Half Year Results Analyst and Investor presentation Wednesday 15 May 2013 1 1
Introduction Carolyn McCall Chief Executive Officer 2 2
Loss before tax PBT / seat PBT margin Key messages 1. easyjet s competitive advantages means it continues to be a structural winner in the European short-haul market despite a difficult economic environment 2. Significantly improved winter performance 3. Strategy is delivering strong results and returns for shareholders Reducing winter losses, down over 45% Improving loss per seat and margins 2011 2012 2013 0-1 2011 2012 2013 0% -2% -112-61 -2-3 -4-3.87-7.6% -2.04-3.8% -4% -6% -8% -10% -153-5 -6-5.47-12.1% -12% -14% Loss / seat PBT margin 3
Finance review Chris Kennedy Chief Financial Officer 4 4
Management action taken to offset headwinds Loss per seat bridge per seat 0.35-2.04-3.87 0.10 0.83 2.44 3.50 1.34 0.83 H1 2012 Fuel per Seat Cost increase FX excl Fuel Easter Revenue per Seat easyjet lean incremental A320 Mix H1 2013 5
Financial Results m H1 13 H1 12 Change B/(W) Total revenue 1,601 1,465 136 Fuel (496) (483) (13) Operating costs excluding fuel (1,042) (982) (60) EBITDAR 63-63 Ownership costs (124) (112) (12) Loss before tax (61) (112) 51 EBITDAR margin 3.9% 0.0% 3.9ppt Loss before tax margin (3.8%) (7.6%) 3.8ppt 6
Financial results m H1 13 H1 12 Change Loss before tax (61) (112) 45.5% Tax credit 14 22 (36.6%) Loss after tax (47) (90) 47.8% Effective tax rate 23% 20% 3ppt Loss per share 12.0p 21.2p (43.4%) Return on capital employed* (0.9%) (2.8%) 1.9ppt Notes: Return on capital employed (ROCE) measure includes leases capitalised at 7 times The ROCE measure with target liquidity included is shown in the appendix 7
Improved revenue performance m H1 13 H1 12 Change Passengers (m) 26.6 25.2 5.3% Load factor (%) 88.6% 86.9% 1.7ppt Seats (m) 30.0 29.0 3.3% Average sector length (km) 1,042 1,061 (1.8%) Total revenue ( m) 1,601 1,465 9.3% Total revenue per seat ( ) 53.39 50.47 5.8% @ constant currency ( ) 54.80 50.47 8.6% Revenue per seat at constant currency easyjet capacity growth Competitor capacity on easyjet markets 4.7% 7.5% 5.2% 6.7% 8.0% 5.0% 9.2% 1.5% Q3 12-3.6% -2.4% -2.3% Q4 12 Q1 13 Q2 13-3.3% Source: Competitor capacity from OAG using an easyjet definition of overlapping markets. This excludes charter capacity. 8
Revenue improvement driven by initiatives Year on year drivers of revenue per seat change ( /Seat) 0.83 0.59 3.23 0.09 53.39 1.64 50.47 H1 2012 Actual Revenue initiatives New Route maturity Non-seat Easter FX and hedge H1 2013 Actual 9
Currency impact Currency split total revenue Currency split total costs Euro 44% 45% Sterling US Dollar 31% 37% Euro 3% 8% Other Swiss Franc 1% Other 6% Swiss Franc 25% Sterling H1 13 currency impact favourable / (adverse) EUR CHF USD Other Total Revenue - Euro rate 1.22 (2012: 1.16) (36) (6) - (1) (43) Fuel 3-4 - 7 Costs excluding fuel - Euro rate 1.22 (2012: 1.18) 3 1 (1) (1) 2 Total (30) (5) 3 (2) (34) 10
Timing of Euro: Sterling movement drove adverse fx GBP: Euro rates: 1.30 1.25 1.20 1.15 1.10 FY'12 FY'13 1.05 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Sharp decline in value of Sterling to Euro in January 2013 High level of forward bookings posted at above 1.20, cost incurred at lower rate 11
Impact of fuel H1'13 H1'12 Change B/(W) Fuel $ per metric tonne Market price 1,041 1,028 (13) Effective price 988 972 (16) US dollar rate Market rate 1.59 1.59 - Effective rate 1.61 1.60 1c Actual cost of fuel per metric tonne 613 608 (5) Year on year drivers of (13)m fuel cost increase (2)m from 5 per metric tonne increase in fuel price, ETS and fx movements (14)m volume related: increased sectors and load factor partially offset by reduced sector length 3m saving from increased proportion of A320 aircraft 12
Cost per seat key drivers H1 13 vs. H1 12 Favourable/ (Adverse) cost per seat ex fuel var at Constant Currency % var at Constant Currency Drivers Ground Operations 15.47 (1.57) (10.9%) Crew 7.17 (0.15) (2.1%) Navigation 4.07 0.03 0.9% Maintenance 2.99 0.28 8.3% Overhead 4.89 (0.06) (1.2%) Brand Licence 0.16 (0.07) (88.2%) Ownership Costs 4.14 0.28 7.1% Total cost (ex fuel) 38.89 (1.26) (3.4%) Steep increase in airport charges in Spain & Italy Increase in de-icing costs due to adverse weather conditions in winter 2012 Pay increase of 1.8% & changes to performance related bonus schemes Increase in regulated charges Offset by cost savings achieved through fleet mix change & reduction in average sector length Underlying maintenance costs broadly flat One off adjustment to leased engine maintenance provision in H1 2012 (not repeated in H1 2013) Increase in disruption costs Investment in IT development resources Increase in proportion of performance-related pay Royalty fee increased from 2.5m to 4.8m due to the change from fixed royalty payments to a percentage of revenue Decrease in interest cost due to repayment of more expensive debt Decrease in lease costs due to lower average fleet lease mix Variances shown: red & bracketed = negative or an increase in cost, black = favourable or decrease in cost 13
Increasing proportion of A320 s Mar 13 Mar 12 Change A319 (operating lease) 49 55 (6) A319 (owned / finance lease) 105 111 (6) A319 Total 154 166 (12) A320 (operating lease) 14 6 8 A320 (owned / finance lease) 42 32 10 A320 Total 56 38 18 Total fleet 210 204 6 Percentage of operating leases 30% 30% - Percentage unencumbered 40% 21% 19ppt Percentage of A320s in fleet 27% 19% 8ppt 14
Seasonal working capital benefit from summer bookings m 390 34 85 97 131 36 1,194 239 193 883 40 56 Sep 2012 * Operating Depn & Net Tax, net int Ordinary CAPEX Borrowings Sale & Restricted FX Mar 2013 Loss amort Working & other dividend Leaseback Cash Capital paid * Includes money market deposits but excludes restricted cash 15
Strong balance sheet m Mar 13 Mar 12 Property, plant and equipment 2,192 2,193 Goodwill and other intangible assets 456 452 Other assets 554 591 Liabilities (excluding debt) (1,968) (1,772) 1,234 1,464 Debt 761 1,169 Cash and money market deposits (1,194) (1,211) Net debt / (cash) (433) (42) Shareholders equity 1,667 1,506 Capital employed 1,234 1,464 Gearing* 11% 31% *Gearing defined as (debt + 7 x annual lease payments cash) divided by (shareholders equity + debt +7 x annual lease payments cash) 16
Fuel and foreign exchange hedging Fuel requirement US Dollar requirement Euro surplus Six months to 30 September 2013 83% 80% 85% Average rate $980/ tonne 1.60 1.18 Full year ending 30 September 2013 85% 82% 85% Average rate $983/ tonne 1.60 1.18 Full year ending 30 September 2014 67% 62% 71% Average rate $984/ tonne 1.58 1.20 Sensitivities $10 movement per metric tonne impacts F 13 PBT by +/-$1.3m One cent movement in /$ impacts F 13 PBT by +/- 0.9m One cent movement in / impacts F 13 PBT by +/- 0.4m Rates as at 13 May 2013: Euro to sterling 1.18; US$ to sterling 1.54; Jet fuel cif US$923 per metric tonne. FX sensitivities shown relate to the impact of changes in the fx rate on the unhedged element of currency over and away from the outlook statement and the rates shown above 17
Forward bookings H2 bookings in line with prior year % seats sold * 89% 87% FY'12 FY'13 49% 49% Apr May Jun Jul Aug Sep H2 Easter Impact H2 (Apr 13 to Sept 13) * As at 6 May 2013 18
Outlook Capacity (seats flown) Q3: c. +4% (before disruption) H2: c.+3.5% (before disruption) Revenue per seat (constant currency) H2: c.+4% Cost per seat ex fuel (constant currency) H2: c.+4% (assuming normal disruption levels and constant load factors) Second half results H2: 5 million to 10 million further adverse movement from foreign exchange rates (including those related to fuel). H2: With fuel remaining within its recent $900/MT to $1,000/MT trading range, constant currency fuel costs for the second half would be up to 10 million favourable. Whilst there is always the potential for unexpected events to impact short term financial performance, the outlook for the second half of the financial year combined with the strong reduction in first half losses means that easyjet expects to deliver improved returns and profitability for the year ending 30 September 2013. Rates as at 13 May 2013: Euro to sterling 1.18; US$ to sterling 1.54; Jet fuel cif US$923 per metric tonne. 19
Business Review Carolyn McCall Chief Executive 20 20
Environment creating opportunity for easyjet Industry Headwinds Economic uncertainty & sluggish growth Industrial unrest High fuel costs Sovereign debt concerns + Competitive + Competitive = environment advantages Legacy carriers incurring significant short haul losses Weaker carriers retreating or exiting with 3% reduction in competitor capacity over winter Consumers valuing low fares 1. Efficient, low cost model 2. Strong network and market positions 3. easyjet.com and brand 4. Strong balance sheet Growing returns Clear opportunity to deliver sustainable growth and returns for shareholders 21
Profitable opportunities within existing markets Share of traffic within easyjet s top 20 airports Other LCC 51m seats EZJ 46m seats Growth in existing markets easyjet has approximately 22% share of capacity at its top 20 airports equating to around 46 m seats Other low cost carriers (LCCs) have ~25% share Non-LCC transfer (est) 26m seats Non-LCC P2P (est) 86m seats Non-LCCs account for 53%, with 12% estimated to be for connections to long haul flights 41% or 86m seats opportunity within easyjet s top 20 airports Source: Market size sourced from OAG data based on easyjet definition of short-haul routes; estimates of transfer traffic obtained from airport and company external announcements. P2P = point to point; LCC = Low-cost carrier. 22
Continued competitor capacity retrenchment Capacity growth H2 F 13 (OAG) easyjet change 13% Competitors on easyjet markets Total change on easyjet markets 7% 4% 4% 4% 2% 3% 1% 0% Capacity change (YOY) Competitors on EZJ routes H2 12 capacity H1 13 capacity H2 13 capacity -3.0% -2.8% -1.0% easyjet +7.5% +3.3% +3.5% Market on easyjet routes -0.1% -1.0% +0.1% 0% -2% -4% -5% -1% Competitors in total SH market -1.1% -4.6% +0.1% -9% UK France Swiss Italy Market Rate of competitor capacity withdrawal expected to slow going into summer Source: Market share data from OAG. easyjet routes based on internal easyjet definition. Based on April download for the six months to 31 March 2013. Forward looking data based on 6 months ending 30 September 2013. Adjustments made to forward looking capacity to remove outliers and conform with easyjet and analyst views. 23
Strategy to drive growth and returns Leverage easyjet s cost advantage, leading market positions and brand to deliver point-to-point low fares with operational efficiency and friendly service for our customers 1. Drive demand, conversion and yield across Europe 2. Build strong number 1 and 2 network positions 3. Maintain cost advantage 4. Disciplined use of capital Sustainable growth (slightly in excess of market c. 3% to 5% per annum) Improved returns Tangible and regular cash returns via 3x cover dividend 24
1. Drive demand: Digital developments 1. Drive Demand demand Developments easyjet is the 3rd most searched for airline globally easyjet App now has 4.5m downloads Flight tracker introduced used over 4 million times since launch Over 4,000 updates posted Inspire me launched in October Mobile boarding cards being trialled Marketing strategy is increasing traffic to easyjet and improving conversion rates 25
1. Drive demand: CRM improvements allow targeted upsell 1. Drive Demand Pre-booking Consolidated data sources to create a single customer view allowing improved targeting and allocation of marketing spend Departure Inspire me Allocated seating Airport info 48 hours to go Additional products Hotels Car hire Allocated seating Information to make journeys easier On departure and arrival airport Info. for families Travel checklist Online check-in and document reminders 26
1. Drive demand: Brand recognition scores improving 1. Drive Drive Demand Demand 98% 100% 90% 98% 88% 92% 12% 13% 6% 19% 7% 21% H1'12 H1'13 H1'12 H1'13 H1'12 H1'13 UK France Italy Brand strength is building: Total brand awareness Sustained strong brand awareness in all markets Brand choice/preference Consideration still growing, and Europe continuing to match strong UK levels 1 in 5 consumers in both France and Italy consider easyjet to be their first choice airline, up from less than 1 in 10 a year ago. Source: 2013 data based on Millward Brown research commissioned by easyjet. 2012 data normalised based on GfK CSAT 27
1. Drive demand: Allocated seating on track 1. Drive Demand Delivered against objectives 1. No impact on asset utilisation Strong operational performance, best in class OTP 2. No negative impact on cost per seat 3. Drive increased customer satisfaction Satisfaction with boarding experience has increased by 2.6 percentage points year on year to 70.5%* 4. Generating higher returns than speedy boarding Allocated seating drove an incremental 8 million sales over Speedy Boarding in the first half easyjet s focus remains on minimising the operational impact of the change to allocated seating over the busy summer schedule *Source : Gfk & weighted Millward Brown for six months to March 13 vs 6 months to end March 12. 28
1. Drive demand: Business travel 1. Drive Demand Building blocks FY11 FY12 FY13 FY14 FY15 Proposition improve punctuality o add new network points o increase frequency Product launch & develop flexi fare deploy allocated seating o enable Fast Track Security Sales recruit pan European sales force o negotiate TMC incentives o deliver corporate fares Distribution agree new commercial terms with GDS o standardise GDS booking process o strengthen position on Self Booking Tools o enhance online & mobile capability Consideration develop Business Sense campaign o increase allocation of media weight Delivered Delivered Delivered Delivered Ongoing Ongoing Delivered Ongoing In progress Delivered Ongoing Ongoing In progress Planned Planned 29
2. Network: Optimising the network 2. Network Overall c. 3.5% capacity growth in H2 (assuming minimal disruption) United Kingdom +5% Germany +4.5% France +4% Portugal +2% Italy +7% Switzerland +13% Spain -16% Source : Internal easyjet projection April 2013 30
3. Cost: Innovating to reduce cost 3. Cost advantage Bendibelt New technology to load bags onto aircraft Reduces headcount required to load bags from 3 to 2 people Forced air de-icing Trialling forced Air technology Potential to reduce de-icing fluid usage by c. 40-50% Reducing weight & fuel burn Lightweight seats Lightweight trollies Lightweight carpets Sharklets 31
3. Cost: easyjet turn to reduce costs 3. Cost advantage easyjet turn logged 360 activities required to turn an aircraft round Simplifying the process without compromising safety E.g. Refuelling in Italy Ground handling contracts Targeting reducing time on ground by 3 minutes 32
4. Continued growth in network returns 4. Capital Discipline Rolling 12 months returns: April March 13 vs. April to March 12 Returns 12% ROCE 0% ROCE Rolling 12 to March 12 Rolling 12m to March 13 R outes Improving network returns year on year Improving returns In 2012-56 routes were delivering less than 40% of average ROCE; now only 20 routes 18 Improved 18 Dropped. E.g. o o Liverpool: Brussels Brest : Paris CDG Madrid closure implemented efficiently June 12 proposed closure Dec 12 closure completed Q2 13 improving returns Growing capacity on high performing routes 33
4. Evaluation of new generation aircraft 4. Capital Discipline Technical evaluation complete Competitive process Rigorous level of governance of the process No decision yet made and dependant on making an order that is in the interests of all shareholders 34
Summary: strategy continues to deliver Strategy delivered strong performance over winter Modest capacity growth Strong unit revenue growth Controlling costs Capital discipline Improving returns Favourable competitive environment Legacy carriers losses Weaker carriers retreating or exiting Consumers valuing low fares Further opportunities to take profitable share 1. Efficient, low cost model 2. Strong network and market positions 3. easyjet.com and brand 4. Strong balance sheet Clear opportunity to continue to deliver growing returns to shareholders 35
Q&A 36 36
Appendix 37 37
ROCE Calculation including 7x lease adjustment Reported m H1 2013 H1 2012 Loss before interest and tax reported (40) (99) Interest element of operating lease payments 16 17 Loss before interest and tax - adjusted (24) (82) Tax 23% 24% Normalised operating profit after tax (NOPAT) (19) (62) Average shareholders equity reported 1,731 1,606 Average net cash reported (180) (71) Opening capitalised leases 665 763 Closing capitalised leases 644 713 Average capitalised leases 655 738 Average capital employed 2,206 2,273 Return on capital employed 7x basis (0.9%) (2.8%) 38
ROCE Calculation NPV and Target liquidity Proforma m H1 2013 H1 2012 Loss before interest and tax reported (40) (99) Interest element of operating lease payments 9 14 Loss before interest and tax adjusted (31) (85) Tax 23% 24% Normalised operating profit after tax (NOPAT) (24) (65) Average shareholders equity reported 1,731 1,606 Adjustment to shareholders equity (41) (37) Average shareholder s equity adjusted 1,690 1,569 Average net cash reported (180) (71) Increase in debt associated with capitalising leases 363 376 Target liquidity adjustment 848 816 Average net debt adjusted 1,031 1,121 Average capital employed 2,721 2,690 Return on capital employed NPV basis (0.9%) (2.4%)* *2012 ROCE on NPV basis restated from -2.3% to -2.4% to reflect the same NPV calculation methodology used for FY 2012 statement 39
RASK and CASK m H1 2013 H1 2012 Change B/(W) Total revenue per seat 53.39 50.47 5.8% at constant currency 54.80 50.47 8.6% RASK at constant currency (pence) 5.26 4.76 10.5% Total cost per seat ex fuel 38.89 37.70 (3.1%) at constant currency 38.96 37.70 (3.4%) CASK ex fuel at constant currency (pence) 3.74 3.55 (5.2%) 40
Disclaimer This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of investment professionals in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. Persons within the United Kingdom who receive this communication (other than those falling within (i) and (ii) above) should not rely on or act upon the contents of this communication. Nothing in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion contained in the Financial Services and Markets Act 2000. This presentation has been furnished to you solely for information and may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any other purpose. This presentation does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of easyjet plc ( easyjet ) in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of easyjet. Without limitation to the foregoing, these materials do not constitute an offer of securities for sale in the United States. Securities may not be offered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there from. easyjet has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither easyjet nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, from any reliance on this presentation or its contents. This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. By attending or reading this presentation you agree to be bound by the foregoing limitations. 41