www.easyJet.com Annual report and accounts 2011 Hangar 89 London Luton Airport Luton Bedfordshire LU2 9PF Annual report and accounts 2011 easyJet plc Annual report easyJet and accounts 2011 Europe by THANK YOU We’d like to thank everyone who has helped to produce this report: Paul Ablin, Charlotte Allin, Angela Bennett, Alita Benson, Warwick Brady, Mike Campbell, Trevor Didcock, Peter Duffy, Joanne Flynn, Chris Gadsden, Paul Gibson, Lewis Girdwood, Val Goldine, Adam Hughes, Bruce James, Chris Kennedy, Rachel Kentleton, Ken Lawrie, Thomas Loizeau, Cath Lynn, Carolyn McCall OBE, Nicola McGarry, Shuhall Miah, Paul Moore, Reg Otten, Chris Paull, Giles Pemberton, Sir Michael Rake, Tom Smethers, Andrew Tempest, Helen Whittle and all of our employees across the network. 1 Overview 4 Corporate responsibility Highlights 02 Introduction 32 Chairman’s introduction 03 Safety 32 Turning Europe Orange 04 People 33 Our cause 06 Environment 36 2 Business review 5 Governance Our long-term strategy 08 Chairman’s introduction 41 Chief Executive’s introduction 09 Board of directors 42 Strategic position 10 Executive management team 44 Strategy implementation 13 Corporate governance 46 Market review 13 Shareholder information 51 Looking forward to 2012 14 Report on Directors’ remuneration 52 Key performance indicators 16 Statement of Directors’ responsibilities 62 3 Performance and risk 6 Accounts & other information Financial review 19 Independent auditors’ report 64 Introduction 19 Consolidated income statement 65 Financial performance 22 Consolidated statement of Earnings per share 24 comprehensive income 66 Cash flows and financial position 24 Consolidated statement of financial position 67 Going concern 25 Consolidated statement of changes in equity 68 Significant contracts and creditor policy 25 Consolidated statement of cash flows 69 Principal risks and uncertainties 27 Notes to the accounts 70 Company statement of financial position 98 Directors’ report Company statement of changes in equity 99 easyJet plc is incorporated as a public limited company and is registered in Company statement of cash flows 100 England with the registered number 3959649. easyJet plc’s registered office 101 is Hangar 89, London Luton Airport, Bedfordshire LU2 9PF. The Directors Notes to the Company accounts present the Annual report and accounts for the year ended 30 September 2011. Five year summary 103 This annual report is printed on Amadeus 100 Silk paper and board, produced using 100% deinked, References to ‘easyJet’, the ‘Group’, the ‘Company’, ‘we’, or ‘our’ are to easyJet 104 recycled fibre. Both the paper mill and the printer involved in this production hold ISO 14001 plc or to easyJet plc and its subsidiary companies where appropriate. Pages Glossary 01 to 62, inclusive, of this Annual report comprise the Directors’ report that has accreditation, which specifies a process for continuous environmental improvement, and both are been drawn up and presented in accordance with English company law and the FSC® certified. If after reading, you no longer wish to retain this report, please pass it on to other liabilities of the Directors in connection with that report shall be subject to the interested readers or dispose of it in your recycled paper waste. limitations and restrictions provided by such law. This report is available at: http://corporate.easyjet.com/investors/reports-and-accounts.aspx Designed and produced by Radley Yeldar www.ry.com 01 Overview OVERVIEW Business review Business Performance and risk and Performance responsibility Corporate Governance Highlights 02 3 Chairman’s introduction 03 3 Turning Europe Orange 04 3 Our cause 06 3 1 Accounts & other information 02 easyJet plc Annual report and accounts 2011 Highlights Our results £3,452m £248m £248m Total revenue Profit before tax – reported Profit before tax – underlying1 (2010: £2,973m) + 16.1% (2010: £154m) +60.8% (2010: £188m) +31.5% 7.2% 12.7% 52.5p Pre-tax margin – underlying1 Return on Capital Employed Basic earnings per share (pence) (2010: 6.3%) +0.9ppt (2010: 8.8%) +3.9ppt (2010: 28.4p) +84.9% 10.5p 34.9p Proposed dividend – Proposed dividend – ordinary (pence per share) special (pence per share) (2010: nil) (2010: nil) Operational highlights – easyJet has made excellent progress over the past year – Underlying cost1 per seat (excluding fuel and currency and has delivered a strong set of results with underlying movement) fell by 1.3% for the full year and was flat on profit before tax up by £60 million to £248 million a reported basis with strong performances in ground despite a £100 million increase in unit fuel costs. This handling, maintenance and disruption related costs strong performance is due to firm control of costs, – The year saw strong operating cash generation of effective yield management, the strength of easyJet's £424 million, resulting in net cash of £100 million as at network and focus on customers 30 September 2011 – Return on Capital Employed (ROCE) improved by – The Board has recommended a one-off return to 3.9 percentage points to 12.7% shareholders, structured as a special dividend, of – On time performance improved by 13 percentage £150 million. Taken together with the ordinary dividend points to 79% with the strong performance across the of 10.5 pence per share, this provides an estimated total network leading to a six percentage point improvement cash return to shareholders for the year of £195 million in customer satisfaction or 45.4 pence per share to be paid on 23 March 2012 to those shareholders on the register at the close of – Total revenue per seat up 4.1% (3.4% at constant business on 2 March 2012 with an ex dividend date of currency) to £55.27, as capacity investments made 29 February 2012 in FY’10 and the first half of FY’11 matured combined with a strong performance from ancillary revenue, up – Earnings per share improved by 24.1 pence to 52.5 pence per share, of which around nine pence 12.9% to £11.52 per seat following decisive management resulted from changes in the UK corporation tax rate action in the second quarter and the resolution of various tax enquiries – Passenger numbers rose 11.8% to 54.5 million and – Forward bookings are in line with the prior year. load factor improved by 0.3 percentage points to With around 45% of winter seats now booked, first half 87.3%. Passengers originating outside of the UK now total revenue per seat at constant currency is expected account for 56%, an increase of 3 percentage points to be up by mid single digits compared to the prior year. Passengers travelling with easyJet on business increased by almost one million to Note 1: Underlying measures exclude £27 million of cost relating to the volcanic ash cloud and £7 million loss on disposal of A321 aircraft 9.5 million in 2010. There were no underlying adjustments in 2011. 03 Overview easyJet plc Annual report Chairman’s introduction and accounts 2011 Business review Business Performance and risk and Performance responsibility Corporate Governance I am pleased to report that your Company has easyJet is well placed and the Board is confident in delivered a good financial performance this year confirming our first ever dividend of £45 million for and the business has strengthened. financial year 2011 and a special dividend of £150 million. Progress this year Industry regulation In its first full year in charge the management team It is important that our industry ensures that we play has made excellent progress in implementing the our part in tackling climate change. However, if this is strategy laid out in last year’s annual report and driving done through only constraining demand the economic improvement in processes and capability. and social benefits of travel will be put at risk. In the UK alone aviation contributes £11 billion to GDP. As a result both unit revenues and costs have improved to drive a substantial improvement in profitability and Environmental measures must deliver real gains in returns. environmental efficiency and cannot be used as a way to simply tax passengers. easyJet continues to support We have refreshed the Board with the appointments aviations’ entry to EU ETS, however we are disappointed of Charles Gurassa as Deputy Chairman and Senior by the UK Government’s proposal to increase the tax on Independent Director, Andy Martin and Adele Anderson short-haul travel and reduce it for long-haul travel. This and strengthened the Board’s capabilities in the areas proposal will reduce growth and jobs, as the majority of of aviation, and risk and financial management. the UK’s tourists come from Europe, and it will increase Returns to shareholders emissions, as long-haul flights are responsible for much The Board is committed to delivering returns in excess greater emissions than short-haul flights. of the cost of capital and returning excess capital to We are also concerned about the apparent lack of shareholders. In the past year, earnings per share has Government commitment to expanding runway increased by 24.1 pence to 52.5 pence and Return on capacity in the South East. This will have negative Capital Employed improved by 3.9 percentage points consequences for the London and wider UK economy to 12.7%. and easyJet supports projects, such as a second The weak consumer environment with rising fuel costs runway at Gatwick, the most congested runway and taxation will continue to present challenges for the in Europe. aviation industry. We have proactively put in place Finally, we call for the end of inconsistent application actions to ensure the business navigates a difficult of consumer rules across Europe. We are proud of environment by maintaining a strong balance sheet our commitment to ensuring our passengers receive and by curtailing growth over winter 2012 and 2013.