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24 Financial risk and capital management (continued)
Market risk sensitivity analysis (continued)
The interest rate analysis assumes a 1% change in interest rates over the reporting year applied to end of year financial instruments.
Currency rates Interest rates Fuel price
US dollar +10% US dollar –10% Euro +10% Euro –10% 1% increase 10% increase
At 30 September 2008 £million £million £million £million £million £million
Income statement impact: gain/(loss) (3.6) 2.9 2.3 (1.9) 2.4 –
Impact on shareholders’ funds: increase/(decrease) 86.8 (70.5) (27.1) 22.1 – 27.6
Currency rates Interest rates Fuel price
US dollar +10% US dollar –10% Euro +10% Euro –10% 1% increase 10% increase
At 30 September 2007 £million £million £million £million £million £million
Income statement impact: gain/(loss) 6.3 (5.2) 2.4 (2.4) 3.4 –
Impact on shareholders’ funds: increase/(decrease) 62.9 (54.0) – – – 9.4
The impact of a 1% increase in interest rates and a 10% increase in the fuel price is disclosed above. A corresponding decrease in each of the rates results
in an equal and opposite impact on the income statement and shareholders’ funds in both reporting periods.
Capital management
The objective of capital management is to ensure that easyJet is able to continue as a going concern whilst delivering shareholder expectations of a strong
capital base as well as returning benefits for other stakeholders and optimising the cost of capital.
easyJet manages its capital structure in response to changes in both economic conditions and strategic objectives. The cash and net debt position together
with the maturity profile of existing debt is monitored to ensure the continuity of funding. During the year, a major aircraft financing programme was put in
place though a number of bi-lateral facilities totalling $937 million.
The principal measure used by easyJet to manage capital risk is the gearing ratio of debt (debt plus seven times aircraft operating lease payments less cash,
including money market deposits and restricted cash) to shareholders’ funds. Gearing increased in the year from 20.4% to 28.8%. Cash was used to purchase
GB Airways and the acquisition resulted in taking on additional borrowings related to owned aircraft and additional lease costs. A strengthening US dollar in
the year also contributed to increased indebtedness and lease costs.
25 Leasing commitments
Commitments under operating leases
Land and buildings Aircraft
2008 2007 2008 2007
£million £million £million £million
Total commitments under non-cancellable operating leases due:
Within one year 2.5 1.5 118.2 109.3
Greater than one and less than five years 4.4 3.8 267.7 305.9
After five years 4.1 4.9 72.8 100.7
11.0 10.2 458.7 515.9
easyJet holds 84 aircraft (2007: 76 aircraft) under operating leases, with initial lease terms ranging from seven to ten years. At 30 September 2008,
approximately 60% (2007: 54%) of lease payments were based on fixed interest rates and 40% (2007: 46%) on floating interest rates. 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 the critical accounting policies section of note 1.
easyJet plc
Annual report and accounts 2008
Notes to the
financial statements
continued
74