FY 2016 Analyst & investor presentation Tuesday 15 November - - PowerPoint PPT Presentation

FY 2016 Analyst & investor presentation

Tuesday 15 November 2016

Introduction

Carolyn McCall Chief Executive Officer

3 3 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Proven business model in all market conditions

• Strong performance in a tough year
• Purposeful and disciplined growth; reinforcing our market

positions

• Revenue and network differentiate easyJet and drive RPS
• Strong cost performance
• Strong balance sheet to support strategy which delivers

dividend.

3

Financial review

Andrew Findlay Chief Financial Officer

5 5 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Financial performance

*Favourable / (adverse) ** Profit before tax at constant currency including balance sheet revaluations

FY 2 2016 FY 2 2015 Change* Change* £ m £ m % % @ C CC Total revenue 4,669 4,686 (0.4%) (0.9%) Fuel (1,114) (1,199) 7.1% 7.4% Costs excluding fuel (3,060) (2,801) (9.2%) (5.3%) Profit before tax 495 686 Profit before tax at constant currency 576 686 ** EBITDAR 770 940 (18.0%) (9.0%) EBITDAR Margin (%) 16.5% 20.0% (3.5ppt) Earnings per share (pence) 108.4 139.1 (22.1%) Dividend per share (pence) 53.8 55.2 (2.5%) Return on capital employed (%) 14.6% 22.2% (7.6ppt)

5

6 6 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Revenue performance

*Favourable / (adverse)

FY 2 2016 FY 2 2015 Change* Seats flown (m) 79.9 75.0 6.5% Load factor (%) 91.6% 91.5% +0.1ppt Passengers (m) 73.1 68.6 6.6% Average sector length (km) 1,098 1,118 (1.7%) Total revenue - reported (£m) 4,669 4,686 (0.4%) Total revenue -constant currency (£m) 4,644 4,686 (0.9%) Total revenue per seat - reported (£) 58.46 62.48 (6.4%) Total revenue per seat - constant currency (£) 58.16 62.48 (6.9%)

6

c.35% of the decrease in RPS can be attributed to the immediate impact

• f post terrorist incidents in Sharm el Sheik, Paris, Brussels, Nice and

Turkey

7 7 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

A strong focus on costs

Total cost per seat bridge

• Total cost per seat at constant currency: 4.6% decrease
• Cost per seat ex fuel at constant currency: 1.1% decrease

1.32 1.96 0.09 1.41 0.40 0.10 0.13 0.10 0.59 0.30 0.53

HPT blades Fuel 52.81 Before Mgmt action Balance sheet revaluations Cost post Mgmt actions Other savings including lean FY 2015 Eurocontrol settlement 54.62 Inflation* Disruption Regulated airports inflation FY 2015 53.33 FY 2016 P&L FX A320 mix Reduced sector length 52.26

*Operational price increases including unregulated airports, ground handling, navigation and crew costs

7

8 8 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Impact of fuel & currency

*Favourable / (adverse)

FY 2016 6 fuel l impact* FY 2016 FY 2015 Change* e* Fuel $ p per metric c tonne Market rate 415 619 204 Effective price 754 872 118 US dolla lar rate Market rate 1.41 1.54 (13 cents) Effective price 1.57 1.58 (1 cent) Actual cost of fuel £ per metric tonne 479 553 74 FY 2016 6 currency cy impact ct* EUR CHF USD Other Total £m £m Revenue 8 10 4 2 24 Fuel

• (3)
• (3)

Prior year balance sheet revaluations (3) 1 (5)

• (7)

Costs excluding fuel and prior year balance sheet revaluations (84) (13) (3) (2) (102) Total (79) (2) (7)

• (88)

8

9 9 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Strong cash generation

106 19 6 22 586 139 219 99 22 35 169 498

Cash and MMD’s @ 30 Sep ’16

969

FX Net interest Restricted cash Own shares CAPEX Increased borrowings Cash & MMDs post div & tax paid

1,345

Ordinary dividend Tax paid Other

• perating

Net working capital Depn & amort Operating profit Cash & MMDs at 1 October 2015*

939

*Includes money market deposits but excludes restricted cash

Cash flow bridge

• Net cash: £213m (FY15: £435m)
• Adjusted net debt: £508m (FY15: £363m)

Cash generated from operations (excluding dividends): £724m Investing and financing

9

10 10 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Strong balance sheet

£m £m FY 2 2016 FY 2 2015 Goodwill and other intangible assets 517 492 Property, plant and equipment 3,252 2,877 Derivative financial instruments 98 (297) Other assets (excluding cash and money market deposits) 324 348 Unearned revenue (568) (619) Other liabilities (excluding debt) (1,124) (987) Capital employed 2,499 1,814 Cash and money market deposits 969 939 Debt (756) (504) Net cash 213 435 Net assets 2,712 2,249

10

Liquidity ity is support rted by the 5 500 millio ion US dollar ar Revolving ing Credit Facility ity that has no financial al covenants or draw-stops

• ps

11 11 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Gross capital expenditure

• Figures in graph quoted in millions
• Assumes base case fleet plan

11

£1,0 ,050 50 FY19 FY18 £1,100 ,100 FY17 £650 50 FY16 £600 00 Replacement Maintenance/other Retrofit Growth

• Incremental capex in FY18 &

FY19 driven by replacement expenditure

• Unit cost savings of 13-14% are

anticipated from up-gauging to 186 seat A320 Neo’s

• Maintenance capex is

projected to remain stable

• ver the next 3 years

12 12 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

257 301 312 335 357 279 302 331 345 358 257 239 234 222 175 200 225 250 275 300 325 350 375

FY16 FY17 FY18 FY19 FY20 FY21

Base Case Contracted Max Contracted Min

Fleet flexibility

Extra aircraft allows greater flexibility in fleet planning

12

Business Review

Carolyn McCall Chief Executive Officer

14 14 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

easyJet delivers returns in all market conditions

Purposeful network strategy Capital Discipline T

• ugh on cost

50% dividend payout & Long term shareholder returns Strong balance sheet

+ + =

Supported by

Differentiated proposition

&

14

15 15 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Strong underlying demand in our markets

Passenger forecasting undertaken at city level and aggregated up to countries 3.6%

Expected passenger growth CAGR, 2016-21

United King ngdom

• m

France Germany ny Switzerland nd Italy 3.2% 3.2% Spain n & Portug ugal 2.4% 3.8% 3.1% 3.5% Netherland nds

15

16 16 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Purposeful growth with a significant opportunity to secure long term returns

16 Purposeful Growth

Opportunities to support profitable growth of up to 9% per annum

Purposeful growth Disciplined capital allocation UK, Switzerland

• Portfolio management: sustained short term returns & investment for future
• Allocating aircraft and churning routes to maximise returns
• Leverage lean bases to access markets cost-efficiently

Build & strengthen No1 positions Take advantage of growth opportunities Target specific catchment areas Invest in lean bases

France Eg: Amsterdam, Venice, Berlin Eg: Barcelona

17 17 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

#1 Other #2

easyJet position at airport

Purposeful allocation of capacity

17

• Leverage, build and

strengthen

• Strong positions

behind legacy carriers

• Build or churn
• Lean basing

High ghly profit

• fitab

able Profi

• fitab

able

Returns driven by strong network positions at primary airports….

Purposeful Growth

The sweet eet spot is being ing No1 at the airpo port rt and No1

• n the route

te

Graph not to scale

18 18 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Source : easyJet internal plan for 2017 data. Departing capacity

18

easyJet’s 2016 capacity split

▪ 98% of capacity touches a number 1 or

number 2 position airport.

▪ easyJet has a high share of capacity at

number 1 positions driving premium returns

Focused investment to drive the highest returns

▪ Focussed capacity deployment in FY17 to

invest in number 1 positions

▪ Purposeful investment to develop other

airports to become no 1 or 2

Purposeful Growth

2017 7 new capac pacit ity y grow

• wth

th

• 5.5

5 millio ion n seats ts into to No 1 posit ition ions

• 1.6

6 millio ion n seats ts into to No 2 posit ition ions

• Flat

at seat t growth

• wth in othe

her

83% 15%

Number 1 Number 2 Other

19 19 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Strong positions in slot constrained airports

19 Purposeful Growth Airpor

• rt1

Curren ent morning peak k utilisat ation

• n1,

1,2,3

London Gatwick Milan MXP London Luton Geneva Berlin SXF Paris CDG Manchester Edinburgh Pais Orly Lyon Amsterdam Schipol Nice Lisbon Barcelona Full at peak times Constrained at peak times Less constrained at peak times

• 80% of easyJet capacity touches an

airport that is slot constrained during peak times

• Up-gauging allows easyJet to continue

to grow capacity at slot constrained airports A network that is difficult to replicate

1) easyJet airports that are part of the top 30 European airports, where easyJet is present (therefore excludes Heathrow, Frankfurt, Istanbul and Dublin); 2) Based on theoretical max runway capacity at airport 3) Peak = first wave departures (before 8.30am) on weekdays in IATA Summer season or at other time of day. For leisure destinations may also include weekend peak demand periods e.g. Saturday in Geneva in ski season;

20 20 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold easyJet Non-LCC P2P

Non-LCC transfer Other LCC

Significant opportunities within the current network

High return opportunities at easyJet’s top 20 airports

77m s seats

Capacity split at easyJet’s top 20 airports

20 Purposeful Growth

63m seats at

airports where easyJet hold a No1

• r No2 position

14m Other

21 21 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

c.9% easyJet capacity growth in 2017

UK France Italy Switzerland Germany

Country capacity growth is schedule on schedule, based on network touching seats.

Investment in the network in 2017 to capture market opportunities

Netherlands

Purposeful Growth 21

4.1m 2.4m 0.5m 0.6m 1.4m 1.4m

Build & strengthen No1 positions Take advantage of growth opportunities Target specific catchment areas Invest in lean bases

Spain 1.7m xx

2017 growth – seats, millions

22 22 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Track record of driving returns

Contribution per block hour by route (FY16)

Capital Discipline Mature routes (> 3 years) Maturing routes (< 3 years) Not operated in FY12

14%

Outside top 25% then

40%

In top 25 % then

46%

54 54% of our top 25% 5% of routes utes wer ere e not in our top 25% 5% in FY2012 2012

Development of our top 25% routes

22 WACC = 8%

Graph not to scale

23 23 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

The easyJet brand is strongest in our most profitable markets

#1/2 airpo port t posit ition ions % pax1 % returning urning pax pax1 First st choic

• ice

airlin line (vs vs LCC) 2 Value alue percept ption ions2 Digita ital l deman mand3 Top p rated airlin line app4

14 45 79

#1 #1 #1 #1

6 14 68

#1 #1

#2

#1

2 11 82

#1 #1 #1 #1

Strong

• ng network

rk and digital l offering ing Compelling ing value proposit ition ion First choice airline for a growing, loyal and valuable customer base

+

1. Source: easyjet customer database 2. Source: Millward Brown easyJet brand tracker 3. Source: Google searches last 12 months, Google Analytics 4. Source: iTunes

Differentiated Proposition 23

24 24 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Digital offering that drives ticket sales

24

1. 1. easyJ syJet. et.com

• m
• Web visits now totalling over 350M
• 84% passengers check in online – repeat visit

Differentiated Proposition

• 2. Mobile

le - Industry ustry leadi ading ng app

• 4.5* UK Apple app rating (example Ryanair 1.5*)
• Highly used mobile boarding passes + 63% YOY
• 168M visits and 20.3% of all e commerce

bookings now made on mobile + 38% YOY

• 3. Bala

lanced nced appr proach ach with GDS/Aggr /Aggregat gator

• r/D

/Dir irect ect API capabil ability ity

• Market leading 3rd Party API capability (12.5% of total seats)
• Over 300 TMC relationships to support the corporate customer

Digital distribution strategy is built on three commercially mature channels

25 25 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

25 Differentiated Proposition

Driving growth in non-ticket revenue

Digital offering that drives ancillary revenue

Infli flight ght reven enue ue +31% 1% v FY15

• Premium in flight range to match customer

profile

• Increased penetration and spend per head
• Improved supplier terms/waste reduction

Non ticket ket seat revenue ue +9% % v FY15

• Allocated seating conversion uplift
• >40% growth in eJ+ revenue
• Flight club launch and roll out

Par artner tner Ancil cillarie ries s +6% % v FY15 15

• New media sales initiatives

26 26 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Data is driving customer insight and loyalty

Source easyJet database FY16

26 Differentiated Proposition

Source: easyJet database

Customer insight Driving loyalty

• 26.3M marketable customers – an increase of

5% YOY

• easyjet Plus has increased 40% YOY
• Our email programme drives incremental value:
• 30% more customers in the programme

make a booking (versus non marketable).

• They book more frequently and spend

more each time they book:

• 50% more flight revenue
• 47% more ancillary revenue

We u understan and our 73.1m passengers ers:

• 55% passengers originate from outside of the UK
• 20% travel for business purposes, 51% travel for
• ccasional leisure purposes and 17% are high-

frequency leisure travellers

• 50% easyJet’s customers are AB, and our most

frequent and valuable customers come from the highest UK socio-economic group (Business Elite)

• Managers, professionals and directors
• High earnings
• Strong internet and smartphone usage

Socio-economic profile (UK)

27 27 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Investment in business driving higher yielding growth

27 Differentiated Proposition

12.5m passengers travelled Record 1.3m passengers in September Over 300 corporate agreements 14% increase in Business Fares Award Winning B2B program GDS contracts renewed

On track to deliver increased business passengers of 25% over next 3 years

28 28 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

On-going digital momentum

Source easyJet database FY16

28 Differentiated Proposition

Live or immine inentl tly y going ing live init itiati iatives es

• Inflight vouchers (live)
• Earlier flight (live)
• easyJet holidays (live)
• Disruption portal & self service initiatives (live)
• Personalised ancillary upsell at check-in (live)
• Inflight pre-order (December)
• EPOS on board (January)
• Tours and excursions (February ‘17)

Futur uture Commer mercia ial l Platf tfor

• rm
• Hybris e-commerce platform in build
• Personalised Sitecore platform rolling out
• Will be an industry leading merchandising capability

and the platform for deeper ancillary integration

• Programme on track for delivery in FY18

29 29 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Increasing cost advantage

29 Tough on cost

Cost advantage over non LCC carriers Market share on easyJet’s network

*Capacity on easyJet airport to airport pairs (FY 2016)

4.1% 2.9% 1.4% 4.8% Norwegian Airberlin easyJet Ryanair Stage ge lengt gth adjusted ed CASK ex fuel cag agr grow

• wth,

, 2011 - 2016

easyJet cost performance vs LCC’s

9.7 8.6 6.0 3.5 AF-KLM Lufthansa IAG easyJet Stage ge lengt gth adjusted ed CASK ex fuel, , pen ence

Source: Airline Analyst. Note: CASK covers last 12 months to 30 June 2016 for peers (unless otherwise noted) & FY16 for easyJet. Peer cask translated to pence using average rate for FY16.

easyJet easyJet Air France KLM Vueling BA Ryanair Alitalia Thomson TAP Monarch Thomas Cook Other

30 30 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Proven delivery of sustainable savings

30 Tough on cost

Up-gauging: A structural advantage

156 seat ats 186 seats

Current generation A319 New generation A320neo 13% -14%

Lean delivers sustainable savings

41 43 32 46 95 315 58

Y2015 Y2014 Y2013 Y2012 Y2011 Y2017 Y2011-16 Y2016

CPS ex fuel target: flat 2015 vs 2019

2015 CPS (ex Fuel @ cc) 2019 CPS (ex Fuel @ cc)

Lean programme

• ffsets inflation

Efficient and effective cost base

31 31 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Lean initiatives will continue to deliver

31 Tough on cost

FY 2017 7 CPS Cost saving initiatives Inflation

(inc. regulated airport increases)

Investment

• Up-guaging
• Airport and Ground handling contract

negotiations and efficiencies

• Crew productivity initiatives including

seasonal basing and positioning

• Engineering and maintenance efficiencies

and contract savings

• Improved disruption mitigation and

management

• Contact centre savings through increased

self service and process improvements

• Resilience
• Fleet expansion
• Funding
• Projects / development
• Data science e.g. predictive maintenance

2.0% c.(2.0%) c.1.0%

• c. 1.0%

2018-19 19 CPS 2.0% (2%) - (3%) 0% - 2%

• c. Flat

easyJ syJet et Lean

Figures are excluding fuel at constant currency

32 32 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

The operational environment has dramatically changed

32

Airport

• rt congestion
• n
• European short haul capacity has increased by
• ver 100m seats in the past 2 years
• London capacity has increased by 15m seats in

the past 2 years

ATC issues

• French ATC strikes in March and June causing
• ver 1,000 cancellations
• Brest airspace control systems upgrade
• Greek islands – Heavily congested during the

summer with dated systems unable to cope

London TMA

• Delays due to London TMA congestion tripled

from 2015 to 2016

Operating in primary slot constrained airports

• 80% of easyJet capacity touches an airport

that is slot constrained during peak times

• Gatwick airport currently have 57 days per year
• f more than 900 movements compared to 5

days in 2014

External factors

There is a direct link between on time performance and delays that are not in easyJet’s control

100 200 300 400 500 0% 20% 40% 60% 80% 100% Delay y Count nt On On-Ti Time me Perfor

• rmanc

nce

Impact act of ATC C delay ays throu

• ugh summe

mer

Delay Count Arr 15 Minute OTP %

When en ATC C delay ays are below

• w 100 a day easyJet’s OTP was

abov

• ve

e 80%

33 33 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

easyJet is investing in resilience

33

• Aircraft availability
• Leased business jet to deliver

engineers and parts rapidly to where they are needed

• Predictive maintenance

programme to increase reliability

• Crew
• Investing in recruitment and

training

• Schedule and rostering
• End to end planning to improve

delivery of operational performance

• Forging closer relationships with

crew to ensure sustainability

34 34 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Brexit – No impact on model or strategy

• EU AOC process on schedule
• Extensive process to define criteria for best location
• Process close to completion
• Formal application expected in early 2017
• Will secure intra-European flying rights

34

Confident that easyJet’s network will not be affected

Flow

• ws

% of curren ent t capa pacit ity Flying ing right ghts (AOC OC) Flying ing right ghts at April il 2019? 9? Domestic UK 10% UK Yes UK – EU 40% UK, EU Yes EU – EU 30% EU Yes CH – EU/UK 15% UK, EU, CH Yes Other 5% UK, EU, CH Yes

35 35 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Outlook in 2017

Capaci city y (seats s flown)

• H1 c.+9% (before disruption)
• FY c.+9% (before disruption)

Revenue p per seat at constant currency

• H1 revenue per seat: down mid to high single digits

Cost per seat at constant currency

• FY cost per seat: down c. 3% (assuming normal levels of disruption)
• FY cost per seat excluding fuel: up c. 1% (assuming normal levels of disruption)

FX FX

• H1: c.£70 million adverse movement from foreign exchange rates
• FY: c.£90 million adverse movement from foreign exchange rates

Fuel

• H1: unit fuel costs £85 million to £95 million favourable
• FY: unit fuel costs £245 million to £275 million favourable
• Expected total fuel cost £1,050 million

Rates at 14 November 2016 £/USD:1.2601; £/EUR: 1.1604 Unit fuel guidance based on Jet fuel trading range of $400 / metric tonne to $520 / metric tonne

35

36 36 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

easyJet is a structural winner

• Purposeful future growth plans
• Significant opportunities for profitable growth
• Best customer proposition with constant innovation to

drive demand and loyalty

• Cost plan to deliver flat CPS ex-fuel
• 50% profit after tax pay-out ratio

36

Q & A

appendix

39 39 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Fuel and foreign exchange hedging

Sensitivities – FY17

• $10 per tonne change in fuel price will impact the full year pre-tax result by +/- $2.8 million
• One cent movement in the £/$ will impact the full year pre-tax result by +/- £2.0 million
• One cent movement in the £/€ will impact the full year pre-tax result by +/- £0.4 million
• One cent movement in the £/CHF will impact the full year pre-tax result by +/- 0.3 million

Fuel requirement US dollar requirement Euro surplus CHF surplus lus

Six months ending 31 March 2017 83% at $664/ metric tonne 79% at $1.53/£ 78% at €1.36/£ 73% at CHF1.42/£ Full year ending 30 September 2017 81% at $617/ metric tonne 74% at $1.52/£ 82% at €1.35/£ 71% at CHF1.41/£ Full year ending 30 September 2018 47% at $510 / metric tonne 50% at $1.43/£ 47% at €1.27/£ 47% at CHF1.35/£

As at 14 November 2016

39

40 40 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

H1 forward bookings

H1 2017 (October 2016 to March 2017) as at 12 November 2016

H1 bookings in line with prior year

% seats sold* 40 93% 50% 90% 49% Oct Nov Dec Jan Feb Mar H1 Winter 2016 Winter 2017

41 41 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Profit after tax

*Favourable / (adverse)

£ m FY 2016 FY 2015 Change* ge* Profit before tax 495 686 (27.9%) Tax charge (68) (138) 51.1% Profit after tax 427 548 (22.0%) Effective tax rate 13.7% 20.1% 6.4ppt

41

42 42 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Revenue per seat

*Favourable / (adverse)

£ per er seat at FY 2016 FY 2015 Change* ge* Seat revenue 57.43 61.54 (6.7%) Non-seat revenue 1.03 0.94 9.7% Total revenue 58.46 62.48 (6.4%)

42

43 43 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

H2 Performance

*Favourable / (adverse)

Reported ported £ £m H2 2016 H2 2015 Chang ange* e*

Total revenue 2,898 2,919 (0.8%) Fuel (652) (683) 4.5% Operating costs excluding fuel (1,587) (1,426) (11.1%) EBITDAR 659 810 (18.5%) Ownership costs (140) (131) (8.5%) Profit before tax 519 679 (23.6%) PBT margin 17.9% 23.3% (5.4ppt) Seats (m) 45.3 42.8 5.8%

Cons nstan tant t curren ency y £ £ per seat H2 2016 H2 2015 Chang ange* e*

Total revenue 62.38 68.16 (8.5%) Fuel (14.22) (15.94) 10.8% Operating costs excluding fuel (32.42) (33.32) 2.8% EBITDAR 15.74 18.90 (16.7%) Ownership costs (3.12) (3.10) (1.2%) Profit before tax excluding prior year revaluations 12.62 15.80 (20.2%) 43

44 44 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Cost per seat excluding fuel – key drivers

*Favourable / (adverse)

Cost per seat excluding fuel £ Varianc nce at constant nt currenc ncy* y* £ Varianc nce at constant nt currenc ncy* y* % Weight hted varianc nce at constant nt currenc ncy* y* £ Drivers Navigation 4.21 0.19 4.7% 0.5%

• Decrease in average sector length
• Price benefits in France and Germany

Maintenance 2.97 0.17 5.3% 0.5%

• Reduction in number of leased aircraft in the fleet

combined with savings from new maintenance contract

Crew 6.78 0.15 2.2% 0.4%

• Efficiency gained from upgauging our fleet
• Decrease in average sector length
• Improved crew scheduling
• Offset by pay increases

Overheads 5.04 0.14 2.8% 0.4%

• Small absolute increase in cost diluted by 6.1%

capacity increase

• Lower levels of selling expenses and wet leasing
• Offset by higher disruption costs

Airports and ground handling 15.86 (0.22) (1.5%) (0.6%)

• Increases in airport and ground handling costs at

Gatwick

• Regulated airports price increases
• Offset by savings from renegotiated airport and

ground handling contracts

Ownership ex revaluations* 3.50 (0.03) (0.7%) (0.1%)

• Increase in depreciation due to new aircraft

purchased

• Offset against decreasing lease costs due to a

decrease in the number of leased aircraft

38.36 0.40 1.1% 1.1% Net exchange (gains)/losses (0.05) Total CPS excluding fuel 38.31

44

45 45 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Increasing proportion of A320’s

FY 2 2016 FY 2 2015 Change A319 (operating lease) 45 49 (4) A319 (owned / finance lease) 99 99 A319 Total 144 148 (4) (4) A320 (operating lease) 18 18 A320 (owned / finance lease) 95 75 20 A320 20 Total 113 113 93 93 20 20 Total l fleet 257 241 241 16 16 Operating lease 25% 28% (3ppt) Number unencumbered 156 114 42 Percentage of A320s in fleet 44% 39% 5ppt

45

46 46 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

Currency impact

Average effective Euro rate for revenue for FY 2016 was €1.28 (FY 2015: €1.29) Average effective Euro rate for costs for FY 2016 was €1.27 (FY 2015: €1.35)

Revenue Costs FY 2 2016 FY 2015 FY 2 2016 FY 2015 Sterling 50% 49% 27% 27% Euro 39% 40% 35% 32% US dollar 1% 1% 1% 32% 35% Other (principally Swiss franc) 10% 10% 6% 6% 6%

46

47 47 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold

ROCE calculation – including 7x lease adjustment

Reporte ted £m FY 2 2016 FY 2 2015 Earnings before interest and tax – reported 498 688 Interest element of operating lease payments 34 38 Earnings before interest and tax - adjusted 532 726 Tax 20% 20% Normalised operating profit after tax (NOPAT) 426 581 Average shareholders’ equity – reported 2,481 2,211 Average net cash – reported (324) (429) Average capitalised leases 759 833 Average capital employed 2,916 2,615 Return on capital employed – 7x basis 14.6% 22.2%

47