TIDMEZJ
RNS Number : 8269T
easyJet PLC
19 November 2019
19 November 2019
easyJet plc
Results for the year ending 30 September 2019
easyJet announces a strong finish to 2019
driven by the delivery of self-help initiatives in challenging
market conditions
easyJet to become the world's first major airline to operate
net-zero carbon flights
by offsetting the carbon emissions from the fuel used on the
flights
Summary
-- Against the background of a difficult year, in the year
ending 30 September 2019, easyJet has:
o delivered full year results in line with expectations, with
headline profit before tax towards the top end of guidance,
o achieved solid revenue per seat during the second half of the
year, as our self-help initiatives deliver valuable returns
o demonstrated good operational performance thanks to our
ongoing operational resilience programme and continued strong cost
control, in spite of a difficult Q4 disruption environment (weather
and LGW issues)
-- Passenger numbers for the year ending 30 September 2019
increased by 8.6% to 96.1 million (2018 10.2%)
-- Capacity(1) increased by 10.3% due to growth across all
regions. Load factor decreased by 1.4 percentage points to
91.5%
-- Total revenue increased by 8.3% to GBP6,385 million (2018:
GBP5,898 million) enabled by our increase in capacity. Total
revenue per seat decreased by 1.8% to GBP60.81 (2018: GBP61.94),
driven by some weakness in consumer confidence, notably offset by
the self-help initiatives delivered in the second half of the
financial year and the positive impact from strikes at British
Airways and Ryanair. The self-help initiatives included a focus on
optimising late yield, whilst maintaining our commitment to offer
great value. Revenue per seat at constant currency(2) for the year
ending 30 September 2019 decreased by 2.7%, but increased by 0.8%
during the second half, reflecting these self-help initiatives
-- Headline cost per seat excluding fuel at constant currency(2)
was down 0.8% to GBP43.11, mainly due to the successful delivery of
the operational resilience programme which drove disruption costs
down for the year. Headline cost per seat increased by 1.5% to
GBP56.74 (2018: GBP55.87) as a result of higher unit fuel(3) costs
and adverse foreign exchange movements
-- Cost and efficiency programme savings of GBP139 million
(2018: GBP107 million) were delivered over the year
-- Non-headline items of GBP3 million positive (2018: GBP133
million cost). Total cost per seat, including the impact of
non-headline items was GBP56.71 (2018: GBP57.26)
-- Headline profit before tax was down 26% to GBP427 million
(2018: GBP578 million), towards the top of the GBP420-430 million
guidance range. Total headline profit before tax per seat decreased
by 32.9% to GBP4.07 per seat (2018: GBP6.07 per seat)
-- Reported profit before tax decreased to GBP430 million (2018 GBP445 million)
-- Headline ROCE for the year decreased to 11.4% (2018: 14.6%).
On a like-for-like accounting basis, headline ROCE decreased to
9.9%(4) .
-- Proposed dividend of 43.9 pence (2018: 58.6p) subject to approval by shareholders
-- Balance sheet strength amongst the best in the sector, with a
net debt position of GBP326 million
Looking forward
-- From today onwards easyJet will make all flights net zero
carbon. By offsetting the carbon emissions from the fuel used on
the flights across our whole network we will become the world's
first major net zero carbon airline. Carbon offsetting is an
interim measure and we will continue the push to reinvent aviation
for the long-term, including development of sustainable fuel and
electric flying
-- easyJet holidays will launch in the UK before Christmas and
will offer beach and city holidays, travelling across easyJet's
network. Flexibility will play a key part in the new offering
allowing customers to holiday the way they want by choosing from a
huge range of flight options paired with Europe's most loved
hotels, all at great value
Outlook
-- Forward bookings for the first half of the 2020 financial
year are reassuring. Bookings are slightly ahead of last year
(recognising that the second quarter is a weak comparative)
-- easyJet's expected capacity growth for the year ending 30
September 2020 will be at the lower end of historic guidance of
between 3% and 8% per year
-- Headline airline revenue per seat at constant currency(2) in
the first half of the 2020 financial year is expected to be up low
to mid single digits
-- Headline airline cost per seat excluding fuel at constant
currency(2) for the full year to 30 September 2020 is expected to
be up by low single digits, assuming normal levels of
disruption
-- easyJet Holidays is expected to be at least breakeven for the
financial year to 30 September 2020
-- Offsetting carbon emissions from the fuel used for all
flights on behalf of customers is expected to cost c.GBP25 million
in the financial year to 30 September 2020, and is reflected within
our guidance of total fuel costs
-- Capital expenditure for the financial year to 30 September
2020 is expected to be around GBP1,350 million
-- easyJet has been operating since March 2019 in a state of
full preparedness for all possible Brexit outcomes. We are
structured as a pan-European airline group with three Air Operator
Certificates based in Austria, Switzerland and the UK. Around 50%
of our equity capital is held by qualifying European nationals. We
continue to closely monitor customer demand in relation to
Brexit.
Commenting on the results, Johan Lundgren, easyJet Chief
Executive said:
"easyJet finished the 2019 financial year with a strong
performance across the business and a record summer. More customers
than ever are coming to easyJet as their airline of choice, with a
record 96.1 million customers flying with us this year. Our
self-help initiatives meant we have been able reduce costs and
drive a better yield performance which has improved revenue per
seat in the second half of the year.
"We have also invested in tackling disruption for our customers
through our Operational Resilience programme, which has reduced
cancellations by 46% and lowered delays of 3 hours or more by 24%
year on year. All of these efforts have led to easyJet being the
number one airline in the UK in terms of customer satisfaction,
ahead of BA and Jet2; and the first choice airline brand and
considered best value for money across Europe.
"I am really thrilled that with the launch, before Christmas, of
our brand new easyJet Holidays business we are bringing flexibility
and excellent value to the holiday market. We are now able to offer
our customers more than 100 amazing beach and city holiday
destinations, pairing Europe's best short-haul flight network with
more than 5,000 of Europe's best hotels. We believe there is a gap
in the market for a modern, relevant and flexible business for
today's consumer.
"And finally I am proud that we have announced that from today
we will be the world's first major airline to operate net-zero
carbon flights across our whole network. We are doing this by
offsetting the carbon emissions from the fuel used for all of our
flights. We recognise that offsetting is only an interim measure,
but we want to take action on our carbon emissions now. easyJet has
a long tradition of efficient flying - the aircraft we fly and the
way we fly them means that easyJet is already more efficient than
many airlines. However, our priority is to continue to work on
reducing our carbon footprint in the short term, coupled with
long-term work to support the development of new technology,
including electric planes, to reinvent aviation for the
long-term."
2019 2018 Change
Favourable/(adverse)
---------------------------------------------- ------ ------ ----------------------------
Capacity (millions of seats) 105.0 95.2 10.3 %
Load factor (%) 91.5 92.9 (1.4) ppts
Passengers (millions) 96.1 88.5 8.6 %
Total revenue (GBP million) 6,385 5,898 8.3 %
Headline profit before tax (GBP million) 427 578 (26.0) %
Total profit before tax (GBP million) 430 445 (3.4) %
Headline basic earnings per share (pence) 88.7 118.3 (25.0) %
Revenue per seat (GBP) 60.81 61.94 (1.8) %
Constant currency(2) revenue per seat
(GBP) 60.28 61.94 (2.7) %
Headline cost per seat (GBP) 56.74 55.87 (1.5) %
Headline constant currency(2) cost per
seat excluding fuel (GBP) 43.11 43.43 0.8 %
Proposed ordinary dividend per share (pence) 43.9 58.6 (25.1) %
Headline return on capital employed (%) 11.4 14.6 (3.2) ppt
---------------------------------------------- ------ ------ ---------------- ----------
For further details please contact easyJet plc:
Institutional investors and analysts:
+44 (0) 7985 890
Michael Barker Investor Relations 939
+44 (0) 7583 101
Holly Grainger Investor Relations 913
Media:
+44 (0) 7985 873
Anna Knowles Corporate Communications 313
+44 (0) 207 251
Dorothy Burwell Finsbury 3801
+44 (0) 7733 294
930
There will be an analyst presentation at 09:15am GMT on 19
November 2019 at Nomura, One Angel Lane, London, EC4R 3AB.
Alternatively a webcast of the presentation will be available
both live and for replay (please register on the following
link):
https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/16532/117606/Lobby/default.htm
For those who prefer a telephone Replay available for 7 days afterwards:
dial-in:
+44 (0) 20 3003 +44 (0) 20 8196
UK & International: 2666 UK & International: 1998
UK Toll Free: 0808 109 0700 UK Toll Free: 0800 633 8453
PIN: 5863180# PIN: 5863180#
Overview
easyJet delivered a resilient performance in the year to 30
September 2019. These results reflect the underlying strength of
easyJet's network and brand. We continue to see easyJet as a
structural winner in the European short-haul airline market, across
the economic cycle.
easyJet is reinforcing its competitive advantage by building
leading positions at the primary airports which our customers want
to fly to. This customer-focused strategy is driving profitable
growth and delivering resilient returns for the long term. We have
made significant progress with the Berlin operations which we
acquired last year and they have been successfully integrated into
our network. We believe that it is the strength of this network,
combined with our outstanding people and great value proposition,
which are enabling easyJet to deliver robust bookings and continue
to take market share from the legacy carriers.
Revenues on a per seat basis this year were negatively impacted
by uncertainty around the original March 2019 Brexit date, although
have since recovered well, supported by a number of self-help
initiatives, such as our late yield pricing initiative. Operational
performance has remained strong as we have invested in operational
resilience initiatives to reduce the impact of industry disruption
for our customers. Cost control continues to be a core focus and
our underlying cost per seat has remained broadly stable this year,
despite some industry-wide issues in the fourth quarter such as
summer storms and disruption at London Gatwick.
Our all-new easyJet Holidays platform launches in the UK market
before Christmas, taking bookings for the winter 2019 and summer
2020 seasons. We will offer our customers a wide range of city and
beach holidays teamed with the flexibility of our airline network
and a simple-to-use and inspiring website. We are excited about
this opportunity to build a differentiated and financially
meaningful Holidays business for a low upfront investment and
limited risk. We expect easyJet Holidays to be at least breakeven
in the financial year to 30 September 2020.
Revenue
Total revenue increased by 8.3% to GBP6,385 million (2018:
GBP5,898 million) due to our increase in capacity. Total revenue
per seat decreased by 1.8% to GBP60.81 (2018: GBP61.94), reflecting
economic uncertainty across our markets, weakness in the second
quarter and subsequent recovery in the second half. Revenue per
seat at constant currency(2) decreased by 2.7%.
Passenger revenue grew by 6.9%. The drivers of this performance
were:
-- The self-help initiatives delivered in the second half,
mainly focusing on optimising late yield, whilst maintaining our
commitment to offer great value
-- Strength in the UK regions and in France
-- A full year's contribution from our Tegel base in Berlin
-- Positive impact from strikes at British Airways and Ryanair.
Offset by:
-- A tougher comparison as the previous year had benefited from
the collapse of Monarch, cancellations at Ryanair and industrial
action in France
-- Economic uncertainty in core markets
-- Weakness in the second quarter, as customers' propensity to
book flights was impacted by uncertainty surrounding the original
date of 29 March 2019 proposed for the UK to leave the European
Union
-- Softer London market
-- Drone sightings at London Gatwick
Ancillary revenue grew 13.7% to GBP1,376 million (2018: GBP1,210
million). This reflected our continued focus on a data-driven
programme of products and services which our customers value,
including:
-- Seasonal pricing on allocated seating
-- Introduction of the fourth band of seat pricing
-- Loss of revenue from changes to admin fees more than offset
by strong performance of ancillary revenues generally
Cost
easyJet's underlying cost performance has been strong in the
2019 financial year. Headline cost per seat including fuel
increased by 1.5% to GBP56.74 (2018: GBP55.87). Headline cost per
seat at constant currency(2) increased by 0.4% to GBP56.08 (2018:
GBP55.87).
Headline cost per seat excluding fuel decreased by 0.8% at
constant currency(2) to GBP43.11 (2018: GBP43.43). This cost
performance was driven by:
-- Investment in operational resilience, which drove decreases
in cancellations and delays over three hours, despite experiencing
the drone issue at Gatwick as well as summer thunderstorms across
many markets
-- Lower navigation costs due to reduction in Eurocontrol rates
-- Favourable impact of IFRS 16 in relation to maintenance costs
offset by increased underlying costs of maintenance
-- Fleet up-gauging from A319ceo to A320neo and A321neo albeit
this has been somewhat lower than planned due to Airbus delivery
delays
-- Established strategic relationships with key suppliers,
particular airports and ground handling agents, to drive long-term
cost efficiencies
-- Lower de-icing costs due to relatively benign weather
Partially offset by:
-- Annualisation of previously agreed crew pay deals
-- Price increases from both regulated and non-regulated airports
-- Ownership costs reflecting new aircraft year on year and the
impact of IFRS 16 accounting changes. The net impact of IFRS 16 is
an GBP8 million decrease in headline costs
-- The cost impact of the drones at Gatwick relating to customer
welfare costs. The incident affected around 82,000 customers and
led to over 400 flights being cancelled
Fuel cost per seat increased by 8.4% to GBP13.48 (2018:
GBP12.44) and by 4.3% at constant currency(2) , driven by a higher
hedged fuel price compared to the prior year, partially offset by a
continued investment into more fuel efficient aircraft.
Non-headline items
easyJet incurred a net benefit of GBP3 million in non-headline
items during the 2019 financial year (2018: GBP133 million cost).
Non-headline items are material non-recurring items or are items
which do not reflect the trading performance of the business. These
costs are separately disclosed and further detail can be found in
the notes to the accounts. These include:
-- GBP2 million gain as a result of the sale and leaseback of
ten A319 aircraft in the period (2018: charge of GBP19 million)
-- GBP2 million gain from the retranslation of balance sheet
monetary assets and liabilities (2018: nil)
-- GBP2 million credit related to the commercial IT platform
programme (2018: GBP65 million charge)
-- GBP4 million charge for ongoing organisational and legal
costs associated with easyJet's Brexit-mitigation programme (2018:
GBP7 million)
-- GBP1 million credit related to fair value adjustments (2018: GBP1 million charge)
There were no non-headline charges relating to Tegel, which is
now fully integrated into the underlying business (2018: charge of
GBP40 million).
Strategic progress
Delivering Our Plan
easyJet has a well-established business model that provides a
strong foundation to drive profitable growth and long term
shareholder returns. easyJet is delivering its strategy through the
strategic framework which we call 'Our Plan'. The five priorities
are:
-- Network - number one or number two in primary airports
-- Winning our customers' loyalty
-- Value by efficiency
-- The right people
-- Innovating with data
Network - number one or number two in primary airports
easyJet aims to provide customers with the leading, best value
offer for the destinations they want to fly to. easyJet's strategy
is driving both leisure and business travel by focusing on the key
airports which serve valuable catchment areas and represent
Europe's largest markets by GDP. easyJet has a portfolio of slots
at customer-friendly times in capacity-constrained airports, which
reinforces its competitive advantage against airlines which cannot
match its breadth of destinations and frequencies.
99% of easyJet's seat capacity touches these key, primary
airports, positioning the airline strongly against its competitors.
During the year easyJet established a number one position at two
more airports, taking the total to 27.
Looking forward, easyJet has identified a number of potential
target airports for the coming years where GDP and passenger
volumes are high, and where there is a weak incumbent or fragmented
competition. By being number one in key airports, with the
strongest brand and delivering the best value, we can become the
first choice airline for our customers. easyJet estimates that
within its existing target airports there are 61 million
head-to-head seats being flown with legacy airlines. This
represents a significant opportunity for growth.
easyJet regularly reviews its route network in order to maximise
returns and exploit demand opportunities in the market. During the
2019 financial year easyJet added 112 routes to the network.
Reflecting the airline's discipline, it also discontinued 40 routes
which either did not meet expected return criteria or became
secondary to a more attractive route elsewhere. We will continue to
monitor any additional opportunities for growth which may become
available in our target airports.
easyJet's network decisions are not driven solely by cost but by
the desire to secure long-term, sustainable and profitable
positions in our customers' favourite airports, which in turn will
drive long-term, sustainable competitive advantage and returns for
shareholders, throughout the cycle.
easyJet's strategy is a winning one and customers continue to
choose to fly with us. This is due to our fantastic staff, our
efficiency and our all-round value proposition in short haul
European flights.
easyJet continues to target growth in regional France,
leveraging its long-established brand and network presence. In
April easyJet opened a new base in Nantes, which brings its number
one positions in France to six, including Nice, Lyon, Bordeaux,
Lille and Grenoble as well as a number two position in Paris
Charles de Gaulle and Toulouse.
easyJet also consolidated its position as the UK's leading
airline in the domestic market, with growth at Manchester,
Edinburgh, Glasgow, Belfast, Liverpool, Southend and Bristol, as
well as continuing to strengthen its number one positions in Italy
at Milan Malpensa, Venice and Naples.
During the 2019 financial year, easyJet grew capacity by 9.8m
seats (+10.3%). This was a faster rate of growth than our markets,
which grew capacity by 5.3%. Our growth came predominantly from the
UK, French, Spanish and Italian operations, as well as from Germany
where we benefited from a full year of operations at our Tegel
base. 25% of easyJet's capacity growth during 2019 was from
domestic flights, in markets we already knew very well.
Shortly after the end of the financial year, easyJet acquired
Thomas Cook's slots at Gatwick Airport (12 summer slot pairs and 8
winter slot pairs) and Bristol Airport (6 summer slot pairs and one
winter slot pair) for GBP36 million. We are in the process of
finalising the schedules and will be flying these routes as early
as February 2020.
Winning our customers' loyalty
easyJet makes travel easy, enjoyable and affordable for
customers whether it is for business or leisure - seamlessly
connecting Europe with the warmest welcome in the sky.
We are making great progress in strengthening our brand across
Europe, with record brand scores across many markets and more
consumers now saying that we are their first choice airline in the
markets where we operate(5) . Consumers are choosing us because
they want to fly easyJet, and not just because of our great prices
and strong network.
Sustainability
From today easyJet will offset the carbon emissions from the
fuel used for all of its flights on behalf of customers. In doing
so easyJet will become the world's first major airline to have
net-zero carbon emissions from all its flights. The airline will
also continue its long-term work to support the development of new
technology, including electric planes, so that European aviation
can move towards becoming net-zero carbon. At this stage the
expected cost will be c.GBP25 million for 2020.
easyJet will offset carbon emissions from the fuel used for
every flight across its whole network. Through carbon offsetting
easyJet will invest in projects to reduce carbon and carbon
equivalents from the atmosphere. easyJet will compensate for every
tonne of CO2 emitted from fuel used for its flights, by ensuring
there is one tonne less in the atmosphere - whether by reducing CO2
by physically removing it from the air (e.g. by planting more
trees) or by avoiding the release of additional CO2.
easyJet has undertaken a rigorous process in selecting its
carbon offset programmes. Only programmes which meet either the
Gold Standard or Verified Carbon Standard (VCS) accreditation,
which are globally recognised and respected for their standards of
offsetting, will be used. These accreditors ensure that the carbon
reductions claimed by individual programmes would not have happened
without that project, or that by reducing carbon emissions in one
place they do not inadvertently increase them elsewhere. easyJet
has partnered with Climate Focus to help with the appointment of
the projects. Climate Focus is an international advisory company
committed to the development of policies and programmes that
mitigate and adapt to the impacts of climate change.
This action on easyJet's carbon emissions is an interim measure,
and will be in place until new carbon-reducing technologies become
available and commercially viable. The airline will continue to
support innovative technology, including the development of hybrid
and electric planes, working with others across the industry to
reinvent aviation over the long-term so that European aviation can
become net-zero carbon. The aim will be for easyJet to reduce the
amount of carbon offsetting it does as new technologies emerge.
As part of this work, the easyJet and Airbus partnership has
been established, to jointly research the opportunities and
challenges of introducing hybrid and electric aircraft for short
haul flying in Europe.
easyJet has been supporting Wright Electric over the last two
years, which is aiming to produce an all-electric commercial
aircraft which could be used for short haul flights. The airline is
also working with Rolls Royce and Safran on new technologies to
reduce the carbon footprint of flying.
easyJet's focus on operational efficiency also continues to
deliver fuel and carbon emissions savings. The airline is
transitioning its fleet to increasingly more modern, fuel efficient
aircraft; operating the aircraft in ways which avoid the
unnecessary use of fuel; and maximising passenger load factor as
much as possible.
Since 2000 easyJet has reduced its carbon emissions per
passenger kilometre by over one-third. Its carbon dioxide emissions
per passenger kilometre in the 2019 financial year were 77.07
grams, down from 78.46 grams in the 2018 financial year.
Holidays
Last year easyJet identified a significant opportunity to
develop a financially meaningful holidays business. We have built a
brand new organisation from the ground up to replace the previously
outsourced commission-based model, so we can directly sell to
customers and grow our business quickly and at scale.
Around 20 million customers per year fly with easyJet to
Europe's largest leisure destinations, but only 0.5 million book
accommodation with us. These 19.5 million leisure customers are our
initial target market. The total European package holidays market
is worth around GBP61 billion per year. The UK alone is a GBP13
billion market and has grown by 6% annually.
easyJet holidays has built an entire organisation focused on
technology, digital and data working alongside our experienced
local hotel sourcing team and supported by our commercial,
marketing, finance, HR, legal and customer functions. Our people
are a mix of industry and tech specialists and easyJet talent.
The all-new easyJet holidays offering will be launching in the
UK market before Christmas, taking bookings for winter 2019 and
summer 2020 seasons. Our new holidays website and mobile app will
offer a simple-to-use streamlined search and booking process with
inspiring content.
The way that customers are taking holidays is changing and we
know customers want holidays with various durations and not the
traditional seven and 14 nights. Our research tells us that easyJet
customers will value easyJet Holidays' unrivalled flight
flexibility, curated portfolio of hand-picked hotels and compelling
pricing. easyJet Holidays is well placed to provide customers with
this level of flexibility and the tailored holidays they want and
our business is built to respond to this.
easyJet is excited about the opportunity to build a major player
in the holidays market for a low upfront investment and with
limited risk.
Business
easyJet is proud that it has been voted UK Business Airline of
the Year at the Business Travel Awards (UK).
easyJet has a well-established and attractive business passenger
offer, based on its network of primary airports, its slot portfolio
and high frequency on Europe's major commercial routes. easyJet has
built its business customer base from 10 million in 2012 to almost
17 million in 2019. The increase in business passengers during 2019
was 11.0% and has been driven by a B2B sales focus on promoting a
new Flexi Fare proposition and Inclusive products on our UK, French
and German domestic routes, which saw a 13% increase in business
passenger numbers. Overall penetration of business rose by 0.5
percentage points to 17.5%. The business pricing premium decreased
by 4% reflecting tougher market conditions, however continued
investment in its business offer will help easyJet reach a higher
market share of European short-haul business travellers. We now
proactively work with 40% of the FTSE 100 and our dedicated
business travel team is actively engaged with a high proportion of
DAX30 and CAC40 companies.
Loyalty
easyJet has a great offer and a great brand which continue to
drive customer loyalty. Loyal customers are much more valuable to
us, with returning customers buying twice as many flights per year
as first timers.
Brand affinity is at an all-time high across our major markets,
with both affinity and preference increasing to our highest ever
levels compared to 2018 in the UK, France, Germany, Italy,
Netherlands and Switzerland.
The easyJet brand is considered of equal status to many of our
full-service competitors.
In the 2019 financial year, 68% of easyJet seats were booked by
returning customers (who had made a booking in the preceding two
years), representing 65 million passengers. This is a 7 million
increase compared to 2018.
Membership of easyJet's invitation-only loyalty programme,
Flight Club (for those who fly more than 20 times a year with
easyJet) also grew strongly, with Flight Club members increasing by
24% in 2019 and accounting for 9% of all bookings made. easyJet
plus membership rose by 17% over the 2019 financial year.
easyJet's ambition is to drive customer loyalty further whilst
proving that expensive and complex structures are not needed in
order to be innovative. Whilst our internal resources have been
focused on the Holidays launch during 2019, easyJet will continue
to evolve its loyalty offering during 2020 to grow the total value
per passenger through a customer-centric loyalty programme that
enhances the end-to-end travel experience, driving loyalty through
personalised benefits that offer fair value and relevancy.
Value by efficiency
easyJet is committed to maintaining its structural cost
advantage in the markets in which it operates, particularly
compared to the legacy airlines. easyJet is low cost, driving
efficiency and investing only where it matters most to our
customers and our people.
Through its Cost and Efficiency Programme, easyJet continues to
drive both short-term efficiencies and longer term structural cost
savings across all areas of the business, leveraging its increasing
scale. These savings enable the airline to offset the effects of
underlying inflation and build flexibility to help mitigate revenue
pressure. Data is playing an increasingly large part in identifying
and delivering cost savings.
The Cost and Efficiency Programme has been able to deliver
sustainable reduction this period: GBP139 million of savings have
been achieved in the financial year (2018: GBP107 million),
principally in:
-- airport deals: easyJet continues to benefit from economies of
scale and delivering passenger growth to its network of
airports
-- ground handling costs
-- disruption cost savings.
easyJet expects to deliver at least GBP80 million incremental
savings in the 2020 financial year.
Disruption
In addition to our structural cost programme initiatives to
leverage our scale, easyJet sees opportunities to address the
difficult aviation operating environment and the associated cost of
disruption. This in turn will drive better On Time Performance
(OTP) and customer satisfaction, as well as reduce costs.
The Air Traffic Control (ATC) environment in Europe remains
challenging, experiencing 24.5 million delay minutes in 2019,
compared to 14.1 million in 2015, as reported by Eurocontrol.
During the financial year easyJet has made significant progress
in its Operational Resilience (OR) programme, using data and
resource from across the company to plan for this difficult
environment. The OR Programme has resulted in improvements in
several key areas:
-- Schedule design - for the summer 2019 schedule easyJet has
improved automation and increased the number of parameters used in
the planning process, including factoring in longer turn times for
bigger aircraft such as the A320s and A321s and buffers for
congested airspace or curfew-constrained airports. As easyJet
operates more slots at constrained airports than any other airline
in the world this is a key development which will continue to be
enhanced in the future
-- Crew cost and resilience - standby has been increasingly
shifted to afternoon/evening duties and around 900 prioritised
pairings have been proactively split
-- Aircraft planning - increased standby aircraft to 13
-- First wave and turn - re-timed first wave processes, and
introduced new hot turn/hot arrival processes
-- Operations Control Centre (OCC) resilience - new operating
model rolled-out, including specialist 'pods' or sub teams to
manage each cluster of bases
-- Customer management - reduced unnecessary or duplicative
customer communications, and increased automation in claims
processing
-- Data products - introduced 21 new Data products to support
operational decision making including
o Crewing Analyser, to predict crew pairings which would benefit
from being split
o OTP Simulator, to predict EU261 events and enable proactive
action.
easyJet has successfully reversed the trend of increasing
disruption events and costs (this includes 3hour+ delays, overnight
delays and cancellations) during the 2019 financial year thanks to
our resilience work.
Our Operational Resilience programme has yielded tangible
positive results (FY19 vs 18) including:
o 30% reduction in total events
o 46% reduction in cancellations
o 24% reduction in 3 hour delays
In mitigating the impact of ATC delays our pre-flight tactical
planning team avoided over 550 hours of forecast delay and the
flight planning team is re-routing on the day to avoid a further
20,000 minutes of delay per week.
Overall we have managed to keep net total minutes of delay per
flight broadly flat this year, in extremely challenging conditions.
For the first time in the last four years easyJet has seen a
reduction in disruption costs year-on-year.
On-Time Performance
In the year to 30 September 2019, On-Time Performance (OTP) was
flat year on year at 75%. This reflects our renewed focus on
operational resilience in order to counteract the effects of
operating at scale in increasingly congested airspace. This is
despite OTP in the fourth quarter being significantly affected by
the impact of lightning storms across Europe.
OTP % arrivals within Q1 Q2 Q3 Q4 Full year
15 minutes(5)
----------------------- ---- ---- ---- ---- ----------
2019 Network 79% 82% 74% 66% 75%
2018 Network 81% 82% 73% 68% 75%
----------------------- ---- ---- ---- ---- ----------
The right people
People are at the heart of everything easyJet does. Our
customer-facing employees are the very best in the industry and
provide the warmest welcome in the sky. The positive experience
which they provide for customers leads to increased loyalty and
repeat business.
As our business continues to evolve and grow, easyJet remains
committed to fostering an inclusive and energising environment
which attracts the right people and inspires everyone to learn and
grow.
This commitment is demonstrated in an Employee Net Promoter
Score (eNPS) of 23 and an overall engagement score of 8 out of 10,
which are both strong results. easyJet also has a Glassdoor rating
of 4.1, which puts us in the Top 50 places to work in the UK and
the best airline.
easyJet's business model of employing crew on local contracts
across Europe delivers significant value in attracting and
retaining high quality crew. easyJet believes this is the best
long-term and sustainable resourcing model in the markets where we
operate. easyJet's investment in this area has driven structural
benefits including employee turnover being amongst the lowest in
the industry.
In order to continue to help navigate the increasingly
challenging trading climate and long-term strategic choices ahead,
easyJet will be making some accountability changes within the AMB
in December 2019. Andrew Findlay will increase his responsibilities
by taking on the corporate strategy function. This will simplify
ways of working by consolidating our corporate and fleet strategy
activities under one AMB member, in addition to allowing Andrew to
lead all teams managing the strategy and 5-year planning process.
This will support us in maximising long-term shareholder value and
achieve our change and sustainability ambitions. Robert Carey will
continue to own Network and Commercial strategy, working alongside
Andrew and the wider AMB.
Employee turnover
Employee turnover remains at very low rates, at 5% for cabin
crew, 6% for pilots and 6% in total over the year.
Our employees tell us that they value our friendly, positive and
upfront atmosphere, our famous 'orange spirit' and our competitive
remuneration policies.
easyJet is investing significant resources to improve schedule
and rostering efficiency, which will improve crew productivity and
create a more stable working environment.
Female pilots
easyJet's Amy Johnson Flying Initiative continues to address the
significant gender imbalance in the worldwide pilot community. This
programme promotes and supports female recruits and has seen
considerable success. Activity this year has included over 180
visits to schools and youth organisations, sponsorship of an
Aviation Badge for Brownies (a division of Girlguiding in the UK)
and highlighting female easyJet pilots in the media. From just 5%
of our pilot intake in 2015, the proportion of new entrant pilots
who were female continues to rise and is on track to meet our 20%
target in 2020. We will continue to work to influence the issue of
diversity on the flight deck in the coming years.
Innovating with data
easyJet is aiming to become the world's most data-driven
airline. Our Chief Data and Information Officer Sam Kini has built
out a team of data scientists and data analysts to help us achieve
this goal. We have identified a rich pipeline of projects to
optimise revenues and costs throughout easyJet.
Over the 2019 financial year our teams have been working in a
co-ordinated, airline-wide way to identify improvements across the
end-to-end process, from designing our flying schedules and
rosters, managing our fleet, communicating with and supporting our
customers, and using data to make the best network-wide
decisions.
Our data scientists now use analytics in a much more
sophisticated way to inform every part of our plan. We have
introduced new data products, upgraded core systems and created a
new team to provide rapid insights on recent events, and identify
any systemic patterns or opportunities to improve. This has
included activating over 50,000 updates to the summer 2019 schedule
to help us avoid disruption where possible, and to be better
positioned to manage where we cannot. easyJet has also optimised
our maintenance planning and used analytics to better predict where
and when standby aircraft might be required - reducing delays and
speeding up recovery when disruption occurred.
easyJet has invested in a new team to work directly with
external bodies involved in air traffic management, so we can
improve how we plan our flight slots and work together to avoid
delays.
Notable successes in 2019 included:
-- Taking predictive data analysis into our schedule design, in
order to manage disruption. This has resulted in our disruption
costs actually falling this year, for the first time in the last
four years
-- Testing the impact of what is placed in the booking funnel
and where, in order to maximise ancillary revenue
-- Analysing the results of our 4th band of seat pricing, which is delivering well
-- Voted best airline app at the World Aviation Awards
-- Starting the roll-out of iPads for our crew, to improve OTP,
reduce disruption, improve customer service and save 30,000 pieces
of paper a day
Future projects
easyJet's current pipeline of data projects include:
-- Our late yield initiative, which was introduced after the
softer trading in Q2, in order to capture some of the pricing gap
in super-late bookings, relative to our competitors. easyJet now
has a new data team working side-by-side with a much larger trading
team, identifying the best performing flights to get more yield,
generating incremental revenue. Initial results have been very
encouraging and we will roll out a further wave in 2020
-- Ongoing operational resilience processes, such as the OTP
simulator, which has helped us to keep net total minutes of delay
per flight broadly flat year-on-year, in extremely challenging
conditions
-- Continued roll-out of our predictive maintenance
capabilities, with 56 aircraft already benefiting from the Advanced
Active software. The predictive maintenance programme notifies us
in advance of potential issues and has avoided 318 cancellations
and 47 major delays already since launch
-- Analysis of on-board purchasing decisions to assess whether
changes should be made to our offering
-- Continual innovation in our offer such as the new Bag Sizer
on the easyJet app and the roll-out of Auto Bag Drop, which is now
offered in 19 airports
This exciting pipeline of projects for the coming year will
continue to drive cost efficiency and operational excellence in
2020 and beyond.
Brexit
easyJet is well prepared for the UK's departure from the
European Union and has been operating in a 'No-Deal Brexit'
environment since March 2019.
Since March easyJet has been structured as a pan-European
airline group with three airlines based in Austria, Switzerland and
the UK. This ensures that easyJet will continue to be able to
operate flights both across the EU and domestically within EU
countries after the UK has left the EU, regardless of the Brexit
outcome.
easyJet has made good progress in meeting the European ownership
requirements and our equity capital is currently around the 50%
threshold of qualifying nationals (EU member states plus
Switzerland, Norway, Iceland, Liechtenstein, but excluding the UK).
In the event that the UK were to leave the EU without a deal and if
the European ownership of easyJet were to fall below 50% then
easyJet could invoke the provisions within its Articles of
Association which allow for suspension of rights to attend and vote
at shareholder meetings and/or sale of shares by non-qualifying
nationals to qualifying nationals. Similar powers exist in the
articles of association of other airlines, as well as in the
articles of companies in other sectors which have national share
ownership requirements. Whilst easyJet has no current intention of
exercising these powers, the position will be kept under review
pending the outcome of Brexit negotiations between the UK and the
EU, along with other options.
easyJet continues to closely monitor demand on all of our
routes, in the event that political events may affect our
customers' propensity to travel.
Having started our Brexit preparations early and with
contingency plans in place, we are confident that easyJet will keep
flying and that our operations will not be materially affected,
whatever the outcome of the current political situation.
Fleet
easyJet's fleet is a major component of its business model and a
competitive advantage. easyJet's total fleet as at 30 September
2019 comprised 331 aircraft (2018: 315 aircraft) with the increase
driven by the addition of new aircraft from the A320 family. The
average gauge of the fleet is now 175 seats per aircraft, an
increase from 172 seats at 30 September 2018. The average age of
the fleet increased slightly to 7.4 years (2018: 7.0 years). During
the year easyJet's asset utilisation across the network decreased
slightly to an average 10.9 block hours per day (2018: 11.1
hours).
easyJet is pleased to announce that it has reached an agreement
with Airbus which ensures continued delivery of aircraft from 2024
and executes some fleet flexibility. Specifically, the agreement
includes:
-- The exercise of 12 purchase options resulting in 12 firm
orders of A320neo aircraft for delivery in 2024 under the existing
2013 agreement
-- The deferral of delivery dates of 9 A320neo aircraft and 3
A321neo aircraft resulting in 2021 deliveries reducing by 12
aircraft, and being deferred to delivery dates starting from
2023
The agreement secures valuable delivery slots in 2024 at a list
price of $1,368.4m for the 12 new firm orders of A320neo aircraft.
Under the terms of the 2013 agreement between easyJet and Airbus,
the actual cost of the aircraft is subject to a substantial
discount from the list price. Following this agreement, easyJet has
13 purchase options and 58 purchase rights remaining.
The agreement also allows the fleet to meet the planned fleet
size for 2021 and is a key demonstration of easyJet's fleet
flexibility which means the airline is able to either increase or
decrease the fleet growth programme as well as increase or decrease
deployed capital.
Our current fleet plan reflects expected fleet growth to reach
352 aircraft by the end of Financial Year 2020, 353 aircraft by the
end of Financial Year 2021, 358 aircraft by the end of Financial
Year 2022 and 361 aircraft by the end of Financial Year 2023.
Fleet as at 30 September 2019:
Changes Unexercised
% of since Future Purchase purchase
Owned Leased Total fleet Sep-18 deliveries options rights
A319 69 56 125 38% (7) - - -
A320 180 seat 17 23 40 12% (35) - - -
A320 186 seat 109 20 129 39% 36 - - -
A320 neo 31 - 31 9% 18 79 25 58
A321 neo 6 - 6 2% 4 24 - -
----------------- ------ ------- ------ ------- -------- ------------ --------- ------------
232 99 331 16 103 25 58
Percentage
of total fleet 70% 30%
Balance sheet
easyJet's business model and strategy are underpinned by sector
leading balance sheet strength. easyJet is committed to its
investment grade rating, with a BBB+ (stable) rating from Standard
& Poor's and a Baa1 (stable) rating from Moody's.
Of easyJet's 331 aircraft on the balance sheet at 30 September
2019, the 232 owned aircraft are unencumbered, representing 70% of
the total fleet (unchanged year-on-year).
Over the next four years easyJet's gross capital expenditure,
including the impact of new IFRS accounting standards is expected
to be as follows:
Year 2020 2021 2022 2023
--------------------------- ------ ----- ------ ------
Gross capital expenditure
(GBP million) 1,350 950 1,200 1,100
--------------------------- ------ ----- ------ ------
easyJet's funding position is strong with net debt at 30
September 2019 of GBP326 million, which comprised cash and money
market deposits of GBP1,576 million (2018: GBP1,373 million) and
borrowings of GBP1,902 million (2018: GBP977 million).
Borrowings as at 30 September 2019 include GBP578 million of
lease liabilities, with the majority added as a result of the
adoption of IFRS 16.
After allowing for the impact of operating leases, as previously
adjusted (seven times operating lease costs incurred in the 12
months ending 30 September 2018), adjusted net debt at 30 September
2018 was GBP738 million.
Liquidity per 100 seats was GBP3.6 million (2018: GBP3.9m),
which represents comfortable headroom compared to our target of a
liquidity buffer of GBP2.6 million per 100 seats, defined as cash
plus undrawn Revolving Credit Facilities and Business Interruption
insurance.
Headline return on capital employed (ROCE) fell to 11.4% (2018:
14.6%), driven by the weaker performance in Q2. Total ROCE fell to
11.4% (2018: 11.7%). On a like-for-like accounting basis(4) , total
ROCE decreased to 10.0%.
Outlook
easyJet continues to see the current market environment as an
opportunity to build and strengthen its network, operational
resilience and customer experience for the long term.
For the 2020 financial year easyJet plans to grow capacity at
the lower end of our medium-term 3-8% guidance. Scheduled capacity
growth in Q1 is currently around 2% and is expected to be less than
2% for the first half.
Forward bookings for the first half of the 2020 financial year
are reassuring. Bookings are slightly ahead of last year
(recognising that the second quarter is a weak comparative).
Revenue per seat for the first half of the 2020 financial year
is expected to be up low to mid single digits year-on-year. This
excludes the incremental revenues associated with easyJet
Holidays.
Disruption costs are expected to continue improving next year,
driven by our Operational Resilience programme. A lower rate of
capacity growth will make it more challenging to deliver lower
costs per seat on an underlying basis. Headline cost per seat
excluding fuel at constant currency for the 2020 financial year is
expected to increase by low single digits, assuming normal levels
of disruption. This guidance excludes the incremental costs
associated with easyJet Holidays, which is expected to be at least
breakeven for the financial year ending 30 September 2020.
Capital expenditure for the 2020 financial year is expected to
be c.GBP1.35 billion (including the effect of new IFRS accounting
standards).
Based on today's fuel prices, unit fuel costs3 for the year to
30 September 2020 are expected to result in a headwind of between
GBP70 million and GBP140 million, due to easyJet's advantaged
hedging position. Total fuel bill is expected to be around GBP1.62
billion (includes GBP10 million of the headline foreign exchange
impact) and this figure includes c.GBP25 million investment in
carbon offsetting.
The total expected headline foreign exchange impact(6) for the
year to 30 September 2020 is expected to be a positive movement of
around GBP40 million.
Hedging positions
Details of hedging arrangements as at 30 September 2019 are set
out below:
Percentage of anticipated Fuel requirement US Dollar Euro surplus CHF surplus
requirement hedged requirement
------------------------------- ----------------- ------------- ------------- -----------
Six months to 31 March
2020 74% 70% 68% 76%
$632 /
Average rate metric tonne $1.36 EUR1.11 CHF 1.27
------------------------------- ----------------- ------------- ------------- -----------
Full year ending 30 September
2020 68% 66% 67% 73%
$655 /
Average rate metric tonne $1.36 EUR1.11 CHF 1.27
------------------------------- ----------------- ------------- ------------- -----------
Full year ending 30 September
2021 45% 46% 52% 52%
$643 /
Average rate metric tonne $1.31 EUR1.10 CHF 1.23
------------------------------- ----------------- ------------- ------------- -----------
Footnotes
(1) Represents the number of earned seats flown. Earned seats
include seats which are flown whether or not the passenger turns
up, as easyJet is a no-refund airline and once a flight has
departed, a no-show customer is generally not entitled to change
flights or seek a refund. Earned seats also include seats provided
for promotional purposes and to staff for business travel.
(2) Constant currency is calculated by comparing 2019 financial
period performance translated at the 2018 financial period
effective exchange rate to the 2018 financial period reported
performance, excluding foreign exchange gains and losses on balance
sheet revaluations.
(3) Unit fuel calculated as the difference between latest
estimate of FY'20 fuel costs less FY'19 fuel cost per seat
multiplied by FY'20 seat capacity
(4) Adjusted for the adoption of IFRS 9, 15 and 16 accounting
standards
(5) On-time performance is defined as the percentage of flights
which arrive within 15 minutes of the scheduled arrival time and is
measured by internal easyJet systems
(6) US$ to GBP Sterling 1.28, Euro to GBP Sterling 1.15.
Currency, capital expenditure and fuel increases are shown net of
hedging impact
OUR FINANCIAL RESULTS
In the 2019 financial year, easyJet flew 96.1 million passengers
(2018: 88.5 million) and delivered a headline profit before tax for
the year of GBP427 million (2018: GBP578 million) or GBP4.07 per
seat (2018: GBP6.07 per seat). Total reported profit before tax for
the year was GBP430 million (2018: GBP445 million) or GBP4.10 per
seat (2018: GBP4.68 per seat).
IFRS 9, 15 and 16 have been adopted with effect from 1 October
2018, applying the standard prospectively for IFRS 9 and using the
cumulative catch-up ('modified') transition method for IFRS 15 and
16. This means that the prior year comparatives have not been
restated. The impact on the 2019 financial results of the adoption
has been disclosed in the income statement to allow comparability
with the 2018 financial year.
Amounts presented at constant currency are an alternative
performance measure and not determined in accordance with
International Financial Reporting Standards but provide relevant
and comparative reporting for users.
FINANCIAL OVERVIEW
GBPm (reported) 2019 2018
---------------------------------- ----------------------------------------- ------------
Amounts Impact of As reported As reported
without new IFRSs
adoption
of new IFRSs
---------------------------------- -------------- ----------- ------------ ------------
Revenue 6,408 (23) 6,385 5,898
Headline costs excluding fuel (4,568) 26 (4,542) (4,136)
Fuel (1,416) - (1,416) (1,184)
----------------------------------- -------------- ----------- ------------ ------------
Headline profit before tax 424 3 427 578
Headline tax charge (78) - (78) (112)
----------------------------------- -------------- ----------- ------------ ------------
Headline profit after tax 346 3 349 466
Non-headline items 18 (15) 3 (133)
Non-headline tax (charge)/credit (3) - (3) 25
----------------------------------- -------------- ----------- ------------ ------------
Total profit/(loss) after tax 361 (12) 349 358
----------------------------------- -------------- ----------- ------------ ------------
GBP per seat (reported) 2019 2018
---------------------------------- ----------------------------------------- ------------
Amounts Impact of As reported As reported
without new IFRSs
adoption
of new IFRSs
---------------------------------- -------------- ----------- ------------ ------------
Revenue 61.03 (0.22) 60.81 61.94
Headline costs excluding fuel (43.51) 0.25 (43.26) (43.43)
Fuel (13.48) - (13.48) (12.44)
----------------------------------- -------------- ----------- ------------ ------------
Headline profit before tax 4.04 0.03 4.07 6.07
Headline tax charge (0.75) - (0.75) (1.18)
----------------------------------- -------------- ----------- ------------ ------------
Headline profit after tax 3.29 0.03 3.32 4.89
Non-headline items 0.17 (0.14) 0.03 (1.39)
Non-headline tax (charge)/credit (0.02) - (0.02) 0.26
----------------------------------- -------------- ----------- ------------ ------------
Total profit/(loss) after tax 3.44 (0.11) 3.33 3.76
----------------------------------- -------------- ----------- ------------ ------------
Total revenue increased by 8.3% to GBP6,385 million (2018:
GBP5,898 million), and increased by 7.3% at constant currency.
Excluding the impact of IFRS 15, which changes the recognition of
certain fees from the time of booking to the time of flying and
reclasses an element of disruption costs to offset revenue, total
revenue would have been GBP6,408 million. The increase in total
revenue reflected an increase in passenger numbers of 8.6% to 96.1
million. Within total revenue, ancillary revenue increased by 13.7%
reflecting easyJet's customer-focused products and improved
ancillary conversion.
Total revenue per seat decreased by 1.8% to GBP60.81 (2018:
GBP61.94), with a decrease of 2.7% at constant currency. Excluding
the impact of IFRS 15, total revenue per seat would have fallen
1.5% to GBP61.03, or 2.3% at constant currency. The decrease in
revenue per seat is a consequence of a number of contributors
including Brexit-related market uncertainty coupled with a wider
macroeconomic slowdown in Europe. In addition, the dilutive impact
of a full period of Tegel flying, and the non-repeat of one-off
benefits in 2018, such as the bankruptcies of Monarch and Air
Berlin, also impacted our performance.
Headline cost per seat excluding fuel decreased by 0.4% to
GBP43.26, and decreased by 0.8% at constant currency. The key
drivers were lower disruption costs, benefitting from easyJet's
operational resilience programme, reduced navigation charges and
lower wet leasing costs, as well as unit cost savings from the
up-gauging of the fleet to larger and more efficient aircraft.
easyJet continues to negotiate volume deals on airport contracts,
and obtain savings through our cost programme initiatives. This
decrease in cost was achieved in spite of an environment of
continued inflationary pressure and significant air traffic
congestion. Excluding the impact of the adoption of IFRS 15 and 16,
headline cost per seat excluding fuel increased by 0.2%, and
decreased by 0.5% at constant currency.
Fuel cost per seat increased by 8.4% to GBP13.48 (2018:
GBP12.44) and by 4.3% at constant currency, driven by hedging fuel
at higher rates compared to the prior year.
A non-headline profit of GBP3 million (2018: GBP133 million
charge) was recognised in the period, consisting of a GBP2 million
gain as a result of the sale and leaseback of 10 A319 aircraft, a
GBP2 million gain for balance sheet revaluations, a GBP2 million
credit from releasing the balance of the non-headline 2018
Commercial IT platform close down accrual no longer required, a
GBP1 million gain on fair value adjustments, partially offset by a
GBP4 million charge in relation to Brexit-related plans.
The total tax charge for the year was GBP81 million (2018: GBP87
million). The effective rate for the year was 18.9% (2018: 19.7%).
This is in line with the standard UK rate of 19% (2018: 19%).
Due to the recognition of the post-employment obligation for the
Swiss retirement benefit scheme, a change was reflected as a
restatement of previous financial statements. In addition, easyJet
has presented other income as a separate line on the face of the
consolidated income statement. Prior year comparatives have been
reclassified from other costs and other financing income lines to
be consistent with the change in presentation. Please refer to note
1 of the Annual Report and Accounts for full details of both
changes.
Earnings per share and dividends per share
2019 2018
Pence Pence Change
per share per share in pence
per share
-------------------------------------- ----------- ----------- -----------
Basic headline earnings per share 88.7 118.3 (29.6)
Basic total earnings per share 88.6 90.9 (2.3)
Diluted headline earnings per share 87.8 117.4 (29.6)
Proposed ordinary dividend per share 43.9 58.6 (14.7)
--------------------------------------- ----------- ----------- -----------
Basic headline earnings per share decreased to 88.7 pence (2018:
118.3 pence) and basic total earnings per share decreased to 88.6
pence (2018: 90.9 pence).
In line with the stated dividend policy of a pay-out ratio of
50% of headline profit after tax, the Board is recommending an
ordinary dividend of GBP174 million or 43.9 pence per share which
is subject to shareholder approval at the Company's Annual General
Meeting on 6 February 2020. This will be paid on 20 March 2020 to
shareholders on the register at close of business on 28 February
2020.
Return on capital employed (ROCE)
ROCE calculation
------------------------------------- ------------- --------- ---------
2019 2018
Pre IFRS Reported Restated
9, 15 and
16 adoption
------------------------------------- ------------- --------- ---------
Headline Return on capital employed 9.9% 11.4% 14.6%
Total Return on capital employed 10.0% 11.4% 11.7%
-------------------------------------- ------------- --------- ---------
Headline ROCE for the period was 11.4%, a decline of 3.2
percentage points on the prior year, driven by the decrease in
profit for the period, partially offset by a decrease in the
average adjusted capital employed due to the adoption of IFRS 16.
Total ROCE for the period was 11.4%, a decline of 0.3 percentage
points from last year.
For 2018, the ROCE calculation includes an adjustment for the
capital implicit in aircraft operating lease arrangements. This
adjustment is calculated by multiplying the annual charge for
aircraft dry leasing by a factor of seven. Upon adoption of IFRS 16
in 2019, the recognition of newly-capitalised lease liabilities
results in this lease adjustment no longer being required.
Headline ROCE without adopting IFRS 9, 15 and 16 would be lower
at 9.9%, due to the adverse impact of the lease adjustment
described above.
Exchange rates
The proportion of revenue and costs denominated in currencies
other than Sterling remained broadly consistent year on year:
Revenue Costs
----- -------- --------- ---------
2019 2018 2019 2018
--------------------------------- ----- -------- --------- ---------
Sterling 43% 45% 30% 29%
Euro 46% 44% 38% 39%
US dollar 1% 1% 26% 26%
Other (principally Swiss franc) 10% 10% 6% 6%
---------------------------------- ----- -------- --------- ---------
Average exchange rates
2019 2018
--------------------------------- ----- -------- --------- ---------
Euro - revenue EUR1.13 EUR1.15
Euro - costs EUR1.13 EUR1.13
US dollar $1.32 $1.37
Swiss franc CHF 1.27 CHF 1.31
---------------------------------- ----- -------- --------- ---------
Foreign exchange rate movements arise as easyJet's foreign
currency risk management policy is to hedge between 65% and 85% of
the next 12 months' forecast surplus cash flows on a rolling basis,
and hence a portion of cash flows remains unhedged. Additionally
the Group's foreign currency risk management policy is aimed at
reducing the impact of a fluctuation in exchange rates on future
cash flows, however the timing of cash flows can be different to
the timing of recognition within the income statement resulting in
foreign exchange movements.
Headline exchange rate impact
Euro Swiss US dollar Other Total
franc
Favorable/(adverse) GBP million GBP million GBP million GBP million GBP million
------------------------------------- ------------ ------------ ------------ ------------ ------------
Total revenue 37 16 3 (1) 55
Fuel - - (54) - (54)
Headline costs excluding fuel - (11) (3) (1) (15)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Headline total before tax 37 5 (54) (2) (14)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline exchange rate impact
Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP million GBP million GBP million GBP million GBP million
------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline costs excluding prior
year balance sheet revaluations - - 4 3 7
Prior year balance sheet revaluations 3 1 (4) (1) (1)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline total before tax 3 1 - 2 6
-------------------------------------- ------------ ------------ ------------ ------------ ------------
There was an GBP8 million adverse (2018: GBP1 million adverse)
impact on total profit due to the year-on-year changes in exchange
rates. A GBP14 million adverse (2018: GBP8 million favourable)
impact on headline profit was partially offset by a GBP6 million
favourable (2018: GBP9 million adverse) impact on the non-headline
items. The adverse impact of the Sterling/US dollar exchange rate
movement on fuel costs was offset by a favourable impact on revenue
mainly driven by the continued weakening of Sterling against the
Euro.
Revenue
GBP million (Reported) 2019 2018
------------------------- ----------------------------------- ------------
Amounts Impact As reported As reported
without of IFRS
adoption 15
of IFRS
15
------------------------- ---------- --------- ------------ ------------
Passenger revenue 5,030 (21) 5,009 4,688
Ancillary revenue 1,378 (2) 1,376 1,210
-------------------------- ---------- --------- ------------ ------------
Total revenue 6,408 (23) 6,385 5,898
-------------------------- ---------- --------- ------------ ------------
GBP per seat (Reported)
------------------------- ----------------------------------- ------------
Amounts Impact As reported As reported
without of IFRS
adoption 15
of IFRS
15
------------------------- ---------- --------- ------------ ------------
Passenger revenue 47.91 (0.20) 47.71 49.23
Ancillary revenue 13.12 (0.02) 13.10 12.71
-------------------------- ---------- --------- ------------ ------------
Total revenue 61.03 (0.22) 60.81 61.94
-------------------------- ---------- --------- ------------ ------------
Total revenue increased by 8.3% to GBP6,385 million (2018:
GBP5,898 million), and increased by 7.3% at constant currency.
Excluding the impact of IFRS 15, total revenue would have been
GBP6,408 million. The number of passengers carried increased by
8.6% to 96.1 million (2018: 88.5 million) driven by a growth in
capacity of 10.3% to reach 105.0 million seats (2018: 95.2
million). Load factor decreased by 1.4 percentage points to 91.5%
(2018: 92.9%).
Revenue per seat (RPS) decreased by 1.8% to GBP60.81 (2018:
GBP61.94), with a decrease of 2.7% at constant currency. Excluding
the impact of IFRS 15, total revenue per seat would have fallen
1.5% to GBP61.03, or 2.3% at constant currency.
Despite Brexit-related market uncertainty coupled with a wider
macroeconomic slowdown in Europe, there has been strength in
underlying trading, with easyJet's brand recognition supporting
demand, as well as the success of a number of self-help initiatives
including a focus on late yields. This helped to partially offset a
number of other adverse contributors such as the impact of IFRS 15,
the dilutive impact of a full period of Tegel flying, as well as
the non-repeat of one-off benefits in 2018 such as the bankruptcies
of Monarch and Air Berlin.
The increase in ancillary revenue of 13.7% has been mainly
driven by the capacity growth. On a RPS basis, ancillary revenue
has increased by 3.1%, with product and pricing initiatives and
improved conversion rates offsetting lower load factor.
Headline costs excluding fuel
Headline cost per seat excluding fuel decreased by 0.4% to
GBP43.26 (2018: GBP43.43) and decreased by 0.8% at constant
currency.
2019 2018
--------------------------------------------------- -------------------------
Amounts Impact As reported Cost per As reported Cost per
without of new seat seat
adoption IFRSs
of new
IFRSs
GBP million GBP million GBP million GBP per GBP million GBP per
seat seat
------------ ------------ ------------ --------- ------------ ---------
Operating costs/(income)
Airports and ground
handling 1,848 (3) 1,845 17.57 1,649 17.32
Crew 859 - 859 8.18 754 7.92
Navigation 409 - 409 3.89 400 4.20
Maintenance 387 (85) 302 2.88 313 3.28
Selling and marketing 157 - 157 1.50 143 1.50
Other costs 480 (24) 456 4.36 507 5.32
Other income (29) - (29) (0.27) (13) (0.13)
--------------------------- ------------ ------------ ------------ --------- ------------ ---------
4,111 (112) 3,999 38.11 3,753 39.41
------------ ------------ ------------ --------- ------------ ---------
Ownership costs
Aircraft dry leasing 187 (182) 5 0.05 152 1.59
Depreciation 240 244 484 4.61 199 2.09
Amortisation 15 - 15 0.14 15 0.15
Net finance charges 15 24 39 0.35 17 0.19
--------------------------- ------------ ------------ ------------ --------- ------------ ---------
457 86 543 5.15 383 4.02
------------ ------------ ------------ --------- ------------ ---------
Headline costs excluding
fuel 4,568 (26) 4,542 43.26 4,136 43.43
--------------------------- ------------ ------------ ------------ --------- ------------ ---------
Headline airports and ground handling cost per seat increased by
1.5%, and by 1.1% at constant currency. Airport charges were
adversely impacted by the change in airport mix, which is driven by
the annualisation of Tegel flying and continued inflationary
increases at regulated airports. This was partially offset by cost
savings obtained by our continued focus on airport procurement
activity and cost initiatives.
Headline crew cost per seat increased by 3.3% to GBP8.18, and by
2.9% at constant currency. This was driven by agreed inflationary
increases in crew and pilot pay, low attrition rates and investment
in operational resilience over the summer peak period.
Headline navigation cost per seat decreased by 7.5% to GBP3.89,
and decreased by 7.6% at constant currency, resulting from lower
Eurocontrol rates from January 2019.
Headline maintenance cost per seat decreased by 12.3% to
GBP2.88, and decreased by 13.2% at constant currency. Underlying
increases in maintenance costs from inflationary price rises and
unanticipated heavy maintenance findings were offset by the impact
of the introduction of IFRS 16, which reclassifies maintenance
provision charges out of the maintenance line into depreciation
expense.
Headline other costs per seat decreased by 17.9% to GBP4.36 per
seat, and by 18.6% at constant currency. There has been a
significant decrease in disruption costs as a result of our
investment in operational resilience, which resulted in a lower
number of disruption events and cost in 2019 and a small
reclassification of disruption costs to revenue from the
introduction of IFRS 15. In addition, there was a reduction in wet
leasing charges, due to the high level of Tegel wet lease flying in
2018 whilst our own fleet was being introduced, and lower staff
incentive payments.
Headline other income is an additional line item in the income
statement that separately recognises income not originating from
customers, which includes items such as insurance receipts,
compensation (including Airbus delay compensation) and dividends
received, which have been reclassified in both 2018 and 2019.
Ownership costs
Ownership cost per seat has been significantly impacted by the
adoption of IFRS 16. Under IFRS 16, all aircraft and properties
previously held under operating leases have been capitalised.
Annual operating lease and maintenance costs, which would have been
recognised under the existing leases accounting standard, are
replaced by similar aggregated levels of depreciation and interest
expense.
Dry lease costs have decreased from GBP152 million in 2018 to
only GBP5 million in 2019. Only those leases which are exempt under
IFRS 16, due to their short duration or low value, are now
recognised within this line item.
Depreciation costs have increased from GBP199 million in 2018 to
GBP484 million in 2019. Excluding the impact of the adoption of
IFRS 16, depreciation increased to GBP240 million, being driven by
the additional depreciation charged as a result of the
annualisation of the 28 aircraft delivered in 2018, and 22 new
aircraft delivered in 2019. Net finance charges have increased by
GBP22 million to GBP39 million in 2019. Excluding the impact on
interest expense from the adoption of IFRS 16, the net charge
decreased by GBP2 million from 2018. This was mainly due to income
from higher yield deposits, partially offset by an increase in
interest payable as a result of the issuance of a EUR500m bond in
June 2019.
Fuel
2019 2018
---------------------- ----------------------
GBP million GBP per GBP million GBP per
seat seat
------ ------------ -------- ------------ --------
Fuel 1,416 13.48 1,184 12.44
------- ------------ -------- ------------ --------
Total fuel cost for the year was GBP1,416 million (2018:
GBP1,184 million). Fuel cost per seat of GBP13.48 increased by 8.4%
and by 4.3% at constant currency.
The operation of easyJet's fuel and US Dollar hedging policy
meant that the average effective fuel price movement saw an
increase of 5.5% to an actual cost of GBP458 per tonne from GBP434
per tonne in the previous year.
The increase in fuel costs also reflects increased fuel fees and
an increase in the price of ETS (Emission Trading System)
permits.
Non-headline items
Non-headline items are non-recurring items or items which are
not considered to be reflective of the trading performance of the
business.
2019 2018
---------------------- ----------------------
GBP million GBP per GBP million GBP per
seat seat
----------------------------------------- ------------ -------- ------------ --------
Commercial IT platform credit/(charge) 2 0.02 (65) (0.68)
Tegel integration - - (40) (0.42)
Sale and leaseback gain/(loss) 2 0.02 (19) (0.20)
Brexit-related costs (4) (0.04) (7) (0.07)
Organisational review - - (1) (0.01)
Fair value adjustment 1 0.01 (1) (0.01)
Balance sheet foreign exchange gain 2 0.02 - -
------------------------------------------ ------------ -------- ------------ --------
Non-headline profit/(charge) before tax 3 0.03 (133) (1.39)
------------------------------------------ ------------ -------- ------------ --------
Non-headline profit before tax items of GBP3 million
comprise:
-- a GBP2 million credit for releasing the balance of a 2018
non-headline commercial IT platform close down accrual no longer
required (2018: GBP65 million charge);
-- there were no further non-headline integration costs in
relation to the operations in Tegel in 2019 (2018: GBP40 million
charge);
-- a GBP2 million gain as a result of the sale and leaseback of
10 A319 aircraft in the period (2018: GBP19 million charge as a
result of the sale and leaseback of 10 A319 aircraft);
-- a GBP4 million charge in relation to our Brexit-related
preparation plans (2018: GBP7 million charge) principally due the
cost of transferring pilot licenses and re-registering aircraft to
Austria;
-- there were no further organisational review costs classified
as non-headline during 2019 (2018: GBP1 million charge);
-- a GBP1 million fair value gain (2018: GBP1 million charge); and
-- a GBP2 million gain for balance sheet revaluations (2018: GBPnil).
Summary net cash reconciliation
2019 2018 Change
GBP million GBP million GBP million
--------------------------------------------------- ------------ ------------ ------------
Operating profit 466 463 3
Depreciation and amortisation 499 214 285
Loss on disposal of intangibles - 4 (4)
Commercial IT platform charge (2) 60 (62)
Net movement in working capital and other items
of an operating nature 118 446 (328)
Net tax paid (58) (74) 16
Net capital expenditure (984) (1,012) 28
Net proceeds from sale and operating leaseback
of aircraft 121 106 15
Purchase of own shares for employee share schemes (16) (17) 1
Decrease/(increase) in restricted cash 7 (4) 11
Repayment of capital element of finance leases
arising under IAS 17 - (6) 6
Repayment of capital element of leases arising
under IFRS 16 (174) - (174)
Other (including the effect of exchange rates) 65 21 44
Ordinary dividend paid (233) (162) (71)
---------------------------------------------------- ------------ ------------ ------------
Net (decrease)/increase in net cash (191) 39 (230)
---------------------------------------------------- ------------ ------------ ------------
Net cash at closing of the prior year 396 357 39
IFRS 16 implementation impact at 1 October 2018 (531) - -
--------------------------------------------------- ------------ ------------ ------------
Net (debt)/cash at the beginning of the year (135) 357 (492)
Net (debt)/cash at end of year (326) 396 (722)
---------------------------------------------------- ------------ ------------ ------------
Operating lease adjustments (7x basis) - (1,134) 1,134
Adjusted net debt (326) (738) 412
---------------------------------------------------- ------------ ------------ ------------
Net debt as at 30 September 2019 was GBP326 million (30
September 2018: net cash GBP396 million) and comprised cash and
money market deposits of GBP1,576 million (30 September 2018:
GBP1,373 million) and borrowings of GBP1,902 million (30 September
2018: GBP977 million). Borrowings as at 30 September 2019 include
GBP578 million of lease liabilities as a result of the adoption of
IFRS 16. On 1 October 2018, GBP531 million of lease liabilities
were recognised, and GBP98 million of existing finance lease
obligations within borrowings in the financial statements were
reclassified as lease liabilities.
After allowing for the impact of aircraft operating leases
(calculated as seven times operating lease costs incurred in the
year), adjusted net debt as at 30 September 2018 was GBP738
million, with no operating lease adjustment required to the GBP326
million net debt balance as at 30 September 2019 due to the
recognition of lease liabilities upon adoption of IFRS 16.
The movement in net working capital has decreased by GBP328
million, driven by a decrease in trade and other payables as a
result of timing of invoices, movement in short-term derivative
financial instruments and provisions.
Net capital expenditure includes final delivery payments for the
acquisition of 22 aircraft (2018: 28 aircraft), the purchase of
life-limited parts used in engine restoration, and pre-delivery
payments relating to aircraft purchases. The number of aircraft in
the fleet increased from 315 as at 30 September 2018 to 331 as at
30 September 2019. The sale and leaseback of 10 aircraft in 2019
resulted in a net cash inflow of GBP121 million (2018: GBP106
million).
easyJet made corporation tax payments totalling GBP58 million
during the period (2018: GBP74 million).
The depreciation and amortisation charge of GBP499 million
includes GBP244 million depreciation arising from adoption of IFRS
16 whereby operating lease and maintenance costs, which would have
been recognised under the previous leases accounting standard, are
replaced by similar aggregated levels of depreciation and interest
expense.
Summary consolidated statement of financial position
2019 2019 2018 Change
Amounts Reported Reported
without
adoption
of new
IFRSs
GBP million GBP million GBP million GBP million
(restated)
------------------------------------------ ------------ ------------ ------------ ------------
Goodwill and other intangible assets 561 561 546 15
Property, plant and equipment (excluding
RoU assets) 4,732 4,661 4,140 521
Right of use assets under IFRS 16 - 502 - 502
Derivative financial instruments 49 63 364 (301)
Equity investments - 48 - 48
Other assets (excluding cash and money
market deposits) 550 542 539 3
Unearned revenue (977) (1,069) (877) (192)
Trade and other payables (1,065) (1,050) (1,023) (27)
Other liabilities (excluding debt) (952) (947) (852) (95)
------------------------------------------- ------------ ------------ ------------ ------------
Capital employed 2,898 3,311 2,837 474
------------------------------------------- ------------ ------------ ------------ ------------
Cash and money market deposits* 1,576 1,576 1,373 203
Debt (excluding lease liabilities) (1,420) (1,324) (977) (347)
Lease liabilities under IFRS 16 - (578) - (578)
Net assets 3,054 2,985 3,233 (248)
------------------------------------------- ------------ ------------ ------------ ------------
Net (debt)/cash 156 (326) 396 (722)
* Excludes restricted cash
Since 30 September 2018 net assets have decreased by GBP248
million. This reflects payment of the 2018 ordinary dividend and
the unfavourable mark-to-market movement in jet fuel forward
contracts, partially offset by retained earnings in the period, and
the recognition of the equity investment in The Airline Group
required under IFRS 9.
The net book value of property, plant and equipment excluding
right of use assets, recognised due to adoption of IFRS 16, has
increased by GBP521 million as a result of the acquisition of 22
aircraft and pre-delivery payments relating to future aircraft
purchases, offset by depreciation.
Upon adoption of IFRS 16, all operating leases have been
capitalised on the balance sheet with a GBP497 million opening
right of use asset adjustment being recognised, with a
corresponding lease liability of GBP531 million representing
easyJet's obligation to make lease payments. Previously recognised
finance leases of GBP73 million were reclassified to right of use
assets as at 1 October 2018.
At 30 September 2019, right of use assets amounted to GBP502
million. Lease liabilities amounted to GBP578 million which
includes additions during the year as a result of aircraft sale and
leasebacks, as well as the impact of lease payments and
extensions.
Net derivative financial instruments have decreased by GBP301
million. This movement is largely due to mark-to-market losses on
jet fuel contracts and cross currency interest rate swaps,
partially offset by mark-to-market gains in US dollar
contracts.
The equity investment of GBP48 million represents a 13.2%
shareholding in a non-listed entity, The Airline Group Limited,
which has a shareholding of 41.9% in NATS Holdings Limited - the
provider of air traffic control services for the UK. This
investment has been held at cost by easyJet since 2001. With the
adoption of IFRS 9, this asset is now required to be recognised at
fair value.
Unearned revenue increased by GBP192 million. This is due to the
increase in capacity and the adoption of IFRS 15 which changes the
timing of the recognition of certain fees from the time of booking
to being recognised at the time of flying.
Other liabilities include a GBP47 million post-employment
benefit obligation in relation to a Swiss retirement benefit scheme
(2018: GBP29 million). In the current year, easyJet has assessed
options to extend the pension scheme insurance it holds. It has
been identified as part of this work that, despite the scheme being
fully insured, it meets requirements to be accounted for as a
defined benefit plan under IAS 19, primarily due to the legal
obligation to accrue interest on the pension accounts and the
payment of lifetime pension benefits. Actuarial valuations have
been performed to calculate the valuation of the scheme assets and
liabilities under IAS 19. The scheme was recognised with effect
from 1 October 2017 and the impact on the 30 September 2018
statement of financial position was recognition of a net defined
benefit obligation with a corresponding reduction in retained
earnings of GBP26 million. Refer to note 1 in the Annual Report and
Accounts for further details.
Debt has increased by GBP347 million in the period, primarily
due to the issuance of a EUR500 million bond in June 2019.
Key statistics
Increase/
2019 2018 (decrease)
--------------------------------------------------- -------- -------- ------------
Operating measures
Seats flown (millions) 105.0 95.2 10.3%
Passengers (millions) 96.1 88.5 8.6%
Load factor 91.5% 92.9% (1.4ppt)
Available seat kilometres (ASK) (millions) 116,056 104,800 10.7%
Revenue passenger kilometres (RPK) (millions) 107,741 98,522 9.4%
Average sector length (kilometres) 1,105 1,101 0.4%
Sectors 605,899 559,857 8.2%
Block hours ('000) 1,184 1,088 8.8%
Number of aircraft owned/leased at end of year 331 315 5.1%
Average number of aircraft owned/leased during
year 321.5 295.1 8.9%
Number of aircraft operated at end of year 317 305 3.9%
Average number of aircraft operated during year 297.0 269.0 10.4%
Operated aircraft utilisation (hours per day) 10.9 11.1 (1.8%)
Number of routes operated at end of year 1051 979 7.4%
Number of airports served at end of year 159 156 1.9%
---------------------------------------------------- -------- -------- ------------
Financial measures
Total return on capital employed 11.4% 11.7% (0.3ppt)
Headline return on capital employed 11.4% 14.6% (3.2ppt)
Liquidity per 100 seats (GBPm) 3.6 3.9 (7.7%)
Total profit before tax per seat (GBP) 4.10 4.68 (12.4%)
Headline profit before tax per seat (GBP) 4.07 6.07 (32.9%)
Total profit before tax per ASK (pence) 0.37 0.42 (12.8%)
Headline profit before tax per ASK (pence) 0.37 0.55 (33.2%)
Revenue
Revenue per seat (GBP) 60.81 61.94 (1.8%)
Revenue per seat at constant currency (GBP) 60.28 61.94 (2.7%)
Revenue per ASK (pence) 5.50 5.63 (2.2%)
Revenue per ASK at constant currency (pence) 5.45 5.63 (3.1%)
Revenue per passenger (GBP) 66.47 66.67 (0.3%)
Revenue per passenger at constant currency (GBP) 65.90 66.67 1.2%
Costs
Per seat measures
Headline cost per seat (GBP) 56.74 55.87 1.5%
Non-headline cost per seat (GBP) (0.03) 1.39 (102.0%)
Total cost per seat (GBP) 56.71 57.26 (1.0%)
Headline cost per seat excluding fuel (GBP) 43.26 43.43 (0.4%)
Headline cost per seat excluding fuel at constant
currency (GBP) 43.11 43.43 (0.8%)
Total cost per seat excluding fuel (GBP) 43.23 44.82 (3.6%)
Total cost per seat excluding fuel at constant
currency (GBP) 43.15 44.83 (3.7%)
Per ASK measures
Headline cost per ASK (pence) 5.13 5.08 1.1%
Non-headline cost per ASK (pence) - 0.13 (100.0%)
Total cost per ASK (pence) 5.13 5.21 (1.4%)
Headline cost per ASK excluding fuel (pence) 3.91 3.95 (0.8%)
Headline cost per ASK excluding fuel at constant
currency (pence) 3.90 3.95 (1.2%)
Total cost per ASK excluding fuel (pence) 3.91 4.08 (4.2%)
Total cost per ASK excluding fuel at constant
currency (pence) 3.90 4.08 (4.4%)
Consolidated Income Statement
Year ended 30 September
-----------------------------------------------------------------------------------
2019 2018
Non-headline Non-headline
(note (note
Headline 4) Total Headline 4) Total
GBP
Notes million GBP million GBP million GBP million GBP million GBP million
------------------ ------ ----------- ------------- ------------ ------------ ------------- ------------
Passenger revenue 5,009 - 5,009 4,688 - 4,688
Ancillary revenue 1,376 - 1,376 1,210 - 1,210
------------------- ------ ----------- ------------- ------------ ------------ ------------- ------------
Total revenue 6,385 - 6,385 5,898 - 5,898
Fuel (1,416) - (1,416) (1,184) - (1,184)
Airports and ground
handling (1,845) - (1,845) (1,649) - (1,649)
Crew (859) - (859) (754) (7) (761)
Navigation (409) - (409) (400) - (400)
Maintenance (302) - (302) (313) (22) (335)
Selling and
marketing (157) - (157) (143) - (143)
Other costs (456) - (456) (507) (93) (600)
Other income 29 - 29 13 - 13
------------------- ------ ----------- ------------- ------------ ------------ ------------- ------------
EBITDAR 970 - 970 961 (122) 839
Aircraft dry
leasing (5) - (5) (152) (10) (162)
Depreciation 8 (484) - (484) (199) - (199)
Amortisation of
intangible
assets (15) - (15) (15) - (15)
------------------- ------ ----------- ------------- ------------ ------------ ------------- ------------
Operating profit 466 - 466 595 (132) 463
Interest
receivable
and other
financing
income 21 3 24 12 - 12
Interest payable
and
other financing
charges (60) - (60) (29) (1) (30)
------------------- ------ ----------- ------------- ------------ ------------ ------------- ------------
Net finance
(charges)/income 2 (39) 3 (36) (17) (1) (18)
Profit/(loss)
before
tax 427 3 430 578 (133) 445
Tax
(charge)/credit 5 (78) (3) (81) (112) 25 (87)
Profit for the year 349 - 349 466 (108) 358
--------------------------- ----------- ------------- ------------ ------------ ------------- ------------
Earnings per
share,
pence
Basic 6 88.6 90.9
Diluted 6 87.8 90.2
------------------- ------ ----------- ------------- ------------ ------------ ------------- ------------
Consolidated Statement of Comprehensive Income
Year ended
30 September
2018
Year ended
30 September
2019 (restated)
Notes GBP million GBP million
---------------------------------------------- ------ -------------- -------------
Profit for the year 349 358
Other comprehensive income/(expense)
Items that may be reclassified to the income
statement:
Cash flow hedges
Fair value (losses)/gains in the year (214) 531
Gains transferred to income statement (165) (191)
Gains/(losses) transferred to property,
plant and equipment 14 (19)
Related tax credit/(charge) 5 69 (60)
Cost of hedging 4 -
Items that will not be reclassified to the
income statement:
Remeasurement of post-employment benefit
obligations (17) (2)
Related deferred tax credit 5 3 -
Fair value movement on equity investment (6) -
---------------------------------------------- ------ -------------- -------------
(312) 259
------ -------------- -------------
Total comprehensive income for the year 37 617
--------------------------------------------------- ------ -------------- -------------
Consolidated Statement of Financial Position
30 September
2018
30 September
2019 (restated)
Notes GBP million GBP million
---------------------------------------- ------ ------------- -------------
Non-current assets
Goodwill 365 365
Other intangible assets 196 181
Property, plant and equipment 8 5,163 4,140
Derivative financial instruments 17 126 175
Equity investment 48 -
Restricted cash 4 11
Other non-current assets 142 122
--------------------------------------------- ------ ------------- -------------
6,044 4,994
Current assets
Trade and other receivables 9 372 406
Derivative financial instruments 17 147 220
Current tax assets 24 -
Money market deposits 291 348
Cash and cash equivalents 1,285 1,025
--------------------------------------------- ------ ------------- -------------
2,119 1,999
Current liabilities
Trade and other payables 10 (1,050) (1,023)
Unearned revenue (1,069) (877)
Borrowings 11 - (9)
Lease liabilities 11 (219) -
Derivative financial instruments 17 (138) (24)
Current tax payable - (9)
Provisions for liabilities and charges 14 (192) (118)
--------------------------------------------- ------ ------------- -------------
(2,668) (2,060)
Net current liabilities (549) (61)
Non-current liabilities
Borrowings 11 (1,324) (968)
Lease liabilities 11 (359) -
Derivative financial instruments 17 (72) (7)
Non-current deferred income 13 (6) (18)
Post-employment benefit obligation (47) (29)
Provisions for liabilities and charges 14 (397) (335)
Deferred tax (305) (343)
--------------------------------------------- ------ ------------- -------------
(2,510) (1,700)
Net assets 2,985 3,233
--------------------------------------------- ------ ------------- -------------
Shareholders' equity
---------------------------------------- ------ ------------- -------------
Share capital 108 108
Share premium 659 659
Hedging reserve (4) 299
Cost of hedging reserve 8 -
Translation reserve (1) 1
Retained earnings 2,215 2,166
--------------------------------------------- ------ ------------- -------------
2,985 3,233
------ ------------- -------------
Consolidated Statement of Changes in Equity
Cost of Retained
Share Share Hedging hedging Translation earnings Total
capital premium reserve reserve reserve (restated) (restated)
GBP GBP GBP GBP GBP GBP
million million million million GBP million million million
--------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 30 September
2018 108 659 299 - 1 2,166 3,233
Recognition on
adoption
of IFRS 9 - - (5) 4 - 55 54
Recognition on
adoption
of IFRS 15 - - - - - (70) (70)
Recognition on
adoption
of IFRS 16 - - (2) - - (34) (36)
At 1 October
2018 108 659 292 4 1 2,117 3,181
Profit for the
period - - - - - 349 349
Other
comprehensive
income - - (296) 4 - (20) (312)
Total
comprehensive
income - - (296) 4 - 329 37
Dividends paid - - - - - (233) (233)
Share
incentive
schemes
Value of
employee
services - - - - - 18 18
Purchase of
own shares - - - - - (16) (16)
Currency
translation
differences - - - - (2) - (2)
---------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 30 September
2019 108 659 (4) 8 (1) 2,215 2,985
---------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
Cost of Retained
Share Share Hedging hedging Translation earnings Total
capital premium reserve reserve reserve (restated) (restated)
GBP GBP GBP GBP GBP GBP
million million million million GBP million million million
--------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 30 September
2017 108 659 38 - 1 1,996 2,802
Swiss pension
scheme
recognition - - - - - (24) (24)
At 1 October
2017 108 659 38 - 1 1,972 2,778
Total
comprehensive
income - - 261 - - 356 617
Dividends paid - - - - - (162) (162)
Share
incentive
schemes
Value of
employee
services - - - - - 17 17
Purchase of
own shares - - - - - (17) (17)
---------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 30 September
2018 108 659 299 - 1 2,166 3,233
---------------- ---------- ---------- ---------- ---------- ------------ ----------- -----------
The hedging reserve comprises the effective portion of the
cumulative net change in fair value of cash flow hedging
instruments relating to highly probable transactions that are
forecast to occur after the year end. Within the hedging reserve,
GBP1m relates to a deferred tax liability amounts and GBP39 million
gain to trades where hedge accounting has been discontinued. As the
hedged item is still expected to occur this amount has been
deferred until the underlying cash flow impacts the income
statement.
Further details of the adjustment made to the opening retained
earnings as at 1 October 2018 due to the adjustment arising on the
adoption of IFRS 9, 15 and 16 can be found in note 1. Details of
the prior period restatement in relation to defined benefit
pensions can also be found in note 1.
Consolidated Statement of Cash Flows
Year ended Year ended
30 September 30 September
2019 2018
Notes GBP million GBP million
-------------------------------------------------------- ----- -------------- --------------
Cash flows from operating activities
Cash generated from operations 15 1,098 1,215
Ordinary dividends paid 7 (233) (162)
Interest and other financing charges paid (58) (29)
Interest and other financing income received 12 11
Tax paid (58) (74)
--------------------------------------------------------- ----- -------------- --------------
Net cash generated from operating activities 761 961
Cash flows from investing activities
Purchase of property, plant and equipment (954) (931)
Purchase of intangible assets (30) (81)
Net decrease in money market deposits 16 52 269
Net proceeds from sale and leaseback of aircraft 121 106
--------------------------------------------------------- ----- -------------- --------------
Net cash used by investing activities (811) (637)
Cash flows from financing activities
Purchase of own shares for employee share schemes (16) (17)
Proceeds from Eurobond issue 16 443 -
Repayment of capital element of finance leases arising
under IAS 17 - (6)
Repayment of capital element of leases arising under
IFRS 16 16 (174) -
Net decrease/(increase) in restricted cash 7 (4)
--------------------------------------------------------- ----- -------------- --------------
Net cash generated from financing activities 260 (27)
Effect of exchange rate changes 50 17
Net increase in cash and cash equivalents 260 314
Cash and cash equivalents at beginning of period 1,025 711
Cash and cash equivalents at end of year 1,285 1,025
--------------------------------------------------------- ----- -------------- --------------
Notes to the Accounts
1. Significant accounting policies
Basis of preparation
This consolidated financial information has been prepared in
accordance with the Listing Rules of the Financial Conduct
Authority.
The financial information set out in this document does not
constitute statutory accounts for easyJet plc for the two years
ended 30 September 2019 but is extracted from the 2019 Annual
Report and Accounts.
The Annual Report and Accounts for 2018 has been delivered to
the Registrar of Companies.
The Annual Report and Accounts for 2019 will be delivered to the
Registrar of Companies in due course. The auditors' report on those
accounts was unqualified and neither drew attention to any matters
by way of emphasis nor contained a statement under either section
498(2) of Companies Act 2006 (accounting records or returns
inadequate or accounts not agreeing with records and returns), or
section 498(3) of Companies Act 2006 (failure to obtain necessary
information and explanations).
Income statement presentation
From 1 October 2018, easyJet has presented other income as a
separate line on the face of the consolidated income statement.
Other income includes items such as insurance receipts,
compensation and dividends received. It is believed this
presentation enhances the disclosure and understanding of these
balances, which have increased in magnitude from previous years.
The prior year comparatives have been reclassified from other costs
and other financing income lines to be consistent with the change
in presentation but have not been restated.
Prior period adjustment
The Swiss retirement benefit scheme operates as a defined
contribution scheme under Swiss law. In the current year, easyJet
has assessed options to extend the pension scheme insurance it
holds. It has been identified as part of this work that, despite
the scheme being fully insured, it meets requirements to be
accounted for as a defined benefit plan under IAS 19 'Employee
benefits', primarily due to the legal obligation to accrue interest
on the pension accounts and the payment of lifetime pension
benefits. An actuarial valuation has been performed to calculate
the valuation of the scheme assets and liabilities under IAS 19.
Plan assets are measured at fair value and plan liabilities reflect
the future benefits of past and current service, discounted to
present values. The service cost and interest on the net defined
benefit liability are recognised in the income statement and
actuarial movements are recognised in other comprehensive income.
The impact on the 30 September 2018 statement of financial position
was recognition of a net defined benefit obligation of GBP31
million, and a GBP5 million deferred tax asset. Retained earnings
have reduced by GBP26 million accordingly. There was also a GBP2
million reclassification of a pension prepayment from trade and
other receivables into the net defined benefit obligation. There
was no material impact on the income statement, other comprehensive
income or EPS for the year ended 30 September 2018.
The scheme was recognised with effect from 1 October 2017. The
impact on the 1 October 2017 balance sheet is as follows:
As reported Adjustment Restated
Non current assets 4,237 - 4,237
Trade and other receivables 275 (2) 273
Current assets 1,734 (2) 1,732
Current liabilities (1,670) - (1,670)
Deferred tax liability (249) 5 (244)
Post-employment benefit obligation - (27) (27)
Non-current liabilities (1,499) (22) (1,521)
Net assets 2,802 (24) 2,778
------------------------------------ ------------ ----------- ---------
Retained earnings 1,996 (24) 1,972
Equity 2,802 (24) 2,778
==================================== ============ =========== =========
1b. Changes in significant accounting policies
The Group has initially adopted IFRS 15 Revenue from Contracts
with Customers, IFRS 16 Leases and IFRS 9 Financial Instruments
from 1 October 2018.
IFRS 15 Revenue from Contracts with Customers
easyJet has adopted IFRS 15 on 1 October 2018 applying the
cumulative catch-up ('modified') transition method. The comparative
information has not been restated, and the retrospective cumulative
impact of IFRS 15 has been recognised within the opening balance of
retained earnings as at 1 October 2018.
The standard provides a single model for measuring and
recognising revenue arising from contracts with customers. It
supersedes all existing revenue requirements in IFRS. Under IFRS
15, revenue is recognised when customers obtain control of goods or
services and so are able to direct the use, and obtain the
benefits, of those goods or services.
easyJet identified two principal areas which were impacted on
adoption of IFRS 15:
-- Revenue recognition from certain revenue streams, principally
administration and change fees, will be recognised on the date of
flight rather than the date of booking. This change results in a
higher proportion of annual revenues being recognised in the second
half of the financial year.
-- Some of the compensation payments made to customers (in
respect of flight delays), previously recorded wholly within
expenses, are now offset against revenues recognised, with the
excess compensation continuing to be recorded within expenses. This
presentational change will have no impact on the overall profit for
the year.
easyJet continues to report one operating segment, being its
route network. The IFRS 15 criteria for revenue disaggregation has
been reviewed and it has been determined that no additional
disaggregation is appropriate.
Unearned revenue is a contract liability as defined by IFRS 15.
In the current year GBP87 million has been recognised in revenue
which was recorded in unearned revenue at the beginning of the
year.
Accounting policy for revenue
easyJet categorises total revenue earned on the face of the
income statement between passenger and ancillary revenue. Passenger
revenue arises from the sale of flight seats and administration
fees and is measured as the price paid by the customer. Passenger
revenue is recognised when the performance obligation has been
completed. This is when the flight takes place. Amounts paid by
'no-show' customers are recognised as passenger revenue when the
booked service is provided, as such customers are not generally
entitled to change flights or seek refunds once a flight has
departed.
Ancillary revenue includes revenue from the provision of checked
baggage, allocated seating and change fees, as well as revenue
arising from commissions earned from services sold on behalf of
partners and inflight sales. It is measured as the price paid by
the customer for the service booked. Ancillary revenue is
recognised when the performance obligation is complete, which is
generally when the related flight takes place, with the following
exceptions:
-- cancellation fees which are recognised when the cancellation is processed; and
-- in the case of commission earned from travel insurance,
revenue is recognised at the time of booking as easyJet acts solely
as appointed representative of the insurance company.
Unearned revenue from flights not yet flown is held in the
statement of financial position until it is realised in the income
statement when the performance obligation is complete.
Some of the compensation payments made to customers (in respect
of flight delays) are offset against revenues recognised up to the
amount of the flight, with the excess compensation being recorded
within expenses.
IFRS 16 Leases
IFRS 16 has been early adopted, bringing the timing of adoption
in line with IFRS 9 and 15. The standard provides a single lessee
accounting model, specifying how leases are recognised, measured,
presented and disclosed.
easyJet has applied the cumulative catch-up ('modified')
transition method. The comparative information has not been
restated, and the retrospective cumulative impact of IFRS 16 has
been recognised within the opening balance of retained earnings as
at 1 October 2018. The financial statement impact of IFRS 16 is
shown within this note.
On initial adoption, easyJet has elected to use the following
practical expedients proposed by the standard:
-- the application of a single discount rate to a portfolio of
leases with reasonably similar characteristics, for example
aircraft with similar lease term;
-- the use of hindsight when determining the lease term if the
contract contains options to extend or terminate the lease;
-- the exclusion of initial direct costs from the measurement of the right of use asset; and
-- lease payments for contracts with a duration of 12 months or
less and contracts for which the underlying asset is of a low value
continue to be expensed to the income statement on a straight-line
basis over the lease term.
Judgements made in applying IFRS 16 include assessing the lease
term, identifying the discount rate to be used and assessing
maintenance obligations. Further details are given below.
Capitalisation of lease contracts
Under IFRS 16, easyJet has capitalised the right of use of all
aircraft and properties previously held under operating leases. At
the date of adoption 84 aircraft and six properties were
capitalised. The lease term corresponds to the duration of the
contracts signed except in cases where the Group is reasonably
certain that it will exercise contractual extension or termination
options.
easyJet has recognised a right of use asset representing its
right to use the underlying asset and a corresponding lease
liability representing its obligation to make lease payments.
Operating lease expenses have been replaced by a depreciation
expense on right of use assets recognised and an interest expense
as the interest rate implicit in easyJet's lease liabilities
unwinds. When the interest rate implicit in the lease is not
readily determined, easyJet's incremental borrowing rate has been
used.
Finance leases previously capitalised under IAS 17 'Leases' have
been reclassified to the right of use asset category under IFRS
16.
Accounting for the maintenance of leased aircraft
easyJet has contractual obligations to maintain aircraft held
under leases. Previously, provisions were created over the term of
the lease based on the estimated future costs of major airframe
checks, engine shop visits and end of lease liabilities. These
costs were discounted to present value with the corresponding
income statement charge recognised within maintenance costs and the
unwinding of the discount recognised within interest costs.
As at 1 October 2018 and going forward under IFRS 16,
contractual maintenance obligations which are not dependent on the
use of the aircraft are recognised in full on commencement of the
lease. They have been capitalised as part of the right of use asset
at the inception of the lease and will be depreciated over the
lease term. Contractual maintenance obligations which are dependent
on the use of the aircraft will continue to be provided for over
the term of the lease based on the estimated future costs,
discounted to present value. However they will be capitalised to
the right of use asset rather than recognised within maintenance
costs in the income statement. This asset will be depreciated
immediately as the obligation has arisen as a result of flying
hours/cycles already undertaken.
Where an aircraft is sold and leased back, other than when first
delivered to easyJet, a maintenance catch-up liability resulting
from past flying activity arises at the point the lease agreement
is signed and a corresponding maintenance provision catch-up charge
was previously recognised immediately in the income statement.
Under IFRS 16 this maintenance provision catch-up has been
capitalised as part of the right of use asset at the inception of
the lease and depreciated over the lease term.
These changes will result in a decrease in maintenance costs and
an increase in depreciation expense.
Accounting policy for leases
Finance leases and operating leases for the comparative period
ended 30 September 2018, were recognised and measured in accordance
with IAS 17 'Leases'. The accounting policies set out below are
those applied to the current period, in accordance with IFRS
16.
When a contractual arrangement contains a lease easyJet
recognises a lease liability and a corresponding right of use asset
at the commencement of the lease.
At the commencement date the lease liability is measured at the
present value of the future lease payments, discounted using the
Group's incremental borrowing rate where the interest rate in the
lease is not readily determined. Subsequently, the lease liability
is adjusted by increasing the carrying amount to reflect interest
on the lease liability, reducing the carrying amount to reflect the
lease payments made and remeasuring the carrying amount to reflect
any reassessment or lease modifications.
The lease term is determined from the commencement date of the
lease and covers the non-cancellable term. If easyJet has an
extension option, which it considers it reasonably certain to
exercise, then the lease term will be considered to extend beyond
that non-cancellable period. If easyJet has a termination option,
which it considers it reasonably certain to exercise, then the
lease term will be considered to be until the date of the
termination option.
At the commencement date the right of use asset is measured at
an amount equal to the lease liability plus any lease payments made
before the commencement date and any initial direct costs, less any
lease incentive payments. An estimate of costs to be incurred in
restoring an asset, in accordance with the terms of the lease, is
also included in the right of use asset at initial recognition.
Subsequently, the right of use asset is measured in accordance with
the accounting policy for property, plant and equipment. Adjustment
is also made to the right of use to reflect any remeasurement of
the corresponding lease liability.
Short-term leases and low value leases are not recognised as
lease liabilities and right of use assets, but are recognised as an
expense straight line over the lease term.
easyJet enters into sale and leaseback transactions whereby it
sells either new or mid-life aircraft to a third party and
immediately leases them back. Where sale proceeds received are
judged to reflect the aircraft's fair value, any gain or loss
arising on disposal is recognised in the income statement, to the
extent that it relates to the rights that have been transferred.
Gains and losses that relate to the rights that have been retained
are included in the carrying amount of the right of use asset
recognised at commencement of the lease. Where sale proceeds
received are not at the aircraft's fair value, any below market
terms are recognised as a prepayment of lease payments, and above
market terms are recognised as additional financing provided by the
lessor.
IFRS 9 Financial Instruments
easyJet has adopted IFRS 9 on 1 October 2018 applying the
standard prospectively. The standard removes the multiple
classification and measurement models for financial assets required
by IAS 39 'Financial Instruments: Recognition and Measurement' and
instead introduces a model that has three classification
categories: amortised cost; fair value through the income statement
and fair value through other comprehensive income. Classification
of a debt asset instrument is driven by its cash flow
characteristics and the business model in which the asset is held.
Equity investments can now be measured at fair value through either
the income statement or through other comprehensive income.
Accounting for financial liabilities and for derecognising
financial instruments under IFRS 9 is materially consistent with
that required by IAS 39. IFRS 9 adds new requirements to address
the impairment of financial assets and hedge accounting, which have
had an immaterial impact. Existing hedging activities have not
materially changed on adoption of the standard. Some changes have
been recognised in the classification and measurement of financial
instruments, though these changes do not materially impact the
financial statements due to the stable nature of the Group's
investments. Similarly, easyJet does not have a material impact
from the changes to hedge accounting or impairment due to upfront
payments from customers and the high credit quality of
counterparties with which easyJet transacts.
Accounting policy for financial instruments
Financial instruments for the comparative period ended 30
September 2018, were recognised and measured in accordance with IAS
39. The accounting policies set out below are those applied to the
current period, in accordance with IFRS 9.
Financial instruments are recognised when easyJet becomes a
party to the contractual provisions of the relevant instrument and
derecognised when it ceases to be a party to such provisions.
Financial assets are also impaired (written-off) when the Group has
no reasonable expectation of recovering the financial asset.
With the exception of trade receivables that do not contain a
significant financing component, financial instruments are
initially measured at fair value plus or minus, in the case of a
financial asset or financial liability not at fair value through
profit or loss, directly attributable transactions costs. Trade
receivables that do not contain a significant financing component
are initially measured at the transaction price.
Where market values are not available, the fair value of
financial instruments is calculated by discounting expected cash
flows at prevailing interest rates and by applying period end
exchange rates.
The equity investment in The Airline Group Limited is measured
at fair value. Movements in fair value are assessed at each
reporting period and recorded in other comprehensive income. The
fair value is measured with reference to income and market
valuation techniques in line with IFRS 13 'Fair Value Measurement'
requirements.
Financial assets measured at amortised cost
Financial assets are classified and measured according to
easyJet's business model for managing a specified group of
financial assets, and the nature of the contractual cash flows
arising from that group of financial assets.
Subsequent to initial recognition, this classification of
financial asset is measured at amortised cost using the effective
interest rate method.
Financial assets are measured at amortised cost when both of the
following criteria are met:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amounts outstanding.
Financial assets measured at amortised cost include refundable
lease deposits and other refundable lease contributions, restricted
cash, trade and other receivables, money market deposits and cash
and cash equivalents (excluding money market funds).
Restricted cash comprises cash deposits which have restrictions
governing their use and is classified as a current or non-current
asset based on the estimated remaining length of the
restriction.
Cash and cash equivalents comprise cash held in bank accounts
with no access restrictions, bank term deposits and tri-party repos
all being repayable on demand or maturing within three months of
inception.
Money market deposits comprise of term deposits and tri-party
repos maturing greater than three months from inception.
Financial assets measured at fair value through profit or
loss
Subsequent to initial recognition, this classification of
financial asset is measured at fair value through profit or
loss.
Financial assets are measured at fair value through profit or
loss when they do not meet the criteria to be measured at amortised
cost or at fair value through other comprehensive income.
Financial assets measured at fair value through profit or loss
comprise money market funds.
Financial assets measured at fair value through other
comprehensive income
On initial recognition, equity investments, excluding interests
in associates, are irrevocably designated as measured at fair value
through other comprehensive income. Subsequently they are measured
at fair value with changes recognised in other comprehensive income
with no recycling of these gains and losses to the income
statement.
Impairment of financial assets measured at amortised cost
At each reporting date easyJet recognises a loss allowance for
expected credit losses on financial assets measured at amortised
cost.
In establishing the appropriate amount of loss allowance to be
recognised, easyJet applies either the general approach or the
simplified approach, depending on the nature of the underlying
group of financial assets.
General approach - impairment assessment
The general approach is applied to the impairment assessment of
refundable lease deposits and other refundable lease contributions,
restricted cash, money market deposits and cash and cash
equivalents.
Under the general approach easyJet recognises a loss allowance
for a financial asset at an amount equal to the 12-month expected
credit losses, unless the credit risk on the financial asset has
increased significantly since initial recognition, in which case a
loss allowance is recognised at an amount equal to the lifetime
expected credit losses.
Simplified approach - impairment assessment
The simplified approach is applied to the impairment assessment
of trade and other receivables.
Under the simplified approach easyJet always recognises a loss
allowance for a financial asset at an amount equal to the lifetime
expected credit losses.
Non-derivative financial liabilities
Non-derivative financial liabilities are initially recorded at
fair value less directly attributable transaction costs, and
subsequently at amortised cost, and include trade and other
payables and borrowings. Interest expense on borrowings is
recognised using the effective interest method.
Borrowings are classified as current liabilities unless there is
an unconditional right to defer settlement of the liability for at
least 12 months after the reporting period date.
Financial liabilities measured at amortised cost
Subsequent to initial recognition, this classification of
financial liability is measured at amortised cost using the
effective interest rate method.
Financial liabilities measured at amortised cost include trade
and other payables, lease liabilities and borrowings.
Derivative financial instruments and hedging activities
Derivative financial instruments are measured at fair value
through profit or loss with the exception of derivative financial
instruments that are designated as a hedging instrument in a cash
flow for hedge relationship.
easyJet uses foreign currency forward exchange contracts to
hedge foreign currency risks on transactions denominated in US
dollars, Euros, Swiss francs and South African rand. These
transactions primarily affect revenue, fuel, fixed costs, and the
carrying value of owned aircraft. easyJet also uses cross-currency
interest rate swaps to hedge currency and interest rate risk on
certain borrowings, and jet fuel forward contracts to hedge fuel
price risks. Hedge accounting is applied to those derivative
financial instruments that are designated as cash flow hedges or
fair value hedges.
Fair value hedges
Changes in the fair values of derivatives that are designated
and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair values of the
hedged assets or liabilities that are attributable to the hedged
risk. Any differences between the hedge item and hedge instrument
fair valuation is recoded as hedge ineffectiveness as a
non-headline item within the income statement.
Fair value changes in the derivative instrument attributable to
currency basis are not designated as part of the hedged instrument.
Such fair value changes are recognised through other comprehensive
income, and are recycled to the income statement on a rational
basis, according to the nature of the underlying hedged item.
Cash flow hedges
Gains and losses arising from changes in the fair value of
foreign exchange forward, jet fuel forward swaps and cross currency
interest rate swap contracts designated as a cash flow hedge are
recognised in other comprehensive income and deferred in the
hedging reserve to the extent that the hedges are determined to be
effective. Fair value changes in the derivative instrument
attributable to currency basis are not designated as part of the
hedged instrument. Such fair value changes are recognised through
other comprehensive income, and are recycled to the income
statement on a rational basis, according to the nature of the
underlying hedged item. All other changes in fair value are
recognised immediately in the income statement.
When the hedged forecast transaction relates to an item of
property, plant and equipment, the relevant accumulated gains and
losses are transferred from the hedging reserve and included in the
initial carrying amount of that purchased asset. Otherwise they are
recognised in the income statement in the same period in which the
hedged transaction affects the income statement and against the
same line item.
In the event that a hedged forecast transaction is no longer
expected to occur, any related gains and losses are immediately
transferred from the hedging reserve and recognised in the income
statement.
Hedge accounting is discontinued when a hedging instrument is
derecognised (e.g. through expiry or disposal), or no longer
qualifies for hedge accounting. Where the hedged item continues to
be expected to occur, the related gains and losses remain deferred
in the hedging reserve until the transaction takes place.
Hedge relationship
The Group determines that the criteria for each hedge accounting
relationship are met due to:
-- All relationships demonstrate a strong economic correlation;
-- The effects of credit do not dominate the change in value of the associated hedged risk; and
-- All Group hedge relationships have a hedge ratio of one to
one, aligning to the Groups risk management strategy.
Impact on the Consolidated Statement of Financial Position as at
1 October 2018
The following table summarises the impacts of adopting IFRS 9,
15 and 16 on the Group's consolidated statement of financial
position as at 1 October 2018.
As at 1 October 2018 As reported
GBP millions 30 September
2018
Adjusted
opening
IFRS IFRS 15 IFRS 16 balance
(restated) 9 impact impact impact sheet
------------------------ --- --- ---- -------------- ----------- -------- -------- ---------
Non-current assets
Goodwill 365 - - - 365
Other intangible assets 181 - - - 181
Property, plant and equipment 4,140 - - 497 4,637
Derivative financial
instruments 175 - - - 175
Equity investments - 54 - - 54
Restricted cash 11 - - - 11
Other non-current assets 122 - - - 122
---------------------------------------- -------------- ----------- -------- -------- ---------
4,994 54 - 497 5,545
Current assets
Trade and other receivables 406 - - (8) 398
Derivative financial
instruments 220 - - - 220
Money market deposits 348 - - - 348
Cash and cash equivalents 1,025 - - - 1,025
---------------------------------------- -------------- ----------- -------- -------- ---------
1,999 - - (8) 1,991
Current liabilities
Trade and other payables (1,023) - - 9 (1,014)
Unearned revenue (877) - (87) - (964)
Borrowings (9) - - 9 -
Lease liabilities - - - (152) (152)
Derivative financial
instruments (24) - - - (24)
Current tax payable (9) - - - (9)
Provisions for liabilities
and charges (118) - - (2) (120)
---------------------------------- ----------- -------- -------- ---------
(2,060) - (87) (136) (2,283)
Net current liabilities (61) - (87) (144) (292)
Non-current liabilities
Borrowings (968) - - 89 (879)
Lease liabilities - - - (477) (477)
Derivative financial
instruments (7) - - - (7)
Non-current deferred
income (18) - - 12 (6)
Post-employment benefit
obligations (29) - - - (29)
Provisions for liabilities
and charges (335) - - (18) (353)
Deferred tax (343) - 17 5 (321)
---------------------------------------- -------------- ----------- -------- -------- ---------
(1,700) - 17 (389) (2,072)
---- -------------- ----------- -------- -------- ---------
Net assets 3,233 54 (70) (36) 3,181
---------------------------------------- -------------- ----------- -------- -------- ---------
Shareholders' equity
------------------------ --- --- ---- -------------- ----------- -------- -------- ---------
Share capital 108 - - - 108
Share premium 659 - - - 659
Hedging reserve 299 (5) - (2) 292
Cost of hedging reserve - 4 - - 4
Translation reserve 1 - - - 1
Retained earnings 2,166 55 (70) (34) 2,117
---------------------------------------- -------------- ----------- -------- -------- ---------
3,233 54 (70) (36) 3,181
---- -------------- ----------- -------- -------- ---------
1b. Changes in significant accounting policies continued
The following tables summarise the impacts of adopting IFRS 9,
15 and 16 on the Group's consolidated income statement for the year
ended 30 September 2019, its consolidated statement of financial
position as at 30 September 2019, and its consolidated statement of
cash flows for the year ended 30 September 2019. There has been an
immaterial impact of IFRS 9 adoption on the income statement and
cash flow statement.
Impact on the consolidated income statement
Year ended 30 September 2019 Amounts
GBP millions without
adoption
IFRS IFRS of IFRS
As reported 15 impact 16 impact 15 & 16
-------------------------------------- ------------ ----------- ----------- ----------
Passenger revenue 5,009 21 - 5,030
Ancillary revenue 1,376 2 - 1,378
----------------------------------------- ------------ ----------- ----------- ----------
Total revenue 6,385 23 - 6,408
Fuel (1,416) - - (1,416)
Airports and ground handling (1,845) - (3) (1,848)
Crew (859) - - (859)
Navigation (409) - - (409)
Maintenance (302) - (85) (387)
Selling and marketing (157) - - (157)
Other costs (456) (18) (3) (477)
Other income 29 - - 29
----------------------------------------- ------------ ----------- ----------- ----------
EBITDAR 970 5 (91) 884
Aircraft dry leasing (5) - (182) (187)
Depreciation (484) - 244 (240)
Amortisation of intangible assets (15) - - (15)
----------------------------------------- ------------ ----------- ----------- ----------
Operating profit 466 5 (29) 442
----------------------------------------- ------------ ----------- ----------- ----------
Interest receivable and other
financing income 24 - 14 38
Interest payable and other financing
charges (60) - 22 (38)
----------------------------------------- ------------ ----------- ----------- ----------
Net finance charges (36) - 36 -
Profit before tax 430 5 7 442
Taxation (81) - - (81)
Profit for the period 349 5 7 361
----------------------------------------- ------------ ----------- ----------- ----------
Earnings per share, pence
Basic 88.6 91.6
----------------------------------------- ------------ ----------- ----------- ----------
Interest receivable and other financing income includes a GBP16 million
IFRS 16 hedging benefit as a result of management action
1b. Changes in significant accounting policies continued
Impact on the consolidated statement of financial position
As at 30 September 2019 Amounts
GBP millions without
adoption
of IFRS
IFRS IFRS IFRS 9, 15 and
As reported 9 impact 15 impact 16 impact 16
----------------------------------- ------------ ----------- ----------- ----------- -----------
Non-current assets
Goodwill 365 - - - 365
Other intangible assets 196 - - - 196
Property, plant and equipment 5,163 - - (431) 4,732
Derivative financial instruments 126 - - - 126
Equity investments 48 (48) - - -
Restricted cash 4 - - - 4
Other non-current assets 142 - - - 142
-------------------------------------- ------------ ----------- ----------- ----------- -----------
6,044 (48) - (431) 5,565
Current assets
Trade and other receivables 372 - - 8 380
Derivative financial instruments 147 - - (14) 133
Current tax assets 24 - - - 24
Money market deposits 291 - - - 291
Cash and cash equivalents 1,285 - - - 1,285
-------------------------------------- ------------ ----------- ----------- ----------- -----------
2,119 - - (6) 2,113
Current liabilities
Trade and other payables (1,050) - - (15) (1,065)
Unearned revenue (1,069) - 92 - (977)
Borrowings - - - (43) (43)
Lease liabilities (219) - - 219 -
Derivative financial instruments (138) - - - (138)
Current tax payable - - (17) - (17)
Provisions for liabilities
and charges (192) - - 2 (190)
-------------------------------------- ------------ ----------- ----------- ----------- -----------
(2,668) - 75 163 (2,430)
Net current liabilities (549) - 75 157 (317)
Non-current liabilities
Borrowings (1,324) - - (53) (1,377)
Lease liabilities (359) - - 359 -
Derivative financial instruments (72) - - - (72)
Non-current deferred income (6) - - - (6)
Post-employment benefit obligations (47) - - - (47)
Provisions for liabilities
and charges (397) - - 15 (382)
Deferred tax (305) - - (5) (310)
-------------------------------------- ------------ ----------- ----------- ----------- -----------
(2,510) - - 316 (2,194)
Net assets 2,985 (48) 75 42 3,054
-------------------------------------- ------------ ----------- ----------- ----------- -----------
Shareholders' equity
----------------------------------- ------------ ----------- ----------- ----------- -----------
Share capital 108 - - - 108
Share premium 659 - - - 659
Hedging reserve (4) 9 - 2 7
Cost of hedging reserve 8 (8) - - -
Translation reserve (1) - - - (1)
Retained earnings 2,215 (49) 75 40 2,281
-------------------------------------- ------------ ----------- ----------- ----------- -----------
2,985 (48) 75 42 3,054
----------------------------------- ------------ ----------- ----------- ----------- -----------
1b. Changes in significant accounting policies continued
Impact on the consolidated statement of cash flows
Year ended 30 September 2019 Amounts
without
adoption
IFRS IFRS of IFRS
As reported 15 impact 16 impact 15 & 16
-------------------------------------------------- ------------ ----------- ------------ ----------
Cash flows from operating activities
Operating profit for the period 466 5 (29) 442
Adjustments for non cash items:
Depreciation 484 - (244) 240
Commercial IT platform (2) - - (2)
Gain on sale and leaseback (2) - - (2)
Amortisation of other intangibles 15 - - 15
Share-based payments charge 19 - - 19
Changes in working capital and other items
of an operating nature:
Decrease in trade and other receivables 37 - - 37
Decrease in trade and other payables 43 - - 43
Increase in unearned revenue 105 (5) - 100
Increase/(decrease) in provisions (3) - 85 82
Increase in other non-current assets (20) - - (20)
Decrease in derivative financial instruments (32) - - (32)
Decrease in non-current deferred income (12) - - (12)
--------------------------------------------------- ------------ ----------- ----------- ----------
Cash generated from operating activities 1,098 - (188) 910
Ordinary dividends paid (233) - - (233)
Interest and other financing charges paid (58) - 21 (37)
Interest and other financing income received 12 - - 12
Net tax paid (58) - - (58)
--------------------------------------------------- ------------ ----------- ----------- ----------
Net cash generated from operating activities 761 - (167) 594
Cash flows from investing activities
Purchase of property, plant and equipment (954) - - (954)
Purchase of intangible assets (30) - - (30)
Net increase in money market deposits 52 - - 52
Net proceeds from sale and leaseback of aircraft 121 - - 121
Net cash used by investing activities (811) - - (811)
Cash flows from financing activities
Purchase of own shares for employee share
schemes (16) - - (16)
Proceeds from Eurobond issue 443 443
Repayment of capital element of finance leases
arising under IAS 17 - - (7) (7)
Repayment of capital element of leases arising
under IFRS 16 (174) - 174 -
Net decrease in restricted cash 7 - - 7
--------------------------------------------------- ------------ ----------- ----------- ----------
Net cash used by financing activities 260 - 167 427
Effect of exchange rate changes 50 - - 50
Net increase in cash and cash equivalents 260 - - 260
Cash and cash equivalents at beginning of
year 1,025 - - 1,025
Cash and cash equivalents at end of year 1,285 - - 1,285
--------------------------------------------------- ------------ ----------- ----------- ----------
1c. Critical accounting judgements and estimates
The preparation of accounts in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the accounts and the reported amounts of
income and expenses during the reporting period. Although these
amounts are based on management's best estimates, events or actions
may mean that actual results ultimately differ from those
estimates, and these differences may be material. The estimates and
the underlying assumptions are reviewed regularly.
1c.(i) Critical accounting judgements
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised and presented in the financial
statements.
Classification of income or expenses between headline and
non-headline items
The Group seeks to present a measure of underlying performance
which is not impacted by material non-recurring items or items
which are not considered to be reflective of the trading
performance of the business. This measure of profit is described as
'headline' and is used by the Directors to measure and monitor
performance. The excluded items are referred to as 'non-headline'
items.
Non-headline items may include impairments, amounts relating to
acquisitions and disposals, expenditure on major restructuring
programmes, litigation and insurance settlements, balance sheet
exchange gains or losses, the income or expense resulting from the
initial recognition of sale and lease back transactions, fair value
adjustments on financial instruments and other particularly
significant or unusual non-recurring items. Items relating to the
normal trading performance of the business will always be included
within the headline performance.
Judgement is required in determining the classification of items
between headline and non-headline.
Consolidation of easyJet Switzerland
Judgement has been applied in consolidating easyJet Switzerland
S.A. as a subsidiary on the basis that the Company exercises a
dominant influence over the undertaking. A non-controlling interest
has not been reflected in the consolidated accounts on the basis
that holders of the remaining 51% of the shares have no entitlement
to any dividends from that holding and the Company has an option to
acquire those shares for a pre-determined minimal
consideration.
EU Carbon Emissions Tax Scheme
The EU emissions trading system (ETS) mandates that greenhouse
gas producing businesses, such as airlines, offset their carbon
footprint by obtaining, and subsequently surrendering carbon
allowances ('allowances') by submitting them to the relevant
regulator. Airlines can obtain allowances by receiving free
allowances from the EU as allocated by the UK government and
purchasing allowances from the market.
In December 2018 the EU issued a regulation which stated that
aviation operators may not use allowances issued by Member States
who have triggered article 50 and notified of their intention to
leave the EU. This was implemented to protect the integrity of the
carbon allowances market and avoid an inundation of UK free
allowances into the market if the EU law did not apply to the UK at
the ETS submission date, but free allowances had been allocated.
The free allowances allocated to our Austrian and Swiss operations
were not impacted and have been received.
As at 30 September 2019 easyJet have recognised a UK ETS
liability of GBP60 million and a UK free allowance asset of GBP25
million as the EU confirmed the suspension would be lifted
automatically in the event of a withdrawal agreement coming into
force.
Brexit has now been further delayed. The submission date for ETS
allowances relating to calendar year 2019 is 31 December 2019, with
settlement on 30 April 2020. Three scenarios are possible as at the
due date of submission; firstly the UK could have left the EU with
a withdrawal agreement in place. In this case the transition period
becomes applicable, meaning the UK will remain subject to the EU
ETS scheme for calendar years 2019 and 2020, and therefore the free
allowances automatically become available. Secondly, the UK could
have left without a deal, in which case EU law no longer applies
and no ETS liability or free allowances apply, as confirmed by the
UK government. In this scenario, de-recognition of the liability
and asset relating to ETS may occur. Thirdly, Brexit could be
further delayed. In this case easyJet expect to be required to
submit allowances to cover the total 2019 ETS liability and receive
the related free allowances. Due to the ongoing uncertainty,
easyJet have retained the liability and related asset as at 30
September 2019 which is consistent with historic treatment and
reflects the conditions as at 30 September 2019.
1c.(ii) Critical accounting estimates
The following critical accounting estimates involve a higher
degree of judgement or complexity, or are areas where assumptions
are significant to the financial statements. The critical
accounting estimates concerned are not major sources of estimation
uncertainty that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next year.
Aircraft maintenance provisions - GBP526 million
easyJet incurs liabilities for maintenance costs in respect of
aircraft leased during the term of the lease. These arise from
legal and constructive contractual obligations relating to the
condition of the aircraft when it is returned to the lessor. To
discharge these obligations, easyJet will also normally need to
carry out one heavy maintenance check on each of the engines and
the airframe during the lease term.
On recognition of a right of use asset under IFRS 16 a provision
is made in the income statement full for maintenance not dependent
on use of the aircraft, plus maintenance relating to previous use,
based on hours or cycles flown, to provide for the cost of these
obligations. Contractual obligations which are dependent on the
ongoing use of the aircraft will be provided over the term of the
lease based on the estimated future costs, discounted to present
value. This will be capitalised to the right of use asset rather
than recognised in maintenance in the income statement. This asset
will be depreciated immediately as the obligation has arisen as a
result of flying hours already undertaken. The most critical
estimates required are considered to be the utilisation of the
aircraft, the expected costs of the heavy maintenance checks at the
time which they are expected to occur, the condition of the
aircraft, the lifespan of life-limited parts and the rate used to
discount the provision.
The bases of all estimates are reviewed annually, and also when
information becomes available that is capable of causing a material
change to an estimate, such as renegotiation of end of lease return
conditions, increased or decreased utilisation, or changes in the
cost of heavy maintenance services. No reasonable combination of
changes to these estimates would result in a material movement to
the carrying value of the provision.
Provisions for customer claims - GBP50 million
easyJet incurs liabilities for amounts payable to customers who
make claims in respect of flight delays and cancellations, and
refunds of air passenger duty or similar charges. Estimates include
passenger claim rates, the value of claims made and the period of
time over which claims will be made. The basis of all estimates are
reviewed at least annually and also when information becomes
available that is capable of causing a material change to the
estimate. No reasonable combination of changes to these estimates
would result in a material movement to the carrying value of the
provision.
Goodwill and landing rights - GBP497 million
Goodwill and landing rights are tested for impairment at least
annually. easyJet has one cash-generating unit, being its route
network. In making this assessment, easyJet has considered the
manner in which the business is managed including the centralised
nature of its operations and the ability to open or close routes
and redeploy aircraft and crew across the whole route network.
The value in use of the cash-generating unit is determined by
discounting future cash flows to their present value. When applying
this method, easyJet relies on a number of key estimates including
its ability to meet its strategic plans, future fuel prices and
exchange rates, long-term economic growth rates for the principal
countries in which it operates, and its pre-tax weighted average
cost of capital. Both fuel price and exchange rates are volatile in
nature, and the assumptions used are sensitive to significant
changes in these rates.
Defined benefit pension assumptions - GBP47 million
The Swiss pension scheme meets the requirements under IAS 19 to
be recognised as a defined benefit pension scheme and the net
pension obligation is recognised on the balance sheet. The
measurement of scheme assets and obligations are calculated by an
independent actuary in line with IAS 19. The financial and
demographic assumptions used in the calculation are determined by
management following consultation with the independent actuary with
consideration of external market movements and inputs. The
calculation is most sensitive to movements in the discount rate
applied to the future obligation.
Derivative financial instruments - GBP273 million asset, GBP210
million liability
easyJet is exposed to financial risks including fluctuations in
exchange rates, jet fuel prices and interest rates. Financial risk
management aims to limit these market risks with selected
derivative hedging instruments being used for this purpose. The
group hold a number of derivatives and financial instruments
including foreign currency forward exchange contracts, jet fuel
forward contracts and cross-currency interest rate swap contracts.
easyJet's policy is not to speculatively trade derivatives but to
use the instruments to hedge anticipated exposure. Given the
inherently complex nature of this area the Finance Committee (a
committee of the Board) oversees the Group's treasury and funding
policies and activities.
1d. New and revised standards and interpretations not
applied
There are no standards that are issued but not yet effective that would
be expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
2. Net finance charges
2019 2018
GBP million GBP million
Interest receivable and other financing income
Interest income (22) (12)
Net exchange gains on monetary assets and liabilities(1) (2) -
(24) (12)
Interest payable and other financing charges
Interest payable on bank and other borrowings 23 18
Interest payable on finance lease obligations under
IAS 17 - 4
Interest payable on lease obligations under IFRS
16 26 -
Other interest payable 11 8
60 30
Net finance charges 36 18
(1) Included within net exchange gains on monetary assets and liabilities
is a GBP24 million gain relating to the fair value gain on derivatives
designated as fair
value through profit or loss.
3. Profit before tax 2019 2018
GBP million GBP million
Depreciation of property, plant and equipment:
Owned assets 236 195
Assets held under finance leases arising under IAS
17 - 4
Right of use assets under IFRS 16 248 -
(Gain)/loss on disposal of intangibles, property,
plant and equipment - 4
(Gain)/loss on sale and leaseback (2) 11
Operating lease rentals arising under IAS 17:
Aircraft - 154
Other assets - 7
Lease rentals on short-term and low value leases
arising under IFRS 16:
Dry leased aircraft and other low value rentals 11 -
Wet leased aircraft rentals* 22 56
* These are short-term leases where the treatment
remains the same under IAS 17 and IFRS 16
In the comparative period ended 30 September 2018 aircraft operating
lease rentals of GBP154 million included only the operating dry lease
rental charges recognised in the period, as well as the impact of hedging
the USD exposure on these lease rentals.
Wet leased aircraft rentals of GBP22 million (2018: GBP56 million) were
recognised within other costs. Wet leases are fundamentally different
to regular, long-term lease commitments as they are short-term in nature
(with terms of less than one year) and they relate to the provision of
aircraft, crew, maintenance and insurance ('ACMI').
4. Non-headline items
An analysis of the amounts presented as non-headline is given
below:
Year ended Year ended
30 September 30 September
2019 2018
GBP million GBP million
------------ ------------
Commercial IT platform (credit)/charge (2) 65
Tegel integration - 40
Sale and leaseback (gain)/charge (2) 19
Brexit-related costs 4 7
Organisational review - 1
------------ ------------
Recognised in operating profit - 132
------------ ------------
Fair value adjustment (1) 1
Balance sheet foreign exchange gain (2) -
------------ ------------
Total non-headline (credit)/charge before tax (3) 133
------------ ------------
Tax on non-headline items 3 (25)
------------ ------------
Total non-headline charge/(credit) after tax - 108
------------ ------------
Commercial IT platform charge
At the end of 2018, a one-off charge of GBP65 million was
recognised in relation to our commercial IT platform. This charge
included a GBP60 million write down of costs previously
capitalised, along with an additional GBP5 million accrual for
close down costs.
During 2019, only GBP3 million of the close down accrual was
utilised, mainly due to staff being redeployed and anticipated
compromise agreements not being required. Therefore the remaining
GBP2 million has been released back to the Income Statement.
Tegel integration
There were no further one-off integration costs in relation to
the operations in Tegel classified as non-headline in 2019. In
2018, the main drivers of the GBP40 million integration expenses
were from engineering costs, dry leasing and transaction costs.
Sale and leaseback charge
During the year, easyJet completed the sale and leaseback of 10
A319 aircraft (2018: 10). The net Income Statement impact of the 10
sale and leasebacks was a GBP2 million gain (2018: GBP19 million
loss).
In 2018 (before the adoption of IFRS 16), the charge was split
between a loss on disposal of GBP11 million and a maintenance
provision catch-up of GBP8 million. Under IFRS 16, the maintenance
provision catch-up is now capitalised within the right of use asset
rather than being recognised as part of the gain or loss on
disposal. As the 2019 aircraft were sold at mid-life, there was no
maintenance provision catch-up required.
Brexit-related costs
Following the UK's referendum vote to leave the EU easyJet has
established a multi Air Operator Certificate (AOC) structure,
helping to secure flying rights for the portion of our network that
remains wholly within and between EU states.
In 2019 easyJet incurred further expenses of GBP4 million (2018:
GBP7 million), with the primary drivers being re-registering
aircraft and pilot licences, as well as legal costs.
Organisational review
There were no further organisational review costs classified as
non-headline during 2019 as the project ceased in 2018.
Fair value adjustment
This relates to hedge accounting ineffectiveness for items held
in fair value and cash flow hedge relationships.
This arises as the value of hedged items are adjusted for
changes in fair value attributable to the hedged risks, which are
not perfectly offset by the fair value change on the hedging
instruments due to factors such as in counterparty credit risk,
cash flow timing or amount changes.
Hedge ineffectiveness causes temporary volatility in the Income
Statement; over the life of the contract it nets out to zero and
has no cash flow impact. Therefore, it is presented as a
'non-headline' item.
Balance sheet foreign exchange (gain)/loss
This relates to foreign exchange gains or losses arising from
the re-translation of monetary assets and liabilities held in the
statement of financial position.
The (gain)/loss from balance sheet revaluations fluctuates each
month, being driven by exchange rate movements which are unrelated
to the trend in the underlying performance of our ongoing business,
so are excluded from headline costs.
5. Tax charge
Tax on profit on ordinary activities
2019 2018
GBP million GBP million
------------ ------------
Current tax
United Kingdom corporation tax 16 57
Foreign tax 9 7
Adjustments in respect of prior years - (16)
------------ ------------
Total current tax charge 25 48
------------ ------------
Deferred tax
Temporary differences relating to property, plant and
equipment 49 39
Other temporary differences 7 (20)
Adjustments in respect of prior years - 20
Total deferred tax charge 56 39
Total tax charge 81 87
------------ ------------
Effective tax rate 18.9% 19.7%
------------ ------------
Current tax recoverable at 30 September 2019 amounted to GBP24
million (2018: current tax payable GBP9 million). This related to
GBP29 million of tax recoverable in the UK (2018: tax payable GBP12
million) and GBP5 million (2018: GBP3 million) of tax payable in
other European jurisdictions.
During the year ended 30 September 2019, net cash tax paid
amounted to GBP58 million (2018: GBP74 million).
Tax on items recognised directly in other comprehensive income or shareholders'
equity
2019 2018
GBP million GBP million
------------ ------------
Charge to other comprehensive income
Deferred tax on change in fair value of cash flow hedges 69 (60)
Deferred tax on post-employment 3 -
------------ ------------
6. Earnings per share
Basic earnings per share has been calculated by dividing the
profit for the year by the weighted average number of shares in
issue during the year after adjusting for shares held in employee
benefit trusts.
To calculate diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential shares. Share options granted to
employees where the exercise price is less than the average market
price of the Company's ordinary shares during the year are
considered to be dilutive potential shares. Where share options are
exercisable based on performance criteria and those performance
criteria have been met during the year, these options are included
in the calculation of dilutive potential shares.
Headline basic and diluted earnings per share are also
presented, based on headline profit for the year.
Earnings per share is based on:
2019 2018
GBP million GBP million
Headline profit for the year 349 466
Total profit for the year 349 358
----------- -----------
2019 2018
million million
----------- -----------
Weighted average number of ordinary shares used to calculate
basic earnings per share 393 394
Weighted average number of dilutive potential shares 4 3
----------- -----------
Weighted average number of ordinary shares used to calculate
diluted earnings per share 397 397
----------- -----------
2019 2018
Earnings per share pence pence
----------- -----------
Basic 88.6 90.9
Diluted 87.8 90.2
----------- -----------
2019 2018
Headline earnings per share pence pence
----------- -----------
Basic 88.7 118.3
Diluted 87.8 117.4
----------- -----------
7. Dividends
An ordinary dividend in respect of the year ended 30 September
2019 of 43.9 pence per share, or GBP174 million, based on headline
profit after tax, is to be proposed at the forthcoming Annual
General Meeting. These accounts do not reflect this proposed
dividend.
An ordinary dividend of 58.6 pence per share, or GBP233 million,
in respect of the year ended 30 September 2018 was paid in the year
ending 30 September 2019. An ordinary dividend of 40.9 pence per
share, or GBP162 million, in respect of the year ended 30 September
2017 was paid in the year ended 30 September 2018.
8. Property, plant and equipment
Assets Right of use
held as assets held
finance under leasing
leases arrangements
under IAS under IFRS
Owned assets 17 16
Aircraft
Aircraft Land Aircraft and
and spares and buildings Other and spares spares Other Total
GBP GBP GBP GBP
GBP million GBP million million GBP million million million million
Cost
At 30 September 2018 4,964 - 67 103 - - 5,134
Recognised on adoption
of IFRS 16 - - - (103) 1,125 32 1,054
At 1 October 2018 4,964 - 67 - 1,125 32 6,188
Additions 905 34 15 - 125 2 1,081
Aircraft sold and leased
back (149) - - - 48 - (101)
Disposals - - (6) - - - (6)
At 30 September 2019 5,720 34 76 - 1,298 34 7,162
Depreciation
At 30 September 2018 946 - 18 30 - - 994
Recognised on adoption
of IFRS 16 - - - (30) 575 12 557
At 1 October 2018 946 - 18 - 575 12 1,551
Charge for the year 232 - 5 - 243 4 484
Aircraft sold and leased
back (31) - - - - - (31)
Disposals - - (5) - - - (5)
At 30 September 2019 1,147 - 18 - 818 16 1,999
Net book value
At 30 September 2019 4,573 34 58 - 480 18 5,163
At 1 October 2018 4,018 - 49 - 550 20 4,637
At 30 September 2018 4,018 - 49 73 - - 4,140
Information presented for the comparative period ended 30
September 2018, is presented in accordance with IAS 17. Information
presented for the current period ended 30 September 2019, is
presented in accordance with IFRS 16.
The net book value of aircraft includes GBP286 million (2018:
GBP283 million) relating to advance and option payments for future
deliveries. This amount is not depreciated.
Aircraft with a net book value of GBP71 million (2018: GBP73
million) which were classified as finance leases in 2018 are now
included within the right of use asset created on adoption of IFRS
16 as at 1 October 2018. Right of use assets with a net book value
of GBP497 million were recognised as at that date which were
previously treated as operating leases.
easyJet is contractually committed to the acquisition of 110
(2018: 115) Airbus A320 family aircraft, with a total list price*
of US$13.0 billion (2018: US$13.2 billion) before escalations and
discounts for delivery in financial years 2020 (22 aircraft), in
2021 (26 aircraft), in 2022 (27 aircraft) and in 2023 (35
aircraft).
The 'Other' category mainly comprises leasehold improvements,
computer hardware, and fixtures, fittings and equipment.
During the 2019 financial year easyJet purchased land in Luton,
UK with the intention to build a new head office.
*Airbus no longer publishes list prices. The estimated list
price is based on the last available list price published in
January 2018 and escalated by Airbus' standard escalation from
January 2018 to January 2019 of 3.7%.
9. Trade and other receivables
2019 2018
GBP million GBP million
Trade receivables 80 112
Less provision for loss allowance (1) (1)
79 111
Prepayments and accrued income 247 215
Recoverable supplemental rent (pledged as collateral) 1 24
Other receivables 45 56
372 406
With respect to trade receivables that are neither impaired nor
past due, there are no indications at the reporting date that the
payment obligations will not be met. Amounts due from trade
receivables are short-term in nature and largely comprise credit
card receivables due from highly rated financial institutions and,
accordingly, the possibility of significant default is considered
to be unlikely.
10. Trade and other payables
2019 2018
GBP million GBP million
Trade payables 339 329
Accruals 598 574
Leased aircraft - surplus on sale and leaseback - 7
Taxes and social security 27 26
Other payables 86 87
1,050 1,023
11. Borrowing and lease liabilities
Current Non-current Total
GBP million GBP million GBP million
At 30 September 2019
Eurobond - 1,324 1,324
Lease liabilities arising under IFRS 16 219 359 578
219 1,683 1,902
Current Non-current Total
GBP million GBP million GBP million
At 30 September 2018
Eurobond - 879 879
Finance lease liabilities arising under IAS 17 9 89 98
9 968 977
Information presented for the comparative period ended 30
September 2018, is presented in accordance with IAS 17 Leases.
Information presented for the current period ended 30 September
2019, is presented in accordance with IFRS 16 Leases.
Finance lease obligations relate to aircraft and bear interest
partly at fixed rates and partly at variable rates linked to USD
LIBOR.
On 7 January 2016, the UK Listing Authority approved a
prospectus relating to the establishment of a GBP3,000 million Euro
Medium Term Note Programme of easyJet plc. The prospectus under
this programme has subsequently been updated with the latest
version being issues on 5 February 2019. Under this programme, on 9
February 2016 easyJet plc issued notes amounting to EUR500 million
for a seven-year term with a fixed annual coupon rate of 1.750%. On
18 October 2016 easyJet plc issued additional notes amounting to
EUR500 million for a seven-year term with a fixed annual coupon
rate of 1.125%. On 11 June 2019 easyJet plc issued additional notes
amounting to EUR500 million for a six-year term with a fixed annual
coupon rate of 0.875%.
The EUR500 million Eurobond issued on 9 February 2016 was
designated as the hedged item in an effective fair value hedging
relationship. The Group used cross-currency interest rate swaps to
convert the fixed rate Eurobond to a Sterling floating rate
exposure. The cross-currency interest rate swaps have the same
maturity and common terms as the Eurobond that they are hedging.
The carrying value of the fixed rate Eurobond net of cross-currency
interest rate swaps at 30 September 2019 was GBP378 million.
The EUR500 million Eurobond issued on 18 October 2016 was
designated as the hedged item in an effective cash flow value
hedging relationship. The Group used cross-currency interest rate
swaps to convert the fixed rate Eurobond to a Sterling fixed rate
exposure. The cross-currency interest rate swaps have the same
maturity and common terms as the Eurobond that they are hedging.
The carrying value of the fixed rate Eurobond net of cross-currency
interest rate swaps at 30 September 2019 was GBP446 million.
The EUR500 million Eurobond issued on 11 June 2019 was
designated as the hedged item in an effective cash flow value
hedging relationship. The Group used cross-currency interest rate
swaps to convert the fixed rate Eurobond to a Sterling fixed rate
exposure. The cross-currency interest rate swaps have the same
maturity and common terms as the Eurobond that they are hedging.
The carrying value of the fixed rate Eurobond net of cross-currency
interest rate swaps at 30 September 2019 was GBP448 million.
On 10 February 2015 easyJet signed a $500 million revolving
credit facility with a minimum five-year term. The facility is due
to mature in February 2022.
On 1 August 2018 easyJet signed a GBP250 million revolving
credit facility with a two-year term. This facility was cancelled
in June 2019 following the bond issue in the same month.
12. Leases
Information presented in this note is in respect of the current
period ended 30 September 2019 and is presented in accordance with
IFRS 16. Information in respect of the comparative period ended 30
September 2018 is presented in accordance with IAS 17.
easyJet holds aircraft under leasing arrangements that are
recognised as right of use assets and lease liabilities, with
remaining lease terms ranging up to eight years. easyJet is
contractually obliged to carry out maintenance on these aircraft,
and the cost of this is provided based on the number of flying
hours and cycles operated. Further details are given in note 1.
easyJet also enters into short-term leases and low value leases
which are not recognised as right of use assets and lease
liabilities.
The weighted average incremental borrowing rate applied to the
lease liabilities in the statement of financial position at the
initial adoption on 1 October 2018 was 4.38%.
30 September
2019
Amounts recognised in the statement of cash flows GBP million
Repayment of capital element of leases (174)
1 October 2018
Reconciliation to prior year operating lease commitment GBP million
Operating lease commitments as disclosed at 30 September
2018 601
Reconciling items:
Effect of discounting (at incremental borrowing rate as
at 1 October 2018) (84)
Adjustment for options reasonably certain to be exercised 14
Finance lease liabilities recognised as at 30 September
2018 under IAS 17 98
Lease liabilities as at 1 October 2018 629
30 September
2019
Lease liabilities GBP million
Maturity analysis - contractual undiscounted cash flows
Less than one year (230)
One to five years (343)
More than five years (64)
(637)
30 September
2019
Amounts recognised in Income Statement GBP million
Interest on lease liabilities adopted under IFRS 16 26
Expenses relating to short-term and low value leases
(excluding wet leases) 11
Expenses relating to short-term wet leases 22
59
13. Non-current deferred income
The balance for the comparative period ending 30 September 2018
principally comprised the non-current surplus of sale proceeds over
fair value of aircraft that have been sold and leased back under
operating leases. Following the adoption of IFRS 16, the surplus
should be recognised as additional financing provided by the lessor
and has therefore been reclassified to lease liabilities within the
opening balances.
14. Provisions for liabilities and charges
Provisions
Maintenance for customer Other
Provision claims provisions Total provision
GBP million GBP million GBP million GBP million
At 30 September 2018 392 61 - 453
Recognised on adoption of IFRS 16 20 - - 20
At 1 October 2018 412 61 - 473
Exchange adjustments 23 - - 23
Charged to income statement 90 141 13 244
Unwinding of discount 19 - - 19
Utilised (18) (152) - (170)
At 30 September 2019 526 50 13 589
Provisions for customer claims comprise amounts payable to
customers who make claims in respect of flight delays and
cancellations, and refunds of air passenger duty or similar
charges. Other provisions include amounts in respect of potential
liabilities for employee-related matters.
2019 2018
GBP million GBP million
Current 192 118
Non-current 397 335
589 453
Maintenance provisions are expected to be utilised within ten
years. Provisions for customer claims and other provisions are
expected to be utilised within one year.
15. Reconciliation of operating profit to cash generated from
operations
2019 2018
GBP million GBP million
------------ ------------
Operating profit 466 463
Adjustments for non-cash items:
Depreciation 484 199
Loss on disposal of intangibles - 4
Commercial IT platform (credit)/charge (2) 60
(Gain)/loss on sale and leaseback (2) 11
Amortisation of intangible assets 15 15
Share-based payments 19 17
Changes in working capital and other items of an operating
nature:
Decrease/(increase) in trade and other receivables 37 (130)
Increase in trade and other payables 43 303
Increase in unearned revenue 105 150
(Decrease)/increase in provisions (3) 121
Increase in other non-current assets (20) (48)
(Decrease)/increase in derivative financial instruments (32) 57
Decrease in non-current deferred income (12) (7)
Cash generated from operations 1,098 1,215
------------ ------------
16. Reconciliation of net cash flow to movement in net cash
Fair value Loan issue Net
1 October IFRS and foreign costs cash 30 September
2018 16 adoption exchange capitalised flow 2019
GBP million GBP million GBP million GBP million GBP million GBP million
Cash and cash
equivalents 1,025 - 50 - 210 1,285
Money market deposits 348 - (5) - (52) 291
1,373 - 45 - 158 1,576
Eurobond (879) - (8) 6 (443) (1,324)
Finance lease
obligations
under IAS 17 (98) 98 - - - -
Lease liabilities
arising
under IFRS 16 - (629) (43) (80) 174 (578)
(977) (531) (51) (74) (269) (1,902)
Net cash/(debt) 396 (531) (6) (74) (111) (326)
17. Financial instruments
Carrying value and fair value of financial assets and
liabilities
The fair values of financial assets and liabilities, together
with the carrying value at each reporting date, are as follows:
Amortised cost Held at fair
value
Financial Financial Fair value Cash flow Other financial Other(1) Carrying Fair
assets liabilities hedges hedges instruments value value
At 30 September GBP million GBP million GBP million GBP million GBP million GBP GBP GBP
2019 million million million
Other non-current
assets 141 - - - - 1 142 142
Trade and other
receivables 209 - - - - 163 372 372
Trade and other
payables - (919) - - - (131) (1,050) (1,050)
Derivative
financial
instruments - - 73 (30) 20 - 63 63
Restricted cash 4 - - - - - 4 4
Money market
deposits 291 - - - - - 291 291
Cash and cash
equivalents 872 - - - 413 - 1,285 1,285
Eurobonds - (1,324) - - - - (1,324) (1368)
Lease liabilities - (578) - - - - (578) (580)
Equity
investments(2) - - - - 48 - 48 48
Amortised cost Held at fair
value
Loans Financial Fair value Cash flow Other financial Other(1) Carrying Fair
and liabilities hedges hedges instruments value value
receivables
At 30 GBP million GBP million GBP million GBP million GBP million GBP GBP GBP
September million million million
2018
Other
non-current
assets 120 - - - - 2 122 122
Trade and
other
receivables 240 - - - - 166 406 406
Trade and
other
payables - (894) - - - (129) (1,023) (1,023)
Derivative
financial
instruments - - 64 300 - - 364 364
Restricted
cash 11 - - - - - 11 11
Money market
deposits 348 - - - - - 348 348
Cash and
cash
equivalents 1,025 - - - - - 1,025 1,025
Eurobonds - (879) - - - - (879) (908)
Finance
lease
obligations - (98) - - - - (98) (100)
Information presented for the comparative period ended 30
September 2018, is presented in accordance with IAS 39 and IFRS 7
Financial Instruments: Disclosures, as applicable to IAS 39.
Information presented for the current period ended 30 September
2019, is presented in accordance with IFRS 9 and IFRS 7, as
modified by IFRS 9.
1. Amounts disclosed in the 'Other' column are items that do not
meet the definition of a financial instrument. They are disclosed
to facilitate reconciliation of the carrying values of financial
instruments to line items presented in the statement of financial
position.
2. The equity investment of GBP48 million represents a 13.2%
shareholding in a non--listed entity, The Airline Group Limited.
Valuation movements are designated as being fair valued through
other comprehensive income due to the nature of the investment
being held for strategic purposes. A dividend of GBP3 million
(2018: GBP3 million) was received during the year.
Fair value calculation methodology
Where available the fair values of derivatives and financial
instruments have been determined by reference to observable market
prices where the instruments are traded. Where market prices are
not available, the fair value has been estimated by discounting
expected future cash flows at prevailing interest rates and by
applying year end exchange rates (excluding the Airline Group
Limited equity investment).
The fair values of the three Eurobonds are classified as level 1
of the IFRS 13 Fair Value Measurement fair value hierarchy
(valuations taken as the closing market trade price for each
respective Eurobond as on 30 September 2019). Apart from the equity
investment, the remaining financial instruments for which fair
value is disclosed in the table above, and derivative financial
instruments, are classified as level 2.
The equity investment is classified as level 3 due to the use of
forecast cash flows which are discounted to present value. Though
there are other level 2 inputs to the valuation, the discounted
cash flow is a significant input which is not based on observable
market data. The fair value is assessed at each reporting date
based on the discounted cash flows and two other valuations
calculated using a market approach and level 2 inputs. If the level
3 forecast cash flows were 10% higher or lower the fair value would
not increase / decrease by a significant amount.
The investment was recognised on adoption of IFRS 9 at 1 October
2018 at GBP54 million based on an external valuation. Using the
same methodology management performed the calculation as at 30
September 2019 resulting in a fair value reduction of GBP6m which
was recognised in other comprehensive income.
The fair value measurement hierarchy levels have been defined as
follows;
Level 1, fair value of financial instruments based on quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2, fair value of financial instruments in an active market
(for example, over the counter derivatives) which are determined
using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity specific
estimates.
Level 3, fair value of financial instruments that are not based
on observable market data (i.e. unobservable inputs).
For foreign currency forward exchange contracts and exchange
swap contracts, quantity represents the gross nominal value of
currency contracts held, disclosed in the contract currency. The
cross-currency interest rate swap contracts are presented at the
sterling notional. For jet fuel forwards contracts quantity
represents contracted metric tonnes.
Fair value of derivative financial instruments
Non-current Current Current Non-current
Quantity assets assets liabilities liabilities Total
At 30 September 2019 million GBP million GBP million GBP million GBP million GBP million
Designated as cash flow hedges
US dollar 2,740 43 108 - (2) 149
Euro 2,338 4 15 (11) (3) 5
Swiss franc 492 1 - (9) (5) (13)
South African Rand 134 - 2 - - 2
Jet fuel 3 - 7 (118) (55) (166)
Cross-currency interest rate
swaps 888 - - - (7) (7)
Designated as fair value hedges
Cross-currency interest rate
swaps 379 73 - - - 73
Designated as fair value through
profit or loss
US dollar 345 5 15 - - 20
126 147 (138) (72) 63
Non-current Current Current Non-current
Quantity assets assets liabilities liabilities Total
At 30 September 2018 million GBP million GBP million GBP million GBP million GBP million
Designated as cash flow hedges
US dollar 2,627 25 22 (11) (1) 35
Euro 2,020 1 9 (12) (2) (4)
Swiss franc 429 - 5 (1) (4) -
South African Rand 237 2 1 - - 3
Jet fuel 3 83 183 - - 266
Cross-currency interest rate
swaps 445 - - - - -
Designated as fair value hedges
Cross-currency interest rate
swaps 379 64 - - - 64
175 220 (24) (7) 364
The majority of hedged foreign exchange and jet fuel
transactions are expected to occur on various dates within the next
24 months. Accumulated gains and losses resulting from these
transactions are deferred in the hedging reserve. They will be
recognised in the income statement in the periods that the hedged
transactions impact the income statement. Where the gain or loss is
included in the initial amount recognised following the purchase of
an aircraft, recognition in the income statement is over a period
of up to 23 years in the form of depreciation of the purchased
asset.
Amounts related to USD foreign exchange derivatives held at fair
value through profit or loss (e.g. not held in a hedge accounting
relationship) form part of the Group's balance sheet retranslation
risk management strategy. Fair valuation movements on these
derivatives are recognised in the income statement and offset
foreign exchange movements on the corresponding notional amount of
balance sheet liabilities held in USD. These trades are all
expected to occur on various dates within the next 24 months.
The Group maintains cross-currency interest rate swap contracts
on fixed rate debt issuance as part of the approach to currency and
interest rate risk management. The cross-currency interest rate
swap contracts are designated and qualify as either fair value or
cash flow hedges to minimise volatility in the income
statement.
The following derivative financial instruments are subject to
offsetting, enforceable master netting agreements:
Amount
Gross not set Net
amount off amount
At 30 September 2019 GBP million GBP million GBP million
Derivative financial instruments
Assets 273 (143) 130
Liabilities (210) 143 (67)
63 - 63
Amount
Gross not set Net
amount off amount
At 30 September 2018 GBP million GBP million GBP million
Derivative financial instruments
Assets 395 (31) 364
Liabilities (31) 31 -
364 - 364
All financial assets and liabilities are presented gross on the
face of the statement of financial position as the conditions for
netting specified in IAS 32 Financial Instruments: Presentation are
not met.
The effect of adoption of IFRS 9 on the statement of financial
position in the current period to 30 September 2019 is set out in
note 1.
18. Contingent liabilities
easyJet is involved in a number of disputes and litigation which
arose in the normal course of business. The likely outcome of these
disputes and litigation cannot be predicted, and in complex cases
reliable estimates of any potential obligation may not be
possible.
Having reviewed the information currently available, management
considers that the ultimate resolution of these disputes and
litigation is unlikely to have a material adverse effect on
easyJet's results, cash flows or financial position.
As at 30 September 2019 easyJet had no agreements with third
parties for which fees were contingent upon the completion of
acquisition activities (2018: nil).
At 30 September 2019 easyJet had outstanding letters of credit
and performance bonds totalling GBP34 million (2018: GBP33
million), of which GBP7 million (2018: GBP12 million) expires
within one year. The fair value of these instruments at each year
end was negligible.
No amount is recognised on the statement of financial position
in respect of any of these financial instruments as it is not
probable that there will be an outflow of resources.
19. Related party transactions
The Company licenses the easyJet brand from easyGroup Limited
('easyGroup'), a wholly owned subsidiary of easyGroup Holdings
Limited, an entity in which easyJet's founder, Sir Stelios
Haji-Ioannou, holds a beneficial controlling interest. The
Haji-Ioannou family concert party shareholding (being easyGroup
Holdings Limited and Polys Holding Limited) holds, in total,
approximately 33% of the issued share capital of easyJet plc as at
30 September 2019.
Under the Amended Brand Licence signed in October 2010 and
approved by the shareholders of easyJet plc in December 2010, an
annual royalty of 0.25% of total revenue is payable by easyJet to
easyGroup for a minimum term of 10 years. The full term of
agreement is 50 years.
easyJet and easyGroup established a fund to meet the annual
costs of protecting the 'easy' (and related marks) and the
'easyJet' brands. easyJet contributes up to GBP1 million per annum
to this fund and easyGroup contributes GBP100,000 per annum. Beyond
the first GBP1.1 million of costs, easyJet can commit up to an
aggregate GBP5.5 million annually to meet brand protection costs,
with easyGroup continuing to meet its share of costs on a 10:1
ratio. easyJet must meet 100% of any brand protection costs it
wishes to incur above this limit.
A side letter to the Brand Licence was entered with easyGroup,
dated 29 September 2016, under which, in return for easyGroup
consenting to easyJet acquiring a portion of the equity share
capital in Founders Factory Limited, easyJet made a payment of
GBP1.
The amounts included in the income statement, within Other
Costs, for these items were as follows:
2019 2018
GBP million GBP million
------------ ------------
Annual royalty 16 15
Brand protection (legal fees paid through easyGroup to
third parties) 1 1
17 16
At 30 September 2019, GBP0.9 million (2018: GBP3 million) of the
above aggregate amount was included in trade and other
payables.
20. Events after the reporting period
easyJet acquired Thomas Cook's slots at Gatwick Airport (12
summer slot pairs and eight winter slot pairs) and Bristol Airport
(six summer slot pairs and one winter slot pair) for GBP36 million.
Contractual terms have concluded and the slots have been awarded to
easyJet.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LIFSILTLALIA
(END) Dow Jones Newswires
November 19, 2019 02:01 ET (07:01 GMT)
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