Investor day
18 September 2014
Investor day 18 September 2014 Agenda Time me Agenda nda item - - PowerPoint PPT Presentation
Investor day 18 September 2014 Agenda Time me Agenda nda item Led by Page 14.0 .00 Prov oven en strat ateg egy, , executio cution n and returns ns Carolyn McCall 3 14.15 A. Future ure profitabl ble growth th Future
18 September 2014
2
Agenda
Time me Agenda nda item Led by Page 14.0 .00 Prov
en strat ateg egy, , executio cution n and returns ns Carolyn McCall 3 14.15
ure profitabl ble growth th
Cath Lynn Francois Bacchetta 12 27 14.45
ustr try leadi ding g retur turn n on capital empl ploy
d and margi gins ns thro rough ugh revenue nue and cost t initi tiati tives ves Revenu enue e initiat itiativ ives es
Peter Duffy Anthony Drury 38 49 15:30 Break ak 15:45 45 Cos
iativ ives es
Chris Kennedy Warwick Brady Will Facey Gary Smith Ian Davies 60 63 76 80 89 16.45
urns for shareho reholde ders rs 16.45
Chris Kennedy 97 17.10 Wrap ap up and clos
Carolyn McCall 17:15 Stall lls cover verin ing Regul gulatio ion, n, Revenue enue Manag agem ement ent and Digita ital Chris Gadsden, Jennifer Genevieve, Alberto Villaverde, James Millett
Carolyn McCall Chief Executive Officer
4
Continuing to deliver
Proven strategy, execution and returns
aviation
A. Future profitable growth B. Industry leading return on capital employed and margins through revenue and cost initiatives C. Cash returns for shareholders
1 2 3
5
Proven strategy and execution
Platform to deliver growth & sustain leading returns 2010 0 - 2014
Passengers grew by 12 million1 Profitably increased number of routes from c.500 to c.700 Opened 5 new bases including Nice and Toulouse Continued to strengthen key bases
Gatwick
Compelling network Cost advantage
easyJet lean delivered c.£170m of sustainable savings OTP improved from 66% in 2010 to 87% in 2013
Capital discipline
Rigorous focus on return on capital introduced
Regular dividend introduced and increased to 3x cover Total cash returns to shareholders of £589 million
Culture & people
Strengthened team, succession planning and developed pipeline of talent Staff turnover declined from 7.6% in 2010 to 6.5% in 2013 Over 90% of easyJet people are now shareholders
Customer & product
Introduced the Customer Charter europe by easyJet & generation easyJet Enhanced product
passenger
Load factor increased from 87% to 89%1 Customer satisfaction increased from 73% in 2010 to 83% in 2013
1. 30 September 2010 to 30 September 2013
6 2011 2012 2013
easyJet has delivered on key financial metrics
£53.07 £62.58 £45 £50 £55 £60 £65 2010 2013
Revenue per seat PBT Margin Profit per seat ROCE Dividends
Special dividend (million) Ordinary dividend (million)
5.2% 11.2% 0% 5% 10% 15% 2010 2013
£196m £85m £308m
£2.75 £7.03 £0 £2 £4 £6 £8 2010 2013 6.9% 17.4% 0% 5% 10% 15% 20% 2010 2013
Data relates to easyJet Financial Years ended 30 September 2010 and 30 September 2013
7
Industry and market leading returns
2010–2013 T
2013 FTSE 100 ROCE performance2
37.2% 30.6% 28.0% 27.3% 25.9% 24.9% 24.4% 23.8% 23.2% 21.8% 19.7% 19.2% 19.0% 19.0% 18.4% 18.3% 17.7% 17.4% 16.8% 16.1% 16.1% 16.0% 15.7% 15.6% 15.1% 14.8% 14.7% 14.6% 14.4% 14.4% 14.1% 13.8% 13.7% 13.3% 13.2% 12.9% 12.8% 12.3% 11.9% 11.8% 11.5% 11.1% 10.4% 10.3% 10.0% 9.9% 9.9% 9.8% 9.7% 9.5% 9.4% 8.8% 8.7% 8.5% 8.3% 8.0% 7.6% 7.6% 7.3% 7.3% 7.2% 7.0% 6.9% 6.8% 6.7% 6.7% 6.6% 6.6% 6.3% 6.2% 6.2% 5.3% 5.2% 4.3% 4.1% 3.9% 3.8% 3.4% 3.4% 3.0% 3.0% 2.8% NA BskyB Shire Intercontinental NEXT Croda ITV BAT Petrofac Reckitt Benckiser Antofagasta GSK ARM Fresnillo Astrazeneca Sage Unilever Burberry easyJet Centrica Aggreko Compass Smith & Nephew IMI Experian Rolls Royce Intertek Diageo Tate & Lyle Smiths AMEC William Hill BT Johnson Matthey Imperial Tobacco BHP Billiton Sports Direct Randgold Resources Weir Bunzl Persimmon BG Wolseley Royal Dutch Shell BAE SSE ABF Capita GKN Babcock Whitbread Mondi WPP Morrisons Rexam Marks & Spencer Meggitt Rio Tinto G4S National Grid SABmiller Kingfisher Tesco Sainsbury Severn Trent Anglo American Coca-Cola HBC TUI Travel Travis Perkins Tullow Oil BP United Utilities IAG Pearson Melrose Vedanta Resources Carnival Vodafone British Land Land Securities CRH Glencore Xstrata Hammerson Reed Elsevier 1st Quartile 37.2% - 16.1% 2nd Quartile 16.1% - 11.8% 3rd Quartile 11.5% - 7.3% 4th Quartile 7.2% - 2.8% Source: Capital IQ and Datastream. Note: Excludes financial institutions and insurance companies (1) Source: Datastream. Total shareholder return for the period 1 October 2010 to 30 September 2013. Assumes dividends are reinvested. (2) Source: Capital IQ, public filings. Represents ROCE for the LTM to Sep-2013. ROCE calculated as: LTM EBIT plus of 1/3 operating lease expense taxed at nominal tax rate divided by average capital employed (defined as financial net debt plus shareholders equity (including balance sheet value of minority interests) plus net pension deficit) adjusted for operating leases (capitalised at 7.0x).2013 Return on Capital Employed2
17.4% 15.7% 9.3% 8.0% 7.4% 6.6% 5.3% 5.3% 0.8% easyJet Ryanair Delta Norwegian Southwest Lufthansa JetBlue IAG AF-KLM 261% 134% 97% 76% 39% 14% 13% 0% (35)% easyJet Norwegian Delta Ryanair IAG Southwest Lufthansa JetBlue AF-KLM
8
48 23 39 9 24 24 21 18 17 15 14 14 3 3 1 20 1
20 30 40 50 60 Non primary airports Number of market pairs operated between 2 primary airports
Business model and brand to succeed in a dynamic environment
recognition scores
Brand and customer proposition Cost advantage Valuable markets Financial strength
easyJet 21.5% Ryanair 15.6% Norwegian 3.1% IAG 8.3% Lufthansa 11.6% Air France 2.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%Strong balance sheet
8.0 2.0 4.0 6.0 0.0 500 250
0.99 1.65 65 2.14 2.94 3.11 4.60 5.60 Airport; ground handling, navigation and en-route charges
Seats (m)
CASK( p) Cost
9
Team, processes and culture in place for continued execution
has the necessary “bench strength”
succession planning
employee engagement survey results
To be Europe’s preferred short-haul airline, delivering market leading returns To make travel easy & affordable
Ambition Cause
10
Continuous pipeline of innovation
Platform to deliver growth & sustain leading returns 2015 5 onwar wards ds
Opening Amsterdam and Porto in 2015 Continued
industry restructuring Opportunity to deepen existing traffic flows in core markets and develop new routes
Compelling network Cost advantage
easyJet lean pipeline
Fleet up-gauging Engineering & Maintenance Engine selection for A320neo from 2017 Single terminal at Gatwick efficiency Airport deals Innovation
Capital discipline
Ordinary dividend payout ratio from one third to 40% of profit after tax Industry leading margins will deliver strong future cash flows
Culture & people
Succession planning and talent development Principles of easyJet lean and return on capital embedded throughout the
Customer & product
New brand campaign Personalisation and data mining Product enhancements Continue to develop
passenger
Single terminal at Gatwick
11 11
easyJet best positioned to deliver what consumers want
1. Price/value
7. Flight times 1. Price/value
/ convenience
1. Staff/service
/cleanliness
reputation
/convenience
1. Price/value
/service
/scheduling
Source: Millward Brown Brand Tracker 2014
Most important factors for European consumers when choosing an airline
12
12
Cath Lynn Group Commercial Director: Markets, Network & Pricing
13 13
Agenda - future profitable growth opportunities
1 2 3
14 14
easyJet has leading positions across European airports
easyJet capacity easyJet’s #1 and #2 positions
EDI LPL LGW LTN STN ALC CDG AGP LYS GVA BSLSource: OAG
SEN OLBeasyJet No.1 48% of capacity 35 million seats easyJet No.2 29% of capacity 21 million seats Other 23% of capacity 17 million seats
Majority of easyJet’s capacity is in airports where it has leading positions many of which are slot constrained
Slot constrained during peak times
15 15
Milan
Convenient airports
Paris
Charles de Gaulle
Europe, c.45m seats a year
market share
Orly
Europe, c.29m seats a year
market share
Milan Malpensa
40.5% market share
Beau auvais ais Charles rles de de Gaulle lle Orly ly Malpe lpensa Linate ate Bergamo amo
minutes, or less, travelling distance from an easyJet airport
with a broad and inter- connected network to stimulate demand at both ends of routes
which are under-supplied with low LCC penetration Large addressable market for easyJet
Source: OAG
16 16
Strong market share delivers value for customers
Great product
for business and leisure Great schedule
Source: Millward Brown Brand Tracker 2014
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easyJet No2
Strong market share delivers financial value
market share and returns
positions delivers
advantage
leading load factors
utilisation of assets
easyJet generates highest returns where it hold a No.1 or No.2 network position
45 30 15 60 Seats (millions) easyJet No.1 Other
Returns vs. network position
24 airports
48% of capacity
29 airports
29% of capacity
87 airports
23% of capacity
Returns
18 18
Network structure delivers flexibility
Belfast London Luton Malaga
flying
utilisation
19 19
Compelling network positions take time to develop
Rome attractive both outbound and inbound
strong positions at primary airports
Source: OAG
0% 10% 20% 30% 40% 50% 60%
Milan Malpensa - Market Share FY 2006 vs. FY 2014
2006 2014 0% 10% 20% 30% 40% 50%
Geneva - Market Share FY 2006 vs. FY 2014
2006 2014 0% 10% 20% 30% 40% 50%
London Gatwick - Market Share FY 2006 vs. FY 2014
2006 2014
20 20
Rigorous capital allocation framework
Decision process ensures capital is invested in most profitable parts of the network
reallocating assets to more profitable network areas, or reposition to drive higher returns
network positions
area with low level of capacity investment
easyJet delivers superior returns by allocating assets in positions where it can leverage its sources of competitive advantage
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route
analysis undertaken
led by the Network Development Forum
Granular approach to route planning
Year
easyJet capacity increase on an individual route easyJet capacity increase on an individual route
0.0 0.1 0.2 0.3 0.4 0.5 0.6 £- £1 £2 £3 £4 £5 £6 £7 £8 £9 2009 2010 2011 2012 2013 2014 Seats (right axis) Contribution 0.0 0.1 0.2 0.3 £- £1 £2 £3 £4 £5 £6 £7 2009 2010 2011 2012 2013 2014 Seats (right axis) Contribution
Returns Seat growth (million) Returns Seat growth (million)
22 22
Low risk opportunities within the current network footprint
Source: OAG scheduled data for the 12 months to 30 September 2014 Other LCC Non LCC P2P (est.) 86m
Non LCC transfer (est.)
1. 1. 28 millio lion n seats on existing easyJet airport pairs
existing market positions by thickening routes
2. 2. 33 33 millio lion n seats represents
easyJet network points
3. 3. 25 millio lion n seats opportunity
footprint
Opportunity at easyJet’s top 20 airports
ent easyJet et airpo port pairs 28 million
‘Thicken routes’
ppor
“join the dots” 33 million
er grow
pportunities es 25 million
easyJet
23 23
50 100 150 200 250 300 350
Granular approach to fleet planning
2 3
Significant number of low risk opportunities for easyJet to pursue
1.
2.
Invest in existing network Growth
Natural market growth of 2.2%2 FY19 easyJet
Current easyJet fleet Route churn easyJet FY19 base case3 Minimum easyJet fleet3 Maximum easyJet fleet3
40-65 30-45 296- 356 20-30 10-20
3
226 204 316
Number of aircraft
market position by thickening routes
dots
points
September 2014
churn FY14 – FY19
passenger growth2 on easyJet current markets
304
Range of easyJet FY19 fleet size
3 1 2
Load factor: 90.3%1 Average utilisation: 11 hours / day
1 2
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Time sensitive opportunities
London Gatwick
purchase of Flybe slots
Amsterdam, Inverness and Vienna
Amsterdam
November 2014
Hamburg
easyJet network
United Kingdom +2.5% France +4.6% Spain -2.0% Germany +14.0% Switzerland +6.3% Italy +5.4% Netherlands +13.4%
easyJet H1 2015 capacity growth
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network and sustainable partner
Strong market share gives easyJet relevance
“easyJet is a loyal customer that flies to Schiphol since 1996. By opening a base, easyJet confirms this sustainable relationship that European destinations add to Schiphol1”
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Bringing it all together – easyJet Country Directors
Country Director
Local sales (B2B) Local marketing Public Affairs / Relations Regulatory affairs Airports Day-to-day
People management Country plans
airports, pricing
Customer experience Country performance Employee / Industrial Relations
Francois Bacchetta Country Director - France
27
27
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easyJet in France 2006 Jan 2012 2014
Routes 53 157 176 Market share 5% 12% 14% Business travel 17% 21% 24% Routes with min 2 dailies 6 17 24 Customer satisfaction1 # 2 # 2
easyJet in France – strong progress
Since January 2012 investor day
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2 4 6 8 10 12 14 16 18 2008 2009 2010 2011 2012 2013
…delivering capacity growth and strong returns
Over the last 5 years
(seats million)
Network built on No1 and No2 positions…..
easyJet has built a strong position in France
feeding traffic (30% in Charles De Gaule and 3% in Orly).
#2 – 19% #2 - 16%* #2 - 13%* #1 – 25% #2 – 14% #2 – 20% #2 – 18% #11 – 2% #2 – 21%
Ranking – Capacity share
easyJet has a number 1 or 2 position in 8 out of 10 major French airports
easyJet capacity in France
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210 205 169 136 133
50 100 150 200 250
UK Germany Spain Italy France Million seats 2014 (OAG)
12% 12% 5% 5% 5% 5% 5% 4% 4% 4%
1% 3% 5% 7% 9% 11% 13% 1 2 3 4 5 6 7 8 9
Spain-UK UK- Dom Italy- Dom France- Dom France-UK France-Italy UK-Italy Swiss-UK Germany-UK UK-Nether
Balanced traffic between outbound, inbound and domestic flows respectively sustained by an affluent population, tourism and business traffic
Significant market for easyJet
Million seats FY13 % weight on easyJet network
easyJet network1 European market
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Where is the future opportunity for easyJet
Take advantage of main competitor restructuring and limited presence of other low cost carriers Profitably grow market share over time by offering affordable fares and reliable product Use the easyJet network to increase travel into France Focus on business passengers, leverage France tourism attractiveness and high income residents propensity to fly Keep on building the brand and focus on customer experience
“Be the challenger brand to Air France”
1 2 3 4 5
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Respected in the French community
Employ over 1,000 people
French social service
Development of regions
the network
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easyJet is the only significant competitor to Air France
1 Time period: Oct 2013 – Sep 2014
Full year 2014 – French market share (in seats)1
47% 25% 45% 36% 49% 10% 25% 20% 19% 21% 5% 1% 5% 1% 7% 4% 1% 2% 2% 34% 49% 29% 42% 21%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% PAR NCE TLS LYS BOD
Others Vueling Airlines Ryanair easyJet Air France
1
Paris Nice Toulouse Lyon Bordeaux
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Gaining market share
Capacity in France
by Air France reduction
than Europe average
easyJet progress
Toulouse bases to establish strong regional network
consolidate No 2 position
4.5%
7.8% 0.8% 3.2%
3.4% 4.7%
0% 4% 8% 12%
2013 2014
Market excl. easyJet LCC FSC easyJet
2
AirFrance-KLM 42% easyJet 14% Ryanair 8% Lufthansa Group 7% IAG 4% Vueling 4% Royal Air Marocco 2% Other 20%
Source OAG: Oct 2013 – Sep 2014
Legacy
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World’s leading tourist destination
visitors, with 32 million arrivals in 2013
Charles de Gaulle
France is expected to increase at a CAGR of 2%, rising to 90 million in 2017
France is the leading tourist destination in the world
3
1 Source: Euromonitor, 2013
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Business passenger opportunity in France
Most popular business
network)
Continue to increase share of business / high yield passengers through
and develop GDS distribution
4
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Brand awareness industry leading in France
26 26 9 11 36 36 37 46 42 43 29 32 31 31 30 23 19 21 58 54 6 9 4 5
Brand consideration closing gap with Air France and strengthening against competition
Q2 13
easyJet
Air France Ryanair
Q2 14
Vueling
Q2 13 Q2 14 Q2 13 Q2 14 Q2 13 Q2 14
from a low level where education was needed to change people’s mind-set about low-cost
by giving confidence to customers as we continue to make travel easy and affordable
Source: Millward Brown
First choice Would seriously consider Might consider Would not consider
5
Peter Duffy Group Commercial Director: Customer, Product & Marketing
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Agenda
1. Driving demand through brand and communication investment
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Source: easyJet Brand ranking study
Awareness
2014 (Q3)
Serious consideration
2014 (Q3)
Preference
2014 (Q3) 98% 62% 15% 98% 66% 19% 91% 28% 5% 97% 68% 22% 100% 71% 40%
Universal brand awareness in our key markets
41 41
Strong brand awareness delivers sales
Passenger origination
million passengers
million bookings
million customers
easyJet database
million contacts
Catchment
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Improving customer experience
Average age by market
Average age at departure
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Structured re-targeting
increased three-fold since 2012
are 33% more valuable than those who are not
frequently than non-emailed customers
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Digital strategy
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Pricing
across the entire network – c.45% of passengers pay under £50 per flight
system
positive contribution
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Non-seat revenue
Allianz
deliver sales
holiday options
holidays
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Quality revenue streams - easyJet Holidays
bookings in UK - significant market in Germany, Switzerland & across Europe
Proposi
ion
ski - full European coverage
Including branded 5 star properties
specialist requirements
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Quality revenue streams - Inflight
Beverage
consultant to Waitrose
improvements
Anthony Drury Director, Head of Business
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Business journey
Distribution agreements with all major GDS’s Dedicated sales team in core markets Online booking tool integration Flexible corporate fares +12 million business passengers and growing Travel agency agreements Contracted Corporate Accounts Inclusive fares “Business sense” campaign Business
network Fast track security easyJet plus cards 2014 “Best short haul airline” Business travel awards Allocated seating
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Delivering expected results
annum
penetration
contracted
major GDS and self booking tools
YOY business passenger growth
Millions
13 12 11 10 6 9 8 7
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What is the future opportunity
TMC Managed ged spend Direc ect spend easyJet market share across the managed segment is
3%
easyJet market share across the direct segment is
15%
estimated at £20 billio lion pa (165 65 millio lion n seats) ts)
35% of the short haul market is direct to airline websites
management companies
3% across Europe
15% of the direct opportunity which is indexed above our overall market share
3% of the managed opportunity which is indexed well below our overall market share
with the “Managed Business” sector highlighting the most opportunity
European short haul market1
Manag aged ed spend
pportunity 97% Direc ect spend
pportunity 85% 5%
3% 3% 15%
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Seizing the opportunity
Product Network Marketing Distribution Sales
across all markets
both the managed and direct channels
sales approach
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“Multi channel” sales approach
Corporate contracts Travel Management Company (TMC) Direct
Corporate accounts Corporate spend
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Seamless distribution through all channels
all channels
consistent display
channel across Europe
Self booking tools
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Delivering tailored business products
Inclusive Ticket Growth
for the corporate customer
TMC’s GDS systems
all self booking tools
easyJet plus at more than 35 airports
Flexi Ticket Growth
£ growth £ growth
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Building a stronger business network
Presence in top 100 market pairs
2 4 6 8 10 12 14 16 Departures Daily
High Frequencies on key Business Routes
13 11 10 10 9 9 7 7 7 7 6 6 5 5 4
European markets
primary airports
Business routes
through our business friendly schedule
48 23 39 9 24 24 21 18 17 15 14 14 3 3 1 20 1
20 30 40 50 60
Non primary airports Number of market pairs operated between 2 primary airports
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Stakeholder focussed marketing campaigns
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Summary
across both managed and direct segments in all markets
managed sector through TMC channel development
consideration
Industry partners
60
60
Chris Kennedy Chief Financial Officer
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Low cost everyday
easyJet’s low cost base provides the platform to make travel easy and affordable
Low cost t al allows lows eas asyJet Jet to to:
Offer affordab able e fares Continue e to compete te success ssfu fully lly Sustain in and grow margins ins
8.0 2.0 4.0 6.0 0.0 500 250
0.99 1.65 65 2.14 2.94 3.11 4.60 5.60 Airport; ground handling, navigation and en-route charges CASK( K( p)*
Capac pacity ity deplo loyed d on easyJe Jet t networ
Cost t base allows
et acces ess to the oppor portu tunity nity
easyJet Air France Alitalia British Airways KLM TAP Thomson Other
60 Other airlines hold a lower than 2.5% share
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easyJet lean will deliver £30 million - £40 million in sustainable savings per annum over the next 5 years
lean principle les: s:
culture Benchmarking ing process:
competitors
saving initiatives easyJet lean will continue to deliver sustainable savings
Engine e selection Enginee eering g & Mainten enan ance Airpor
als 2015 2016 2017 2018 2019 Up Up-ga gaugin ging A320 NEO’s
easyJ syJet et lean initiat ativ ives es
Pipeline of sustainable cost savings easyJet lean has delivered c.£170 million ion in sustainab able le cost savings
63
63
Warwick Brady Chief Operations Officer
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Our operation in 2014
Flight Operations
Cabin Services
Ground Operations
Engineering & Maintenance
Operations Control
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Leading asset utilisation
Industry leading asset utilisation
Operatio ional al efficiency
66.0% 87.0% 0% 20% 40% 60% 80% 100% 2010 2013
On Time Performance 90.3% Load factor
1
Innovate to m maintain in cost advantag age
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Maintaining cost advantage
All based on single aircraft type which allows for scale and simplicity benefits in all cost and operational areas
easyJ syJet t cost base se
base of £3.5 billion
billion
base
directly impact c.60% of the cost base
Fuel 33% £1,182m Maintenance 6% £212m Crew 13% £454m Airports & ground handling 31% £1,078m Navigation 8% £294m Selling and Marketing 3% £101m Other costs 6% £226m
1
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Pipeline of initiatives to maintain cost advantage
Short term <2yrs Medium term 2 – 4 yrs Long term 4yrs>
Increased pipeline of initiatives
and develop significant cost reductions
initiatives across
contract re-tender in 2015
Size of savings per annum
(larger circle means bigger saving opportunity)
68 68
Airport costs: the facts
7 years
allowing doubling of passengers
(18 Airports)
capped for 4 years, low-cost terminal discount protected
Europe
31%
69 69
Airport costs: delivering savings
Continual focus to minimise price increases to below inflation
Structure of charges Culture change Airport deals
Regulated airports
airports
process is developed and adhered to
from the easyJet network
together to ensure fairness in cost structures
efficiency is rewarded and airports are customer friendly and efficient
provided
31%
70 70
Ground handling costs: the facts
partners
lowest in the industry
31%
71 71
Ground handling costs: delivering savings
External benchmarking confirms easyJet as one of the industry leaders in ground handling costs
To deliver an easy, efficient and friendly service at competitive prices
Evolving airport processes
Airports of the future
Making key airports customer friendly and efficient (e.g.: Gatwick single terminal consolidation)
Automation
Auto bag drop and auto gates will drive efficiency across the airport experience
Competitive market
Leverage new contracts based
31%
72 72
Crew: the facts
performance
enjoy flying and continue to fly with easyJet
“I have no doubt in my mind that the quality and professiona
n crew is a major reason why I will continue to use easyJet.”
13%
1
73 73
Crew: delivering a sustainable cost base
Crew cost per block hour is in line with low cost competitors
T
efficient and friendly service at competitive prices
Industrial Relations
Specialised employee relations team regularly liaises with our 14 recognised unions
Pay deals
Variant pay deals which are competitive in each of our jurisdictions with rewards based
Growing network
Improved flexibility through new entrant contracts & strategic flying from new bases (e.g.: Netherlands, Portugal)
Lifestyle options
Offer choices to enhance lifestyle - select between pay, time off or part time
IT systems
Optimisation software ensures our crew are as productive as possible
13%
74 74
Fuel costs: the facts
made savings of £22 million
FY’14 fuel bill by +/-$1.0 million
33% 1
75 75
Fuel: delivering savings
deliveries since August 2013
remove unnecessary weight carriage
remove 600kg per aircraft
economy and minimising emissions
(removed paper charts) saving 25kg per aircraft
Pipeline of initiatives to continue to drive fuel efficiency savings
cost savings
manufacturers
during descent)
What has been done so far Continuing to deliver savings
33%
76
76
Will Facey Head of Operations Control Centre
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Role of the Operations Control Centre (OCC)
Being on the front foot – anticipating, mitigating and controlling execution
resilience
making
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OCC in disruption – considerations & outcomes
Control
Operational routines Business disruption teams Legal liabilities
React to any situation
Realistic and pre-emptive decision making
Open communication
Be open and honest with passengers Flight tracker
Centralised procurement
E.g.: centralised hotel booking
Innovative technology
E.g.: pre loaded cash card refreshment vouchers
Increased customer satisfaction
rates
to fly with easyJet again
Increased cost control
Future cost initiatives / innovation
Outcome
Disruption cost per cancelled flight decrease
2012 – £3,718 2013 – £3,551 2014 – £3,403
OCC Role Action / Process
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Case study: disruption incident management
Recovering well is the key to retaining the passenger
Aircraft at LGW suffers bird strike
Initial assessment undertaken
(LGW / BSL flight delayed)
Decision made to ground aircraft LGW / NCL rotation is cancelled as passengers not at airport yet LGW / NCL passengers informed
(majority informed prior to arrival at airport and placed
Swiss passengers moved in both directions & NCL passengers put on next
Quick decision required due to Basel curfew limited options to move passengers between UK / Switzerland in the coming days Is there enough time to inform NCL passengers
and stop them from travelling to the airport?
Bird strike ike Decis cision ion proces cess
Considerations Operationally committed to move Swiss passengers Aircraft scheduled to travel too and return from BSL to LGW
80
80
Gary Smith Head of Powerplant and Fleet Transition
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Background to E&M re-tender
the future’ launch
announcement
beyond 12 years
benchmarking completed
re-tender with selected suppliers/network
formed
house
6 year break clause
2008 2009 2010 2011 2012 2013 2014 2015
exited fleet
launched
Maintenance re-tender launch
completed
Now
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How the E&M cost base breaks down
easyJet Engineering & Maintenance cost base
Primary Activity Description
Engine maintenance Engine workshop visits, unscheduled and scheduled (every 9 years approx.) Engine LLPs Cost of engine life limited parts, replaced at scheduled engine workshop visit Component support Network wide repair and logistics management for over 30,000 component removal transactions Logistics and Warehousing Transportation and warehousing for components and consumables Consumable parts Non-repairable parts consumed at line or heavy maintenance Heavy maintenance Hangar based maintenance – currently includes 6 and 12 year checks, end-of-lease maintenance and C-checks Line maintenance Line maintenance – network wide Equalised checks Overnight checks performed every 85-90 days on each aircraft
Engineering by Category
Engine gines Compo ponen ents ts Airfr frame me Main intena nanc nce
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Implications of fleet transition on heavy maintenance
Increase in maintenance volume gives opportunity to leverage cost
20 20 31 31 24 24 25 25 20 20 9 9 23 23 25 25 20 20 8 9 17 17 27 27 19 19 19 19 5 4 10 10 22 22 10 20 30 40 50 60 70 80 90 100 6 Years 8 Years 10 Years 12 Years 14 Years 16 Years
48
1
33 20 39
1
94
21 21
3
64 74
T ype of check
maintenance check at 6 and 12 years (14 and 21 days downtime respectively)
medium-maintenance check every 2 years, allowing opportunity to perform reliability modifications
provide significant leverage with maintenance providers
type offers opportunity to leverage ‘lean principles’ and technology to improve efficiency of maintenance
Heavy maintenance demand forecast based on easyJet internal analysis: 2014-2020
Average age of fleet1
2014 2015 2016 2017 2018 2019 2020
Average age of fleet1 5.8 6.2 6.7 7.1 7.2 7.5 8.0
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Vision 2015
In spring 2013, easyJet engineering launched ‘Vision2015’
Outcome
engineering supply base
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Significant opportunities
Component support Heavy maintenance Current aircraft engine maintenance Line maintenance
Categories Strategy
aggregation of contract
maintenance programme strategy
maintenance contract in place until 2017
selection to drive cost reduction
strategy of continuous re- tender
configuration to be reviewed
Key areas of focus following the benchmarking exercise Largest opportunities in component support and heavy maintenance
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Engine selection
Rigorous, thorough and competitive process
engines to power 35 current generation A320s and 100 A320neos
the 100 purchase rights over new generation aircraft
LEAP-1A engines
powered by CFM56-5B engines
reduction target
Engine selection delivers future cost certainty and a significant improvement
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Next steps
Broad supplier base Issue of RFP Round 1 bids Supplier meetings
New contract ract(s)
Round 2 bids and down select Supplier selection Supplier meetings, site visits, Finalise Contract Jan 2014 March 14 April 14 May 14 June 14 Oct-Dec Dec July - Oct FY15 Tod
ay FY15-16 16 Implementation
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Goal of benchmarking exercise
result in material increase in E&M cost per seat by 2019
Engine Selection 2014 2019e 2019e E&M re- tender Up-gauging, fleet management CPS increase Engineering & Maintenance cost per seat
contract re-tender will result in lower E&M cost per seat in 2019 than in 2014
Ian Davies Head of Engineering
89
90 90
Continuous improvement by innovation
defects by 2020
application of technology
Objective Outcome Identifying innovation
innovation partners
91 91
Development of bespoke software to drive efficiencies
Rapid software change – Fan blades management
apps to optimise existing processes
help engineers replace damaged blades
replacement blades reducing inventory
aviation software specialists
92 92
Using technology to reduce delays
Front line support – real time video transmission
teams to engage using virtual technology
video calls with front line engineers, workshops and manufacturers
airports solved more quickly
delays
and Vuzix
93 93
Damage assessment time minimised
Dent and buckle – augmented reality
multiple delays per day, complex assessment processes
recorded and tracked for the life of the aircraft
pilots and engineers to see previous damage super- imposed onto the aircraft, minimising time taken to assess new damage
94 94
Drone and robotic technology
Remote inspections - drones
scan and assess any damage
undertake remote checks
Coptercraft, Measurement Solutions and Bristol Robotics Laboratory
95 95
What can prognosis do for us?
HOW IT would WORK…
SITA Network
ACARS Air-ground datalink
Data Snapshot
Ground System Engineering
Component Rectification/ Removal Engineering Processing Pattern Matching Alert Generation Costumer Notification
Goal of prognosis is to minimise aircraft on the ground, standby aircraft, delays and passenger compensation
96 96
Summary
Company’s DNA
implemented and longer term research projects
and leverage greater cost and efficiency savings as the fleet grows
business and improve operational efficiency
97 97
Chris Kennedy Chief Financial Officer
98 98
Agenda
competitive advantage
1 2 3 4
99 99
Focus on capital discipline to deliver sustainable growth and returns
capital
the organisation
year after year
Routes
12m to 30/6 /6/2 /2011 12m to 30/6 /6/2 /2012 12m to 30/6 /6/2 /2013 12m to 30/6 /6/2 /2014
Returns
100 100
Between FY15-17, easyJet will target a gearing range of between 15% and 30%
Target range
easyJet 21.5% Ryanair 15.6% Norwegian 3.1% IAG 8.3% Lufthansa 11.6% Air France 2.5% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
33% 28% 29% 7% 0% 5% 10% 15% 20% 25% 30% 35% 2010 2011 2012 2013
27% (historical average)
easyJet historical gearing
101 101
Target of £4 million per aircraft
by easyJet from prepaid bookings
£0m £2m £4m £6m £8m FY2010 FY2011 FY2012 FY2013
easyJet’s historic cash1 per aircraft
102 102 259 281 296 316 317 330 327 226 241 250 261 226 204 214 197 200 304 304 311 311 175 200 225 250 275 300 325 350 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Contracted Max Contracted Min Fleet Plan Previous Plan
Increased fleet flexibility to respond appropriately to market conditions
1. At the end of the relevant financial year 2. Based on the fleet plan – base case 3. Maximum fleet does not include the A320neo purchase rights
Maximum, minimum and base case fleet size following exercise of 27 purchase rights
103 103
with CFM engines for delivery between 2015 and 2017
purchase rights remained over A320 current generation
February 2014
exercised September 2014
aircraft with CFM LEAP-1A engines
2022
New Framework Arrangements
2015 - 2017 Bridge 2017 - 2022
remaining 27 purchase rights over current generation aircraft
proportion of A320 aircraft in the fleet
delivered with sharklets
upside growth flexibility to support key strategic
104 104
2005-20121 2013-142 2015-20173 2018-20223 Additional aircraft 49% 52% 66% 26% Replacement aircraft 42% 28% 9% 45% Maintenance 9% 20% 25% 30% T
100% 100% 100% 100% T
acquisition and
as a % of easyJet revenue
18% 9% 11% 10% - 12%
Fleet acquisition and overhauls will be funded through a combination of easyJet’s internal resources, cashflow, sale and leaseback transactions and debt
1. Based on actual revenue for the 2005 – 2012 Financial Years 2. Based on actual and estimated revenue 3. Based on estimated revenue
105 105
* Includes money market deposits but excludes restricted cash
Self funding ordinary dividend and capex
2 25 148 316 283 416 85 69 161 112 497 Sep 2013* 1,237 FX Restricted Cash Sale & Leaseback Borrowings CAPEX Ordinary dividend paid Tax, net int & other Net Working Capital Depn & amort Operating Profit * Sep 2012 * 883 Other
£million
106 106
after tax to 40% from the financial year ending 30 September 2014
46 85 133 150 175 FY2011 FY2012 FY2013 FY2014e
Special Ordinary
forecast for FY2014 profit after tax as at 15 September 2014
40% of FY14 profit after tax1
£ million
107 107
Capital discipline Capital structure Liquidity Dividend policy Returns
+ + +
=
Objectives
through industry shocks
Metric
Top quartile ROCE Fleet size flexibility of between 204 and 316 aircraft by 2019 Gearing: 15% to 30% Moving to 80:20 ratio on
£4 million cash per aircraft 40% ordinary dividend payout ratio
Gearing defined as net debt (adjusted by adding seven times aircraft dry leasing payments for the year) dividend by the sum of shareholders’ equity and adjusted net debt
108 108
Summary
competitive advantage
1 2 3 4
Carolyn McCall Chief Executive Officer
110
Summary
Proven strategy, execution and returns
aviation
A. Future profitable growth B. Industry leading return on capital employed and margins through revenue and cost initiatives C. Cash returns for shareholders
1 2 3
112
Presenters enters
Carolyn
all, OBE – Chie ief Execu ecuti tive
Carolyn joined easyJet on 1 July 2010 as Chief Executive and was appointed to the Board of easyJet. Prior to this, she was Chief Executive of Guardian Media Group. She was a Non-Executive Director of Lloyds TSB from 2008 to 2009, Non-Executive Director of Tesco PLC from 2005 to 2008 and Non-Executive Director of New Look from 1999 to 2005. She was Chair of Opportunity Now and a former President of Women in Advertising and Communications London (WACL). Carolyn was awarded the OBE for services to women in business in 2008. In April 2008, she was named Veuve Clicquot Business Woman of the Year. Carolyn graduated from Kent University with a BA in History and Politics and from London University with a Masters in Politics.
Chris is Kenne nedy dy – Chief ef Fina nanc ncial ial Office ficer
Chris joined easyJet on 1 July 2010 in the position of Chief Financial Officer and was appointed to the Board of easyJet. After graduating from Cambridge with a degree in Engineering, Chris worked in Audit and Consultancy before a two year stint as a venture capitalist and banker. In 1993 Chris joined EMI Music where he worked both in the UK and the US, covering a variety of roles including UK Chief Financial Officer, European Chief Operating Officer and International Chief Financial Officer. In early 2008 he joined the EMI Music Board as Chief Financial Officer and then Chief Investment Officer.
Cath th Lynn – Grou
ercial ial Direct ector
ets, Networ
icin ing
Cath joined easyJet in 2002 following the merger with Go, in which she played an active role. Cath has carried out a number of senior leadership roles at easyJet including Head of Ground Operations, Head of Airport Development and Procurement and Head of Network Development. In April 2011, she was appointed as Customer and Revenue Director, and to Group Commercial Director in April 2012. Cath spent 12 years in retail for J Sainsbury before joining Go where she was part of the management buy-out team and headed up cabin services, ground operations and customer service. Cath graduated from the University of Leicester with a BA (Hons) in Geography.
Franc ancois
acche hetta tta – Coun untry try Direct ector
ance
Francois joined easyJet in may 2005 as Country Manager for France and Benelux, then taking the responsibility of Italy and Spain as easyJet was expanding in Southern Europe. Since 2010, Francois , as Country Director for France, has taken the easyJet business in France to the next step after the opening of Charles de Gaulle and Lyon bases in 2008 and Nice and Toulouse in 2012. Before joining easyJet Francois held various senior position within L’Oreal Group in France, Asia and Eastern Europe as Marketing and Country Director. Francois graduated from HEC business school in France.
113
Presenters enters
Peter er Duff ffy – Grou
mercia ial Direct ector
tomer, mer, Prod
uct & Marketing eting
Peter joined easyJet in February 2011 as Marketing Director and leads on all aspects of easyJet’s marketing, e-commerce, contact centre and customer programme across Europe. Before joining easyJet, he was Marketing Director for Audi in the UK. Prior to that, Peter was Marketing Services Director at Barclays. Peter has a degree in Economics and an MBA.
Anthon thony Drury ury – Direct ector
ad of
iness
Anthony joined easyJet in March 2014 as the Director, Head of Business and leads all aspects of easyJet’s Business program across Europe. Before joining easyJet Anthony held a number of senior leadership and board positions with American Express. Most recently Anthony was the Vice President and General Manager across northern Europe within the company’s global business travel organisation. Anthony has a masters in eCommerce management and an MBA.
Warwic ick Brady ady – Chie ief Oper erat ations ions Office ficer
Warwick is currently Chief Operations Officer responsible for all of easyJet operations. He joined easyJet in May 2009 as the Procurement Director responsible for fleet management, airport, central procurement and regulation. In October 2010 he was appointed Director of Group Operations. Before joining easyJet Warwick was the CEO at Mandala Airlines in Asia. He also spent two years as Chief Operating Officer of Air Deccan/Kingfisher which, at the time, was India’s second largest airline. Prior to this Warwick was Deputy Operations Director at Ryanair from 2002 to 2005, where he held various senior executive roles including Deputy CEO of Buzz, following its acquisition from KLM. Prior to this Warwick worked in private equity for 6 years as well as a number of years with Thomson Airways. He also holds an MBA.
Will Face acey – Head ad of
erat ations ions / Oper erat ations ions Contr trol
tre
Will joined easyJet In November 2008 into his current position and is responsible for the Day of Operations delivery of the flying program and ensuring that the expectations of the company and customers are delivered on a daily basis . Prior to joining easyJet, Will worked for 20 years with DHL Express in various countries and roles across Europe however always within Operations and Network logistics. Will has a degree in International Transport Management.
114
Presenters enters
Gary Smit ith – Head ad of
erplant and Trans ansit itio ion
Gary joined easyJet in 2009 as part of the engineering insourcing project as Head of Powerplant and Transition, responsible for all aspects of engine management, new aircraft delivery and fleet exit management. Prior to joining easyJet, Gary was General Manager – Component repair at Rolls-Royce and prior to that had worked in the airline / aircraft maintenance industry for 17 years. Gary has a degree in Aeronautical Engineering and an MBA from Cranfield University.
Ian Davies es – Head ad of
ineering ering
Ian is the Technical Director and Head of Engineering at easyJet where he is responsible for the airworthiness of all easyJet’s Airbus A320 family of
highly maintained condition. Ian is a Licensed Aircraft Engineer with over 35 years of experience in civil aviation and has worked for easyJet for six years. Prior to his appointment at easyJet Ian was Director of Engineering at BMI British Midland for seven years.
115 115
Disclaimer
This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. Persons within the United Kingdom who receive this communication (other than those falling within (i) and (ii) above) should not rely on or act upon the contents of this communication. Nothing in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion contained in the Financial Services and Markets Act 2000. This presentation has been furnished to you solely for information and may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any other purpose. This presentation does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of easyJet plc (“easyJet”) in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of
United States. Securities may not be offered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there from. easyJet has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither easyJet nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, from any reliance on this presentation or its contents. This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. By attending or reading this presentation you agree to be bound by the foregoing limitations.