FY 2017 Analyst & investor presentation 21 November 2017 - - PowerPoint PPT Presentation

FY 2017

Analyst & investor presentation

21 November 2017

business review

Carolyn McCall- Chief Executive Officer

Proven business model in all market conditions

• Strong performance in a tough year
• £509m headline PBT (@ constant currency)
• Purposeful and disciplined growth; reinforcing our market positions
• Capacity growth of 8.5%
• Revenue and network differentiate easyJet and drive RPS
• Positive revenue trend through 2017 continuing into H1 2018
• Strong cost performance
• Headline CPS down 4.4% (@ constant currency)
• Strong balance sheet
• easyJet Europe established in July

3

3

Robust & sustainable business model

4 Winning Network Strategy Focused on Our Customers Continuing to Innovate Relentless Focus on Cost Lean delivers sustainable savings*

41 43 32 46 95 85 400 58

2016 2018 2011-17 2012 2013 2014 2015 2011

Committe ted d to our People ple

* Financial year Lean savings in £ millions

5.7% 7.6% 8.7% 8.3% 6.9% 3.6% 4.2% 4.9%

Capacity change total SH Market Competitors on easyJet markets Capacity Change easyJet markets easyJet capacity change

H1 growth in European Short Haul market

5

2017 2017 2017 2017 2018 2018 2018 2018

H1 2018 capacity (Oct’17 – Mar’18)

Capacity taken out by Ryanair & Monarch in H1

* Data from OAG – Does not include growth from Air Berlin transaction

winning network strategy

Protect the profitable core Capture the national

• pportunity in France

Target investment in key cities

Purposeful investment Disciplined use

• f capital

Well positioned in a dynamic market

Efficient basing

+ +

6

easyJet growth in 2018

7

c.6% easyJet capacity growth in 2018*

UK France Italy Switzerland Germany Netherlands 1.3m 5% 0.8m 7% 0.2m 5% (0.2)m (5%) 0.5m 6% 0.9m 9% Spain 0.4m 5% XXm X%

2018 grow

• wth (seats / %)

* Not including growth from Air Berlin transaction

• Allocated seat

conversion +6 ppt since launch of new website

• 420k+ hands free bags

sold since May 2017

• Launch of pre-order for

inflight retail

• 23m app downloads
• 24% of customers using

mobile boarding passes

• 15.6m personalised push

notifications sent

• App opened over

600,000 times each day

• Recognising customer to

tailor content and messages

• Launch of new digital

interface in May 2017 driving increased conversion PERSONALISED PRODUCT AND OFFERS PERSONALISED BUYING EXPERIENCE COMMERCIALISED CUSTOMER JOURNEY

• Empowering our people

to better serve using digital tools and relevant data

• Access to purchase

history and customer profiles CONNECTED PEOPLE

• Worldwide
• Airtime (onboard

entertainment platform) launching on select Swiss routes – Nov 30th) DIGITAL / INFLIGHT EXPERIENCE

Driving revenue - customer & digital initiatives

8

9

Partner

Extending across the travel value chain

Inflight

World class retail offer with brands you love

Product*

T argeted options aligned to customer needs

T ariff

A fair tariff if customer plans change and no surprises

Ancillary revenue performance FY14-17 (£m)

strong ancillary revenue performance

Old “non-seat” definition Extended “ancillary revenue” definition

9

£739m 9m £770m 0m £837m 7m

£986m 6m

FY14 FY15 FY16 FY17P FY17

* Product includes but is not limited to the provision of checked baggage, allocated seating, speedy (priority) boarding services, sports equipment

Relentless focus on cost

10

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

Lean delivers sustainable savings**

41 43 32 46 95 85 58

400

2013 2012 2011 2011-17 17 2017 2016 2015 2014

* Flat headline cost per seat excluding fuel at constant currency, excluding hedging, from the 2015 financial year to the 2019 financial year, assuming normal levels of disruption (excludes Air Berlin transaction) **Lean savings in £ millions

delivering operational improvements

11 Delivering step change improvements Focus on operational performance

Decreased by 238 H2 delays over 3hrs "easyJet has been a real driving force, working with us to help create a world leading bag drop process in North T erminal” Stewart Wingate, CEO London Gatwick +4.5 ppts LGW H2 OTP FY 2017 Cancellations

Down 3.4%

FY 2017 EU261 events Decreased by 19%

Easyjet Europe

12

> easyJet Europe established in July > easyJet now has three airlines. One based in the UK, Switzerland and Austria

• All owned by easyJet plc which itself will be EU owned and controlled,

listed on the London Stock Exchange and based in the UK

> Above 50% EU (non-UK) ownership required prior to the UK’s exit from the EU

• Close to 50% of shares already held in the hands of EEA nationals

(excluding UK nationals)

> Proposed changes to articles of association relating to

• wnership

Sustainable business model

13

97.6% touch No1 or No2 airports 60 million returning passengers £400m in easyJet Lean savings 279 aircraft 23 million app downloads

Winning Network Strategy Focused on Our Customers Continuing to Innovate Relentless Focus on Cost

Co Committed d to our People ple

Strong Balance Sheet

97% crew attendance

Financial review

Andrew Findlay- Chief Financial Officer

Key performance indicators

FY 2 2017 FY 2 2016* Change** Seats flown (m) 86.7 79.9 8.5% Passengers (m) 80.2 73.1 9.7% Load factor (%) 92.6% 91.6% +1ppt Average sector length (km) 1,105 1,098 0.6% Revenue per seat - reported currency (£) 58.23 58.46 (0.4%) Revenue per seat - constant currency (£) 55.83 58.46 (4.5%) Headline cost per seat incl fuel - reported currency (£) 53.52 52.28 (2.4%) Headline cost per seat incl fuel - constant currency (£) 49.96 52.28 4.4% Headline cost per seat excl fuel - reported currency (£) 41.27 38.33 (7.7%) Headline cost per seat excl fuel - constant currency (£) 38.69 38.33 (0.9%)

* Restated ** Favourable/(adverse)

15

Financial performance

FY 2 2017 FY 2 2016* Change** £ m £ m Total revenue 5,047 4,669 8.1% Headline costs: Headline costs excluding fuel (3,577) (3,061) (16.9%) Fuel (1,062) (1,114) 4.7% Headli line profit before tax 408 494 £(86) ) m Headli line profit before tax at constant currency 509 494 £15 m Non-headline items (23) 13 £(36) m Total l profit before tax 385 507 £(122) 22) m Headline basic earnings per share (pence) 82.5 108.4 (23.9%) Total basic earnings per share (pence) 77.4 110.9 (30.2%) Headline diluted earnings per share (pence) 81.9 107.6 (23.9%) Dividend per share (pence) 40.9 53.8 (24.0%) Headline return on capital employed (%) 11.9% 15.0% (3.1ppt)

* Restated ** Favourable/(adverse)

16

Revenue performance

17

£3.10

• 4.5%

FY17 @ PYCC £55.83 Other £0.08 Allocated Seating £0.16 First Bag £0.23 Passenger FY16 £58.46

(5.3%) +0.4% +0.3% +0.1%

• 6.1%
• 9.5%

H2’17 H1’17 Improvin ing g trend nd in Passen enge ger RPS PS

(adjus usted for Easter)

Strong ancillar ary perform rmam amce ce in 2017

• 6.5%

4.5%

• 4.5%

Passenger RPS Ancillary RPS Total RPS

A strong focus on costs

Headline cost per seat bridge

• Total headline cost per seat at constant currency: 4.4% decrease
• Headline cost per seat ex fuel at constant currency: 0.9% increase

3.56 2.68 0.26 0.46 0.95 0.23 0.22 0.26 0.34

Lean and other A320 mix FY 2017 headline cost per seat Fuel

52.64

P&L FX Investment in resilience

53.52

Disruption

51.92

Ownership costs Inflation Regulated airports inflation FY 2016 headline cost per seat (restated)

52.28

FY 2017 headline cost per seat at CC before fuel variance FY 2017 headline cost per seat at CC before fuel, disruption and investment in resilience variance

18

Impact of fuel & currency

FY 2017 7 fuel l impact pact FY 2017 FY 2016 Chan ange ge* Fuel el $ per metric ic tonn nne Market rate 501 415 (86) Effective price 596 754 158 US dolla lar rate te Market rate 1.27 1.41 (14 cents) Effective price 1.45 1.57 (12 cents) Difference between market rate and effective rate 0.18 0.16 Actual cost of fuel £ per metric tonne 412 479 67 FY 2017 7 curren ency y impac act t on headline adline PBT* EUR UR CHF USD Othe her Total tal £m £m Revenue 151 42 6 8 207 Fuel (1)

• (84)
• (85)

Headline costs excluding fuel (165) (28) (26) (4) (223) Total (15) 14 (104) 4 (101)

*Favourable/(adverse)

19

Strong cash generation

* Leases capitalised at 7x **Includes money market deposits but excludes restricted cash

Cash flow bridge

• Net cash: £357m (FY16: £213m)
• Adjusted net debt: £413m (FY16 restated: £424m)*

Cash generated from operations (post tax): £898m Investing and financing 20

3 21 10 630 224 115 214 51 25 325 195 404

Own shares Increased borrowings CAPEX Cash & MMDs at 30 Sept ptem embe ber r 2017 **

1,328

FX Net interest Sale & leaseback proceeds Cash & MMDs post di div & tax paid id

1,653

Ordinary dividend (FY’16) Tax paid Other

• perating

Net working capital Depn & amort Operating profit Cash & MMDs at 1 Octobe

• ber

r 2016**

969

Strong balance sheet

£m £m FY 2 2017 FY 2 2016* Goodwill and other intangible assets 544 517 Property, plant and equipment 3,525 3,252 Derivative financial instruments 92 98 Other assets (excluding cash and money market deposits) 348 324 Unearned revenue (727) (568) Other liabilities (excluding debt) (1,337) (1,142) Capital employed 2,445 2,481 Cash and money market deposits** 1,328 969 Debt (971) (756) Net cash 357 213 Net assets 2,802 2,694 Liquidity ity is support rted by the 5 500 millio ion US dollar ar Revolving ing Credit Facility ity that h has no financial al covenants or draw-stops

• ps
• *Restated
• ** Excludes restricted cash

21

Utilising flexibility in fleet planning

• Delivery schedule assumes base case fleet plan
• Excludes Air Berlin transaction
• Downside cases assume sale at 16 years of age

22

279 302 306 326 342 348

302 317 337 364 363 293 271 293 302 300 282 260 280 300 320 340 360 380 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022

Planned Fleet Size Maximum Fleet Size using existing assets Fleet Size with exercise of deferral options and all operating leases returned at maturity (Amendment #5) Fleet Size with exercise of deferral options (Amendment #5)

Fleet plan as at 30 Sept 2017

5 10 15 20 25 30 35 40 FY2018 FY2019 FY2020 FY2021 FY2022

easy syJe Jet Orderbook

• ok Deliv

ivery y Schedule ule

A320CEO A320NEO A321NEO

Gross capital expenditure

23

FY’20

£1,0 ,000 00m

FY’19

£900 00m

FY’18

£1,200 ,200m

FY’17

£630 30m

• Incremental capex in FY18

& FY19 driven by replacement expenditure

• Four A321 deliveries

moved into FY 18

• Maintenance capex is

projected to remain relatively stable over the next 3 years

• Revised Capex spend

updated for current exchange rates

Growth Replacement Maintenance & Other

• Excludes Air Berlin transaction

H1 forward bookings

H1 2018 (October 2017 to March 2018) as at XX November 2017

24 90% 83% 59% 31% 18% 12% 50% 93% 86% 59% 32% 22% 16% 52%

Oct Nov Dec Jan Feb Mar H1 Last Year This Year

Purposeful investment

Air Berlin asset acquisition

DEAL HIGHLIGHTS

26

> easyJet has reached a binding agreement to acquire part of Air Berlin operations at Berlin Tegel airport, subject to antitrust clearance and regulatory approval

• easyJet will operate up to 25 A320 family aircraft

> Consideration of €40m payable in cash upon completion

• Completion subject to regulatory approval
• £60m headline & £100m non-headline PBT adverse impact in FY’18

> Leadership in large Berlin market created with combined presence in Berlin-Tegel and Berlin-Schönefeld > Acquisition expected to deliver attractive financial returns to easyJet shareholders

• Earnings accretive by FY 2019; synergies from increased presence in Berlin provides potential upside

> Consideration to be financed through internal sources

Tegel fleet plan

Winter Summer Shoulder Wet lease easyJet Summer Peak

Tegel fleet plan by month (2018) 8)

Jan Mar Feb Apr Jul Nov (steady state) Sep Aug Oct May Jun easyjet is a combination

• f existing fleet and crew

to be reallocated to TXL and conversion of AB aircraft and crew 27

> Strong correlation between strong performance and #1 positions > We have a targeted plan to build more airports into #1 positions

Being number 1 delivers returns

Superior product

> widest range of routes > best frequencies / times > strongest brand awareness

Cost advantage

> Leverage scale on airport fees > procurement of ground handling > economies of scale from media spend

Operational advantage

> improved crew productivity > more flexible scheduling (larger slot portfolio) #1 positions #2 Other Returns

28

Delivering returns in strong market positions

DELIVERING SUPERIOR MARKET POSITIONS

29

Total Berlin Capacity* (m seats)

Airport Positions Total Berlin #1 #2 #3 #4 #5 #6 #7

• FY 2017 OAG data adjusted for transaction:
• AirBerlin TXL capacity and Niki PMITXL included in easyJet figure
• NIKI and LGW capacity included in Eurowings

Ryanair IAG Norwegian easyJet AF-KLM Lufthansa Group 5.5 5.3 16.0 10.7 0.7 1.1 5.9 Turkish 1.6 0.8 Eurowings

Seats at SXF (5.8m)

EXPECTED TIMING

> Antitrust clearance, regulatory approval and closing expected in December 2017 > First flight out of T egel planned for early January > Update on implementation at Q1

30

PBT accretive from 2019 onwards

Revenue

31

Headline Impact Non-Headline Impact

Air Berlin perimeter 2018

Load d factor tor: : below

• w averag

rage RPS: below

• w averag

rage High h cost / mainl nly wet t leasing ng

c.

• c. £60m adver

erse

Headline AB PBT Impact

c.

• c. £100m

adver erse

Cost

• Flying a partial winter schedule
• Uncertain on competitors schedules
• Lower load factor / build demand
• Wet lease aircraft required to fly initial schedule as

Air Berlin leased aircraft come on line

• Crew recruiting and training
• Aircraft leasing and fleet conversion costs

Positive FY’18 Underlying trading

32

Current easyJet PBT consensus FY’18 £465m Based on input from 27 analyst sts H1 Trading vs consensus

• c. +£55m

Includes one off benefits from capacity decreases post Monarch / Air Berlin administration and

• perational issues at Ryanair

Consensus post H1 trading ing upside £520m 0m Fuel and FX update (£15)m Fuel at $630 per metric tonne Headli line PBT consensus pre Air Berlin transac actio ion £505m 5m Impact from Air Berlin transaction c.(£60)m Headli line PBT incl Air Berlin in impact £445m 5m

Fuel and foreign exchange hedging

Fuel r requirement US US dollar ar requireme ment Euro Surplus lus Six months to 30 March 2018 82% @ $512/tonne 80% @ $1.36/£ 71% @ €1.25/£ Full year ending 30 September 2018 75% @ $514/tonne 73% @ $1.36/£ 73% @ €1.24/£ Full year ending 30 September 2019 45% @ $533/tonne 47% @ $1.30/£ 51% @ €1.13/£

As at 30th September 2017

33

2018 headline Outlook – excluding Air Berlin

H1 2018 (October 2017 to March 2018) as at 20 November 2017 * Based on fuel spot price range of $580 - $650 ; GBP: EUR 1.12; GBP: USD 1.132

34

Capaci city y (seats s flown)

• FY c.+6% increase

Revenue p per seat at constant currency

• Q1 / H1 2018 revenue per seat low to mid single digits positive

Cost per seat at constant currency

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

FX / / Fuel*

• FY: c.£5 million adverse movement from foreign exchange rates on headline PBT
• FY: unit fuel costs £100 million to £125 million favourable
• Expected total fuel cost £1,100 million

Air Berlin transact ction

• n – Headlin

line PBT impact ct

• Circa £60 million adverse

Summary

> 2017 performance has been robust in a low yield environment > Positive revenue per seat momentum - easyJet is winning in the market > Leading the way in customer initiatives to drive loyalty and ancillary revenue > Strong cost performance delivered > Continued focus to improve On-time Performance and Customer Satisfaction > Strong balance sheet and cash position > The Air Berlin transaction will deliver long term value to easyJet

35

Q & A

appendix

Profit after tax

£ m FY 2017 FY 2016* 6* Ch Change* ge** Headline profit before tax 408 494 (17.3%) Headline tax charge (83) (67) (24.2%) Headline profit after tax 325 427 (23.9%) Total profit before tax 385 507 (24.0%) Total tax charge (80) (70) (14.8%) Total profit after tax 305 437 (30.2%) Effective tax rate 20.8% 13.8% (7.0ppt)

* Restated ** Favourable/(adverse)

38

Revenue per seat

£ p per seat FY 2017 FY 2016 Chang nge* e* Seat revenue 57.20 57.43 (0.4%) Non-seat revenue 1.03 1.03 0.7% T

• tal revenue

58.23 58.46 (0.4%) £ p per seat FY 2017 FY 2016 Chang nge* e* Passenger revenue 46.85 47.98 (2.4%) Ancillary revenue 11.38 10.48 8.6% T

• tal revenue

58.23 58.46 (0.4%)

*Favourable/(adverse)

Seat at revenu nue includes all revenue except for commissions earned from goods and/or services sold on behalf of partners. Non-sea eat t reven enue ue arises from commissions earned from goods and/or services sold on behalf of partners. Passen enge ger revenu nue arises from the sale of flight seats and is recognised net

• f government taxes in the period in which the service is provided, that being

when the flight is flown. Ancillar illary reven enue ue primarily arises from the discretionary purchase of additional goods and/or services in addition to passenger revenue. This includes but is not limited to the provision of checked baggage, allocated seating, speedy (priority) boarding services, sports equipment and change fees, and commissions earned from goods and/or services sold on behalf of partners. Under the new presentation from 1 October, total revenue would have been categorised between passenger and ancillary revenue as follows: 39

H2 Performance

Repor ported ted £ £m H2 2017 H2 2016* Chan ange ge**

Total revenue 3,220 2,898 11.1% Fuel (603) (652) 7.6% Headline operating costs excluding fuel (1,830) (1,593) (15.0%) Headline EBITDAR 787 653 20.4% Headline ownership costs (167) (138) (20.6%) Headline profit before tax 620 515 20.4% Headline PBT margin 19.3% 17.8% 1.5ppt Seats (m) 49.2 45.3 8.6%

Cons nstan tant t curren ency y £ £ per seat H2 2017 H2 2016* Chang ange* e**

Total revenue 63.06 63.93 (1.4%) Fuel (11.29) (14.39) 21.5% Headline operating costs excluding fuel (35.53) (35.12) (1.2%) Headline EBITDAR 16.24 14.42 12.6% Headline ownership costs (3.26) (3.06) (6.7%) Headline profit before tax 12.98 11.36 14.2%

40

* Restated ** Favourable/(adverse)

Headline CPS excluding fuel – key drivers

Cost per seat excluding fuel £ Varianc nce to prior

• r

year at constant nt currenc ncy* y* £ Varianc nce to prior

• r

year at constant nt currenc ncy* y* % Weight hted varianc nce at constant nt currenc ncy* y* £ Drivers

Navigation 4.40 0.16 4.0% 0.4%

• Price benefits in France and Germany

Maintenance 3.09 0.22 7.2% 0.6%

• Upgauging of fleet from A319s to A320s
• Engineering and maintenance savings such as the

component supply contract

Crew 7.44 (0.29) (4.2%) (0.7%)

• Pay increases
• Increase in average sector length
• Investment into operational resilience over the

summer peak

Overheads 5.69 (0.44) (8.8%) (1.1%)

• Higher disruption costs
• Higher wet leasing costs

Airports and ground handling 16.90 0.21 1.3% 0.5%

• Annualised increases in charges at regulated

airports

• Increased de-icing costs due to a colder winter
• Offset by savings from volume deals and

renegotiated airport and ground handling contracts

Ownership 3.75 (0.22) (6.5%) (0.6%)

• Increase in depreciation due to new aircraft

purchased

• Increase in interest payable due to the bond

issues

• Partially offset by decreasing lease costs due

to a favourable lease mix

Total headline CPS excluding fuel 41.27 (0.36) (0.9%) (0.9%)

*Favourable/(adverse)

41

Increasing proportion of A320’s

FY 2 2017 FY 2 2016 Change A319 (operating lease) 54 45 9 A319 (owned / finance lease) 89 99 (10) A319 Total 143 144 (1) A320 (operating lease) 18 18

• A320 (owned / finance lease)

118 95 23 A320 20 Total 136 113 113 23 23 Total l fleet 279 257 22 22 Operating lease 26% 25% 1ppt Number unencumbered 202 156 46 Percentage of A320s in fleet 49% 44% 5ppt Average seats per aircraft 168 166 1%

42

Non-headline items

FY 2017 FY 2016 Chan ange* e* Descript ption £ m £ m £ m Sale and leaseback charge (16)

• (16)

The sale and leaseback of the Group’s 10 oldest A319 aircraft resulted in a loss on disposal of the assets of £10 million and a £6 million maintenance provision catch up. Organisational review (6) (1) (5) The programme involves redundancy costs and associated third party adviser fees. Air Operator Certificate ('AOC') (2) (1) (1) Cost of establishing a multi-AOC post-Brexit structure following the UK’s referendum vote to leave the European Union (‘EU’). Maintenance reserves discounting

• 8

(8) In 2016 the maintenance provision was discounted reflecting the time value of money. The discount applied generated a cumulative one-off non-headline credit. Balance sheet foreign exchange gain 2 3 (1) Foreign exchange gains or losses arising from the retranslation of foreign currency monetary assets and liabilities held in the statement of financial position. Fair value adjustment (1) 4 (5) Fair value adjustments associated with the cross-currency interest rate swaps put in place to hedge the bond issued in February 2016. Tot

• tal

al non

• n-hea

eadl dline item ems (23) 13 13 (36)

*Favourable/(adverse)

43

Currency impact

Revenue Costs FY 2 2017 FY 2016 FY 2 2017 FY 2016 Sterling 46% 50% 30% 30% 27% Euro 41% 39% 37% 35% US dollar 1% 1% 1% 26% 32% Other (principally Swiss franc) 12% 10% 7% 7% 6%

Average effective Euro rate for revenue for FY 2017 was €1.19 (FY 2016: €1.28) Average effective Euro rate for costs for FY 2017 was €1.15 (FY 2016: €1.27)

44

ROCE calculation

Reporte ted £m FY 2 2017 FY 2016* Earnings before interest and tax – reported 404 511 Interest element of operating lease payments 37 30 Earnings before interest and tax - adjusted 441 541 Tax 19% 20% Normalised operating profit after tax (NOPAT) 357 433 Average shareholders’ equity – reported 2,748 2,457 Average net cash – reported (285) (324) Opening capitalised leases 637 798 Closing capitalised leases 770 637 Average capitalised leases 704 718 Average capital employed 3,167 2,851 Return on capital employed – 7x basis 11.3% 15.2%

45

* Restated

Headline ROCE calculation

Reporte ted £m FY 2 2017 FY 2016* Headline earnings before interest and tax – reported 428 504 Interest element of operating lease payments 37 30 Headline earnings before interest and tax - adjusted 465 534 Tax 19% 20% Normalised headline operating profit after tax (NOPAT) 376 427 Average shareholders’ equity – reported 2,748 2,457 Average net cash – reported (285) (324) Opening capitalised leases 637 798 Closing capitalised leases 770 637 Average capitalised leases 704 718 Average capital employed 3,167 2,851 Return on capital employed – 7x basis 11.9% 15.0%

46

* Restated