H1 2017 analyst & investor presentation Tuesday 16 th May 2017 - - PowerPoint PPT Presentation

H1 2017 analyst & investor presentation

Tuesday 16th May 2017

Introduction

Carolyn McCall Chief Executive Officer

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easyJet is in a strong position

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Customer Balan ance Sheet Network Cost Digital al and data Purposeful and disciplined growth; strengthening our market positions Improving revenue trend Strong cost control in H1 delivering flat headline CPS ex fuel (@cc) Investment grade balance sheet provides flexibility and secures lower funding costs Continuous investment in customer proposition and lean initiatives T

• p ranked LCC in UK, Switzerland and France offering great value and

quality service

Financial review

Andrew Findlay Chief Financial Officer

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Key performance indicators

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* Favourable /(adverse)

H1 2017 H1 2016 Change* Seats flown (m) 37.5 34.5 8.4% Passengers (m) 33.8 31.0 9.0% Load factor (%) 90.2% 89.7% +0.5ppt Average sector length (km) 1,058 1,054 0.4% Revenue per seat - reported currency (£) 48.80 51.29 (4.9%) Revenue per seat - constant currency (£) 46.32 51.29 (9.7%) Headline cost per seat incl fuel - reported currency (£) 54.45 51.91 (4.9%) Headline cost per seat incl fuel - constant currency (£) 49.79 51.91 4.1% Headline cost per seat excl fuel - reported currency (£) 42.18 38.54 9.5% Headline cost per seat excl fuel - constant currency (£) 38.54 38.54 0.0%

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Financial performance

* Restated ** Favourable/(adverse)

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H1 2017 17 H1 2016* 6* Chang nge** e** £ m m £ m m T

• tal revenue

1,827 1,771 3.2 % Headline costs: Headline costs excluding fuel (1,580) (1,330) (18.7) % Fuel (459) (462) 0.5 %

Headline

ne loss before e tax (212) (21) £(191) m

Headline

ne loss before e tax at c constant curren ency cy (130) (21) £(109) 9) m

Non-headline items: Sale and leaseback charge (16)

• £(16) m

Organisational review (2)

• £(2) m

EU Air Operator Certificate (‘AOC’) (1)

• £(1) m

Balance sheet foreign exchange (loss)/gain (1) 2 £(3) m Fair value adjustment (4) 1 £(5) m

Total loss before

e tax (236) (18) £( £(218) ) m

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H1 Revenue performance

Revenue per seat bridge

£51.29 29

H1 2016 Easter

£1.23

Underlying market conditions

£3.74

Before

• re FX

£46. 6.32

H1 2017

£48.80

FX

£2.48

7

(2.4%) (7.3%) 4.8% (9.7%) %) (4.9%) %)

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A strong focus on costs

Headline cost per seat bridge

4.66 2.12 1.13 0.12 0.30 0.30 0.24 0.41 H1 2017 headline cost per seat 54.45 45 P&L Fx Fuel H1 headline cost per seat at constant currency before fuel variance 51.91 Lean A320 mix Inflation* Regulated airports inflation Ownership costs Disruption H1 2016 headline cost per seat (restated) 51.91

Flat headline cost per seat ex fuel variance at constant currency

• T
• tal headline cost per seat at constant currency: 4.1% decrease
• Headline cost per seat ex fuel at constant currency: Remains flat

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

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Impact of fuel & currency

* Favourable /(adverse)

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H1 2017 7 fuel l impac act H1 2017 H1 2016 Chang ange* e* Fuel el $ per metric ic tonn nne Market rate 500 409 (91) Effective price 662 786 124 US dolla lar rate te Market rate 1.24 1.48 (24 cents) Effective price 1.47 1.61 (14 cent) Difference between market rate and effective rate 0.23 0.13 Actual cost of fuel £ per metric tonne 449 489 40 H1 2017 7 currenc ncy impact pact on headlin dline PBT* EUR UR CHF USD Othe her Total tal £m £m Revenue 71 14 3 5 93 Fuel (1)

• (37)
• (38)

Headline costs excluding fuel (96) (19) (16) (6) (137) Total (26) (5) (50) (1) (82)

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Strong cash generation

9 24 6 302 229 115 214 28 21 667 92 220

Cash & MMDs at 1 October 2016*

969

Cash & MMDs at 31 March 2017 *

1,308

FX* Net interest Own shares CAPEX Increased borrowings Sale & leaseback proceeds Cash & MMDs post div & tax paid

1,287

Ordinary dividend (FY’16) Tax paid Other

• perating

Net working capital Depn & amort Operating loss

*Includes money market deposits but excludes restricted cash

Cash flow bridge

• Net cash: £353m (FY16: £213m)
• Adjusted net debt: £333m (FY16 restated: £424m)

Cash generated from operations (excluding dividends): £560m Investing and financing

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Strong balance sheet

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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

£m £m

31 March h 2017 30 Sept ptember mber 2016 (res estat tated ed)

Goodwill and other intangible assets 533 517 Property, plant and equipment 3,314 3,252 Derivative financial instruments 123 98 Other assets (excluding cash and money market deposits) 367 324 Unearned revenue (1,298) (568) Other liabilities (excluding debt) (1,052) (1,142) Capital employed 1,987 2,481 Cash and money market deposits 1,308 969 Debt (955) (756) Net cash 353 213 Net assets 2,340 2,694

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A321 – delivering cost & revenue benefits

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• Provides further structural advantage
• Maximises constrained high value,

peak-day flying

• Will deliver an 8-9%* cost per seat

benefit and incremental contribution per annum compared with A320 NEOs

• perating on easyJet’s network
• Maintains a neutral capex commitment

via increased flexibility within the contract

Capital Discipline

*Based on current fuel price

A319 CEO – 156 seats A320 CEO – 186 seats A320 NEO – 186 seats A321 NEO – 235 seats

30 A321 NEO’s added to fleet plan

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• 1. At the end of the relevant Financial Year
• 2. Based on fleet plan – base case
• 3. Maximum fleet does not include the purchase rights

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Mix of fleet (%)

Fleet up-gauging Delivering CPS savings

easyJet fleet mix

Capital Discipline / Tough on cost

Up-gauging delivering CPS savings

A319 9 CEO O – 156 6 seats ts A320 0 CEO – 180 0 seats ts A320 0 NEO O – 186 6 seats ts A321 NEO O – 235 5 seats 7% % -8% % saving ing 6% % -7% % saving ing 8% % -9% % saving ing

73% A320 & A321

51% 43% 37% 34% 27% 20% 19% 28% 31% 49% 45% 43% 1% 6% 11% 12% 21% 1% 3% 9% 9% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% FY2017 FY2018 FY2019 FY2020 FY2021

A319CEO-156 A320CEO-180 A320CEO-186 A320NEO-186 A321NEO-235

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Prior base plan Current base plan

Utilising flexibility in fleet planning

14 Aircraft numbers

301 312 335 357 279 296 304 327 343 270 280 290 300 310 320 330 340 350 360 370 FY2017 FY2018 FY2019 FY2020 FY2021

Revised base case fleet numbers Up and down side flexibility

279 296 304 327 343 298 316 338 364 279 281 286 270 280 290 300 310 320 330 340 350 360 370 FY2017 FY2018 FY2019 FY2020 FY2021 Current base plan Current max plan Current min plan*

* With exercise of deferral options and all operating leases returned at maturity

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FY '17 FY '18 FY '19 FY '20

Maintenance & Other Replacement Growth

Gross capital expenditure

• Assumes base case fleet plan

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£1,0 ,050 50m £1,100 ,100m Prior ior cape apex x plan an:

• Revised Capex spend post

capacity review process

• Profile represents new

schedule based on latest agreement with Airbus which includes A321 purchases

• Maintenance capex is

projected to remain stable

• ver the next 3 years

£800 00m £1,0 ,050 50m £700 00m £950 50m

• c. £250m

0m reduct duction ion in CAPEX PEX in next xt 3 years £650 50m

Business Review

Carolyn McCall Chief Executive Officer

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Driving strategic delivery

Purposeful network strategy Capital Discipline T

• ugh on cost

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

+ + =

Supported by

Differentiated proposition

&

17

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Ruthless capital discipline

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Strategy supports profitable growth and returns

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

Capital Discipline

Purposeful growth strategy Capacity

• easyJet undertake a bi-annual,

thorough analysis of capacity to reflect the market environment and fuel price

• Disciplined approach to opportunities

to reach #1/#2 positions

• Managed by increased flexibility in

fleet plans:

• Utilisation / gauge
• Lease renewals
• Sale and leaseback
• A321

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#1 Other #2

easyJet position at airport

Purposeful allocation of capacity

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• Leverage, build and

strengthen

• Strong positions

behind legacy carriers

• Lean basing

High ghly profit

• fitab

able Profi

• fitab

able

Returns driven by strong network positions at primary airports….

Purposeful network strategy

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

• n the route

te

Graph not to scale

56% of H1 growth 38% of H1 growth 6% of H1 growth

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Source : OAG, scheduled data and Internal easyJet projection May 2017. Country capacity growth is based on network touching seats.

Delivering purposeful investment in H1

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H1 2017

Purposeful network strategy

H1 seat growth 800k 600k 300k 0k 200k 200k 150k 0k 400k 100k 0k 200k 200k

8% 9% 12% 7% 6% 9% 17% 16% 8% 8% 4% 10% 4% 4% 15% 10%

UK Switzerland France Netherlands Italy Germany Portugal Spain

easyJet Growth Market Growth

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Strong positions in slot constrained airports

21 Purposeful network strategy Airpor

• rt1

Curren ent morning ng peak k utilisat ation EZY share e @ airpo port EZY H1 grow

• wth

EZY H2 grow

• wth

Airpor

• rt H2

grow

• wth

London Gatwick 47.3% 2.3% 4.3% 2.8% London Luton 42.5% 17.3% 16.7% 4.8% Geneva 40.4% 5.9% 9.9% 6.2% Berlin SXF 38.6% 14.8% 6.7% 6.1% Manchester 15.0% 27.7% 17.4% 8.0% Paris Orly 12.3% Flat 2.6% (2.5)% Lyon 23.0% 17.5% 5.2% 5.4% Amsterdam Schiphol 11.5% 6.6% 8.6% 8.5% Lisbon 10.2% 12.3% 15.3% 15.1% Barcelona 8.2% 19.9% 5.8% 6.7%

Full at peak times Constrained at peak times

Source : OAG, scheduled data and Internal easyJet projection May 2017. Country capacity growth is based on network touching seats.

• 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

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Source : OAG, scheduled data and Internal easyJet projection for H2 growth. Country capacity growth is based on network touching seats.

• Aircraft numbers based on total touching aircraft

Building & strengthening - No1 positions

Airport growth easyJet growth at the airport

22 Purposeful network strategy

H2 2017

7.6% 6.0%

Brist stol

14 aircr craft aft

5.2% 5.4%

Lyon

8 aircr craft aft

9.9% 6.2%

Genev neva

25 aircr craf aft

4.3% 2.8%

Gatwick ick

62 aircr craft aft

16.7% 4.8%

Luton

• n

23 aircr craft ft

8.6% 8.5%

Schiph iphol

• l

18 aircr craft

15.5% 0.6%

Venice ice

9 aircr craf aft

7.8% 6.6%

Nice

14 aircr craft aft

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Improving capacity trend on easyJet markets

easyJet market pairs

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5.8% 8.4% 8.4% 7.6% 8.8% 6.2% 8.2% 4.8%

H2 ‘16 H1 ‘17 Q3 ‘17 Q4 ‘17 H2 ‘16 H1 ‘17 Q3 ‘17 Q4 ‘17 easyJet capacity growth Competitor capacity growth

Source : OAG, scheduled data and Internal easyJet projection May 2017. Country capacity growth is based on network touching seats.

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Customer focus driving brand and loyalty

24 Differentiated Proposition

London Gatwick North Terminal consolidation Mobile app easyJet Plus c.26% of ecommerce bookings

• n mobile devices

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Revenue initiatives

25 Differentiated Proposition

Continuing to improve Innovation driving future revenue New Digital Platform

RMS Opti timisat misation

• n

Netw twork rk Opti timisat misation

• n

Data Scien ience ce

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Lean initiatives underpin strong cost control

26 Tough on cost

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

• Improving long term airports and ground

handling deals

• Increased automation, e.g. auto bag drop
• Data science driving long term cost saving
• Seasonal base opening in Palma
• Overhead reduction: Next Generation
• Predictive maintenance to drive further

efficiency

• Improved scheduling and roster efficiency
• Young fleet reduces maintenance costs
• Leverages size to drive economies of scale
• Low cost of funding from strong balance

sheet

• Investment into 186 A320
• Introduction of A321 NEO into fleet

Utilising structural advantage Up-gauging and purposeful fleet management Strong pipeline of LEAN initiatives

*Headline cost per seat at constant currency

* *

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Investing in resilience

27

Actions delivered in H1

Increased number of remote de-icing pads across network Push notifications live now at 39 airports London Gatwick North Terminal consolidation Customer Disruption Program (CDP) initiated MINIMISE / MANAGE and MONITOR Ground handling initiatives:

• Improved stand planning

and marked equipment bays

• More Walk in Walk out

stands Increased auto bag drop capacity at – STN, LTN

Ongoing resilience investment

Pred edictive ve mainten enan ance

• Working with Airbus and leading data science companies

to leverage data directly gathered from aircraft

• Expect 20% of technical operational interruption events

can be eliminated. Aircraft aft spar are parts inve ventory

• Invested in additional inventory of critical spares parts

that typically cause operational interruption AOG respo ponse e aircraft ft and d teams

• Rapid response aircraft and engineering available in Luton

and now Malpensa Sched edule resilien ence

• Schedule firebreaks / standby aircraft availability / invest

in wet lease aircraft Cabin bin mainten enan ance

• Additional capability and resources to perform

preventative maintenance on our cabins

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Self help initiatives deliver operational improvements

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London Gatwick North Terminal consolidation Improving on time performance

+7 ppts

Q2 improvement in CSAT relating to bag drop experience (vs Q2 2016)

Easter er 2016 Easter er 2017 Chan ange

Total tal Secto tors 28,380 32,087 +13.1% Networ

• rk OTP

76.3% 85.3% .3% +9.0 .0 ppts LGW GW OTP 66.7% 84.1% .1% +17.4 7.4ppt ppts Strong operational performance over busy Easter period*

*Includes flying program from 10th April 2017 to 30th April 2017 vs equivalent Easter period in 2016

95% H1 Arrivals within 60min of schedule 99% H1 Technical Dispatch Reliability

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Apr May Jun Q3 Jul Aug Sep Q4 H2

Last Year This Year

H2 forward bookings

H2 2017 (April 2017 to September 2017) as at 12 May 2017

H2 bookings ahead of prior year

% seats sold* 29

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Outlook in 2017

Capaci city y (seats s flown)

• H2 c.+8.5% (before disruption)
• FY c.+8.5% (before disruption)

Revenue p per seat at constant currency

• Q3 revenue per seat: Low single digit decline

Cost per seat at constant currency (Unchange ged)

• FY headline cost per seat excluding fuel: up c.1% (assuming normal levels of disruption)
• FY headline cost per seat: down c.4% (assuming normal levels of disruption)

FX ( (Improv

• ved)
• H2: c.£20 million adverse movement from foreign exchange rates on headline profit before tax
• FY: c.£100 million adverse movement from foreign exchange rates headline profit before tax

Fuel ( (Improv

• ved)
• FY: unit fuel costs £225 million to £235 million favourable
• Expected total fuel cost £1,060 million
• Full year headline PBT expectations are in line with current market consensus

Rates at 2017 £/USD:1.2866; £/EUR: 1.1843 Unit fuel guidance based on Jet fuel trading range of $500/ metric tonne to $580/ metric tonne

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Summary

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• EU AOC on track to be announced this summer
• Strong structural business
• Resilient performance in H1
• Improving RPS trend
• Right actions and right position to benefit in the

future

Q & A

appendix

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Fuel and foreign exchange hedging

As at 31 March2017

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Fuel r requirement US US dollar ar requireme ment Euro Surplus lus Full year ending 30 September 2017 84% @ $612/tonne 82% @ $1.50/£ 91% @ EUR1.35/£ Half year ending 30 September 2018 52% @ $520/tonne 53% @ $1.36/£ 60% @ EUR1.22/£ Full year ending 30 September 2018 60% @ $516/tonne 59% @ $1.40/£ 66% @ EUR1.25/£

Sensi nsitivi tivities ties

• $10 per tonne change in fuel price will impact the pre-tax result by +/- $2.2 million
• 1 cent movement in the £:$ will impact the pre-tax result by +/-£1.0 million
• 1 euro cent movement will impact the pre-tax result by +/-£0.6 million

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Loss after tax

* Restated **Favourable/(adverse)

35

£ m H1 2017 H1 2016* 6* Change* ge** Headline loss before tax (212) (21) (892.3%) Headline tax charge 40 3 1,183.1% Headline loss after tax (172) (18) (842.8%) Total loss before tax (236) (18) (1,214.7%) T

• tal tax charge

44 3 1,319.5% Total loss after tax (192) (15) (1,192.7%) Effective tax rate 18.7% 17.3% (1.4ppt) however this isn’t

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Revenue per seat

* Favourable /(adverse)

36

£ per er seat at H1 2017 H1 2016 Change* ge* Seat revenue 47.82 50.39 (5.1%) Non-seat revenue 0.98 0.90 8.7% Total revenue 48.80 51.29 (4.9%)

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Headline cost per seat excluding fuel – key drivers

*Favourable /(adverse)

37

Cost per seat excluding fuel £ Varianc nce at constant nt currenc ncy* y* £ Varianc nce at constant nt currenc ncy* y* % Weight hted d varianc nce at constant nt currenc ncy* y* % Drivers Navigation 4.25 0.14 3.5% 0.4%

• Price benefits in France and Germany

Maintenance 3.39 0.16 4.9% 0.4%

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

component supply contract

Crew 7.82 (0.03) (0.5%) (0.1%)

• Pay increases
• Increase in average sector length
• Offset by efficiencies from up-guaging of the

fleet

Overheads 5.84 (0.04) (0.8%) (0.1%)

• Higher disruption costs
• Offset by volume benfit from increased capacity

Airports and ground handling 16.66 0.01 0.1% 0.0%

• Annualised increases in charges at regulated

airports

• Offset by savings from volume deals and

renegotiated airport and ground handling contracts

Ownership 4.22 (0.24) (6.2%) (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 42.18 0.00 (0.0%) 0.0%

however this isn’t

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Increasing proportion of A320’s

38

H1 2017 FY 2 2016 Change A319 (operating lease) 55 45 10 A319 (owned / finance lease) 89 99 (10) A319 Total 144 144 A320 (operating lease) 18 18 A320 (owned / finance lease) 104 95 9 A320 20 Total 122 113 113 9 Total l fleet 266 257 9 Operating lease 27% 25% (2ppt) Number unencumbered 188 156 32 Percentage of A320s in fleet 46% 44% 2ppt Average seats per aircraft 167 166 1%

however this isn’t

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Non-headline costs

39

Sale and Leasebac ack k charge

Income stateme ment impact ct

• £10m loss on disposal of aircraft (reflecting the transfer of the residual value risk)
• £6m maintenance catch-up provision (reflecting the fact that the aircraft have to be returned to the lessor at

the end of the lease in a particular maintenance condition). Change e in accounting ing policy icy: : maintena nance nce catch-up up charge ge Previousl sly: deferred on balance sheet and amortised to income statement over the life of the lease. Now: charged immediately to the income statement. Why Why: Better matches the economics of the transaction in both the income statement and balance sheet.

Organis isat atio ional al review

• £2m recognised in the period for the programme, which involves redundancy costs and third party advisor fees

EU Air Operator Certificate (‘AOC’)

• £1m recognised to date for the set-up costs of establishing an AOC in another EU member state following the

UK’s referendum vote to leave the European Union (‘EU’)

Balan ance sheet f foreign gn exchange (gain)/l n)/loss ss

• £1m charge recognised for the foreign exchange loss arising from the retranslation of monetary assets and

liabilities held in the statement of financial position

Fair value adjustment

• £4m loss for the period recognised for the fair value adjustment that arises from the ineffective portion of the

cross currency interest rate swaps elected into fair value hedge relationships with the €500 million Eurobond issued 9 February 2016

however this isn’t

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Currency impact

Average effective Euro rate for revenue for H1’17 was €1.21 (H1’16: €1.32) Average effective Euro rate for costs for H1’17 was €1.16 (H1’16: €1.34)

40

Currency split – total revenue Currency split – total costs

Sterling, 45% Euro, 43% USD, 1% Swiss Franc, 9% Other, 2% Sterling, 33% Euro, 36% USD, 23% Swiss Franc 6% Other, 2%

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Currency impact

41

Revenue Costs H1 2017 H1 2016 H1 2017 H1 2016 Sterling 45% 47% 33% 33% 29% Euro 43% 41% 36% 33% US dollar 1% 1% 1% 23% 32% Other (principally Swiss franc) 11% 11% 11% 8% 8% 6%

Average effective Euro rate for revenue for H1’17 was €1.2050 (H1’16: €1.3241) Average effective Euro rate for costs for H1’17 was €1.1565 (H1’16: €1.3403)