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Easyjet's Yield Management

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Easyjet's Yield Management 2007 Interim Results 09 May 2007 1 Highlights 4 Margin improved by 4.0pp as loss before tax reduced from £40m to £17m 4 Total revenue grew by 14% to £719m 4 Passenger revenues up 0.8% or £0.26 to £31.70 per seat 4 Ancillary revenues up 18% or £0.58 to £3.81 per seat 4 Costs ex-fuel down 2.1% or £0.57 to £27.18 per seat 4 12 month rolling return on equity at 11.9% for March 2007, up from 5.6% for 12m to March 2006 4 Strong balance sheet with £905m cash and gearing at 21% 4 Guidance maintained: full year pre-tax profit up 40% to 50% 2 Highlights 4 11% increase in passenger numbers to 16.4 million 4 Madrid base opened February 2007 with 4 A319 aircraft 4 16 new routes launched - network on sale is now 292 routes serving 75 airports across 20 countries 4 100th Airbus delivered in April 2007 4 1 new A319 taken every 12 days since September 2003 4 Speedy boarding implemented throughout network 4 Network development: 4 More focus on time sensitive passengers 4 Extending our market footprint 3 Profit and loss account £m H1 2007 H1 2006 Change Total revenue 719 630 + 14% Operating costs (679) (603) + 13% EBITDAR 40 27 + 45% Finance and ownership (57) (67) - 16% Pre-tax loss (17) (40) - 58% Margin (2.4%) (6.4%) +4.0pp Loss per seat (pence) (85p) (222p) + 137p Margin improved by 4.0pp with seasonal loss reduced to £17m 4 Return on equity and profit per seat progression 16% £3.72 £4 £3.32 14% £4 PBT12% per seat £3 £2.38 11.9% 10% £2.16 £3 10.1% 8% £2 7.1% 6% £2 5.3% 4% £1 Return on equity2% £1 0% £0 Sep-04Sep 04 Sep-05Sep 05 Sep-06Sep 06 Mar-07Mar 07 12 month rolling 5 Passenger revenue H1 2007 H1 2006 Change Passengers (m) 16.4 14.9 + 11% Load factor 81.2% 81.8% -0.6pp Seats (m) 20.2 18.2 + 12% Pax revenue (£m) 642 571 + 12% Per seat £31.70 £31.44 + 0.8% 6 Ancillary revenues H1 2007 H1 2006 Change Ancillary revenue (£m) 77 59 +32% Per seat £3.81 £3.23 +18% Change per seat H1 2007 Card fees + 2% Change / Rescue / Speedy boarding fees + 15% Partner + 56% Excess baggage / Sporting goods + 40% In-flight - 8% Ancillary revenue per seat in order of revenue contribution 7 Cost per seat Cost/seat Change vs Change vs H1 2007 H1 2006 H1 2006 Ownership £ 2.81 - 25% - £0.91 Better Maintenance £ 2.31 - 18% - £0.52 Airports / handling £ 10.25 - 0% - £0.05 Worse Navigation £ 3.05 + 1% + £0.04 Fuel £ 9.18 + 1% + £0.05 Overheads £4.06 + 8% + £0.30 Crew £ 4.71 + 14% + £0.57 Total £ 36.36 - 1.4% -£0.52 Total (ex fuel) £ 27.18 - 2.1% -£0.57 8 Aircraft ownership Change in aircraft ownership cost per seat £1.50 £0.75 £- -£0.75 - 91p -£1.50 2003 2004 2005 2006 H1 2007 4 Improved fleet mix and financing 4 A319s represent 76% of fleet up from 60% in March 2006 4 Owned aircraft increased from 23% to 41% of fleet 4 Benefit from weaker USD (effective rate $1.87 from $1.78) 4 Continued reduction in lease return costs 4 Ongoing savings through leveraging Airbus deal 9 Maintenance Change in maintenance cost per seat £1.50 £0.75 £- -£0.75 - 52p -£1.50 2003 2004 2005 2006 H1 2007 4 Benefit from the elimination of B737-300s from fleet and mix change to owned A319s 4 Benefit from weaker USD 4 Reduction in unscheduled one-off maintenance 4 Tender for engine maintenance nearing completion 10 Airports and ground handling Change in airport / handling cost per seat £1.50 £0.75 £- -5p -£0.75 -£1.50 2003 2004 2005 2006 H1 2007 4 Reduction in Spanish ground handling costs with benefits from Madrid and Barcelona still to come 4 Weaker Euro and Swiss franc offsetting mix effect 4 Reduction in winter de-icing costs 4 Continued pressure in H2 with Stansted rates changing 11 Overheads Change in overhead cost per seat £1.50 + 30p £0.75 £- -£0.75 -£1.50 2003 2004 2005 2006 H1 2007 4 Increase in legal and IT related costs 4 Increased share based payments & timing of bonus provisions 4 Full year forecast in line with expectations of reduced unit overhead costs 4 Options for call centre under review 12 Crew Change in crew / training cost per seat £1.50 + 57p £0.75 £- -£0.75 -£1.50 2003 2004 2005 2006 H1 2007 4 Effect of salary inflation circa 17 pence per seat 4 Successful winter recruitment programme has impacted average efficiency (+400 pilots and +900 cabin crew recruited) 4 Higher retention rates for both pilots and cabin crew 4 Crew requirements in place for summer 2007 13 Net income, EPS and ROE £m H1 2007 H1 2006 Change Pre-tax loss (17) (40) - 58% Tax 4 11 - 60% Net loss (13) (29) - 56% EPS (fully diluted) (3.0p) (7.2p) - 57% Return on Equity 11.9% 5.6% + 6.3pp (rolling 12 month) 4 Full year effective tax rate around 26% 14 Strong balance sheet £m Mar 07 Sep 06 Aircraft (incl. deposits) 795 699 Cash 905 861 Goodwill 310 310 Other assets 333 254 Total assets 2,343 2,124 Debt 493 480 Other liabilities 859 661 Shareholders’ funds 991 983 Total equity and liabilities 2,343 2,124 Gearing* 21% 31% *Gearing defined as (debt + 7 x annual lease payments – cash incl. restricted cash) divided by (shareholders funds + debt + 7 x annual lease payments – cash incl. restricted cash) 15 Good cash generation £m 1100 1000 900 800 £861m 700 (£25m) £162m £17m Cash 9/06 £4m EBIT £14m Depn / amort Wk capital (£128m) Tax / net int. £905m Financing Net capex Cash 3/07 16 US$ forward hedging US$:£ weighted average values 2.00 20% fwd @ $1.91 1.90 $1.88 60% collars 1.80 $1.77 1.70 H2 80% 1.60 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 4 80% exposure hedged for H2 FY07 17 Fuel forward hedging Jet A1 price per tonne (US$) weighted average values 800 $776 750 22% collars 700 $699 650 36% fwd @ $659 600 550 H2 58% 500 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 4 58% exposure hedged for H2 FY07 18 Business Review 19 Business review 4 Priorities and focus 4 Fleet and growth 4 Network development 4 Business product Revenue Costs 4 Competitive landscape 4 Environmental issues 4 People People Network 20 Focus, growth and margin improvement 4 Continued focus on our targets 4 15% growth 4 15% ROE 4 Yield improvement 4 Network development 4 Yield mix (e.g. business traveller) 4 Ancillary revenue 4 Car hire, hotels, In-flight 4 Operational efficiency 4 Aircraft ownership 4 Fleet mix 21 Fleet and order book 4 31 March fleet of 127 Aircraft 4 97 Airbus A319s 4 30 Boeing 737-700s 4 Order book: 4 95 Airbus A319s on order for delivery 2007 – 2010 4 123 further Airbus A320 family options available through 2015 4 Rapid growth of Airbus fleet 4 100th A319 April 2007 4 1 new A319 added every 12 days since Sep 2003 22 15% annual capacity growth planned Committed aircraft owned / leased at end of financial year 122 137 149 174 Planned seat growth + 15% + 15% + 15% Actual Expected Expected Expected FY 2006 FY 2007 FY 2008 FY 2009 23 Base expansion concentrated in Europe Base 9/06 9/07 Base 9/06 9/07 Gatwick 18 +2 Madrid +4 Luton 17 Belfast 5 Stansted 13 +1 Paris Orly 5 +1 Bristol 9 +1 Basel 4 Berlin 8 Dortmund 4 Liverpool 8 Glasgow 4 Geneva 6 +2 Edinburgh 3 +1 Newcastle 6 +1 E Midlands 3 Malpensa 3 +4 Tactical 6 -2 Total 122 137 24 Revenue growth greatest in continental Europe % of total Growth in revenue by location revenue of route versus prior year Europe – H1 FY 06 + £41m Europe 30% H1 FY 07 + £62m UK – + £17m Europe 55% + £10m UK - £1m Domestic 15% - £1m -£10 £0 £10 £20 £30 £40 £50 £60 £70 25 Madrid base launch & network 4 Madrid base launched Feb 2007 4 4 aircraft 4 18 routes total 4 9 new routes 4 3 domestics 4 6 countries 4 Load factor to date over 80% 4 Complements existing Spanish network 4 72 routes 4 11 airports 4 8m pax last 12m 26 Strategic network development Primary Secondary Tertiary Heartland Increased Frequency London - Geneva - Newcastle - Madrid Lisbon Faro Join the London - London - Bristol - Dots Glasgow Pisa Krakow New Frontier New London - Madrid - Bristol – Airports Zurich Casablanca La Rochelle 4 Balanced network development focusing on each area 27 Network development in the winter schedule 4 16 new routes 4 14 routes culled 4 Frequency increases on 35 routes* 4 Timing improvements on 18 routes * Capacity increases over 15% year on year 28 Improving product attractiveness 4 Product improvements through network development 4Frequency increases e.g. Newcastle - Belfast 4Timing improvements e.g. Berlin - Bristol 4 Speedy boarding introduction 4 High brand awareness 4 60% - 99% brand awareness in core countries 4 Strong customer satisfaction 4 92% of passengers would recommend easyJet* 4 Best Low Cost Airline – Business Traveller Awards 4 8th consecutive year * Source: Dec 2006 Customer Satisfaction Survey, Jan 2007 European Brand Monitor 29 Competitive landscape: competition overlap analysis 70% Monarch Airlines - 12 (# of market pairs overlapping) 60% British Airways - 48 bmi british midland - 11 50% Swiss - 20 bmibaby - 20 How important we are to them 40% Jet2.com - 15 Air Berlin - 22 30% flyglobespan - 4 Air France - 18 Wizz - 5 KLM - 7 Alitalia - 16 How important they are to us Iberia - 17 flybe.
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