5) has increased by 11 percentage points up to
46% thanks to more targeted marketing activities in the key
catchment areas.
Germany
In a highly regional market, easyJet’s focus in Germany has
remained on building a strategic European point-to-point network
in Berlin (now with 50% market share in Schönefeld(4)). easyJet
has continued to build both its leisure and business product out
of Berlin whilst rationalising the non-essential network in Dortmund
to improve profitability.
Spain
The outbound Spanish market, remains one of the most
competitive in Europe, with the existing overcapacity leading to
lower yields than in other easyJet markets. Lower yields and high
and increasing airport charges led to the decision to cease having
crew and aircraft based in Madrid from 1 December 2012. The base
closure is on plan and 87% of the 300+ staff currently based in
Madrid have accepted the offer to relocate to another easyJet
operational base in Europe.
easyJet remains committed to Spain, including Madrid, and will
continue to fly to and from Spain out of its other bases. Although
capacity will be reduced by around 9%, easyJet expects to carry
over 12 million passengers to and from Spain next year.
Portugal
easyJet is the third largest carrier in Portugal with a market share of
around 13%(4) and is also the second carrier in Lisbon Portela airport,
having opened a base there in April 2012. The base launched with
two aircraft and a third one started there in November 2012.
12
easyJet plc
Annual report and accounts 2012
Business review
Chief Executive’s introduction
continued
Market overview
Competitive landscape
There are 3,000 short-haul aircraft in operation in Europe and
around half of overall capacity is flown by the top five carriers:
Ryanair, IAG, Lufthansa, AF-KLM and easyJet. In recent years,
the sustained high price of aviation fuel combined with restricted
European economic growth and consumer spending, rising aviation
taxes and scarcity of financing has led to a difficult operating
environment for all airlines.
In the past year, several carriers have exited and other carriers have
changed ownership or required refinancing; the charter operators
are seeing their market share and profitability diminishing further;
and the losses incurred from legacy operators’ short-haul operations
are well publicised. Consequently, overall capacity in the European
short-haul aviation market remained flat, and declined slightly on
easyJet’s routes(4).
Overall demand for European point-to-point leisure and business
travel in the medium term is expected to grow slightly ahead
of GDP and this, combined with the capacity restraint in the
European aviation market, means that there are structural growth
opportunities for carriers such as easyJet with robust business
models and strong competitive positions.
Competitive position
easyJet is one of the very few pan-European low-cost carriers in
the European short-haul passenger aviation market and is focused
on making travel easy and affordable for its customers. easyJet
is the fourth largest short-haul carrier in Europe with a market
share of 8%(4) and derives its competitive advantages from the
following attributes:
(cid:3)(cid:65) leading short-haul network with the highest number of market
pairs within Europe’s top 100 market pairs and strong market
shares in valuable markets such as London, Paris, Milan,
Amsterdam and Geneva;
(cid:3)(cid:65) low cost, efficient and flexible business model derived from
scale and cost advantage, high asset utilisation, a young
efficient fleet with low cost ownership, a leading online and
digital offering and industry-leading load factors; and
(cid:3)(cid:65) efficient and robust capital structure.
Regulatory environment
The regulatory environment continues to have a significant impact
on easyJet and over the last year monopoly infrastructure providers
have pushed through unreasonable increases in charges.
However, there are EU proposals on slot and ground handling
frameworks which could improve competition across Europe and
allow better access to congested airports. easyJet has devoted
significant effort to the European Commission’s proposals as these
have the potential to improve competition at airports. In particular,
easyJet is advocating the legalisation of secondary slot trading at
airports across Europe and an increase in competition within the
ground handling market which would lead to lower costs and an
improved service. This is particularly important in Germany and
Portugal, where anti-competitive restrictions on the number of
ground handlers at an airport have led to excessive costs.
easyJet plc
Annual report and accounts 2012
13
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ROIS EN LEUR CHÂTEAU
et vous, vos envies ?
nice au départ de lille
à partir de39€ aller simple,
*
taxes incluses
Example only. Not a current offer.
(4) Market share data from OAG. Size of European market based on internal easyJet
definition. Historic data based on the 12 month period from October 2011 to end
September 2012. Forward looking data based on available OAG information to
the end of March 2013 with assumptions made on Ryanair growth.
easyJet supports the work to make airspace more efficient through
the Single European Sky initiative, and the European Commission’s
efforts to drive lower costs into airspace. Europe now has a real
opportunity to address the inefficiencies in airspace, and it is vital
that individual Member States are not allowed to escape their
responsibilities to deliver change and control costs.
easyJet remains concerned with the continual increase in taxes
on aviation across Europe, which is undermining European growth
and ultimately jobs. easyJet has undertaken work to demonstrate
to governments that these taxes are not in their interest or those
of consumers or people working within the sector.
Towards the end of 2012, the European Commission will set out
a redraft of the EU 261 regulations, which govern passenger rights.
easyJet is focused on ensuring that the reform brings clarity to
airline obligations. easyJet believes in the importance of providing
passengers with the right level of protection, but also the protection
passengers value and want to pay for.
The airports easyJet flies to are central to its business model.
easyJet’s network focuses on primary airports where people want
to fly to and this provides easyJet with access to important
catchments and drives up unit revenues. Primary airports tend
to have pricing power and could engage in monopolistic behaviour
if they are not regulated.
Where airports are monopolies, regulation is the only effective
answer. Only in this way will passengers be protected from
excessive airport charges and poor service. easyJet has focused
on ensuring that there is effective regulation where it is needed, but
also that regulators understand the needs of point-to-point airlines
and their passengers. There is cost pressure from regulated airports
across Europe from a combination of lower passenger volumes,
restricted access to finance and upcoming regulatory reviews.
The cost increases from the regulatory reviews in Spain and Italy
were disappointing for easyJet and there are upcoming reviews
at Gatwick, Geneva and Stansted. To address the risk of increasing
airport costs, easyJet has put in place a more sophisticated
approach to regulated airport charges building on experience
of working with governments and economic regulators. This has
involved developing economic evidence on the impact of airport
charges, providing technical input into regulatory reviews and
ensuring that easyJet is properly represented in discussions with
regulators and governments.
At non-regulated airports, easyJet has worked where possible
to put in place long-term contracts that mitigate the risk of future
cost increases and ensure that easyJet can build on a long-term
sustainable platform.
Strategic progress: easyJet is uniquely positioned to
be the structural winner in European short-haul aviation
easyJet is structurally positioned as the strongest pan European
airline due to its cost advantage, leading market positions at
convenient airports and great customer proposition of low fares
with friendly and efficient service supported by one of the strongest
balance sheets in European aviation. As inefficient and financially
weak competitors retrench, easyJet will continue its strategy to build
its leading position on Europe’s top 100 routes where it has a 25%
market share to become the leading point-to-point airline flying
between primary airports. This will enable easyJet to deliver
passenger growth, in excess of the market overall, of around 3%
to 5% per annum and tangible returns to shareholders of an
annual ordinary dividend of three times cover.
14
easyJet plc
Annual report and accounts 2012
Business review
Chief Executive’s introduction
continued
M.B.A.*
From
£79
* That’s ‘Much Better Airline’, by the way.
And you don’t need a degree from Harvard
to work out why:
Flexibility
We offer flexible fares from £79 one way.†
Allocated seating
We’re introducing allocated seating
on every flight.
Comprehensive flight network
We fly on more of the top 100
European routes than any other airline.
Business-friendly schedule
We fly from London to 22 major
European cities and back, within
a single business day.
Business sense, not business class.
Example only. Not a current offer.
(6) To be delivered as part of a GB Airways commitment.
(7) The 16 future easyJet deliveries and 2 ex-GB Airways deliveries are anticipated to
be delivered over the next three financial years; 10 in FY13, 6 in FY14 and 2 in FY15.
(8) Purchase options and rights may be taken on any A320 family aircraft and are
valid until 2015.
In order to execute against our strategy, easyJet is focused on four
key objectives:
1. Build strong number 1 and 2 network positions
2. Maintain cost advantage
3. Drive demand, conversion and yields across Europe
4. Disciplined use of capital
1. Build strong number 1 and 2 network positions
A core easyJet strength is its pan-European network which
connects more of the top 100 city to city market pairs than any
other airline. easyJet’s principal competitors are the legacy carriers
operating in slot constrained, primary airports over whom easyJet
enjoys a significant cost advantage, allowing it to offer competitive,
affordable fares. easyJet has the number 1 or 2 market share
position in 21 valuable slot constrained airports such as London
Gatwick, Paris Orly, Milan Malpensa, Amsterdam and Geneva.
easyJet has built up key positions in slot constrained airports
over a number of years which provide the Company with a very
competitive and resilient network platform for its operations.
easyJet’s strategy is to continue to build positions of strength in its
key markets and to reallocate aircraft to the routes and bases which
will deliver the highest returns. Routes are measured on the returns
they are delivering against the Company’s returns target. Capacity
on underperforming routes is reallocated, or performance managed
and profitability improved, to deliver an appropriate return. In a
dynamic marketplace, 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.
As a consequence of the desire to re-orientate the easyJet network
to drive sustainable long-term returns, easyJet took the difficult step
of announcing the proposed closure of its Madrid base from winter
2012/13. easyJet will continue to serve Madrid and the rest of Spain
but to do so differently by moving its aircraft to other easyJet bases,
which will deliver higher returns for the airline.
It was clear from the network review that the Madrid base was
delivering returns, significantly below all of easyJet’s other bases.
This was due to a combination of overcapacity in the Spanish
airline market, leading to low revenue per passenger, combined with
high airport charges, which have more than doubled in the last two
years and will be subject to further increases above inflation in the
coming years.
Aircraft have been redeployed in areas which have the potential to
drive higher returns, further evidenced by the strengthening of our
position in Lyon and the opening of the French regional bases in
Nice and Toulouse; the new Lisbon base; London Southend opening
to improve the offering in north London and additional aircraft
based in Gatwick, Basel and Milan with further plans to increase
aircraft based in Edinburgh and Manchester.
2. Maintain cost advantage
easyJet has a cost advantage over its competitors in the airports
that it operates from, allowing it to offer competitive and affordable
fares. Its key competitors in these airports tend to be legacy carriers
with older, less efficient aircraft, lower asset utilisation, lower seat
densities and load factors and higher levels of fixed costs. This lower
cost base enables easyJet to offer the lower fares its customers value.
In addition, easyJet’s asset utilisation of 10.4 block hours per day for
owned aircraft is amongst the highest in the industry. During the
year, asset utilisation decreased by 0.6% year-on-year following the
introduction of shorter but higher returning sectors including French
domestic routes.
easyJet plc
Annual report and accounts 2012
15
easyJet Lean
The easyJet Lean programme is now firmly established and embedded
within the organisation with targets every year on a rolling 5 year
basis under the sponsorship of the Chief Financial Officer.
easyJet Lean’s goal is to protect easyJet’s structural cost advantage
by ensuring below inflation non-fuel cost per seat increases. The
emphasis is both on keeping cost out as well as taking cost out.
easyJet Lean delivered ahead of the planned £90 million in 2012 and
expects to deliver additional savings of around £35 million in the
2013 financial year. Savings are being achieved by driving cost
efficiencies through best in-class procurement, leveraging scale,
tight control of overhead costs, greater crew flexibility and improved
operational performance. Savings to date have partially offset
inflationary increases and the increased investments in infrastructure
developments including allocated seating.
Ground handling was a target area in the last financial year and
significant savings have been achieved. Over a third of ground
handling contracts measured by spend were renegotiated,
delivering typical savings of between 5% and 15%. easyJet continues
to work with suppliers to drive operational efficiencies and to
simplify its product.
easyJet’s strategy is focused around building strong positions at
primary airports where there is inherent demand and thus higher
yields are available. Consequently around 70% of easyJet’s airport
costs come from regulated airports and there have been above
inflationary cost increases in the period especially in Italy and Spain.
The easyJet procurement team have mitigated part of the impact
by putting in place key deals to support asset growth elsewhere in
the network. easyJet expects further cost pressure from regulated
airports in 2013.
easyJet continues to make progress in optimising crew costs
to ensure it is competitive in each market in which it operates.
Successes include agreeing more flexibility with crew and increasing
crew planning horizons. easyJet continues to recognise and engage
with unions during a difficult economic time for the industry.
Fleet
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 the flexibility to move aircraft between
routes and markets to improve returns.
easyJet’s total fleet as at 30 September 2012 comprised 214 aircraft,
split between 156 seat Airbus A319s and 180 seat A320s. During the
year, easyJet took delivery of 19 A320 aircraft under the terms of
the Airbus easyJet agreement and seven A319 aircraft exited the
fleet. The two remaining Boeing 737-700s were returned to their
lessors in November 2011.
The larger A320 aircraft have been introduced over the last few
years with minimal reduction in yields, and deliver a per seat cost
saving of approximately 7% over the A319 aircraft through
economies of scale, efficiencies in crew, ownership, fuel and
maintenance. The modest increase in the proportion of A320s
this year delivered a 21 pence per seat cost saving in 2012. easyJet
believes that the mix of A320s in the fleet can continue to increase
in the foreseeable future with minimal impact on yields.
easyJet targets an owned:leased split of aircraft of 70:30 but,
as it evaluates the next generation of aircraft, expects the mix
to fluctuate.
The major airframe suppliers have embarked upon the development
of the next generation of short-haul aircraft to take advantage of
new engine technology being developed by CFM International (a
joint venture between General Electric and Snecma) and Pratt &
Whitney. Airbus and Boeing are updating their single aisle aircraft
with new engines and various other upgrades whilst Bombardier is
producing a completely new 100 to 150 seat family aircraft using the
latest systems and production techniques. The new aircraft types,
which are planned to enter service over the next six years, promise
double digit fuel efficiency improvements which are clearly attractive
to easyJet.
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easyJet is making good progress on its technical and commercial
evaluation of the next generation of short-haul aircraft technology.
As the evaluation advances further, easyJet will bring a proposal to
shareholders which will cover both the next generation of deliveries
which are likely to be after 2017 and a plan for the bridging period
from 2014 to 2017.
easyJet’s intention for any new aircraft order is to maximise the
economic efficiencies of the fleet and to support further returns-
focused capacity growth.
Fleet as at 30 September 2012:
Owned
Operating
leases
Finance
leases Total
Changes
in year
Future
committed
Unexercised
purchase
rights and
deliveries(7)
options(8)
easyJet
A319
easyJet
A320
Boeing
737-700
GB Airways
A320 family
105
49
6 160
43
–
–
6
–
–
148
55
5
–
54
–
–
–
11 214
-7
19
-2
–
10
–
16
–
2(6)
18
–
73
–
–
73
3. Drive demand, conversion and yields across Europe
Over the course of the year, easyJet introduced a number of
initiatives to drive demand and improve unit revenue. Unit revenues
rose by 7.5% on a constant currency basis to £59.41.
The “europe by easyJet” campaign has continued to drive visits to
easyJet.com and has been a success in all of its major markets. The
aim of the campaign has been to develop a brand that people
know, like and understand, increasing their likelihood to fly with
easyJet on a recurring basis.
During the course of the year, easyJet launched its first television
advertising campaign focusing on connecting people across Europe
and the experiences customers have. The emphasis has been
placed on having a consistent presence across Europe with
appropriate market testing and tailoring of key messages. The TV
campaign was delivered at the same time as reducing marketing
cost per seat with a reallocation of marketing investment achieved
through the rigorous testing of all media.
easyJet has continued to focus on attracting business travellers to
improve unit revenues. Key to success in this market is to establish
effective partnerships with Global Distribution System (GDS)
providers, travel management companies (TMCs) and large scale
corporate customers. The emphasis of the business traveller
initiative in 2012 was to put these building blocks in place for future
growth. Agreements were signed with the major GDS providers
(including Amadeus), the leading TMCs (including American
16
easyJet plc
Annual report and accounts 2012
Business review
Chief Executive’s introduction
continued
Express) and by reaching agreements with specific customers
(including major high street banks) and recently with the UK Houses
of Parliament. easyJet is working in partnership with the GDS
providers and TMCs to improve technology to make the booking
functionality for third party agents easier and expects these
improvements to be completed in mid-2013.
In the cost conscious business travel market, easyJet has seen
a 6% growth in business passengers and increased its share of
the European business travel market. (9)
In September, easyJet announced that its allocated seating trial
had been successful and would be rolled out across its network
by 27 November 2012. easyJet was keen to ensure that allocated
seating did not impact asset utilisation and is confident that the
roll-out will not materially diminish on-time performance. Customer
feedback has been positive with more than 70% of customers
preferring allocated seating and over 60% more likely to use easyJet
in the future(10).
easyJet is the third most searched for airline globally(11) with close
to 400 million visits to easyJet.com over the last 12 months. 60%
of visitors originate from outside the UK.
easyJet.com’s new content management system was introduced
to improve operational efficiency, increase agility, and target specific
users with relevant route pricing and messages. Other new initiatives
include the introduction of InspireMe, a map based search tool
targeting those people who may not know exactly where or when
they want to travel, and specific Swiss and US websites.
During the course of the year, easyJet also focused on broadening
its digital reach through the introduction of new channels. As at
30 September 2012, the easyJet mobile app had over 3 million
downloads delivering £42 million of revenue since its introduction
in December 2011. The easyJet app is now available through iPhone
and Android devices and has been complemented with the recent
launch of a mobile website. By focusing on core booking
functionality and “making travel easy” for customers on the move,
easyJet is well positioned to take further advantage of
developments in this growing area.
easyJet made significant improvements in the way it prices its
flights over the last 12 months, investing in improvements to its yield
management system. Developments include continuous pricing
allowing more specific yield algorithms to be utilised on a wider
range of flights, using the latest artificial intelligence techniques
to optimise pricing, and further unbundling and yield managing
ancillary charges.
Through partnerships with leading providers (including booking.com
and Europcar) and an increased focus on customer insight and
segmentation, easyJet is in the process of overhauling its customer
contact strategy. A range of relevant and personalised emails will be
deployed at appropriate points with the aim of driving ancillary upsell
and improving customer experience.
4. Disciplined use of capital
The aviation market is a highly capital intensive industry and it is
important for airlines to pay careful consideration to its financing
and balance sheet position to balance risk, growth, access to
funding and shareholder returns.
easyJet has a strong balance sheet and derives a competitive
advantage through access to funding at a lower cost. easyJet
has a range of measures and tools to effectively allocate capital
and resources across its network whilst maintaining an optimal
capital structure. This has enabled easyJet to deliver returns in
excess of its cost of capital. easyJet has the following targets
to ensure its capital structure remains both robust and efficient:
(cid:3)(cid:65) a maximum gearing of 50% giving investors and finance
providers assurance that easyJet will not over-leverage;
(cid:3)(cid:65) a limit of £10 million net debt per aircraft; and
(cid:3)(cid:65) a target £4 million liquidity per aircraft.
These measures allow easyJet to withstand external shocks such
as an extended closure of airspace, significant fuel price increases
or a sustained period of low yields whilst being in a position to drive
growth and returns for shareholders.
Over the cycle, easyJet is committed to covering its cost of capital,
and will self-fund both growth and the dividend from the cash flows
of the business.
During the year good progress has been made on reducing excess
liquidity and capital by paying a special dividend of £150 million
and repaying £162 million of relatively high coupon mortgage debt.
easyJet is currently in the process of closing sale and leasebacks
for 12 new A320s and 12 older A319 aircraft. The tender process
was heavily oversubscribed allowing easyJet to close deals at very
attractive lease rates; demonstrating the benefit of easyJet’s strong
balance sheet.
In light of the continued strong financial performance of easyJet
and the robustness of the easyJet balance sheet, the Board has
decided that it is appropriate to reduce the level of dividend cover
from 5 times to 3 times for the foreseeable future and consequently
the Board has recommended paying an ordinary dividend of 21.5
pence per share at total cost of £85 million, an increase of 104.8%.
The recommended ordinary dividend will be paid on Friday
22 March 2013 to those shareholders on the register at the close
of business on Friday 1 March 2013 with an ex-dividend date of
Wednesday 27 February 2013.
Looking forward
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 current
hedging arrangements are set out below:
Percentage of anticipated requirement hedged
Six months ending 31 March 2013
Average rate
Full year ending 30 September 2013
Average rate
Full year ending 30 September 2014
Average rate
Fuel
requirement
US Dollar
requirement
Euro
surplus
86%
$986 m/t
78%
$985 m/t
55%
$993 m/t
86%
$1.61
81%
$1.60
62%
$1.58
76%
€1.18
68%
€1.18
48%
€1.22
RUSSIA.
FOR THE
PEOPLE.
We’re pleased to announce that we’ll soon be flying from
London Gatwick to Moscow, making travelling to the Russian
capital more affordable for everyone.
where are you going?
new route to moscow coming soon
moscow
from
£67*
one way pp
Example only. Not a current offer.
easyJet plc
Annual report and accounts 2012
17
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Sensitivities
(cid:3)(cid:65) A $10 movement per metric tonne impacts the FY’13 fuel bill
by $4 million.
(cid:3)(cid:65) A one cent movement in £/$ impacts the FY’13 profit before
tax by £1.6 million.
(cid:3)(cid:65) A one cent movement in £/€ impacts the FY’13 profit before
tax by £1.2 million.
Outlook
The European macro-economic environment remains uncertain
and easyJet continues to be disciplined in its approach to asset
allocation. Weaker competitors have retrenched and there are clear
opportunities for profitable growth, thus easyJet will grow overall
capacity in seats flown by around 3.5% in the first half of the year.
Full year capacity growth is expected to be at a similar level to the
first half of the year.
Forward bookings for the first half of the 2013 financial year are
broadly 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 low to mid-single digits; as is usual at this
time of the year, it is too early to have any visibility on second half
revenue per seat performance.
easyJet expects cost per seat (excluding fuel and currency
movements) to increase by around 3% to 4% for the full year and
by around 4% to 5% for the first half assuming normal levels of
disruption and constant load factors. Cost increases will be
predominantly driven by increases in charges at regulated airports
and airport costs are likely to increase by £70 million at constant
currency for the 2013 financial year.
It is estimated that at current exchange rates and with fuel
remaining within its recent $1,000 m/t to $1,100 m/t trading range,
easyJet’s unit fuel bill for 2013 financial year would be up to
£30 million higher (12). In addition, exchange rate movements
(excluding those related to fuel) are likely to have a further
£50 million(12) negative impact in the 2013 financial year.
The challenges faced by easyJet are shared by all European airlines
but easyJet’s leading European network and cost advantage
combined with a disciplined approach to use of capital means
that easyJet is well placed to continue to make travel easy and
affordable for customers and to continue to generate returns
and growth for shareholders.
Whilst there is always the potential for unexpected events to
temporarily impact financial results the Board of easyJet is confident
that its business model, strategy and people will consistently
continue to generate returns and growth for shareholders.
We are well placed to take advantage of opportunities due to the
strength and commitment of the people at easyJet for which
I would like to say thank you.
Carolyn McCall OBE
Chief Executive
(9) Source: Business traveller market share from PhoCusWright report October 2012.
(10) Source: Allocated seating data based on 32,000 respondents to end of
August 2012.
(11) Source: Google.
(12) Rates as at 16 November 2012: USD $1.59 / £1, €1.25 / £1 and US $1,019 per
metric tonne.
Performance
and risk
Key performance indicators
Exchange rates
Financial performance
Cash flows and financial position
Going concern
Significant contracts and creditor policy
Principal risks and uncertainties
19
21
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23
25
25
26
Performance and risk
Financial review
easyJet plc
Annual report and accounts 2012
19
We will maintain a robust capital
structure and deliver sustainable
returns to shareholders.
Chris Kennedy
Chief Financial Officer
£4.81
Profit before tax per seat
(2011: £3.97) +21.3%
11.3%
ROCE (including operating
leases adjustment)
(2011: 9.8%) +1.5ppt
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Key performance indicators
easyJet has delivered a strong financial performance for the 2012
financial year, despite continuing macroeconomic challenges across
Europe and fuel prices remaining both high and volatile. Profit
before tax grew by 27.9% to £317 million, resulting in profit before
tax per seat of £4.81; close to our ambition of £5. Profit after tax was
£255 million, an increase of 13.3% from £225 million last year.
Return on capital employed and capital structure
ROCE – excluding operating
leases adjustment
ROCE – including operating
leases adjustment
Return on equity
Gearing
2012
2011
Change
14.5% 12.7% +1.8ppt
11.3% 9.8% +1.5ppt
14.6% 14.0% +0.6ppt
29% 28%
+1ppt
When return on capital employed was introduced as a key
performance indicator in 2010, the decision was taken not to adjust
the calculation for aircraft held under operating leases. This was in
the expectation that the IASB’s leasing project would complete in a
relatively short time frame, resulting in all leases being shown on the
statement of financial position.
Over the last year it has become clear that this process is far from
complete and the accounting position is not expected to change
before our 2016 financial year at the earliest. Consequently it has
been decided to amend our ROCE calculation to reflect appropriately
the impact on return on capital of aircraft held under operating
leases by capitalising that at seven times the annual lease rental,
in line with market practice. While the returns indicated by the new
measure are lower, the measures are closely correlated and both
old and new measures indicate returns in excess of cost of capital.
ROCE including operating leases adjustment for the year was 11.3%,
an increase of 1.5 percentage points from the previous year.
Return on equity improved by 0.6 percentage points to 14.6%. This
increase is lower than that seen in either ROCE measure due to the
increase in effective tax rate from 9% last year to 20% this year.
During the year good progress has been made on reducing excess
liquidity and capital by paying a special dividend of £150 million and
repaying £162 million of relatively high-coupon mortgage debt.
Gearing was stable at 29% (2011: 28%).
Profit before tax per seat
%
9.0
8.0
7.0
6.0
5.0
4.0
3.0
4.14
(2.77)
(0.18)
0.22
(0.69)
4.81
3.97
0.12
2011
Currency
impact
(excl fuel)
Revenue
Fuel
(inc fuel)
Crew
Disruption Other cost
2012 PBT
per seat
2012
20
easyJet plc
Annual report and accounts 2012
Performance and risk
Financial review
continued
Revenue
%
Costs
%
GBP
EUR
Other
USD
EUR
USD
GBP
Other
47
43
9
1
35
35
24
6
Financial performance per seat
2012
2011
£ million
£ per
seat
Pence
per ASK
3,854
58.51
5.34
£ million
3,452
£ per
seat
Pence
per ASK
55.27
4.98
2,388
1,149
36.25
17.45
317
62
4.81
0.94
3.31
1.59
0.44
0.09
2,287
917
36.62
14.68
248
23
3.97
0.37
3.30
1.32
0.36
0.04
255
3.87
0.35
225
3.60
0.32
Total revenue
Costs
excluding
fuel
Fuel
Profit
before tax
Tax charge
Profit
after tax
Total revenue grew by 11.6% to £3,854 million resulting in growth
of 5.9% in revenue per seat to £58.51. At constant currency, revenue
per seat grew by 7.5% to £59.41. Just over half of this improvement
was driven by improved ticket prices, with the balance mainly from
the annualising of changes to fees and charges introduced last year.
Excluding fuel, cost per seat fell by 1.0% to £36.25, however it grew
by 1.8% at constant currency. easyJet experienced above-
inflation increases in charges at regulated airports (particularly in
Spain and Italy). Set against this easyJet successfully re-negotiated
a number of key ground handling contracts and also continued to
benefit from the increasing proportion of larger A320 aircraft in the
fleet. To a lesser extent, cost per seat was also adversely impacted
by higher load factors and benefited from slightly shorter average
sector length.
Disruption levels and the costs that resulted were exceptionally
low this year with just over 1,000 sectors cancelled on the day or
delayed overnight. This is a quarter of the level experienced last year.
While it is pleasing to be able to report this, easyJet does not
consider it to be representative of what may be seen in the future.
As previously reported, our average fuel price increased by $164 per
tonne compared with last year resulting in an increase in fuel unit
costs of £182 million, equivalent to £2.77 per seat.
Overall, profit before tax increased by £69 million (£0.84 per seat)
to £317 million (£4.81 per seat). While the impact of exchange rate
changes on certain components of the income statement were
significant, overall profit before taxation was improved by £10 million
driven by the favourable timing of Euro booking revenues.
The tax charge was £62 million resulting in an effective tax rate of
20% (2011: charge of £23 million and effective tax rate of 9%). The
difference between the effective tax rate and standard UK rate is
principally driven by the reduction in the UK deferred tax rate to 23%
and the utilisation of previously unrecognised losses.
Earnings per share and dividends per share
Earnings per share
Ordinary dividend per share
Special dividend per share
2012
62.5p
21.5p
2011
Change
52.5p
19.0%
10.5p
104.8%
–
34.9p
N/A
easyJet paid its first ever dividends during March 2012,
comprising an ordinary dividend of 10.5 pence per share and a
special dividend of 34.9 pence per share. The total dividend paid
was £196 million. Following payment of the special dividend,
share capital was consolidated on a basis of 11 for 12, and at
year end we had 396 million shares of 272/7 pence outstanding.
easyJet plc
Annual report and accounts 2012
21
Financial performance
Revenue
2012
2011
£ million
£ per
seat
Pence
per ASK
£ million
£ per
seat
Pence
per ASK
3,794
57.61
5.26
3,389
54.25
4.89
60
3,854
0.90
58.51
0.08
5.34
63
3,452
1.02
55.27
0.09
4.98
Seat revenue
Non-seat
revenue
Total revenue
Revenue per seat improved by 5.9% compared with last year
to £58.51 reflecting strong performances across the network
(with the exception of Spain), particularly from London Gatwick,
France and Switzerland.
Seats flown grew by 5.5% to 65.9 million, principally in London
Gatwick, France and Switzerland. Load factor was marginally higher
at 88.7% and passengers increased by 7.1% to 58.4 million.
Seat revenue contributed 6.2% 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, increased by 8.0% to £6.76 per seat.
Non-seat revenue contracted by 11.8% to £0.90 per seat as
commissions earned from sale of travel insurance and, to a lesser
extent, car hire continued to fall.
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i
s
k
Costs
Operating
costs
excluding
fuel
Fuel
Ownership
costs
Total costs
Total costs
excluding
fuel
2012
2011
£ million
£ per
seat
Pence
per ASK
£ million
£ per
seat
Pence
per ASK
2,174
1,149
33.00
17.45
214
3.25
3,537
53.70
3.01
1.59
0.30
4.90
2,067
917
220
3,204
33.10
14.68
3.52
51.30
2.98
1.32
0.32
4.62
2,388
36.25
3.31
2,287
36.62
3.30
Total cost per seat increased by 4.7% to £53.70; however excluding
fuel, cost per seat was broadly flat at £36.25, and up by 1.8% at
constant currency.
Earnings per share grew 19.0% to 62.5 pence per share. Of this
increase, 13.6% is due to growth in profit after tax and 5.4% due
to the impact of the share consolidation following payment of
the special dividend in March.
Ordinary dividend per share grew by 104.8% to 21.5 pence per share.
easyJet is pleased to announce that dividend policy is being
amended from this year to pay out one-third of profit after tax
for each year, up from the one-fifth payout introduced last year.
There are no plans to propose a further special dividend at this time,
and excess liquidity will continue to be used where appropriate to
pay down mortgage debt.
Exchange rates
Capacity grew in the year by 3.4 million seats flown, of which around
two-thirds was deployed in bases outside the UK. While this resulted
in increased cash flows denominated in euros, the weakness of the
euro against the pound meant that the overall currency profile of
the business was little changed year-on-year:
Sterling
Euro
US dollar
Other (principally Swiss franc)
Average exchange rates
Euro – revenue
Euro – costs
US dollar
Swiss franc
2012
47%
43%
1%
9%
Revenue
2011
47%
44%
–
9%
2012
€1.19
€1.22
2012
24%
35%
35%
6%
Costs
2011
24%
35%
35%
6%
2011
Change
€1.15
€1.15
(3.9%)
5.8%
(0.6%)
(0.7%)
$1.60
$1.61
CHF 1.46 CHF 1.45
The value of the euro against sterling declined during the year, with
the year end exchange rate 7.8% lower at €1.25/£1. This decline was
more marked during the second half of the year. Since the business
generates a euro surplus (euro revenue exceeds euro costs) a net
loss from this euro exposure might be expected.
However a significant proportion of summer bookings were taken
before the sharpest decline in the exchange rate, which, coupled
with the policy of hedging surplus euros, meant that easyJet was
shielded from the full impact of the falling euro in this financial year.
The impact on profit of changes in exchange rates was as follows:
Favourable / (adverse)
Euro
£ million
Swiss franc
£ million
US dollar
£ million
Other
£ million
Total
£ million
Operating costs excluding fuel
Revenue
Fuel
Costs excluding fuel
Total
(65)
11
68
14
9
–
4
13
1
(10)
(5)
(14)
(5)
–
2
(3)
(60)
1
69
10
Ground
operations
Crew
Navigation
Maintenance
Selling and
marketing
Other costs
2012
2011
£ million
£ per
seat
Pence
per ASK
£ million
£ per
seat
Pence
per ASK
955
432
280
203
104
200
14.49
6.55
4.25
3.08
1.58
3.05
2,174
33.00
1.32
0.60
0.39
0.28
0.14
0.28
3.01
923
407
285
179
102
171
2,067
14.79
6.51
4.56
2.86
1.64
2.74
33.10
1.33
0.58
0.41
0.26
0.15
0.25
2.98
22
easyJet plc
Annual report and accounts 2012
Performance and risk
Financial review
continued
Operating costs per seat excluding fuel decreased by 0.3% to
£33.00. At constant currency, operating costs per seat excluding
fuel increased by 2.8% to £34.01 per seat.
Fuel
Ground operations cost per seat fell by 2.0% but increased by 1.6%
excluding the effect of changes in exchange rates. Although costs
have decreased due to the relatively benign winter weather and
better controls over the use of de-icing fluid, as well as savings on
contract renegotiations with ground handlers, this has been offset
by significant increase at airports operated in Spain by AENA and
a doubling of charges for on-ground navigation services in Italy.
The further increases in AENA charges were a factor in our decision
to withdraw the six aircraft based in Madrid from December 2012.
Crew cost per seat increased by 0.6%, and by 2.8% at constant
currency driven by an average 2% increase in salaries and disciplined
thinning of capacity during the winter months.
Navigation costs fell 6.7% to £4.25 per seat and were down 1.2%
at constant currency despite regulated cost increases averaging 2%.
This reduction is driven by the increased proportion of A320 aircraft
in the fleet and a slightly shorter average sector length as capacity
based on the European mainland continues to grow at a faster rate
than in the UK.
Maintenance costs have been declining for a number of years, but
increased this year by 7.7% to £3.08 per seat; similar to the level
seen in 2010. This increase is driven by one-off items that are
unlikely to recur. The cost benefits from reducing the proportion
of leased aircraft in the fleet have now come to an end, and
the average age of the fleet is gradually increasing as planned.
We are investing in process improvements that will maintain our
cost position in the future.
Other costs increased by 11.3% to £3.05 per seat. This is due to
investment in IT infrastructure, and higher performance-related
employee costs, reflecting the significantly improved profitability
of the business. This was partly offset by unusually low levels of
operational disruption resulting in lower compensation payments
under EU Regulation EU261/2004.
Fuel cost
£ million
1,200
1,100
1,000
900
800
73
42
917
700
2011
Volume
Market price
Jet hedging
Foreign
exchange
hedging
2012
2012
2011
£ million
£ per
seat
Pence
per ASK
£ million
£ per
seat
Pence
per ASK
Fuel
1,149
17.45
1.59
917
14.68
1.32
The market price for jet fuel remained high and volatile over the
year, mostly in excess of $1,000 per tonne. Our hedging activities
continued to defer the full impact of this. Average price paid
increased by $164 to $982 per tonne; in sterling terms an increase
of £110 to £618. Of the total increase in fuel costs of £232 million,
£182 million (£2.77 per seat) is due to the roll off of fuel purchases
hedged at favourable rates.
Forward purchases of 1.8 million tonnes of fuel for 2013 and 2014
were executed during the periodic dips below $1,000 at an average
price of $992 per tonne. As a result the hedged percentages are
78% for 2013 at $985 per tonne and 55% for 2014 at $993 per tonne.
Ownership costs
2012
2011
£ million
£ per
seat
Pence
per ASK
£ million
£ per
seat
Pence
per ASK
Aircraft
dry leasing
Depreciation
Amortisation
Interest
receivable
Interest
payable
and other
financing
charges
Net
exchange
(gains) /
losses
95
97
8
1.44
1.47
0.12
0.13
0.14
0.01
109
83
7
1.75
1.33
0.12
0.16
0.12
0.01
(10)
(0.14)
(0.01)
(9)
(0.15)
(0.01)
25
0.38
0.03
24
0.38
0.03
(1)
(0.02)
–
214
3.25
0.30
6
220
0.09
3.52
0.01
0.32
The final two Boeing 737 aircraft were returned to lessors during
the first quarter, and we now operate a standardised fleet with
two gauges of Airbus aircraft. Depreciation cost per seat increased
by £0.14 to £1.47 driven by the increased proportion of owned
aircraft in the fleet.
The leased proportion of the fleet is currently 26%, which is below
the objective of a 70% owned and 30% leased fleet mix, as
completion of a number of leases was deferred into the first
quarter of the coming financial year. The recent trend of declining
ownership costs is not expected to continue at the same rate,
although the increasing proportion of A320 aircraft in the fleet will
continue to deliver some reductions to depreciation and aircraft
dry leasing costs per seat.
Exchange gains and losses arise from changes in the value of
monetary assets and liabilities denominated in currencies other
than sterling. Fluctuations of the size seen in the last two years
are within the range of expectations given the size of the related
foreign currency cash flows.
104
13
1,149
Ownership costs declined slightly to £3.25 per seat; continuing
recent strong performance.
easyJet plc
Annual report and accounts 2012
23
Summary consolidated statement of financial position
Goodwill
Property, plant and equipment
Net working capital
Restricted cash
Net (debt) / cash
Current and deferred taxation
Other non-current assets and liabilities
Opening shareholders’ equity
Profit for the year
Ordinary dividend paid
Special dividend paid
Change in hedging reserve
Other movements
2012
£ million
2011
£ million
Change
£ million
365
2,395
(792)
159
(74)
(227)
(32)
365
2,149
(765)
123
100
(188)
(79)
1,794
1,705
1,705
255
(46)
(150)
28
2
1,501
225
–
–
(21)
–
1,794
1,705
–
246
(27)
36
(174)
(39)
47
89
P
e
r
f
o
r
m
a
n
c
e
a
n
d
r
i
s
k
Net assets increased by £89 million driven by the profit for the year
offset by dividends paid and a small net change in the hedging reserve.
The net book value of property plant and equipment increased by
£246 million driven principally by the acquisition of 19 A320 family
aircraft, and advance payments for aircraft due to be delivered over
the next two years.
Net working capital was broadly flat at a net negative £792 million.
Passengers pay for their flights in full when booking, therefore the
key component of this balance is unearned revenue, which
increased by £24 million to £496 million. This increase was rather
lower than that seen last year as flights for July and August 2013
did not go on sale until shortly after year end.
Reconciliation of net cash flow to movement in net (debt) / cash
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
2012
£ million
2011
£ million
Change
£ million
645
238
883
(752)
(205)
(957)
(74)
1,100
300
1,400
(1,079)
(221)
(1,300)
100
(455)
(62)
(517)
327
16
343
(174)
Cash flows and financial position
Summary consolidated statement of cash flows
Net cash generated from operating
activities (excluding dividends)
Ordinary dividend paid
Special dividend paid
Net capital expenditure*
Net loan and lease finance
(repayment) / drawdown
Net decrease / (increase)
in money market deposits
Other including the effect
of exchange rates
Net (decrease) / 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
2012
£ million
2011
£ million
Change
£ million
457
(46)
(150)
(389)
424
–
–
(478)
33
(46)
(150)
89
(314)
356
(670)
55
(38)
(68)
(76)
93
8
(455)
188
(643)
1,100
912
188
645
1,100
(455)
238
300
(62)
883
1,400
(517)
* 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. Operating cash flow exceeded capital
expenditure and the ordinary dividend paid in line with the ambition
to self-fund growth and fleet renewal.
Net capital expenditure principally comprises the acquisition of
19 A320 aircraft and advance payments on aircraft due to be
delivered mainly over the next two years.
No new loan or lease finance was drawn down during the year, and
mortgage loans on 12 aircraft were fully repaid. Two of these loans had
reached their contractual end, however the other ten loans were
repaid early as part of our strategy to reduce excess liquidity.
Cash flow
£ million
1,400
1,800
1,600
1,400
1,200
1,000
800
331
(196)
105
67
(71)
(364)
Net (debt) / cash
600
2011
Operating
profit
Dividends
paid
Depn &
Amort
2012
Working
capital
Other
Financing
Capex
2012
(389)
easyJet ends the year with £883 million in cash and money market
deposits; a decrease of £517 million compared with 30 September
2011. Net borrowings decreased by £343 million.
Net debt at 30 September 2012 was £74 million compared with net
cash of £100 million at 30 September 2011. At 30 September 2012
gearing was 29%, marginally higher than last year’s gearing of 28%.
883
Although the net position has changed relatively little, both cash
and debt balances have declined markedly during the year, due
to payment of the special dividend and accelerated repayment of
£162 million mortgage loans and a reduction in the number of
leased aircraft. These actions reduced excess liquidity, and we
ended the year with a cash and money market deposits balance in
line with our policy of holding £4 million cash per aircraft in the fleet.
24
easyJet plc
Annual report and accounts 2012
Performance and risk
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)
Owned 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 – excluding operating leases adjustment
Return on capital employed – including operating leases adjustment
Gearing
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)
2012
65.9
58.4
88.7%
72,182
65,227
1,096
2011
Change
62.5
54.5
5.5%
7.1%
87.3% +1.4ppt
69,318
61,347
4.1%
6.3%
1,110
(1.3%)
411,008
393,147
786,854
761,708
214
206.6
203
195.7
11.0
10.4
605
133
204
198.8
197
185.4
11.3
10.5
547
123
4.5%
3.3%
4.9%
3.9%
3.0%
5.5%
(2.1%)
(0.6%)
10.6%
8.1%
2012
14.6%
14.5%
2011
Change
14.0% +0.6ppt
12.7% +1.8ppt
11.3%
9.8%
+1.5ppt
29%
4.81
0.44
58.51
59.41
5.34
5.42
53.70
36.25
37.28
50.45
33.00
34.01
3.25
4.90
3.31
3.40
4.60
3.01
3.10
0.30
28%
3.97
0.36
55.27
55.27
4.98
4.98
51.30
36.62
36.62
47.78
33.10
33.10
3.52
4.62
3.30
3.30
4.30
2.98
2.98
0.32
+1ppt
21.3%
22.8%
5.9%
7.5%
7.2%
8.9%
4.7%
(1.0%)
1.8%
5.6%
(0.3%)
2.8%
(7.8%)
6.0%
0.2%
3.1%
6.9%
0.6%
4.1%
(6.6%)
easyJet plc
Annual report and accounts 2012
25
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 26 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 £645 million as at
2012. Total debt of £957 million is free from financial covenants, with
£129 million due for repayment in the year to 30 September 2013.
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 single Airbus fleet with the last two Boeings
having been returned to lessors in the year to 30 September 2012.
Engines are provided by CFM International. Maintenance is
undertaken by SR Technics, Virgin Atlantic Engineering*, Monarch
Aircraft Engineering, General Electric, BF Goodrich, ATIS, Storm,
Nayak, Honeywell, Dublin Aerospace and Lufthansa Technik.
The major lessors of aircraft to easyJet are Amentum Capital,
AWAS*, GECAS*, Nomura Babcock & Brown*, SMBC Aviation
Capital*, 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*, SMBC Aviation Capital*, Sumitomo
Mitsui Banking Corporation* and WestLB*.
Our main insurers are Global Aerospace, Allianz, AXA, Canada Life,
QBE Houston Casualty Company Europe and Generali.
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 Unit 4 who provide our accounting system, Agresso.
As at 30 September 2012 easyJet had 23 bases and they were
operated by:
BAA
AdP
Manchester Airports Group
Abertis
Aeroports de Lyon
Global Infrastructure Partners
EuroAirport Basel-Mulhouse-
Freiburg
South West Airports
Peel Holdings
Flughafen Berlin-Schoenefeld
P
e
r
f
o
r
m
a
n
c
e
a
n
d
r
i
s
k
Aeroporti Di Milano
Geneva International Airport
Aeroporti di Roma
Aeroport Toulouse Blagnac
ANA – Aeroportos de Portugal
Newcastle Airport
AENA
London Southend Airport
Company
Aeroport de la Cote D’Azur
At these airports our ground handling was carried out by:
Menzies Aviation
Group Europe Handling
Swissport
Globeground Berlin
Aviation Service
Portway
Servisair
Aviapartner
SEA Handling
Swissport Menzies
Gate Aviation
London Southend Airport
Company
Our main ancillary partners are Gate Gourmet, who provide our
in-flight merchandise, Europcar, who provide car rental services,
booking.com who broker hotels, Low Cost Holidays who provide
accommodation and transfers for easyJet UK 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 Limited and CAE Parc
Aviation and flight simulation services from CAE and SIM Aerotraining.
We have a key relationship with easyGroup IP Licensing, who own
the easyJet brand, through the Amended Brand Licence, and with
Sir Stelios Haji-Ioannou through the Comfort Letter 1.
* These contracts contain provisions giving the other party the right to terminate if
there is a change in control in easyJet.
1 See Note 26 to the accounts on Related Party Transactions.
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:
(cid:3)(cid:65) Agree the terms of payment at the start of business with
the supplier
(cid:3)(cid:65) Ensure that those suppliers are made aware of the terms of
the payments
(cid:3)(cid:65) Pay in accordance with contractual and other legal obligations
At 30 September 2012, the number of creditors days outstanding
for the Group was 10 days (2011: 8 days), and for the Company was
nil days (2011: nil days).
26
easyJet plc
Annual report and accounts 2012
Performance and risk
Financial review
continued
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 47 and 48.
Strategic
impact Risk description and potential impact
Current mitigation
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.
Our number one priority is the safety, including security,
of our customers and people. We operate a strong safety
management system through:
(cid:3)(cid:65) Fatigue Risk Management System.
Security and terrorist threat or attack
A major security related threat or attack from either internal
or external sources occurs and we fail to deal with it effectively.
This could adversely affect our reputation, operational and
financial performance.
I
T
S
R
F
Y
T
E
F
A
S
(cid:3)(cid:65) Incident reporting.
(cid:3)(cid:65) Safety Review Board.
(cid:3)(cid:65) Safety Action Group.
(cid:3)(cid:65) Management and control system for our operations
including weekly operations meetings and reporting.
(cid:3)(cid:65) 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 regularly.
Insurance is held which is believed to be in line with
other airlines.
We constantly ensure that regulations required by relevant
Governments are enforced. Crew are trained within the
current guidelines.
easyJet plc
Annual report and accounts 2012
27
Strategic
impact Risk description and potential impact
Current mitigation
Impact of mass disruption in peak seasonal months
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 affect
our reputation, operational 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.
Processes in place to adapt to widespread disruption.
A full crisis management exercise is performed regularly
and a business continuity programme is in place.
Significant analysis and senior management focus has
resulted in 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 us to
be in a strong position to withstand potential events that
result in periods of reduced revenues.
Single fleet risk
easyJet is dependent on Airbus as its sole supplier for aircraft, with
two aircraft types (A319 and A320).
There are significant cost and efficiency advantages of a single
fleet, however there are two main associated risks:
(cid:3)(cid:65) Technical or mechanical issues that could ground the full fleet or
part of the fleet which could cause negative perception by the
flying public.
(cid:3)(cid:65) Valuation risks which crystallise on the ownership exit of the
aircraft. The main exposure at this time is with the ageing A319
fleet, where we are reliant on the future demand for second-
hand aircraft.
IT system failure
easyJet is currently 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 including the website,
could lead to significant disruption and have an operational,
reputational and financial impact.
E
C
N
E
L
L
E
C
X
E
L
A
N
O
T
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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.
The efficiencies achieved by operating a single fleet type
are believed to outweigh the risks associated with the
Company’s single fleet strategy.
Rigorous established maintenance programme is followed.
easyJet constantly reviews the second-hand market and
has a number of different options when looking at fleet exit
strategies, e.g. easyJet’s targeted fleet mix is a 70:30 split
between owned and leased. This facilitates the exit strategy
of older A319s, protects residual values as well as increasing
flexibility in managing the fleet size.
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Key systems are hosted in multiple datacentres in two
distinct locations with failover arrangements between them.
A business continuity programme including disaster
recovery arrangements is in place. This is being refined to
ensure continued alignment to operational requirements.
Alternative sites are available should there be a need to
relocate critical staff at short notice due to a loss of facilities.
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.
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 our flight schedule.
This could adversely affect our reputation, operational and
financial performance.
Employee and union engagement takes place on a
regular basis.
Significant analysis and senior management focus has
resulted in crewing solutions being put into place to further
recognise the external factors and volatility that impact the
airline industry.
28
easyJet plc
Annual report and accounts 2012
Performance and risk
Financial review
continued
Strategic
impact Risk description and potential impact
Current mitigation
Asset allocation
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
easyJet’s costs and reputation.
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.
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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 protected against, this would
have a material adverse effect on financial performance.
easyJet’s business can also be affected by macroeconomic issues
outside of our 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.
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 period.
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 the business through
fluctuations in the economic conditions for the sector.
Regular monitoring of markets and route performance
by our network and fleet management teams.
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 our financial performance.
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.
All on balance sheet debt is floating rate, re-priced up to
six months.
None of the agreements contain financial covenants to
be met.
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 our financial performance.
Board policy is to maintain a targeted level of free cash and
money market deposits.
This allows the business to ride out downturns in business
or temporary curtailment of activities (e.g. fleet grounding,
security incident, extended industrial dispute at a key supplier).
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 is placed on deposit with institutions based upon
credit rating with a maximum exposure of £150 million
for AAA counterparty money market funds.
easyJet plc
Annual report and accounts 2012
29
Strategic
impact Risk description and potential impact
Current mitigation
Major shareholder / investor relationship issues
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
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 card
transactions and operates as an e-commerce business.
A security breach could result in a material adverse impact for the
business and reputational damage.
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We have a very active shareholder engagement
programme led by our Investor Relations team. We seek
to engage with easyGroup Holdings Limited on a regular
basis alongside all our other major shareholders as part
of that programme with a view to ensuring the Board
and management team are kept aware of the views
of all shareholders.
A team of individuals from the Board and senior
management take responsibility for addressing issues
arising from the activist approach adopted by the major
shareholder. The objective is to address issues when they
arise as effectively as possible in order to minimise the
disruptive effect on day-to-day management of the
Company’s operation and to anticipate and plan for
potential future activism.
Programme management office (PMO) and experienced
project teams have been set up to oversee delivery and
track the budget and benefits realisation of all projects.
Steering Group set up with key senior management on it to
ensure monitoring, challenge and key decisions are being
made at the appropriate level.
Systems are secured and monitored against unauthorised
access. This will receive continued focus.
Information security controls are being further enhanced in
key areas including third parties, governance, HR, physical
security and IT / technical.
The security of internal systems and easyJet.com are
reviewed quarterly through penetration testing.
Employee security sessions are run periodically to maintain
staff awareness.
Scanning software for fraudulent customer activity is
monitored and controlled by the Revenue Protection team.
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Bribery Act
The Bribery Act came into force in July 2011. To date there are no
precedents set in respect of how this will be enforced with respect to
corporations. As with all companies, if we were found to be in breach
of the Act this could adversely affect us financially and reputationally.
easyJet has a strong ethical tone from the top .
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.
New offerings add complexity to customer experience
easyJet has the ability to deliver value to the customer by ensuring
the end to end customer proposition continues to make travel easy.
There is a risk that as easyJet continues to grow we could add
additional complexity into our business model.
Rigorous change governance process in place.
The customer experience is at the heart of all changes
or new offerings considered by easyJet.
30
easyJet plc
Annual report and accounts 2012
Performance and risk
Financial review
continued
Strategic
impact Risk description and potential impact
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Competition and industry consolidation
easyJet operates in competitive marketplaces against both flag
carriers and other low-cost airlines.
One of easyJet’s key competitive advantages is its strong cost
base. If we lost sight of this or relaxed our stance over cost
control this could significantly reduce any competitive
advantage and impact profitability.
Industry consolidation will also 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 which have charges 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.
Chris Kennedy
Chief Financial Officer
Current mitigation
Regular monitoring of competitor activity and potential
impact of any consolidation activity.
Rapid response in anticipation of and to changes.
Strong cost control across the company. “easyJet Lean”
drives cost reduction and efficiency into targeted areas.
easyJet has a key role in influencing the future state
of regulations.
A Regulatory Affairs Group coordinates the work and effort
in this area.
Corporate
responsibility
Introduction
Safety first
Our people
easyJet and the environment
easyJet actions
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easyJet plc
Annual report and accounts 2012
Corporate responsibility
Introduction
easyJet aims to achieve its ambition of becoming Europe’s
preferred short-haul airline by making travel easy and affordable
and in order to do so we continually look at safer, more sustainable
and innovative ways of running the airline.
Our foremost responsibility is SAFETY.
We take our responsibility to our customers and our people
seriously. Over the last year we have worked hard to make it easy
for our customers and our people.
Aviation makes a positive contribution to the economies of Europe.
At easyJet we believe in connecting people as efficiently as possible,
in the air and on the ground. This is integral to the ongoing success
and sustainable development of the business.
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 ensuring we generate market leading returns.
Safety first
The safety of our customers and staff comes first and this is one
of our guiding principles and a core part of our DNA. Safety informs
everything we do and is the starting point for every decision.
The evolution of our just culture continues with easyJet being at the
forefront of promoting open reporting of all safety-related incidents.
We maintain processes and structures to monitor and manage
safety related risk throughout the airline.
Our Chief Executive, Carolyn McCall OBE, and Chief Operations
Officer, Warwick Brady, are responsible for all aspects of safety
delivery, including our compliance obligations under the Air
Operator’s Certificate (AOC). The AOC Accountable Manager is
Carolyn McCall OBE and she chairs our Safety Review Board which
meets monthly to assess reports from the Safety Action Groups
across the airline. This review and assessment process delivers
monthly reports to both the UK Civil Aviation Authority (UK CAA)
and the easyJet plc Board. In addition to our internal safety and
compliance oversight, our Director of Safety and Security, Captain
David Prior delivers an independent safety report to the Board each
month. Captain David Prior has a direct line through to the Chairman
which reinforces the independence of safety oversight.
No compromise on safety
The Safety Management System (SMS), Fatigue Risk Management
System (FRMS) and SafetyNet are all at the forefront of technology.
Our reporting process is very rigorous. All reported safety-related
incidents are assessed and categorised, with risk values assigned
and aggregated to form our Composite Risk Value (CRV) index. This
past year, the index has shown a steady improvement, continuing a
long-term trend of reducing risk to well within the assigned
boundary level.
The Safety Management System (SMS) launched in 2009 has
continued to extend its influence across the organisation to ensure
that the highest standards of 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 our ground
de-icing programme.
During 2012 we continued to develop our SMS capability and
carried out a range of activities designed to enhance our data
management acquisition. We are in the process of integrating
our bespoke safety data system into our operations. easyJet has
developed the capability to generate risk based 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 continued our
commitment to further understand rostering practices by carrying
out Human Factors studies with our research partners at the
National Aeronautics and Space Administration (NASA) and Imperial
College London. Given that easyJet has led the field in FRMS
development, it is well placed to achieve EASA Sub Part Q as soon
as it becomes available.
Safety innovators
easyJet has continued to work closely with UK, EU and European
governments and authorities to ensure a coordinated response to
large scale air traffic disruption caused by extreme weather
conditions or other unexpected events. In 2012 easyJet continued
to develop the on-board ash detection radar AVOID (Airborne
Volcanic Object Identifier and Detector) technology, which it
helped pioneer in 2010 in collaboration with the Norwegian Institute
for Air Research and its inventor Dr Fred Prata. This 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 plc
Annual report and accounts 2012
33
Over the past year AVOID was successfully tested using a light
aircraft on an active Mount Etna in Sicily. Following on from this, a
partnership was announced with Airbus to test the equipment on
an A340-300 test aircraft at the speed and altitude of commercial
aircraft. The equipment was successfully fitted which led to the
UK’s Civil Aviation Authority asking it to be made available during the
period running up to and during the London 2012 Olympic Games.
These latest developments also led to easyJet’s Head of
Engineering Ian Davies being awarded, alongside Dr Fred Prata,
Flight Global’s Aviators of the Year award.
In 2012 easyJet continued its campaign to help raise awareness
of the pan-European emergency number 112 as the safety
of our passengers once off the plane remains just as important.
On 11 February, also known as 112 day, easyJet pledged its support
for the European 112 Emergency Number campaign run by the
European Commission, the 112 Foundation and a number of
transportation companies (airlines, trains, ferries) to publicise the
112 number. easyJet remains the first airline to have pioneered the
use of inflight services to help promote the number and continued
to do so in 2012 by increased visibility on the website, corporate
activities and its in-flight magazine, as well as introducing a rolling
programme of on-board announcements ahead of major
holiday periods.
Passengers who require special assistance
easyJet takes the welfare of all of its passengers extremely seriously
as it continuously looks to improve the travelling experience. In 2012
we took a further step to better assess the requirements of our
300,000 passengers requiring special assistance. Following on from
continued improvements to service delivery, we looked closely at
upgrading the training provided to our staff on the ground and in
the air by reviewing existing courses and calling upon the support of
the special assistance and disabled community to do so. We have
worked with several leading experts and associations from across
Europe including Guide Dogs UK and the French association APAJH
(Association pour Adultes et Jeunes Handicapés) to help do this.
We have also set up a special advisory group – the easyJet Special
Assistance Advisory Group (ESAAG) – and chaired by the Right
Honourable David Blunkett MP to help fully oversee these changes.
Our people
Our people are at the heart of our business and they are the key to
our ability to make travel easy and affordable and meet our goal of
being Europe’s preferred short-haul airline. Our focus is to attract
the right person at every level, and to keep them engaged.
People strategy
This year we have reviewed our people strategy and have set
ourselves clear goals. Our three-part strategy is to make it easy
for our people to be at the gate, on-board and able to fly. By this
we mean:
(cid:3)(cid:65) At the gate – The right people, in the right job at the right time
equipped to succeed, supported by processes that work.
(cid:3)(cid:65) On-board – Living the values, wanting to be part of the
Company’s success and knowing the part they play.
(cid:3)(cid:65) Able to fly – A high-performance culture where success and
continuous improvement are expected, managed and
rewarded and people achieve their maximum potential.
In order to deliver this we have organised the strategy under five
core strategic pillars.
(cid:3)(cid:65) HR service delivery. This is all about the easyJet HR team being
able to deliver a reliable, effective and efficient service to our
easyJet people. By this we mean ensuring that our people and
their managers are supported by clear, simple and accurate
processes and making it easy for them to understand these
processes and to ask when they need to. This also means
holding accurate data on our people and providing our people
managers with information which supports their roles.
(cid:3)(cid:65) Organisational effectiveness. This is about ensuring that the
infrastructure of the organisation enables delivery of the
required business performance and ensuring that our core
business processes, organisation design and physical
environment are all enablers of business success.
(cid:3)(cid:65) Leadership, management and development. Our success
will come from our people so we want to ensure that we have
capable leaders and people managers to drive the business
agenda, and that our people have the right skills and capability
to deliver both now and in the future.
(cid:3)(cid:65) High performance culture. At easyJet we set ourselves
stretching goals and we want our people to understand the
key part that they play in our business plan and our success.
We want them to feel accountable for their delivery and
rewarded for their success.
(cid:3)(cid:65) Talent and succession. In order to protect the long-term
success of easyJet we want to ensure that we understand our
talent portfolio and nurture this such that our people can be the
best that they can be. We would like to be a destination of
choice for current and future talent from across Europe.
Building the foundations for success
This financial year marked the first year of our plan and our focus
was on building the foundations for future success. We focused on
reviewing some of the basics of good people practice such that we
could improve them and on sowing the seeds of our ambitions for
our people. We believe that we have moved the people agenda
forward this year and that there is still more to do.
Staff turnover and attendance
In line with the growth of the airline, our employment levels across
Europe have continued to grow.
As at 30 September 2012, easyJet employed 8,446 people
(2011: 8,288) based across Europe as illustrated below:
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840
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Of the 158 additional heads we added 56 cabin crew, 51 pilots and
51 new management and administration staff.
The commitment by our people to working at easyJet was very
strong with staff attendance at 95% for 2012 (FY 2011: 96%), and
staff turnover decreasing to 7.5% (FY 2011: 9.7%).
34
easyJet plc
Annual report and accounts 2012
Corporate responsibility
continued
Delivery
We have improved our recruitment processes and the information
and support we give to candidates. As an example, for our cabin
crew recruitment we have introduced a “try before you fly” feature
on our career portal (careers.easyJet.com) enabling candidates
to self-assess whether the role of cabin crew is the right move
for them and we also introduced online assessment tools in the
recruitment process.
In 2012 we improved our conversion rate by 7% on last year.
Organisational efficiency
This year easyJet announced that it was going to cease basing
aircraft and crew out of Madrid. This of course was an exceptionally
difficult message for our crew based in Madrid.
Our approach was all about doing the right thing for our people.
We offered all of our cabin crew and pilots an alternative role across
the network and are pleased that 87% of our people have accepted
to continue with us.
Leadership, management and development
We have spent time building our leadership teams and building
individual leadership capability, ensuring that our leaders understand
our strategy, the associated business challenges and their roles in
leading and engaging their teams to deliver on this. To support this
we have introduced an easyJet leadership framework, highlighting
for our leaders and managers the competencies required at
different levels across the Company.
We ran our first manager conference in November 2011 where we
brought together our key functional leaders and our leaders at the
various bases across the network to share our goals and align our
managers behind our plan.
In addition, we have introduced a number of core development
modules for many of our people to support individual development
– including development planning workshops and an introduction
to project management.
High performance culture
We have continued our focus on engagement as there are proven
links between an engaged workforce and excellence in customer
service and business delivery. We saw an encouraging uplift in the
Company engagement survey in October 2011 to 40% (from 23%
in September 2010) as measured by the AonHewitt “say stay strive”
model of engagement. There is still a lot of work to do and each
department across the Company had its own improvement plan
which was actively managed throughout the year.
At the time of writing, we have just received top level results for
our September 2012 survey. Disappointingly, but perhaps not
surprisingly given the tough climate, our top level results have
dropped by 3% on the previous year. The leadership team are
committed to understanding the feedback from the survey and to
work with our people to continue to drive a culture of engagement
across all parts of the airline.
As in previous years we have continued with our various internal
communications channels such as the CEO weekly call, news
round-ups, AMB base visits and community based newsletters,
to ensure that we share our thinking and business successes with
all of our people.
In the spirit of partnership we have spent a lot of time this year
in dialogue with our employee representatives and union
representatives across Europe. We have also established a new
European Works Council which met for the first time in May 2012.
Recognising that good performance management and recognition
are both drivers of engagement and performance, we have
improved our approach to both this past year. Our hugely
successful second annual awards event was held in February 2012
at Disneyland Paris in France where we celebrated our people who
have the Orange Spirit. We have asked our people how we can
improve our culture of recognition and will make changes to our
Spirit programme and portal in the coming year.
Talent and succession
We ran the first year of our new European Graduate programme.
This got off to a flying start with easyJet being listed as 35th Best
Company to work for in The Job Crowd publication of “Top
Companies for Graduates to work for 2012/13” . This report is based
on reviews and feedback from graduate employees. easyJet rated
4.18/5 in the publication gaining a higher position than other well
established graduate programmes such as Rolls-Royce, KPMG,
L’Oreal, ASDA, M&S and Sainsbury’s to name just a few. easyJet
scored 4.6/5 for its company culture which is described by
graduates as “vibrant”, “young” and “exciting”. The Company
is “dynamic and enthusiastic” and reviewers report that it is
a “fast-paced environment that rewards its employees”.
The second intake of graduates started in October 2012 and we
plan to have a further intake in October 2013.
As part of our goal of becoming a destination of choice for
future talent, we translated our careers website into five
additional languages.
We recognise that our approach to reward is critical to our ability
to both attract and retain our people. easyJet offers a competitive
reward package and reviews salaries annually in line with market
rates to ensure continued alignment to the market. The focus is
on cash and variable pay rather than fixed benefits. The reward
package includes an annual performance-driven bonus, based on
personal and Company performance, and grants of performance
shares, which encourages all our people to contribute towards
achieving our strategic objectives.
We once again offered all our people the opportunity to join our
popular all-employee share plans. These help to increase
engagement and commitment to easyJet and contribute to
Company success.
The plans have won five major awards to date, and involve three
elements: Save As You Earn (SAYE); Buy As You Earn (BAYE) and
Performance Shares. During the year, all eligible employees were
offered the equivalent of two week’s salary in the form of
“Performance 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
schemes remains very strong, with over 85% of our eligible people
taking part in one or more of the plans.
easyJet offers a small number of Company provided benefits in line
with our cost focused approach. These include insurances and
access to staff travel at cost price.
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.
In the UK we have also been able to facilitate a number of additional
“flexible benefits” under our Benefits4me programme. These enable
easyJet plc
Annual report and accounts 2012
35
our people to access programmes and savings which would not be
available to them on an individual basis, without additional cost to
easyJet. These include our popular environmentally friendly Cycle 2
Work scheme and a carbon offsetting scheme. A “lifestyle benefits”
programme was also in place 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 flexible benefits, through salary sacrifice. easyJet’s
National Insurance savings contribute to the financing of the
scheme, which is fully outsourced.
Equality and diversity
easyJet is an equal opportunities employer and our people and
applicants are treated fairly and equally regardless 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.
Capitalising on what is unique about individuals and drawing on their
different perspectives and experiences adds value to the way we do
business. We recognise that a diverse workforce will provide us with
an insight into different markets and help us anticipate and provide
what our customers want from us.
Senior management team
%
Community and charitable activities
2012 has been an important year for easyJet and its charity
work with a renewed focus on charitable activities across the
easyJet network.
UNICEF – our new charity
In 2012 easyJet formed a partnership with UNICEF, the world’s
leading organisation for children. The partnership runs across
easyJet’s pan-European network during the peak summer and
winter seasons.
The programme is branded Change for Good and offers all our
customers the chance to support the world’s children simply by
dropping their spare change into specially designed pouches, which
are handed out by easyJet’s crew during flights. The money raised
through donations from easyJet customers will fund UNICEF’s
life-saving work for children across the world, such as vaccinating
children at risk from diseases such as measles and polio or providing
mosquito nets to prevent malaria.
We have chosen to focus on immunisation projects in the hope
of saving the lives of over a million children across the world. The
response by our people and passengers has been overwhelming.
To date easyJet has raised as part of this campaign over £800,000.
The Company has also provided over £15,000 of benefits in kind,
and given the initiative visibility through various channels including
the in-flight magazine “Traveller”. easyJet has also provided free
flights in support of UNICEF’s work.
Female
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Since the partnership’s launch a series of road shows have taken
place across our European bases to raise the partnership’s profile
with our own people.
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Our aim into next year is to raise more funds than any other UNICEF
Change for Good partner in the world.
New easyJet European Charity Committee set-up
This past year a dedicated European Charity Committee was set
up to oversee the partnership with UNICEF and any additional
charitable actions. This committee includes representatives from
across the whole of our airline.
One of the outcomes has been the creation of a special fund where
staff members from across Europe can apply for access to funds to
support their local charities and communities.
Support for local communities
We have continued to provide support at local community level
through a variety of unplanned and planned initiatives. In May 2012
Italy was struck by a tragic earthquake which impacted the lives of
thousands of people in the Emilia Romagna region. easyJet decided
to carry out a special onboard collection on its Italian flights to
support the victims of this tragedy. We raised over €70,000 in
support of the Italian Red Cross’ work in this region.
In addition, easyJet has sponsored a number of local community
based events and activities such as Manchester and Brighton PRIDE
to reflect our diversity, the Edinburgh International Film Festival 2012
to reflect our position as Scotland’s leading airline, the Love Luton
city status campaign because of our historic links to Luton, and the
Daily Mirror Pride of Northern Ireland awards to name a few.
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easyJet plc
Annual report and accounts 2012
Corporate responsibility
continued
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. Every Christmas (and less frequently, at
various times through the year) easyJet holds a staff raffle of all the
gifts that are received.
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.
This also means that every year is often “more of the same”, in other
words we continue to focus on being as efficient as possible and
making steady gains, rather than outlining eye catching initiatives
that in reality would have little impact.
Fuel is our largest single cost item, so we are heavily incentivised
to minimise its use and therefore CO2 emissions.
As we continue to grow we are replacing less efficient operators
across Europe, and therefore reducing emissions on those
routes where we are replacing capacity provided by inefficient
legacy carriers.
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:
(cid:3)(cid:65) To be efficient in the air
(cid:3)(cid:65) To be efficient on the ground
(cid:3)(cid:65) To lead the move to more efficient flying
We have also focused on ensuring the industry plays its role in
tackling climate change. This year was the first year that aviation
played a full role in the European Union’s Emission Trading System
(EU ETS), as carriers are required to have carbon permits for all
flights at EU airports. This is an important step as it ensures that
aviation is helping to tackle climate change, and means that we
can now push for the removal of inefficient taxes such as the UK’s
Air Passenger Duty.
To significantly reduce our environmental impact further will require
technological change across the industry, so our environment
policy focuses on these long-term gains.
Progress over time and environmental data
Over the last ten years easyJet has successfully improved our CO2
efficiency every year. However, in 2012 easyJet’s emissions per
passenger km (the standard industry measure of efficiency) rose
from 84.6g / km in 2011 to 85.5g / km. The reflects a further
shortening of stage-lengths and the business focus on primary
airports, which by their nature tend to have long taxi-times.
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.
CO2 / passenger Km
g
110
104.5
98.8
95.7
95.56
90.31
87.3
84.4
84.6
85.48
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
On local air quality
Local air quality impacts arise from NOx emissions during aircraft
take-offs and landings. We have upgraded 57% 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 routings 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.
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.
easyJet plc
Annual report and accounts 2012
37
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 in 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 AMB receives regular updates on
environmental policy as part of our reporting on regulatory issues.
easyJet 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.
New technologies and design
In 2012 easyJet announced a trial of an electronic ground taxi
motor, which will allow easyJet to save fuel by reducing the need
for engines to be run during ground taxi.
Entry into ETS
Aviation entered ETS in 2010. For easyJet’s emissions in 2012
it is required to surrender permits to cover its CO2 emissions.
ETS compliance is overseen by our finance team. easyJet has put
in place the appropriate mechanisms to monitor and report the
required data and to manage its 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 there has been some progress in the short-haul market, with
the development of the Airbus A320 NEO and Boeing B737 MAX,
easyJet remains 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. easyJet will continue 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. easyJet believes there are three parts to this, only one
of which is in place.
(cid:3)(cid:65) Aviation in ETS
Aviation entered the EU Emissions Trading Scheme (EU ETS) in
2010, and airlines will have to surrender permits to cover their 2012
emissions. easyJet was a strong supporter of aviation’s entry and
continues to believe that this is the best way to ensure aviation
makes its fair contribution to tackling climate change.
(cid:3)(cid:65) Ensuring any taxes support environmental objectives
easyJet does not support the imposition of aviation specific taxes.
Furthermore the entry of aviation into ETS removes any
environmental justification for such taxes. Where these taxes are
in place (such as the UK) easyJet believes they must be designed
to provide incentives for more environmentally efficient flying.
This means the tax base must be flights, not passengers.
(cid:3)(cid:65) Minimum standards for aircraft
International minimum standards are needed to drive the
development of new technology aircraft.
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Governance
Chairman’s statement on corporate governance
Board of Directors
Executive Management Team
Corporate governance
Shareholder information
Directors’ remuneration report
Statement of Directors’ responsibilities
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Governance
Chairman’s statement on corporate governance
easyJet plc
Annual report and accounts 2012
39
The review of our remuneration policy and consultation with
shareholders took place under the auspices of the Committee and
further details of the review and consultation can be found in the
Directors’ remuneration report.
Charles Gurassa also took over the chair of the Nominations
Committee last year. As a result of appointing three new Non
Executive Directors towards the end of the last financial year, there
has been no need to appoint any further Non Executives and
consequently the Nominations Committee has only met once
during the year. I stepped down from the Nominations Committee
as of 27 September 2012.
David Bennett continues to chair the Audit Committee and, despite
having had to miss some meetings of the Board and its committees
at the start of the financial year due to illness, has been able to
attend all scheduled meetings since February 2012. During his
absence, David remained in regular contact with me to provide his
views on matters arising.
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. There have been questions
over demands on my own time and I would like to take this
opportunity to reiterate my continued commitment to give all the
time necessary to fulfil my duties at easyJet.
During the year, a performance review of the Board was
undertaken using an independent external facilitator, Lintstock.
This process involved a detailed questionnaire completed by each of
the Directors and the Company Secretary. This was followed up by
Lintstock interviewing each respondent before producing a report
to the whole Board. The Senior Independent Director led the Non
Executive Directors in a review of my own performance which also
involved feedback from the Executive Directors.
We have reviewed the monthly management information provided
to the Board with the assistance of Board Intelligence, and are
developing measures to update and improve the quality of
information provided to the Board and ways in which the Board can
access information in an easy and secure manner. These actions to
drive further improvement in the quality of information presented to
the Board form a significant part of a plan compiled in response to
the output of this year’s annual evaluation process.
We recognise the importance of diversity for Board effectiveness
and have established a new diversity policy. We remain committed
to ensuring that appointments are ultimately made on merit against
the agreed selection criteria. Further details of our diversity
considerations are set out in the Nominations Committee section.
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At our Annual General Meeting in February 2012, we put all of our
Directors up for re-election in compliance with the June 2010 UK
Corporate Governance Code (the Code) and anticipate continuing
to put all Directors up for re-election annually.
Shortly before entering the close period at the end of the 2012
financial year, the Board agreed to adopt Non Executive Director
shareholding guidelines setting out that Non Executive Directors
are expected to hold shares in the Company to the value of at
least 100% of their annual fees. This level of shareholding is to be
achieved by the later of three years from the adoption of the
guidelines or, for Non Executives joining after the adoption of the
guidelines, within three years of their joining date. The intention of
implementing these guidelines is to demonstrate the Board’s
commitment to the Company and to align Non Executive Directors’
interests with those of the shareholders.
This has been a successful year for easyJet on the corporate
governance front as well as operationally and financially.
easyJet’s strategy has been further rigorously reviewed and
challenged by the Board during the course of the year. This included
a two day session in June 2012 devoted to debating and refining
the strategy. The information presented by the management team
in June resulted in a high quality, detailed review, a well focused
debate and a clear strategic vision for the Company to take
forwards. The process was a good demonstration of how
effectively the management team and the Board are currently
functioning together.
More work has been put into the sharing of that strategic vision and
other relevant information with our shareholders: easyJet continues
to run an active investor relations programme and in the past year
has hosted a number of well attended events including a capital
markets day and a number of site visits aimed at giving our
shareholders greater transparency of the Company’s operations.
The Company actively solicits feedback from investors and the
Board is kept informed of market perceptions and shareholder
feedback via a formal monthly report to the Board and by regular
verbal briefings.
It has obviously been a source of regret to the Board that, in spite
of our outstanding results, our largest shareholder, easyGroup, has
pursued a highly public activist campaign which on occasion has
been targeted at undermining the good governance of the
Company and overriding normal corporate governance protocols.
However the 2012 Annual General Meeting process and the EGM
called by easyGroup seeking my removal as Chairman provided
the opportunity to consult with our shareholders and for them to
formally record their views, with 96% of the non-family votes
supportive for the Board.
In recent months the Board has consulted with ten of our largest
shareholders on the matter of the optimal methodology for the
calculation of ROCE as the Company’s principal corporate target,
following an independent review carried out by Deloitte. This was led
by Chris Kennedy with the support of Andy Martin. Subsequently,
Charles Gurassa undertook a consultation with 15 shareholders
on the most appropriate remuneration structure for Executive
Directors. This interaction has ensured that the Board has been able
to undertake its debate and decision-making process on these
issues with a clear understanding of shareholder sentiment.
We have refreshed the memberships of some of the
Board committees:
Andy Martin has joined the Remuneration Committee, as has
Charles Gurassa who has taken over as chairman of the Committee.
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easyJet plc
Annual report and accounts 2012
Governance
Board of Directors
Sir Michael Rake
Non Executive Chairman
(1948)
Charles Gurassa
Non Executive Deputy Chairman
and Senior Independent Director
(1956)
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 and Deputy Chairman of Barclays PLC, as well as a Non
Executive Director of McGraw Hill Inc. He is also Chairman of the private
equity oversight group; the Guidelines Monitoring Committee.
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, Genesis Housing Association
and Group NBT.
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 and a member of the Prime
Minister’s Business Advisory Group.
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,
Parthenon Entertainment 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 McCall OBE
Chief Executive
(1961)
Chris Kennedy
Chief Financial Officer
(1964)
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. In 2012, Carolyn won the ‘Woman of the Year Award’
at the Women 1st Shine Awards 2012.
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 in the position of Chief Financial
Officer and was appointed to the Board.
After graduating from Cambridge with a degree in Engineering, Chris
progressed rapidly within Audit and Consultancy before a two year stint
as a venture capitalist and banker. In 1993 Chris joined EMI Music where he
worked both in the UK and the US, covering a variety of roles including; UK
CFO, European Chief Operating Officer and International CFO. In early 2008
he joined the Board as CFO and then Chief Investment Officer. He has a
proven track record of delivering operational improvement and has deep
knowledge and invaluable experience of working in senior financial and
commercial positions within high profile, international, fast changing
consumer facing businesses.
Adèle Anderson
Independent Non Executive Director
(1965)
David Bennett
Independent Non Executive Director
(1962)
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
appointed to the KPMG UK Board in 2000 and was appointed Chief
Financial Officer 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 (1962) was appointed to the Board of easyJet on 1 October 2005 and
is Chairman of the Audit and Finance Committees. He is currently Chairman
of Homeserve Membership Ltd and a Non Executive Director of Pacnet Ltd,
Jerrold Holdings Ltd, Cheshire Mortgage Corporation Limited and a member
of the Advisory Board of Glendevon King Asset Management.
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.
easyJet plc
Annual report and accounts 2012
41
John Browett
Independent Non Executive Director
(1963)
Professor Rigas Doganis
Independent Non Executive Director
(1939)
John (1963) was appointed to the Board of easyJet on 27 September 2007.
He was previously Senior Vice President of Retail at Apple Inc. Prior to joining
Apple in 2012, John was Chief Executive Officer of Dixons Retail plc for four
years and also held a number of Executive Director positions at Tesco plc,
including Operations Development Director, Group Strategy Director and
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 was Professor and Head of the Air Transport Department at Cranfield
University and is still a Visiting Professor there. He is also the author of books
on aviation economics and management.
Keith Hamill OBE
Independent Non Executive Director
(1952)
Andy Martin
Independent Non Executive Director
(1960)
Keith (1952) was appointed to the Board of easyJet on 1 March 2009. He has
considerable experience as a Director of listed companies and is currently
the Chairman of Tullett Prebon plc and a Non Executive Director of
Samsonite International SA.
He was previously Chairman of Go, prior to its acquisition by easyJet in 2002,
and Travelodge. He was Chairman of Collins Steward, Heath Lambert and
the Council of The University of Nottingham and a Non Executive Director of
Electrocomponents and Cadmus Communications Corp. He was Finance
Director of WH Smith, Forte and United Distillers and a partner in Price
Waterhouse (from 1986 to 1988).
Keith is a Fellow of the Institute of Chartered Accountants.
Andy (1960) was appointed to the Board of easyJet on 1 September 2011.
He is currently Group Chief Operating Officer-Europe,UK and Japan for
Compass Group PLC.
Prior to joining the Compass Group in 2004, as Group Finance Director,
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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Annual report and accounts 2012
Governance
Executive Management Team
Alita Benson
People Director
(1967)
Warwick Brady
Chief Operations Officer
(1964)
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) is currently our Chief Operations Officer responsible for all of
the easyJet operation. He joined easyJet in May in 2009 as the Procurement
Director responsible for Fleet management, airport, central procurement and
regulation. In October 2010 he was appointed Director of Group Operations.
He has extensive airline and broad business experience at senior level and
within the Aviation sector has lead and managed high growth low cost
airlines, early start-ups as well as restructuring.
Before joining easyJet Warwick was the CEO at Mandala Airlines in Asia
where he turned a legacy brand into a modern, low cost carrier with an all
Airbus fleet. He also spent two years as Chief Operating Officer of Air
Deccan/Kingfisher with commercial and operational accountability. Air
Deccan at the time was India’s 2nd largest airline and during this time he was
instrumental in listing the company on the Bombay stock exchange. Prior to
this Warwick was Deputy Operations Director at Ryanair from 2002 to 2005,
where he held various senior executive roles including Deputy CEO of Buzz,
following its acquisition from KLM.
Mike Campbell
Europe Director
(1957)
Trevor Didcock
Chief Information Officer
(1963)
Mike (1957) is currently our Europe Director and is responsible for looking
after all of our business outside the UK. He joined easyJet in October 2005
as People Director.
Before joining easyJet, Mike worked at Wedgwood in a broad role as Director
of People and Brands and Managing Director for Canada, Australia and
Pan-Asia. Prior to that, Mike worked for 14 years at Fujitsu in a variety of
development and personnel roles across Europe, Asia, Africa and the Middle
East, ending up as Chief Personnel Officer. His early career was in education
and research.
Mike has a BSc in Mathematics and Masters in Fluid Dynamics.
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)
Chris Kennedy
Chief Financial Officer
(1964)
Peter (1966) joined easyJet in February 2011 as Marketing Director.
See Directors’ profiles.
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.
easyJet plc
Annual report and accounts 2012
43
Cath Lynn
Group Commercial Director
(1964)
Carolyn McCall OBE
Chief Executive Officer
(1961)
See Directors’ profiles.
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, and to Group Commercial Director in April 2012.
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. Cath graduated from
University of Leicester with a BA (Hons) in Geography.
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 2012
Governance
Corporate governance
Principles statement
easyJet is committed to meeting the required standards of
corporate governance.
Statement of compliance
The version of the Code applicable to the current reporting period
is the June 2010 UK Corporate Governance Code.
Throughout the year ended 30 September 2012, the Board
considers that it and the Company have complied without
exception with the provisions of the June 2010 UK Corporate
Governance 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 2012, the Board comprised eight
Non Executive Directors (including the Chairman) and two
Executive Directors.
The roles of Chairman and Chief Executive are separated, set out
in writing, clearly defined, and approved by the Board.
Charles Gurassa fills the posts of Senior Independent Non
Executive Director and Deputy Chairman.
Executive Directors
Chris Kennedy
Carolyn McCall OBE
Non Executive Directors
Sir Michael Rake
Charles Gurassa
David Bennett
Keith Hamill
John Browett
Rigas Doganis
Adèle Anderson
Andy Martin
* by invitation.
The Board meets regularly, with ten scheduled meetings having
been held during the year ended 30 September 2012 with a
further three ad hoc meetings. All members of the Board are
supplied in advance with appropriate information in a timely
manner covering matters which are to be considered. The Non
Executive Directors have also met without any Executive Directors
present during the year.
The document containing the matters reserved for the Board is
available in the governance section of easyJet’s corporate
website, http://corporate.easyJet.com.
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 Directors’ attendance record at the scheduled Board
meetings and Board committee meetings for the year ended
30 September 2012 was as set out in the table below. For Board
and Board Committee meetings, attendance is expressed as the
number of meetings attended out of the number that each
Director was eligible to attend. In addition to those scheduled
meetings set out below, ad hoc meetings were also arranged to
deal with matters between scheduled meetings as appropriate.
John Browett was unable to attend two Board meetings due to
unavoidable commitments, details of which he had notified to
the Company in advance (for one of the meetings he notified
the Company at the time when the Board meeting dates were
initially confirmed).
Board
(maximum 10)
Remuneration
Committee
(maximum 3)
Audit
Committee
(maximum 3)
Nominations
Committee
(maximum 1)
10/10
10/10
10/10
10/10
8/10
10/10
8/10
10/10
10/10
10/10
1*
2*
n/a
3/3
2/3
1/1
n/a
2/3
n/a
2/2
3*
2*
n/a
n/a
2/3
3/3
1/1
n/a
3/3
n/a
n/a
n/a
1/1
1/1
0/1
n/a
n/a
1/1
n/a
n/a
easyJet plc
Annual report and accounts 2012
45
Effectiveness
The Company regards David Bennett, Professor Rigas Doganis,
John Browett, Keith Hamill, Charles Gurassa, Adèle Anderson
and Andy Martin, as Non Executive Directors who are
independent in character and judgement.
All new Directors are given a full, formal and tailored induction
upon appointment which provides them with information about
the Company. In addition, meetings are arranged with key
executives and managers within the business during and after
induction to provide ongoing education and information about
the business. Visits to network bases are organised for the Board
from time to time to assist understanding of the operational
issues the business faces. The next visit by Non Executive
Directors to one of the European bases has been arranged for
December 2012. The Board is also regularly kept up to date with
developments in relevant law, regulation and best practice to
maintain their skills and knowledge. Directors are given the
opportunity to highlight specific areas in which their skills or
knowledge would benefit from development as part of the annual
Board evaluation process. Directors’ and officers’ insurance cover
has been established for all Directors to provide cover against
their reasonable actions on behalf of the Company and a deed
was executed in 2007 indemnifying each of the Directors of the
Company and/or its subsidiaries. The indemnities were in force
during the last financial year and remain in force for all persons
who are, or were, such Directors.
During the year, a performance review of the Board was
undertaken using an external facilitator, Lintstock, in accordance
with provision B6.2 of the Code. Lintstock has no connection with
the Company, beyond evaluating the Board, other than providing
software to the Company with which to monitor insider lists
and Directors’ shareholdings. The Board considers that the
performance review shows that each Director continues to
contribute effectively and to demonstrate commitment to the
role (including commitment of time for Board and committee
meetings and other duties) and that there is an appropriate
balance of skills, experience, independence, diversity (including
gender) and knowledge of the Company to enable the Directors
to discharge their respective duties and responsibilities effectively.
Directors’ conflicts of interest
The Company has procedures for managing conflicts of interest
in place and the Company’s Articles of Association contain
provisions to allow the Directors to authorise potential conflicts of
interest so that a Director is not in breach of his/her duty under
company law. Should a Director become aware that they have an
interest, directly or indirectly, in an existing or proposed
transaction with easyJet, they should notify in accordance with
the Company’s Articles of Association. Directors have a continuing
duty to update any changes to these conflicts.
Board engagement with investors
The Chairman and Deputy Chairman (also being the Senior
Independent Director) have both had meetings with shareholders
in order to help maintain a balanced understanding of the issues
and concerns of major shareholders. They have both updated the
whole Board on the results of these meetings and on the opinions
of investors. Regular feedback is provided to the Board on the
opinions of shareholders. In addition the Company has held an
investor day and capital markets day to share information with
investors and listen to shareholder opinion.
Board Committees
Remuneration Committee
At 30 September 2012, the Remuneration Committee comprised
four Independent Non Executive Directors, namely Charles
Gurassa (Chairman), David Bennett, Professor Rigas Doganis and
Andy Martin. This Committee, which has met three times during
the 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.
New Bridge Street (NBS) (an AON Hewitt Company) has been
appointed as easyJet’s remuneration advisors. NBS are a member
of the Remuneration Consultants Group and comply with its code
of conduct. A different member of the AON Hewitt Group also
conducted employee surveys for the Company.
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 three Non Executive Directors,
all of whom are independent. At 30 September 2012, the Audit
Committee members were David Bennett (Chairman), 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.
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easyJet plc
Annual report and accounts 2012
Governance
Corporate governance
continued
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
→(cid:3)Assess potential conflicts of interest of Directors on behalf of
the Board and
→(cid:3)Report to the Board on how it has discharged its responsibilities
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 2012. The Company currently has no set frequency
for tendering the external audit however notes the September
2012 Corporate Governance Code, which applies to its next
reporting period, and includes a provision to put the external audit
out to tender at least every ten years. The Company’s external
audit was last tendered in 2005 and resulted in a change of
external auditors in February 2006 to the current external
auditors, PricewaterhouseCoopers LLP.
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. To assess the effectiveness
of the external audit process, 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 current and
prior financial year, easyJet did not incur any costs with
PricewaterhouseCoopers LLP in respect of non-audit services.
There are no contractual obligations which restrict the choice
of external auditors.
Both external and internal 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 & Leicester plc, financial 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)Principal judgemental accounting issues affecting the Group
based on reports from both the Group’s management and the
external auditors
→(cid:3)External audit plans and reports
→(cid:3)Risk and assurance plans and reports, including:
→(cid:3)key internal audit reports
→(cid:3)control themes
→(cid:3)follow ups
→(cid:3)fraud and loss prevention
→(cid:3)revenue protection
→(cid:3)risk assessment
→(cid:3)internal controls
→(cid:3)Information Security and Business Continuity
→(cid:3)Delegated authorities
→(cid:3)Audit Committee terms of reference
→(cid:3)Whistleblower reports
→(cid:3)Internal audit effectiveness and independence
→(cid:3)Maintenance accounting
→(cid:3)Specific investigations as required
The Board as a whole, including the Audit Committee members,
debated risks and risk management on which basis we believe
that the Board has fulfilled its obligations under the Code.
The Audit Committee continues to be responsible for reviewing
the adequacy and effectiveness of the Company’s risk
management process.
easyJet plc
Annual report and accounts 2012
47
Nominations Committee
The Nominations Committee has comprised of at least three
members during the year. As at 30 September 2012, the
Nominations Committee members were Charles Gurassa
(Chairman), David Bennett and Professor Rigas Doganis.
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 once during the year.
The terms of reference of the Nominations Committee are
documented and agreed by the 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, independence, diversity (including
gender) and experience on the Board to ensure that a suitable
balance is maintained. The Committee adopts a formal, rigorous
and transparent procedure for the appointment of new Directors
to the Board. 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. The standard terms and conditions of the appointment
of Non Executive Directors are also available in the governance
section of easyJet’s corporate website,
http://corporate.easyJet.com.
The appointments process takes account of the benefits of
diversity of the Board, including gender diversity, and in identifying
suitable candidates the Committee will seek candidates from a
range of backgrounds, with the final decision being based on
merit against objective criteria. The Company has two female
Directors on its Board, one being the Chief Executive. There are
currently ten Directors of the Company. Accordingly, women
represent 20% of the Board, a percentage which easyJet aspires
to improve or at least to retain in the future.
In addition to Board diversity, the Company believes in promoting
diversity at all levels of the organisation, further details of which
can be found in the Corporate responsibility section on page 35.
Relations with investors
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. This process was enhanced during
the year following the establishment of an Internal Financial
Control monitoring programme administered by Internal Audit.
No material failings or weaknesses were identified during the
course of this review.
The internal control regime is supported 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 its operation.
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easyJet plc
Annual report and accounts 2012
Governance
Corporate governance
continued
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 2012, there was continued investment in and
assessment of the risk management process resulting in
improved risk management understanding and reporting. 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 strategic,
financial and operational 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.
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BOARD
EXECUTIVE
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TEAM OWNERSHIP
AND CHALLENGE
SIGNIFICANT
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RISK EVALUATION GROUP
FUNCTIONAL
RISK ASSESSMENTS
STRATEGIC
RISK ASSESSMENT
Functional risks
Strategic risks
To ensure that risk is effectively managed a number of key
activities are undertaken, as defined by the Executive Directors:
→(cid:3)Ongoing risk management and assurance 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 operational
weekly meetings. In addition, the Safety Audit Group (SAG)
meets monthly to discuss safety, security and environmental
risks and the Safety Review Board (SRB) 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 and overall business performance.
→(cid:3)Internal Audit considers, reviews and tests internal control and
business risk matters as defined by its risk based audit plan.
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 internal and external
audit reports.
→(cid:3)Controls which mitigate or minimise high-level risks are
reviewed by management 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.
The Audit Committee undertake an annual review of the
appropriateness of the risk management processes to ensure that
they are sufficiently robust to meet the needs of the Company.
Internal audit
Internal Audit is part of the Company’s Risk and Assurance
function. 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 basis.
The Internal Audit department reviews the extent to which
systems of internal control:
→(cid:3)are designed and operating effectively;
→(cid:3)are adequate to manage easyJet’s risks; and
→(cid:3)safeguard the Company’s assets.
The Head of Internal Audit reports to the Head of Risk and
Assurance and also has direct access to the Chief Executive, Chief
Financial Officer and the Chairman of the Audit Committee. The
Risk and Assurance function was formed in 2011 which combines
the responsibilities for Internal Audit, monitoring internal financial
controls, 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.
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 in meeting its corporate
governance and regulatory responsibilities. During the year the
effectiveness of the Internal Audit function was assessed by the
Head of Risk and Assurance and the Audit Committee; this
followed a formal external effectiveness review completed in 2011.
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.
easyJet plc
Annual report and accounts 2012
49
Substantial interests
In accordance with the Disclosure and Transparency Rules DTR 5,
the Company as at 16 November 2012, has been notified of the
following disclosable interests of 3% or more in its issued
ordinary shares:
easyGroup Holdings Ltd
(Holding vehicle for Sir Stelios Haji-Ioannou)
Polys Haji-Ioannou
Standard Life Investments Ltd
Prudential Group of Companies (M&G)
%
26.07
11.11
7.36
6.24
Note: Changes to the position above since 16 November 2012
can be found at our corporate website,
http://corporate.easyjet.com.
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
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Shareholder information
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 directors or ordinary shares which are
unallocated. Generally, on a poll the trustee shall vote in
accordance with directors given by participants. In the absence
of directions or on a show of hands the trustee shall not vote.
The trustee of the easyJet Employee Share Trust (the Trust),
which is used in connection with the easyJet Long Term Incentive
Plan, has the power to vote or not vote at its discretion in respect
of any shares in the Company held in the Trust.
50
easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
for the year ended 30 September 2012
Charles Gurassa
Non Executive Deputy Chairman
and Senior Independent Director
Letter from the Chairman of the
Remuneration Committee
Dear shareholder,
On behalf of the Board, I am pleased to present the
Remuneration Report for the year ended 30 September 2012.
Performance of the Company in 2012
The Company continued its strong performance in 2012 despite
a difficult macroeconomic environment. The key highlights are set
out below:
→(cid:3)27.9% growth in profit before tax.
→(cid:3)1.8ppt growth in ROCE (excluding lease adjustment) from 12.7%
in 2011 to 14.5% in 2012.
→(cid:3)A major improvement in On Time Performance from 79%
to 88%, reflecting operational robustness.
→(cid:3)Increasing dividend with a proposed ordinary dividend
of 21.5 pence per share for 2012.
These results should be considered in light of the continuing
challenges faced in the airline industry. In addition to the results
set out above, we remain committed to delivering returns in
excess of our cost of capital and returning surplus capital to
our shareholders.
Aligning remuneration policy with Company principles
Simple and cost effective approach – In line with our low cost and
efficient business model, the Committee aim to set a simple fixed
pay package against the market. For example, our Executive
Directors receive minimal benefits (see page 53).
Support the stated business strategy of growth and returns –
Performance is assessed against a range of financial, operational
and longer term returns ensuring value is delivered to
shareholders, and participants are rewarded for the successful
delivery of the key strategic objectives of the Company.
Pay for performance – Remuneration is heavily weighted towards
variable pay, dependent on performance. This ensures that there
is a clear link between the value created for shareholders and pay.
Key pay outcomes in respect of 2012
Annual bonus payment is based on PBT and key operational
performance targets. Bonuses of 95.8% of the maximum were
awarded to the CEO and 93.3% for the CFO, in respect of 2012.
This reflects the outstanding financial and operational results the
Company has achieved.
Carolyn McCall OBE chose to defer the maximum amount of 50%
of her bonus permitted into shares for three years under the
matching scheme. Chris Kennedy chose to defer a third of his
bonus into shares under the matching scheme.
Long-Term Incentive Plan – LTIP awards made in July 2010 are
due to vest in July 2013. These awards are based on ROE
performance for the financial year ended 30 September 2012.
During this period the Company achieved ROE performance of
14.6%, resulting in 91.7% of the awards vesting.
Pay for 2013
Following discussions with shareholders around the 2012 AGM, we
consulted widely on how best to calculate ROCE to appropriately
reflect the performance of the Company. Given that this has clear
implications on our wider remuneration policy, and taking into
account my recent appointment as Remuneration Committee
Chairman, we also took the opportunity to review remuneration
arrangements as a whole.
The key objective of the review process was to ensure that
remuneration arrangements support the successful delivery of the
strategy of the Company. We also compared our arrangements
against a ‘best practice’ point of view and took on board shareholder
comments. As a result we are making the following changes:
→(cid:3)Salary increases – Neither Executive Director has received a
salary increase since their appointment in July 2010. The CEO
will not receive an increase at this time. The CFO received a
salary increase of 2.5% effective 1 October 2012, in line with
those across the wider workforce.
→(cid:3)Mandatory deferral of annual bonus – One-third of the annual
bonus will now be compulsorily deferred each year and will be
subject to forfeiture (as a result, the CEO will have a lower take
home pay opportunity). Executive Directors will also have the
opportunity to voluntarily defer an additional portion.
→(cid:3)No increase in incentive opportunity –The CFO’s incentive
opportunity (split between short term and long term) has been
rebalanced to ensure alignment with the CEO’s. There is no
increase in overall incentive opportunity for either the CEO
or CFO.
→(cid:3)Tougher annual bonus targets – Higher levels of performance
required and a lower payout for the delivery of threshold
performance target. A formal safety underpin also applies
to the bonus.
→(cid:3)Definition of ROCE – Following extensive shareholder
consultation, this has been revised. ROCE for future LTIP grants
will now include an adjustment for operating leases.
→(cid:3)Introduction of a relative TSR measure to LTIP – The LTIP will
be based 50% on TSR relative to the FTSE 51 to 150 and 50%
on ROCE to incorporate an external relative assessment of
performance. In addition, the TSR portion of the LTIP will not
vest unless the Company has achieved positive TSR
performance over the award period.
→(cid:3)Introduction of clawback – Introduced to both short and
long-term incentives in line with emerging best practice.
Shareholder feedback
We are committed to maintaining an open and transparent
dialogue with shareholders. The objective of this report is to clearly
communicate how much our Executive Directors are earning and
how this is strongly linked to performance. As always, I welcome
any comments you may have.
Charles Gurassa
Remuneration Committee Chairman
19 November 2012
easyJet plc
Annual report and accounts 2012
51
What is in this report?
This report sets out details of the remuneration policy for
Executive Directors, describes the implementation and discloses
the amounts paid relating to the year ended 30 September 2012.
The report complies 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.
The report has been prepared in line with the recommendations
of the UK Corporate Governance Code 2010 and UKLA
Listing Rules.
What is the role of our Remuneration Committee?
The Remuneration Committee has responsibility for determining
remuneration for the Executive Directors and the Chairman.
The Committee also reviews the remuneration of the Company’s
most senior executives in consultation with the CEO.
The Committee takes into account the need to recruit and retain
executives and ensure that they are properly motivated to
perform in the interests of the Company and its shareholders,
while paying no more than is necessary.
Who is on our Remuneration Committee?
The members of the Committee are: Charles Gurassa
(Chairman with effect from 1 April 2012, Keith Hamill to 31 March
2012), David Bennett, Professor Rigas Doganis and Andy Martin.
The responsibilities of the Committee are set out in the Corporate
Governance section of the Annual Report on page 45.
During the year the Committee appointed and used the services
of New Bridge Street (“NBS”) (an Aon Hewitt company) as
remuneration advisers. NBS are a member of the Remuneration
Consultants Group and comply with its Code of Conduct. Aon
Hewitt also conducted employee surveys for the Company.
What activities have been undertaken by the
Committee in the year?
The past year has seen unprecedented levels of scrutiny around
executive pay. The Committee takes its responsibility to
shareholders very seriously, demonstrated through the recent
shareholder consultation process.
In addition to the remuneration review, the Committee considered
the following during the year ended 30 September 2012:
→(cid:3)Executive Director and senior executive remuneration policy
and changes required for the future.
→(cid:3)Annual bonus awards for the financial year ended
30 September 2011.
→(cid:3)The structure and targets of the annual bonus scheme for the
financial year ended 30 September 2012.
→(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 2012 under the Long
Term Incentive Plan.
→(cid:3)Testing of the performance conditions for Long Term Incentive
Plan awards granted in January 2010.
What does the Committee consider when
setting remuneration?
When setting the policy for Executive Directors’ remuneration,
the Committee takes into account the pay and employment
conditions elsewhere in the Group.
The Committee has sight of the overall approach to reward for
employees in the Group as well as appropriate external market
reference points.
Have shareholders raised any concerns? If so, how
are you going to address them?
We remain committed to shareholder dialogue and take an active
interest in voting outcomes. Where there are substantial votes
against resolutions in relation to Directors’ remuneration, we seek
to understand the reasons for any such vote, and will detail here
any actions in response to it.
Following the 2012 AGM we consulted widely with shareholders
on the definition of ROCE which is used to measure performance
under the LTIP.
Our dialogue with shareholders on this was constructive and we
agreed that going forward, the definition of ROCE will take into
consideration operating leases on our aircraft.
As indicated in the Remuneration Committee Chairman’s letter,
we also took this opportunity to review the wider remuneration
framework and consulted extensively with shareholders on
proposals, taking into account their feedback before
implementing the changes for 2012 / 13.
What did the Executive Directors earn in 2012?
We have set out the amount earned by the CEO and CFO in
respect of 2012 in the table below:
Element
Salary
Benefits
Pension or cash equivalent
Annual bonus
→(cid:3)Cash
→(cid:3)Deferred into shares
Total
CEO
£’000
665
0
47
637
637
1,986
CFO
£’000
400
0
29
249
124
802
G
o
v
e
r
n
a
n
c
e
LTIP shares earned for FY12
performance (original grant at 5 July
2010 at a share price of £3.97)
307,115
184,732
52
easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
continued
How was pay linked to performance in 2012?
Annual bonus
For 2012, the annual bonus was based on the following
performance targets:
Measure
As a percentage of maximum
bonus opportunity
Profit before tax
On-time performance
Customer satisfaction targets
Total cost per seat excluding fuel
at constant currency
Departmental objectives
CEO
70%
10%
10%
10%
–
CFO
60%
10%
10%
10%
10%
The following chart shows performance achieved against the
bonus targets in respect of 2012:
Achievement
%
100
100
91.7
66.3
75
A
B
C
D
E
A – Profit before tax
B – On-time performance
C – Customer satisfaction targets
D – Total cost per seat excluding fuel at constant currency
E – Departmental objectives
Company measures
Financial – PBT
On-time performance
Customer satisfaction
Cost per seat (ex fuel)
Departmental
Actual
£317m
88%
82.5%
£37.57
Achieved
100%
100%
91.7%
66.3%
75%
→(cid:3)Profit before tax – Strong performance, particularly in the
context of fuel price increases, with 27.9% growth to
£317 million.
→(cid:3)On-time performance – Very pleasing improvement in this
measure, increasing from 79% to 88%.
→(cid:3)Customer satisfaction targets – Much improved score, rising
from 78.6% to 82.5%.
→(cid:3)Total cost per seat excluding fuel at constant currency –
We made considerable progress against this measure during
the year.
→(cid:3)CFO’s departmental objectives – Reflects a very successful
year for Finance & Procurement, measured against a number
of business objectives.
95.8% of the maximum bonus was awarded to the CEO and
93.3% for the CFO in respect of performance for the year ended
30 September 2012. This resulted in a bonus payment of
£1,274,101 to the CEO and £373,188 to the CFO.
LTIP
The awards made to Executive Directors in 2010 were subject to
ROE performance in the financial year ended 30 September 2012.
The percentage which could be earned was determined using the
following vesting schedule:
ROE year ended
30 September 2012
Award One (up to
100% of salary)
Award Two (over
100% of salary)
Threshold
(25% vests)
Target
(50% vests)
Maximum
(100% vests)
9.0%
12.0%
15.0%
11.0%
13.0%
15.0%
ROE in the year to 30 September 2012 was 14.6%, this compares
to a 5.5% ROE in the year prior to grant. Correspondingly 93.3% of
award one and 90% of award two (or 91.7% of the overall award)
is due to vest in July 2013.
How is remuneration structured for 2013?
Element
Purpose and link to strategy
Operation for 2013
Salary
To provide a core reward
for the role
Sufficient level to recruit
and retain individuals
of the necessary calibre
to execute our
business strategy
Annual review with any change
effective from 1 October
Set by reference to companies
of a similar size and complexity
targeted at or around median
Scope of the role and
responsibilities, performance,
experience and potential retention
issues are also considered
Performance metrics
None, although overall
performance of the
individual is taken
into account in
reviewing salaries
–
–
Benefits
In line with the Company’s
strategy to keep
remuneration simple and
consistent, the Executive
Directors receive no
conventional executive
Company benefits
Pension
To provide employees with
long-term savings via
modest pension provision
Annual
bonus
To incentivise and
recognise execution of
the business strategy
on an annual basis
Rewards the achievement
of annual financial and
operational goals
Compulsory and voluntary
deferral provides alignment
with shareholders
Bonuses subject to
clawback (repayment)
in the event of a
misstatement of results
Executives can pay for voluntary
benefits, where Company
purchasing power may provide
an advantage to employees
Executives receive modest
personal accident and life
assurance cover (0.5 x salary),
at the same levels as the wider
employee population
Defined contribution plan with
the same monthly employer
contributions as those offered to
all eligible employees below the
Board of 7% of basic salary
HMRC approved salary sacrifice
arrangement for employee
contribution
Maximum opportunity of 200%
of salary for CEO and 150% of
salary for CFO
One-third subject to compulsory
deferral into shares for three years
Executives can choose to defer
a further portion of their bonus
into shares which is subject to
matching
The remainder of the bonus will
be paid in cash
easyJet plc
Annual report and accounts 2012
53
Changes effective for
2012 / 13 financial year and
associated rationale
Neither the CEO or CFO
has received a salary
increase since joining in
July 2010
The CEO will not receive
an increase at this time.
The CFO received a salary
increase of 2.5% effective
1 October 2012, in line with
those across the wider
workforce. This results
in the following salaries:
CEO £665,000 and
CFO £410,000
No change
No change
G
o
v
e
r
n
a
n
c
e
Primary measure is profit
before tax
Performance is also
assessed against a range
of operational measures –
customer satisfaction,
operating costs, on-time
performance and in the
case of the CFO
departmental objectives
In addition, there is a safety
underpin which must be
satisfied before bonuses
are paid, under this the
Committee will review the
Company’s record over the
period in relation to safety
and, in the event that it
was considered
appropriate to do so, the
Committee may scale
back the bonus earned
based on performance
against the other metrics
Rebalancing of CFO’s
annual bonus opportunity
from 100% of salary to
150% of salary
(corresponding decrease
in LTIP opportunity)
Introduction of compulsory
deferral element with no
potential for a matching
element to be earned
Tougher targets
with higher levels of
performance required
(relative to budget) and
a lower payout (90%
of maximum vs. 85%
previously) for delivery of
the threshold performance
target
Introduction of a formal
safety underpin
Introduction of clawback
54
easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
continued
Element
Purpose and link to strategy
Operation for 2013
Performance metrics
Performance against key
goals is measured over
three years
50% of award based on
three year average ROCE
50% of award based on
TSR relative to UK listed
companies ranked in the
positions FTSE 51–150
In order for the TSR portion
of the award to be earned,
the Company’s absolute
TSR performance must
also be positive over the
performance period
Performance against key
goals is measured over
three years
50% of award based on
three year average ROCE
50% of award based on
TSR relative to UK listed
companies ranked in the
positions FTSE 51–150
In order for the TSR portion
of the award to be earned,
the Company’s absolute
TSR performance must
also be positive over the
performance period
Matching
share
awards
To incentivise and
recognise execution of
the business strategy over
the longer term
Rewards sustained profit
growth and sustained
increase in shareholder
value
LTIP award subject to
clawback (reduction)
in the event of a
misstatement of results
Only the portion of bonus that
is not subject to compulsory
deferral may be applied to
matching shares
Each year, Executive Directors
can voluntarily defer 50% of
bonus for CEO and 33% of
bonus for CFO into shares for
three years
The amount they voluntarily
defer may be subject to a
1:1 match dependent on the
delivery of performance goals
over three years
Long term
incentive
plan
To incentivise and
recognise execution of
the business strategy over
the longer term
Rewards substantially
increased and sustained
Return on Capital
Employed and sustained
increase in shareholder
value
LTIP award subject to
clawback (reduction)
in the event of a
misstatement of results
Share
ownership
To ensure alignment
between executives
and shareholders
Each year performance shares are
allocated which can be earned
subject to the delivery of
performance goals over a three
year performance period
Maximum opportunity of 200%
of salary for CEO and 150% of
salary for CFO
175% of salary holding required for
Executive Directors expected to
be reached within five years of
appointment
Executives are required to retain
half of the shares vesting under
the LTIP until the guideline is met
Executive Directors may also
participate in the Share Incentive
Plan and Sharesave Plan on the
same terms as other eligible staff
Changes effective for
2012 / 13 financial year and
associated rationale
Following the introduction
of compulsory deferral, the
matching element is only
available on the additional
portion of the bonus that
Executive Directors choose
to defer
Following extensive
shareholder consultation,
there has been a change
to the definition of ROCE
used to assess
performance under this
Plan. It will now include the
cost of leases of our planes
Introduction of relative TSR
performance measure
Introduction of clawback
Reduction in CFO’s
opportunity from 200%
of salary to 150% of salary
Following extensive
shareholder consultation,
there has been a change
to the definition of ROCE
used to assess
performance under this
Plan
It will now include the cost
of leases of our planes
Introduction of relative TSR
performance measure
Introduction of clawback
50% of shares vesting
after tax are required to be
retained until the guideline
is met (previously 100%)
easyJet plc
Annual report and accounts 2012
55
The Directors’ salaries for 2012 / 13 are as follows:
CEO
CFO
1 October 2011 salary
1 October 2012 salary
£665,000
£665,000 (0%)
£400,000
£410,000 (+2.5%)
What pension contributions are given?
In line with the Company’s simple and prudent approach to
remuneration, easyJet normally offers a modest 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).
If an Executive Director has reached the lifetime pension
limit, a cash alternative may be paid with the agreement of
the Committee.
How is successful annual performance rewarded?
The maximum annual bonus opportunity during the 2011 / 12
financial year was 200% of salary for the CEO, with a 100%
of salary opportunity for the CFO.
As stated previously, for the 2012 / 13 financial year, the maximum
bonus will remain unchanged for the CEO but will be increased to
150% of salary for the CFO (with a corresponding decrease in his
LTIP opportunity) ensuring management incentives are aligned.
The annual bonus will now be delivered as follows:
→(cid:3)One-third of any bonus earned will be compulsorily deferred
and subject to forfeiture. This element will be deferred into
shares for three years and will not be subject to any
further matching.
→(cid:3)In addition, Executive Directors can choose to invest a further
proportion of their bonus into the LTIP (CEO 50% of bonus
and CFO 33% of bonus). Matching share awards may be made
linked to this investment which may then be matched on a 1:1
pre-tax basis subject to the LTIP performance conditions.
The change in the operation of deferral means a greater
proportion of the CEO’s package will now be subject to deferral
over a three year period.
Annual performance is measured against a range of financial and
operational performance indicators as follows:
Measure
Profit before tax
Customer satisfaction targets
Total cost per seat excluding fuel
at constant currency
On-time performance
Departmental objectives
As percentage of maximum bonus
opportunity
Carolyn McCall OBE Chris Kennedy
70%
10%
10%
10%
–
60%
10%
10%
10%
10%
G
o
v
e
r
n
a
n
c
e
1,669
→(cid:3)The remainder of the bonus will be delivered as cash.
How much could the Executive Directors earn under
the current remuneration guidelines?
As mentioned earlier in this report, a significant proportion of
remuneration is linked to performance, particularly at maximum
performance levels.
Neither Executive Director will receive an increase in the overall
opportunity as a result of the changes. The proportion of the
CEO’s pay delivered in cash will decrease.
The charts below show how much the CEO and CFO could
earn under easyJet’s remuneration guidelines under different
performance scenarios. The following assumptions have
been made:
Below threshold – There is no bonus and no vesting under
the LTIP.
Meets target – This shows the value payable for performance at
the mid point of the bonus range (giving 50% of the maximum
opportunity) and vesting at threshold under the LTIP (of 25% of
the award).
Exceeds target – There is maximum bonus and maximum vesting
under the LTIP.
Chief Executive Officer
£‘000
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
3,372
1,710
712
Below threshold
Meets target
Exceeds target
Salary
Pension
Bonus
LTIP
Chief Financial Officer
£‘000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
900
439
Below threshold
Meets target
Exceeds target
Salary
Pension
Bonus
LTIP
The value of any matching shares has been excluded for simplicity.
What are the Executive Directors’ salaries?
The salaries of the CEO and CFO have not been increased since
they joined the Company in July 2010.
56
easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
continued
Targets for the financial year ending 30 September 2013 will be
subject to the same metrics but the Remuneration Committee
has made the threshold performance target tougher relative to
budget and reduced the proportion of the total bonus that is
earned at this level of performance.
The safety of our customers and people underpins all of the
operational activities of the Group and the bonus plan includes an
underpin that enables the Remuneration Committee to scale back
the bonus earned in the event that there is a safety event that
occurs that it considers warrants the use of such discretion.
Subsequent to this review, the appropriateness of the level of
ROCE targets for 2013 awards was considered. After careful
thought, the following ranges are to apply:
ROCE Vesting % (of ROCE part of award)
Below 12%
12%
16%
0%
25%
100%
Straight-line vesting between performance points.
How does the Long Term Incentive Plan work?
The LTIP provides for annual awards of performance shares and
matching shares subject to three year performance.
Following the review, the ROCE targets were set against a
background of the excellent progress made by the management
team, the business plan and market expectations.
The annual award limit for performance shares is 200% of salary.
In the year ending 30 September 2013 the intention is to grant
awards of 200% of salary to the CEO and 150% of salary to the
CFO (previously 200% of salary). The reduced award to the
CFO reflects a policy to ensure full alignment of incentives for
the senior executives following the remuneration review.
Matching share awards are linked to the investment of any
voluntary amount deferred by the Executive Directors under the
annual bonus plan (up to 50% of annual bonus earned for the
CEO and 33% for the CFO). The investment is made into easyJet
shares, which are then matched on a 1:1 pre-tax basis.
2013 awards
For 2013 awards onwards, performance and matching
share awards are earned three years after grant, subject to
continued employment and the satisfaction of the following
performance conditions:
→(cid:3)50% ROCE (including operating leases adjustment)
→(cid:3)50% relative TSR
The introduction of relative TSR reflects feedback received from
shareholders around the time of last year’s AGM to consider the
use of more than one performance measure, and will provide a
balance between incentivising improved financial performance
and creating market-leading returns for shareholders.
ROCE (including operating leases adjustment) targets
ROCE targets for 2013 grants have been reviewed against the
Company’s three year business plan.
Following extensive shareholder consultation and feedback,
going forward, operating leases will be included in the
ROCE calculation.
ROCE is calculated based on normalised profit after tax, adjusted
for implied interest on operating lease costs, divided by the
average net debt, plus average shareholders’ equity, plus an
adjustment to capitalise operating leases at seven times the
annual lease rental, in line with market practice.
In addition, three year average ROCE will be assessed to ensure
sustainable performance over the whole period (for 2013
awards performance will be assessed for the financial years
ending 30 September 2013, 30 September 2014 and
30 September 2015).
The increased ROCE targets represent an incentive for
significantly improved performance.
Relative TSR targets
The TSR performance condition will assess the relative TSR
performance of the Company against a comparator group
comprised of those UK listed companies ranked in the positions
FTSE 51–150 at the date of grant, on the basis that they are
broadly of a similar size. The following performance schedule
will apply:
Relative TSR
performance
Threshold
(25% vesting)
Median
performance
Maximum
(100% vesting)
Upper quartile
performance
Awards will vest on a straight-line basis between these points.
In order for the TSR element of the awards to be earned, there will
be an additional requirement that the Company must achieve
positive absolute TSR performance over the performance period.
Employee share plan participation
easyJet encourages share ownership throughout the Company
by the use of Performance (Free) Shares within a Share Incentive
Plan and a Sharesave Plan. Take up of the schemes remains high
with over 85% of eligible staff now participating in one or more of
the plans. Executive Directors may also participate in these plans
on the same terms as other eligible staff. They are summarised in
the Corporate Responsibility section on page 34.
During the review, the ROCE targets were reviewed in light of the
excellent progress made by the management team, the business
plan and market expectations.
Employee Share Plans
%
Share plan participants
Other employees
85
15
easyJet plc
Annual report and accounts 2012
57
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 Sep 20111
Scheme
Share
consolidation
Share/
options
granted
in year
Share/
options
lapsed in
year
Share/
options
exercised
in year
No. of
shares/
options at
30 Sep 20121 Date of grant
Exercise
price
(£)
Market price
on exercise
date
(£)
Date
from which
exercisable
Expiry date
A
A
A
A
A
B
C
C
D
E
335,096
196,803
147,602
–
–
–
880
–
349
3,133
–
–
–
–
–
–
(73)
–
(28)
–
–
–
–
169,297
169,297
106,978
–
617
319
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Chris Kennedy
335,096
5 Jul 2010
196,803 31 Mar 20112
147,602 31 Mar 20112
169,297 4 Jan 20123
169,297 4 Jan 20123
106,978 4 Jan 20123
807
1 May 2011
617 18 Apr 2012
640
–
–
5 Jul 2013 5 Jul 2020
– 31 Mar 2014 31 Mar 2021
– 31 Mar 2014 31 Mar 2021
– 4 Jan 2015 4 Jan 2022
– 4 Jan 2015 4 Jan 2022
– 4 Jan 2015 4 Jan 2022
–
1 May 2014
– 18 Apr 2015
– See note 4
–
n/a
n/a
n/a
3,133
1 Aug 2011
2.88
–
1 Aug 2014
1 Feb 2015
No. of
shares/
options at
30 Sep 20111
Share
consolidation
Share/
options
granted
in year
Share/
options
lapsed in
year
Share/
options
exercised
in year
Scheme
No. of
shares/
options at
30 Sep 20121 Date of grant
Exercise
price
(£)
Market price
on exercise
date
(£)
Date
from which
exercisable
Expiry date
A
A
A
A
A
B
C
C
D
E
201,562
118,378
88,783
–
–
–
880
–
376
3,133
–
–
–
–
–
–
(73)
–
(31)
–
–
–
–
101,832
101,832
32,174
–
617
319
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
201,562
5 Jul 2010
118,378 31 Mar 20112
88,783 31 Mar 20112
101,832 4 Jan 20123
101,832 4 Jan 20123
32,174 4 Jan 20123
807
1 May 2011
617 18 Apr 2012
664
–
–
5 Jul 2013 5 Jul 2020
– 31 Mar 2014 31 Mar 2021
– 31 Mar 2014 31 Mar 2021
– 4 Jan 2015 4 Jan 2022
– 4 Jan 2015 4 Jan 2022
– 4 Jan 2015 4 Jan 2022
–
1 May 2014
– 18 Apr 2015
– See note 4
–
3,133
1 Aug 2011
2.88
–
1 Aug 2014
1 Feb 2015
The closing share price of the Company’s ordinary shares at 28 September 2012 was £5.81 and the closing price range during the year
ended 30 September 2012 was £3.54 to £5.93.
Notes
A Long Term Incentive plan – Performance Shares
B Long Term Incentive plan – Matching Shares
C Share Incentive Plan – Performance (Free) Shares
D Share Incentive Plan – Matching Shares
E Save As You Earn Awards
Note 1: The numbers of share 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 announcement of results.
Note 2: For LTIP awards made in March 2011, vesting is based on ROCE (excluding operating leases adjustment) performance for the year to 30 September 2013, according to
the following targets:
Award 1
Award 2
Threshold
(25% vesting)
Target
(50% vesting)
Maximum (100%
vesting)
7.0%
10.0%
8.5%
12.0%
12.0%
13.0%
Note 3: For LTIP awards made in January 2012, vesting is based on three year average ROCE (excluding lease adjustment) performance for the years ended 30 September 2012,
30 September 2013 and 30 September 2014. The following targets were published in an RNS in January and apply for these awards:
Award 1
Award 2
Threshold
(25% vesting)
Target
(50% vesting)
Maximum (100%
vesting)
8.0%
11.5%
10.0%
12.5%
12.0%
13.0%
Note 4: Participants 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.
n/a
n/a
n/a
G
o
v
e
r
n
a
n
c
e
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
58
easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
continued
What shareholdings are Directors’ required to have?
Executive Directors are required to build up a shareholding of
175% of salary. It is expected that this guideline will be achieved
within five years of appointment. Until the guideline is met,
they are required to retain 50% of net vested shares from
the LTIP. Other senior executives have a 100% of salary
shareholding requirement.
The Board agreed a policy on shareholding guidelines for Non
Executives. The level of shareholding is to be 100% of annual fees
to be built up over three years from the (30 September 2012)
adoption of the policy.
What are the 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
Adèle Anderson
David Bennett
John Browett
Professor Rigas Doganis
30 September*
2012
30 September
2011
63,540
27,685
11,283
18,198
2,614
9,166
4,312
12,467
12,602
12,631
12,308
19,853
2,854
10,000
4,705
13,600
* The final shareholding has been adjusted to reflect the share consolidation that
occurred on 5 March 2012.
Note: Changes to the position above since 30 September 2012
can be found at our corporate website,
http://corporate.easyjet.com
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 2012, ordinary
shares held in the Trusts were as follows:
Position against dilution limits
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 ten 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 share purchases on the
market. The remaining 1.4 million options under the Discretionary
Share Option Schemes, when or if exercised, will continue to be
settled by the issue of new shares.
What are the Executive Directors’ terms of
employment and external appointments?
Executive Directors
Name
Date of service contract
Carolyn McCall OBE
1 July 2010
Chris Kennedy
1 July 2010
Notice period
12 months
12 months
On termination by the Company, Carolyn McCall OBE would
continue to receive 12 monthly instalments of salary and pension
which would cease to the extent that alternative employment was
taken up. Alternatively, by mutual consent, the Company may
elect to make a payment to the value of 12 months’ 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 predetermined compensation to be
paid on termination.
Executive Directors are permitted to accept one appointment
on an external board or committee so long as this is not thought
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 2012.
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
3,242,663
3,242,663
1,170,393
97,047
8,378
1,275,818
4,518,481
easyJet plc
Annual report and accounts 2012
59
What are the terms of appointment of the Non Executive Directors?
Non Executive Directors
Details of the service contracts and letters of appointment currently in place for Directors who served during the year are as follows:
Sir Michael Rake
Charles Gurassa
David Bennett
Keith Hamill
John Browett
Professor Rigas Doganis
Adèle Anderson
Andy Martin
Date of current service contract
or letter of appointment
Unexpired term at
30 September 2012 Notice period
Provision for
compensation
1 June 2012
2 years 8 months
3 months
27 June 2011
1 year 9 months
3 months
27 September 2010
1 year
3 months
1 March 2012
2 years 5 months
3 months
27 September 2010
27 September 2010
1 year
1 year
3 months
3 months
1 September 2011
1 year 11 months
3 months
1 September 2011
1 year 11 months
3 months
None
None
None
None
None
None
None
None
Non-Executive Directors do not have service contracts and are not entitled to compensation on loss of office. The required notice from
the Company is three months in all cases.
How are the Non Executive Directors remunerated?
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.
Our Non Executive Directors are paid an annual fee, however do not participate in any of the Company’s incentive schemes.
The Chairman’s fees are currently £300,000 per annum and the Deputy Chairman’s basic fees are £80,000 per annum.
The other Non Executive Directors’ fees as at 30 September 2012 are as follows:
Basic fee
Chairmen of the Audit and Remuneration Committees
Per annum
£55,000
£10,000
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easyJet plc
Annual report and accounts 2012
Governance
Directors’ remuneration report
continued
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
2012 are as follows:
Executive
Carolyn McCall OBE
Chris Kennedy
Non Executive
Sir Michael Rake
Charles Gurassa
Sir David Michels (resigned 26 August 2011)
David Jonathan Bennett
Professor Rigas Sotiris Doganis
John Browett
Keith Hamill
Sven Boinet (resigned 30 September 2011)
Adèle Anderson
Andrew David Martin
Fees and
salary
Bonuses
712
400
300
85
–
65
55
55
60
–
55
55
1,274
373
–
–
–
–
–
–
–
–
–
–
Total
2012
1,986
773
Total
2011
1,552
653
300
300
85
–
65
55
55
60
–
55
55
15
73
65
55
55
65
55
5
5
Pension contributions
2012
2011
–
291
–
28
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Chris Kennedy received £690 in exchange for sacrificing salary into the pension scheme, in line with easyJet’s SMART pension arrangements (page 55).
1,842
1,647
3,489
2,898
29
28
easyJet plc
Annual report and accounts 2012
61
Total shareholder return performance
The chart below sets out the performance of the Company relative to the FTSE 250 and a group of European airlines. The FTSE 250
has been chosen as we are a member of that Index.
Total shareholder return
£
140
120
100
80
60
40
20
0
30 Sep 07
30 Sep 08
30 Sep 09
30 Sep 10
30 Sep 11
30 Sep 12
easyJet
FTSE 250 Index
Comparator Airlines
Source: Thomson Reuters
This graph shows the value, by 30 September 2012 of £100 invested in easyJet on 30 September 2007 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: British Airways, Lufthansa, Ryanair, Air France-KLM and Iberia have all been included in the comparative European Airlines group.
British Airways and Iberia have been tracked forward for 2011 and 2012 as IAG.
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easyJet plc
Annual report and accounts 2012
Governance
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report,
the Report on Directors’ remuneration and the accounts in
accordance with applicable law and regulations.
Company law requires the Directors to prepare accounts for each
financial year. Under that law the Directors have 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 and the Company
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
and the Group’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and the Group and enable them to ensure that the accounts
and the Report on Directors’ remuneration comply with the
Companies Act 2006 and, as regards the Group accounts,
Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and the Group and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of accounts may
differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on
pages 40 and 41 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 accordance with Section 418 of the Companies Act 2006, each
Director in office at the date the Directors’ report is approved,
confirms that:
(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 / she has taken all the steps that he / she ought to have
taken as a Director in order to make himself / herself 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 19 November 2012 and
signed on behalf of the Board by:
Carolyn McCall OBE
Chief Executive Officer
Chris Kennedy
Chief Financial Officer
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
64
easyJet plc
Annual report and accounts 2012
Accounts & other information
Independent auditors’ report
to the members of easyJet plc
We have audited the accounts of easyJet plc for the year ended
30 September 2012 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 2012
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
19 November 2012
Consolidated income statement
Seat revenue
Non-seat revenue
Total revenue
Fuel
Ground operations
Crew
Navigation
Maintenance
Selling and marketing
Other costs
EBITDAR
Aircraft dry leasing
Depreciation
Amortisation of intangible assets
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
easyJet plc
Annual report and accounts 2012
65
Year ended
30 September
2012
£ million
Year ended
30 September
2011
£ million
Notes
3,794
60
3,854
(1,149)
(955)
(432)
(280)
(203)
(104)
(200)
531
(95)
(97)
(8)
331
11
(25)
(14)
317
(62)
3,389
63
3,452
(917)
(923)
(407)
(285)
(179)
(102)
(171)
468
(109)
(83)
(7)
269
9
(30)
(21)
248
(23)
25
8
7
2
3
5
255
225
6
6
62.5
61.7
52.5
52.0
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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
Total comprehensive income for the year
Year ended
30 September
2012
£ million
Year ended
30 September
2011
£ million
Notes
255
225
5
109
(74)
(7)
28
283
122
(152)
9
(21)
204
Consolidated statement of financial position
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Derivative financial instruments
Loan notes
Restricted cash
Other non-current assets
Current assets
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
easyJet plc
Annual report and accounts 2012
67
30 September
2012
£ million
30 September
2011
£ million
Notes
7
7
8
21
9
12
10
11
21
12
12
12
13
14
21
16
14
21
16
5
17
365
91
2,395
21
10
29
57
2,968
241
73
130
238
645
1,327
(1,021)
(129)
(26)
(29)
(59)
(1,264)
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)
63
561
(828)
(24)
(46)
(141)
(198)
(1,237)
1,794
108
656
42
1
987
1,794
(1,145)
(27)
(59)
(177)
(179)
(1,587)
1,705
108
654
14
1
928
1,705
The accounts on pages 65 to 97 were approved by the Board of Directors and authorised for issue on 19 November 2012 and signed
on behalf of the Board.
Carolyn McCall OBE
Director
Chris Kennedy
Director
A
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easyJet plc
Annual report and accounts 2012
Accounts & other information
Consolidated statement of changes in equity
At 1 October 2011
Total comprehensive income
Dividends paid
Share incentive schemes
Proceeds from shares issued
Value of employee services
Related tax (note 5)
Purchase of own shares
At 30 September 2012
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
108
Share
premium
£ million
654
–
–
–
–
–
–
–
–
2
–
–
–
108
656
Share
capital
£ million
107
–
1
–
–
–
Share
premium
£ million
652
–
2
–
–
–
108
654
Hedging
reserve
£ million
Translation
reserve
£ million
Retained
earnings
£ million
14
28
–
–
–
–
–
42
1
–
–
–
–
–
–
1
928
255
(196)
–
12
3
(15)
987
Hedging
reserve
£ million
Translation
reserve
£ million
Retained
earnings
£ million
35
(21)
–
–
–
–
14
1
–
–
–
–
–
1
706
225
–
6
(1)
(8)
Total
£ million
1,705
283
(196)
2
12
3
(15)
1,794
Total
£ million
1,501
204
3
6
(1)
(8)
928
1,705
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
Cash flows from operating activities
Cash generated from operations (excluding dividends)
Ordinary dividends paid
Special dividends paid
Net interest and other financing charges paid
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
Proceeds from sale of property, plant and equipment
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 decrease / (increase) in money market deposits
Increase in restricted cash
Net cash (used by) / generated from financing activities
Effect of exchange rate changes
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
easyJet plc
Annual report and accounts 2012
69
Notes
19
Year ended
30 September
2012
£ million
Year ended
30 September
2011
£ million
494
(46)
(150)
(9)
(28)
261
449
–
–
(23)
(2)
424
(379)
(550)
–
1
(13)
2
75
–
(6)
3
(389)
(478)
2
(15)
–
(305)
–
(9)
–
55
(37)
(309)
(18)
(455)
1,100
3
(8)
172
(154)
71
(6)
273
(38)
(67)
246
(4)
188
912
Cash and cash equivalents at end of year
12
645
1,100
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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, Luton,
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 17. Principal risks and uncertainties are described on pages 26 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 £645 million as at 30 September 2012. Total debt of £957 million is free from financial
covenants, with £129 million due for repayment in the year to 30 September 2013.
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 two 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.
easyJet plc
Annual report and accounts 2012
71
Basis of consolidation
The consolidated accounts incorporate those of easyJet plc and its subsidiaries for the years ended 30 September 2011 and 2012.
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 seat revenue, being the value of airline services (net of air passenger duty, VAT and discounts), and
non-seat revenue.
Seat revenue arises from the sale of flight seats, including the provision of checked baggage, speedy (priority) boarding services,
booking, credit card and change fees. Seat revenue is recognised when the service is provided. This is generally when the flight takes
place, but in the following cases, this is 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.
Amounts paid by "no-show" customers are recognised as seat revenue when the booked service is provided as such customers are not
generally entitled to change flights or seek refunds once a flight has departed.
Unearned revenue represents flight seats, including the provision of checked baggage and speedy (priority) boarding services, sold but
not yet flown and is included in trade and other payables until it is realised in the income statement when the service is provided.
Non seat revenue arises from commissions earned from services sold on behalf of partners. Non seat revenue is recognised when the
service is provided. This is generally when the related flight takes place. In the case of commission earned from travel insurance,
revenue is recognised at the time of booking as easyJet acts solely as appointed representative of the insurance company.
During the year, the classification between seat and non-seat revenue has been revised and the comparative data has been reclassified
to conform to the current year presentation.
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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easyJet plc
Annual report and accounts 2012
Accounts & other information
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 utilisation requirements are observed, and are tested for
impairment at least annually or where there is any indication of impairment.
Other intangible assets are stated at cost less accumulated amortisation, which is calculated to write-off their cost, less estimated
residual value, on a straight-line basis over their expected useful lives. Expected useful lives and residual values are reviewed annually.
Computer software
Contractual rights
Expected useful life
3 years
Over the length of the related contracts
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 recoverable amount. Impairment losses recognised on goodwill are not reversed.
easyJet plc
Annual report and accounts 2012
73
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.
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.
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easyJet plc
Annual report and accounts 2012
Accounts & other information
Notes to the accounts
continued
1 Accounting policies continued
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.
easyJet plc
Annual report and accounts 2012
75
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 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 basis:
→(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 2012:
Amendments to standards
IAS 24 Related party disclosures
IFRS 1
IFRS 7 Financial Instruments: Disclosures
First-time Adoption of IFRS (Hyperinflation and Removal of Fixed Dates for First-time Adopters)
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 2012
Accounts & other information
Notes to the accounts
continued
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 2012.
Effective for the year ending 30 September 2013
Amendments to standards
IAS 1
IAS 12 Deferred Tax (Recovery of Underlying Assets)
Presentation of Items of Other Comprehensive Income
Effective for the year ending 30 September 2014
New and revised standards
IAS 27 Separate Financial Statements
IAS 28
IFRS 10 Consolidated Financial Statements
IFRS 11
IFRS 12 Disclosures of Interests in Other Entities
IFRS 13 Fair Value Measurement
Joint Arrangements
Investments in Associates and Joint Ventures
Amendments to standards and interpretations
IAS 19
Employee Benefits
Effective for the year ending 30 September 2015
Amendments to standards and interpretations
IAS 32 Financial Instruments: Presentation (Offsetting Financial Assets and Financial Liabilities)
Effective for the year ending 30 September 2016
Amendments to standards and interpretations
IFRS 9 Financial Instruments
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
Net exchange gains on financing items (note 21)
Interest payable and other financing charges
Interest payable on bank loans
Interest payable on finance lease obligations
Other interest payable
Net exchange losses on financing items (note 21)
Other interest payable in 2011 includes a credit of £1 million reversing previous interest accruals.
2012
£ million
2011
£ million
(10)
(1)
(11)
20
5
–
–
25
14
(9)
–
(9)
20
5
(1)
6
30
21
easyJet plc
Annual report and accounts 2012
77
2012
£ million
2011
£ million
90
7
1
89
5
77
6
–
102
4
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
Auditors’ remuneration
During the year easyJet obtained the following services from easyJet’s auditors and their associates (including foreign partners):
Group audit fee
4 Employees
The average number of persons employed by easyJet was:
Flight and ground operations
Management and administration (including IT)
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
2012
£ million
0.4
2011
£ million
0.3
2012
7,743
463
8,206
2011
7,361
363
7,724
2012
£ million
2011
£ million
379
53
32
12
476
350
48
28
6
432
2012
£ million
2011
£ million
7
4
11
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
Details of Directors’ remuneration are disclosed in the Report on Directors’ remuneration.
2012
£ million
4
2011
£ million
3
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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 charge / (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
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 25% (2011: 27%)
Attributable to rates other than standard UK rate
Expenses / (income) not deductible / (chargeable) for tax purposes
Share-based payments
Adjustments in respect of prior years – current tax
Adjustments in respect of prior years – deferred tax
Utilisation of previously unrecognised losses
Change in tax rate
2012
£ million
2011
£ million
37
11
–
48
42
(8)
(2)
(18)
14
62
20%
5
9
(30)
(16)
54
(5)
7
(17)
39
23
9%
2012
£ million
317
2011
£ million
248
79
–
7
1
–
(2)
(5)
(18)
62
67
(1)
(4)
1
(30)
7
–
(17)
23
In the year ended 30 September 2011 the adjustments in respect of prior year 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 2012 amounted to £29 million (2011: £9 million), of which £12 million relates to years prior to 2012
which remain open with the relevant tax authorities.
During the year ended 30 September 2012, net cash tax paid amounted to £28 million (2011: £2 million).
easyJet plc
Annual report and accounts 2012
79
Tax on items recognised directly in other comprehensive income or shareholders’ equity
(Charge) / credit to other comprehensive income
Deferred tax (charge) / credit on fair value movements of cash flow hedges
Credit / (charge) to shareholders’ equity
Current tax credit on share-based payments
Deferred tax credit / (charge) on share-based payments
Deferred tax
The net deferred tax liability in the statement of financial position is as follows:
2012
£ million
2011
£ million
(7)
1
2
3
9
–
(1)
(1)
At 1 October 2011
Charged / (credited) to income statement
Charged to other comprehensive income
Credited to shareholders’ equity
At 30 September 2012
At 1 October 2010
Charged / (credited) to income statement
Credited to other comprehensive income
Charged to shareholders’ equity
At 30 September 2011
Accelerated
capital
allowances
£ million
Short-term
timing
differences
£ million
Fair value
gains
£ million
Share-
based
payments
£ million
Total
£ million
120
26
–
–
146
39
(9)
–
–
30
23
(1)
7
–
29
(3)
(2)
–
(2)
(7)
179
14
7
(2)
198
Accelerated
capital
allowances
£ million
Short-term
timing
differences
£ million
Fair value
gains
£ million
Share-
based
payments
£ million
Total
£ million
62
58
–
–
120
57
(18)
–
–
39
33
(1)
(9)
–
23
(4)
–
–
1
(3)
148
39
(9)
1
179
It is estimated that deferred tax liabilities of approximately £11 million (2011: £5 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 £212 million (2011: £190 million). The net overseas deferred tax asset is £14 million (2011: £11 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.
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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
2012
£ million
255
2011
£ million
225
2012
million
408
5
413
2012
pence
62.5
61.7
2011
million
429
4
433
2011
pence
52.5
52.0
An ordinary dividend in respect of the year ended 30 September 2012 of £85 million (21.5 pence per share) is to be proposed at the
forthcoming Annual General Meeting (2011: ordinary dividend £46 million, special dividend £150 million). These accounts do not reflect
this dividend payable.
On 5 March 2012, the shares of easyJet plc were consolidated on an 11 for 12 basis. The impact of the share consolidation on the
weighted average number of shares used to calculate basic and diluted earnings per share is 21 million. Further details in respect of the
share consolidation are given in note 17.
7 Goodwill and other intangible assets
Cost
At 1 October 2011
Transfer from property, plant and equipment
Disposals
At 30 September 2012
Amortisation
At 1 October 2011
Charge for the year
Disposals
At 30 September 2012
Net book value
At 30 September 2012
At 1 October 2011
Goodwill
£ million
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
365
–
–
365
–
–
–
–
365
365
74
–
–
74
–
–
–
–
74
74
4
–
(3)
1
3
–
(3)
–
1
1
25
13
(3)
35
14
8
(3)
19
16
11
103
13
(6)
110
17
8
(6)
19
91
86
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Annual report and accounts 2012
81
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
Goodwill
£ million
Landing
rights
£ million
Contractual
rights
£ million
Computer
software
£ million
Total
£ million
Other intangible assets
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
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 approved by the Board for the period up to 2017, 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%
1,100
1.58
1.27
1.50
Both fuel price and exchange rates are volatile in nature, and the assumptions used represent management’s view of reasonable
average rates. Operating margins are sensitive to significant changes in these rates.
Cash flow projections beyond the forecast period have been extrapolated using 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.
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Annual report and accounts 2012
Accounts & other information
Notes to the accounts
continued
8 Property, plant and equipment
Cost
At 1 October 2011
Additions
Transfer to intangible assets
Disposals
At 30 September 2012
Depreciation
At 1 October 2011
Charge for the year
Disposals
At 30 September 2012
Net book value
At 30 September 2012
At 1 October 2011
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
Aircraft and
spares
£ million
Leasehold
improvements
£ million
Other
£ million
Total
£ million
2,410
371
–
(36)
2,745
276
93
(1)
368
2,377
2,134
8
7
–
–
15
4
1
–
5
10
4
19
14
(13)
(6)
14
8
3
(5)
6
8
11
2,437
392
(13)
(42)
2,774
288
97
(6)
379
2,395
2,149
Aircraft and
spares
£ million
Leasehold
improvements
£ million
Other
£ million
Total
£ million
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
The net book value of aircraft includes £88 million (2011: £164 million) relating to advance and option payments for future deliveries.
This amount is not depreciated.
Aircraft with a net book value of £990 million (2011: £1,206 million) were mortgaged to lenders as loan security.
Aircraft with a net book value of £154 million (2011: £159 million) are held under finance leases.
easyJet is contractually committed to the acquisition of 18 (2011: 37) Airbus A320 family aircraft, with a total list price of US$1.0 billion
(2011: US$1.9 billion) before escalations and discounts for delivery in the period to April 2015.
easyJet plc
Annual report and accounts 2012
83
9 Loan notes
In 2001, easyJet in consortium with six other UK airlines formed The Airline Group Limited in order to acquire a non-controlling interest in
NATS, the company that owns the UK air traffic control system. easyJet’s investment is principally in the form of unsecured loan notes
bearing interest at a fixed rate of 8%. Interest receivable is settled by the issue of additional loan notes. Redemption is governed by a
priority agreement among the consortium members.
At 1 October
Interest receivable converted to loan notes
Redemption of loan notes
At 30 September
10 Other non-current assets
Recoverable supplemental rent (pledged as collateral)
Deposits held by aircraft lessors
Other
11 Trade and other receivables
Trade receivables
Less provision for impairment
Other receivables
Recoverable supplemental rent (pledged as collateral)
Prepayments and accrued income
2012
£ million
2011
£ million
11
1
(2)
10
13
1
(3)
11
2012
£ million
2011
£ million
36
17
4
57
40
17
6
63
2012
£ million
2011
£ million
124
(4)
120
33
6
82
241
84
(3)
81
27
11
46
165
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’)
At 30 September
2012
£ million
2011
£ million
3
1
4
3
–
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 2012
Accounts & other information
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
2012
£ million
2011
£ million
52
1
53
31
10
41
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
2012
£ million
2011
£ million
645
238
130
29
1,042
1,100
300
90
33
1,523
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:
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
2012
£ million
2011
£ million
130
25
4
159
90
30
3
123
2012
£ million
2011
£ million
109
496
338
13
65
1,021
90
472
280
13
61
916
easyJet plc
Annual report and accounts 2012
85
Current
£ million
Non-current
£ million
Total
£ million
120
9
129
632
196
828
Current
£ million
Non-current
£ million
146
9
155
933
212
1,145
752
205
957
Total
£ million
1,079
221
1,300
14 Borrowings
At 30 September 2012
Bank loans
Finance lease obligations
At 30 September 2011
Bank loans
Finance lease obligations
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 2011
Exchange adjustments
Charged to income statement
Utilised
At 30 September 2012
Maintenance provisions are analysed as follows:
Current
Non-current
The provision for maintenance liabilities is expected to be utilised within eight years.
£ million
222
(7)
61
(76)
200
2012
£ million
2011
£ million
59
141
200
45
177
222
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easyJet plc
Annual report and accounts 2012
Accounts & other information
Notes to the accounts
continued
17 Share capital
Authorised
At 30 September 2011; ordinary shares of 25 pence each
At 30 September 2012; new ordinary shares of 272/7 pence each
Allotted, called up and fully paid
At 1 October
Issued during the year under share incentive schemes
Effect of share consolidation
At 30 September
2012
million
Number
2011
million
2012
£ million
Value
2011
£ million
–
458
431
1
(36)
396
500
–
430
1
–
431
–
125
108
–
–
108
125
–
107
1
–
108
On 5 March 2012, following the special dividend, the shares of easyJet plc were consolidated. The share consolidation replaced every
12 existing ordinary shares of 25 pence each with 11 new ordinary shares of 27 2/7 pence each. The impact of the share consolidation
on the number of allotted, called up and fully paid shares is 36 million.
There is no change in the total value of the Company’s issued share capital.
The weighted average share price for options exercised during the year was £4.57 (2011: £4.31) 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)
2012
2011
3
12
17
2
7
7
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
19 January 2004
8 December 2004
Long Term Incentive Plan
16 January 2009
16 December 2009
5 July 2010
31 March 2011
4 January 2012
Sharesave
6 June 2008
5 June 2009
10 June 2010
1 July 2011
1 July 2012
Share incentive plan
1 October
2011
million
Granted
million
Forfeited
million
Share
consolidation
million
Exercised
million
30 September
2012
million
0.4
2.6
1.2
0.9
0.5
2.4
–
1.0
1.1
0.4
2.3
–
4.3
17.1
–
–
–
–
–
–
2.7
–
–
–
–
1.0
2.0
5.7
–
–
(0.1)
–
–
(0.1)
–
(0.1)
–
(0.1)
(0.1)
–
(0.1)
(0.6)
–
–
–
–
–
–
–
–
–
–
–
–
(0.4)
(0.4)
(0.2)
(1.2)
(0.8)
–
–
–
–
(0.9)
(0.9)
–
–
–
(0.3)
(4.3)
0.2
1.4
0.3
0.9
0.5
2.3
2.7
–
0.2
0.3
2.2
1.0
5.5
17.5
easyJet plc
Annual report and accounts 2012
87
Weighted average exercise prices are as follows:
Discretionary schemes
Sharesave
1 October
2011
£
2.05
2.73
Granted
£
Forfeited
£
Exercised
£
30 September
2012
£
–
4.11
–
2.78
1.98
2.42
2.11
3.24
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
Price
£
2011
2.05
2.40
–
2012
2.11
2.43
–
2012
1.6
0.2
0.8
2.6
The weighted average remaining contractual life for each class of share award at 30 September 2012 is as follows:
Discretionary schemes
Long Term Incentive Plan
Sharesave
Share incentive plan
Number
million
2011
3.0
1.0
0.7
4.7
Years
2.1
8.5
2.9
2.0
Discretionary schemes
All 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.
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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
Long Term Incentive Plan
16 January 2009
16 December 2009 and 5 July 2010
31 March 2011
4 January 2012
Sharesave
6 June 2008
5 June 2009
10 June 2010
1 July 2011
1 July 2012
Share
price
£
Exercise
price
£
Expected
volatility
%
Option life
years
Risk-free
interest rate
%
3.80
1.81
2.88
3.49
3.41
3.92
2.86
3.02
4.36
3.60
5.23
3.60
1.84
40%
42%
6.5
6.5
4.62%
4.45%
–
–
–
–
2.40
2.43
3.49
2.88
4.18
–
–
–
–
41%
53%
53%
46%
35%
–
–
–
–
3.5
3.5
3.5
3.5
3.5
–
–
–
–
4.92%
2.52%
1.20%
1.45%
0.24%
Fair
value
£
1.90
0.88
2.88
3.49
3.41
3.92
1.16
1.40
1.96
1.37
1.77
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 £4.96 (2011: £3.81)
For grants under the Sharesave scheme after 30 September 2011, the dividend yield assumption is calculated based on the actual yield
at the date the options are granted. For the options granted on 1 July 2012, the dividend yield assumption was 2%.
easyJet plc
Annual report and accounts 2012
89
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
Amortisation of intangible assets
Share-based payments
Changes in working capital and other items of an operating nature:
(Increase) / decrease in trade and other receivables
Increase in trade and other payables
Increase / (decrease) in provisions
Increase / (decrease) in other non-current assets
Decrease / (increase) in derivative financial instruments
Increase in non-current deferred income
2012
£ million
331
2011
£ million
269
97
1
8
12
(44)
74
18
6
4
(13)
494
83
–
7
6
27
87
(5)
(9)
(2)
(14)
449
20 Reconciliation of net cash flow to movement in net funds / (debt)
Cash and cash equivalents
Money market deposits
Bank loans
Finance lease obligations
Net funds / (debt) (non-GAAP measure)
1 October
2011
£ million
Exchange
differences
£ million
Loan issue
costs
£ million
Net
cash flow
£ million
30 September
2012
£ million
1,100
300
1,400
(1,079)
(221)
(1,300)
100
(18)
(7)
(25)
25
7
32
7
–
–
–
(3)
–
(3)
(3)
(437)
(55)
(492)
305
9
314
(178)
645
238
883
(752)
(205)
(957)
(74)
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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 2012
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 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
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
Other
£ million
Carrying
value
£ million
Fair
value
£ million
10
53
195
–
–
159
238
645
–
–
–
(454)
–
–
–
–
–
(957)
–
–
–
–
53
–
–
–
–
–
–
–
–
(9)
–
–
–
–
–
4
46
10
57
241
10
57
241
(567)
(1,021)
(1,021)
–
–
–
–
–
44
159
238
645
44
159
238
645
(957)
(965)
Amortised cost
Held at fair value
Loans and
receivables
£ million
Financial
liabilities
£ million
Cash flow
hedge
£ million
Held for
trading
£ million
Other
£ million
Carrying
value
£ million
Fair
value
£ million
11
59
130
–
–
123
300
1,100
–
–
–
(375)
–
–
–
–
–
(1,300)
–
–
–
–
20
–
–
–
–
–
–
–
–
8
–
–
–
–
–
4
35
11
63
165
11
63
165
(541)
(916)
(916)
–
–
–
–
–
28
123
300
1,100
28
123
300
1,100
(1,300)
(1,307)
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.
easyJet plc
Annual report and accounts 2012
91
Fair value of derivative financial instruments
At 30 September 2012
Designated as cash flow hedges:
US dollar
Euro
Swiss franc
Jet fuel
Designated as held for trading: US dollar
At 30 September 2011
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
3,204
653
202
2
850
1
5
1
14
–
21
4
20
4
45
–
73
(11)
–
–
(6)
(9)
(26)
(15)
–
–
(9)
–
(24)
(21)
25
5
44
(9)
44
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)
(47)
–
(52)
–
–
(1)
(26)
–
(27)
39
11
(2)
(28)
8
28
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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easyJet plc
Annual report and accounts 2012
Accounts & other information
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 2012
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
At 30 September 2011
Hedges of transaction currency risk
Hedges of jet fuel price risk
Related deferred tax
Gains on cash flow hedges recycled from other comprehensive income in
income statement captions:
Revenue
Fuel
Other costs
Aircraft lease costs
Within 1 year
£ million
1–2 years
£ million
Total
£ million
17
39
56
(8)
5
(3)
9
44
53
(11)
42
Within 1 year
£ million
1–2 years
£ million
Total
£ million
25
(4)
21
21
(24)
(3)
46
(28)
18
(4)
14
2012
£ million
2011
£ million
21
51
1
1
74
9
142
1
–
152
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
2012
$ million
619
(1,245)
(280)
39
(867)
850
(17)
2011
$ million
673
(1,654)
(301)
73
(1,209)
1,240
31
easyJet plc
Annual report and accounts 2012
93
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 gains / (losses) on non-derivative financial instruments
Realised foreign exchange gains on non-derivative financial instruments
Unrealised revaluation gains / (losses) on other monetary assets and liabilities
Unrealised (losses) / gains on derivatives
Realised losses on derivatives
Net gains / (losses) (note 2)
2012
£ million
2011
£ million
8
10
7
(16)
(8)
1
(7)
4
(1)
9
(11)
(6)
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 employed
Capital employed comprises shareholders’ equity, borrowings, cash and money market deposits (excluding restricted cash) and an
adjustment for the capital implicit in aircraft operating lease arrangements. The adjustment is calculated by multiplying the annual
charge for aircraft dry leasing by a factor of seven, in line with accepted practice for the airline industry.
Normalised operating profit is adjusted for the implied interest incorporated in the charge for aircraft dry leasing.
Consequently, the capital employed and normalised operating profit after tax (both excluding and including the adjustment for
operating leases) at the end of the current and prior year and the return earned during those years were as follows:
Shareholders’ equity
Borrowings
Cash and money market deposits (excluding restricted cash)
Reported capital employed
Operating leases adjustment
Capital employed including operating leases adjustment
Operating profit – reported
Implied interest in operating lease costs
Operating profit – adjusted
Normalised operating profit after tax – reported
Normalised operating profit after tax – adjusted
Return on capital employed – excluding leases adjustment
Return on capital employed – including leases adjustment
2012
£ million
1,794
957
(883)
1,868
665
2,533
331
32
363
252
276
14.5%
11.3%
2011
£ million
1,705
1,300
(1,400)
1,605
763
2,368
269
36
305
199
226
12.7%
9.8%
Return on capital employed was introduced as a key performance indicator in 2010. The decision was taken at the time not to adjust
the calculation for aircraft held under operating leases, in the expectation that the IASB’s leasing project would complete in a relatively
short time frame, resulting in all leases being shown on the statement of financial position.
As the accounting position is now not expected to change before easyJet’s 2016 financial year at the earliest, it has been decided to
amend the ROCE calculation to reflect appropriately the impact on return on capital of aircraft held under operating leases. The above
table shows both the return on capital employed excluding and including operating leases adjustment.
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easyJet plc
Annual report and accounts 2012
Accounts & other information
Notes to the accounts
continued
22 Financial risk and capital management continued
The percentage of operating leased aircrafts at 30 September 2012 was 26% (2011: 30%). Board policy is to hold around 30% of the
fleet under operating lease arrangements to provide an appropriate degree of flexibility in fleet size and partially mitigate the residual
value risk associated with a single fleet type.
Capital management
The objective of capital management is to ensure that easyJet is able to continue as a going concern whilst delivering shareholder
expectations of a strong capital base as well as returning benefits for other stakeholders and optimising the cost of capital.
easyJet manages its capital structure in response to changes in both economic conditions and strategic objectives. The cash and net
debt position, together with the maturity profile of existing debt, is monitored to ensure the continuity of funding.
The principal measure used by easyJet to manage capital risk is the gearing ratio of debt (defined as debt plus seven times aircraft
operating lease payments less cash, including money market deposits and restricted cash) to shareholders’ equity. Gearing remained
stable at 29% (2011: 28%).
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 a target level of liquidity of £4 million per aircraft in the fleet. Total cash (excluding restricted cash) and money
market deposits at 30 September 2012 was £883 million (2011: £1,400 million). Surplus funds are invested in high quality short-term liquid
instruments, usually money market funds or bank deposits.
The maturity profile of financial liabilities based on undiscounted gross cash flows and contractual maturities is as follows:
At 30 September 2012
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
At 30 September 2011
Borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
Within
1 year
£ million
146
454
(2,943)
2,874
Within
1 year
£ million
177
375
(2,887)
2,843
1–2 years
£ million
2–5 years
£ million
140
–
(1,821)
1,790
467
–
–
–
1–2 years
£ million
2–5 years
£ million
169
–
(1,041)
1,031
584
–
–
–
Over
5 years
£ million
288
–
–
–
Over
5 years
£ million
493
–
–
–
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 by setting limits on credit exposure 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 amount in the statement of financial position at each year end.
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 and credit limits differentiate between A, AA and AAA rated counterparties. 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 given in note 11 to the accounts.
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
easyJet plc
Annual report and accounts 2012
95
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 55 operating leases in place at 30 September 2012, 75% were based on fixed interest rates and 25% were based on floating
interest rates (2011: 69% fixed, 31% 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
nineteen aircraft were cash acquired (2011: 11 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% (2011: between 65%
and 85%) of estimated exposures up to 12 months in advance, and to hedge between 45% and 65% (2011: between 45% and 65%)
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 2012
Income statement impact: gain / (loss)
Impact on other comprehensive income: increase / (decrease)
At 30 September 2011
Income statement impact: gain / (loss)
Impact on other comprehensive income: increase / (decrease)
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
17
164
(13)
(134)
(3)
(43)
2
35
(1)
–
–
111
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
108
(15)
(89)
3
(40)
(3)
25
(2)
–
–
84
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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easyJet plc
Annual report and accounts 2012
Accounts & other information
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
2012
£ million
Aircraft
2011
£ million
2012
£ million
Other
2011
£ million
85
214
51
350
101
272
84
457
2
2
2
6
1
2
3
6
easyJet holds 55 aircraft (2011: 64 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
2012
£ million
2011
£ million
14
129
93
236
(31)
205
13
139
105
257
(36)
221
easyJet holds 11 aircraft (2011: 11 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 2012 easyJet had outstanding letters of credit and performance bonds totalling £37 million (2011: £44 million),
of which £34 million (2011: £41 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
2012
£ million
2011
£ million
1,761
1,310
738
45
3,854
1,594
1,190
629
39
3,452
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 159 owned and finance leased aircraft. A further 55 aircraft are held under
operating leases, giving a total fleet of 214 at 30 September 2012. All of these aircraft are registered in the United Kingdom except for
21 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.
easyJet plc
Annual report and accounts 2012
97
26 Related party transactions
The Company licences the easyJet brand from easyGroup IP Licensing Limited (“easyGroup”), a wholly owned subsidiary of easyGroup
Holdings Limited, an entity which easyJet’s founder, Sir Stelios Haji-Ioannou, holds a beneficial interest and holds 26.07% of the issued
share capital of the Company.
Under the Amended Brand Licence signed in October 2010, 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 ended 30 September 2012) is payable for a minimum term of ten years.
The full term of agreement is 50 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 with Sir Stelios (“the Comfort Letter”), dated 9 October 2010, under which, in return for certain
non-compete obligations, easyJet makes payment of a fee of £300,000, adjusted annually per the UK Retail Price index, each year for
five years (or until the expiry of the longest subsisting restriction, whichever is later). Whilst certain of those obligations have since
expired, remaining in force are the following:
→(cid:3)For three years from the date of the Comfort Letter, to not sell the easyJet brand or the shares in easyGroup IP Holdings Limited
to any airline licensed in any EEA country, or Switzerland, or the owner or indirect owner of such airline,
→(cid:3)For five years from the date of the Comfort Letter, Sir Stelios shall not use his own name (or a derivative thereof) to brand an airline
flying to or from any EEA country, or Switzerland.
The Amended Brand Licence and Comfort Letter were approved by the shareholders at a general meeting held on 10 December 2010.
The amounts included in the income statement for the year ended 30 September 2012 for these items were as follows:
Annual royalty
Brand protection (legal fees paid through easyGroup to third parties)
Agreement with Sir Stelios Haji-Ioannou
2012
£ million
2011
£ million
5.0
1.2
0.3
6.5
4.0
0.7
0.3
5.0
At 30 September 2012, £0.2 million (2011: £nil) of the above aggregate amount was included in trade and other payables.
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easyJet plc
Annual report and accounts 2012
Accounts & other information
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
Current tax liabilities
Net current assets
Net assets
Shareholders’ equity
Share capital
Share premium
Retained earnings
30 September
2012
£ million
30 September
2011
£ million
Notes
b
283
271
1,143
933
(278)
(4)
(282)
861
1,144
108
656
380
1,144
(31)
–
(31)
902
1,173
108
654
411
1,173
The accounts on pages 98 to 102 were approved by the Board of Directors and authorised for issue on 19 November 2012 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 2012
99
At 1 October 2011
Total comprehensive income
Profit for the year
Dividends paid
Share incentive schemes
Proceeds from shares issued
Movement in reserves for employee share schemes
At 30 September 2012
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
Share
capital
£ million
108
Share
premium
£ million
654
Retained
earnings
£ million
411
Total
£ million
1,173
–
–
–
–
–
–
2
–
108
656
153
(196)
–
12
380
153
(196)
2
12
1,144
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
An ordinary dividend in respect of the year ended 30 September 2012 of £85 million (21.5 pence per share) is to be proposed at the
forthcoming Annual General Meeting (2011: ordinary dividend £46 million, special dividend £150 million). These accounts do not reflect
this dividend payable.
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 2012
Accounts & other information
Company statement of cash flows
Cash flows from operating activities
Cash generated from / (used by) operations
Interest received
Dividends received
Dividends paid
Net cash used by operating activities
Cash flows from investing activities
Capital distributions
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
2012
£ million
Year ended
30 September
2011
£ million
54
10
130
(196)
(2)
–
2
–
(26)
14
3
–
(9)
6
3
–
Notes to the Company accounts
easyJet plc
Annual report and accounts 2012
101
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 and statement of comprehensive income. The Company’s profit for the year was £153 million (2011: £16 million). Included in
this amount are dividends received of £130 million (2011: £3 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 2012 (2011: eight). These are the Non-Executive Directors of easyJet plc; their
remuneration is paid by easyJet Airline Company Limited. The Executive Directors of easyJet plc are employed and paid by easyJet
Airline Company Limited. Details of directors’ remuneration are disclosed in the Report on Directors’ remuneration and in note 4 to the
consolidated accounts.
b) Investments in subsidiary undertakings
Investments in subsidiary undertakings were as follows:
At 1 October
Capital contributions to subsidiaries
Capital distributions made by subsidiaries
At 30 September
2012
£ million
2011
£ million
271
12
–
283
271
6
(6)
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
easyJet Switzerland S.A.
easyJet Sterling Limited
easyJet Leasing Limited
Country of incorporation
England and Wales
Switzerland
Principal activity
Airline operator
Airline operator
Cayman Islands Aircraft trading and leasing
Cayman Islands Aircraft trading and leasing
Class and
percentage
of ordinary
shares held
100
49
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 2012
Accounts & other information
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 in amounts due from subsidiary undertakings
Increase / (decrease) in amounts due to subsidiary undertakings
2012
£ million
146
(15)
(340)
263
54
2011
£ million
2
1
(19)
(10)
(26)
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 Group accounts.
Five year summary
Year end to 30 September
Income statement
Revenue
EBITDAR
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
Exchange activities
Increase / (decrease) in cash and cash equivalents
Key performance indicators
Return on capital employed –
including operating lease adjustment
Return on capital employed –
excluding operating lease adjustment
Gearing
Net debt / (cash)
Profit before tax per seat (£)
Revenue per seat (£)
Cost per seat (£)
Cost per seat excluding fuel (£)
Seats flown (millions)
easyJet plc
Annual report and accounts 2012
103
2012
£ million
2011
£ million
2010
£ million
2009
£ million
2008
£ million
3,854
3,452
2,973
531
331
317
255
317
62.5
61.7
2,968
1,327
(1,264)
(1,237)
1,794
261
(389)
(309)
(18)
(455)
468
269
248
225
248
52.5
52.0
2,731
1,738
(1,177)
(1,587)
1,705
424
(478)
246
(4)
188
361
174
154
121
188
28.4
28.0
2,488
1,515
(1,065)
(1,437)
1,501
363
(482)
233
9
123
11.3%
9.8%
6.9%
14.5%
29%
74
4.81
58.51
53.70
36.25
65.9
12.7%
28%
(100)
3.97
55.27
51.30
36.62
62.5
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
156
3.6%
3.6%
38%
46
1.04
50.47
49.43
34.16
52.8
91
110
83
123
19.8
19.4
1,681
1,415
(910)
(908)
1,278
296
(418)
6
29
(87)
5.7%
7.3%
29%
(236)
2.12
45.51
43.39
29.74
51.9
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easyJet plc
Annual report and accounts 2012
Accounts & other information
Glossary
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.
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) excluding
operating leases
Normalised profit after tax divided by average net debt plus
average shareholders’ equity.
Return on capital employed (ROCE) including
operating leases
Normalised profit after tax adjusted for implied interest on
operating lease costs, divided by average net debt plus
average shareholders’ equity, plus an adjustment to capitalise
operating leases at seven times the annual lease rental, in line
with market practice.
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 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.
THANK YOU
We’d like to thank everyone who has helped to produce this report:
Paul Ablin, Charlotte Allin, Paul Atkins, Angela Bennett, Alita Benson, Warwick Brady,
Mike Campbell, Phil Chastell, Edward Coppock, Trevor Didcock, Peter Duffy, Chris Gadsden,
Lewis Girdwood, Val Goldine, Bruce James, Chris Kennedy, Rachel Kentleton, Ken Lawrie,
Cath Lynn, Carolyn McCall OBE, Andrew McConnell, Nicola McGarry, Reema Mehta,
Paul Moore, Shahina Mostafa, Reg Otten, Chris Paull, Giles Pemberton, Sir Michael Rake,
Zarina Sabir, Neil Slaven, Tom Smethers, Andrew Tempest, Charles Whitehouse,
Helen Whittle and all of our employees across the network.
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
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by Radley Yeldar
www.ry.com
www.easyJet.com
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