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WELCOME IN THE SKY
A N N U A L R E P O R T
A N D A C C O U N T S 2 0 1 8
2018 at easyjet
easyJet has a well-established
business model that provides
a strong foundation to drive
profitable growth and long-
term shareholder returns.
During the year easyJet has
reviewed and refreshed its
strategic framework which
is now called 'Our Plan'.
This plan includes 'Our Purpose',
'seamlessly connecting Europe
with the warmest welcome in
the sky'.
'Our Promise' to ourselves
is that we will be:
•
Safe and responsible
• On our customers' side
•
In it together
• Always efficient
• Forward thinking
Overview
Strategic progress
Outlook
Chairman's letter
Highlights
Investment case
At a glance
Market review
Our business model
Our strategy
STRATEGIC REPORT
1
2
3
4
6
7
8
10 Chief Executive's review
10
13
21
28 Key performance indicators
30 Financial review
36 Going concern
36 Viability statement
Key statistics
37
38 Risk
49 Corporate responsibility
CORPORATE GOVERNANCE
59 Chairman's statement on
corporate governance
Board of Directors
61
64 Airline Management Board
Corporate governance report
67
87 Directors' remuneration report
106 Directors' report
110 Statement of Directors'
responsibilities
ACCOUNTS
111
Independent auditors' report to
the members of easyJet plc
118 Consolidated accounts
123 Notes to the accounts
150 Company accounts
153 Notes to the Company accounts
155 Five-year summary
156 Glossary
VISIT OUR WEBSITE FOR OTHER
INVESTOR INFORMATION
http://corporate.easyJet.com/investors
CHAIRMAN’S LETTER
Delivering
long-term
value
basic headline earnings per share increasing by 43.4% to
118.3 pence (2017: 82.5 pence). Total profit before tax increased
by £60 million to £445 million. Non-headline costs of £133 million
(2017: £23 million) included a £40 million transition cost of Tegel
and a £65 million charge relating to a change in our approach to
technology development. Basic total earnings per share increased
by 17.4% to 90.9 pence (2017: 77.4 pence).
DIVIDENDS
easyJet’s dividend policy is to pay shareholders 50% of headline
earnings, reflecting the Board’s confidence in the long-term
prospects of the business. I am pleased to recommend to
shareholders a dividend of 58.6 pence for the 2018 financial
year, an increase of 43.3% from the previous year.
BERLIN TEGEL
As noted above, easyJet acquired part of Air Berlin’s operations at
Berlin Tegel Airport, completing the transaction in December 2017.
This secured a market-leading position across the Berlin market, which
is one of Europe’s biggest, and Berlin is now our second biggest city
base after London. The start-up of operations has gone well and
the total loss before tax this year of £152 million was broadly in
line with initial expectations. We will continue to optimise both our
operations and schedule in Berlin to underpin its long-term success.
OUR PEOPLE
I would like to thank all of easyJet’s employees and in particular
the crew who, despite all the disruption experienced this year,
ensure easyJet provides the warmest welcome in the sky. We are
committed to investing in creating a great place to work, on the
ground as well as in the sky.
During the year we have introduced a number of new people to
the Airline Management Board (‘AMB’), who have market-leading
expertise and experience that is aligned with the new strategic
priorities and who will lead the business in its next stage of
development.
THE FUTURE
easyJet continues to be well positioned for the future, with a
sound business model and strong financial base. Whilst there
are some challenges to face in the next 12 months, including
the impact of Brexit, there are also significant opportunities
and the business is well set to sustain our leading position in
Europe’s aviation market.
JOHN BARTON
Non-Executive Chairman
www.easyJet.com
1
The 2018 financial year has been a tough but successful one for
easyJet, with industry-wide disruption being more than offset by record
revenues. Uncertainty around Brexit, high oil prices and the wider
macro-economic environment have led to a recent fall in the share
price which is disappointing, but easyJet is well positioned to face
current market challenges and take advantage of any opportunities
arising. In 2018 the Group has increased the number of passengers
flown by over 10.2% to 88.5 million passengers (2017: 80.2 million)
and revenue has increased to £5,898 million (2017: £5,047 million).
In the year, we acquired part of Air Berlin’s operations at Tegel,
the integration of which is progressing well. This acquisition is an
important strategic move that secures a leading position in one
of Europe’s biggest markets.
BOARD
Johan Lundgren became Chief Executive on 1 December 2017
and during his first year has taken the opportunity to meet many
employees, customers, regulatory bodies and other stakeholders
to seek their views on, amongst other things, the Group’s strategy
and culture. This has culminated in the presentation to the
Board of ‘Our Plan’, which is an evolution of our existing strategy,
incorporating a number of new strategic initiatives. On behalf
of the Board I would like to thank Johan and his team for their
contribution during his first year; the Group continues to go from
strength to strength under his refreshed and focused leadership.
In addition to Johan’s arrival as Chief Executive there have also
been other changes on the Board. We welcomed Julie Southern
on 1 August 2018, who brings extensive experience of the airline
industry and a background in commercially-oriented finance roles.
Julie will assume the role of Audit Committee Chair on 1 January 2019.
After seven years with easyJet, Adèle Anderson has recently notified
us of her intention to step down and will be leaving with effect
from the AGM on 7 February 2019. On behalf of the Board, I would
like to thank Adèle for her important contribution to easyJet and
specifically in her role as Audit Committee Chair. Keith Hamill OBE
also stepped down from the easyJet Board in December 2017
following completion of nine years on the Board. On behalf of the
Board, I would like to reiterate my thanks to Keith for his important
contribution to the easyJet Board and to easyJet’s success.
RESULTS
easyJet’s results this year have been driven in particular by
a strong revenue performance, which increased by 16.8% to
£5,898 million (2017: £5,047 million), including £198 million from
Tegel routes. This was partially offset by costs, which were
negatively affected by severe disruption, an industry-wide issue,
combined with inflationary pressures. This resulted in headline
profit before tax increasing by £170 million to £578 million and
STRATEGIC REPORT
HIGHLIGHTS
Strong performance
TOTAL REVENUE 2013 TO 2018 (£M)
7
2
5
4
,
6
8
6
4
,
9
6
6
4
,
8
5
2
,
4
8
9
8
5
,
7
4
0
5
,
2018 TOTAL REVENUE
£5,898m
2017: £5,047M
HEADLINE PROFIT
BEFORE TAX
REPORTED PROFIT
BEFORE TAX
BASIC TOTAL
EARNINGS PER SHARE
BASIC HEADLINE
EARNINGS PER SHARE
£578m
2017: £408M
£445M
2017: £385M
90.9p
2017: 77.4 pence
118.3p
2017: 82.5 pence
2013
2014
2015
2016
2017
2018
LOAD FACTOR
92.9%
2017: 92.6%
SEATS FLOWN
95.2M
2017: 86.7M
TOTAL ANCILLARY REVENUE
£1,210M
2017: £986M
2
easyJet plc Annual Report and Accounts 2018
INVESTMENT CASE
Investing in our strengths
We continue to invest in what differentiates us,
strengthening our long-term customer offer.
UNPARALLELED
NETWORK
Read more
on page 22
51NUMBER ONE OR TWO AIRPORTS1
2017: 47
Driving
revenue
growth 88.5M
PASSENGERS3
2017: 80.2M
LOW-
COST
MODEL
Read more
on page 24
2017: 862
979ROUTES OPERATED2
15%FUEL BURN REDUCTION
FROM NEW GENERATION
AIRCRAFT4
Read more
on page 26
Customer
Loyalty 66%RETURNING CUSTOMERS3,5
£396m
Strong
Balance
Sheet
NET CASH2
2017: £357M
2017: 66%
AIRLINE BRAND IN THE UK,
FRANCE AND SWITZERLAND2,6
NO.1OR2
14.4%
HEADLINE ROCE3
2017: 11.9%
value
by
efficiency
(1) As at 30 September 2018 – airports where easyJet is the number one
(4) A320neo vs previous generation A320
or number two carrier based on short-haul capacity
(2) As at 30 September 2018
(3) In the year ended 30 September 2018
(5) Percentage of seats booked by customers who made a booking in the
preceding 24 months
(6) Millward Brown brand tracker
www.easyJet.com
3
AT A GLANCE
Unparalleled network
easyJet continues to go
from strength to strength
across Europe, adding
more top destinations
to our market-leading
network and increasing
our presence at
slot-constrained
primary airports.
REGIONAL FLOWS – % OF EASYJET’S
CURRENT CAPACITY
Other
UK EU27
55%
35%
10%
Domestic UK
NO. OF NUMBER ONE
OR TWO AIRPORTS1
IN COUNTRIES WITH
A BASE
NO. OF
BASED
AIRCRAFT2
YEAR-ON-
YEAR EASYJET
CAPACITY
GROWTH3
TOTAL YEAR-ON-
YEAR GROWTH
ON EASYJET’S
MARKETS3
GBR 14
FRA 10
5
ITA
3
DE
3
ESP
2
SUI
POR 2
1
NL
155
34
37
32
9
26
9
9
4.4%
0.4%
4.1%
6.5%
10.4% 6.2%
50.9% (0.1)%
0.5%
8.5%
4.1%
8.6%
4.2%
6.7%
2.3%
4.0%
(1) Number one and number two airports defined as easyJet having the largest or second largest capacity at an airport of any carrier on European
short-haul route markets
(2) As at 30 September 2018
(3) Scheduled country seat capacity growth based on country-touching seats (source: OAG)
4
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT 156
AIRPORTS1
2017: 138
979
ROUTES
OPERATED1
2017: 862
7
NEW NUMBER
ONE AIRPORTS
IN 2018
Bases
Countries with bases
Our
bases
Glasgow
Edinburgh
Belfast
Newcastle
Liverpool
Manchester
UK
Amsterdam
Bristol
Stansted
Luton
Southend
Gatwick
netherlands
Berlin TXL
Berlin SXF
germany
Paris CDG
Paris ORY
France
Geneva
Basel
Switzerland
Bordeaux
Lyon
Milan MXP
Venice
Toulouse
Nice
italy
Porto
portugal
Lisbon
spain
Barcelona
Palma
Naples
(1) As at 30 September 2018
www.easyJet.com
5
MARKET REVIEW
Market dynamics
easyJet operates in the European short-haul aviation
market. The following trends are current key drivers
in that market:
DEMAND
FUEL
BRENT PRICE ($ PER BBL)
GDP
easyJet is based in large, mature
aviation markets with a high propensity
to travel. GDP growth is an established
driver that is generally accepted as
having a positive multiplier effect on
air passenger traffic. Economic trends
remain favourable, with positive GDP
growth expected in all of easyJet’s
European base markets in 2019.
GEOPOLITICAL EVENTS
The aviation industry has been
affected by a number of geopolitical
events in recent years which have
had both short-term and long-term
consequences for demand and the
structure of the industry. easyJet has
recently been particularly focused on
addressing the potential impact of Brexit.
ENVIRONMENTAL
AND SOCIAL IMPACT
easyJet’s stakeholders increasingly
demand greater focus on environmental
and social factors. For example, airports
are increasingly encouraging lower noise,
lower carbon air traffic in response to
environmental and social demands.
easyJet’s investment in new fleet,
technology and development leave it well
placed to improve further its impact on
climate, its customers and employees.
Fuel is one of the biggest costs
that airlines face, and one of the
most volatile. Fuel represented
22% of easyJet’s cost base for
the 2018 financial year. During
the year the price of Brent Oil
rose by 44%(1). The price of
Emissions Trading System (ETS)
permits has also significantly
increased in the year.
120
90
60
30
0
2014
2015
2016
2017
2018
SUPPLY AND AIRSPACE MANAGEMENT
European short-haul capacity increased by 5.6%(2) in total and by 2.8%(2)
on easyJet’s markets in 2018. This was lower than in previous years reflecting the
rising price of oil and various issues affecting competing airlines. With the growth
in capacity, increasing pressure is being placed on airspace management. Disruption is
an industry-wide issue that is having an increasing impact on customers and costs
as aviation infrastructure becomes more congested.
EUROPEAN SHORT-HAUL CAPACITY
GROWTH YEAR ON YEAR %2
7
.
7
4
.
7
6
6
.
.
4
5
0
6
.
9
5
.
6
5
.
easyJet markets
Total markets
4
4
.
0
.
3
8
.
2
FY14
FY15
FY16
FY17
FY18
FOREIGN EXCHANGE
easyJet is exposed to foreign exchange rate movements, principally Sterling
against the US dollar and the Euro, which it hedges to mitigate volatility.
Since the UK referendum vote to leave the EU, Sterling has significantly
fallen in value against both currencies, which has had an ongoing negative
impact on profit and capital expenditure. A strong US dollar increases the
price of fuel, one of easyJet’s biggest costs; a strong Euro typically has a
net translational benefit for easyJet’s European operations, although it may
impact Eurozone inbound demand. See page 32 for details of the impact
from foreign exchange on our results for the 2018 financial year.
1.8
1.6
1.4
1.2
1.0
(1) Brent per barrel closing price 29 September 2017 to closing price 28 September 2018
(2) Country seat capacity growth based on country-touching seats (source: OAG)
6
easyJet plc Annual Report and Accounts 2018
US dollar to Sterling rate
Euro to Sterling rate
2014
2015
2016
2017
2018
STRATEGIC REPORT
OUR BUSINESS MODEL
Our business model
Our sustainable business model makes it easy,
enjoyable and affordable to travel again and again,
and drives growth and returns for our shareholders.
KEY RESOURCES
The success of our business depends on a number of key resources:
Financial
capital
easyJet has a
strong capital
base, with
a market
capitalisation of
£5 billion(1) and a
net cash position
of £396 million
at 30 September
2018 (2017: £357
million). easyJet’s
credit ratings
are amongst
the strongest
in the world for
an airline.
CREDIT
RATING
bbb+
/Baa1
2017: BBB+/
BAA1
Aircraft
easyJet operates
a modern fleet
of Airbus A320
family aircraft,
of which 70% are
owned outright,
and is investing
in more fuel
efficient(2) and
environmentally
friendly(3) new
generation
aircraft. This
provides
customer,
operating and
maintenance
benefits to
the Group.
People
easyJet has
a dedicated
workforce of over
14,000 people,
including nearly
4,000 pilots and
over 8,500 cabin
crew members(4).
In 2018 we trialled
our new employee
listening platform,
Peakon, across
one-third of
our people. The
resulting score of
8.0 out of 10
reflects our strong
levels of employee
advocacy.
Technology
and data
easyJet leverages
its information and
data capabilities,
driving revenue
by increasing
customer loyalty
and implementing
its wider digital
strategy. Our
increasingly
sophisticated
use of data will
unlock significant
revenue and
cost opportunities.
Slots and brand
easyJet has a
valuable portfolio
of slot pairs at
slot-constrained
primary airports,
as well as flying
rights and
AOCs in the
UK, Switzerland
and Austria.
easyJet has a
strong brand as
the number one
value airline
in Europe.
Our suppliers
easyJet relies on
its suppliers to
deliver many of its
critical operational
and commercial
activities. Our
partners are
carefully selected
and significant
emphasis is
placed on
managing these
relationships,
with the aim
of extracting
incremental
innovation and
performance.
Currently, our top
300 suppliers are
responsible for
around 97% of
our spend.
315
AIRCRAFT4
2017: 279
OVER
14,000
EMPLOYEES4
2017: OVER
12,000
615m
VISITS TO
ALL DIGITAL
PLATFORMS
2017: 567M
89%
CAPACITY
AT SLOT-
CONSTRAINED
AIRPORTS5
2017: 88%
87%
SUPPLIER
PAYMENTS
ON TIME
2017: NOT
REPORTED
OUTCOMES
Creating value for our stakeholders
50%
DIVIDEND
PAYOUT RATIO6
2017: 50%
71%
CUSTOMER
SATISFACTION
2017: 71%
75%
ON-TIME
PERFORMANCE
2017: 76%
6.5%
EMPLOYEE
TURNOVER
2017: 7.4%
(1) Based on a share price of £13.14 at 30 September 2018
(4) As at 30 September 2018
(2) 15% fuel saving A320neo vs previous generation A320
(5) Based on level 2 and level 3 airports as updated by IATA on
(3) Around 50% quieter on takeoff and landing than previous
generation aircraft
26 October 2018 and defined within IATA Worldwide Slot Guidelines
(6) Based on headline profit after tax
www.easyJet.com
7
OUR STRATEGY
OUR PLAN
Our new strategic plan is about evolution, not revolution;
we are building on our strengths and charting our path
into an even more successful future.
OUR
PURPOSE
SEAMLESSLY CONNECTING EUROPE WITH
THE WARMEST WELCOME IN THE SKY
NUMBER ONE OR TWO IN
PRIMARY AIRPORTS
Giving customers the leading offer in the airports they
want to fly to
WINNING OUR CUSTOMERS’
LOYALTY
Making it easy, enjoyable and affordable to travel again
and again for business and holidays
OUR
PRIORITIES
VALUE BY EFFICIENCY
We are low cost, driving efficiency and investing only
where it matters most to our customers and our people
THE RIGHT PEOPLE
Creating an inclusive and energising environment that
attracts the right people and inspires everyone to learn
and grow
INNOVATING WITH DATA
Using the millions of data points we collect to make smart
decisions and shape the future of travel, to become the
world’s leading data-driven airline
OUR
PROMISE
WE ARE:
SAFE AND RESPONSIBLE
ON OUR CUSTOMERS’ SIDE
IN IT TOGETHER
ALWAYS EFFICIENT
FORWARD THINKING
8
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT HOW WE WILL DELIVER
WHAT DOES THIS MEAN FOR US?
KEY PERFORMANCE
INDICATORS
Customers don’t just want a great deal on price – they
want to fly from the airports that work best for them.
We will continue to target being the market share leader at
our primary airports, offering the most compelling network
of destinations and driving greater returns and frequencies
from these markets.
Customers have increasing choice and their expectations
are rising.
We will give customers reasons to choose to spend more
with us, including growing our end-to-end holiday offer,
expanding our business travel and offering a compelling
customer loyalty programme.
We are seeing increasing inflationary pressures and competitors
expanding into some of our markets.
We will stay low cost but also invest in efficiency, developing
customer solutions that drive operating efficiencies while meeting
customers’ evolving needs. Efficiency includes targeting the
reduction of easyJet’s impact on the environment.
PROFIT
PER SEAT
ON-TIME
PERFORMANCE
CUSTOMER
SATISFACTION
SCORE
RETURN
ON CAPITAL
EMPLOYED
In today’s shifting environment, we will place even
more focus on recruiting the right people and building
the right talents.
Our new employee feedback and listening platform, Peakon,
will be constantly used to enhance our employee experience.
EARNINGS PER SHARE
CO2 EMISSIONS
PER PASSENGER
KILOMETRE
easyJet generates millions of data points every day.
Our aim is to use this to become the world’s leading
data-driven airline, by making our people’s jobs easier
and creating deeper relationships with our customers.
Progress against these KPIs,
which have been selected to
align with Our Plan, will be
reported from the 2019
financial year.
Details of performance
against our KPIs for the 2018
financial year can be found on
pages 28 to 29.
www.easyJet.com
9
CHIEF EXECUTIVE’S REVIEW
JOHAN LUNDGREN
Chief Executive
easyJet has delivered
a great performance
during the year. We are
announcing a 43% increase
in the proposed dividend
reflecting a successful
year of delivery.
(1) Constant currency is calculated by comparing performance for
the 2018 financial year translated at the effective exchange rate
for the 2017 financial year with the 2017 financial year reported
performance, excluding foreign exchange gains and losses on
balance sheet revaluations.
10
easyJet plc Annual Report and Accounts 2018
OUR PLAN
OVERVIEW
easyJet delivered a strong performance in the 2018 financial
year. The airline’s strong revenue growth reflects the strength
of its network, brand and value offer.
easyJet’s strategy will enable it to continue to be a structural
winner within its chosen network in the European short-haul
market and across all market conditions.
easyJet has focused on strengthening its strategic positioning,
investing in its network and acquiring operations at Tegel.
easyJet continues to implement its customer focused
strategy by securing and building on leading positions at
primary airports to drive profitable growth and deliver resilient
returns over the long term.
Disruption has been a major factor for easyJet and the
industry this year. easyJet is investing significantly in resilience
to reduce the impact on customers.
During the year easyJet has reviewed and refreshed its
strategic framework which is now called ‘Our Plan’. This
plan includes our new Purpose, ‘seamlessly connecting
Europe with the warmest welcome in the sky’, five Priorities
and ‘Our Promise’. easyJet has now recruited a number of
people whose expertise and experience will help to lead and
deliver the implementation of Our Plan.
REVENUE
Total revenue increased by 16.8% to £5,898 million (2017:
£5,047 million). This includes £198 million of revenue from
Berlin Tegel operations. Total revenue per seat grew by 6.4%
to £61.94 (2017: £58.23) and by 4.7% at constant currency(1).
Passenger revenue grew by 15.4% to £4,688 million (2017:
£4,061 million). This performance was driven by:
• passenger growth of 10.2% to a record 88.5 million, an
increase of 8.3 million, including 3.9 million new passengers
at Tegel;
• an increase in the overall load factor by 0.3 percentage
points to a record 92.9%, with strong demand in the
underlying business (up 1.0 percentage point to 93.6%
excluding Tegel) partially offset by lower start-up loads
in Berlin;
STRATEGIC REPORT • underlying demand growth, with good performance
in particular from our core markets in the UK and
France, where easyJet’s brand and network positions
are well established;
•
•
the benefit of one-off events including the Monarch and
Air Berlin bankruptcies and Ryanair winter 2017/18 UK
schedule cancellations; and
industrial action in France that led to a benefit of around
£20 million as competitor airline and train customers
switched to easyJet’s services.
Ancillary revenue was also very strong and grew by 22.7%
(18.4% growth excluding Tegel) to £1,210 million (2017:
£986 million). This reflected easyJet’s attractive products
and innovative ancillary management, in particular:
• new bag segmentation (15/23kg offer) leading to better
conversion rates and higher overall yields, reflecting
an attractive price point for 15kg and demand for the
higher weight;
•
improved bag pricing algorithms that better reflect demand;
• allocated seating demand driving higher conversion rates
through pricing improvements; and
•
improvements to our website making it easier for
customers to add ancillary products.
COST
Headline cost per seat increased by 4.4% to £55.87 (2017:
£53.52), driven by exchange rates, underlying cost inflation
and the cost of disruption, which remains a major industry
challenge. Headline cost per seat at constant currency
increased by 2.7% to £54.97 (2017: £53.52). Headline cost
per seat excluding fuel increased by 5.3% to £43.43 (2017:
£41.27), and by 4.8% at constant currency. Total cost per
seat, including the impact of non-headline items, was £57.26
(2017: £53.78).
The overall cost performance excluding the impact of foreign
exchange is driven by:
•
the impact of disruption, an industry-wide issue, with
significant third-party industrial action activity (Air Traffic
Control (ATC) and ground handling) particularly in France,
ATC capacity constraints due to systems upgrades and
weather events. As a result cancellations increased
significantly to 6,814 (2017: 2,502);
• crew cost inflation, including agreed pay deals, inefficiency
due to disruption, higher crewing levels to support
resilience and helped by higher than expected retention;
• general inflation, including the cost of regulated
airports; and
• a negative impact from Airbus delivery delays
resulting in lower than planned standby aircraft, and
wet leased aircraft.
This was offset by:
•
•
total cost programme savings during the year of
£107 million. This ongoing cost programme aims to
drive efficiencies from easyJet’s business model; and
in particular this reflected better cost control in airport
costs (flat per seat at constant currency excluding Tegel)
and lower navigation rates.
Total fuel cost increased by 11.5% (£122 million) to £1,184 million
(2017: £1,062 million) as a result of capacity growth, higher
Emissions Trading System (ETS) costs and adverse foreign
exchange movements. Fuel cost per seat at constant currency
decreased by 4.3% to £11.72 (2017: £12.25) helped by easyJet’s
lower year-on-year effective fuel price.
TEGEL OPERATIONS
On 15 December 2017 easyJet completed the acquisition
of part of Air Berlin’s operations at Berlin Tegel Airport.
This resulted in easyJet becoming the largest short-haul
operator in the Berlin market, leapfrogging both Ryanair
and Lufthansa, with Tegel complementing easyJet’s already
well-established Berlin base at Schönefeld.
easyJet’s flying programme at Tegel started on 5 January 2018,
operating an adopted winter schedule with a fleet of mainly
wet leased aircraft. As anticipated, Tegel flying has resulted in
a dilutive impact to overall load performance and revenue per
seat, and an increase in cost per seat, whilst the operation
becomes established.
Overall progress to date has been in line with expectations
and on track to demonstrate the value of this strategic
acquisition. Since start-up, easyJet has seen strong operational
performance with on-time performance of 82% (versus a
network average of 75%: see page 16 for further details).
Brand consideration scores have also improved significantly
(by five points) in Germany as a result of easyJet’s increased
presence. Demand has been growing steadily with load factors
reaching 86% over the summer period, despite a currently
inefficient schedule.
The headline profit impact was worse than first expected
due to increases in the unhedged fuel cost, airport charges
and taxes as well as late competitive capacity in the market.
Performance improved during the summer, as easyJet took
direct control of its revenue management system to improve
data decisions and revenue profiles.
The total loss for the year is better than originally expected
at £152 million, due in part to faster than planned transition
of crew and fleet.
In the 2019 financial year easyJet’s operations in Berlin will
benefit from a longer selling window, schedule improvements,
a full flying programme, no planned wet lease costs and pricing
optimisation. Schedule optimisation will continue into the 2020
financial year.
Tegel Operations
Passengers
Seats flown
Load factor
Revenue
Revenue per seat
Headline cost per seat excluding fuel
Headline loss before tax per seat
Headline loss
Non-headline cost
Year ended
30 September 2018
3.9 million
4.9 million
80.6%
£198 million
£40.69
£(51.45)
£(23.07)
£(112) million
£(40) million
www.easyJet.com
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CHIEF EXECUTIVE’S REVIEW
CONTINUED
NON-HEADLINE ITEMS
easyJet has incurred £133 million in non-headline costs
during the 2018 financial year (2017: £23 million). Non-headline
items are material non-recurring items or are items which do
not reflect the trading performance of the business. These
costs are separately disclosed. The most significant items were
as follows:
Commercial IT platform charge: £65 million
Over the past three years easyJet has been investing in its
commercial IT platform which has delivered revenue benefits
through significant improvement in its customer facing website
and seating capability, as well as improvements in underlying
resilience and control systems. However, in 2018 easyJet
made the decision to change its approach to technology
development through better utilisation and development
of existing systems on a modular basis, rather than working
towards a full replacement of our core eCommerce platform.
As a result of this change in approach, a non-headline charge
of £65 million has been recognised, relating to IT investments
and associated commitments that are no longer required.
easyJet will continue to invest in its digital and eCommerce
layers that will enable it to continue to offer a leading
innovative, revenue enhancing and customer-friendly platform.
Transition and integration cost of Air Berlin’s Tegel
operations: £40 million
The Air Berlin transaction resulted in £40 million of one-off
integration costs. These primarily comprise: engineering
costs to align the technical specification of ex-Air Berlin
aircraft with the rest of the easyJet fleet; dry lease rental
costs incurred prior to these aircraft becoming operational;
and other costs including project, consultancy and legal fees.
The expected non-headline cost reduced through the year as
aircraft were registered, crewed and put into operation faster
than originally planned and there was no requirement for the
integration contingency fund.
Sale and leaseback: £19 million
The sale and leaseback of the Group’s 10 oldest A319 aircraft
resulted in a loss on disposal of the assets of £11 million and
an £8 million maintenance provision catch-up charge.
Brexit-related costs: £7 million
The Group incurred £7 million in costs associated with
establishing its new AOCs, principally due to the cost of
re-registration of aircraft in Austria as well as legal and
overhead costs.
Further detail can be found in note 5 to the accounts on
page 133.
(2) Capacity and market share figures from OAG. Size of European market
based on internal easyJet definition. Historical data based on 12 month
period from October 2017 to September 2018
12
easyJet plc Annual Report and Accounts 2018
TOTAL PROFIT
Total profit before tax increased to £445 million (2017:
£385 million), after a £133 million (2017: £23 million) impact
from non-headline items.
Headline profit before tax increased to £578 million (2017:
£408 million), driven by strong revenue performance.
Excluding the impact of Tegel operations, headline profit
before tax was £690 million.
Headline profit per seat increased to £6.07 (2017: £4.71) and
headline profit per seat excluding Tegel operations increased
to £7.64 (2017: £4.71).
The tax charge for the year was £87 million (2017: £80 million).
The effective tax rate for the period was 19.7% (2017: 20.8%),
higher than the standard UK rate of 19%, due to the Swiss and
Austrian income being taxed at a higher rate.
Basic earnings per share increased to 90.9 pence (2017:
77.4 pence) after the impact of non-headline items. Basic
headline earnings per share increased by 43.4% to 118.3 pence
(2017: 82.5 pence).
In line with the stated dividend policy of a payout ratio of 50%
of headline profit after tax, the Board is recommending that
the dividend per share will increase by 43.3% to 58.6 pence
(2017: 40.9 pence), subject to approval by shareholders.
MARKET ENVIRONMENT
easyJet operates in the European short-haul aviation
market, with a focused business model that has enabled
it to consistently generate high levels of profitability. As
competitors continue to try to restructure their high cost
bases or operate with inadequate financial resources, easyJet
is well positioned to selectively strengthen its market positions.
Economic trends remain favourable across Europe with
continued GDP growth supporting spending in all of easyJet’s
major markets.
The total European short-haul market(2) grew by 5.6% year on
year and by 2.8% in easyJet’s markets. This was lower than in
previous years, reflecting a rising price of oil and the various
issues affecting Monarch, Air Berlin, Alitalia, Ryanair and
Air France.
Fuel is one of the biggest costs that airlines face, with
structurally stronger airlines able to sustain higher levels
of profitability in a high fuel price environment. Fuel
represented 22% of easyJet’s cost base in the 2018 financial
year and during the year the price of Brent Oil rose by 44%.
Since the UK referendum vote to leave the EU, Sterling has
fallen significantly in value against both the US dollar and
the Euro, which has had an ongoing negative impact on
profit. A strong US dollar increases the price of fuel in
Sterling terms while a strong Euro typically results in a net
translational benefit for easyJet’s European operations, to the
extent it doesn’t impact inbound demand into the Eurozone.
easyJet’s stakeholders increasingly demand greater focus on
environmental and social factors. easyJet’s investment in new
fleet, technology and development makes it well-placed to
reduce its impact on the climate, while improving its services
to customers and working conditions for employees.
STRATEGIC REPORT STRATEGIC PROGRESS
New strategic framework – ‘Our Plan’
easyJet has a well-established business model that provides
a strong foundation to drive profitable growth and long-term
shareholder returns. During the year easyJet has reviewed
and refreshed its strategic framework which is now called
‘Our Plan’. This plan includes our new Purpose, ‘Seamlessly
connecting Europe with the warmest welcome in the sky’,
five Priorities and ‘Our Promise’.
The five Priorities are:
easyJet will continue to pursue this strategy with clarity and
purpose. Looking ahead, easyJet expects that its capacity growth
will be targeted at deepening existing number one positions or
converting number two positions into number one positions, as
well as seeding new number one and two positions.
In the 2018 financial year easyJet has continued its disciplined
growth strategy in line with its purposeful growth framework:
• UK – 4% increase in capacity including to match airport
capacity increases at Luton
• France – 5% increase in capacity aligned with our strategy
1. Network - number one or number two in primary airports
of regional growth in the country
2. Winning our customers’ loyalty
• Switzerland – 7% increase in capacity including a focus at
3. Value by efficiency
4. The right people
5.
Innovating with data
1. Network - number one or number two
in primary airports
easyJet aims to provide customers with the leading, best value
offer in the airports they want to fly to. easyJet’s strategy is
focused on key airports, serving valuable catchment areas that
represent Europe’s largest markets by GDP, driving both leisure
and business travel. These are strong, existing markets, built up
over a period of time by higher cost legacy carriers. easyJet’s
portfolio of peak time slots at airports, where either total
slot availability or availability at customer-friendly times is
constrained, reinforces its competitive advantage against
airlines that cannot match its breadth of destinations and
frequencies in those airports.
99% of easyJet’s capacity now touches either a number one
or number two airport, positioning the airline strongly against
its competitors and at 30 September 2018, 24 of easyJet’s
29 bases were at airports where it held either number one or
number two market positions by share of seat capacity. During
the year easyJet established a number one position at seven
more airports, including Berlin Tegel, Bordeaux and Lille.
Looking forward easyJet has identified a number of potential
target airports for the next five years where GDP and
passenger volumes are high, and where there is a weak
incumbent and/or where there is no clear winner today. By
being number one in key airports with the strongest brand,
delivering the best value, we can become the first choice
airline for our customers. easyJet estimates that there are
60 million non-low cost carrier head-to-head seats being flown
in its top 20 airports where it holds a number one or number
two market share.
easyJet regularly reviews its route network in order to maximise
returns and exploit demand opportunities in the market. During
the 2018 financial year easyJet added 150 routes to the network.
Reflecting the airline’s discipline, it also discontinued 33 routes
which either did not meet expected return criteria or became
secondary to a more attractive route elsewhere.
easyJet’s network decisions are not driven solely by cost but
by the desire to secure strong, long-term, sustainable and
profitable positions in key airports, which secure long-term,
sustainable returns for shareholders. Number two positions
to weaker legacy incumbents in key airports enable the airline
to offer a better all-round experience to customers and higher,
sustainable returns for investors.
(3) Millward Brown brand tracker
our base in Basel
•
Italy – 10% increase in capacity as a result of consolidation
in Venice, further strengthening our number one position
• Germany – 48% increase in capacity following our
acquisition of part of Air Berlin’s operations at Tegel,
partially offset by the closure of our base at Hamburg
as we concentrate on Berlin
• Netherlands – 3% increase in capacity consolidating
the position at Schiphol adding routes and frequencies
• Portugal – 6% increase in capacity to strengthen
connections to the rest of Europe
Overall easyJet grew capacity by 9.8% in the period, with its
market share for easyJet’s markets up 0.6 percentage points
to 32.2%.
2. Winning our customers’ loyalty
easyJet prides itself on making travel easy, enjoyable and
affordable for customers whether it is for business or leisure –
seamlessly connecting Europe with the warmest welcome in
the sky.
During the 2018 financial year easyJet increased revenue
per seat by 6.4%, driven in part by an 11.7% increase in ancillary
revenue per seat and a 0.9 percentage point increase in
customers flying on business. Through investing in the brand,
service, innovation and strong operational performance,
easyJet aims to retain and grow customers and increase
spend per passenger by continuously evolving the offer to
make sure it offers fair value and relevant choices for a better
travel experience.
easyJet’s brand position in core markets continues to
strengthen(3), appealing to consumers across Europe. easyJet
is known for offering value for money and is in fact ranked
first for value across its core markets. Over two thirds of
consumers within key European markets state they would
seriously consider flying easyJet over other airlines. 2018 has
seen the highest levels of consideration to date in the UK,
France and Germany, and maintained strong positions in
Switzerland and Italy. In 2018 easyJet was voted Best Value
Short-Haul Airline by Skyscanner.
In Berlin, perceptions around easyJet’s brand have significantly
improved due to the recent investment at Berlin’s Tegel
Airport. Perception has improved in all of our key areas with
over three quarters of consumers believing we offer value for
money, a six percentage point increase since last year. The
German customer perception of easyJet speaks to easyJet’s
core mission, offering customers fair value for money, as well
as ease.
www.easyJet.com
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CHIEF EXECUTIVE’S REVIEW
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Holidays
easyJet sees a big opportunity to radically change its holidays
offering, based on its existing network of destinations and
frequencies, efficient low-cost operations, its unique customer
base, strength of brand and the ability to develop a customer
experience that is aligned with the easyJet core offer.
Currently there are 20 million existing customers who fly to
easyJet’s top 29 destinations by market share, of which only
500,000 book a hotel through easyJet. This is an opportunity
for easyJet to extend its reach in the wider travel value chain
through the offer of accommodation and other services, with
investment taking place in 2019 and 2020.
easyJet’s plans involve:
•
refining its current business model to capture more value
through the customer journey;
• building the necessary infrastructure to directly curate its
product offering;
• developing direct relationships with hotel partners;
•
focusing on its pricing and yield management expertise
to ensure that the price remains attractive to easyJet
customers; and
• building enhanced value from bundling and vertical
integration of the holiday experience.
easyJet has a clear vision to offer its customers quality and
great value hotels based on its understanding of their needs.
On the biggest and most attractive flows into the most
popular destinations in Europe, easyJet has a market share,
a frequency and most importantly a cost position that no
one else can match.
easyJet will use its data and digital capability to support the
offer, driving ancillary revenue through increasing conversion
and attachment rates and the overall average booking value.
easyJet will further develop its website and booking process
and add data-driven customisation to maximise the attraction
to customers. By combining a quality, great value hotel offer
with the flexibility of multiple frequencies to major European
destinations, we will deliver a better value experience for
our customers.
easyJet targets to significantly improve its profit by moving
to a contribution rather than commission model. easyJet has
already spoken to a large number of hotel partners in Europe
and is progressing well to develop deeper and stronger direct
relationships with them. These relationships will inevitably
help easyJet deliver a better value offer and experience for
its customers.
easyJet’s core focus will remain on airline services, but the
holidays offering incorporates other aspects of the customer
journey which can be sold to a customer base that is well
aligned and that has high capacity and frequencies on Beach,
City and Ski destinations.
Garry Wilson joined as the first ever Chief Executive of easyJet
Holidays on 12 November. He has 20 years’ experience in the
holiday sector, often specialising in the holiday market across
easyJet’s network. He will continue to build the team and the
total customer offer which we expect to launch in late 2019.
14
easyJet plc Annual Report and Accounts 2018
Business
easyJet has a well-established and attractive business
passenger offer, based on its network of primary airports,
slot portfolio and high frequency on Europe’s major
commercial routes. easyJet has built its business customer
base from 10 million in 2012 to over 15 million for the first time
in 2018, an increase of 17% on the 2017 financial year. The
increase was driven in particular by strong business penetration
on Berlin Tegel routes. Overall penetration is now 17.0% (2017:
16.1%) and 16.3% in the network excluding Tegel, a slight
increase on 2017.
The business pricing premium increased by 14.4%, due to
higher penetration, the inclusion of Tegel and the benefit
from cancellations by other airlines or modes of transport
(for example as a result of strikes in France), leading to
late bookings and higher yields. High premiums were also
generated from sales through indirect channels.
easyJet’s business offer historically did not materially extend
beyond schedule and price, and this has limited its growth
within this space, as well as its ability to capture full yield.
easyJet will extend its offer through the development of
business products, a recognition programme and improved
back office functionality. Continued investment in its business
offer will help easyJet reach its ‘fair share’ of European
short-haul business travellers.
easyJet’s business offer development will focus on three
core elements:
•
•
firstly, by improving connectivity to our customers
through improved back office functionality including
the development of an SME portal to allow small
and medium size businesses to book more easily,
automating invoicing and increasing direct contracting
with our corporate customers;
secondly, easyJet will cater for its business customers
with a more personalised product offering including new
business fares and bundles. In the long term, easyJet will
seek ways to innovatively offer an enhanced business
traveller experience without undermining its low cost
operating model; and
•
thirdly, ongoing improvements to the schedule can add
a business-bias on certain routes and frequencies.
Since May easyJet has:
•
started to offer semi-automated invoicing, a process
that will be simplified further through the launch of the
SME Portal;
•
launched Flight Club for Business Partners;
• undertaken schedule analysis for operational protection of
higher value business flights where appropriate; and
• adapted its schedule to prioritise business routes at certain
times of day, with a particular focus on Germany and
France for the winter 2018/19 schedule.
STRATEGIC REPORT Having appointed its first ever Head of Loyalty, easyJet has
started to assemble a new team dedicated to designing and
developing the loyalty programme. The intention is to launch
the programme in 2020 across key European markets. Further
details of the programme will be announced, designed and
developed in 2019, with further rollout of benefits and partners
planned ahead of full launch.
easyJet is confident that a loyalty programme will build
further value into the overall easyJet experience, and will
drive increased average revenue per seat, whilst also providing
profitable new revenue streams from external partners.
In the meantime easyJet will continue to develop and launch
further loyalty initiatives during this financial year, through
enhancements to both easyJet Plus and Flight Club to try
and build as much value for members as possible.
Digital
easyJet has been at the forefront of digital innovation
in the airline industry and its digital strategy is a core part
of easyJet’s wider customer strategy. Its capability helps
to build customer loyalty, drive revenue growth, secure
cost savings and deliver greater customer satisfaction.
easyJet’s increasingly sophisticated use of data will
enable the business to make travel more seamless for
its customers in the long-term.
Customers made 26.8% of all eCommerce bookings
through mobile platforms in the 2018 financial year,
an increase of 4.5 percentage points year on year,
as functionality and accessibility improved further. 29%
of customers now use mobile boarding passes, up 4.5
percentage points from 2017. easyJet’s digital channels
received just under 600 million visits in the 2018 financial
year, up 8.3% on 2017. easyJet’s app has achieved 28.5
million downloads and 254,000 5-star iOS reviews.
Features such as ‘Look and Book’ are tailored to the
Instagram generation and help to drive positive
app reviews.
Loyalty
easyJet continues to benefit from increasingly loyal
customers. In the 2018 financial year, 65.6% of easyJet seats
were booked by customers who had made a booking in
the preceding two years, representing 58 million passengers,
an increase of five million compared to the previous financial
year and an increase from 48 million in 2016. easyJet’s
invitation only loyalty programme, Flight Club (for those who
fly more than 20 times a year with easyJet), is also producing
demonstrable revenue benefits, with Flight Club members
increasing by 45% in 2018 and over 9% of all bookings being
made by Flight Club customers.
Alongside Flight Club, easyJet Plus, easyJet’s paid membership
programme, allows customers to access additional privileges
for an annual fee.
With just under half of travellers flying with easyJet once a
year there is a major opportunity to drive loyalty across leisure
and business travel. easyJet’s ambition is to drive customer
loyalty even further whilst proving that expensive and complex
structures are not needed in order to be innovative.
easyJet is now evolving its loyalty offering to grow the total
value per passenger through a customer-centric loyalty
programme that enhances the end-to-end travel experience,
driving loyalty through personalised benefits that offer fair
value and relevancy.
Our ambition is to make the programme as relevant to
customers as possible, whilst building further demand for
flights, ancillaries and holidays and creating new and
sustainable revenue streams.
Instead of recognising only flying behaviour, easyJet’s
new loyalty programme will recognise and encourage all
behaviours that positively contribute to the bottom line.
From booking direct to inputting customer data to build the
member profile, spending with partners, and easyJet’s financial
services product, customers will be recognised and rewarded
for various behaviours and choices. The programme will
constantly evolve to address the changing behaviours and
attitudes of our customers, leading to an enriched end-to-end
travel experience that is personal to them.
With the intention of building a profitable ecosystem, easyJet
plans to build a comprehensive network of cross-industry
programme partners, in order to reward customers for
purchases beyond the flight. This gives us the opportunity to
engage as many customers as we can, as often as we can,
unlocking new profitable revenue streams across the easyJet
business, including Holidays and Business.
The programme will be powered by a new currency, in which
customers are rewarded and recognised for their behaviours.
This will create higher yielding fares with greater penetration
of ancillaries and allow partners and brands to invest into the
programme. This will be achieved as follows:
• Spend: customers earn points for every purchase with
easyJet and partners
• Redeem: customers use points to purchase exclusive
rewards to enhance the trip
• Recognise: customers progress easily and quickly through
loyalty levels to unlock enhanced benefits
www.easyJet.com
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CHIEF EXECUTIVE’S REVIEW
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Success in ancillaries
2018 was a successful year, with an 11.7% increase in ancillary
revenue per seat year on year. This success is testament to
our strategy of building a portfolio of products and services
which is well matched to our customers’ needs. In 2018, this
was further enhanced by:
•
improvements to the baggage options we offer
customers, with the introduction of 15kg and 23kg
options, the continued enhancement of Hands Free and
home pick-up services in partnership with AirPortr;
• continued multi-variant testing of our digital merchandising
of ancillary products, leading to a six percentage point
increase in allocated seat attachment rates;
•
•
the launch of new partnerships, including a new
Insurance partnership with Collinson and a two-year
brand partnership with Three Mobile who sponsor
Hands Free for their UK customers;
• a trial of an inflight entertainment platform, accessed
through customers’ own devices, which has driven a
22 percentage point improvement in customer satisfaction
for customers using the platform versus easyJet’s network
average. The trial was supported by Rakuten, American
Express and other brand partners;
•
the growth of Worldwide by easyJet, now offering
connections to more than 10 partner airlines, across
11 airports in the network. Bag attachment rates for
these bookings are circa 20 percentage points higher
than easyJet’s network average and the missed
connection rate below 0.5%;
• growth in the Inflight Retail business, with Inflight
vouchers now available in our booking funnel and
average transaction value on board increasing by 4%
from last year; and
• an increase in easyJet Plus membership of 52% year
on year.
easyJet has a number of further initiatives and innovation in
its pipeline to continue to drive ancillary revenue growth.
Operational performance
Operational performance drives long-term customer loyalty
and cost efficiency. Over the last few years the impact of
increasing levels of industry-wide disruption has led to a
declining trend in on-time performance(4) (OTP) and customer
satisfaction. During the 2018 financial year OTP decreased by
1.0 percentage point to 75%, primarily due to disruption, with
a clear impact in the busiest summer months.
easyJet has begun a process of self-help which has already
seen strong improvement in OTP at Gatwick by 3.0 percentage
points to 68% following our contract with DHL to provide
ground handling, further investments in resilience and our
partnership with Gatwick Airport to resolve wider system
issues. As a result of the OTP improvement easyJet has now
agreed with DHL to manage ground handling at Bristol and
Manchester as well as at Gatwick.
OTP % arrivals within 15 minutes
2018 Network
Network excluding UK
2017 Network
Network excluding UK
Q1
Q2
Q4
Full
Q3
year
81% 82% 73% 68% 75%
83% 84% 75% 70% 77%
79% 80% 78% 68% 76%
82% 82% 80% 72% 79%
16
easyJet plc Annual Report and Accounts 2018
easyJet’s focus on operational resilience and friendly,
helpful service helped to sustain customer satisfaction with
Customer Satisfaction(5) (CSAT) scores at 71.2% (an increase
of 0.2 percentage points year on year), despite increased
disruption during the year. Specifically:
• easyJet’s efforts to manage disruption and engage with
customers during this time earned it recognition with a two
percentage point increase in overall satisfaction recorded
by customers delayed for less than three hours and one
percentage point increase in those disrupted by more than
three hours;
in addition to push notifications via our mobile app, easyJet
updated its voice communications within the airport to
shorten announcements and institute later calls to the
gate, reducing passenger waits and increasing customer
satisfaction with the handling of the boarding process; and
• easyJet’s ‘Summer of Boarding’ initiative increased
boarding satisfaction by 4.4 percentage points during the
peak summer months and included improvements such as
self-boarding gates, and greater care given to the boarding
of families and persons with restricted mobility.
3. Value by efficiency
easyJet is committed to maintaining its structural cost
advantage in the markets where it operates, primarily against
the legacy airlines. easyJet is low cost, driving efficiency and
investing only where it matters most to our customers and
our people.
Through its cost and efficiency programme, easyJet continues
to drive both short-term efficiencies and longer term structural
cost savings across all areas of the business, leveraging its
increasing scale. These savings enable the airline to offset
the effects of underlying inflation and build flexibility to help
mitigate revenue pressure.
The cost and efficiency programme has been able to deliver
sustainable reduction this year: over £500 million of savings
have been achieved to date with £107 million saved in the
2018 financial year, principally in airport costs (flat cost
per seat at constant currency), fuel supplier initiatives and
engineering savings.
Initiatives to drive improved cost performance
Airports and ground handling
As easyJet increases in size, the airline will drive further
economies of scale from long-term deals with airports and
ground handling operators. easyJet continues to work with
airports that will reward easyJet’s commitment, efficient
operations and growth with attractive financial agreements.
30% of all easyJet customers now travel through an
automated bag drop area with further automation planned
to be rolled out across the network. Automatic gates are also
being trialled for boarding.
Through the airline’s ground-breaking deal with DHL at
Gatwick, initial investment in the contract is driving superior
OTP performance and operational efficiency.
(4) On-time performance (OTP) is defined as the percentage of flights
which arrive within 15 minutes of the scheduled arrival time
(5) Customer satisfaction (CSAT) is based on results of a customer
satisfaction survey which measures how satisfied the customer was
with their most recent flight
STRATEGIC REPORT Maintenance and engineering
easyJet is driving further efficiencies from its contract for
maintenance and the provision of spare parts, which started
in October 2015.
Overheads and IT
easyJet has identified opportunities to reduce cost and
become more efficient in its overhead cost base and IT
systems by:
easyJet is using data science and its strong relationship
with Airbus to support predictive maintenance, which is now
active on all easyJet’s A319 and A320 fleet and resulted in
149 pre-emptive maintenance actions in 2018. All new fleet
deliveries will have hardware installed that enables even higher
levels of data transfer. easyJet expects to deliver meaningful
savings in the 2019 financial year and to drive greater value as
the programme progresses.
Crew
easyJet’s business model of employing crew across Europe
on local contracts delivers significant value in attracting
and retaining high quality crew. The airline believes this is
the best long-term and sustainable resourcing model in the
markets it operates in. easyJet’s investment in this area has
driven structural benefits including low crew turnover, at less
than 5% for pilots, and a strong pipeline of talent wanting to
join easyJet.
easyJet is investing significant resources to improve schedule
and rostering efficiency, which will improve crew productivity
and create a more stable working environment.
Up-gauging and efficient fleet management
Moving from 156 seats on an A319 to either 186 seats on an
A320neo or 235 seats on an A321neo aircraft is expected
to deliver a cost per seat saving of up to 13% and 20%
respectively. This is being achieved by increasing the
proportion of higher gauge aircraft in the fleet:
• all new A320 deliveries are fitted with 186 seats, with
the first 186-seat A320neo delivered in June 2017;
•
•
retrofitting the existing fleet of 180-seat A320s; and
the addition of A321neo aircraft to the fleet from July 2018,
which is delivering up to 9% cost per seat savings compared
to an A320neo.
easyJet has built fleet flexibility which means the airline
is able to either increase or decrease the fleet growth
programme, allowing it to manage ownership costs in line
with external factors.
• continuing to embed its organisational redesign which has
resulted in the ability to leverage scale in overheads for
future growth;
•
increasing investment into data and digital to increase
simplicity, enhance flexibility and drive efficiency; and
• continuing end-to-end review of the supplier base in all
areas of the business to drive value and support innovative
thinking about the way the airline works in the future.
Fuel
easyJet continues to optimise its commercial and logistical fuel
supply arrangements, working closely with its fuel providers.
Operational resilience
easyJet is investing in resilience to more effectively manage
disruption and ease the impact on the customer. To tackle
this sector-wide issue easyJet has begun a number of self-
help initiatives:
• modifying schedules to improve overall resilience using
better data and updated parameters and assumptions;
•
•
•
increasing standby aircraft availability;
focusing on the first wave, using better processes,
communication and data-driven decisions to minimise
delay minutes as the day progresses;
implementing automation and data-driven decision
making across all areas of operations through the use of
our OTP simulator;
• developing strategic partnerships, predominantly in ground
handling, to implement and deliver better processes and
equipment levels into contracts, for example with DHL at
Gatwick; and
•
improving operational and customer communications
across the Operational Control Centre (OCC), ground
handlers and crew.
These initiatives are targeted to deliver savings of over
£100 million in the 2019 financial year, offsetting
inflationary pressures.
www.easyJet.com
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CHIEF EXECUTIVE’S REVIEW
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4. The right people
easyJet cares about its people and believes they set
the airline apart. Providing the warmest welcome in the
sky, easyJet’s customer-facing employees are the very best
in the industry and contribute significantly to the positive
experience that customers enjoy, leading to increased
loyalty and repeat business. At the end of the 2018 financial
year, 14,605 people (2017: 12,181) worked for easyJet.
Creating an inclusive and energising environment which
attracts the right people and inspires everyone to learn and
grow is at the heart of easyJet’s strategy. This is particularly
important as our business continues to evolve. This year
easyJet has introduced a new employee listening tool, Peakon,
to obtain real-time, honest feedback on a more regular basis
to help make better, data-led people decisions and to make
easyJet a better place to work. Results of a first trial of the
platform were good. The engagement score of 8.0 out of
10 is strong and the overall employee Net Promoter Score
(eNPS) was 27, where any positive score is good on the
Peakon benchmark. In our cabin crew community, eNPS
was 41, a high score with a direct link to our positive
customer perception of crew. Our Tegel employees are
exceptionally positive about their experience with easyJet
with the base registering an eNPS of 67. easyJet will work
to maintain and improve further its employee engagement.
easyJet is seen as an attractive employer and featured in
the Top 50 places to work in the UK Employees’ Choice
Awards on Glassdoor UK, voted by easyJet employees.
easyJet continues to recruit to support its growth, adding
over 742 pilots and 1,544 cabin crew during the 2018 financial
year (2017: 399 pilots and 1,076 cabin crew). 29% of positions
were also filled by internal candidates (2017: 36%). Retention
rates remain good with total employee turnover at 6.5%
(2017: 7.4%), while flight deck turnover was 4.9% (2017: 3.6%).
There is also a strong pipeline of pilots and crew who want
to work at easyJet, with 75,000 applications during the 2018
financial year, an increase of 7,800 compared to 2017.
Since 2015, particularly through its Amy Johnson initiative,
easyJet has been seeking to encourage more women to
become pilots, to help address the significant gender
imbalance in the worldwide pilot community. easyJet’s current
target is that 20% of its new entrant co-pilots attracted by
2020 are female. In the 2018 financial year easyJet attracted
15% female new entrant co-pilots, up from 13% in the 2017
financial year and 5% when the initiative was started in 2015.
In May, easyJet announced the appointments of a number
of new Airline Management Board (‘AMB’) members, to take
easyJet forward in alignment with the updated strategy:
• Garry Wilson as Chief Executive of easyJet Holidays
• Luca Zuccoli as Chief Data Officer
• Flic Howard-Allen as Chief Communications Officer
• Ella Bennett as Group People Director
• Thomas Haagensen was promoted to Group
Markets Director
• Lis Blair was promoted to Chief Marketing Officer
18
easyJet plc Annual Report and Accounts 2018
5. Innovating with data
easyJet has the ambition to become the most data-driven
airline in the world and is now investing substantially to give
greater focus and weight to our use of data to improve the
customer experience, drive revenue, reduce cost and improve
operational reliability:
• Revenue – opportunities to leverage existing data-based
initiatives, in particular focusing on enhancing the revenue
management system, harnessing customer-related information
and improving easyJet’s ability to target clients with the
right offer. In particular, easyJet is focusing on harnessing
new sources of data to improve demand-forecasting and
simulation capabilities, and to deliver further competitive
pricing for tickets and ancillary products such as
seat allocation.
• Cost and operations – specific data applications have
opportunities to improve utilisation and productivity, fuel
efficiency and resilience, enabling predictive maintenance
and reducing waste, whilst also helping to minimise the
impact of disruption by combining machine learning
predictions of delays and optimisation algorithms to find
the best solution to the problems. During 2018 easyJet
implemented an OTP simulator that allows for rapid and
often pre-emptive action resulting from first wave issues
each day.
• Customer – both on board to complement existing
demand and personalisation initiatives, such as food and
beverage, and ‘off-board’ where we will develop our
capability to make the most efficient, effective decisions
to the customer’s benefit such as in managing disruption
(for example by implementing the Optym solution in future
planning from 2019).
easyJet’s new Chief Data Officer, Luca Zuccoli, joined the
business in August and has started the process of hiring an
additional 28 data scientists to join the existing team of 22.
As a result easyJet has made a major step up in its data
activities and now has over 50 data projects in place to
drive the above benefits, more than doubling the number
of initiatives in the last six months. easyJet expects to secure
benefits from the 2019 financial year which will deliver
substantial future annualised benefits.
OUR PROMISE
easyJet has consolidated and updated its customer and
employee values and behaviours, which it is now calling Our
Promise. This is one single, simple way to bring together the
elements which will support Our Plan:
• Safe and responsible: safety is our number one priority
• On our customers’ side: we always think about the
customer and see things from their point of view
•
In it together: we are one team and work together in all
we do
• Always efficient: we will always be efficient and focus on
what matters most
• Forward thinking: we anticipate what we need tomorrow
and consider how what we do today might affect us in
the future
This brings a clarity of purpose and understanding for all of
our employees that will drive better customer service and
long-term success for the business.
STRATEGIC REPORT CAPITAL ALLOCATION AND FLEET
easyJet has a ruthless focus on capital allocation, using its
market-leading fleet flexibility to increase or decrease capacity
deployed. easyJet regularly reviews the opportunities available
and prevailing economic and market conditions to determine
the most effective capital allocation. Every year the airline
churns routes that have not reached their targeted objectives
using the flexibility to move aircraft between routes and
markets to ensure improved utilisation and generate
increased returns.
easyJet is able to support this with market-leading fleet
flexibility, through the timing and scale of capacity deployment:
new aircraft orders can be deferred, aircraft leases may be
extended or returned to the lessor, aircraft may be sold or
utilisation can be reduced at times of low demand.
easyJet’s total fleet as at 30 September 2018 comprised
315 aircraft (2017: 279 aircraft), of which 42% are A319s, 57%
are A320s and 1% are A321s.
Alongside its cost initiatives over the next five years easyJet
will reduce cost per seat by improving the fleet mix. In the 2018
financial year, easyJet took delivery of 49 aircraft, and exited
13. Deliveries included 18 ex-Air Berlin aircraft now being leased
by the company and 28 aircraft that are part of our highly
advantageous deal with Airbus.
As at 30 September 2018, easyJet had taken delivery of two
A321neo aircraft, with a third delivered since year end. The
A321neos are operated from Gatwick, enabling growth in a
slot-constrained, high customer demand airport. The A321neo
has 51% more seat capacity than the A319 and delivers up to
9% cost savings compared to a 186-seat A320neo or up to
20% compared to an A319.
At 30 September 2018 the average age of the fleet was
7.0 years (2017: 7.1 years) and the average number of seats
per aircraft increased to 172 seats (2017: 169 seats). During the
year, easyJet improved its fleet utilisation across the network
to an average 11.1 block hours per day (2017: 10.9 hours).
easyJet is pleased to announce that it has reached an
agreement with Airbus that extends easyJet fleet plans into
2023, delivers more flexibility into the schedule and secures
valuable delivery slots at a time when the Airbus order book
has limited availability. In particular the agreement includes:
• The exercise of purchase rights resulting in firm orders
for 17 A320neo under the existing framework agreement
signed in 2013. These aircraft are subject to a very
substantial discount from the list price(6) and are expected
to be funded through a combination of easyJet’s internal
resources, cash flow, sale and leaseback transactions
and debt.
• The deferral of delivery dates of 18 A320neo aircraft by
up to 24 months.
• The conversion of 25 purchase rights for A320neo into
purchase options, which has the primary purpose of
securing delivery slots in 2024.
This provides additional flexibility to easyJet’s existing plans; by
2022 easyJet could increase its fleet size to 385 or reduce it to
316, using existing Airbus delivery arrangements and operating
lease optionality.
Fleet at 30 September 2018, updated to include future commitments including the new Airbus transaction. Since the
end of the financial year five aircraft have been delivered (one A321neo and four A320neos), not included below.
A319
A320 180 seat
A320 186 seat
A320neo
A321neo
Percentage of total fleet
Owned
79
46
80
13
2
220
70%
Finance
leases
–
1
4
–
–
5
1%
Operating
leases
53
28
9
–
–
90
29%
% of fleet
42%
24%
29%
4%
1%
Total
132
75
93
13
2
315
Changes
since Sept
2017
(11)
19
15
11
2
36
Future
deliveries
–
–
–
100
27
127
Purchase
options
–
–
–
25
–
25
Unexercised
purchase
rights
–
–
–
58
–
58
(6) The aircraft list price for the new generation A320 NEO aircraft based on the relevant price catalogue in January 2012 was US$92,346,946 (being the
sum of the airframe list price, engine option list price and the price of certain assumed specification change notices). Therefore the total list price for
the 17 aircraft is approximately US$1,877,115,414 (November 2018). If easyJet chooses to take advantage of these purchase options, the price payable
for such aircraft and the other terms applicable to such acquisitions will be the same as those for the purchase of other aircraft under the existing
framework agreement signed in 2013. A small additional payment is made to Airbus on the conversion of the purchase right to a purchase option,
which amount will be deducted from the purchase price on exercise.
www.easyJet.com
19
CHIEF EXECUTIVE’S REVIEW
CONTINUED
Balance sheet
easyJet continues to have a very strong and market
leading balance sheet with net cash of £396 million at
30 September 2018 (2017: £357 million), positioning the
airline to be able to take advantage of opportunities at a
potentially challenging period for the sector. This is driven
by high operating cash generation, increased unearned
revenue from schedule releases, and improved supplier terms.
Moody’s and Standard & Poor’s credit ratings remain
unchanged at Baa1+ (stable) and BBB+ (stable) respectively.
The majority of easyJet’s capital expenditure is on its fleet,
including pre-delivery payments, final delivery payments and
maintenance expenditure. Over the next four years easyJet
gross capital expenditure is expected to be as follows:
Year
2022
Gross capital expenditure (£ million) 1,000 1,000 800 1,000
2020
2021
2019
easyJet continues to look for ways to optimise the efficiency
of the balance sheet, including management of the liquidity
position. easyJet’s policy is to maintain a liquidity buffer
(defined as cash plus undrawn revolving credit facilities (RCF)
and business interruption insurance) of at least £2.6 million per
100 seats. As at 30 September 2018, the liquidity position was
Percentage of anticipated requirement hedged
Six months to 31 March 2019
Average rate
Full year ending 30 September 2019
Average rate
Full year ending 30 September 2020
Average rate
Fuel requirement
69%
$567 /
metric tonne
65%
$571 /
metric tonne
45%
$654 /
metric tonne
BREXIT
Both the EU and the UK have said that their objective is to
maintain flights between the EU and the UK, whatever the
Brexit outcome. This gives easyJet confidence that flying
rights will be maintained, and it continues to work with EU
institutions, EU member states and the UK Government to
ensure that this is achieved.
easyJet has established easyJet Europe, which is
headquartered in Vienna and will enable easyJet to continue
to operate flights both across the EU and domestically within
EU countries after the UK has left the EU, regardless of the
Brexit outcome. The new structure means that easyJet is
now a pan-European airline group with three airlines based
in Austria, Switzerland and the UK.
UK consumer demand remains strong, with bookings for next
summer ahead of 2018.
In order to continue to operate air services within the EU,
easyJet (and all other airlines with EU operating licences)
must comply with the EU requirement that a majority of its
equity capital must be owned and controlled by nationals of
one of the member states of the EU, Switzerland, Norway,
Iceland or Liechtenstein (‘qualifying nationals’).
20
easyJet plc Annual Report and Accounts 2018
significantly ahead of this policy at £3.9 million per 100 seats
(2017: £3.6 million). On 1 August 2018, easyJet implemented
an additional two-year £250 million RCF to further support its
liquidity position. This RCF has no financial covenants or draw
stops and is unsecured.
Headline return on capital employed(7) (ROCE) increased to
14.4%, an increase of 2.5 percentage points (2017: 11.9%),
driven by the strong performance in profitability. Total ROCE
increased to 11.5% (2017: 11.3%).
Hedging positions
easyJet has a strong hedging position which will allow the
Group to remain highly competitive across the European airline
industry. easyJet operates under a clear set of treasury policies
approved by the Board. The aim of easyJet’s hedging policy
is to reduce short-term cash flow volatility. Therefore, easyJet
hedges forward, on a rolling basis, between 65% and 85%
of the next 12 months’ anticipated fuel and foreign currency
exposures and between 45% and 65% of the following 12 months’
anticipated exposures. These policies are reviewed on at least
an annual basis and any recommendations to amend policies
to take into account changing market conditions need to be
approved by the Board. No material changes were made to
these hedging policies in the 2018 financial year.
Details of hedging arrangements as at 30 September 2018
are set out below:
US Dollar requirement
70%
Euro surplus
69%
CHF surplus
68%
$1.31
66%
$1.33
46%
$1.38
€1.14
68%
€1.13
47%
€1.10
CHF 1.24
66%
CHF 1.25
47%
CHF 1.27
With regard to its ownership easyJet is well prepared and
begins from a position of strength with approximately 47%
of its shares already held by qualifying nationals (excluding UK
nationals). easyJet’s investor relations programme has focused
mainly on Europe since 2016 with the intention of increasing
this to above 50% prior to the UK’s exit from the EU.
easyJet’s Articles of Association contain provisions to allow
it to take action if necessary to ensure it continues to satisfy
the EU ownership and control requirements. These provisions
permit easyJet to regulate the level of ownership by non-
qualifying nationals by suspending rights to attend and vote
at meetings of shareholders and/or forcing the sale of shares
owned by non-qualifying nationals to qualifying nationals.
Similar powers exist in the articles of association of other
airlines as well as in the articles of companies in other sectors
that have national share ownership requirements.
(7) Headline return on capital employed shown adjusted for leases
with leases capitalised at seven times. Under IFRS 16 headline
return on capital employed is expected to improve by approximately
1.5 percentage points, as the newly capitalised lease liabilities are less
than the adjustment historically made for the capital implicit in aircraft
operating lease arrangements (the annual charge for aircraft dry
leasing multiplied by a factor of seven).
STRATEGIC REPORT Whilst easyJet has no current intention of exercising these
powers, the position will be kept under review pending the
outcome of Brexit negotiations between the UK and the EU,
along with other options.
OUTLOOK
easyJet continues to see the current market environment as
an opportunity to build and strengthen its network and
customer experience for the long term.
Currently, approximately 47% of easyJet’s equity capital
is held by qualifying nationals, if UK nationals are excluded,
and therefore approximately 53% by non-qualifying nationals.
Consequently, if no withdrawal agreement is agreed or
approved, and there is therefore no transition period, it may
become necessary for those powers to be exercised, and/or
for other actions to be taken to reduce the proportion of
non-qualifying nationals owning easyJet shares, in advance
of Brexit on 29 March 2019, so as to be compliant with the
relevant EU requirement.
easyJet currently expects to take action in respect of its level
of ownership by non-qualifying nationals only if there is a real
risk of a ‘no deal’ Brexit in the run up to 29 March 2019 and if
the proportion of equity capital held by qualifying nationals
(excluding UK nationals) remains below the required level of
50% plus one share. If the EU and the UK reach agreement on
the terms of withdrawal, and a transition period is agreed, it is
not anticipated that any action would be required in respect of
the level of ownership by non-qualifying nationals until at least
the later stages of the Brexit transition period (which is expected
to end no earlier than 31 December 2020). easyJet continues
to monitor developments but currently considers it would be
inappropriate to commit to a set plan whilst the Brexit outcome
remains uncertain. easyJet will provide a further update as
appropriate in due course.
LONGER TERM FOCUS
Monthly traffic statistics
To reduce the short-term speculative impact around monthly
traffic statistics, easyJet has decided to change the way it
reports monthly passenger numbers and load factors, which
will now be reported within the quarterly reporting framework
in the same manner as our OTP reporting. Historic information
will be available on a dedicated webpage.
Key performance indicators
easyJet has set a number of internal and external Key
Performance Indicators (KPIs) that align to the ‘Our Plan’
strategic framework. The major external KPIs that will be
reported from the 2019 financial year are as follows:
• Profit per seat
• On-time performance – arrival within 15 minutes
• Customer satisfaction score
• Return on capital employed (ROCE)
• Earnings per share
• CO2 emissions per passenger kilometre
Over the longer term easyJet is confident that its strategy
and positioning will deliver substantial value for its shareholders.
easyJet will focus on:
• maintaining capital discipline and maximising ROCE;
• maximising profit per seat by underlying business
improvement, profit from new initiatives and benefits to
revenue and cost from data; and
• generating sustainable positive net cash flow (after
payment of the ordinary dividend and investment in the
fleet) through profitability and fleet flexibility.
easyJet plans to grow capacity by around 10% for the 2019
financial year, and by around 15% in the first half year. Forward
bookings for the first half are 50%.
Bookings for next summer look promising at this very early
stage, slightly ahead of summer 2018.
On a like-for-like accounting basis(8) revenue per seat for
the first half is expected to be down by low to mid-single
digits, in line with previous guidance, including the effect
of annualisation of one-off revenue benefits from the 2018
financial year, dilution from Tegel and the effect of Easter
moving into the second half of the year.
Adjusting for the impact of IFRS 15, revenue per seat in the
first half is currently expected to be down by mid-single digits
mainly due to new treatment of booking fee revenue which
is now recognised at the time of flying and which will benefit
the second half of the year, as well as the revised treatment of
disruption costs which are now partially offset against revenue.
On a like-for-like accounting basis total headline cost per seat
excluding fuel at constant currency (assuming normal levels
of disruption) is expected to be flat for the 12 months to
30 September 2019. This includes one-off expenditures on
the strategic initiatives to drive margin and returns in the long
term. Adjusting for the impact of IFRS 15 total headline cost
per seat excluding fuel at constant currency is expected
to improve slightly as some disruption cost is offset against
revenue, as noted above. IFRS 16 is not expected to have a
material impact on cost as the annual operating lease expense
and maintenance charges will be replaced by anticipated
similar levels of depreciation and interest expense.
Capital expenditure for the 2019 financial year is expected
to remain in line with previous guidance at £1 billion.
Based on today’s fuel prices, unit fuel(9) costs for the year
to 30 September 2019 are expected to be a headwind of
between £50 million and £100 million as a result of easyJet’s
advantaged hedging position.
The total expected headline foreign exchange(10) impact for
the year to 30 September 2019 is expected to be a headwind
of around £10 million.
(8) Applying IAS 18 Revenue, IAS 17 and IAS 39 Financial Instruments:
Recognition and Measurement.
(9) Unit fuel is calculated as the difference between the latest estimate
of financial year 2019 fuel costs less the financial year 2018 fuel cost
per seat, multiplied by the financial year 2018 seat capacity. Based
on fuel spot price range of $675- $760.
(10) US$ to £ Sterling 1.28, Euro to £ Sterling 1.12, Swiss Franc to
£ Sterling 1.28. Currency, capital expenditure and fuel increases
are shown net of hedging impact.
www.easyJet.com
21
Investing in
number one and
two airports:
BERLIN TEGEL
easyJet acquired part of Air Berlin’s operations at
Berlin Tegel Airport in December 2017, and launched
its own operations on 5 January 2018 with the first
easyJet flight from Berlin Tegel to Munich.
In June 2018, we welcomed our 300th aircraft into
the fleet on a new route between Berlin Tegel and
Cologne Bonn, marking another milestone in our
network expansion.
By 30 September 2018, we had 23 aircraft based
in Berlin Tegel. The flying schedule was initially
supported by wet leased aircraft during the transition
period from January to October 2018, but Tegel is
now ‘totally orange’, with the final wet leased flight
operated on 31 October 2018.
The implementation of Tegel operations has
demonstrated the strong operational depth at
easyJet and the ability to drive substantial change
at pace, with 3.9 million passengers flown on
Tegel routes by 30 September 2018.
Our new routes are especially popular with
business travellers, who now account for over 50%
of passengers on our German domestic routes.
We have also welcomed over 400 former Air Berlin
employees into our family, with 182 pilots and 223
cabin crew recruited by 30 September 2018.
It’s all part of our plan to become number one or
number two in our key airports, seamlessly connecting
Europe with the warmest welcome in the sky.
22
easyJet plc Annual Report and Accounts 2018
OVER
400FORMER
AIR BERLIN
CREW
RECRUITED
BY EASYJET
3.9MILLION
PASSENGERS
ON TEGEL
ROUTES
IN THE 2018
FINANCIAL YEAR
STRATEGIC REPORT
23AIRCRAFT BASED
AT BERLIN TEGEL
AS AT 30 SEPTEMBER
2018
OVER
50%BUSINESS
TRAVELLERS
23
STRATEGIC REPORT
Around
50%QUIETER ON
TAKEOFF AND LANDING
(THAN PREVIOUS
GENERATION AIRCRAFT)
Up to
9%COST PER
Up to
20%COST PER
SEAT SAVING
SEAT SAVING
(VS A320NEO)
(VS A319)
235SEATS
24
STRATEGIC REPORT 15%REDUCTION IN
FUEL BURN AND
CO2 EMISSIONS
NEW ENGINE OPTION
VS PREVIOUS GENERATION
ENGINE IN EQUIVALENT
AIRCRAFT MODEL
Value by
efficiency:
the A321neo
In July 2018, the first of our Airbus A321neo aircraft
joined the easyJet fleet, registered under the UK AOC
as G-UZMA. Equipped with the Airbus Cabin Flex
seating option and new emergency exit configuration,
these aircraft have 235 passenger seats. The new
aircraft type is expected to deliver up to a 9% cost
per seat reduction compared to our A320neo, and
up to a 20% reduction compared to our A319. The
new engines are around 50% quieter on takeoff and
landing than previous generation engines, and reduce
fuel burn and CO2 emissions by 15%. This makes the
A321neo our largest, quietest, most cost-efficient
and most eco-friendly aircraft yet.
easyJet first announced the conversion of 30 orders
for A320neo aircraft to A321neo aircraft on 16 May 2017.
14 months later, on 16 July 2018, G-UZMA took off
on its first commercial revenue service from Gatwick
to Faro.
The A321neo onboard service was designed in close
collaboration with our front-line cabin crew, with a
focus group including representatives from our major
bases throughout Europe. The first six A321neo aircraft
will be based at Gatwick. The increased capacity will
help us grow at slot-constrained airports and enable
us to offer low fares to more people on our most
popular business and leisure routes. To date, our
A321neos are predominantly operating flights
between Gatwick and mid-range leisure destinations.
www.easyJet.com
25
1 IN 5
PEOPLE IN THE
UK PREFER TO
FLY EASYJET1
Winning our
customers’
loyalty
Our brand position is continuing to strengthen in our
core markets and is driving greater customer loyalty
as we focus on continuously improving our customer
offer. At easyJet we pride ourselves on making travel
easy, enjoyable and affordable for customers whether
it is for business or leisure, seamlessly connecting
Europe with the warmest welcome in the sky.
Through investing in the brand and service,
innovation and strong operational performance,
we aim to retain and grow our customer base.
easyJet is now number one low-cost carrier in value
for money perceptions in all of its core markets(1).
easyJet was named ‘Best Value Short-Haul Airline’
by Skyscanner in 2018.
easyJet was voted ‘Best Low Cost Airline’ by Business
Traveller magazine in 2018.
In Berlin, perceptions around our brand have made
a significant leap forward with a six percentage point
increase in customers who would seriously consider
flying easyJet since last year(1). The customer perception
of easyJet in Germany speaks to easyJet’s offering,
giving customers value for money, as well as ease.
(1) Millward Brown brand tracker
26
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT Over
66%OF PEOPLE IN
EASYJET’S CORE MARKETS
(UK, FRANCE, ITALY,
SWITZERLAND)
WOULD SERIOUSLY
CONSIDER FLYING EASYJET1
75%OF PEOPLE IN ALL
EASYJET’S MAIN MARKETS
THINK EASYJET IS VALUE
FOR MONEY1
27
KEY PERFORMANCE INDICATORS
Measuring our performance
SAFE AND RESPONSIBLE
FINAL EVENT RISK CLASSIFICATION (FERC)
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
k
s
i
r
d
e
s
i
l
a
m
r
o
n
f
o
m
u
S
Aug
14
Aug
Dec
Apr
14
14
15
Six-month rolling average FERC
Apr
15
Dec
15
Apr
16
Aug
16
Dec
16
Apr
17
Aug
17
Dec
17
Apr
18
Aug
18
DEFINITION:
All reported safety-related incidents
are assessed and categorised with
risk values assigned and aggregated
to form a final event risk classification.
The sum of normalised risk is the
risk classification of safety events,
normalised by 1,000 sectors flown.
PERFORMANCE:
Safety continues to underpin
everything we do, supported by
a strong safety reporting culture.
Overall the final event risk classification
has remained broadly flat year on year,
reflecting our continued appropriate
reporting culture and focus on safety.
WINNING OUR CUSTOMERS’ LOYALTY
REVENUE PER SEAT (£)
OVERALL CUSTOMER
SATISFACTION (%)
1
3
.
3
6
8
4
.
2
6
.
6
4
8
5
3
2
.
8
5
4
9
.
1
6
8
7
5
7
2
7
1
7
1
7
NETWORK
AIRPORT MARKET SHARE
WHERE EASYJET IS NUMBER
ONE OR TWO CARRIER*
.
6
5
2
.
5
6
2
.
9
5
2
.
5
5
2
4
.
3
2
14
15
16
17
18
DEFINITION:
Market share at airports where easyJet
is the number one or number two
carrier based on short-haul capacity.
PERFORMANCE:
easyJet’s market share decreased
slightly to 25.5% (2017: 25.9%) as
seven new airports achieved number
one status in the year, whose market
shares are not yet as strong as at
established number one airports. The
percentage of easyJet capacity that
touches a number one or two airport
increased to 98.7% (2017: 98.1%).
* Source: OAG
THE RIGHT PEOPLE
EMPLOYEE ENGAGEMENT –
PEAKON SCORE OUT OF 10
0
8
.
14
15
16
17
18
14
15
16
17
18
18*
DEFINITION:
Revenue divided by seats flown.
PERFORMANCE:
Revenue per seat increased
to £61.94 (2017: £58.23) with
an increase of 4.7% at constant
currency due to the positive
trading environment based on
the strength of our network and
customer offer, competitor capacity
reductions and lower competitor
growth in easyJet markets.
DEFINITION:
Customer satisfaction index,
based on results of a customer
satisfaction survey which measures
how satisfied the customer was
with their most recent flight.
PERFORMANCE:
Overall customer satisfaction
increased from 71.0% to 71.2%
year on year, despite significant
air traffic disruption in the year.
DEFINITION:
Employee engagement score, based
on results of an employee survey.
PERFORMANCE:
In 2018 easyJet introduced a new
employee feedback and continuous
listening platform called Peakon. This
was trialled with a third of our people
across the network. The resulting
score of 8.0 out of 10 reflects our
strong levels of employee advocacy.
Peakon has been rolled out to all
employees in November 2018 and
will be delivered on a quarterly basis
across all easyJet communities.
* Trial data across one third of employees
28
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
INNOVATING WITH DATA
TOTAL NUMBER OF VISITS TO
ALL DIGITAL PLATFORMS (M)
VALUE BY EFFICIENCY
HEADLINE COST PER SEAT
EXCLUDING FUEL (£)
ON-TIME
PERFORMANCE (%)
5
1
7 6
6
9 5
1
5
2
7
4
4
9
4
0
7
.
7
3
5
3
.
7
3
3
3
.
8
3
3
4
.
3
4
7
2
.
1
4
5
8
0
8
7
7
6
7
5
7
*
14
15 16* 17*
18*
DEFINITION:
Total number of visits to all digital
platforms (in millions)
PERFORMANCE:
easyJet’s award-winning digital
platform has driven an increase in
number of visits to all digital platforms.
14* 15* 16*
restated
17
18
DEFINITION:
Revenue less headline profit
before tax, plus fuel costs,
divided by seats flown.
PERFORMANCE:
Headline cost per seat excluding
fuel increased by 5.3% to £43.43,
with an increase of 4.8% at constant
currency, primarily driven by general
inflation and higher disruption
costs, as well as the integration of
Tegel operations.
14
15
16
17
18
DEFINITION:
Percentage of flights which arrive
within 15 minutes of the scheduled
arrival time.
PERFORMANCE:
Despite increased disruption due to
significant third-party industrial action,
air traffic control restrictions and
adverse weather conditions across
Europe, on-time performance has
only fallen by one percentage point
year on year to 75% (2017: 76%).
* 2016, 2017 and 2018 include visits to the
Flight Tracker section of our website
* 2014-2015 as reported, not headline.
2016 as restated, not headline.
OVERALL
ORDINARY DIVIDEND
(PENCE PER SHARE)
.
6
8
5
2
.
5
5
8
.
3
5
.
4
5
4
.
9
0
4
LIQUIDITY PER
100 SEATS (£M)
.
9
6 3
.
3
2
.
3
2
.
3
7
.
2
14* 15* 16*
17
18
14
15
16
17
18
PERFORMANCE:
The Board has recommended a
final dividend of 58.6 pence per
share (2017: 40.9 pence), which is
in line with the dividend policy of
a payout ratio of 50% of headline
profit after tax.
DEFINITION:
Liquidity (cash plus revolving
credit facilities and business
interruption insurance policy)
per 100 aircraft seats.
PERFORMANCE:
easyJet liquidity continues to be
significantly above the minimum
policy position of £2.6 million
per 100 seats. Liquidity increased
in the year due to entering into
an additional £250 million revolving
credit facility and a business
interruption insurance policy.
HEADLINE
ROCE (%)
2
.
2
2
.
5
0
2
.
0
5
1
.
4
4
9 1
.
1
1
14* 15* 16*
restated
17
18
DEFINITION:
Normalised headline operating
profit after tax divided by average
adjusted capital employed
(see Glossary).
PERFORMANCE:
Headline ROCE increased to
14.4% (2017: 11.9%) and total ROCE
increased to 11.5% (2017: 11.3%),
driven by an increase in headline
profit for the year.
* 2014-2016 based on reported profit
after tax, not headline
* 2014-2015 as reported, not headline.
2016 as restated, not headline.
www.easyJet.com
29
FINANCIAL REVIEW
OUR FINANCIAL RESULTS
In the 2018 financial year, easyJet flew
88.5 million passengers (2017: 80.2 million)
and delivered a headline profit before tax for
the year of £578 million (2017: £408 million)
or £6.07 per seat (2017: £4.71 per seat).
Total reported profit before tax for the
year was £445 million (2017: £385 million)
or £4.68 per seat (2017: £4.45 per seat).
ANDREW FINDLAY
Chief Financial Officer
On 15 December 2017 easyJet completed the acquisition of part of Air Berlin’s operations at Berlin Tegel Airport. Its flying programme
started on 5 January 2018, operating a winter schedule with a fleet of mainly wet leased aircraft. As anticipated, Tegel flying resulted in a
dilutive impact to overall load factor performance, revenue per seat and profit per seat whilst the operation was being established. The
impact of the Tegel operation has therefore been split out in the financial overview below to provide visibility of the existing business.
Tegel headline loss before tax in the year of £112 million relates to our flying activities in Tegel, including the use of lower gauge
wet leased aircraft, combined with anticipated initially lower loads and yields as we commenced our operations. Tegel non-headline
costs represent the parallel integration of our dry lease operation, including fleet conversion and training costs, as well as
transaction-related costs.
The headline profit before tax excluding Tegel for the year ended 30 September 2018 was £690 million (2017: £408 million) and
the total profit before tax excluding Tegel was £597 million (2017: £385 million). Total profit before tax includes the impact of a
£65 million non-headline charge resulting from our change in approach to technology development during the year.
FINANCIAL OVERVIEW
£ million (reported)
Revenue
Headline costs excluding fuel
Fuel
Headline profit/(loss) before tax
Headline tax (charge)/credit
Headline profit/(loss) after tax
Non-headline costs
Non-headline tax credit
Total profit/(loss) after tax
£ per seat (reported)
Revenue
Headline costs excluding fuel
Fuel
Headline profit/(loss) before tax
Headline tax (charge)/credit
Headline profit/(loss) after tax
Non-headline costs
Non-headline tax credit
Total profit/(loss) after tax
2018
5,700
(3,886)
(1,124)
690
(133)
557
(93)
17
481
2018
63.09
(43.00)
(12.45)
7.64
(1.47)
6.17
(1.03)
0.18
5.32
Ex-Tegel
2017
5,047
(3,577)
(1,062)
408
(83)
325
(23)
3
305
Ex-Tegel
2017
58.23
(41.27)
(12.25)
4.71
(0.96)
3.75
(0.26)
0.03
3.52
Tegel
2018
198
(250)
(60)
(112)
21
(91)
(40)
8
(123)
Tegel
2018
40.69
(51.45)
(12.31)
(23.07)
4.38
(18.69)
(8.12)
1.55
(25.26)
2018
5,898
(4,136)
(1,184)
578
(112)
466
(133)
25
358
2018
61.94
(43.43)
(12.44)
6.07
(1.18)
4.89
(1.39)
0.26
3.76
Total
2017
5,047
(3,577)
(1,062)
408
(83)
325
(23)
3
305
Total
2017
58.23
(41.27)
(12.25)
4.71
(0.96)
3.75
(0.26)
0.03
3.52
Total seats flown grew by 9.8% with total load factor increasing by 0.3 percentage points to 92.9%. Excluding Tegel, seats flown
increased by 4.2% and load factor increased by 1.0 percentage point to 93.6%.
Total revenue per seat grew by 6.4% to £61.94 (2017: £58.23), an increase of 4.7% at constant currency. Revenue per seat
performance excluding Tegel grew by 6.7% at constant currency. The increase in revenue per seat is a consequence of the
positive trading environment based on the strength of our network and customer offer, competitor capacity reductions and
lower growth in easyJet markets, in particular as a result of the bankruptcies of Monarch, Air Berlin and Alitalia, as well as the
impacts from Ryanair’s winter flight cancellations and summer strike action. Tegel generated £198 million of revenue in the period;
Tegel revenue per seat was £40.69 which had a dilutive impact on total revenue per seat.
30
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
Total headline cost per seat excluding fuel increased by 5.3% to £43.43 and increased by 4.8% at constant currency. Headline
cost per seat excluding fuel was £43.00 excluding Tegel, an increase from last year of 3.8% at constant currency. The increase
was mainly due to higher disruption costs which have been driven by the high number of disruption events through the year,
mainly as a result of significant third-party industrial action, air traffic control restrictions and adverse weather conditions across
Europe. Crew costs were also higher than last year due to agreed inflationary increases in pay along with the impact of the
significant disruption on crew productivity, combined with the increase in accrued employee incentive costs as a result of our
strong financial performance. These were partially offset by cost benefits from synergies at our larger airports, the up-gauging of
fleet to larger and more efficient aircraft, savings obtained from airport cost programme initiatives, and navigation price benefits.
Tegel headline costs were £310 million in the year and Tegel headline cost per seat was £63.76, which had an adverse impact on
total cost per seat.
Total fuel costs grew by £122 million, and increased from £12.25 to £12.44 per seat. At constant currency fuel cost per seat
decreased by 4.3%. Despite an increase in the market price of fuel, the operation of easyJet’s hedging policy resulted in a
reduction in the effective US dollar fuel price.
Total headline profit before tax per seat increased by 28.7% to £6.07 per seat (2017: £4.71), which includes an £8 million
favourable movement from foreign exchange.
Total non-headline costs of £133 million (2017: £23 million) were recognised in the year, consisting of: a £65 million charge for
the write-down of IT investments and associated commitments the business will no longer require; a £40 million charge for the
integration of the Berlin Tegel operation; a £19 million charge as a result of the sale and leaseback of 10 A319 aircraft in the first
quarter; a £7 million charge for Brexit-related preparation activity; a £1 million charge associated with the completion of the
organisational review; and a £1 million charge for fair value adjustments associated with the cross-currency interest rate swaps
in place for the Eurobonds issued in February 2016 and October 2016.
Total profit before tax per seat increased by 5.2% to £4.68 per seat (2017: £4.45), which includes a £1 million favourable year-on-
year movement from foreign exchange (£0.01 per seat).
The total tax charge for the year was £87 million (2017: £80 million). The effective tax rate for the year was 19.7% (2017: 20.8%),
higher than the standard UK rate of 19.0% (2017: 19.0%), due to the impact of Swiss and Austrian income being taxed at
higher rates.
EARNINGS PER SHARE AND DIVIDENDS PER SHARE
Basic headline earnings per share
Basic total earnings per share
Diluted headline earnings per share
Proposed ordinary dividend per share
2018
pence per
share
118.3
90.9
117.4
58.6
2017
pence per
Change in
pence per
share
82.5
77.4
81.9
40.9
share
35.8
13.5
35.5
17.7
Basic headline earnings per share increased by 43.4% to 118.3 pence (2017: 82.5 pence) and basic total earnings per share
increased by 17.4% to 90.9 pence (2017: 77.4 pence). The increases were as a consequence of the increases in both headline and
total profit after tax for the year.
In line with the stated dividend policy of a payout ratio of 50% of headline profit after tax, the Board is recommending an
ordinary dividend of £233 million or 58.6 pence per share which is subject to shareholder approval at the Company’s Annual
General Meeting on 7 February 2019. This will be paid on 22 March 2019 to shareholders on the register at close of business on
1 March 2019.
RETURN ON CAPITAL EMPLOYED (ROCE)
Headline ROCE
Total ROCE
2018
14.4%
11.5%
2017
11.9%
11.3%
Change
2.5ppt
0.2ppt
Headline ROCE for the year was 14.4%, an improvement of 2.5 percentage points on the prior year and total ROCE for the year
was 11.5%, an improvement of 0.2 percentage points from last year.
The increase in both headline and total ROCE was due to the increase in profits for the year, partially offset by a 13.9% increase
in the average adjusted capital employed including lease adjustments. This is primarily due to the acquisition of 28 aircraft during
the year and the entry into the fleet of 19 leased aircraft as part of the Air Berlin transaction.
The ROCE calculation excludes borrowings, cash and money market deposits and includes 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.
www.easyJet.com
31
FINANCIAL REVIEW
CONTINUED
EXCHANGE RATES
The proportion of revenue and costs denominated in currencies other than Sterling remained broadly consistent year on year:
Sterling
Euro
US dollar
Other (principally Swiss franc)
AVERAGE EXCHANGE RATES
Euro – revenue
Euro – costs
US dollar
Swiss franc
2018
45%
44%
1%
10%
Revenue
2017
46%
41%
1%
12%
2018
29%
39%
26%
6%
Costs
2017
30%
37%
26%
7%
2018
€1.15
€1.13
$1.37
CHF 1.31
2017
€1.19
€1.15
$1.46
CHF 1.38
There was a £1 million adverse (2017: £85 million adverse) impact on total profit due to the year-on-year changes in exchange
rates. An £8 million favourable (2017: £101 million adverse) impact on headline profit was more than offset by a £9 million
adverse (2017: £16 million favourable) impact on the non-headline loss. The adverse impact of the Sterling/US dollar exchange
rate movement on fuel costs was partially offset by a favourable impact on revenue mainly driven by the weakening of Sterling
against the Euro.
Foreign exchange rate movements arise as easyJet’s foreign currency risk management policy is to hedge between 65% and
85% of the next 12 months’ forecast surplus cash flows on a rolling basis, and hence a portion of cash flows remains unhedged.
Additionally the Group’s foreign currency risk management policy is aimed at reducing the impact of a fluctuation in exchange
rates on future cash flows, however the timing of cash flows can be different to the timing of recognition within the income
statement resulting in foreign exchange movements. Amounts presented at constant currency are an alternative performance
measure and not determined in accordance with International Financial Reporting Standards.
HEADLINE EXCHANGE RATE IMPACT
Favourable/(adverse)
Total revenue
Fuel
Headline costs excluding fuel
Headline total
NON-HEADLINE EXCHANGE RATE IMPACT
Favourable/(adverse)
Non-headline costs excluding prior year balance sheet
revaluations
Prior year balance sheet revaluations
Non-headline total
Euro
£ million
96
–
(24)
72
Swiss franc
£ million
(1)
–
14
13
US dollar
£ million
(3)
(68)
(6)
(77)
Other
£ million
1
–
(1)
–
Total
£ million
93
(68)
(17)
8
Euro
£ million
Swiss franc
£ million
US dollar
£ million
Other
£ million
Total
£ million
–
3
3
–
1
1
(10)
(4)
(14)
3
(2)
1
(7)
(2)
(9)
REVENUE
Passenger revenue
Ancillary revenue
Total revenue
£ million
4,688
1,210
5,898
2018
£ per seat
49.23
12.71
61.94
£ million
4,061
986
5,047
2017
£ per seat
46.85
11.38
58.23
Total revenue in the year increased by 16.8% to £5,898 million (2017: £5,047 million), a 4.7% increase in revenue per seat at
constant currency, reflecting the additional 8.3 million passengers carried as well as a benefit from foreign exchange. Tegel flying
generated £198 million of revenue in the year.
The number of passengers carried increased by 10.2% to 88.5 million (2017: 80.2 million), driven by a growth in capacity of 9.8%
to 95.2 million seats (2017: 86.7 million) and load factor increasing by 0.3 percentage points to 92.9% (2017: 92.6%). Increase in
capacity has been lower than originally planned due to disruption, which resulted in 6,814 cancellations during the year (2017: 2,502).
Revenue per seat increased by 6.4% to £61.94 (2017: £58.23), and increased by 4.7% to £60.96 at constant currency. Tegel
revenue per seat was £40.69, which had an anticipated dilutive impact on total revenue per seat.
32
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
easyJet saw a positive trading environment based on the strength of our network and customer offer, capacity reductions and
lower growth in easyJet markets, in particular as a result of the bankruptcies of Monarch, Air Berlin and Alitalia as well as the
impacts from Ryanair’s winter flight cancellations and summer strike action.
Ancillary revenue per seat continued to perform well, and increased by 11.7% to £12.71 (2017: £11.38). The momentum from
last year’s product and pricing initiatives, particularly bags and allocated seating, continued into this year, along with greater
conversion and attachment rates from improved website functionality. Performance benefitted from higher loads as well as
further product offerings brought to market.
HEADLINE COSTS EXCLUDING FUEL
Headline cost per seat excluding fuel increased by 5.3% to £43.43 (2017: £41.27) and increased by 4.8% at constant currency.
Operating costs
Airports and ground handling
Crew
Navigation
Maintenance
Selling and marketing
Other costs
Ownership costs
Aircraft dry leasing
Depreciation
Amortisation
Net finance charges
Total headline costs excluding fuel
£ million
2018
£ per seat
£ million
£ per seat
2017
1,649
754
400
313
143
497
3,756
152
199
15
14
380
4,136
17.32
7.92
4.20
3.28
1.50
5.22
39.44
1.59
2.09
0.15
0.16
3.99
43.43
1,465
645
381
268
122
371
3,252
110
181
14
20
325
3,577
16.90
7.44
4.40
3.09
1.41
4.28
37.52
1.27
2.09
0.16
0.23
3.75
41.27
Headline airports and ground handling cost per seat increased by 2.5%, and by 2.3% at constant currency. Excluding Tegel,
these costs increased by 0.8% at constant currency, highlighting the impact of higher than average costs at Tegel Airport and
the lower gauge of the wet leased aircraft used to launch the operation. The relatively flat movement excluding Tegel is a result
of inflationary increases in ground handling charges in the UK, Germany and Spain, as well as the impact of the new DHL contract
at Gatwick, substantially offset by the cost benefits from synergies which have been achieved as we deliver growth at our larger
airports and airport cost savings obtained as a result of easyJet’s cost programme initiatives.
Headline crew cost per seat increased by 6.4% to £7.92, and by 6.2% at constant currency. This was driven by agreed inflationary
increases in crew and pilot pay combined with the accrual of expected crew incentive payments, due to our strong financial
performance. Other factors included: a higher retention of crew over the winter to build for peak summer growth; an investment
in resilience for the summer; and high levels of disruption impacting crew productivity related costs.
Headline navigation cost per seat decreased by 4.4% to £4.20, and by 5.1% at constant currency, driven by the annualisation of
reduced charges, primarily in France and Germany, and the impact of the change in fleet mix.
Headline maintenance cost per seat increased by 6.3% to £3.28, and by 5.5% at constant currency. The increases were driven
by higher costs associated with the increased level of lease returns, additional aircraft recovery resilience and inflation on supply
chain contracts. These were partially offset by the impact of up-gauging the fleet.
Headline selling and marketing cost per seat increased by 6.0% to £1.50, and by 5.8% at constant currency. This was largely
driven by marketing and advertising expenditure in the year in relation to the new Tegel routes and expenditure for the new
advertising campaign in the year.
Headline other operating costs per seat increased by 22.0% to £5.22 per seat, and by 21.9% at constant currency. An increase
in disruption costs was the main driver due to the high number of disruption events through the year, mainly as a result of
significant third-party industrial action, air traffic control restrictions, adverse weather conditions across Europe and increased
congestion at airports. This was combined with an increase in wet lease charges resulting from the Tegel integration and delays
to Airbus deliveries, and the increase in accrued employee incentive costs due to our strong financial performance.
Headline aircraft dry leasing cost per seat increased by 25.4% to £1.59, and by 19.7% at constant currency. The adverse variance
was mainly driven by the 10 aircraft sale and leasebacks that occurred earlier in the year.
Depreciation costs have increased by 0.3% on a per seat basis driven by the annualisation of 23 aircraft deliveries last year and
28 new aircraft deliveries this year, which more than offset the decrease from the 10 sale and leasebacks and the impact of
increased capacity. The average number of owned aircraft increased by 6.9% to 211.
Headline net finance charges decreased by 30.4% to £0.16 per seat. The variance was driven by higher dividends received in the
year, along with higher interest receivable from higher cash balances and favourable interest rates.
www.easyJet.com
33
FINANCIAL REVIEW
CONTINUED
FUEL
Fuel
£ million
1,184
2018
£ per seat
12.44
£ million
1,062
2017
£ per seat
12.25
Total fuel cost for the year was £1,184 million (2017: £1,062 million), of which £60 million related to Tegel. Fuel cost per seat
of £12.44 was 1.5% higher than last year, but decreased by 4.3% at constant currency.
During the year the average market jet fuel price increased by 32.5% to $664 per tonne, from $501 per tonne in the previous
year. The operation of easyJet’s fuel hedging policy meant that the average effective fuel price decreased by 1.0% to $590 per
tonne, from $596 per tonne in the previous year.
The impact of Sterling/US dollar exchange rate movement on fuel costs was £68 million adverse (2017: £85 million), resulting
in an actual cost of £434 per tonne, a 5.3% increase compared to £412 per tonne in the previous year. The increase in fuel costs
also reflects the increase in the price of Emissions Trading System (ETS) permits from €7.07 at 30 September 2017 to €21.21 at
30 September 2018.
NON-HEADLINE ITEMS
Commercial IT platform charge
Tegel integration
Sale and leaseback charge
Brexit-related costs
Organisational review
Fair value adjustment
Balance sheet foreign exchange gain
Non-headline charge before tax
£ million
(65)
(40)
(19)
(7)
(1)
(1)
–
(133)
2018
£ per seat
(0.68)
(0.42)
(0.20)
(0.07)
(0.01)
(0.01)
–
(1.39)
£ million
–
–
(16)
(2)
(6)
(1)
2
(23)
2017
£ per seat
–
–
(0.18)
(0.02)
(0.07)
(0.01)
0.02
(0.26)
Non-headline profit before tax items of £133 million comprise:
• a one-off charge of £60 million for the write-down of IT assets under development which will no longer be utilised by the
business, following a change in approach to technology development, as well as £5 million of associated commitments;
• a £40 million charge for the costs associated with the integration of the Tegel operation following the acquisition of part
of Air Berlin’s operations at Berlin Tegel Airport;
• an £11 million loss on disposal and an £8 million maintenance provision catch-up, both one-off charges as a result of the
sale and leaseback of 10 A319 aircraft in the first quarter, arising due to the age of the selected aircraft and maintenance
provision accounting;
• a £7 million charge for our Brexit-related plans, principally due to the cost of re-registration of aircraft in Austria;
• a £1 million charge associated with the completion of our organisational review; and
• a £1 million charge relating to fair value adjustments associated with the cross-currency interest rate swaps in place for the
Eurobonds issued in February 2016 and October 2016.
SUMMARY NET CASH RECONCILIATION
Operating profit
Depreciation and amortisation
Loss on disposal of intangibles, property, plant and equipment
Commercial IT platform charge
Net movement in working capital and other items of an operating nature
Net tax paid
Net capital expenditure
Net proceeds from sale and operating leaseback of aircraft
Purchase of own shares for employee share schemes
Net increase in restricted cash
Other (including the effect of exchange rates)
Ordinary dividend paid
Net increase in net cash
Net cash at beginning of year
Net cash at end of year
34
easyJet plc Annual Report and Accounts 2018
2018
£ million
460
214
4
60
449
(74)
(1,012)
106
(17)
(4)
15
(162)
39
357
396
2017
£ million
404
195
4
–
325
(51)
(630)
115
(10)
–
6
(214)
144
213
357
Change
£ million
56
19
–
60
124
(23)
(382)
(9)
(7)
(4)
9
52
(105)
144
39
STRATEGIC REPORT
Net cash at 30 September 2018 was £396 million (2017: £357 million) and comprised cash (excluding restricted cash) and money
market deposits of £1,373 million (2017: £1,328 million) and borrowings of £977 million (2017: £971 million). After allowing for the
impact of aircraft operating leases (calculated as seven times operating lease costs incurred in the year), adjusted net debt
increased by £325 million to £738 million, mainly due to the increase in total lease costs as a result of the sale and leaseback
of 10 aircraft in the year and the leases entered into for ex-Air Berlin aircraft.
The movement in net working capital has increased by £124 million year on year, driven by an increase in trade and other
payables as a result of an increase in activity, partially offset by an increase in trade and other receivables.
Net capital expenditure includes the acquisition of 28 A320 family aircraft (2017: 23 aircraft), the purchase of life-limited parts
used in engine restoration and pre-delivery payments relating to aircraft purchases. The number of aircraft in the fleet increased
from 279 at 30 September 2017 to 315 at 30 September 2018.
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Goodwill
Property, plant and equipment
Derivative financial instruments
Unearned revenue
Net working capital
Restricted cash
Net cash
Current and deferred taxation
Other non-current assets and liabilities
Net assets
Opening shareholders’ equity
Ordinary dividend paid
Profit for the year
Change in hedging reserve
Other movements
2018
£ million
365
4,140
364
(877)
(733)
11
396
(357)
(50)
3,259
2,802
(162)
358
261
–
3,259
2017
£ million
365
3,525
92
(727)
(543)
7
357
(284)
10
2,802
2,694
(214)
305
14
3
2,802
Change
£ million
–
615
272
(150)
(190)
4
39
(73)
(60)
457
108
52
53
247
(3)
457
Net assets increased by £457 million, due to the profit generated in the year and favourable movements on the hedging
reserve, which were only partially offset by the payment of the ordinary dividend. The movement on the hedging reserve was
predominantly due to the favourable mark-to-market movement on jet fuel forward contracts.
The net book value of property, plant and equipment increased by £615 million, driven principally by the acquisition of 28 A320
family aircraft and pre-delivery payments relating to aircraft purchases.
Net derivative financial instruments have increased by £272 million due to mark-to-market gains on jet fuel contracts, gains on
US dollar contracts and gains on cross-currency interest rate swaps, partially offset by losses on Euro contracts.
Unearned revenue increased by £150 million due to the increased revenue activity year on year, driven by the changes in trading
conditions and the competitor landscape.
Net working capital (comprising trade receivables, trade payables and current provisions) increased by £190 million, primarily as a
result of the timing of invoice receipts and payments as well as an increase in activity year on year.
Current and deferred taxation increased by £73 million, mainly driven by the deferred tax liability arising from movements in
hedge positions.
Other non-current assets and liabilities have moved from a net asset position of £10 million to a net liability position of £50 million,
mainly driven by the reduction in deposits held by aircraft lessors as a result of lease returns in the year.
www.easyJet.com
35
FINANCIAL REVIEW
CONTINUED
GOING CONCERN
easyJet’s business activities, together with factors
likely to affect its future development and performance,
are described in the strategic report on pages 2 to 58.
Principal risks and uncertainties are described on pages
38 to 48. Note 23 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.
At 30 September 2018, the Group held cash and cash
equivalents of £1,025 million and money market deposits
of £348 million. Total debt of £977 million is free from
financial covenants, with £9 million due for repayment in
the year to 30 September 2019.
Net current liabilities at 30 September 2018 were £59 million,
including unearned revenue (payments made by customers
for flights scheduled post year end) of £877 million.
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 between 45% and 65% of
estimated exposures from 13 up to 24 months in advance.
Specific decisions may require consideration of a longer
term approach. Treasury strategies and actions will be
driven by the need to meet treasury, financial and corporate
objectives. 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
and deposits for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the
Annual Report and Accounts.
VIABILITY STATEMENT
The Directors have assessed easyJet’s viability over a
three-year period to September 2021. This is based on
a three-year strategic plan, which gives greater certainty
over the forecasting assumptions used.
Based on this assessment, the Directors have a reasonable
expectation that the Company and the Group will be able to
continue in operation and meet all liabilities as they fall due
up to September 2021. In making this statement, the
Directors have also made the following key assumptions:
In making their assessment, the Directors took account
of easyJet’s current financial and operational positions
and contracted capital expenditure. They also assessed
the potential financial and operational impacts of the
principal risks and uncertainties set out on pages 38 to 48
in severe but plausible scenarios, including the impact of a
sustained significant adverse movement in foreign currency
exchange rates or jet fuel prices and the likely degree of
effectiveness of current and available mitigating actions.
•
•
•
funding for capital expenditure in the form of capital
markets debt, bank debt or aircraft leases will be
available in all plausible market conditions;
there will not be a prolonged grounding of a substantial
portion of the fleet; and
the terms on which the United Kingdom leaves the EU
are such that easyJet will be able to continue to operate
over broadly the same network as at present and there
will be no material and sustained economic downturn
following the United Kingdom’s exit from the EU.
36
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT Key statistics
OPERATING 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 (‘000)
Number of aircraft owned/leased at end of year
Average number of aircraft owned/leased during year
Number of aircraft operated at end of year
Average number of aircraft operated during year
Operated aircraft utilisation (hours per day)
Number of routes operated at end of year
Number of airports served at end of year
FINANCIAL MEASURES
Total return on capital employed
Headline return on capital employed
Liquidity per 100 seats (£m)
Total profit before tax per seat (£)
Headline profit before tax per seat (£)
Total profit before tax per ASK (pence)
Headline 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)
Revenue per passenger (£)
Revenue per passenger at constant currency (£)
Costs
Per seat measures
Headline cost per seat (£)
Non-headline cost per seat (£)
Total cost per seat (£)
Headline cost per seat excluding fuel (£)
Headline cost per seat excluding fuel at constant currency (£)
Total cost per seat excluding fuel (£)
Total cost per seat excluding fuel at constant currency (£)
Per ASK measures
Headline cost per ASK (pence)
Non-headline cost per ASK (pence)
Total cost per ASK (pence)
Headline cost per ASK excluding fuel (pence)
Headline cost per ASK excluding fuel at constant currency (pence)
Total cost per ASK excluding fuel (pence)
Total cost per ASK excluding fuel at constant currency (pence)
2018
95.2
88.5
92.9%
104,800
98,522
1,101
559,857
1,088
315
295.1
305
269.0
11.1
979
156
2017
86.7
80.2
92.6%
95,792
89,685
1,105
516,902
1,010
279
267.3
270
253.2
10.9
862
138
2018
11.5%
14.4%
3.9
4.68
6.07
0.42
0.55
61.94
60.96
5.63
5.54
66.67
65.62
55.87
1.39
57.26
43.43
43.25
44.82
44.57
5.08
0.13
5.21
3.95
3.93
4.08
4.05
2017
11.3%
11.9%
3.6
4.45
4.71
0.40
0.43
58.23
58.23
5.27
5.27
62.90
62.90
53.52
0.26
53.78
41.27
41.27
41.53
41.55
4.84
0.03
4.87
3.73
3.73
3.76
3.76
Increase/
(decrease)
9.8%
10.2%
0.3ppt
9.4%
9.9%
(0.4%)
8.3%
7.8%
12.9%
10.4%
13.0%
6.2%
1.4%
13.6%
13.0%
Increase/
(decrease)
0.2ppt
2.5ppt
8.3%
5.2%
28.7%
5.6%
29.2%
6.4%
4.7%
6.8%
5.1%
6.0%
4.3%
4.4%
422.5%
6.5%
5.3%
4.8%
7.9%
7.3%
4.8%
424.5%
6.9%
5.7%
5.2%
8.4%
7.7%
www.easyJet.com
37
RISK
Risk management framework
easyJet is exposed to a variety of risks which are driven by both internal and external factors.
There are 16 principal risks which are being actively monitored and managed in order to
maximise shareholder value. The plc Board (‘the Board’) is responsible for risk management
and ensuring appropriate mitigating actions are being taken to manage risks effectively.
RISK APPETITE
Risk appetite is the level of risk considered appropriate to
accept in achieving the Group’s strategic objectives. The
risk appetite provides direction and boundaries for balanced,
risk-intelligent decision making, and guides us in ensuring that
our risk response is appropriate for the relevant area. Risk
appetite statements are subject to ongoing review and can
change for a number of reasons, for example in response to
changes in the external environment.
RISK MANAGEMENT ACTIVITIES
Corporate risk management activities are coordinated by
the Risk and Assurance team, which reports to the Chief
Financial Officer, as well as having a direct line to the Chair
of the Audit Committee. The key risk management activities
are outlined below:
• Risks are assessed taking into account the potential impact
and likelihood of the risks occurring and the key responses
identified. The level of risk is compared to the Board’s risk
appetite to determine whether the level and nature of the
response is appropriate.
• The most significant risks from across the Group (based
on materiality, cross-functional impact and/or those which
have common themes across the business) are reviewed
and prioritised by the relevant members of the Airline
Management Board (‘AMB’).
• These risks, which form the basis of the principal risks and
uncertainties detailed in this section, are challenged and
validated by the AMB and the Board. Principal risks are
monitored throughout the year by the owners as well as
the Risk and Assurance team, with specific agenda items
relating to particular risks driving discussion by both the
AMB and the Board as they arise.
• The Risk and Assurance team also provides regular updates
to the AMB (monthly) and the Board (as appropriate) on
interdependencies and credible aggregation of principal risks.
•
In addition to supporting the AMB and the Board, the Risk
and Assurance team supports the business in its management
of risks relating to key projects and programmes, specific
business risks, third parties, countries and bases.
CHANGES IN THE YEAR
Our principal risks and uncertainties continue to evolve over
time. As we evolve our strategy in a dynamic industry against
a backdrop of political and economic uncertainty, new risks
emerge and we adapt our response activities as our risk
exposure changes. The following changes in our risk profile
have been approved by the Board.
Three of our principal risks have increased since
30 September 2017:
Delivery of strategic initiatives
Impact of Brexit
Cyber and information security
These risks, together with our response plans, are monitored
regularly through our governance structure. Further detail on the
context and mitigation for each is detailed on the following pages.
One risk has decreased since 30 September 2017:
Attraction and retention of talent
This remains a significant risk to the Group and so is still
closely monitored to enable the Group to take advantage
of any opportunities presented, as well as mitigate downside
risk appropriately.
This year, we have incorporated our ‘third-party service
providers’ risk into a broader ‘continuity of services’ risk,
due to the outsourced nature of our business model and
the similarity in mitigating actions.
We have identified two new risks during the year:
NEW
NEW
Customer experience – a significant increase in
disruption to our operation could negatively impact
customer satisfaction and financial performance,
including the payment of EU 261 claims.
Environmental – changes to the climatic conditions
may lead to more volatile weather patterns. More
extreme weather events could affect the reliability of
easyJet’s operations, and financial performance could
be adversely affected.
GOING CONCERN AND VIABILITY STATEMENTS
The Group’s business activities, together with
the factors likely to affect its future development,
performance and position are set out in the strategic
report. Taking account of the Group’s current position
and principal risks, we reviewed the processes and
assumptions underlying the Going Concern and Viability
Statements set out on page 36.
In particular, we considered:
•
the Group’s forecast funding position over the
next five years;
• an analysis of impacts of severe but plausible risk
scenarios, ensuring that these were consistent with
the risks reviewed by the Board as part of its
strategy review;
•
the impact of multiple risks crystallising simultaneously;
• additional mitigating actions that the Group could take
in extreme circumstances; and
•
the current borrowing facilities in place and the
availability of future facilities.
As a result, we were satisfied that the Going Concern
and Viability Statements have been prepared on an
appropriate basis.
38
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT Principal RISKS and uncertainties
The risks and uncertainties described below are considered, at this point in time, to have
the greatest effect on easyJet’s strategic objectives. This categorised list is not intended to
be exhaustive, and the ordering of the risks is not an indication of exposure. Whilst easyJet
can monitor risks and prepare for adverse scenarios, the ability to affect the core drivers
of many risks is not within the Group’s control: for example adverse weather, pandemics,
acts of terrorism, changes in government regulation and macroeconomic issues.
SAFETY FIRST
RISK DESCRIPTION
MAJOR SAFETY INCIDENT
A major safety incident (such as a hull
loss) could adversely affect easyJet’s
operational and financial performance
and its reputation.
The impact of such an incident
would be heightened if easyJet failed
to react promptly and deal with the
incident effectively.
Links to Our Plan
1
2
B
C
CONTEXT AND MITIGATION
easyJet’s number one priority is the safety and security of its customers
and people.
The Safety Committee (a committee of the Board) provides oversight of the
management of easyJet’s safety processes and systems. See pages 76 to 77
for further details.
The easyJet Safety Board, chaired by the Chief Executive and including the
Chief Operating Officer and AOC Accountable Managers, is responsible for
directing overall safety policy and governance. The Safety Board meets every
month to review safety performance.
Functional Safety Action Groups from across the airline are chaired by the
appropriate senior manager and are responsible for the identification, evaluation
and control of safety-related risks.
easyJet operates a Safety Management System using leading software systems
(SafetyNet and RiskNet). These are used to:
report incidents and identify hazards;
investigate events and take appropriate risk-mitigating actions;
•
•
• collect and analyse safety data (enabling potential areas of risk to be
projected); and
• enable learning from easyJet and industry events/incidents to be captured
and embedded into future risk mitigations.
A Safety Policy is published that promotes the incident reporting process
and supports this safety culture.
easyJet has an emergency response process and performs regular crisis
management exercises.
Hull (all risks) and liabilities insurance (including spares) is held.
easyJet has an industry-leading fatigue risk management system and has
implemented the European Aviation Safety Agency (EASA) Flight Time
Limitations regulations.
Links to Our Plan
Our Priorities
Our Promise
Change in Risk
A
B
C
Network
Loyalty
People
D
E
Data
Efficiency
1
2
3
Safe and responsible
On our customers’ side
In it together
4
5
Always efficient
Forward thinking
Increase
No change
Decrease
www.easyJet.com
39
RISK
CONTINUED
SAFETY FIRST CONTINUED
RISK DESCRIPTION
CONTEXT AND MITIGATION
SECURITY THREAT OR ATTACK
Failure to identify or prevent a major
security-related threat or attack, or
react immediately and effectively, could
adversely affect easyJet’s reputation and
its operational and financial performance.
Such an incident has the potential to
impact upon easyJet’s business, regardless
of the location or target.
The threat of further security-related
attacks (regardless of where they may
occur) may impact the future demand
for air travel.
Links to Our Plan
1
2
B
A Security Decision Group, comprising the Chairman of the Board, the Chief
Executive, appropriate members of the AMB and other senior management,
determines whether easyJet should continue to operate in countries or areas
affected by security-related incidents or conflict.
As part of that process the easyJet Security team works to provide the Security
Decision Group with the most timely, credible and reliable information upon
which to base operational decisions. easyJet adheres to all recommendations
and guidelines provided by the authorities.
The Director of Safety, Security and Compliance and the Head of Security work
with authorities and governments around easyJet’s network to assess whether
security measures are effective and compliant with regulatory requirements.
A significant amount of work is carried out with the aim of enhancing:
• early identification of developing and emerging security risks;
•
•
•
the active management of security risks;
the methods for reducing the impact of any security-related incident; and
the Group’s security culture and awareness.
COMMERCIAL AND OPERATIONAL
RISK DESCRIPTION
CONTEXT AND MITIGATION
easyJet maintains a strong focus on each of its competitive advantages.
There are initiatives to drive cost control and improve efficiency in targeted
areas. easyJet is also developing commercial and digital enhancements, and
continues to invest in its brand.
The Network Development Forum, a cross-functional panel of senior managers,
including members of the AMB, approves the allocation of assets around the
network in the context of expected market conditions. easyJet also aims to
have an agile response to any structural changes in market conditions.
Competitor and consolidation activity is monitored in detail by the Network
team, enabling strategic decision making on key market positions. easyJet’s
rapid and targeted response to the Air Berlin insolvency demonstrates the
success of this approach.
Fleet framework arrangements, together with the Group’s leasing policy,
provide easyJet with significant flexibility in respect of scaling the fleet
according to business requirements.
COMPETITION, CAPACITY AND
INDUSTRY CONSOLIDATION
easyJet’s success in the highly competitive
European short-haul aviation market is
built on our key competitive advantages:
our network, cost base, brand, digital
innovation and efficient and robust
capital structure. Failure to retain these
advantages could have an adverse
financial impact.
Excess capacity in our markets may
arise due to a decrease in demand
for air travel and/or an acceleration
of growth by competitors, driven for
example by low fuel prices. This could
have an adverse financial impact.
Industry consolidation could affect the
competitive environment in a number
of markets. Whilst also an opportunity,
consolidation could result in the loss of
market positions (relative market share)
with adverse financial impacts.
easyJet’s ability to respond quickly to
changes in the competitive environment
is fundamental to ensuring that profitability
is sustainable. Failure to respond quickly
could result in adverse market positions
or the inability to capture opportunities
to grow the business.
Links to Our Plan
2
4
5
A
B
E
40
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
COMMERCIAL AND OPERATIONAL CONTINUED
RISK DESCRIPTION
CONTEXT AND MITIGATION
CONTINUITY OF SERVICES
easyJet is dependent on a number
of key IT systems and processes.
A loss of critical systems or access
to facilities, including the website and
Operations Control Centre, could lead
to significant disruption to operations
and could have an adverse
reputational and financial impact.
easyJet has entered into agreements
with third-party service providers
for services covering a significant
proportion of its operations and cost
base. Failure to adequately manage
third parties may adversely affect
easyJet’s reputation and its operational
and financial performance.
Links to Our Plan
1
2
4
B
E
CUSTOMER EXPERIENCE
Reliability, including on-time
performance (OTP), is a key element
of the customer experience.
Unreliable operational performance
and inability to react to customer
expectations as a result of routine
and ongoing disruption will negatively
impact customer satisfaction and
financial performance, including the
payment of EU 261 claims.
NEW
Links to Our Plan
2
4
5
A
B
D
E
Critical systems identified through our Business Resilience Criticality Matrix are
hosted either across two data centres, or at third-party provider locations. Recovery
arrangements, including failover protocols between the two data centres, are in place
for all locations holding critical systems.
An IT Incident Management team is in place to respond rapidly to any unforeseen
incidents that may arise.
Continuity arrangements exist for critical IT systems and for loss or denial of access
to critical facilities. These plans include relocation of staff to alternative locations.
easyJet continues to enhance all elements of resilience activity, and has a
programme of work with dedicated expertise and a view to adopting a more
integrated model.
There is a defined and centralised procurement process which ensures a competitive
and robust selection of suppliers and a supplier relationship management framework
covering key principles such as defined ownership and accountability, governance
and communication. In addition, a new contracts database and e-sourcing tool have
been introduced during the year, providing additional functionality to improve the
procurement and supplier management processes.
In the event of switching strategic suppliers, project management and transition
plans are agreed, taking into account previous lessons learned to help ensure an
acceptable level of performance is maintained. This was demonstrated by the
transition of ground handling at our largest base, Gatwick Airport, from Menzies
to DHL during the year.
Where easyJet is affected by industrial action or other service interruption by a key
supplier, internal and external resources are deployed to manage this as effectively
as possible. See the significant network disruption risk outlined on page 43 for
further detail.
This year there has been a one percentage point decrease in OTP, driven by an
increase in disruption events.
There has been a significant increase in French Air Traffic Control (ATC)
strikes compared to the 2017 financial year, resulting in widespread network
disruption. easyJet, along with other airlines, has made a proactive challenge to the
European Commission to seek to protect overflight rights in France in the event
of ATC strikes.
There is also continued focus on the EU 261 claims management process which
has been further strengthened during the year by increasing the size of the team
handling legal claims and the introduction of a claims management system.
To provide the appropriate level of focus and oversight of risk response measures,
easyJet has initiated a key strategic project, Operational Resilience, and as part of
this, all aspects of the operation, schedule and disruption are under review. This
includes how we manage customers before, during and after disruption. The project
is prioritising the following themes:
• aircraft and crew standby;
• Operations Control Centre reporting on the day of operations, including
customer communication;
• airport performance and strategic supply chain; and
• EU 261 management (see the significant network disruption risk outlined on
page 43 for further detail).
Links to Our Plan
Our Priorities
Our Promise
Change in Risk
A
B
C
Network
Loyalty
People
D
E
Data
Efficiency
1
2
3
Safe and responsible
On our customers’ side
In it together
4
5
Always efficient
Forward thinking
Increase
No change
Decrease
www.easyJet.com
41
RISK
CONTINUED
COMMERCIAL AND OPERATIONAL CONTINUED
RISK DESCRIPTION
CONTEXT AND MITIGATION
easyJet takes its environmental and climate change related responsibilities
seriously and continues to develop its disclosures on this matter to reflect
developing legal and regulatory requirements and increased stakeholder interest.
easyJet recognises the need to transition to a lower carbon economy and we
continue to work towards ensuring that aviation plays its part in achieving this.
easyJet was an early advocate for aviation being part of the EU ETS.
easyJet’s business model supports fuel efficiency and minimising carbon
emissions, through means such as investment in efficient aircraft, use of fuel
efficiency measures and operating flights with a high load factor. easyJet is
a short-haul operator, which has a lower carbon impact per passenger kilometre
than the major European airlines whose operations include a significant amount
of long-haul flights. By operating ‘point-to-point’ flights rather than encouraging
customers to transfer, we make customer journeys more efficient.
easyJet started to operate a new generation of Airbus A320 family aircraft in
2017. These aircraft are 15% more fuel efficient than previous generation aircraft.
As at 30 September 2018, 13 A320neo aircraft were in operation, with a further
87 to be delivered by August 2022. Two of the larger A321neo aircraft were
also in the fleet at this date, with a further 28 to be delivered by October 2020.
More volatile weather can have an adverse impact on the customer experience
(see the customer experience risk outlined on page 41).
Operational efficiency measures include: the continual review of flight plans to
ensure the optimal routings and cruise levels are used; maximising the use of
external power, rather than the aircraft auxiliary power unit, when on the ground;
use of only one engine when taxiing on the ground; and climb, descent and
landing techniques that improve efficiency.
In 2013 easyJet established a public target to reduce its carbon emissions per
passenger kilometre. The target was strengthened in 2015 and is currently a 10%
reduction in carbon emissions per passenger kilometre by 2022 from its 2016
financial year performance.
In the 2018 financial year easyJet’s carbon emissions per passenger kilometre
were 78.46 grams (g). This is a reduction from 78.62g per passenger km in the
prior financial year and down by 1.9% from the 2016 baseline.
By engaging with key stakeholders, easyJet’s Regulatory Affairs Group seeks
to reach a common understanding on the drive to impose policy measures
and regulation to address the impact of aviation on climate change. The group
co-ordinates easyJet’s role in influencing future and existing policy and regulations
which affect the airline industry and will work with industry bodies to assist in this,
as appropriate. The group includes Country Directors and senior representation
from Legal, Regulatory, Fleet, Airport and Public Affairs teams.
ENVIRONMENTAL
Climate change has the potential to
affect easyJet’s operations and broader
business in a number of ways.
In particular, climate change is likely to
lead to more volatile weather, including
greater frequency and intensity of
storms. This could disrupt easyJet’s
operations, such as a reduction in
the handling capacity of airports and
loss of ground transport access. Any
increase in cancelled or delayed flights
would also increase disruption costs
and reduce revenue.
Changes in wind patterns and jet
stream disruption as a result of
climate change are also recognised
as having the potential to increase
en route turbulence.
The nature of airline operations means
that easyJet is a significant emitter of
greenhouse gases, in particular carbon
dioxide. Aviation is already part of
the EU’s Emissions Trading System
(EU ETS), and easyJet expects to be
part of the future global scheme for
aviation emissions, CORSIA. If the
cost of carbon permits in the future
significantly increases, or the cost of
more efficient technologies (such as
new aircraft) significantly increases,
easyJet faces a material financial risk.
Future policy measures and regulation
to tackle the impact of aviation on
climate change could impact easyJet’s
business if they impose limitations and
cost on how easyJet operates and
the services it can provide. Linked to
this, increased compliance costs and
any costs associated with potential
distortions to the aviation market could
affect easyJet.
NEW
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1
2
3
4
5
E
42
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
COMMERCIAL AND OPERATIONAL CONTINUED
RISK DESCRIPTION
CONTEXT AND MITIGATION
SIGNIFICANT NETWORK
DISRUPTION
Widespread, sustained disruption to
easyJet’s network could be caused by
a single event or factors which occur for
a prolonged period. Examples include
forces of nature (such as extreme
weather or volcanic ash), terrorism, air
traffic management restrictions, strikes,
epidemics/pandemics, or the closure of
a key airport/runway.
Significant, sustained disruption to the
network could adversely affect easyJet’s
reputation and its operational and
financial performance.
There are processes in place, and clear roles and responsibilities within
teams across the business, to plan for and manage significant disruption.
This includes a Business Disruption team brought together to manage both
expected and on-the-day/unexpected disruption events and to determine
and initiate the required action. The Business Disruption team includes senior
managers from relevant business areas, including the Operations Control Centre
and Customer Services.
Board policy is to maintain a liquidity buffer which allows the Group to better
manage the impact of downturns in business or temporary curtailment of
activities (see the financial risk outlined on page 44).
In addition, easyJet holds business interruption insurance which provides some
cover for very significant shock events such as extreme weather, air traffic
management issues and loss of access to key airports. The policy would allow
us to claim in the event of a very substantial number of cancellations.
Links to Our Plan
2
A
B
SINGLE FLEET SUPPLIER
easyJet is dependent on Airbus as its
sole supplier for aircraft.
There are significant cost and efficiency
advantages of a single fleet; however
there are three main associated risks:
The Board considers that the efficiencies achieved by operating a single fleet type
outweigh the risks associated with easyJet’s single fleet strategy.
The Airbus A320 family (which includes the A319, A320 and A321) is one of the
two primary fleets used for short-haul travel, the other being the Boeing B737
family. There are approximately 8,000 A320 family aircraft operating, with a
proven track record for safety and reliability.
The introduction of the A320neo in part mitigates this risk as the aircraft is
equipped with a different engine type. Airbus has already delivered 13 A320neos
to easyJet as at 30 September 2018 and two A321neos, with a total of 130 aircraft
with the new engine option scheduled to be in the fleet by the end of 2022.
easyJet continues to work closely with Airbus to ensure full visibility of the delivery
schedule for new aircraft. In the event that there are material delays appropriate
mitigation is put in place; for example short-term wet lease arrangements are used
to minimise any operational impact.
easyJet operates a rigorous established aircraft maintenance programme.
Maintenance schedules are designed in line with manufacturer recommendations
and approved by the relevant regulatory body (the Civil Aviation Authority,
Austro Control or the Federal Office of Civil Aviation).
To mitigate any potential valuation risks, easyJet regularly reviews the second-
hand market and has a number of different options when looking at fleet exit
strategies. Sale and leaseback facilitates the exit of aircraft from the fleet by
transferring residual value risk, and also provides flexibility in managing the fleet
size. In December 2016, 10 A319 aircraft were sold, and a further 10 A319 aircraft
in October to November 2017, under sale and leaseback arrangements.
•
•
supply chain issues which may
cause delay to the delivery of
new aircraft;
technical or mechanical issues that
could ground the full fleet, or part
of the fleet, which could cause a
negative reputational impact; and
• valuation risks which crystallise when
aircraft exit the fleet. The main
exposure at this time is with the
older A319 fleet, as easyJet is reliant
on the future demand for second-
hand aircraft.
Links to Our Plan
1
4
A
B
E
Links to Our Plan
Our Priorities
Our Promise
Change in Risk
A
B
C
Network
Loyalty
People
D
E
Data
Efficiency
1
2
3
Safe and responsible
On our customers’ side
In it together
4
5
Always efficient
Forward thinking
Increase
No change
Decrease
www.easyJet.com
43
RISK
CONTINUED
FINANCIAL
RISK DESCRIPTION
CONTEXT AND MITIGATION
A project management framework, which sets out approval processes,
governance requirements, key ongoing processes and controls, is followed by
all projects and programmes, and reviews are undertaken to ensure continuous
improvement in this approach.
Each strategic initiative has an executive sponsor from the AMB and its own
steering group which provides oversight and challenge to the project, monitors
progress against programme objectives and ensures that decisions are made at
the appropriate level. These key strategic initiatives are managed by experienced
programme managers, complemented by appropriate subject matter specialist
resource where appropriate.
A Project Management Office is in place to oversee delivery of projects and
programmes, including the allocation of support resource, budget tracking and
realisation of benefits. With an increase in the number of strategic initiatives, the
AMB has approved additional headcount for the 2019 financial year to strengthen
both the portfolio and programme management capability.
The AMB meets twice monthly. The executive sponsor provides routine updates
and can use this as an escalation channel for any issue resolution. The Board also
receives updates on key strategic initiatives including any risks or issues associated
with their delivery.
In addition, our Internal Audit function provides independent programme
assurance over our most significant initiatives, drawing upon independent subject
matter expertise where appropriate.
The Finance Committee (a committee of the Board) oversees the Group’s
treasury and funding policies and activities.
See page 85 for further details.
Its responsibilities include:
• maintaining a treasury policy setting out Board-approved strategies for foreign
exchange and fuel hedging, along with liquidity, interest rate management,
and counterparties’ limits; and
reviewing and reporting on compliance with Board treasury policies.
•
The policy is to hedge revenue and costs within a percentage band for a rolling
24-month period.
Board policy is to maintain a liquidity buffer including cash, revolving credit
facilities (provided by a group of relationship banks) and business interruption
insurance cover. This allows the Group to better manage the impact of downturns
in business or temporary curtailment of activities. The policy is to maintain a
minimum liquidity buffer at or above £2.6 million per 100 seats.
A strong balance sheet supports the business through fluctuations in economic
conditions and the Group has access to diverse sources of funding to support
liquidity requirements.
DELIVERY OF STRATEGIC
INITIATIVES
The business continues to undertake
a number of initiatives to support
its strategy.
Ongoing strategic initiatives include:
•
rewarding and recognising our
customers’ loyalty;
transforming our Holidays business;
•
• creating a compelling business offer;
investing in resilience to manage
•
disruption more effectively; and
• becoming the most data-driven
airline in the world.
These complex, large-scale programmes
have been initiated and are managed
through the Project Management Office.
Failure to successfully execute these
initiatives in a timely manner, or to
deliver the planned business benefits
and/or cost savings, could result in
financial underperformance.
Links to Our Plan
3
4
5
B
C
D
E
FINANCIAL RISK
easyJet is exposed to a variety of financial
risks which could give rise to adverse
pressure on the financial performance
of the Group, such as costs, revenue
and cash flow. These include:
• market risk – significant/sudden
increases in jet fuel prices, currency
fluctuations or interest rate changes
which have not been adequately
protected through hedging;
• counterparty risk – non-performance
of counterparties used for depositing
surplus funds (for example money
market funds, bank deposits) and
hedging; and
liquidity risk – misjudgement of the
level of liquidity required, resulting in
inability to meet contractual/
contingent financial obligations or
the inability to fund the business
when needed.
•
Links to Our Plan
4
5
E
44
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
PEOPLE
RISK DESCRIPTION
CONTEXT AND MITIGATION
easyJet has a comprehensive recruitment strategy for all employees including
head office, engineering, pilots and cabin crew. In addition, easyJet has developed
a coherent employment brand to attract and retain top talent across Europe.
easyJet continually improves talent acquisition methods to ensure we stay ahead
of the market. In the year, we have attracted talent at all levels of the business,
including enhancing the AMB (see pages 64 to 66).
easyJet has created a strategy which utilises the apprenticeship levy to build
future capabilities. This year we took on 14 engineering apprentices, as well as
broadening our offering of apprenticeships by opening up opportunities within our
cabin crew, Operations Control Centre, leadership and people management roles.
A focus this year has been on the development of a strategy to increase the
diversity of our employee population to ensure it reflects that of our customer
base. This builds on the existing Amy Johnson initiative, which aims to attract
more female pilots.
easyJet aims to develop talent from within. There are a range of talent
development programmes in place for individuals who have been identified for
fast-tracking into broader or more senior roles. Alongside this, there is an annual
succession planning process to ensure there are clear successors for all AMB
and key business leadership roles and associated risks are proactively managed.
See pages 53 to 54 for further details of how easyJet attracts, retains and
develops a diverse workforce.
easyJet conducts annual salary benchmarking to ensure remuneration is
competitive across all markets and levels.
In 2018, easyJet launched a new employee listening platform called Peakon.
Data and feedback from this platform will provide us with regular insight on
levels of engagement within critical talent populations, enabling us to take action
where required. One of the themes arising from the Peakon trial has resulted
in the launch of Project Home – a suite of investment initiatives to enhance our
head office environment into a more engaging and inspiring place for employees
to perform at their best.
Each of the European countries in which easyJet operates has localised
employment terms and conditions. As such its pilots and crew are members of
20 trade unions across eight countries. There are also an additional 11 consultative
bodies, including five works councils and a European Works Council, that operate
under EU legislative guidance.
easyJet seeks to maintain positive working relationships with all trade unions and
other representative bodies and has a framework in place for consulting and
engaging with trade unions and consultative bodies.
In the event of industrial action or expected disruption, easyJet has processes
to mitigate the impact to our operations. The Operations team also has specific
procedures to deal with such events (see the significant network disruption risk
outlined on page 43).
ATTRACTION AND RETENTION
OF TALENT
easyJet’s current and future success is
reliant on having the right people with
the right capabilities at the right time.
Increased competition in the
recruitment market may impact
easyJet’s ability to attract and retain
key, as well as diverse, talent. This
could adversely affect the delivery
of strategic objectives.
Links to Our Plan
3
5
C
INDUSTRIAL ACTION
easyJet, and the aviation industry
in general, has a significant number
of employees who are members of
trade unions. Industrial action taken
by easyJet employees could impact
on easyJet’s ability to maintain its
flight schedules.
This could adversely affect easyJet’s
reputation, as well as its operational
and financial performance.
Links to Our Plan
2
3
B
C
Links to Our Plan
Our Priorities
Our Promise
Change in Risk
A
B
C
Network
Loyalty
People
D
E
Data
Efficiency
1
2
3
Safe and responsible
On our customers’ side
In it together
4
5
Always efficient
Forward thinking
Increase
No change
Decrease
www.easyJet.com
45
RISK
CONTINUED
REGULATORY AND LEGAL
RISK DESCRIPTION
CONTEXT AND MITIGATION
IMPACT OF BREXIT
easyJet has made or is in the process
of finalising the changes needed to
its operating model to ensure that it
is as robust as possible to any Brexit
outcome, including the set-up of the
Austrian AOC and new UK AOC.
However, the outcome of the Brexit
negotiations remains unknown and
could impact easyJet.
This has the potential to impact our
existing safety approvals, pilot licensing
arrangements, ownership model,
Group tax profile, engineering and
maintenance supply chain, and makeup
of our crew establishment.
Brexit could, at the most extreme, lead
to a halt to flying between the EU and
the UK, although not only do we think
this highly unlikely but if this were to
occur we think it would only last for
a short period of time. However, this
outcome would have both revenue
and cost impacts, and could also
lead to a deterioration of consumer
confidence resulting in longer term
financial underperformance.
Links to Our Plan
1
2
5
A
C
easyJet has established a cross-functional Brexit programme which has
implemented a structured approach to the identification and management of
all risks related to Brexit.
The programme has already made changes to the current operating model and
operating licences to protect our flying rights, regardless of the outcome of the
national negotiations.
easyJet’s focus is now on the management of risks associated with the outcome
of the negotiations around the Withdrawal Agreement. If a deal is agreed and
ratified between the UK Government and EU27, a transition arrangement will
be put in place until at least December 2020 effectively removing any impact on
our operation.
If the outcome of the negotiations results in ‘no deal’ and the UK leaves the EU
without a Withdrawal Agreement in place, both the UK and EU have made it
clear in their notices of no deal preparation that they will ensure that connectivity
is maintained between the EU and the UK through what the EU has called a ‘bare
bones’ aviation agreement. easyJet is finalising its Brexit preparations to ensure
that its network is robust to a no deal outcome and the UK being outside both
the single market and EASA. These include:
•
the transfer of all relevant pilot and cabin crew for EU27 crew from the
UK to EU27 countries, in particular Austria;
• being ready to implement EU27 based safety approvals (for example for
an EASA Part 145, the training organisation) to ensure these are in place to
support easyJet Europe (our Austrian operating airline) after Brexit;
•
•
•
further investment in the recruitment of EU27 nationality pilots and
cabin crew;
the preparation of mitigating actions to ensure easyJet remains EU majority
owned and controlled;
reviewing our engineering and maintenance supply chains and supplier
readiness, making changes where required to our spare part stock levels
and locations to mitigate the risk of customs arrangements being put in
place between the UK and the EU and any restriction on the use of UK-
licensed parts on Austrian registered aircraft; and
• ensuring easyJet’s systems and contract structure is robust to a
‘no deal’ outcome.
Putting these mitigating actions in place will ensure easyJet can continue to
operate its network in the event of a no deal Brexit.
In a more extreme scenario, and in the unlikely event that there is no
‘bare-bones agreement’, approximately 40% of the easyJet programme
(flying between UK and EU) would be at risk. We have conducted stress
testing in this scenario (which included benchmarking of our balance sheet)
and this showed we have significant resilience to this outcome. This analysis
has been presented to the Board.
Seats for the post-Brexit period went on sale in September 2018 and there
were record breaking sales. This indicates that currently, consumer confidence
post-Brexit is holding strong. However, easyJet closely monitors revenue
performance including weekly review meetings involving senior managers
including members of the AMB, to ensure appropriate tactical actions are taken
in response to any identified trends.
46
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT
REGULATORY AND LEGAL CONTINUED
RISK DESCRIPTION
CONTEXT AND MITIGATION
easyJet has an in-house team of legal experts to advise on legal issues and
developments, and to monitor compliance with formal regulatory requirements.
Where appropriate, this expertise is supplemented by specialist external support
relevant to a specific area or jurisdiction.
This panel of external legal advisers, both in the UK and in key easyJet markets,
is briefed to keep easyJet informed of any changes to, or new, legislation and to
assist easyJet in developing appropriate responses to such legislation. This may
include activities such as the implementation of mandatory training programmes,
or clear policies and associated guidance.
The Regulatory Affairs Group coordinates easyJet’s role in influencing future and
existing policy and regulations which affect the airline industry and works with
industry bodies, as appropriate. The group includes Country Directors and senior
representatives from the Legal, Regulatory, Fleet, Airport and Public Affairs teams.
With the General Data Protection Regulation (GDPR) having become EU law
on 25 May 2018, easyJet has a Data Protection Officer (DPO) and Data Privacy
team in place, reporting to the Company Secretary & Group General Counsel.
Key deliverables have been achieved for high-risk processing activities during the
year and there is an ongoing programme for the 2019 financial year.
REGULATORY AND LEGAL
COMPLIANCE
The airline industry is heavily
regulated and there is a continual
need to keep well informed and
adapt (as required) to any legislative
or regulatory changes across the
jurisdictions in which easyJet operates.
Changes to government policy and/or
increased regulation could have an
adverse effect on easyJet.
Failure to comply with legislative
and regulatory requirements, such as
local consumer laws, new case law or
policy changes in relation to customer
compensation, environmental or
airport regulation, in the jurisdictions
in which easyJet operates, could
have an adverse reputational and
financial impact.
Links to Our Plan
1
22
5
B
Links to Our Plan
Our Priorities
Our Promise
Change in Risk
A
B
C
Network
Loyalty
People
D
E
Data
Efficiency
1
2
3
Safe and responsible
On our customers’ side
In it together
4
5
Always efficient
Forward thinking
Increase
No change
Decrease
www.easyJet.com
47
RISK
CONTINUED
REPUTATIONAL
RISK DESCRIPTION
CONTEXT AND MITIGATION
The Information Security Steering Group is a subset of the AMB, chaired
by the Company Secretary & Group General Counsel. It oversees any
developments or changes in the threat landscape, and determines whether
actions taken in response are appropriate. This group provides senior support
to business initiatives to drive continuous adaption and improvement.
There is a dedicated Information Security team, comprised of experienced
professionals, which continuously monitors threats and responds to incidents
to minimise exposure and impact. In the year there has been a review, refresh
and re-communication of a number of key policies and standards.
easyJet has a strong programme of communication and engagement
to maintain employee awareness and education. This is achieved
through a network of champions, online training materials, and periodic
awareness campaigns.
easyJet is coming to the end of an initial three-year Information Security
Remediation Programme, during which some projects have been, and
continue to be, audited. This has resulted in additional proposed projects
for the 2019 financial year to improve the effectiveness of controls.
As part of easyJet’s GDPR programme, key deliverables have been
achieved for high-risk processing activities. There is an ongoing programme
for the 2019 financial year to ensure changes are fully embedded into ways of
working (see the regulatory and legal compliance risk outlined on page 47).
easyJet continues to work closely with industry partners, such as Airbus,
to manage the cyber risks associated with aircraft. In the year, there was a
presentation to, and discussion with, the Board by Airbus on these risks
and mitigations.
However, the nature of this risk and the ever-increasing sophistication of
attacks by serious organised crime groups, terrorists, nation states and even
lone parties means that, despite all the mitigation detailed above, easyJet will
inevitably retain an element of vulnerability.
easyJet has an active shareholder engagement programme led by its Investor
Relations team. As part of that programme easyJet engages with easyGroup
Holdings Limited on a regular basis alongside its other major shareholders.
In addition, the Group has a relationship agreement with easyGroup and Polys
Holdings in line with the controlling shareholder regime set out in the Financial
Conduct Authority’s Listing Rules.
Representatives from the Board and senior management take collective
responsibility for addressing issues arising from any activist approach adopted
by the major shareholder. The objective is to address issues when they arise
and anticipate and plan for potential future activism.
The brand licence agreement with easyGroup provides for the regular
meeting of senior representatives from both sides, attended by the Chief
Financial Officer and the Company Secretary & Group General Counsel, to
actively manage brand-related issues as they arise. Such meetings occur on
a quarterly basis and have proved effective. easyJet also monitors compliance
with brand licence service levels and has a right to take steps to remedy any
instance of non-compliance.
CYBER AND INFORMATION
SECURITY
A breach of our systems by internal or
external threats could lead to financial loss,
aircraft incident, operational disruption, and/
or reputational damage.
Unauthorised access to customer or
employee data could lead to financial,
regulatory or legal damage, and/or loss of
customer or employee trust.
Links to Our Plan
1
2
5
B
C
D
MAJOR SHAREHOLDER
AND BRAND OWNER
RELATIONSHIP
easyJet has two major shareholders
(easyGroup Holdings Limited and Polys
Holdings Limited) which, as a concert
party, control approximately 33% of its
ordinary shares.
Shareholder activism on their part could
adversely impact the reputation of easyJet
and cause a distraction to management.
easyJet does not own its company name or
branding, which is licensed from easyGroup
Ltd. The licence includes certain minimum
service levels that easyJet must meet in
order to retain the right to use the name
and brand. The easyJet brand could also be
impacted through the actions of easyGroup
or other easyGroup licensees.
Links to Our Plan
3
5
B
48
easyJet plc Annual Report and Accounts 2018
CORPORATE RESPONSIBILITY
Running our
business responsibly
easyJet wants to run its business with a purpose, in a
way that truly serves society and is based on principles
which help it achieve sustainable profitability.
AIM
HOW EASYJET IS DOING THIS
MEASUREMENTS AND OUTCOMES
1.
SAFETY IS OUR
NUMBER ONE
PRIORITY
2.
HONEST AND
FAIR WITH OUR
CUSTOMERS AND
SUPPLIERS
3.
A RESPONSIBLE
AND RESPONSIVE
EMPLOYER
• Safety and security management
• Managing crew wellbeing,
including monitoring fatigue
• Seeking to prevent disruptive
behaviour on flights
• Safety in the supply chain
• Supporting customers
during disruption
• Supporting customers
who need special assistance
• Building positive supplier
relationships, including by
making payments on time
• Preventing bribery, corruption
and modern slavery
• Employing people locally
• Working collaboratively with
trade unions
• Encouraging a diverse workforce
• Offering fair reward
• Providing learning and
development opportunities
• Investing in efficient aircraft
• Using operational efficiency
measures
4.
A GUARDIAN
FOR FUTURE
GENERATIONS
5.
A GOOD CITIZEN
• easyJet uses the Final Event Risk Classification
(FERC) as its primary measure of safety.
• Further detail on the FERC is available in
the Key Performance Indicators section on
page 28.
• easyJet tracks customer satisfaction amongst
customers who need special assistance.
This year this was 82% (2017: 83%), which
was higher than the average for all customers
for the fifth consecutive year.
• easyJet paid 87% of supplier invoices on time
in the period 1 April 2018 to 30 September 2018.
• easyJet employs people on local contracts in
nine countries across Europe, complying with
national laws.
• easyJet works in partnership with 20 trade
unions across eight countries.
• easyJet has a target that 20% of the new
entrant co-pilots it attracts should be female
by 2020.
• This year 15% of new entrant co-pilots
attracted were female, up from 13% last year
and 5% when the initiative was started in 2015.
• easyJet measures its carbon emissions
per passenger kilometre. Its current target
is a 10% reduction in carbon emissions
per passenger kilometre by 2022 from its
2016 financial year performance.
• This year its emissions were 78.46 grams
per passenger kilometre, down from 78.62
grams last year and down 1.9% since 2016.
This is a 32.5% reduction since 2000.
• Raising funds for its charity
• easyJet has raised over £11.8 million for its
partner Unicef
charity partner Unicef since 2012.
• Making donations to charities
• This year easyJet made over 140 donations
nominated by employees
• Reducing the aircraft noise
that affects communities
around airports
to local charities nominated by its employees.
• easyJet’s A320neo and A321neo aircraft are
around 50% quieter during takeoff and landing
than equivalent previous generation aircraft.
www.easyJet.com
49
CORPORATE RESPONSIBILITY
CONTINUED
1. SAFETY IS OUR
NUMBER ONE PRIORITY
SAFETY MANAGEMENT
Safety is easyJet’s highest priority. The Group is committed
to providing a safe journey for its customers and a safe
working environment for its people and suppliers. easyJet’s
safety is managed and maintained through business processes
and structures.
The Chief Executive of easyJet has overall responsibility
for safety, alongside the Accountable Managers of easyJet’s
UK, Swiss and Austrian AOCs, who are accountable for
safety compliance to their relevant regulators. The Director
of Safety, Security and Compliance reports directly to the
Chief Executive, with direct access to the Chairman, and has
a remit to act independently on safety and security matters
outside other operational or commercial considerations.
The Safety Committee, comprising independent Non-
Executive Directors, reviews the effectiveness of easyJet’s
safety management processes on behalf of the plc Board
(‘the Board’). This includes reviewing development progress of
the safety plan, which describes easyJet’s actions to enhance
the safety management system. More information on the
Safety Committee is provided on pages 76 to 77.
SECURITY
The easyJet Security team works closely with government
and regulatory agencies throughout its network in order
to minimise the vulnerability of its customers and employees
to security risks. Security risk assessments, informed by
the current geopolitical situation, are made for each
country and airport to which easyJet flies. The Group also
employs measures to protect business and personal data.
FATIGUE RISK MANAGEMENT
easyJet manages the risk of fatigue to support its crew
operating flights safely. Its Fatigue Risk Management System
is approved to EASA standards and the Group continues to
invest in fatigue research with bodies such as the US National
Aeronautics and Space Administration (NASA) and the
Netherlands Aerospace Centre.
SAFETY IN THE SUPPLY CHAIN
easyJet carries out oversight of safety in its supply chain
through its standards assurance and compliance monitoring
processes. Standards assurance enables managers to
undertake performance reviews through sample checks to
monitor service level agreements, key performance indicators
and supplier engagement activities. Compliance monitoring is
undertaken by easyJet’s independent Compliance Monitoring
team. The compliance programme is risk based and focuses
on applicable standards throughout the supply chain.
DISRUPTIVE PASSENGERS
easyJet does not tolerate disruptive or abusive behaviour on
its flights or towards any of its agents. Its crew are trained to
assess all situations to ensure that the safety of the flight and
passengers is not compromised at any time. The airline has
introduced measures to discourage and prevent disruptive
behaviour, and to further increase the support for crew to
respond when it does occur. Cabin crew are empowered to
refuse to serve alcohol to customers and customers are not
allowed to consume their own alcohol on easyJet flights.
Disruptive behaviour on board is often caused by customers
who have consumed too much alcohol whilst in the airport
before their flight, or who consume alcohol purchased
at the airport on board. easyJet has been working with
industry partners through Airline UK’s Code of Practice which
encourages voluntary action. easyJet is also seeking regulatory
changes, including the extension of UK alcohol licensing to
airside areas of airports, to further discourage excess alcohol
consumption when travelling.
AEROMEDICAL AND HEALTH AND SAFETY
MANAGEMENT
Managing and providing oversight of the aeromedical
and health and safety needs of its workforce is essential
to delivering a resilient operation at easyJet. The Group
effectively manages aeromedical and health and safety
risks through an integrated risk management framework,
business processes and structures. This growing capability
in the organisation provides a holistic, proactive, integrated
approach to aeromedical and occupational health management,
human factors and occupational safety. The team ensures that
the organisation is compliant with legislative requirements and
standards associated with aeromedical and health and safety
management and manages emerging risks in the air and
on the ground, including pilot mental fitness, communicable
disease concerns, health and safety, and occupational health
issues. The team also supports the business in achieving its
objectives by contributing to organisational and
individual resilience.
NEW TECHNOLOGY
easyJet continues to add new safety-related technology to the
aircraft fleet. The A320neo aircraft, which began to enter the
fleet in June 2017, are fitted with the Autopilot Traffic Collision
Avoidance System (APTCAS), which builds on existing collision
avoidance technology, and the Runway Overrun Prevention
System (ROPS), which provides additional warnings to pilots
to avoid high-energy approaches which contribute to runway
overrun risks. These technologies supplement the existing
operating procedures and pilot training. The latest addition to
the easyJet fleet is the A321neo aircraft which entered service
in July 2018 and provides the same enhanced safety
capabilities as the A320neo aircraft.
50
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT 2. HONEST AND FAIR WITH OUR
CUSTOMERS AND SUPPLIERS
CUSTOMERS
This financial year easyJet carried more than 88 million
passengers. More information on the service we provide
to customers and customer satisfaction is on page 16.
easyJet recognises that it needs to give extra support to
particular groups of customers. These include customers
who need special assistance or who experience disruption.
CUSTOMERS WHO NEED SPECIAL ASSISTANCE
In 2012 easyJet established the easyJet Special Assistance
Advisory Group (ESAAG) to provide feedback and guidance
on the services it provides to customers who require
special assistance.
The group is chaired by Lord David Blunkett, a former
UK cabinet minister. The group includes members from
key easyJet markets (the UK, France and Italy), who all
have personal or professional experience of special
assistance issues.
This year the group visited Berlin Tegel Airport to see the
special assistance facilities, as easyJet established a new
base at the airport. The group also recruited a new member
from Germany, to reflect the airline’s larger operations in
the country.
Customer satisfaction amongst special assistance
customers was 82%, compared to 71% for all customers,
and down by one percentage point from last year. This is
the fifth successive year that satisfaction is higher among
customers who need special assistance than the average
across all customers.
Since 2012 easyJet and ESAAG have introduced a range
of measures to assist passengers with physical constraints,
such as onboard wheelchairs and more accessible
aircraft toilets.
ESAAG has continued to look at how easyJet supports
customers who have hidden disabilities, and the airline now
trains crew to recognise hidden disability lanyards and badges,
which are increasingly offered to customers by airports to
discreetly inform staff of their condition.
ESAAG has also worked with easyJet to improve the service
provided on the ground in key airports. ESAAG members have
started a series of visits to easyJet’s main airports to give
feedback on facilities and services.
DISRUPTION
easyJet is committed to providing the right support to
customers who experience disruption. Customers are given
timely updates about their flight through text messages,
emails and live updates on easyJet’s Flight Tracker tool. The
information given to customers on Flight Tracker includes the
reason for any disruption and what customers should do next.
To reduce the time it takes to resolve aircraft technical
faults, easyJet has extended its contract for two light aircraft
and crew to transport engineers and spare parts around
its network, with dedicated engineers on standby to travel.
A Luton-based aircraft operates year round, with a Milan-
based aircraft supporting the summer operation. easyJet
has also worked alongside Airbus to enhance its predictive
maintenance technology, and plans to retrofit its fleet with
the new equipment.
When there are delays, easyJet provides welfare support
and overnight accommodation when required, as well
as additional EU 261 payments, when the disruption is
caused by an airline issue. easyJet has established an online
compensation claim form and bank transfer programme to
simplify EU 261 applications and payments. easyJet has also
chosen to be a member of an alternative disruptive resolution
body, approved by the UK Civil Aviation Authority (CAA).
This means that if a customer is not satisfied that easyJet
has resolved their complaint, the customer can also refer it
for independent review.
SUPPLIERS
easyJet seeks to have an open, constructive and effective
relationship with all suppliers, as it believes they are integral to
the Group’s success.
easyJet has a supplier relationship management framework,
which provides a toolkit and guidance for easyJet managers
who lead relationships with easyJet’s key partners.
easyJet aims to build strong, lasting relationships with partners
and drive value from partnerships. The principles are based on
managing suppliers in the same way that easyJet manages its
people, and ensuring that suppliers’ rights and responsibilities
are clearly set out.
In line with the new UK reporting requirements, easyJet
made its second public report on its supplier payment
performance in October 2018, covering the period 1 April 2018
to 30 September 2018. This showed that the average time to
pay an invoice was 30 days and 87% of invoices were paid
within the agreed terms with suppliers.
HUMAN RIGHTS
easyJet is committed to protecting human rights. This includes
observance of the principles set out by the International
Labour Organization Declaration on Fundamental Principles
and Rights at Work.
The Group has a Code of Ethics and Human Rights Policy.
It also has in place other policies which support recognised
human rights principles, including on non-discrimination,
health and safety, whistleblowing and prevention of bribery
and corruption.
www.easyJet.com
51
CORPORATE RESPONSIBILITY
CONTINUED
RESPONSIBLE SOURCING
easyJet has a Supplier Code of Conduct which requires
all suppliers to comply with (and to ensure that their
subcontractors comply with) a number of social and
environmental principles including ensuring fair treatment of
employees and a respectful working environment, no breach
of human rights including no forced labour, and no bribery or
corruption. This Supplier Code of Conduct was reviewed in the
light of the requirements of the Modern Slavery Act and now
also expressly prohibits modern slavery and human trafficking.
When tendering for new suppliers, easyJet seeks information
to ensure compliance from suppliers on factors including
quality assurance, health and safety, environmental practices,
subcontracting arrangements and legal, regulatory and
tax compliance.
In 2016 easyJet established a modern slavery working group
with representatives from across easyJet. The group assessed
easyJet’s supply chain based on the factors that tend to be
associated with higher modern slavery risk, such as certain
geographic areas and industries, particularly those with lower
labour costs (such as textiles, electronics, road transport
and food).
As a result of this assessment, easyJet focused its supplier
due diligence questionnaire on 60 suppliers, made up of those
who were considered to be higher risk and those with which
easyJet has the highest spend.
This year easyJet revisited its risk assessment of the areas of
easyJet’s operations and supply chain most at risk and found
that the underlying risk profile had not changed. Following
the establishment of a large new base at Berlin Tegel Airport
this year, some new suppliers were added to the higher risk
category, due to the scale and significance of their services
to easyJet.
In line with the reporting requirements, easyJet published
its first Modern Slavery Statement in 2017 and an
updated statement this year. These are available at
http://corporate.easyjet.com/.
HUMAN TRAFFICKING PREVENTION
For all airlines and other transport providers, there is a risk
that their services may be used by human traffickers.
The easyJet Security team works closely with relevant
authorities across Europe to help to prevent human trafficking.
easyJet’s crew and ground staff have been provided with
guidance on how to recognise behaviours that could indicate
human trafficking. The crew trainers also receive regular
training from the Security team on the risk of human
trafficking in flight operations.
ANTI-BRIBERY AND CORRUPTION
easyJet has Group-wide policies on anti-bribery and corruption,
and gifts and hospitality.
All easyJet management and administrative employees
are required to complete online training modules covering
anti-bribery and corruption, ethics and competition law. These
training modules were refreshed this year and rolled out across
all existing employees. All new employees must complete
this training before passing their probation period and certain
groups of employees will be required to complete recurrent
training. Employee completion of this training is tracked and
reported to the easyJet Airline Management Board (‘AMB’).
When tendering key new supplier contracts easyJet informs
suppliers of its anti-bribery and corruption and gifts and
hospitality policies, and requires compliance as a condition
of doing business with easyJet. Subsequently, in key contracts,
an appointed supplier is expected to reaffirm its commitment
by signing up to specific obligations on anti-bribery and
corruption in its contract with easyJet.
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easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT 3. A RESPONSIBLE AND
RESPONSIVE EMPLOYER
LOCAL EMPLOYMENT ACROSS EUROPE
As at 30 September 2018 easyJet employed over 14,000
people across its network.
easyJet employs people on local contracts in nine countries
across Europe, complying with national laws. This has a higher
cost than the approach taken by some other airlines which
employ all their people on non-local contracts, irrespective of
where they work.
easyJet does this so that its roles are attractive locally and to
reflect each country’s employment practices. This also helps
to build relationships with key local stakeholders.
easyJet regularly communicates with its employees about
business issues, priorities and financial performance and
encourages them to share feedback. This includes a weekly
all-staff newsletter, specific newsletters for the pilot and
cabin crew communities, staff events and a regularly
updated intranet.
easyJet continues to focus on its employees and their
experience at work. This year the Group has been looking at
how it can further improve the health and wellbeing support
offered to employees. This includes the working environment,
ways of working, and the experience of crew during their
rostered duties, as well as how operational disruption affects
the lives of our crew and other employees. easyJet expects to
start to deliver improvements on this in the 2019 financial year.
This year easyJet has continued to build on its engagement
and relationship with its employees and their representatives
across Europe. There is increasing union activity in the aviation
sector, however, easyJet’s investment in its employee relations
approach over the last two years has encouraged stability in
this active union environment. easyJet works in partnership
with 20 trade unions across eight countries, along with its five
national works councils in Europe, the overarching European
Works Council and a number of other internal employee
consultative groups.
REWARD
easyJet offers a competitive reward package, focused on
cash and variable pay rather than fixed benefits.
easyJet offers all its employees, with a minimum amount
of service, the opportunity to become shareholders in the
Company through the following schemes:
• all employees can join easyJet’s Save As You Earn scheme,
which allows employees to save money from their salary
with the option to purchase shares;
• UK employees can take part in the Buy As You Earn
scheme, in which employees can buy shares from their
salary each month with easyJet matching their
investment; and
• easyJet awards Performance (Free) Shares to all
employees, subject to meeting annual financial targets.
Awards worth up to two weeks’ salary have been granted
in seven of the last eight years.
Over half of all employees participate in one or both of the
Save As You Earn and Buy As You Earn schemes.
At 30 September 2018, employees held interests in 9.4 million
shares. On this date, with a closing share price of £13.14, these
awards had a market value of £123 million.
WORKPLACE ONLINE
NETWORK
This year easyJet introduced Workplace by Facebook
to encourage conversation, collaboration and idea-
sharing amongst its employees. Workplace is an internal
platform and allows communication and collaboration
across desktop and mobile, using familiar social media
features such as groups, reactions and videos.
The platform has encouraged greater communication
between teams and with the business leadership team,
particularly with crew who are not office-based and can
use Workplace on mobile devices. This interaction has
allowed easyJet to, for example, identify improvements
to its inflight retail.
easyJet’s Chief Executive shares weekly updates and
actively encourages feedback. He also shares monthly
videos covering our strategy and performance, and
often uses the tool for employee recognition.
Workplace is actively used by over 6,000 people at
easyJet on a monthly basis, with 78% of those invited
choosing to sign up to the system.
EMPLOYEE ENGAGEMENT
To improve its ability to understand employee engagement,
easyJet this year trialled a new engagement platform, Peakon.
Over 4,000 employees were invited to participate in a trial
and 60% of these shared their view, generating over 20,000
comments about working at easyJet. These were analysed
to identify common themes that can be used to inform
better decision making. easyJet has decided to introduce
this platform across the Group for the 2019 financial year,
to continuously listen to employees’ views and use the data
and insights to inform its approach as an employer.
GENDER
The graphics below represent the gender makeup of
easyJet’s Board, AMB (easyJet’s executive management
team) and all employees directly employed by easyJet as at
30 September 2018.
Since this date one member of the AMB has left and one new
member has been appointed. Both are male so this has not
affected the gender makeup.
PLC BOARD
33.3% (3)
AIRLINE MANAGEMENT BOARD
66.7% (6)
63.6% (7)
53.7% (7,649)
Male
Female
36.4% (4)
ALL EMPLOYEES
46.3% (6,596)
www.easyJet.com
53
DIFFERENCE BETWEEN MALE AND FEMALE
UK EMPLOYEE PAY
Difference in median hourly rate of pay
Difference in median bonus pay
45.54%
32.16%
This is the pay and bonus gap data published in easyJet’s 2017
gender pay report. All data is for UK employees as specified by
UK reporting requirements.
This means that, based on the 2017 reporting data, the median
hourly rate of pay for a female UK employee at easyJet was
45.54% lower than for a male UK employee.
easyJet’s full gender pay report is available at
http://corporate.easyjet.com/.
DISABILITY
easyJet treats applicants with disabilities equally and supports
current employees who become disabled. This includes
offering flexibility and making reasonable adjustments to the
workplace to ensure they can achieve to their full potential.
However, for easyJet’s two largest communities, pilots and
cabin crew, there are a range of regulatory requirements on
health and physical ability with which all applicants and current
employees must comply.
LEARNING AND DEVELOPMENT
easyJet offers a range of in-person and online learning
opportunities, as well as career development planning,
for employees. All employees receive feedback on their
performance and support on their development. People
managers are also given resources and advice to help them
support the development of their teams.
APPRENTICESHIPS
easyJet has established four new apprenticeship
programmes this year, creating opportunities for 36 new
apprentices to join the business, as well as development
opportunities for 14 existing members of staff.
The programmes launched include cabin crew
apprenticeships and three different apprenticeships
across easyJet’s Operations Control Centre. All apprentices
across the programmes will take part in both on-the-job
and classroom-based training.
In addition, easyJet has this year taken a new intake of
14 recruits on its engineering apprenticeship programme.
CORPORATE RESPONSIBILITY
CONTINUED
DIVERSITY AND INCLUSION
This year easyJet carried out a review of its approach to
diversity and inclusion, including what improvements could
be made. Over 70 employees from across the business,
selected using an opportunity sampling method, took part
in interviews and focus group sessions conducted by an
independent consultancy.
As a result of this review easyJet has committed to focus on
three key areas:
• ensuring its employment policies and processes continue
to support diversity and inclusion;
• enabling its leaders and managers to have the confidence
and tools to support a diverse and inclusive culture; and
• creating partnerships, internally and externally, with
those who can give expert support to its inclusion and
diversity strategy.
Sophie Dekkers, previously UK Country Director and now
Head of Scheduling, has been appointed as the senior sponsor
for diversity and inclusion and will lead on these changes over
the next year.
FEMALE PILOTS
Through its Amy Johnson initiative, set up in 2015, easyJet has
sought to encourage more women to become pilots, to help
address the significant gender imbalance in the worldwide
pilot community.
Activities have included:
• carrying out more than 100 visits by pilots to schools,
youth and aeronautical organisations;
•
sponsoring the new Aviation Badge for Brownies, members
of Girlguiding, the UK youth organisation for girls and
young women; and
• continuing to highlight female easyJet pilots in the media.
easyJet’s current target is that 20% of its new entrant
co-pilots attracted by 2020 are female. In the 2018 financial
year easyJet attracted 50 female new entrant co-pilots, which
represented 15% of new entrant co-pilots in this period, up
from 13% in the 2017 financial year and 5% when the initiative
was started in 2015.
GENDER PAY
easyJet voluntarily reported on its gender pay gap in 2015 and
2016, ahead of the new UK regulations.
easyJet’s gender pay gap is strongly influenced by the salaries
and gender makeup of its pilot community, which represents
around a quarter of its UK employees. Pilots are predominantly
male and their higher salaries, relative to other employees,
significantly increase the average male pay at easyJet.
Salaries for pilots and cabin crew are collectively agreed,
meaning, for example, that a female pilot or cabin crew
member’s basic salary and variable pay rates are exactly the
same as that of her male equivalents.
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easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT 4. A GUARDIAN FOR FUTURE
GENERATIONS
easyJet recognises that carbon emissions from air travel
contribute to climate change and that the Group has a
responsibility to seek to minimise the impact of its operations.
As a result easyJet’s aim is to reduce the carbon emissions
produced for each kilometre travelled by its customers.
easyJet’s business model supports the minimisation of fuel
usage and associated carbon emissions in the following ways:
•
it relies on a cost advantage and continually looks for safe
ways to reduce fuel use, including by using efficient aircraft
and emissions-saving measures;
• most flights operate with a large majority of the seats filled,
which means each flight is productively used. This year the
load factor was 92.9%; and
• easyJet flies point-to-point routes between the
customer’s departure and arrival airports, rather than
flying a customer to a hub airport and then on to their
final destination.
easyJet is also working with partners on the development of
an all-electric commercial aircraft.
CARBON EMISSIONS
easyJet’s aircraft carbon emissions in the 2018 financial year
were 7.6 million tonnes, compared to 7.1 million tonnes in the
2017 financial year. easyJet’s calculation of emissions is based
on fuel burn measurement, which complies with the EU’s
Emissions Trading System requirements.
The increase in emissions is due to the continued expansion of
easyJet’s operations. In this financial year easyJet’s passenger
numbers increased by 10.2% from the 2017 financial year.
easyJet’s non-aircraft operations, such as energy use in the
small number of buildings it operates, also create carbon
emissions. However, as emissions related to these operations
are not material when compared to the aircraft operations, it
would not be proportionate for easyJet to include them in its
carbon emissions reporting.
CARBON EMISSIONS REDUCTION TARGET
easyJet’s aim is to reduce the amount of carbon emissions
produced for each kilometre travelled by its passengers.
Since 2000 easyJet has reduced its carbon emissions per
passenger kilometre by 32.5%.
In 2013 easyJet established a public target to reduce its
carbon emissions per passenger kilometre. The target was
strengthened in 2015 and is currently a 10% reduction in
carbon emissions per passenger kilometre by 2022 from its
performance in the 2016 financial year.
If this target is met in 2022, easyJet will have reduced its
carbon emissions per passenger kilometre by 38% since 2000.
In the 2018 financial year easyJet’s carbon emissions per
passenger kilometre were 78.46 grams (g). This is a reduction
from 78.62g per passenger km in the 2017 financial year.
Carbon emissions per passenger kilometre in the 2018
financial year were down by 1.9% from the 2016 financial year,
continuing towards the target of a 10% reduction by 2022.
EMISSIONS PER PASSENGER KILOMETRE SINCE 2000
e
r
t
e
m
o
l
i
k
r
e
g
n
e
s
s
a
p
r
e
p
s
m
a
r
g
–
s
n
o
s
s
m
e
i
i
2
O
C
3.2%
5.3%
8.0%
10.1%
15.0%
17.6%
17.8%
120
115
110
105
100
95
90
85
80
75
70
22.3%
24.9%
26.4%
27.4%
27.2%
27.9%
29.4%
30.2% 31.2%
32.3% 32.5%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Percentage reduction since 2000
Financial year
www.easyJet.com
55
CORPORATE RESPONSIBILITY
CONTINUED
INVESTING IN EFFICIENT AIRCRAFT
easyJet operates an efficient fleet of Airbus A320 family
aircraft, mainly equipped with CFM56 engines.
easyJet is continuing to invest in modern aircraft which are
more efficient and quieter than previous generation aircraft.
For example, easyJet has started to operate a new generation
of Airbus A320 family aircraft, equipped with CFM LEAP
engines, which are 15% more fuel efficient than previous
generation aircraft.
easyJet introduced the Airbus A320neo aircraft in June 2017
and as at 30 September 2018 had 13 of these aircraft in the
fleet, with a further 87 to be delivered by August 2022. In
November 2018 easyJet converted purchase rights to firm
orders for a further 17 A320neos to be delivered by 2023.
This year easyJet also took delivery of its first A321neo aircraft,
which has 235 seats compared to 186 seats on the A320neo.
As at 30 September 2018 there were two of these aircraft
in the fleet, with a further 28 planned to be delivered by
October 2020.
These larger aircraft allow easyJet to maximise the use of
airport capacity, particularly at airports across Europe that
are slot-constrained.
EFFICIENT OPERATION
easyJet operates its aircraft in a way which reduces fuel
usage and carbon emissions. These efficiency measures are
part of easyJet’s standard operating procedures, which means
they are requirements for all flights where they can be used.
The measures include:
• continual review of flight plans to ensure the optimal
routings and cruise levels are used;
• maximising the use of external power, rather than the
aircraft auxiliary power unit, when on the ground;
• use of only one engine when taxiing on the ground; and
• climb, descent and landing techniques that
improve efficiency.
Aircraft are also equipped to minimise weight, which is an important
factor in fuel usage. This includes the introduction of lightweight
Recaro passenger seats and the use of electronic devices to
reduce the amount of paper documents in the flight deck.
AIRCRAFT NOISE
easyJet seeks to reduce the impact of aircraft noise on
residents who live near airports or under flight paths. It works
locally with airports and air traffic control to put in place noise
mitigation activities that best fit each airport. easyJet pilots
also use flying techniques which reduce noise impact, such as
continuous descent approaches.
easyJet’s new generation Airbus A320neo and A321neo aircraft
are 50% quieter during takeoff and landing than the equivalent
previous generation aircraft.
easyJet has also carried out a retrofit programme to address
a particular sound, associated with A320 family aircraft of all
airlines, due to the airflow under the wing. This involved fitting
aircraft with ‘vortex generators’. New aircraft delivered since
September 2014 are fitted with vortex generators as standard.
ELECTRIC AIRCRAFT DEVELOPMENT
In 2017 easyJet began a partnership with Wright Electric
to support the goal for short-haul flights to be operated by
all-electric planes. Wright Electric has set itself the challenge
of building an all-electric commercial passenger jet within
a decade.
WASTE
easyJet’s cabin crew already collect waste in two bags,
separating out the recyclable materials. This year a 50 pence
discount on hot drinks for customers who use their own
reusable cup has been introduced. Certain plastic items used
on board, such as plastic stirrers, will also be replaced with
wooden alternatives.
To build on these measures, easyJet has this year carried out
an initial review of the opportunities to minimise waste across
its operations. This looked at how much waste is produced,
what materials are used, and what improvements could
be made.
56
easyJet plc Annual Report and Accounts 2018
STRATEGIC REPORT 5. A GOOD CITIZEN
UNICEF PARTNERSHIP
easyJet has a pan-European charity partnership with Unicef,
the world’s leading children’s organisation. During the spring,
summer and winter collection periods easyJet cabin crew
carry out onboard appeals for customers to donate their
spare change and leftover foreign currency.
Since 2012 the partnership has raised over £11.8 million,
including over £1.8 million in the 2018 financial year.
The funds primarily support Unicef’s vaccination work to
keep children safe from polio, as part of the global efforts
to eradicate this deadly disease.
This year the funds have supported the global eradication
initiative by providing over five million vaccines for children
under five, as well as the procurement and distribution of
2,600 cold boxes, 6,000 vaccine carriers and 22,280 ice
packs, and the installation of 44 solar refrigerators to
improve vaccine storage capacity.
In July 2018 easyJet renewed its partnership with Unicef.
In addition to continuing to support polio eradication, the
partnership will now also support Unicef’s cause of Education
in Emergencies. Each summer collection will support this area
and the first took place this year.
easyJet chose to support the Education in Emergencies work
because it believes the cause is important to its customers,
many of whom are travelling with their own children in the
summer during school holidays.
CHARITY DONATIONS
easyJet also supports charities nominated by its employees,
through donations awarded by its Charity Committee. This
year the Committee has made over 140 awards of flight
vouchers or financial donations, each to the value of £250
or €300.
EDUCATION IN EMERGENCIES
In addition to continuing to support polio eradication,
the partnership with Unicef now also supports the
charity’s cause of Education in Emergencies. Unicef
has provided more information on this work:
“For children in emergencies, education is lifesaving.
Schools give children stability and structure to help
cope with the trauma they have experienced. Schools
can protect children from the physical dangers around
them, including abuse, exploitation and recruitment
into armed groups. In many cases, schools also provide
children with other lifesaving interventions, such as food,
water, sanitation and health.
Despite the enormous benefits to children, education
is often the first service suspended and the last service
restored in crisis-affected communities.
Unicef works to deliver uninterrupted learning for
every child affected by humanitarian crises and aims
to provide learning spaces that are safe, available and
suitable for children. Unicef provides teachers with
training and learning materials including the ‘School in
a Box’, which is a pop-up classroom which can be set up
anywhere within 72 hours of an emergency and provides
three months’ worth of teaching supplies for a teacher
and up to 40 students.”
www.easyJet.com
57
CORPORATE RESPONSIBILITY
CONTINUED
NON-FINANCIAL INFORMATION STATEMENT
easyJet aims to comply with the new Non-Financial Reporting Directive requirements. The table below sets out where relevant
information can be found in this Annual Report.
• Special assistance in operational manuals
• Customers who need special assistance,
REPORTING
REQUIREMENT
POLICIES
1.
ENVIRONMENTAL
MATTERS
2.
EMPLOYEES
• easyJet has had a target to reduce
its carbon emissions per passenger
kilometre since 2013, and this was
strengthened in 2015
• To support this, a new environmental
policy is being developed for
introduction in the 2019 financial year
• Safety Policy
• People Handbook, which includes:
– Code of Ethics
– Whistleblowing Policy
• Human Rights Policy Statement
• Modern Slavery Statement
• Data Retention Policy, including on
customer data privacy
3.
HUMAN RIGHTS
4.
SOCIAL MATTERS
5.
ANTI-CORRUPTION
AND ANTI-BRIBERY
• People Handbook, which includes:
– Anti-Bribery and Corruption Policy
– Code of Ethics
– Fraud Policy
– Competition Policy
• Supplier Code of Conduct
6.
BUSINESS MODEL
7.
PRINCIPAL RISKS
AND IMPACT
OF BUSINESS
ACTIVITY
8.
NON-FINANCIAL
KEY
PERFORMANCE
INDICATORS
58
easyJet plc Annual Report and Accounts 2018
RELEVANT INFORMATION
• Environmental risk, page 42
• Carbon emissions, page 55
• Aircraft efficiency, page 56
• Waste reduction, page 56
• Chief Executive’s review, page 18
• Safety, pages 50 and 76 to 77
• Local employment across Europe,
page 53
• Working with trade unions, page 53
• Reward, page 53
• Diversity and inclusion, p54
• Human rights, page 51
• Modern Slavery, page 52
page 51
• Customers affected by disruption,
page 51
• Charity partnership with Unicef, page 57
• Local charity donations, page 57
• Aircraft noise, page 56
• Anti-bribery and corruption, page 52
• Supplier relations, page 51
• Business model, page 7
• Major safety incident risk, page 39
• Attraction and retention of talent risk,
page 45
• Regulatory and legal compliance risk,
page 47
• Safety (Final Event Risk Classification),
page 28
• Carbon emissions per passenger
kilometre, page 55
• Customer satisfaction, page 28
• Special assistance customer satisfaction,
page 51
• Employee engagement, page 53
• New entrant female pilots, page 54
• Fundraising for Unicef, page 57
STRATEGIC REPORT
CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE
JOHN BARTON
Chairman
We continue to achieve
good governance through
a responsive governance
framework that supports
and challenges our
executives’ decision making
COMMITTED
TO good
corporate
governance
I am pleased to introduce this report, which describes
the activities of your Board during the year, along with
our governance arrangements and how we have applied
the main principles and complied with the relevant
provisions of the 2016 UK Corporate Governance
Code (‘the Code’).
This year the Board has continued to focus on providing
effective leadership and oversight of the Group as it
seeks to focus on its strategic priorities and create value
for our shareholders. A summary of Board activity during
the year can be found on page 68.
The role and effectiveness of the Board is essential to a
successfully run company; the way in which we discharge
our duties is set out on the following pages.
APPOINTMENT OF A NEW CHIEF EXECUTIVE
Johan Lundgren joined the Board as Director and Chief
Executive on 1 December 2017. During his first year Johan has
taken the opportunity to meet many employees, customers,
regulatory bodies and other stakeholders to seek their views
on, amongst other things, the Group’s strategy and culture.
CHANGES TO THE BOARD
There have been a number of Board changes since the
last Annual Report, with membership of the Board and
its Committees having evolved, but remaining balanced.
Appointments have been subject to a formal, rigorous and
transparent procedure.
We welcomed Julie Southern to the Board on 1 August 2018
as a Non-Executive Director. She also became a member
of the Audit, Remuneration and Safety Committees, and
will take over from Adèle Anderson as Audit Committee
Chair from 1 January 2019. Julie has held a number of
commercially-oriented finance and related roles and
brings with her extensive experience of the airline industry.
I believe she will be a huge asset to the easyJet Board and
its Committees. More detailed information on Julie’s
induction can be found on page 75.
www.easyJet.com
59
CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCE
CONTINUED
Keith Hamill OBE stepped down from the easyJet Board on
31 December 2017 following completion of nine years on the
Board. On behalf of the Board, I would like to reiterate my
thanks to Keith for his valued contribution to the easyJet
Board and to easyJet’s success.
We are also sorry to lose Adèle Anderson, Non-Executive
Director who, after seven years, will resign from the Board
with effect from the end of the Company’s 2019 Annual
General Meeting on 7 February 2019. On behalf of the
Board, I would like to thank Adèle for her important
contribution to the easyJet Board and specifically in her
role as Audit Committee Chair. She has brought deep
understanding and acumen to her responsibilities and
she leaves us with our gratitude and best wishes.
More information on these Board changes and the work of
the Nominations Committee can be found on pages 78 to 79.
CULTURE AND DIVERSITY
We take the issue of diversity in the boardroom very seriously
and are mindful of important recent developments in this area.
We remain focused on maintaining an inclusive and diverse
culture. We believe this improves effectiveness, encourages
constructive debate, delivers strong performance and
enhances the success of the business. At its September 2018
meeting, the Nominations Committee approved a refreshed
Board Diversity and Inclusion Policy and set our objectives
in this area. You can read more about this, and our overall
approach to diversity and inclusion in our other senior
leadership positions and across easyJet, on page 79.
TEGEL OPERATIONS
A key focus of the Board during the year was the oversight
of the acquisition of part of Air Berlin’s operations at Berlin
Tegel Airport.
This year the Board’s annual base visit took place in Tegel, which
provided the Board with the opportunity to see the operation
in action and meet with various members of the management
team. More information on the visit can be found on page 69.
BREXIT
The Board continued to closely oversee the implementation
of easyJet’s planning for Brexit. This has involved regular
management updates on both the design and implementation
of easyJet’s response to Brexit negotiations, and the likely
impact on the European airline industry. We will remain
focused on ensuring that easyJet’s operating model and
network are unaffected by Brexit and that flying rights
between the EU and the UK are maintained.
BOARD EVALUATION
Our Nominations Committee oversaw an externally facilitated
review of the composition, diversity and effectiveness of the
Board to achieve the objectives of the Group. A full report
on the activities of the Nominations Committee and the
outcomes of the evaluation can be found on pages 72 to 73.
LOOKING AFTER OUR STAKEHOLDERS
The Board continues to take account of the impact of its
decisions on all of our stakeholders.
We have also begun to consider ways in which a stronger and
more meaningful engagement can take place between the
Board and the workforce.
This engagement, amongst other things, will allow Directors
to gauge how the Group’s new strategic initiatives are
embedding within the organisation under the new leadership
of Johan Lundgren.
UK CORPORATE GOVERNANCE CODE
I am pleased to report that we were in full compliance with
the requirements of the Financial Reporting Council’s (FRC)
2016 Code, a copy of which is available on www.frc.org.uk.
We welcomed the publication by the FRC of its new UK
Corporate Governance Code in July 2018 and its focus on
the themes of corporate and Board culture, stakeholder
engagement and sustainability, which are critical factors
for us as we partner with our stakeholders to build an
enduring business.
Over the summer, as part of the FRC’s regular review and
assessment of the quality of corporate reporting in the UK,
we engaged with the FRC in response to their questions
relating to information within our 2017 Annual Report and
Accounts. easyJet has taken on board the FRC’s comments
and recommendations with specific enhancements having
been made to our 2018 Annual Report and Accounts. Further
details can be found on page 81.
The following pages set out details of the composition of
our Board, its corporate governance arrangements, processes
and activities during the year, and reports from each of the
Board’s Committees.
JOHN BARTON
Non-Executive Chairman
CONTENTS OF THE CORPORATE
GOVERNANCE REPORT
Plc Board and Airline Management
Board (‘AMB’) profiles
Our governance framework
Board activity in 2018
Compliance with the Code
Board Committee overview and activities
during the year
Directors’ report
Page 61
Page 67
Page 68
Page 69
Page 76
Page 106
60
easyJet plc Annual Report and Accounts 2018
GOVERNANCE
BOARD OF DIRECTORS
An experienced and balanced Board
N
A
NF
R
JOHN BARTON (1944)
Non-Executive Chairman
Nationality British
Appointed May 2013
Key areas of prior experience
Finance, Governance
Skills & Experience John has served
as Chairman of Next plc, Catlin
Group Limited, Cable and Wireless
Worldwide plc, Brit Holdings plc and
Wellington Underwriting plc. John
was previously Senior Independent
Director of WHSmith plc and
Hammerson plc. He was also the
Chief Executive of insurance broker
JIB Group plc. After JIB’s merger
with Lloyd Thompson, he became
Chairman of the combined Group,
Jardine Lloyd Thompson Group plc,
until 2001.
Current External Appointments
Senior Independent Director of SSP
Group plc, Chair of its Nomination
and Remuneration Committees and
member of its Audit Committee.
Senior Independent Director of
Luceco plc and member of its Audit,
Remuneration and Nomination
Committees. Non-Executive Director
of Matheson & Co Ltd.
JOHAN LUNDGREN (1966)
Chief Executive
Nationality Swedish
Appointed December 2017
Key areas of prior experience
Travel and Tourism
Skills & Experience Johan has
more than 30 years’ experience
working in the travel industry,
starting his career as a tour guide
and occupying various roles in travel
marketing and sales. Prior to joining
easyJet in December 2017 as Chief
Executive, Johan was the Group
Deputy Chief Executive Officer
and Chief Executive Officer of
Mainstream Tourism at TUI AG.
Prior to this, Johan was the
Managing Director for the Northern
Region at TUI Travel plc from 2007
until 2011. From 2003 until 2007,
he was the Managing Director
and Chief Executive Officer of
TUI Nordic. Johan led MyTravel’s
businesses out of Canada and
Sweden between 1999 and 2003,
prior to which he was Managing
Director of Always Tour Operations
from 1996.
Current External Appointments
None
CHARLES GURASSA (1956)
Non-Executive Deputy Chairman
and Senior Independent Director
Nationality British
Appointed June 2011
Key areas of prior experience
Airline Industry
Skills & Experience Charles’ 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 of
TUI Northern Europe Limited and
Director of Passenger and Cargo
at British Airways plc. Charles retired
from full-time work in June 2003
to pursue a portfolio career. He was
previously Non-Executive Chairman
of Genesis Housing Association,
LOVEFiLM International Ltd,
Phones4U Ltd, Virgin Mobile plc,
Alamo/National Rent a Car and
7Days Ltd, and a Non-Executive
Director at Whitbread plc.
Current External Appointments
Non-Executive Chairman of Channel
4 and member of its Remuneration,
Ethics and Audit Committees.
Senior Independent Director of
Merlin Entertainments plc, Chairman
of its Remuneration Committee
and member of its Audit and Health
and Safety Committees. Member
of the Board of Trustees at English
Heritage and Chairman of its
Remuneration and Appointments
Committee. Member of the Board
of Trustees at the Migration
Museum Project and member
of its Development Committee.
Chairman of Great Rail Journeys.
BOARD COMMITTEES
Committee Chair
A
Audit Committee
F
N
Finance Committee
Nominations Committee
R
S
Remuneration Committee
Safety Committee
www.easyJet.com
61
BOARD OF DIRECTORS
CONTINUED
ANDREW FINDLAY (1969)
Chief Financial Officer
Nationality British
Appointed October 2015
Key areas of prior experience
Finance
Skills & Experience Andrew was
previously Chief Financial Officer at
Halfords Group plc from February
2011 to October 2015. Prior to this,
Andrew was Director of Finance,
Tax and Treasury at Marks and
Spencer Group plc. He has also held
senior finance roles at the London
Stock Exchange and at Cable and
Wireless both in the UK and the US.
Current External Appointments
Non-Executive Director at
Rightmove plc, Chair of its Audit
Committee and member of its
Nomination Committee.
A
R
S
F
S
ADÈLE ANDERSON (1965)
Independent Non-Executive
Director
Nationality British
Appointed September 2011
Key areas of prior experience
Finance
Skills & Experience Until July 2011,
Adèle was a Partner in KPMG and
held roles including Chief Financial
Officer of KPMG UK, Chief Executive
Officer of KPMG’s captive insurer
and Chief Financial Officer of
KPMG Europe.
Current External Appointments
Senior Independent Director of
Intu Properties plc, Chair of its
Audit Committee and member
of its Remuneration Committee.
Non-Executive Director of Spire
Healthcare Group plc, Chair of
its Audit and Risk Committee
and member of its Remuneration
Committee. Member of the Audit
Committee of the Wellcome Trust.
DR ANDREAS BIERWIRTH
(1971)
Independent Non-Executive
Director
Nationality German
Appointed July 2014
Key areas of prior experience
Airline Industry, European
Perspective
Skills & Experience Andreas
previously served as Chief
Commercial Officer and a
member of the Board at Austrian
Airlines AG. Between 2006 and
2008, Andreas served as Vice
President of Marketing at Deutsche
Lufthansa AG (Frankfurt). Prior to
this, Andreas was firstly Deputy
Managing Director and later
Managing Director at Germanwings.
Current External Appointments
Chief Executive Officer of
T-Mobile Austria GmbH. Chairman
of the Supervisory Board of
Do&CoAG and member of the
Supervisory Board of Telekom
Deutschland GmbH.
DIVERSITY IN THE PLC BOARD
easyJet recognises the benefits of having diversity across the Board to ensure effective engagement with key stakeholders
and effective delivery of the business strategy.
TENURE (YEARS)
3
GENDER
4
AGE
3
3
2
2 2
3
2
0-3
4-6
7-9
M
F
40-49
50-59
60+
Executive
Non-Executive
Executive
Non-Executive
Executive
Non-Executive
11
1
62
easyJet plc Annual Report and Accounts 2018
GOVERNANCE RN
S
A
F N R
A R
S
MOYA GREENE DBE (1954)
Independent Non-Executive
Director
Nationality British and Canadian
Appointed July 2017
Key areas of prior experience
Logistics and Transport
Skills & Experience Moya served as
Chief Executive of Royal Mail Group
for eight years. Prior to joining Royal
Mail, Moya was Chief Executive
Officer of Canada Post. She also has
a strong public sector background,
developed over a 17-year period
when she assumed progressively
more senior roles in seven different
Ministries of the Canadian Federal
Public Service. She has previously
been a Non-Executive Director on
the Boards of Great-West Lifeco
and Tim Hortons Inc, both publicly
quoted in Canada.
Current External Appointments
Non-Executive Director of Rio
Tinto plc and member of its Audit,
Remuneration and Nomination
Committees. Member of the Board
of Trustees of the Tate Gallery.
ANDY MARTIN (1960)
Independent Non-Executive
Director
Nationality British
Appointed September 2011
Key areas of prior experience
Finance, Airline Industry
Skills & Experience Andy trained
as a Chartered Accountant at Peat
Marwick before moving to Arthur
Andersen where he became a
partner. He was, until 2015, Group
Chief Operating Officer, Europe and
Japan, for Compass Group plc,
having previously been their Group
Finance Director from 2004 to 2012.
Before joining Compass Group plc,
Andy was Group Finance Director
at First Choice Holidays plc (now
TUI Group) and prior to that held
a number of senior finance roles at
Granada Group plc and Forte plc.
Current External Appointments
Non-Executive Director of
Intertek Group plc and Chairman
of its Audit Committee. Non-
Executive Director of John Lewis
Partnership and Chairman
of its Audit and Risk Committee.
Non-Executive Chairman
of Hays Group plc and Chairman
of its Nomination Committee.
JULIE SOUTHERN (1959)
Independent Non-Executive
Director
Nationality British
Appointed August 2018
Key areas of prior experience
Finance, Airline Industry
Skills & Experience Julie has held a
number of commercially oriented
finance and related roles during her
career. She was Chief Commercial
Officer of Virgin Atlantic Limited
between 2010 and 2013, responsible
for the commercial strategy of
Virgin Atlantic Airways and Virgin
Holidays. Prior to this, Julie was
Chief Financial Officer of Virgin
Atlantic Limited for 10 years. In
addition, Julie was previously Group
Finance Director at Porsche Cars
Great Britain and Finance and
Operations Director at WHSmith –
HJ Chapman & Co. Ltd.
Current External Appointments
Non-Executive Director and Chair
of the respective Audit Committees
of Rentokil Initial plc, NXP Semi-
Conductors N.V. and DFS Furniture
plc (until 30 November 2018).
Non-Executive Director, Chair of the
Audit Committee and member of
the Remuneration Committee at
Cineworld Group plc. Non-Executive
Director of Ocado plc.
CHANGES TO THE BOARD DURING THE 2018 YEAR AND UP TO 19 NOVEMBER 2018:
Carolyn McCall DBE stepped down as Chief Executive on 30 November 2017, with Johan Lundgren being appointed in her
place from 1 December 2017.
Keith Hamill OBE stepped down from the Board on 31 December 2017.
Julie Southern was appointed to the Board on 1 August 2018.
www.easyJet.com
63
AIRLINE MANAGEMENT BOARD
An experienced team to deliver
ELLA BENNETT
Group People Director
Nationality British
Appointed May 2018
Key areas of prior experience
People, Reward and Digital
Transformation
Skills & Experience Ella joined
easyJet from Sainsbury’s Argos
where she led the integration of
their non-food business to create
a multi-product, multi-channel
business with fast delivery networks.
Ella was also Group HR Director
at Home Retail Group leading the
people aspects of Argos’ digital
transformation. Prior to this she
was a member of the executive
management team at Fujitsu.
LIS BLAIR
Chief Marketing Officer
Nationality British
Appointed May 2018
Key areas of prior experience
Insight, Digital and Marketing
Skills & Experience Lis joined the
AMB as Chief Marketing Officer in
May 2018 after six years heading up
Customer Relationship Management
(CRM) and insight for the airline.
Prior to joining easyJet Lis spent
five years as a marketing consultant
across multiple sectors, leading
brands and marketing agencies
including Audi, Barclaycard, Belu
and Rapier London. Her marketing
career began with 10 years at
Barclays, incorporating leadership
roles in all areas of marketing,
including digital, CRM, insight, brand
and advertising.
CHRIS BROWNE OBE
Chief Operating Officer
Nationality British
Appointed October 2016
Key areas of prior experience
Airline Industry – Operations
and Strategy
Skills & Experience Chris was
appointed to the plc Board on
1 January 2016 as a Non-Executive
Director, before stepping down on
30 September 2016 to join the AMB
as Chief Operating Officer. Chris has
over 25 years’ experience in the
travel sector including the post of
Chief Operating Officer for TUI
Aviation following 10 years as
Managing Director for Thomson
Airways. She was previously the
youngest and first female general
manager for Iberia Airways and led
the merger of Thomsonfly and First
Choice Airways into one airline.
DIVERSITY IN THE AIRLINE MANAGEMENT BOARD (‘AMB’)
easyJet recognises the benefits of having diversity across the executive leadership team to inspire innovation and
increased performance.
GENDER
7
5
4
4
AGE
2
30-39
40-49
50-59
M
F
64
easyJet plc Annual Report and Accounts 2018
GOVERNANCE ROBERT CAREY
Group Director of Strategy and
Network
Nationality French/American
Appointed September 2017
Key areas of prior experience
Airline Industry, Strategy
Skills & Experience Robert joined
from McKinsey & Company where
he was a partner and leader in
the Airline practice. Over the last
11 years, Robert has assisted airline
clients around the world on a range
of strategy, revenue and operations
topics. Prior to McKinsey, Robert
worked for Delta Air Lines and
America West Airlines in a variety
of roles across revenue and
operations functions.
THOMAS HAAGENSEN
Group Markets Director
Nationality Danish
Appointed May 2018
Key areas of prior experience
Commercial and Operations
Management
Skills & Experience With over
20 years’ experience in operations
management in a variety of roles
across Europe, Thomas has served
as easyJet’s Country Director for the
Germany, Austria and Switzerland
region since 2011, developing the
market entry strategy for Germany
and the business traveller segment
in Northern Europe. Most recently,
Thomas was appointed Managing
Director of our Austrian AOC,
easyJet Europe GmbH, which
forms a key part of our Brexit
migration plan.
FLIC HOWARD-ALLEN
Chief Communications Officer
Nationality British
Appointed August 2018
Key areas of prior experience
Corporate Communications,
Sustainability
Skills & Experience Flic has over
20 years’ experience in corporate,
consumer, internal, government
relations and crisis communications.
Flic joined easyJet from Associated
British Foods, the owner of Primark,
Twinings and many other major
brands, where she headed up
external affairs. Flic was previously
Director of Communications and
Corporate Responsibility at Marks
and Spencer where she led the
creation of ‘Plan A’, its Corporate
Responsibility and Sustainability
approach. Flic was also a Director
at public relations consultancy Hill +
Knowlton for a number of years.
AMB CHANGES DURING THE 2018 FINANCIAL YEAR AND UP TO 19 NOVEMBER 2018:
Carolyn McCall stepped down as Chief Executive on 30 November 2017, with Johan Lundgren being appointed in her
place from 1 December 2017. Following Johan’s appointment as Chief Executive, he has reshaped the AMB to best align
with easyJet’s strategic priorities.
Lis Blair was appointed to the new role of Chief Marketing Officer on 15 May 2018.
Thomas Haagensen was appointed to the new role of Group Markets Director on 15 May 2018.
Ella Bennett was appointed Group People Director on 21 May 2018, replacing Jacky Simmonds who stepped down in
December 2017.
Jo Ferris acted as Interim Group People Director from December 2017 until Ella’s appointment in May 2018.
Paul Moore stepped down from his role as Communications Director on 15 June 2018.
Flic Howard-Allen was appointed Chief Communications Officer on 20 August 2018.
Luca Zuccoli was appointed to the new role of Chief Data Officer on 20 August 2018.
Chris Brocklesby stepped down as Chief Information Officer on 31 October 2018. Andrew Findlay has taken responsibility
for this area until a new Chief Information Officer is appointed.
Garry Wilson joined the business in the new role of Chief Executive of easyJet Holidays on 12 November 2018.
Kyla Mullins stepped down as Company Secretary & Group General Counsel on 3 September 2018. Daud Khan was
appointed to this role on an interim basis from the same date.
www.easyJet.com
65
AIRLINE MANAGEMENT BOARD
CONTINUED
LUCA ZUCCOLI
Chief Data Officer
Nationality Italian
Appointed August 2018
Key areas of prior experience
Data and Analytics
Skills & Experience Luca Zuccoli
brings world-leading technical data
expertise as well as the experience
of successfully applying data
management to drive value in a
commercial context. Prior to joining
the airline Luca was at Experian
where he was Head of Analytics
and Data Lab for their Asia-Pacific
region, focusing on managing
analytics and leading on big data
and artificial intelligence (Al).
DAUD KHAN
Company Secretary & Group
General Counsel (Interim)
Nationality British
Appointed September 2018
Key areas of prior experience
Corporate Advisory and
Corporate Finance
Skills & Experience Daud is currently
acting as interim Company Secretary
& Group General Counsel and head
of easyJet’s Legal, Company
Secretarial and Regulatory
departments. Daud is an
experienced lawyer who specialises
in corporate advisory and corporate
finance matters.
GARRY WILSON
Chief Executive, easyJet Holidays
Nationality British
Appointed November 2018
Key areas of prior experience:
Travel, Business Transformation
and Global Markets
Skills & Experience Garry has over
20 years’ experience in the holiday
and travel sector and joins easyJet
from TUI Group where he most
recently held the role of Managing
Director for Group Product and
Purchasing, leading commercial
strategies across a number of
markets and heading a global team
across 20 countries.
Garry began his career as an
international graduate at Nestlé
before joining Thomson Travel
Group (now TUI) in 1997 where he
held a number of senior commercial
roles. In 2006 he became Director
of Europe, Middle East and Africa
for American travel company Orbitz
Worldwide (now Expedia Inc.) based
in Chicago.
ANDREW FINDLAY
Chief Financial Officer
See Board of Directors’ profiles
on page 62
JOHAN LUNDGREN
Chief Executive
See Board of Directors’ profiles
on page 61
66
easyJet plc Annual Report and Accounts 2018
GOVERNANCE CORPORATE GOVERNANCE REPORT
Governance framework
SHAREHOLDERS
CHAIRMAN
Responsible for the leadership of the Board and for ensuring that it operates effectively
through productive debate and challenge.
PLC BOARD (‘THE BOARD’)
The Board is responsible for providing leadership to the airline. It does this by setting strategic priorities and
overseeing their delivery in a way that enables sustainable long-term growth, whilst maintaining a balanced approach
to risk within a framework of effective controls and taking into account the interests of a diverse range of stakeholders.
BOARD COMMITTEES (1)
The terms of reference of each Committee are documented and agreed by the Board.
The Committees’ terms of reference are reviewed annually and are available in the Governance section
of easyJet’s corporate website: http://corporate.easyjet.com/. Their key responsibilities are set out below.
SAFETY
COMMITTEE
To examine specific
safety issues
as requested by the
Board or any member
of the Committee.
To receive, examine
and monitor reports
on actions taken
by departments.
To review and
monitor the
implementation
of easyJet’s
annual safety plan.
NOMINATIONS
COMMITTEE
To keep under review
the composition,
structure and size of,
and succession to,
the Board and its
Committees.
To provide
succession planning
for senior executives
and the Board,
leading the
process for all
Board appointments.
To evaluate the
balance of skills,
knowledge,
experience and
diversity on
the Board.
AUDIT
COMMITTEE
To monitor the
integrity of the
Group’s accounts,
and the adequacy
and effectiveness
of the systems of
internal control
(including
whistleblowing
procedures).
To monitor the
effectiveness and
independence
of the internal and
external auditors.
FINANCE
COMMITTEE
To review and
monitor the
Group’s treasury
policies, treasury
operations and
funding activities,
along with the
associated risks.
REMUNERATION
COMMITTEE
To set remuneration
for all Executive
Directors, the
Chairman and the
AMB, including
pension rights
and any
compensation
payments.
To oversee
remuneration and
workforce policies
and practices and
take these into
account when
setting the policy
for Directors’
remuneration.
Committee
Report
on pages 76 to 77
Committee
Report
on pages 78 to 79
Committee
Report
on pages 80 to 84
Committee
Report
on page 85
Committee
Report
on page 86
CHIEF EXECUTIVE
Responsible for the day-to-day running of the Group’s business and performance,
and the development and implementation of strategy.
AIRLINE MANAGEMENT BOARD (‘AMB’)
Led by the Chief Executive, AMB members are collectively responsible for driving the performance
of the airline against strategic KPIs and managing the allocation of central funds and capital.
(1) The IT Governance and Oversight Committee, which provided independent oversight over the governance and controls relating to the IT business area,
was disbanded during the year with its responsibilities reverting to the Audit Committee and ultimately the Board.
www.easyJet.com
67
CORPORATE GOVERNANCE REPORT
CONTINUED
Board ACTIVITY IN 2018
KEY ACTIVITIES
• Received and discussed regular safety performance reports and updates, presented by the Director of
Safety, Security and Compliance
• Received a presentation on cyber security, covering the threat environment, the regulations and
standards applied to aircraft design, and the operation and security of easyJet aircraft
TOPIC
Safety
Safety is our
number one
priority: read more
about how we are
ensuring this on
pages 50 and 76
to 77
Strategy,
operations
and funding
The strategic
and financial
review explains
this in more detail
on pages 2 to 58
Internal control
and risk
management
Our Risk
Management
Framework and
principal risks are
set out on pages
38 to 48
Leadership
and people
You can read
more about this
on pages 69 and
78 to 79
Governance
and legal
To see how we
comply with the
UK Corporate
Governance
Code please
turn to page 69
• Approved the Group’s five-year plan and strategic initiatives
• Approved the acquisition of part of Air Berlin’s operations at Berlin Tegel Airport
• Received presentations from management in relation to business strategy and performance
• Approved the annual budget, business plan and KPIs
• Reviewed and approved the Group’s full year 2017 and half year 2018 results (including the final 2017
dividend), as well as its quarterly results and the 2018 pre-close statement
• Approved the Group’s 2017 Annual Report (including its fair, balanced and understandable status) and
2018 AGM Notice
• Reviewed the Group’s debt, capital and funding arrangements and approved an update to the Euro
Medium Term Note programme and a new revolving credit facility
• Approved changes to the delegated authority policy
• Approved changes to the treasury policy as recommended by the Finance Committee
• Received regular status updates on the Operational Resilience programme including visibility of costs
and activities
• Considered and approved entering into various key operational agreements including a predictive
maintenance service with Airbus
• Approved a change in approach to technology development based on utilising existing systems on a
modular basis rather than a full replacement of a core commercial platform
• Reviewed the Group’s Risk Management Framework and principal risks and uncertainties
• Reviewed and confirmed the Group’s Viability Statement and going concern status
• Reviewed and validated the effectiveness of the Group’s systems of internal controls and risk management
• Continued to focus on the composition, balance and effectiveness of the Board
• Reviewed Board composition, discussed and acted upon the recommendations of the Nominations
Committee, including the approval of a Non-Executive Director appointment and AMB appointments
• Reviewed the key operational roles and identified gaps in experience needed to deliver the Group’s strategy
• Considered the outcomes and approved the actions arising from the external Board evaluation process
(further detailed information can be found on page 73)
• Reviewed the Group’s culture, vision and values
• Reviewed and approved the proposals for the Chairman’s and Non-Executive Directors’ fees
• Held separate Non-Executive Director sessions with the Chairman after every Board meeting to discuss
leadership and other Board matters
• Received and reviewed regular briefings on corporate governance developments and legal and regulatory
issues, including a presentation from our corporate legal advisers
• Approved the new Articles of Association as detailed in the 2017 Annual Report and Accounts, and
recommended to shareholders their adoption at the 2018 AGM
• Approved the Group’s second Modern Slavery Statement for publication on the Group’s website
• Received reports on engagement with institutional shareholders, investors and other stakeholders
throughout the year
• Monitored and received regular updates on the economic and legislative landscape, including the
potential impact of Brexit on both easyJet and the aviation sector as a whole
• Considered the Group’s proposed approach in preparing for compliance with the Gender Pay Gap
Reporting Regulations and the General Data Protection Regulation
• Received regular reports from the Chairs of the Safety, Nominations, Audit, Finance and
Remuneration Committees
68
easyJet plc Annual Report and Accounts 2018
GOVERNANCE BOARD IN ACTION:
BASE VISIT, BERLIN TEGEL
Our visit to Tegel brought
alive how easyJet’s culture
and values are being
integrated at the local level
To update the Directors’ skills, knowledge and familiarity
with the Group, visits to easyJet’s bases are periodically
organised for the Board.
An understanding of, and connection with, easyJet’s
business are fundamental for our Non-Executive
Directors if they are to maximise their contribution to
effective Board debate. With this in mind, we aim to take
the Board out of the boardroom to visit one of our bases
at least once a year. These visits increase the visibility of
the Board and provide our Non-Executive Directors with
a valuable opportunity to engage with local management
and crew. In June 2018, the Board was invited to visit the
new Tegel base.
The Board toured the base and received presentations
from the local management on the base’s development,
the country strategy and the key challenges faced
and overcome as part of easyJet’s fastest operational
integration. The Board also lunched in the crew room
and spent time with staff, gaining valuable feedback on
easyJet’s culture and values and how these are interpreted
at the local level in the newly integrated business.
In particular, the visit enabled the Board to see how best
practice in key areas, such as safety, is translated and
applied to new operations.
All members of the Board attended the visit which
also included a dinner with the head of ‘Visit Berlin’,
who provided an overview of Berlin’s economy and
tourism trends.
COMPLIANCE WITH THE CODE
The Group has, throughout the year, complied with the
provisions of the 2016 UK Corporate Governance Code
(‘the Code’), which is the version of the code that applied
for the period under review. The section below details how
the Company has complied with the Code, the full text of
which is available at www.frc.org.uk.
LEADERSHIP
Role of the Board
The Board is responsible for providing effective leadership
to the airline. It does this by setting strategic priorities and
overseeing their delivery in a way that enables sustainable
long-term growth, while maintaining a balanced approach
to risk within a framework of effective controls.
The Board has a formal schedule of matters reserved for
its decision which is available in the Governance section of
easyJet’s corporate website: http://corporate.easyjet.com/.
Day-to-day management responsibility rests with the AMB,
the members of which are listed on pages 64 to 66.
Division of responsibilities
The roles of Chairman and Chief Executive are separate,
set out in writing, clearly defined, and approved by the
Board. They are available on easyJet’s corporate website:
http://corporate.easyjet.com/.
The Chairman
The Chairman, John Barton, sets the Board’s agenda
and ensures that adequate time is available for discussion
of all agenda items, including strategic issues. On his
appointment in May 2013, the Board considered John Barton
to be independent in character and judgement in accordance
with the Code.
Senior Independent Director
Charles Gurassa is Senior Independent Director and Deputy
Chairman. In this role, Charles provides advice and additional
support and experience to the Chairman as required, and
is available to act as an intermediary for the other Directors
if necessary. Charles is also available to address shareholders’
concerns that have not been resolved through the normal
channels of communication with the Chairman, Chief
Executive or other Executive Directors. He also leads
the appraisal of the Chairman’s performance annually in
consultation with the other Non-Executive Directors in a
meeting without the Chairman being present.
Non-Executive Directors
The Non-Executive Directors provide an external perspective,
sound judgement and objectivity to the Board’s deliberations
and decision making. With their diverse range of skills and
expertise, they both support and constructively challenge
the Executive Directors and monitor and scrutinise the
Group’s performance against agreed goals and objectives.
The Non-Executive Directors, together with the Chairman,
also meet regularly without any Executive Directors being
present. During the year, there were no unresolved concerns
regarding the running of the Group.
www.easyJet.com
69
CORPORATE GOVERNANCE REPORT
CONTINUED
Board meetings and attendance
The Board meets regularly, with 10 scheduled meetings having been held during the year. The Directors’ attendance records
at those meetings and Board Committee meetings held during the year are shown in the table below.
In addition to those scheduled meetings, four ad hoc Board calls were also arranged during the 2018 financial year to deal with
matters arising between scheduled meetings as appropriate. Non-Executive Directors are encouraged to communicate directly
with each other and senior management between Board meetings.
ATTENDANCE AT MEETINGS DURING THE 2018 FINANCIAL YEAR
The core activities of the Board and its Committees are covered in scheduled meetings held during the year. Additional
ad hoc meetings are also held to consider and decide matters outside of scheduled meetings. All Directors holding office
at the time attended the Annual General Meeting held on 8 February 2018.
If a Director is unable to attend a meeting because of exceptional circumstances, he/she still receives the papers in
advance of the meeting and has the opportunity to discuss with the relevant Chair or the Company Secretary & Group
General Counsel any matters on the agenda which they wish to raise. Feedback is provided to the absent Director on the
decisions taken at the meeting.
For further information regarding when Board members joined or stepped down from Committees during and after the
2018 financial year, please refer to the ‘Committee changes’ sections in the relevant Committee reports (pages 76 to 86).
No of Meetings
Executive Directors
Johan Lundgren(1)
Carolyn McCall DBE(2)
Andrew Findlay(3)
Non-Executive Directors
John Barton
Charles Gurassa(4)
Adèle Anderson(5)
Dr Andreas Bierwirth(6)
Keith Hamill OBE(7)
Moya Greene DBE(8)
Andy Martin(9)
Julie Southern(10)
Notes:
Board
14
11/11
2/3
13/14
14/14
14/14
13/14
13/14
4/4
14/14
12/14
2/2
Audit
Finance
Nominations
Remuneration
Safety
5
–
–
–
–
4/4
5/5
–
1/1
–
5/5
N/A
4
–
–
–
–
4/4
–
4/4
–
–
4/4
–
6
–
–
–
6/6
6/6
–
–
1/1
4/4
5/6
–
7
–
–
–
–
7/7
7/7
–
–
7/7
6/7
N/A
4
–
–
–
–
4/4
4/4
1/1
4/4
–
N/A
(1) Johan Lundgren joined the Board as Chief Executive on 1 December 2017
(2) Carolyn McCall DBE stepped down as Chief Executive on 30 November 2017 and was not invited to attend one Non-Executive Director only
Board meeting
(3) Andrew Findlay was not invited to attend one Non-Executive Director only Board meeting
(4) Charles Gurassa was appointed to the Audit Committee on 17 November 2017 on a temporary basis and attended all Committee meetings
following his appointment
(5) Adèle Anderson missed one Board meeting due to a significant family commitment
(6) Andreas Bierwirth missed one ad hoc Board meeting due to an employer commitment
(7) Keith Hamill OBE stepped down from the Board on 31 December 2017
(8) Moya Greene DBE was appointed to the Nominations Committee on 19 March 2018
(9) Andy Martin missed one set of ad hoc Board, Remuneration and Nominations Committee meetings (arranged at short notice) as a result of
his being on annual leave. He also missed the September Board meeting due to ill health
(10) Julie Southern joined the Board, Audit, Remuneration and Safety Committees on 1 August 2018
Insurance cover
The Group has purchased and maintains appropriate insurance cover in respect of Directors’ and Officers’ liabilities. The Group
has also entered into qualifying third-party indemnity arrangements for the benefit of all its Directors, in a form and scope which
comply with the requirements of the Companies Act 2006.
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GOVERNANCE
ACCOUNTABILITY
Financial and business reporting
Please refer to:
• page 110 for the Board’s statement on the Annual Report
and Accounts being fair, balanced and understandable;
• page 36 for the statement on the status of the Company
and the Group as a going concern and the Viability
Statement; and
•
the strategic report on pages 7 to 9 for an explanation of
the Group’s business model and the strategy for delivering
the objectives of the Group.
Risk management and internal control
The Board has carried out a robust assessment of the
principal risks facing the Group and how those risks affect
the prospects of the Group. Please refer to pages 38 to 48
for further information on the Group’s principal risks and
uncertainties and page 36 for their impact on the longer-term
viability and prospects of the Group.
The overall responsibility for easyJet’s systems of internal
control and for reviewing their effectiveness rests with the
Board. The Board has conducted an annual review of the
effectiveness of the systems of internal control during the
year under the auspices of the Audit Committee. Further
information on the Group’s risk management processes is
given on page 38 and on its internal control systems on
page 82.
Audit Committee and auditors
For further information on the Group’s compliance with the
Code and provisions relating to the Audit Committee and
auditors, please refer to the Audit Committee report on
pages 80 to 84.
EFFECTIVENESS
Composition of the Board
As at 30 September 2018, the Board comprised seven
Non-Executive Directors (including the Chairman) and two
Executive Directors.
Independence
The Board considers Adèle Anderson, Dr Andreas Bierwirth,
Charles Gurassa, Andy Martin, Moya Greene DBE and Julie
Southern to be Non-Executive Directors who are independent
in character and judgement. John Barton was considered
to be independent prior to his appointment as Chairman.
Non-Executive Directors do not participate in any of the
Company’s share option or bonus schemes. The Board reviews
its Committee membership each year to ensure that undue
reliance is not placed on individuals.
Appointments to the Board
The Nominations Committee leads the process for Board
appointments and makes recommendations to the Board.
For information on the work of the Nominations Committee
and a description of the Board’s policy on diversity and
inclusion, please refer to the Nominations Committee report
on pages 78 and 79.
Time commitment
Following the Board evaluation process, detailed further below,
the Board is satisfied that each of the Directors is able to
allocate sufficient time to the Group to discharge his or her
responsibilities effectively.
Contracts and letters of appointment with Directors
are made available at the Annual General Meeting or
upon 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/.
Executive Directors and the AMB are permitted to take
up non-executive positions on the board of a listed company
so long as this is not deemed to interfere with the business
of the Group. Andrew Findlay has acted as Non-Executive
Director at Rightmove plc since June 2017, with his time
commitment for this role being six days per year. Executive
Directors’ appointments to such positions are subject to the
approval of the Board which considers, amongst other things,
the time commitment required.
Development
On joining the Board, new members receive a tailored
induction organised by the Company Secretary & Group
General Counsel which covers, amongst other things, the
business of the Group, their legal and regulatory responsibilities
as Directors, briefings and presentations from relevant
executives and opportunities to visit and experience easyJet’s
business operations. For further information on Board
induction, please refer to page 75.
To update the Directors’ skills, knowledge and familiarity
with the Group, visits to bases are organised for the Board
periodically, to assist Directors’ understanding of the
operational issues that the business faces. In June, the Board
visited our new base at Berlin Tegel Airport, where Directors
attended a presentation from the local management and took
the opportunity to meet crew members. For further
information on the base visit, please refer to page 69.
Regular briefing papers are provided to Board members to
update them on relevant developments in law, regulation and
best practice, usually two to four times per year. Directors are
encouraged to highlight specific areas where they feel their
skills or knowledge would benefit from further development as
part of the annual Board evaluation process.
Information and support
All members of the Board are supplied with appropriate, clear
and accurate information in a timely manner covering matters
which are to be considered at forthcoming Board or
Committee meetings.
Should Directors judge it necessary to seek independent legal
advice about the performance of their duties with the Group,
they are entitled to do so at the Group’s expense. Directors
also have access to the advice and services of the Company
Secretary & Group General Counsel, who is responsible for
advising the Board on all governance matters and ensuring
that Board procedures are complied with.
The appointment and removal of the Company Secretary &
Group General Counsel is a matter requiring Board approval.
Re-election
The Company’s Articles of Association require the Directors
to submit themselves for re-election by shareholders at least
once every three years. However, the Board has decided that
all Directors will stand for re-election (or election) at each
Annual General Meeting in accordance with the Code.
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CONTINUED
BOARD EVALUATION
2017 BOARD AND COMMITTEE INTERNAL EVALUATION: ACTION AND PROGRESS
During 2017, an internal evaluation was undertaken by the Company Secretary & Group General Counsel. The review extended
to all aspects of Board and Committee performance including composition and dynamics, the Chairman’s leadership, agenda and
focus, time management, strategic oversight, overview of risk, succession planning and priorities for change. The areas identified
for development, together with the actions undertaken to address them during 2018, are set out below.
AREAS IDENTIFIED IN 2017
Succession planning
Agenda planning and focus
Enhanced operational
understanding for the Board
WHAT WE HAVE DONE DURING 2018
The Nominations Committee reviewed both the Board’s and the Group’s
leadership and succession plans. During 2018, the Nominations Committee
initiated a process for the identification and recruitment of additional independent
Non-Executive Directors over a two-year period. Further details are set out on
page 78.
During 2018, a comprehensive review of our talent and succession coverage
across all business functions and at executive and senior leadership level was
commenced; this will continue to evolve over the course of 2019.
When setting Board agendas, appropriate time has been allocated to improve
the balance of time spent on commercial matters and more strategic discussion,
including industry consolidation, the competitive environment and the impact of
Brexit on the business.
There is a tailored induction programme in place for newly appointed Directors,
and the annual base visit provides an opportunity for the Board to better
understand operational issues first hand through engagement with local staff.
Key industry topics impacting the aviation sector have also been covered by
external bodies at Board meetings during 2018. Greater focus will be placed in
2019 on encouraging Directors to highlight specific areas where they feel they
would benefit from further development.
2018 BOARD AND COMMITTEE EXTERNAL EVALUATION: THE PREPARATION
For the 2018 external Board evaluation, the Board engaged Dr Sabine Dembkowski of Better Boards Limited (‘Better Boards’)
to conduct an independent external evaluation of the performance of the Board, its Committees and the Chairman, following
the process and steps outlined below and on the following page. Neither Sabine nor Better Boards has any other connection
with the Group.
The purpose of Sabine’s approach was to gain insights into the hallmarks of effective boards, together with how Directors view
themselves versus how they are perceived by their fellow Directors and other key stakeholders. The overall outcome was an
understanding of the levers that individual Directors can personally pull to increase their impact in the boardroom in order to
make the Board more effective. The end result was a collective action plan that allows the Board to focus on the right and most
crucial issues.
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GOVERNANCE 2018 BOARD AND COMMITTEE EXTERNAL
EVALUATION: THE OUTCOME
Key insights
The Board evaluation process found that:
•
•
the Board has distinctive strengths: openness and
respect for each other, a collaborative working style,
good diversity of experience and a healthy balance.
Such strengths can be built on to create an upward
trajectory in performance; and
the Board has a strong collective memory of a series
of successes and achievements, such as the acquisition
of part of Air Berlin’s operations at Berlin Tegel Airport.
The key areas identified by this year’s external evaluation
for increased focus and development during the 2019
financial year are set out below. Progress against these areas
will be reviewed as part of the 2019 internal evaluation and
reported on next year:
• continued focus on succession planning at Board, AMB
and executive leadership team level;
• enhancements to be made to agenda planning working
practices to improve the effectiveness and organisation of
Board meetings; and
•
integration of a broader set of stakeholders’ interests within
Board decision making processes.
Review of the Chairman’s performance
Charles Gurassa, as Senior Independent Director, with input
and data provided by Dr Sabine Dembkowski, led a review
of the Chairman’s performance and held a private meeting
of the Non-Executive Directors without the Chairman being
present to discuss this. It was concluded that John Barton’s
performance and contribution remain strong and that he
demonstrates effective leadership. The Executive Directors
and the Non-Executive Directors also reviewed, and were
satisfied with the Chairman’s time commitment to the Board
and the business.
2018 BOARD AND COMMITTEE EXTERNAL
EVALUATION: THE STAGES
STAGE 1: PROGRAMME DESIGN
Meetings held between Better Boards and the Company
Secretary & Group General Counsel to discuss and agree
the programme’s objectives, areas of particular focus,
design and action plan.
STAGE 2: BOARD INTRODUCTION
Better Boards presented the programme’s objectives at
the July Board meeting and explained the various steps
in the process and the time commitment required from
Board members.
STAGE 3: INDIVIDUAL FACE-TO-FACE MEETING
Better Boards held one-to-one meetings with individual
Board and certain AMB members to gain personal
insights into the Board’s effectiveness, including any
challenges and issues.
STAGE 4: QUESTIONNAIRE
Each Board member completed a confidential online
questionnaire.
STAGE 5: DATA ANALYSIS BY BETTER BOARDS
Data from the online questionnaire and one-to-one
meetings was combined to generate individual reports
and an aggregated report for the collective Board.
STAGE 6: INDIVIDUAL FEEDBACK
CONVERSATION
Better Boards held confidential feedback sessions with
each Board member to discuss the findings from their
individual reports. Each session concluded with a
personal action plan.
STAGE 7: FEEDBACK MEETING
Better Boards held meetings with the Chairman and
Company Secretary & Group General Counsel to discuss
the aggregated Board results and agree an action plan.
STAGE 8: BOARD ACTION PLAN
This included a Board strength matrix, key competencies,
priorities, culture and measures for aligning Board vision.
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CORPORATE GOVERNANCE REPORT
CONTINUED
REMUNERATION
For further information on the Group’s compliance with the
Code provisions relating to remuneration, please refer to:
RISK MANAGEMENT AND INTERNAL CONTROL
The Board has overall responsibility for easyJet’s risk
management and systems of internal control.
•
the Directors’ remuneration report on pages 87 to 105
for the level and components of remuneration; and
• page 86 (the Remuneration Committee report) for
procedures relating to remuneration.
RELATIONS WITH SHAREHOLDERS
Dialogue with shareholders
The Group actively engages with investors and seeks their
feedback. The Chairman and Deputy Chairman met with
shareholders during the year to help maintain a balanced
understanding of their issues and concerns. They also
attended a senior investor dinner in January and met with
a number of the Group’s top institutional investors. The
Chairman has updated the Board on the opinions of investors.
The views of shareholders and market perceptions are also
communicated to the Board via presentations by the Head
of Investor Relations at least every quarter.
easyJet has an Investor Relations function which runs an
active programme of engagement with actual and potential
investors based around the financial reporting calendar. This
year the programme has included one-to-one meetings with
institutional investors, roadshows and conferences. easyJet
has particularly targeted and engaged with European investors
during the year as part of an enhanced programme related
to potential future ownership changes. There is also regular
communication with institutional investors on key
business issues.
During the year, the Chairman, Deputy Chairman and Chief
Executive met with representatives of easyGroup Holdings
Limited, the Company’s largest shareholder, to discuss
relevant matters. The Chief Financial Officer and Company
Secretary & Group General Counsel have also met separately
with representatives of easyGroup Limited (an affiliate of
easyGroup Holdings Limited) to discuss matters relating to the
management and protection of the ‘easyJet’ and ‘easy’ brands.
Constructive use of the Annual General Meeting
The Annual General Meeting (AGM) gives all shareholders
the opportunity to communicate directly with the Board
and encourages their participation. Shareholders are given
the opportunity to raise issues formally at the AGM or
informally with Directors after the meeting. All Directors
attend the AGM and the Chairs of the Committees are
available to answer questions.
Risk management
easyJet has an established risk management process to
ensure that significant risks are identified and mitigated
where possible. For further details of the risk management
process, the principal risks and uncertainties faced by the
Group and the associated mitigating actions, please refer
to pages 38 to 48.
To ensure that risks are managed effectively, a number of
activities are undertaken:
• An AMB member is allocated as the risk owner for each
principal risk, with responsibility for the day-to-day
management of that risk.
• Ongoing risk management and assurance is provided
through the various monitoring reviews and reporting
mechanisms that are embedded in the business operations.
The results of these reviews are reported to the Audit
Committee and the Board, which consider whether these
high-level risks are being effectively controlled.
• Regular operational (including safety), commercial,
financial and IT functional meetings are held to review
performance and to consider key risks and issues (please
refer to page 76 for details of the Safety Committee).
• The AMB meets regularly to consider significant risks, the
status of risk mitigations and overall business performance;
this ensures key issues are escalated through the
management team and, as appropriate, ultimately to
the Board.
• The Directors review the effectiveness of internal controls,
including operating, financial and compliance controls.
The Audit Committee undertakes an annual review of the
appropriateness of the risk management processes to ensure
that they are sufficiently robust to meet the needs of the
Group (please refer to pages 80 to 84 for details of the Audit
Committee’s responsibilities).
Internal control
The Group’s internal control systems are designed to manage,
rather than eliminate, the risk of failure to achieve business
objectives. By their nature, they can only provide reasonable,
not absolute, assurance against material misstatement or loss.
The internal financial control monitoring programme,
administered by Internal Audit, has continued to enhance the
review process. 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 anonymously and in
confidence. 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 2018
GOVERNANCE Internal audit
The Internal Audit function’s key objectives are to provide
independent and objective assurance on risks and controls
to the Board, Audit Committee and senior management, and
to assist the Board in meeting its corporate governance and
regulatory responsibilities. The internal audit plan is approved
by the Audit Committee on behalf of the Board, and updated
on a rolling basis.
The Internal Audit team reviews the extent to which systems
of internal control:
• are designed and operating effectively;
• are adequate to manage easyJet’s key risks; and
•
safeguard the Group’s assets.
The Head of Risk and Assurance reports directly to the Chief
Financial Officer and continues to have direct access to the
Chief Executive and the Chair of the Audit Committee. The
Head of Risk and Assurance is invited to, and attends, Audit
Committee meetings throughout the year and reports regularly
on Internal Audit activity to the AMB.
During the year, the effectiveness of the Internal Audit
function was assessed by the Audit Committee. The role
of the Internal Audit function and the scope of its work both
continue to evolve to take account of recommendations from
the external effectiveness review, changes within the business,
and emerging best practice. A formal audit charter is in place.
NON-EXECUTIVE DIRECTOR INDUCTION PROGRAMME
The outcome was an
insightful understanding
of easyJet’s business,
culture, people and key
relationships
Julie Southern, appointed Non-Executive Director on
1 August 2018, followed a tailored induction programme
covering a range of key areas of the business, a flavour
of which is given below. These included matters pertinent to
her roles on the Audit, Remuneration and Safety Committees.
Safety
• Attended a half-day session hosted by the Director
of Safety, Security and Compliance which included
briefings on the regulatory framework, compliance
monitoring, health and human rights performance and
safety operations and security
• Met employees throughout the business and in key
safety roles to discuss safety matters
• Met with the Chair of the Safety Committee
Governance and remuneration
• Met key employees in our Reward team, including
the Group People Director, to understand our
reward strategy, remuneration policy and current
market practice
• Met with the Chair of the Remuneration Committee
Finance and audit
• Attended face-to-face briefing sessions on key risks,
costs and revenue, balance sheet and financial metrics
with the Chief Financial Officer, Head of Risk and
Assurance, Director of Treasury and Tax, and the
Finance Director
• Met with the Chair of the Audit Committee
The Board and senior management
• Met with the Chairman and Senior Independent Director
• Met with key members of the senior management team
including the Group Director of Strategy and Network,
the Chief Operating Officer and Chief Financial Officer
• Received a Board induction pack to assist with building
an understanding of the nature of the Group,
its business, markets and people, and to provide
an understanding of the Group’s main relationships.
The pack also included information to help facilitate a
thorough understanding of the role of Director and the
framework within which the Board operates.
Business and functions
• Attended a London Luton Airport site visit, hosted by
a senior Ground Operations manager and the Head
of Airport and Central Procurement, to understand
the issues of one of our largest bases
• Met with the Head of Investor Relations
• Met with a key broker to understand easyJet from
a market and broker’s perspective
• Received a briefing from McKinsey which focused on
key issues facing easyJet, and the dynamics of the
low-cost airline market
www.easyJet.com
75
CORPORATE GOVERNANCE REPORT
CONTINUED
Board committees
SAFETY COMMITTEE REPORT
COMMITTEE CHANGES
• Keith Hamill OBE stepped down from the Board and
the Committee on 31 December 2017
• Julie Southern was appointed to the Board and as a
member of the Committee on 1 August 2018
KEY ACTIVITIES OF THE COMMITTEE
DURING THE YEAR
• Supported executive leadership with the
appointment of key management in the Safety,
Security and Compliance team
• Continued to monitor the progress of the 2018
Safety Plan
• Reviewed and approved the insourcing of
maintenance operations at Gatwick Airport
• Received regular updates on any actions in relation
to aircraft cyber security updates
• Oversight and assurance of the wet lease operations
at Berlin Tegel Airport
• Monitored and reviewed the operation and
integration of the new A321neo aircraft
• Reviewed and approved a consortium project
to continue the work already done on wildlife
management at airports, in particular relating to
bird strikes
In line with easyJet’s position that safety is our number one
priority, the Safety Committee continues to ensure that
safety receives the highest level of Board attention. The
Director of Safety, Security and Compliance reports to the
Chief Executive and also has the right of direct access to Dr
Andreas Bierwirth as Committee Chair and to the Board
Chairman, which reinforces the independence of safety
oversight. As Committee Chair, Andreas reports to the Board
with his own assessment of safety management within the
airline throughout the year.
The Committee has welcomed the ongoing continuous
improvement being made by the business with regard
to safety investigations. easyJet continues to train new
investigators from across the business with monthly
courses and now has over 300 lead investigators on its
staff. In addition a revised version of the safety investigation
manual was reviewed and approved by the Committee.
easyJet continues to deliver high standards of safety
across the aviation sector in Europe. Following the UK’s
vote to leave the EU, a new AOC in Austria has been added
to help manage the airline’s risks associated with Brexit. This
has broadened the scope of the Safety Plan to incorporate
the Austrian regulator, Austro Control, and the associated
easyJet Europe nominated person structure. easyJet
continues to grow, making it imperative that we retain
our focus on current and emergent risks.
DR ANDREAS BIERWIRTH
Chair of the Safety Committee
PRIMARY ROLE
To oversee the quality and effectiveness of easyJet’s safety
strategies, standards, policies and initiatives, together with
risk exposures, targets and performance, in order to ensure
that safety receives the highest level of Board attention.
The Committee’s terms of reference, reviewed and
approved annually, are available on the Company’s website
at http://corporate.easyjet.com/.
KEY RESPONSIBILITIES
• To assess the Group’s oversight of safety (including
security) systems, processes, operations and resources
• To monitor and review notable incidents and actions
• To review and receive updates on the progress of the
Safety Plan
• To monitor and review specific deep-dive safety,
security and compliance issues as requested by the
Board and Committee
• To review the resourcing and operation of the Safety,
Security and Compliance team through regular reports
from the Director of Safety, Security and Compliance
MEMBERSHIP, MEETINGS AND ATTENDANCE
• Dr Andreas Bierwirth (Chair)
• Adèle Anderson
• Moya Greene DBE
• Julie Southern
All members of the Committee are independent Non-
Executive Directors. Member biographies can be found
on pages 61 to 63.
The Director of Safety, Security and Compliance has
attended all Safety Committee meetings during the
year. Other key invitees including the Chief Executive,
the Chief Operating Officer, the Head of Safety, Security
and Compliance and nominated persons for Flight
Operations, Engineering and other functions have
attended as relevant.
Meeting attendance can be found in the table on page 70.
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE The Committee received updates on progress towards
an integrated management system with the major focus
being the development of management system governance
processes to ensure that our three AOCs can discharge their
regulatory responsibilities effectively and efficiently.
SECURITY
The Security team continued to support the business in line
with the team strategy for 2018 which included:
• dealing with nearly 300 investigations;
•
supporting crew following disruptive passenger incidents;
• visiting over half of crew bases to offer support, training
and provide threat briefings;
• working with the Department of Transport and other
relevant authorities to provide additional security measures;
•
supporting law enforcement agencies with data protection
requests including assisting with their people trafficking
investigations;
• working to achieve compliance with relevant
elements of the SeMS (Security Management System)
requirements; and
• monitoring events during the World Cup and their potential
impact on the easyJet operation.
This summer easyJet employed additional police at the gates
in Newcastle, Liverpool and Stansted to support routes where
trends of disruptive passengers had been identified. The
Committee is committed to ensuring that disruptive
passengers are a key focus of the Safety, Security and
Compliance team.
COMPLIANCE
The Group’s internal compliance monitoring programme
enables easyJet to monitor the organisation’s compliance with
the applicable aviation regulations. The programme activities
include audits, inspections, reviews and assessments so as
to measure the effectiveness of the procedures designed
by the organisation to ensure safe activities. The findings
resulting from the monitoring activities are regularly reported
to, and reviewed by, the Committee in order to maintain and
improve compliance.
HEALTH AND WELLBEING
The Committee endorses the integrated approach to health,
wellbeing and safety being taken by easyJet to support our
people and enhance the resilience of the operation.
As one example, the Pilot Peer Support Programme was
launched in the UK bases in December 2017. This has been
received very positively by the European Works Council and
pilot unions across the network, and we are now progressively
launching the programme.
Key policies are currently under development in collaboration
with the People team which will cover areas such as ‘just
culture’, mental health, and drugs and alcohol testing. We aim
to provide a further update in next year’s Committee report.
LOOKING FORWARD
Over the next year, the Committee will continue to monitor
and review the structure, content and operation of the Group’s
safety, security and compliance activities. More generally,
we will continue to provide support to management on
embedding a productive culture to ensure high standards
of safety continue to be delivered.
THE COMMITTEE IN ACTION
In July 2018, Committee members Moya Greene DBE
and Julie Southern, both Non-Executive Directors
spent half a day with the Safety, Security and
Compliance team.
Moya and Julie had the opportunity to meet with key
members of the management team and received
presentations on topics such as:
•
•
•
the regulatory framework;
the easyJet Safety and Management System;
risk management;
• change management;
• compliance monitoring and standards assurance;
• occupational health and safety;
•
•
fatigue risk management; and
security.
We could see first-hand
how the business manages
its processes, structures
and relationships so that
safety remains the number
one priority
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CORPORATE GOVERNANCE REPORT
CONTINUED
NOMINATIONS COMMITTEE REPORT
KEY ACTIVITIES OF THE COMMITTEE
DURING THE YEAR
• Evaluated the balance of skills, experience,
independence and knowledge on the Board
• Prepared specifications of the roles and capabilities
required for the recruitment of new independent
Non-Executive Directors
• Oversaw the appointment process and interviewed
shortlisted candidates for new Non-Executive
Director roles, and recommended Julie Southern to
the Board
• Reviewed and approved the Board Diversity and
Inclusion Policy
• Oversaw the induction programmes for Moya Greene
DBE and Julie Southern
• Under the direction of the Chairman, led the external
Board evaluation process
SUCCESSION PLANNING
The Board continues to be satisfied that plans are in place
for orderly succession for appointments to the Board so
that the right balance of appropriate skills and experience
is represented. During the year, the Committee agreed
that, where appropriate, development plans be put in
place for senior management as part of the Chief Executive
succession planning process which commenced following
the appointment of Johan Lundgren as Chief Executive in
December 2017.
COMPOSITION OF THE BOARD
With the support of an external provider, Calibroconsult
Limited, the Committee looked in detail at the skills that
each Director brings to the Board and those that would
be required from new joiners to help easyJet achieve its
strategic objectives and deliver sustainable shareholder
value. The outcome of this detailed review, which took
into account the opinions expressed by all Board members,
resulted in a two-year implementation plan for an orderly
refresh process for external appointments to the Board.
Against the background of the remaining tenure of the
current Non-Executive Directors, the need was identified to
recruit additional Non-Executive Directors with specific skills
and experience such as finance, heavily data-driven businesses,
the aviation sector, European businesses, and EU political and
regulatory regimes.
JOHN BARTON
Chair of the Nominations Committee
PRIMARY ROLE
To ensure there is a formal, rigorous and transparent
procedure for the appointment of new Directors to
the Board.
The Committee’s terms of reference, reviewed and
approved annually, are available on the Company’s
website at http://corporate.easyjet.com/.
KEY RESPONSIBILITIES
• To review the structure, size and composition
(including the skills, knowledge, independence,
experience and diversity) of the Board and make
any recommendations to the Board
• To satisfy itself that plans are in place for orderly
succession for appointment to the Board and
senior management
• To identify and nominate candidates to fill Board
vacancies, for the approval of the Board
• To lead on the Board annual evaluation process
MEMBERSHIP, MEETINGS AND ATTENDANCE
• John Barton (Chair)
• Moya Greene DBE
• Charles Gurassa
• Andy Martin
All members of the Committee are independent Non-
Executive Directors. Member biographies can be found
on pages 61 to 63.
Other key invitees including the Chief Executive, the Group
People Director and external advisers attended as relevant.
Meeting attendance can be found in the table on page 70.
COMMITTEE CHANGES
• Keith Hamill OBE stepped down from the Board and the
Committee on 31 December 2017
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE NON-EXECUTIVE APPOINTMENTS
With the need for an additional Non-Executive Director
with strong financial expertise having been identified for
recruitment during the first half of 2018, Russell Reynolds
Associates (‘Russell Reynolds’) were engaged, after a selection
process, to act as easyJet’s search consultants for this role.
The Committee considered a list of potential candidates,
provided by Russell Reynolds, and took into account the
balance of skills, knowledge, independence, diversity and
experience of the Board together with an assessment of
the time commitment expected. The preferred candidate
was interviewed individually by all members of the Nominations
Committee and by other members of the Board. Following
this process, the Committee recommended to the Board that
Julie Southern be appointed as a Non-Executive Director with
effect from 1 August 2018. Julie’s other commitments were
disclosed to the Board before her appointment and are
provided on page 63.
The search for additional Non-Executive Directors commenced
during the year, with the Committee having engaged Russell
Reynolds to conduct the process which, as at the date of this
report, is ongoing.
DIVERSITY AND INCLUSION AT BOARD LEVEL
We recognise the importance of a diverse Board, bringing
together an appropriate mix of skills and experience to
ensure the future success of our business. We understand
the richness a diverse Board brings in providing the range
of perspectives, insight and challenge needed to support
good decision making and create a positive culture in
the organisation.
New appointments to the Board continue to be made on merit
in the context of the requirements of the Board at that time.
The Committee identifies suitable candidates against objective
criteria and with due regard for the benefits of diversity on the
Board, including cognitive and personal strengths as well as
diversity of gender and social and ethnic backgrounds. Where
there is a known requirement to improve the diversity of the
Board, the Nominations Committee will ask to see a higher
proportion of candidates fitting the diversity criteria. However,
the final selection will, as stated, always be on merit.
Following the annual review of the Board, the Nominations
Committee will discuss the makeup of the Board and agree
annual objectives on diversity for proposal to the Board,
taking into account the recommendations set out in the
Hampton-Alexander Review (which recommends that 33%
of Board and executive committee members should be
female), the McGregor-Smith Review and the Parker Review
(which recommends at least one director of colour by 2021).
To formalise this approach to diversity and inclusion, the
Committee reviewed and approved a Board Diversity and
Inclusion Policy at its September meeting.
As at 30 September 2018, the Company had three
female Directors at Board level, equating to 33% female
Board representation.
The Committee will report annually in the corporate
governance section of the Annual Report on the progress
made in this area by the Board, in particular on the specific
approach to any Board appointments made in the year.
DIVERSITY AND INCLUSION ACROSS
THE BUSINESS
The Nominations Committee oversees the development of
a diverse pipeline for future succession to Board and senior
management appointments, including the gender balance
of senior management and its direct reports. Where there
is a known requirement to improve the diversity at a certain
level or in a certain function in the organisation, the recruiting
team will ask to see a higher proportion of candidates fitting
the diversity criteria. However, the final selection will always be
on merit.
easyJet’s People team monitors the Group’s diversity on at
least an annual basis and highlights any areas of concern to
the AMB. The corporate responsibility section of the Annual
Report on page 54 reports in further detail on the approach
being taken to diversity and inclusion, and the implementation
of the policy across the Group.
EXTERNAL BOARD EVALUATION PROCESS
Under the direction of the Chairman, an independent Board
evaluation review was conducted during the year, which was
externally facilitated by Better Boards Limited. Further details
on the process taken and the outcome are given on pages
72 to 73.
RE-ELECTION OF DIRECTORS
The effectiveness and commitment of each of the Non-
Executive Directors is reviewed annually. The Committee
has satisfied itself as to the individual skills, relevant
experience, contributions and time commitment of all the
Non-Executive Directors, taking into account their other
offices and interests held.
Prior to the appointment of Julie Southern to the Board in
August, the Board reviewed Julie’s other offices and was
satisfied by her approach to managing her time commitment.
The Board is recommending the formal election to office of
Julie Southern and the re-election to office of all the other
Directors at this year’s AGM. Details of the service agreements
for the Executive Directors and letters of appointment for the
Non-Executive Directors, and their availability for inspection,
are set out in the Directors’ remuneration report on pages
87 to 105.
ADVISERS
During the year, the Committee worked with external
consultant Calibroconsult Limited to undertake a full analysis
of the capability and size of the current Board against future
needs. Search consultants Russell Reynolds were also engaged
to identify candidates for additional Non-Executive Director
roles. For the 2018 external Board evaluation, the Committee
worked with Better Boards Limited. None of Calibroconsult,
Russell Reynolds or Better Boards has any other connection
with the Group.
www.easyJet.com
79
CORPORATE GOVERNANCE REPORT
CONTINUED
AUDIT COMMITTEE REPORT
COMMITTEE CHANGES
• Charles Gurassa was appointed as a member of the
Committee on 17 November 2017 on a temporary basis.
• Keith Hamill OBE stepped down from the Board and the
Committee on 31 December 2017.
• Julie Southern was appointed as a member of the
Committee on 1 August 2018 and will become Audit
Committee Chair from 1 January 2019.
• Adèle Anderson will step down from the Committee
with effect from 1 January 2019.
The Board is satisfied that the Audit Committee, as a whole,
possesses experience relevant to the sector in which the
Group operates. The majority of Committee members have
a significant amount of sector experience as Non-Executive
Directors of easyJet, and both Andy Martin and Julie Southern
have executive sector experience in their previous roles at First
Choice Holidays plc and Virgin Atlantic respectively. In addition,
three of the four current Committee members are qualified
accountants. The Board is also satisfied that Adèle Anderson,
in particular, as Audit Committee Chair, possesses the recent
and relevant experience required by the Code.
The Audit Committee met five times during the year.
In each case, appropriate papers were distributed to the
Committee members and other invited attendees, including
representatives of the external audit firm and the internal
Risk and Assurance function. In addition, as Committee Chair,
Adèle holds regular private sessions with senior members of
the Finance team, the Head of Risk and Assurance and the
external audit team to ensure that open and informal lines of
communication exist should they wish to raise any concerns
outside of formal meetings.
FAIR, BALANCED AND UNDERSTANDABLE
The Committee assessed and recommended to the Board
that, taken as a whole, the 2018 Annual Report and Accounts
(which the Board subsequently approved) are fair, balanced
and understandable and provide the necessary information for
shareholders to assess the Group and Company’s position and
performance, business model and strategy. More information
on the process undertaken to reach this assessment can be
found on page 82.
FINANCIAL AND BUSINESS REPORTING
Through its activities, the Committee focuses on maintaining
the integrity and quality of our financial reporting, considering
the significant accounting judgements made by management
and the findings of the external auditor. The Committee
assesses whether suitable accounting policies have been
adopted and whether management has made appropriate
estimates and judgements. The Committee reviewed
accounting papers prepared by management which provided
details of significant financial reporting judgements. The
Committee also reviewed the reports by the external auditor
on the half year and full year 2018 results, which highlighted
any issues with respect to the work undertaken on the audit.
ADÈLE ANDERSON
Chair of the Audit Committee
PRIMARY ROLE
To assist the Board in fulfilling its oversight responsibilities
by reviewing and monitoring the integrity of the financial
information provided to shareholders, the Group’s system
of internal controls and risk management, the internal and
external audit process and the process for compliance with
laws, regulations and ethical codes of practice.
The Committee’s terms of reference, reviewed and
approved annually, are available on the Company’s website
at http://corporate.easyjet.com/.
KEY RESPONSIBILITIES
• To monitor the integrity of the financial statements of
the Company and the Group
• To review the content of the Annual Report and
Accounts and advise the Board on whether, taken as
a whole, they are fair, balanced and understandable
• To keep under review the adequacy and effectiveness
of the Group’s internal financial control systems
• To review and monitor the independence and objectivity
of the external auditor
MEMBERSHIP, MEETINGS AND ATTENDANCE
• Adèle Anderson (Chair)
• Charles Gurassa
• Andy Martin
• Julie Southern
All members of the Committee are independent Non-
Executive Directors. Member biographies can be found on
pages 61 to 63.
Other key invitees, including the Chief Financial Officer, the
Group Finance Director, the Head of Risk and Assurance,
the Director of Treasury and Tax and the external auditor,
attended as relevant.
Meeting attendance can be found in the table on page 70.
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE The Committee’s process included the comprehensive review of
financial issues through the challenge of management, consideration
of the findings of the external auditor and comparison with other
organisations. The number of such issues currently considered
significant is limited, reflective of easyJet’s relatively simple
business model and group structure which are unencumbered
by legacy issues. The significant issues considered in relation to
the financial statements are detailed below.
SIGNIFICANT JUDGEMENTS
The Committee considered whether the carrying value of
goodwill and landing rights held by easyJet, including those
acquired as part of the Air Berlin transaction, should be
impaired. The judgement in relation to impairment largely
relates to the assumptions underlying the calculation of the
value in use of the business being tested for impairment;
primarily whether the forecasted cash flows are achievable
and whether the overall macroeconomic assumptions
which underlie the valuation process are reasonable.
The Committee addressed these matters using
reports received from management outlining the basis
for assumptions used. The forecasted cash flows used in
the calculation were presented to the Board. In addition
the Audit Committee considered whether the carrying
value of significant IT projects was supported, taking
into consideration the Board’s view on the direction of
the projects and the anticipated benefits to be obtained
from each project.
The Committee reviewed the maintenance provision at
the year end, which had increased significantly as a result
of the leases acquired as part of the Air Berlin transaction.
A number of judgements are used in the calculation of the
provision, primarily pricing, utilisation of aircraft and timing
of maintenance checks. The Committee addressed these
matters using reports received from management which
set out the basis of assumptions used. The Committee
also discussed with the external auditor its review of the
assumptions underlying the estimates used.
The Committee reviewed the level and calculations of
key accruals and provisions which are judgemental in
nature, specifically customer claims in respect of flight
delays and cancellations.
The Committee considered the presentation of performance
measures and the income statement resulting from the
separate reporting of ‘non-headline’ items, being non-recurring
material items of income and expense that are significant
in either nature or amount, or items which are not considered
to be reflective of the trading performance of the business,
separately within its income statement in the Annual Report
and Accounts. Additionally the Committee considered the
separate presentation of performance measures in the
strategic report excluding Tegel performance. The Committee
believes that this presentation provides readers with a
better understanding of easyJet’s underlying performance.
The Committee considered the transition methods
and ongoing accounting policy under new accounting
standards IFRS 15 (Revenue from Contracts with
Customers), IFRS 16 (Leases) and IFRS 9 (Financial
Instruments), including the judgements, assumptions
and estimates made by management and the financial
impact these will have both upon adoption on 1 October
2018 and in the first year of adoption.
The Committee was satisfied that all issues had been fully
addressed, that the judgements made by management
were reasonable and appropriate and had been reviewed
and debated with the external auditor (who concurred with
the approach taken by management) and that the accounting
and disclosure requirements had been included in the Annual
Report and Accounts.
FINANCIAL REPORTING COUNCIL
REVIEW LETTER
In May 2018, easyJet received a letter from the Corporate
Reporting Review Team (CRRT) of the Financial Reporting
Council (FRC) in relation to its regular review and assessment
of the quality of corporate reporting in the UK. The letter
focused on the balance of the strategic report, the
disclosures of critical accounting judgements and estimates
and the disclosures of other provisions. The CRRT raised
certain questions regarding the presentation of the IFRS
performance measures within the strategic report and
compliance surrounding the usage of non-GAAP alternative
performance measures (APMs) within the European Securities
and Markets Authority (ESMA) guidelines. easyJet responded
to the CRRT’s questions providing clarifying information
and proposing specific enhancements to its 2018 Annual
Report and Accounts that would address the questions and
comments raised. These enhancements included ensuring
IFRS performance measures are disclosed alongside APMs
where appropriate, providing comparatives for all performance
measures within the strategic report and within the critical
accounting estimates disclosure, and clarifying which
estimates are not major sources of estimation uncertainty.
The recommendations from the review have been
incorporated into the 2018 financial statements.
RISK AND ASSURANCE
The Audit Committee is responsible for overseeing the work
of the Internal Audit function. It reviews and approves the
scope of the Internal Audit annual plan and assesses the
quality of Internal Audit reports, along with management’s
actions relating to findings and the closure of recommended
actions. The Audit Committee also considers stakeholder
feedback on the quality of Internal Audit’s work.
During 2018, a carefully targeted internal audit plan was
agreed and undertaken across easyJet’s operations, systems
and support functions with subsequent reports, including
management responses, recommended action plans and
follow-up reviews being considered by the Audit Committee
at each of its five meetings held during the year.
In order to safeguard the independence of the Internal Audit
function, the Head of Risk and Assurance (who heads up the
Internal Audit function) is given the opportunity to meet
privately with the Audit Committee without any other
members of management being present.
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81
CORPORATE GOVERNANCE REPORT
CONTINUED
FAIR, BALANCED AND UNDERSTANDABLE
At the request of the Board, the Committee considered
whether the Annual Report and Accounts are fair,
balanced and understandable and whether they provide
the necessary information for shareholders to assess
the Group’s position and performance, business model
and strategy. The Committee is satisfied that, taken
as a whole, the Annual Report and Accounts are fair,
balanced and understandable. In reaching this conclusion,
the Committee considered the overall review and
confirmation process around the Annual Report and
Accounts, including:
•
•
•
the input of subject matter experts, the AMB and
other senior management and, where applicable, the
Board and its Committees;
the processes and controls which underpin the
overall review and confirmation process, including the
preparation, control process, verification of content,
and consistency of information being carried out by
an internal financial controls specialist (independent
of the Finance function);
Internal Audit providing assurance over the audit trail
for material data points relating to the non-financial
statement aspects of the Annual Report and
Accounts, and external audit providing assurance
over the financial statements; and
• a full-day session to review the Annual Report and
Accounts held by senior management and other
subject matter experts to focus solely on the
reporting being fair, balanced and understandable.
The Committee was provided with, and commented
on, a draft copy of the Annual Report and Accounts.
It also received a specific paper from management to
assist in its challenge and testing of a fair, balanced and
understandable assessment. This paper contained an
agreed list of key positive and negative narratives for
the business in the 2018 financial year and asked the
Committee to confirm whether it feels each narrative
was given due prominence in the report and treated in
a fair, balanced and understandable manner.
In carrying out the above processes, key considerations
included ensuring that there was consistency between
the financial statements and the narrative provided
in the front half of the Annual Report, and that there
was an appropriate balance between the reporting
of weaknesses, difficulties and challenges, as well
as successes, in an open and balanced manner
including linkage between key messages throughout
the document.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board as a whole, including the Audit Committee
members, considers the nature and extent of easyJet’s
risk management framework and the risk profile that
is acceptable in order to achieve the Group’s strategic
objectives. The Audit Committee has reviewed the work
undertaken by management, the Committee itself and
the Board on the assessment of the Group’s principal risks,
including their impact on the prospects of the Group. As a
result, it is considered that the Board has fulfilled its obligations
under the Code in relation to risk management and internal
controls. Further details on the Group’s principal risks and
uncertainties and their impact on the prospects of the Group
are set out on pages 38 to 48.
easyJet’s system of internal controls, along with its design
and operating effectiveness, which includes the Group’s
financial reporting process, is subject to review by the Audit
Committee, through reports received from management,
along with those from both internal and external auditors.
Any control deficiencies identified are followed up, with
action plans tracked by the AMB and the Committee.
Further details of risk management and internal control are
set out on page 74.
ANTI-BRIBERY AND WHISTLEBLOWING
The Code includes a provision requiring the Audit Committee
to review arrangements by which staff of the Company may,
in confidence, raise concerns about possible improprieties
in matters of financial reporting or other matters. The Audit
Committee’s objective is to ensure that arrangements are in
place for the proportionate and independent investigation of
such matters and for appropriate follow-up action.
The Group is committed to the highest standards of quality,
honesty, openness and accountability. The Group and all
operating companies have whistleblowing policies in place.
Employees are encouraged to raise genuine concerns under
the policy and any concerns raised are investigated carefully
and thoroughly to assess what action, if any, should be
taken. Any matters of significance are reported to the Audit
Committee, along with a comprehensive full year report.
The Board supports the objectives of the Bribery Act 2010
and procedures have been established to ensure that
compliance is achieved. These set out what is expected from
our colleagues and stakeholders to ensure that they protect
themselves as well as the Group’s reputation and assets.
Training has been provided to the Board, senior management
and all employees and is refreshed on a regular basis.
Any breach of the Bribery Act will be regarded as serious
misconduct, potentially justifying immediate dismissal.
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE AUDIT COMMITTEE ACTIVITY IN THE 2018 FINANCIAL YEAR
The main areas of Committee activity during the 2018
financial year included the planning, monitoring, reviewing
and approval of the following:
INTEGRITY OF FINANCIAL STATEMENTS
• The integrity of the 2017 full year and 2018 half
year financial statements relating to the financial
performance and governance of the Group
INTERNAL AUDIT EFFECTIVENESS
AND REVIEW OF ACTIVITIES
• An assessment of the effectiveness and independence
of the Internal Audit function, including consideration of:
– key Internal Audit reports;
– stakeholder feedback on the quality of Internal
Audit activity;
• The material areas in which significant judgements
– Internal Audit’s compliance with prevailing
were applied based on reports from both the Group’s
management and the external auditor. Further
information is provided in the significant judgements
section on page 81
• The information, underlying assumptions and stress-test
analysis presented in support of the Viability Statement
and going concern status
• The consistency and appropriateness of the financial
control and reporting environment
• The potential impact of new accounting standards
IFRS 9 (Financial Instruments), IFRS 15 (Revenue from
Contracts with Customers) and IFRS 16 (Leases)
• The availability of distributable reserves to fund the
professional standards; and
– the implementation of Internal Audit
recommendations.
RELATIONSHIP WITH EXTERNAL AUDITOR
• The scope of and findings from the external audit plan
undertaken by PricewaterhouseCoopers LLP (‘PwC’)
as the external auditor
• The effectiveness of the external audit process
• The assessment of the performance, continued
objectivity and independence of PwC
• The level of fees paid to PwC for permitted non-
audit services
dividend policy and make dividend payments
• The reappointment of PwC as external auditor
• The fair, balanced and understandable assessment of
the Annual Report and Accounts for the 2017 financial
year and the 2018 half year statement
• The five-year plan for the business
• A progress update on the development of the
impairment model
INTERNAL FINANCIAL CONTROLS AND
RISK MANAGEMENT
• The adequacy and effectiveness of the Group’s ongoing
risk management systems and control processes,
through an evaluation of:
– the risk and assurance plans;
– Internal Audit review reports;
– risk assessments;
– information and cyber security threats and
business continuity;
– GDPR readiness; and
– control themes.
SYSTEMS AND CONTROLS FOR PREVENTION
OF BRIBERY, DETECTION OF FRAUD AND
FACILITATION OF WHISTLEBLOWING
• Whistleblower reports, reports on anti-bribery and
corruption procedures, reports on procedures for fraud
and loss prevention and reports on credit card fraud,
together with monitoring and investigations
OTHER SPECIFIC ITEMS CONSIDERED AS PART
OF MAIN ACTIVITIES
• Responses to the FRC’s Corporate Reporting Review
Team’s information request on the 2017 Annual Report
and Accounts
• The controls that the Group would seek to implement
to safeguard against any liability relating to the Criminal
Finances Act 2017
• The Group’s exposure to fraud within the business and
associated mitigating controls and action
• Regular updates including key milestones in regard to
the payroll accuracy project
• The Group’s risk environment, including its significant
• The Group’s tax strategy
and emerging risks register
• The Group’s fraud detection, bribery prevention and
whistleblowing measures
• The updated delegated authority policy
• Regular updates and assurance in relation to IT strategy,
including external assurance in relation to the progress
of our commercial IT platform development
• The financial controls relating to jet fuel supplier contracts
• The Committee’s effectiveness and terms of reference
• Compliance with the Code and the Group’s regulatory
and legislative requirements
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83
CORPORATE GOVERNANCE REPORT
CONTINUED
EXTERNAL AUDITOR
PricewaterhouseCoopers LLP (‘PwC’), as the external auditor,
is engaged to conduct a statutory audit and express an
opinion on the financial statements. Its audit includes the
review and testing of the systems of internal financial control
and data which are used to produce the information contained
in the financial statements. PwC was reappointed as auditor of
the Group at the 2018 Annual General Meeting following a
tender process undertaken in 2015.
EXTERNAL AUDITOR INDEPENDENCE AND
NON-AUDIT FEES
To preserve objectivity and independence, the external
auditor does not provide consulting services unless this is
in compliance with the Group’s non-audit services policy
which reflects the EU audit reform regulations and the
FRC’s Revised Ethical Standard 2016. This policy is available
in the governance section of easyJet’s corporate website,
http://corporate.easyjet.com/ .
In the 2018 financial year, PwC undertook work to provide
a comfort letter in relation to the Company updating its
Euro Medium Term Note Programme for which the fees were
£32,000, and a non-statutory audit engagement for which the
fees were £13,500. The Committee approved this work under
the non-audit services policy. Therefore, in the 2018 financial
year the Company incurred non-audit service fees of £45,500
(2017: non-audit service fees of £32,000), which represent 10%
of the total audit fees payable to PwC for the year.
EXTERNAL AUDIT TENDERING
PwC were first appointed to audit the Annual Report and
Accounts for the year ended 30 September 2006, and
have therefore served a 12-year term. Under EU audit
reform legislation, companies are required to have a
mandatory rotation of auditors after 10 years, or 20 years
if there is a compulsory re-tender at 10 years. During the
2015 financial year, the Committee led a tender process for
external audit services, following which the Audit Committee
agreed to recommend that the Board reappoint PwC as,
on balance, they performed best against the Committee’s
pre-agreed selection and assessment criteria. Having
undertaken such a process, the Company confirms that
it has complied with the provisions of the Statutory Audit
Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.
LOOKING FORWARD
The Committee will continue to consider the financial reporting
of the Group and review the Group’s accounting policies and
annual statements. In particular, any major accounting issues
of a subjective nature will be discussed by the Committee.
The Committee will also continue to review internal and
external audit activity and the effectiveness of the risk
management process.
The current external audit engagement partner is Andrew
Kemp, Senior Statutory Auditor, who has held this role since
2016. The external audit plan and the £0.4 million fee proposal
for the financial year under review (2017: £0.4 million) was
prepared by PwC in consultation with management and
presented to the Committee for consideration and approval.
EXTERNAL AUDITOR EFFECTIVENESS
Senior management monitors the external auditor’s
performance, behaviour and effectiveness during the exercise
of their duties, which informs the Audit Committee’s decision
on whether to recommend reappointment on an annual basis.
The Audit Committee also assesses the effectiveness,
independence and objectivity of the external auditor by,
amongst other things:
• considering all key external auditor plans and reports;
in particular those summarising audit work performed
on significant risks and critical judgements identified,
and detailed audit testing thereon;
• having regular engagement with the external auditor
during Committee meetings and ad hoc meetings
(when required), including meetings without any
member of management being present;
•
•
the Committee Chair having discussions with the Senior
Statutory Auditor ahead of each Committee meeting; and
following the end of the financial year, each
Committee member completing an auditor effectiveness
review questionnaire.
The Committee this year asked PwC to reiterate the
steps taken to ensure the quality of its listed audits.
PwC confirmed that the Audit Partner and audit team
are not the subject of any PwC, Institute, FRC or other
regulatory investigation.
The Committee was satisfied that the external audit had
provided appropriate focus to those areas identified as the
key risk areas to be considered by the Audit Committee. It had
also continued to address the areas of significant accounting
estimates. On this basis, and considering the views of senior
management, the Committee concurred that the external
audit had been effective.
EXTERNAL AUDIT TENDERING TIMELINE
2006
2015
2020
2024/2025
2026
PwC appointed
Full competitive
tender, PwC
reappointed
Mandatory
appointment of
new external audit
lead partner after
five years
Competitive
tender to take
place unless
required earlier
PwC cannot be
reappointed in 2026
and a competitive
tender will take place
(if not already effected
prior to this date)
84
easyJet plc Annual Report and Accounts 2018
GOVERNANCE KEY ACTIVITIES OF THE COMMITTEE
DURING THE YEAR
• Reviewed and approved a new £250 million revolving
credit facility (RCF)
• Approved the annual update of the Euro Medium
Term Note (EMTN) Programme
• Reviewed and approved the revised treasury policy
• Reviewed a number of policies, including the carbon
emissions hedging policy and foreign exchange
hedging policy
• Reviewed and approved the sale and leaseback of
10 A319 aircraft to manage residual value risk
• Reviewed ad hoc issues including the cash investment
strategy and business interruption insurance
The Finance Committee continues to provide effective
oversight of the Group’s treasury and funding policies and
activities, ensuring that treasury activities undertaken do not
subject the Group to undesired levels of risk, and that these
activities are appropriately aligned with the Group’s strategy
and financial performance.
EURO MEDIUM TERM NOTE PROGRAMME
In February 2018, an updated version of easyJet’s Euro Medium
Term Note programme (EMTN) was approved by the UK
Listing Authority. The Committee considers it good practice to
maintain the EMTN platform, allowing the Group rapid access
to highly liquid unsecured funding.
REVOLVING CREDIT FACILITY
A new two-year £250 million RCF was approved in July 2018,
and subsequently entered into in August, to provide additional
flexibility in maintaining the liquidity buffer.
TREASURY POLICY UPDATE
An update to the treasury policy was reviewed and approved
in July 2018. The updates to the policy were made to ensure
compliance with IFRS 9 (Financial Instruments) as well as
incorporating previously approved specific policy updates.
FINANCE COMMITTEE REPORT
ANDY MARTIN
Chair of the Finance Committee
PRIMARY ROLE
To review and monitor the Group’s treasury policies,
treasury operations and funding activities, along with the
associated risks.
The Committee’s terms of reference, reviewed and
approved annually, are available on the Company’s website
at http://corporate.easyjet.com/.
KEY RESPONSIBILITIES
• To regulate how the treasury activities of easyJet are
conducted and how the associated risks are controlled
• To determine and approve any material inter-company
distributions for the purpose of simplifying inter-
company balances or otherwise within the Group
• To determine and approve any change to the share
warehousing policies or loan facility arrangements in
connection with the Company’s share scheme trusts
• To provide approvals in relation to hedging, International
Swaps and Derivatives Association (ISDA) arrangements
and guarantees in line with the delegated authority and/
or the treasury policy
• To ensure that treasury activities undertaken will not
subject the Group to undesired levels of risk
MEMBERSHIP, MEETINGS AND ATTENDANCE
• Andy Martin (Chair)
• Dr Andreas Bierwirth
• Charles Gurassa
All members of the Committee are independent Non-
Executive Directors. Member biographies can be found on
pages 61 to 63.
Key executives including the Chief Financial Officer, the
Finance Director, the Head of Risk and Assurance and the
Director of Treasury and Tax attended as relevant.
Meeting attendance can be found in the table on page 70.
COMMITTEE CHANGES
There were no changes to the Committee during the year.
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CORPORATE GOVERNANCE REPORT
CONTINUED
REMUNERATION COMMITTEE REPORT
KEY ACTIVITIES OF THE COMMITTEE
DURING THE YEAR
• Assessed the level of performance in respect of the
bonus for the 2017 financial year, and LTIP awards
set in December 2014 and vesting in December 2017,
to determine appropriate payouts
• Determined the bonus and LTIP targets for the
2018 financial year after considering and debating
alternative targets, investor expectations and internal
business plans
• Reviewed and approved the new Chief Executive’s
remuneration package as well as those of the new
Group People Director and other AMB members
• Reviewed the salaries and service contracts of the
AMB and senior management
• Reviewed and approved a revised Board expenses policy
• Considered the results and implications of gender
pay gap reporting, and reviewed and commented
on recommendations to further enhance the
Company’s performance
• Reviewed and approved the payment of the
all-employee Performance Share Award in respect of
the 2017 financial year
The Board and the Committee are committed to ensuring
that easyJet’s remuneration framework is designed to
support the strategy, providing balance between motivating
and challenging senior management whilst also driving the
long-term success of the Group for its shareholders.
The updated remuneration policy was approved by shareholders
at the Company’s 2018 AGM; it has been designed to be
straightforward and transparent, in alignment with the Group’s
principle of having a simple and cost-effective approach.
During the year the Committee has received regular updates
on the development of the new UK Corporate Governance
Code. Work is well under way to incorporate, in particular, the
new provisions to address and consider the employee voice.
The Committee carefully considered and approved the new
Chief Executive’s remuneration package during the year,
along with a number of additional packages for new members
appointed to the AMB. Remuneration arrangements have been
designed to promote the long-term success of the Company.
The shareholding guidelines policy was also reviewed and
approved during the year. The guidelines have been structured
to encourage Directors and members of the AMB to acquire
and maintain shares in the Company to specified levels over a
five-year period in line with the external business environment.
Additional key activities of the Committee are detailed further
in the Directors’ remuneration report on pages 87 to 105.
ADDITIONAL DISCLOSURES UNDER THE
UK CORPORATE GOVERNANCE CODE
For additional disclosures under the UK Corporate Governance
Code in relation to the Remuneration Committee’s work and
remuneration consultants, please refer to the Directors’
remuneration report.
CHARLES GURASSA
Chair of the Remuneration Committee
PRIMARY ROLE
To make recommendations to the Board on executive
remuneration packages and to ensure that remuneration policy
and practices of the Company reward fairly and responsibly,
with a clear link to corporate and individual performance.
The Committee’s terms of reference, reviewed and
approved annually, are available on the Company’s website
at http://corporate.easyjet.com.
KEY RESPONSIBILITIES
• To set the remuneration policy for all executive
Directors and the Company’s Chairman
• To set the pay for the AMB
• To oversee remuneration and workforce policies and
practices, and take these into account when setting the
policy for Director remuneration
• To approve the design of, and determine targets for, all
employee share schemes operated by the Company
• To oversee any major changes in employee benefit
structures throughout the Company or Group
• To review and monitor the Group’s compliance with
relevant gender pay reporting requirements
MEMBERSHIP, MEETINGS AND ATTENDANCE
• Charles Gurassa (Chair)
• Adèle Anderson
• Moya Greene DBE
• Andy Martin
• Julie Southern
All members of the Committee are independent Non-
Executive Directors. Member biographies can be found on
pages 61 to 63.
Other key invitees including the Chief Executive, the Group
People Director and external advisers attended as relevant.
Meeting attendance can be found in the table on page 70.
COMMITTEE CHANGES
Julie Southern was appointed as a member of the
Committee on 1 August 2018.
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GOVERNANCE DIRECTORS’ REMUNERATION REPORT
Annual statement by the Chair
of the Remuneration Committee
On behalf of the Board, I am pleased to present the
Directors’ remuneration report (the ‘Report’) for the year
ended 30 September 2018. The 2018 Report sets out details
of the remuneration policy for Executive and Non-Executive
Directors, describes how the remuneration policy is
implemented and discloses the amounts paid relating to
the year ended 30 September 2018, and explains how it
will be implemented for the 2019 financial year.
CHANGES TO THE BOARD
As announced in last year’s Annual Report, Johan Lundgren
was appointed to the Board on 1 December 2017 as our new
Chief Executive. Johan’s base salary was set at appointment at
£740,000, which reflected the competitive market rate for the
role at a company of similar size and complexity to easyJet.
However, underpinning the Company’s commitment to equal
pay and equal opportunity at all levels, Johan requested in
January 2018 that his base salary be reduced to £706,000
going forward, in line with that paid to the previous Chief
Executive before she left the Company. The Committee was
pleased to endorse this decision. All other elements of Johan’s
package remain in line with our approved remuneration policy,
and with the package of his predecessor.
Andrew Findlay stepped up during the transitional period
between Carolyn McCall’s resignation and the appointment
of Johan Lundgren, taking on a number of additional
responsibilities and leading the Company’s acquisition of
part of Air Berlin’s operations at Tegel Airport. In recognition
of his contribution to the success of the business during this
period, the Committee approved an additional grant under
the Company’s Long Term Incentive Plan (LTIP) in June 2018.
This grant was made to the value of 50% of salary, taking the
total value of awards made in the year to the permitted policy
maximum of 250% of salary. This top-up award is subject to
the same challenging performance conditions as the annual
grant made in December 2017, and if these are achieved will
vest on the third anniversary of grant in June 2021.
PERFORMANCE AND REWARD OUTCOMES
IN THE 2018 FINANCIAL YEAR
Despite the challenges facing the business and the
industry as a whole, easyJet has delivered a strong trading
performance in 2018 across the business. This good financial
performance is reflected in the annual bonus outcome for
the year. In contrast, performance for the three-year period
to 30 September 2018 was impacted by more difficult trading
conditions in earlier years resulting in no vesting under the LTIP
this year. Performance against our targets for both the bonus
plan and LTIP are summarised in the ‘Remuneration at a
Glance’ section on page 89.
BONUS
Annual bonus payments are based on a combination of key
financial and operational targets, with a minority element
based on personal objectives.
A very positive financial performance in the year meant that
the maximum headline profit before tax target was significantly
exceeded, however performance against the headline cost per
seat (excluding fuel) and on-time performance measures fell
just below the threshold targets set. Customer satisfaction and
personal performance were both above target and as a result
a bonus of 146% of salary was payable to the Chief Executive
(pro-rated for the portion of the year served) and a bonus of
132% of salary was payable to the Chief Financial Officer.
One-third of the bonuses earned is subject to compulsory
deferral into shares for three years.
LTIP
As noted above, awards made under the LTIP in December
2015 to the Chief Financial Officer and other members of
senior management did not meet the threshold performance
requirements for either return on capital employed (ROCE) or
relative total shareholder return (TSR) set. No awards will vest
in December 2018.
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
REVIEW OF THE DIRECTORS’ REMUNERATION
POLICY AND IMPLEMENTATION IN THE 2018
FINANCIAL YEAR
The Committee undertook a thorough review of the Group’s
remuneration policy in 2017, and a revised policy was approved
by shareholders at the AGM in February 2018. The Committee
believes that the policy provides an appropriate framework
which aligns the interests of the company and shareholders,
and focuses Executive Directors on the delivery of the
Company’s strategic objectives.
As disclosed in last year’s Annual Report, the Committee
carried out a thorough consultation with major shareholders
and shareholder advisory groups regarding the introduction
of an earnings per share (EPS) measure in the LTIP, to
operate alongside the existing ROCE and TSR measures, to
increase the focus of the plan on the sustainable growth of the
business. Shareholders were supportive of this approach and
accordingly LTIP awards were made in December 2017 with a
combination of ROCE (40% of the award), EPS (40% of the
award) and TSR (20% of the award) performance measures.
IMPLEMENTATION OF THE REMUNERATION
POLICY IN THE 2019 FINANCIAL YEAR
We will take the following approach to implementation of the
remuneration policy for the year ending 30 September 2019.
Salary
As described above, Johan Lundgren voluntarily reduced his
salary in January 2018, while Andrew Findlay received the
second of two planned phased increases to bring his salary
to the level agreed on appointment, effective 1 January 2018.
Executives’ base salaries are reviewed annually and any
changes are normally in line with the average increase for
the wider workforce. The Committee has therefore agreed
an increase of 2% for both Executive Directors, effective
1 January 2019.
Bonus
The Committee has set bonus targets reflecting the
opportunities and challenges that the Company is likely to
face in the coming year, based on headline profit before tax
and key operational, financial and personal targets. One-third
of any bonus earned will continue to be subject to compulsory
deferral into shares for three years.
LTIP
In line with the approach adopted in 2017, LTIP awards will
be granted to Executive Directors in December 2018 with a
combination of EPS, ROCE and TSR performance measures.
The Committee has determined that these measures remain
aligned with the strategic plan described on pages 8 to 9 and
the targets set have taken into consideration the challenging
trading environment and market consensus.
RECOVERY AND WITHHOLDING
In line with emerging best practice, and in light of several
high-profile cases which have highlighted the importance
of recovery and withholding provisions, the Committee has
carried out a thorough review of how these provisions are
operated within the Group. To ensure that they remain fit for
purpose, and to increase protection for the Group, a number
of changes were made to the annual bonus and LTIP plan
rules, which will apply in the 2019 financial year and thereafter.
Additional triggers have been introduced allowing the
Company to recover payments in case of serious personal
misconduct or instances of corporate failure.
On behalf of the Committee I thank you for your continued
support. We trust that you will find the Report informative and,
as always, I welcome any comments you may have.
19 November 2018
CHARLES GURASSA
Chair of the Remuneration Committee
WHAT IS IN THIS REPORT?
This Report sets out easyJet’s remuneration policy for Executive and Non-Executive Directors, describes the
implementation of that policy and discloses the amounts earned relating to the year ended 30 September 2018.
The Report complies with the provisions of the Companies Act 2006 and supporting regulations. The Report has
been prepared in line with the recommendations of the UK Corporate Governance Code and the requirements of the
UK LA Listing Rules.
The Directors’ remuneration policy (set out on pages 91 to 97) was approved by shareholders in a binding vote at the
AGM in February 2018 and became effective on that date. The Annual Statement by the Chairman of the Remuneration
Committee (set out on pages 87 to 88) and the Annual Report on Remuneration (set out on pages 97 to 105) will together
be subject to an advisory vote at the forthcoming AGM.
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE Remuneration at a glance
REWARD PRINCIPLES
The Remuneration Committee’s primary objective is to design a remuneration framework which promotes the long-term success
of the Group. To this end, we are guided by the following reward principles which remain unchanged:
Principle
Application in remuneration framework
Simple & cost-
effective
To establish a simple and cost-effective reward package in line with our low-cost and efficient business
model. For example, our Executive Directors do not receive the level of benefits that can be found in the
majority of listed companies and instead are aligned with those in the wider employee population.
Aligned with business
strategy
To support the achievement of our business strategy of growth and returns, performance is assessed
against a range of financial, operational, and longer-term targets. This ensures that value is delivered to
shareholders and that Executive Directors are rewarded for the successful and sustained delivery of the
key strategic objectives of the Group.
Pay for performance
Total remuneration closely reflects performance and is therefore more heavily weighted towards variable
pay than fixed pay. This ensures that there is a clear link between the value created for shareholders and
the amount paid to our Executive Directors.
SINGLE TOTAL FIGURE OF REMUNERATION (£’000)
Johan Lundgren (Chief Executive)
2018
2017
2018
2017
£631
Andrew Findlay (Chief Financial Officer)
£526
£483
£200
£400
£600
£800
£1,000
Fixed
Bonus
LTIP
ANNUAL BONUS AND LTIP OUTCOMES
£869
£1,500
£1,453
N/A
£1,176
£1,108
£1,400
£1,600
£650
£528
£97
£1,262
£1,200
Annual bonus – performance for the 2018 financial year
Metrics
Weighting
Threshold
On-Target
Maximum
Achieved
(% of max)
% of Maximum
bonus achieved
Headline profit before tax
at budgeted constant currency
(£m)
On-time performance
Customer satisfaction
Headline cost per seat at
budgeted constant currency
60%
10%
10%
10%
£298
£341
£406
74.9%
75%
76.5%
78%
69.5%
71.0%
72.5%
71.2%
£44.25
£43.43
£43.01
£42.59
£551
100%
0%
57%
0%
60%
0%
5.7%
0%
Based on the above and including individual/departmental performance, a total bonus of 146% of salary was payable to the Chief
Executive (pro-rated for the portion of the year served) and a bonus of 132% of salary was payable to the Chief Financial Officer.
LTIP – performance for the 2018 financial year
100
75
50
25
Target
20%
18%
15%
Actual
13.8%
ROCE
(70% weighting)
Target
Upper
quartile
Actual
Median
Below
Threshold
TSR
(30% weighting)
0% of ROCE LTIPs
and 0% of TSR
LTIPs vested
0%
vesting
Overall
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
EXECUTIVE DIRECTOR REMUNERATION POLICY – AT A GLANCE
Element
Policy
Implementation of Policy for the 2019 financial year
Johan Lundgren’s salary was reduced, at his request, to £706,000
effective 1 February 2018.
Both Johan Lundgren’s and Andrew Findlay’s salaries will be increased
by 2%, in line with the increase offered to the wider workforce. Their
base salaries effective 1 January 2019 will therefore be £720,120 and
£510,000, respectively.
Pension of 7% of salary; plus modest benefits.
Maximum will remain at 200% of salary for the Chief Executive and at
175% of salary for the Chief Financial Officer. Performance measures and
weightings are as follows:
Annual bonus performance weighting
Personal 10%
On-time performance 10%
Customer satisfaction 10%
Cost per seat 10%
Profit before tax 60%
Award to the Chief Executive of 250% of salary and award to the
Chief Financial Officer of 200% of salary.
The performance targets for the 2019 awards will be disclosed in full at
the date of grant.
Base salary
Benefits and
pension
Annual bonus
Increase normally up to the
average workforce level (though
may be increased at higher rates
in certain circumstances, for
example where salary is set below
market on recruitment and is being
transitioned to a competitive level
in a series of planned stages).
Modest pension and benefit
provision, at similar levels as the
wider UK workforce.
Maximum opportunity is 200% of
salary (Chief Executive) and 175%
of salary (Chief Financial Officer).
One-third of bonus is deferred into
shares for three years. Majority
based on financial measures.
Withholding and recovery
provisions apply.
Long-term
incentive plan
Normal maximum awards of 250%
of salary (Chief Executive) and
200% of salary (Chief Financial
Officer). Up to 300% of salary in
exceptional circumstances.
Three-year performance period
plus two-year post-vesting
holding period.
Based on financial and relative
TSR targets.
Withholding and recovery
provisions apply.
Share ownership
guidelines
200% of salary (Chief Executive)
and 175% of salary (Chief
Financial Officer).
200% of salary for the Chief Executive and 175% of salary for the Chief
Financial Officer: in line with policy.
Requirement to retain 50% of
post-tax LTIP vesting and 100%
of post-tax deferred bonus
shares until guideline is met
(and maintained).
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GOVERNANCE Directors’ remuneration policy
In setting remuneration for the Executive Directors, the
Committee takes note of the overall approach to reward for
employees in the Group. Salary increases will ordinarily be (in
percentage of salary terms) no higher than those of the wider
workforce. The Committee does not formally consult directly
with employees on executive pay but does receive periodic
updates from the Group People Director.
The Committee also considers developments in institutional
investors’ best practice expectations and the views expressed
by shareholders during any dialogue.
CONSIDERING THE VIEWS OF
SHAREHOLDERS WHEN DETERMINING
THE REMUNERATION POLICY
easyJet remains committed to shareholder dialogue and takes
an active interest in voting outcomes. We consult extensively
with our major shareholders when setting our remuneration
policy or when considering any significant changes to our
remuneration arrangements. The Committee also considers
shareholder feedback received in relation to the Directors’
remuneration report each year following the AGM. This, plus
any additional feedback received from time to time, is then
considered as part of the Committee’s annual review of
remuneration policy and its implementation.
This part of the Directors’ remuneration report sets out
easyJet’s Directors’ remuneration policy. This policy was
approved by shareholders in a binding vote at the AGM on
8 February 2018, and became effective on that date. The
Committee’s current intention is that the current policy will
operate for the three-year period to the AGM in 2021.
A copy of the Directors’ remuneration policy can be
found online, within the Annual Report and Accounts, at
http://corporate.easyjet.com/.
ROLE OF OUR REMUNERATION COMMITTEE
The Remuneration Committee has responsibility for
determining remuneration for the Executive Directors and
the Chairman of the Board. The Committee also reviews
the remuneration of the Group’s most senior executives in
consultation with the Chief Executive. The Committee takes
into account the need to recruit and retain executives and
ensure that they are properly motivated to perform in the
long-term interests of the Company and its shareholders,
while paying no more than is necessary.
CONSIDERATIONS WHEN DETERMINING
THE REMUNERATION POLICY
The primary objective of the Group’s remuneration policy is to
promote the long-term success of the business through the
operation of competitive pay arrangements which are
structured so as to be in the best interests of shareholders.
When setting the policy for Executive Directors’ remuneration,
the Committee takes into account total remuneration levels
operating in companies of a similar size and complexity, the
responsibilities of each individual role, individual performance
and an individual’s experience. Our overall policy, having given
due regard to the factors noted, is to weight remuneration
towards variable pay. This is typically achieved through setting
base pay at a competitive level, offering very modest pension
and benefits, and giving the potential to earn above-market
variable pay subject to the achievement of demanding
performance targets linked to the Group’s strategic objectives.
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
SUMMARY OF THE REMUNERATION STRUCTURE
The table below sets out the main components of easyJet’s remuneration policy:
Element, purpose and link
to strategy
Operation (including maximum levels where applicable)
Salary
Base salaries are normally reviewed annually, with changes typically
To provide the core
reward for the role.
Sufficient level to recruit
and retain individuals of
the necessary calibre to
execute the Company’s
business strategy.
effective from 1 January.
Salaries are typically set after considering salary levels in companies
of a similar size and complexity, the responsibilities of each individual
role, progression within the role, individual performance and an
individual’s experience. Our overall policy, having given due regard to
the factors noted, is normally to target salaries at a broadly market
competitive level.
Salaries may be adjusted and any increase will ordinarily be no
higher than those of the wider workforce (in percentage of
salary terms).
Increases beyond those granted to the wider workforce
(in percentage of salary terms) may be awarded in certain
circumstances such as where there is a change in responsibility
or experience, progression in the role, or a significant increase in
the scale of the role, size, value or complexity of the Group.
Framework used to assess
performance and provisions
for the recovery of sums paid
The Committee considers
individual salaries at the
appropriate Committee
meeting each year after
having due regard to the
factors noted in operating
the salary policy.
No recovery provisions
apply to salary.
Benefits
Executive Directors receive benefits provisions at similar levels as
Not applicable.
In line with the Company’s
policy to keep remuneration
simple and consistent.
the wider UK workforce. Benefits will typically include, for example,
modest death in service cover. The cost to the Company of
providing these benefits may vary from year to year depending on
the level of the associated premium.
No recovery provisions
apply to benefits.
Executive Directors typically receive no other conventional executive
company benefits, but will be eligible for any other benefits which
are introduced for the wider workforce on broadly similar terms.
Other benefits such as relocation allowances (and other incidental
associated expenses) may be offered if considered appropriate and
reasonable by the Committee.
Executive Directors can pay for voluntary benefits, where Company
purchasing power may provide an advantage to employees.
Executive Directors are also eligible to participate in any all-
employee share plans operated by the Company, in line with HMRC
guidelines currently prevailing (where relevant), on the same basis
as for other eligible employees.
Should it be appropriate to recruit a Director from overseas,
flexibility is retained to provide benefits that take account of
those typically provided in their country of residence (e.g. it may
be appropriate to provide benefits that are tailored to the unique
circumstances of such an appointment as opposed to providing the
benefits detailed above).
Necessary expenses incurred undertaking Company business are
reimbursed so that Executive Directors are not worse off on a net
of tax basis as a result of fulfilling Company duties.
Pension
Defined contribution plan with the same monthly employer
Not applicable.
To provide employees
with long-term savings
via pension provisions in
line with the Company’s
strategy to keep
remuneration simple
and consistent.
contributions as those offered to eligible employees in the wider
UK workforce (i.e. up to 7% of base salary); or a cash alternative
to the equivalent value less employer’s National Insurance
contribution costs.
No recovery provisions
apply to employer pension
contributions.
easyJet operates a pension salary sacrifice arrangement whereby
individuals can exchange part of their salary for Company-paid
pension contributions. Where individuals exchange salary this
reduces employer National Insurance contributions. easyJet credits
half of this reduction (currently 6.9% of the salary exchanged) to the
individual’s pension plan.
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GOVERNANCE
Element, purpose and link
to strategy
Share ownership
To ensure alignment between
the interests of Executive
Directors and shareholders.
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 deferral provides
alignment with shareholders.
Operation (including maximum levels where applicable)
The Chief Executive and the Chief Financial
Officer are expected to build and maintain
a holding equivalent to 200% and 175% of
salary respectively over a period of five years
from appointment.
Executive Directors are expected to retain
50% of the post-tax shares vesting under the
LTIP and 100% of the post-tax deferred bonus
shares until the guideline is met and keep it
maintained thereafter.
Maximum opportunity of 200% of salary for
Chief Executive and 175% of salary for other
Executive Directors.
One-third of the pre-tax bonus earned is
subject to compulsory deferral into shares
(or equivalent), typically for a period of
three years, and is normally subject to
continued employment.
The remainder of the bonus is paid in cash.
Dividend equivalent payments may be
made on the deferred bonus at the time of
vesting, and may assume the reinvestment
of dividends.
All bonus payments are at the discretion of
the Committee, as shown following this table.
LTIP Performance
Share Award
To incentivise and recognise
execution of the business
strategy over the longer term.
Rewards strong financial
performance and sustained
increase in shareholder value.
Each year LTIP awards may be granted
subject to the achievement of performance
targets. Awards normally vest over a three-
year period.
The maximum opportunity contained within
the plan rules for Performance Share Awards
is 250% of salary (with awards up to 300%
of salary eligible to be made in exceptional
circumstances, such as recruitment).
The normal maximum face value of annual
awards will be 250% of salary for the Chief
Executive and 200% of salary for other
Executive Directors.
Dividend equivalent awards may be made on
LTIP awards that vest, and may assume the
reinvestment of dividends.
A holding period applies to share awards
granted in the financial year ended 30
September 2015 and beyond. The holding
period will require the Executive Directors
to retain the after-tax value of shares for
24 months from the vesting date.
Framework used to assess performance
and provisions for the recovery of sums paid
Not applicable.
Bonuses are based on stretching financial,
operational, and personal or departmental
performance measures, as set and assessed
by the Committee in its discretion, with
performance normally measured over a
one-year period. Financial measures (e.g.
headline profit before tax) will represent the
majority of the bonus, with other measures
representing the balance. A graduated scale
of targets is set for each measure, with 10%
of each element being payable for achieving
the relevant threshold hurdle.
Safety underpins all of the operational
activities of the Group and the bonus
plan includes a provision that enables the
Remuneration Committee to scale back the
bonus earned (including to zero) in the event
that there is a safety event which it considers
warrants the use of such discretion.
The annual bonus plan includes provisions
which enable the Committee (in respect of
both the cash and the deferred elements of
bonuses) to recover or withhold value in the
event of certain defined circumstances.
LTIP awards currently vest based on
performance against a challenging range
of financial targets and relative TSR
performance set and assessed by the
Committee in its discretion. Financial targets
currently determine vesting in relation to
at least 50% of awards. The selection of
measures and weightings may be varied for
future award cycles as appropriate to reflect
the strategic priorities of the business at
that time.
Performance is normally measured over a
three-year period.
A maximum of 25% of each element vests for
achieving the threshold performance target
with 100% of the awards being earned for
maximum performance.
The LTIP includes provisions which enable the
Committee to recover or withhold value in the
event of certain defined circumstances.
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DIRECTORS’ REMUNERATION REPORT
CONTINUED
DISCRETION RETAINED BY THE COMMITTEE
IN OPERATING THE INCENTIVE PLANS
The Committee will operate the annual bonus plan and LTIP
according to their respective rules (or relevant documents)
and in accordance with the Listing Rules where relevant. The
Committee retains discretion, consistent with market practice,
in a number of regards to the operation and administration of
these plans. These include, but are not limited to, the following
in relation to the LTIP and annual bonus deferred in shares:
•
•
•
•
•
the participants;
the timing of grant of an award;
the size of an award;
the determination of vesting;
the payment vehicle of the award/payment;
• discretion required when dealing with a change of control
or restructuring of the Group;
• determination of the treatment of leavers based on the
rules of the plan and the appropriate treatment chosen;
• adjustments required in certain circumstances (e.g. rights
issues, corporate restructuring events and special
dividends); and
•
the annual review of performance measures and weighting,
and targets for the LTIP from year to year.
In relation to the annual bonus plan, the Committee retains
discretion over:
•
•
•
the participants;
the timing of grant of a payment;
the determination of the bonus payment;
• dealing with a change of control;
• determination of the treatment of leavers based on
the rules of the plan and the appropriate treatment
chosen; and
•
the annual review of performance measures and weighting,
and targets for the annual bonus plan from year to year.
In relation to both the Group’s LTIP and the annual bonus
plan, the Committee retains the ability to adjust the targets
and/or set different measures if events occur which cause it
to determine that the conditions are no longer appropriate
(e.g. material acquisition and/or divestment of a Group
business), and the amendment is required so that the
conditions achieve their original purpose and are not
materially less difficult to satisfy.
Any use of the above discretions would be explained in the
Annual Report on Remuneration and may be the subject of
consultation with the Company’s major shareholders.
The use of discretion in relation to the Group’s Save As You
Earn and Share Incentive Plans will be as permitted under
HMRC rules and the Listing Rules.
Details of share awards granted to existing Executive Directors
are set out on page 101. These remain eligible to vest based on
their original award terms.
PERFORMANCE METRICS AND TARGET SETTING
The choice of the performance metrics applicable to the
annual bonus plan reflect the Committee’s belief that any
incentive compensation should be appropriately challenging
and tied to the delivery of a blend of key financial, operational
and personal targets. These targets are intended to ensure
that Executive Directors are incentivised to deliver across
a scorecard of objectives for which they are accountable.
Financial measures (e.g. headline profit before tax) will be used
for the majority of the bonus and will be selected in order to
provide a clear indication of how successful the Group has
been in managing operations effectively overall (e.g. in
maximising profit per seat whilst maintaining a high load factor).
The remainder of the bonus will be based on key operational
(e.g. on-time performance and customer satisfaction) and
personal or departmental measures set annually.
Since safety is of central importance to the business, the
award of any bonus is subject to an underpin that enables
the Remuneration Committee to reduce the bonus earned
(including to zero) in the event that there is a safety event
that it considers warrants the use of such discretion.
LTIP awards are earned for delivering performance against an
appropriate balance of key long-term financial (e.g. headline
ROCE and headline EPS) and relative TSR targets. These seek
to assess the underlying financial performance of the business
while maintaining clear alignment between shareholders and
Executive Directors. Targets are set based on a sliding scale
that takes account of relevant commercial factors.
Only modest awards are available for delivering threshold
performance levels, with maximum awards requiring
substantial outperformance of challenging plans.
The Committee has retained some flexibility on the specific
measures which can be used for the annual bonus plan and
the LTIP to ensure that they will be fully aligned with the
strategic imperatives prevailing at the time they are set.
No performance targets are set for Save As You Earn
awards since these are purposefully designed to encourage
employees across the Group to purchase shares in the
Company. A measure of Group performance is used in
determining awards under the Share Incentive Plan.
HISTORICAL AWARDS
All historical awards that were granted under any current or
previous share schemes operated by the Company, and which
remain outstanding, remain eligible to vest on the basis of their
original award terms.
DIFFERENCES IN PAY POLICY FOR
EXECUTIVE DIRECTORS COMPARED
TO OTHER EASYJET EMPLOYEES
The remuneration policy for the Executive Directors is more
heavily weighted towards variable and share-based pay
than for other employees, to make a greater part of their
pay conditional on the successful delivery of business strategy.
This aims to create a clear link between the value created for
shareholders and the remuneration received by the Executive
Directors. However, in line with the Group’s policy to keep
remuneration simple and performance-based, the benefit and
pension arrangements for the current Executive Directors are
on the same terms as those offered to eligible employees in
the wider workforce. All employees have the opportunity to
participate in the tax-advantaged share plans.
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easyJet plc Annual Report and Accounts 2018
GOVERNANCE ILLUSTRATION OF HOW MUCH THE EXECUTIVE
DIRECTORS COULD EARN UNDER THE
REMUNERATION POLICY
A significant proportion of remuneration is linked to
performance, particularly at maximum performance levels.
The charts below show how much the Chief Executive and
Chief Financial Officer could earn through easyJet’s remuneration
policy under different performance scenarios in the 2019
financial year. The following assumptions have been made:
• Minimum (performance below threshold) – fixed pay only,
with no vesting under any of easyJet’s incentive plans
•
In line with expectations – fixed pay plus a bonus at the
mid-point of the range (giving 50% of the maximum
opportunity) and vesting of 50% of the maximum under
the LTIP
• Maximum (performance meets or exceeds maximum) –
fixed pay plus maximum bonus and maximum vesting
under the LTIP
Fixed pay comprises:
• Salaries – salary effective as at 1 October 2018;
• Benefits – amount received in the 2018 financial year;
• Pension – employer contributions or cash-equivalent
payments received in the 2018 financial year; and
• Free and Matching Shares under the all-employee share
incentive plan.
Chief Executive (Johan Lundgren)1
Below threshold
Below threshold
100%
100%
£754,000
In line with expectations
In line with expectations
32%
30%
38%
£2,343,000
Exceeds target
Exceeds target
19%
36%
45%
£3,931,000
Fixed pay
Annual Bonus
LTIP (Performance)
Chief Financial Officer (Andrew Findlay)2
Below threshold
100%
£535,000
In line with expectations
36%
30%
34%
£1,473,000
Exceeds target
22%
36%
42%
£2,410,000
Fixed pay
Annual Bonus
LTIP (Performance)
(1) Were easyJet’s share price to increase by 50%, Johan Lundgren’s total
remuneration would increase to £4,820,000 under an ‘exceeds target’
scenario – driven by the increased value of the LTIP awards
(2) Were easyJet’s share price to increase by 50%, Andrew Findlay’s total
remuneration would increase to £2,910,000 under an ‘exceeds target’
scenario – driven by the increased value of the LTIP awards
The scenarios do not include any dividend assumptions. It
should be noted that since the analysis above shows what
could be earned by the Executive Directors based on the
remuneration policy described above (ignoring the potential
impact of share price growth), the numbers will be different
to the values included in the table on page 99 detailing what
was actually earned by the Executive Directors in relation
to the financial year ended 30 September 2018, since these
values are based on the actual levels of performance achieved
to 30 September 2018 and include the impact of share price
growth in relation to share awards.
EXECUTIVE DIRECTORS’ TERMS OF
EMPLOYMENT
The Group’s policy is for Executive Directors to have service
contracts which may be terminated with no more than 12
months’ notice from either party.
The Executive Directors’ service contracts are available for
inspection by shareholders at the Company’s registered office.
APPROACH TO LEAVERS
If notice is served by either party, the Executive Director can
continue to receive basic salary, benefits and pension for the
duration of their notice period, during which time the business
may require the individual to continue to fulfil their current
duties or may assign a period of garden leave.
A payment in lieu of notice may be made and, in this event,
the Committee’s normal policy is to make the payment in up
to 12 monthly instalments which may be reduced if alternative
employment is taken up during this period.
Bonus payments may be made on a pro-rata basis, but 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 financial year.
In relation to a termination of employment, the Committee
may make any statutory entitlements or payments to settle
or compromise claims in connection with a termination of
any existing or future Executive Director as necessary. The
Committee also retains the discretion to reimburse reasonable
legal expenses incurred in relation to a termination of employment
and to meet any outplacement costs if deemed necessary.
The rules of the Company’s share plans set out what happens
to awards if a participant ceases to be an employee or Director
of easyJet before the end of the vesting period. Generally, any
outstanding share awards will lapse on such cessation,
except in certain circumstances.
If an Executive Director ceases to be an employee or Director
of easyJet as a result of death, injury, retirement, the sale of
the business or company that employs the individual, or any
other reason at the discretion of the Committee, then they
will be treated as a ‘good leaver’ under the relevant plan’s
rules. Under the deferred bonus, the shares for a good leaver
will normally vest in full on the normal vesting date (or on
cessation of employment in the case of death) and if the
award is in the form of an option, there is a 12 month window
in which the award can be exercised. Awards structured as
options which have vested prior to cessation can be exercised
within 12 months of cessation of office or employment.
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95
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Under the LTIP, a good leaver’s unvested awards will vest
(either on the normal vesting date or the relevant date of
cessation, as determined by the Committee) subject to
achievement of any relevant performance conditions, with
a pro-rata reduction to reflect the proportion of the vesting
period served. The Committee has the discretion to disapply
time pro-rating if it considers it appropriate to do so. A
good leaver may exercise their vested awards structured
as options for a period of 12 months following the individual’s
cessation of office or employment, whereas unvested awards
may be exercised within twelve months of vesting.
In determining whether an Executive Director should be
treated as a good leaver, and the extent to which their
award may vest, the Committee will take into account the
circumstances of an individual’s departure.
In the event of a takeover or winding-up of easyJet plc (which
is not part of an internal reorganisation of the easyJet Group,
in circumstances where equivalent replacement awards are
not granted) all awards will vest subject to, in the case of
LTIP awards, the achievement of any relevant performance
conditions with a pro-rata reduction to reflect the proportion
of the vesting period served. The Committee has discretion to
disapply time pro-rating if it considers it appropriate to do so.
In the event of a takeover, the Committee may determine,
with the agreement of the acquiring company, that awards
will be exchanged for equivalent awards in another company.
POLICY ON EXTERNAL APPOINTMENTS
Executive Directors are permitted to accept appropriate
outside Non-Executive Director appointments so long
as the overall commitment is compatible with their duties
as Executive Directors and 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.
APPROACH TO DETERMINING REMUNERATION
ON RECRUITMENT
Base salary levels will be set in accordance with easyJet’s
remuneration policy, taking into account the experience and
calibre of the individual. Where it is considered appropriate
to offer a lower salary initially, a series of increases to achieve
the desired salary positioning may be given over the following
few years to reflect progression in the role, subject to
individual performance. Benefits will normally be provided
in line with those offered to other employees. The Committee
may provide an allowance and/or reimbursement of any
reasonable expenses in relation to the relocation of an
Executive Director. easyJet may also offer a cash amount
on recruitment, payment of which may be staggered, to
reflect the value of benefits a new recruit may have received
from a former employer.
Should it be appropriate to recruit a Director from overseas,
flexibility is retained to provide benefits that take account of
those typically provided in their country of residence (e.g. it
may be appropriate to provide benefits that are tailored to the
unique circumstances of such an appointment).
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easyJet plc Annual Report and Accounts 2018
The maximum level of variable pay that may be offered on
an ongoing basis and the structure of remuneration will be
in accordance with the approved policy detailed above, i.e. at
an aggregate maximum of up to 450% of salary (200% annual
bonus and 250% Performance Shares under the LTIP), taking
into account annual and long-term variable pay. This limit
does not include the value of any buy-out arrangements. Any
incentive offered above this limit would be contingent on the
Company receiving shareholder approval for an amendment
to its approved policy. Different performance measures may
be set initially for the annual bonus, taking into account the
responsibilities of the individual, and the point in the financial
year that they joined. LTIP awards can be made shortly
following an appointment (assuming the Company is not in
a closed period).
The above policy applies to both an internal promotion to
the Board or an external hire.
In the case of an external hire, if it is necessary to buy out
incentive pay or benefit arrangements (which would be
forfeited on leaving the previous employer), this would be
provided for taking into account the form (cash or shares),
timing and expected value (i.e. likelihood of meeting any
existing performance criteria) of the remuneration being
forfeited. Replacement share awards, if used, will be granted
using easyJet’s share plans to the extent possible, although
awards may also be granted outside these schemes if
necessary and as permitted under the Listing Rules.
In the case of an internal promotion, any outstanding
variable pay awarded in relation to the previous role will be
paid according to its terms of grant (adjusted as relevant to
take into account the Board appointment).
On the appointment of a new Chairman or Non-Executive
Director, fees will be set taking into account the experience
and calibre of the individual. Where specific cash or share
arrangements are delivered to Non-Executive Directors, these
will not include share options or other performance-
related elements.
The Board evaluation and succession planning processes
in place are designed to ensure there is the correct balance
of skills, experience and knowledge on the Board. The
activities of the Nominations Committee overseeing these
matters are disclosed in the Nominations Committee report
on pages 78 to 79.
NON-EXECUTIVE DIRECTOR FEES
The Non-Executive Directors receive an annual fee (normally
paid in monthly instalments). The fee for the Non-Executive
Chairman is set by the Remuneration Committee and the
fees for the other Non-Executive Directors are approved by
the Board, on the recommendation of the Chairman and
Chief Executive.
TERMS OF APPOINTMENT OF THE
NON-EXECUTIVE DIRECTORS
The terms of appointment of the Chairman and the other
Non-Executive Directors are recorded in letters of appointment.
The required notice from the Company is three months. The
Non-Executive Directors are not entitled to any compensation
on loss of office.
The Non-Executive Directors’ letters of appointment are
available for inspection by shareholders at the Company’s
registered office.
GOVERNANCE Element
Fees
Purpose and link to strategy
To attract and retain a high
calibre Chairman, Deputy
Chairman and Non-Executive
Directors by offering market-
competitive fee levels.
Operation (including maximum levels where applicable)
The Chairman is paid an all-inclusive fee for all Board responsibilities.
The other Non-Executive Directors receive a basic Board fee, with supplementary
fees payable for additional Board Committee responsibilities.
The Chairman and Non-Executive Directors do not participate in any of the Group’s
incentive arrangements.
Fee levels are reviewed on a regular basis, and may be increased, taking into
account factors such as the time commitment of the role and market levels in
companies of comparable size and complexity.
Flexibility is retained to exceed current fee levels if it is necessary to do so in order
to appoint a new Chairman or Non-Executive Director of an appropriate calibre.
In exceptional circumstances, if there is a temporary yet material increase in the
time commitments for Non-Executive Directors, the Board may pay extra fees to
recognise the additional workload.
Necessary expenses incurred undertaking Group business will be reimbursed so
that the Chairman and Non-Executive Directors are not worse off, on a net of tax
basis, as a result of fulfilling Company duties.
No other benefits or remuneration are provided to the Chairman or
Non-Executive Directors.
Annual report on remuneration
MEMBERSHIP OF THE
REMUNERATION COMMITTEE
Members of the Committee serving during the year were:
BASE SALARY
The current and proposed salaries of the Executive
Directors are:
• Charles Gurassa (Chair)
• Adèle Anderson
• Moya Greene DBE
• Andy Martin
• Julie Southern (joined 1 August 2018).
The responsibilities of the Committee are set out in the
Corporate Governance section of the Annual Report on
page 86.
The Chairman and the Chief Executive attend meetings
by invitation and assist the Committee in its deliberations
as appropriate. The Committee also receives assistance
and advice from the Chief Financial Officer, Group People
Director and the Group Head of Reward. The Company
Secretary & Group General Counsel acts as secretary to the
Committee. No Directors are involved in determining their
own remuneration.
APPLICATION OF THE REMUNERATION POLICY
FOR THE 2019 FINANCIAL YEAR
There will be no material changes to the remuneration policy
or its implementation for the 2019 financial year. easyJet’s
remuneration policy has received consistently high levels of
investor support in recent years and the Committee considers
that it remains aligned with the best practice expectations of
institutional investors.
01 January
2019 salary
01 February
2018 salary
01 January
2018 salary
Change vs
01 January
2018
Johan
Lundgren
Andrew
Findlay
£720,120 £706,000 £740,000
(3%)
£510,000 £500,000 £500,000
2%
Johan Lundgren’s salary was set at £740,000 from
appointment on 1 December 2017, reflecting a market-
competitive rate for the role of Chief Executive. However, as
disclosed in a Regulatory News Service (RNS) statement dated
29 January 2018, in line with easyJet’s ongoing commitment
to equal pay, Johan requested that the Board reduce his
base salary to £706,000, in line with the salary paid to
his predecessor.
Both Executive Directors were offered a salary increase of 2%
effective 1 January 2019. For comparison, the typical rate of
salary increase to be awarded to employees in Group functions
is 1% to 3%.
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97
DIRECTORS’ REMUNERATION REPORT
CONTINUED
ANNUAL BONUS IN RESPECT OF PERFORMANCE
IN THE 2019 FINANCIAL YEAR
The maximum bonus opportunity remains at 200% of salary
for the Chief Executive and at 175% for the Chief Financial
Officer. The measures have been selected to reflect a range
of financial and operational goals that support the key
strategic objectives of the Group.
The performance measures and weightings will be as follows:
As a percentage of
maximum bonus opportunity
Measure
Headline profit before tax at
budgeted constant currency
On-time performance
Customer satisfaction
Headline cost per seat excluding fuel
at budgeted constant currency
Personal and departmental
objectives
CEO
60%
10%
10%
10%
10%
CFO
60%
10%
10%
10%
10%
The proposed target levels for the 2019 financial year have
been set to be challenging relative to the business plan.
The Committee is comfortable that the bonus targets for
both Executive Directors are appropriately demanding in light
of their respective bonus opportunities.
The targets themselves, as they relate to the 2019 financial
year, are commercially sensitive. However, retrospective
disclosure of the targets and performance against them will
be provided in next year’s remuneration report unless they
remain commercially sensitive at that time. The safety of
our customers and people underpins all of the operational
activities of the Group and the bonus plan includes a provision
that enables the Remuneration Committee to scale back the
bonus awarded in the event that a safety event has occurred,
which it considers warrants the use of such discretion.
One third of the pre-tax bonus earned will be deferred into
shares for a period of three years and will be subject to
continued employment.
Bonus payments may now be withheld or recovered if, within
a period of three years from the date of payment, there is:
a case of serious personal misconduct; a misstatement of
accounts; an error in calculation of results; an instance of
corporate failure; or material damage to the Company’s
reputation as a result of a safety event.
LTIP AWARDS IN RELATION TO THE 2019
FINANCIAL YEAR
We intend to make awards to the Chief Executive of 250%
of salary and to the Chief Financial Officer of 200% of salary
in respect of the 2019 financial year.
As in 2017, awards made in December 2018 will be subject
to a combination of headline ROCE, headline EPS and TSR
performance measures, reflecting a balance between growth
and returns, and aligning with the Group’s strategic priorities
over the medium term described on pages 8 to 9.
The performance measures and weightings will be as follows:
Below
threshold
(0% vesting)
Threshold
(25%
vesting)
On Target
(50%
vesting)
Maximum
(100%
vesting)
3 year average
headline ROCE
(40% of total
award)
3 year
aggregate
headline EPS
(40% of total
award)
TSR (20% of
total award)
<11.0%
11.00%
13.00%
15.00%
<383p
383p
414p
446p
Below
threshold
(0% vesting)
Threshold
(25%
vesting)
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