Annual Report 2016 - easyJet plc

1 Annual Report and accounts 2016 INVESTING IN OUR STRENGTHS Annual Report AND ACCOUNTS 20162016 has been a year of uncertainty. The aviation industry in particular has faced many challenges: low oil prices and interest rates; the continuing impact of terrorism; the decision for the UK to exit the European Union; and increased market capacity sustained by a low fuel price, have all contributed significantly to the position of our business today. However, in these unpredictable times easyJet has continued to pursue its strategy for disciplined growth and long-term shareholder value. This year we have made considerable investments in our business. We have further strengthened the network, continued to invest in projects to deliver customer benefits and cost savings and reinforced the balance sheet. This will enable us to target long-term earnings growth and drive long-term value to our Report easyJet at a glance2 Our business model4 Chairman s letter6 Chief Executive s review7 Overview7 Our market context8 Our strategy9 Outlook15 Key performance indicators16 Financial review18 Going concern22 Viability statement22 Key statistics23 Risk24 Corporate responsibility32 GOVERNANCEC hairman s statement on corporate governance43 Board of Directors44 Executive Management Team46 Corporate governance report48 Directors remuneration report60 Directors report76 Statement of Directors responsibilities79 Independent auditors Report to the members of easyJet plc80 ACCOUNTSC onsolidated accounts86 Notes to the accounts91 Company accounts114 Notes to the Company accounts117 OTHER INFORMATIONFive-year summary119 Glossary120 VISIT OUR WEBSITE FOR OTHER INVESTOR

2 STRENGTHSINVESTMENT CASEU nparalleled networkWe have an increasing presence in the right markets, and with frequencies and slots at slot-constrained primary airports that deliver choice and flexibility to our brandWe are respected for delivering a safe, reliable and great value service to top destinations across Europe and modelWe are driven by our strong focus on cost savings, with a commitment to maintaining easyJet s structural cost advantage against the legacy and charter operators who are its major competitors in its PER SEAT AT CONSTANT OF easyJet CAPACITY THAT TOUCHES A NUMBER ONE OR NUMBER TWO AIRPORT(3)Number1 or 2 BRAND IN THE UK, FRANCE AND SWITZERLAND(2)74%OF OUR CUSTOMERS ARE RETURNING CUSTOMERS(3)(1) As at 30 September 2016 .(2) Based on data received for brand awareness for the 2016 financial year from the Millward Brown Brand tracker.

3 (3) In the year ending 30 September 2016 .(4) At constant currency, performance from 2015 financial year compared to 2019 financial year at normal levels of NUMBER OF SEATS PER PLANE(1)FlatTARGET FOR COST PER SEAT EXCLUDING FUEL(4) FACTOR(3)803 ROUTES OPERATED(1)132 AIRPORTS IN 31 COUNTRIESLow-cost modelWe are driven by our strong focus on cost savings, with a commitment to maintaining easyJet s structural cost advantage against the legacy and charter operators who are its major competitors in its balance sheetWe maintain a strong balance sheet to facilitate our low funding costs, operational flexibility and to provide insulation from external use of capitalWe have a clear capital structure framework and a strategy intended to maximise shareholder revenue growthWe have a clear focus on building strong relationships with customers to create more sustainable, long-term revenues leveraging quality, innovation and DOWNLOADS TO 30 SEPTEMBER 2016 LIQUIDITY PER 100 SEATS OF(1) PER SEAT AT CONSTANT CURRENCY50%DIVIDEND PAYOUT RATIOINTRODUCTION OFNET CASH OF(1) (3)

4 237%TOTAL SHAREHOLDER RETURN OVER FIVE YEARS TO 30 SEPTEMBER 2016156 UNENCUMBERED AIRCRAFT(1)167 AVERAGE NUMBER OF SEATS PER PLANE(1)FlatTARGET FOR COST PER SEAT EXCLUDING FUEL(4)INVESTING INOUR STRENGTHSLOW COST MODELWELL KNOWN BRANDUNDERPINNED BY OUR PEOPLESTRONG BALANCE SHEETDRIVING REVENUE GROWTHDISCIPLINED USE OF CAPITALUNPARALLELED AIRPORTSDESTINATION COUNTRIESCOUNTRIES WITH BASESTUGALCZECH REPUBLICPOLANDHUNGARYSERBIAAUSTRIASWITZE RLANDPONTA see our entire networkeasyJet at a glanceStrengthening our networkWHAT WE DOLow-cost European point-to-point use our cost advantage and number one and number two network positions in strong markets to deliver low fares and operational efficiency on point-to-point routes, with our people making the difference by offering friendly service for our WE DO ITIntra-European short-haul network is focused on primary airports serving high GDP catchment 30 SEPTEMBER 20162easyJet plc Annual Report and accounts 2016 BELGIUMGERMANYFRANCESPAINPORBASESNETWORK AIRPORTSDESTINATION COUNTRIESCOUNTRIES WITH BASESTUGALCZECH REPUBLICPOLANDHUNGARYSERBIAAUSTRIASWITZE RLANDPONTA DELGADASLOVENIACROATIABULGARIATURKEYEGYP TISRAELGREECEITALYSWEDENNETHERLANDSKOSOV ODENMARKESTONIAUKICELANDMOROCCOMONTENEGR OOVER30 NEW ROUTES ON SALE FOR WINTER 2016 WITH MORE NEW ROUTES ANTICIPATED FOR SUMMER 2017132 AIRPORTS IN 31 DIFFERENT reportGovernanceAccountsOur business modelAn efficient low cost model to drive above market returnsOur sustainable business model makes travel easy and affordable and drives growth and returns for RESOURCESThe success of our business

5 Depends on a number of key resources:OUR VALUESC apital easyJet has a strong capital base, with market capitalisation of 4 billion(1) and a net cash position of 213 million at 30 September 2016 . easyJet s credit ratings are amongst the strongest in the world for an easyJet operates a modern Airbus fleet, using the A320 family of aircraft, and is up-gauging its fleet to 186 seat cabins and the new fuel efficient A320neo aircraft. This provides customer, operating and maintenance benefits to the never compromise on safetySimplicityWe cut out the things that don t matter to keep us lean and make it easyOne teamTogether we ll always find a wayPeople easyJet has a dedicated workforce of over 10,000 people, including 2,865 pilots and 6,516 cabin crew members as at 30 September easyJet interacts with a number of stakeholders in its operations, such as customers, suppliers, (including infrastructure owners and operators airports, air traffic control), regulators and national and insighteasyJet leverages its customer relationship management capabilities, driving revenue by increasing customer loyalty and implementing its wider digital strategy.

6 Our increasingly sophisticated use of data will enable us to continue to make travel easy and affordable in the longer cap of 4bSAFETY UNDERPINS EVERYTHING WE DO 257aircraftOver 10, (1) Based on a share price of at 30 September plc Annual Report and accounts 2016 OUTCOMESHOW WE DO ITWe build on our business through our strategic pillars:Build strong number one and two network positionsWe fly from the main airports in attractive catchment areas. We are increasing our presence in the right markets, with frequencies and slots at primary airports that deliver choice and lean cost advantageeasyJet is committed to maintaining its structural cost advantage against the legacy and charter operators. We have low overhead costs, use our aircraft efficiently and have a lean approach to all areas of the business. Customer and operational excellencePeople are attracted to the well-known easyJet brand and high-quality service offering.

7 We make it easy to buy our low fares through our website and digital platforms, which have on average over one million visits every day. Grow revenue We have a clear focus on building strong relationships with customers to create more sustainable, long-term revenues leveraging quality, innovation and digital. easyJet is looking to develop new revenue streams, leveraging its network, cost focus and track record of and digitaleasyJet's award-winning digital platform continues to be a major enabler of revenue and customer satisfaction. easyJet s app has been downloaded million times at 30 September 2016 and as it becomes more established it is driving increasing contribution to best peopleIt is our people who continue to deliver the strategy for the business and will drive future success. Internally, we continue to focus on recruiting the right people, helping them to understand our values and their role, and then giving them the tools to develop a high-performance culture.

8 IntegrityWe stand by our word and do what we sayPassionWe have a passion for our customers, our people and the work we doPioneeringWe challenge to find new ways to make travel easy and affordableSAFETY UNDERPINS EVERYTHING WE DOTurn to page: 9 for more details on to read more about our valuesTurn to page: 16 for more details on KPIsCustomer satisfaction 72%Operational excellence 77%On time performanceGenerating high returns for our shareholders50%dividend payout ratioEmployee engagement76% reportGovernanceAccountsChairman s letterFinancial performanceeasyJet has delivered a resilient financial performance this year, despite a number of events that have disproportionately affected easyJet when compared with other grew its passenger numbers to a new high of million, showing continued strong demand for its services. This record level of flying generated slightly reduced revenues of 4,669 million in 2016 , as passengers benefitted from low fares, with a reinforced programme of cost controls, that delivered savings ahead of target of 95 million.

9 easyJet 's profit before tax was 495 's strategy is founded on leadership positions at many of Europe's foremost airports, providing the frequency and wide range of convenient destinations demanded by customers combined with a relentless focus on cost control which allows us to offer excellent value fares, making travel easy and affordable. Despite challenging market conditions characterised by multiple terrorist actions, industrial strikes, geopolitical instability and currency movements as well as excess market capacity, easyJet s lean business model and effective strategy continue to identify opportunities for highly targeted and profitable growth, which will deliver long-term value to referendumeasyJet remains committed to the UK and has taken steps to secure the future of the business following the outcome of the EU referendum. We are in the process of selecting a preferred country in which to obtain an EU-based Air Operator Certificate (AOC), securing flying rights in Europe.

10 easyJet will continue to work closely with the UK Government and the EU to maintain a liberal aviation market in s focus on its culture and people, its "Orange spirit", is a key contributor to easyJet s success. In a very difficult year it has been this spirit of commitment to passengers, particularly by front-line staff, that has ensured easyJet remains amongst the strongest airlines in the year Chris Browne joined as a Non-Executive Director and, with a strong background in aviation, has made a significant contribution to board discussions. I am pleased that she has easyJet has delivered a resilient financial performance this year, with record passenger numbers showing continued strong demand for its services. We are investing for the future in order to deliver sustainable long-term value for BARTONC hairmannow accepted an executive role in the business as our Chief Operating Officer, in which I believe she will make a major contribution in developing that part of the returnsIn May, the Board increased the dividend payout ratio to 50%.