EasyJet 2008 Annual Report Download - page 9

easyJet plc
Annual report and accounts 2008
Business review
continued
OverviewDirectors’ reportReport on Directors’ remunerationFinancial informationOther information
07
Focus on margins
easyJet remains focused on margin improvement and, in order to limit
further margin dilution over the winter, has withdrawn several lower
yielding flights in those hours of the day and days of the week where
consumer demand is weak thereby reducing aircraft utilisation
compared to last winter.
A key element of revenue enhancement is the continued development
of easyJet’s ancillary revenue stream. The checked bag charge, introduced
during the year, has quickly become a strong contributor to total revenue.
Speedy Boarding and Speedy Boarding Plus are recognised as valuable
customer offerings generating consistently good revenue. A significant
step in the development of inflight revenues was the transfer of the
service provision to Gate Gourmet at the end of last year. Subsequently,
revenues have improved and the next stage of development, the
introduction of electronic point of sale equipment onboard, will further
enhance the inflight revenue stream. Partner revenues continue to improve
and of particular note this year was the improvement in insurance
revenues following changes such as the introduction of annual, multi-trip,
and one-way policies and enhancement of the website presentation.
The cost environment continued to be challenging with above inflationary
increases in airport charges at Gatwick, Stansted, Paris and Amsterdam.
Despite this, easyJet has delivered an improvement in cost per available
seat kilometre excluding fuel and currency impacts. easyJet’s low cost
and efficient operation is a key competitive advantage and continued
aggressive cost management is vital to easyJet’s future success and thus
easyJet has put in place clear targets for further cost reduction over the
next three years in the areas of ownership, maintenance, crew and fuel
burn. These initiatives are expected to deliver more than £100 million
of savings by 2011. easyJet made 60 head office staff redundant in
September 2008, this and other overhead rationalisation will result
in annual savings of £6 million.
In the past year easyJet has further strengthened its network by the
integration of GB Airways which has given easyJet the leading position
at Gatwick with its large and affluent catchment area. easyJet now has
35 aircraft based at Gatwick.
easyJet’s expansion in mainland Europe in 2008 has been derived
from organic growth with capacity, measured by seats flown, in the year
increasing by 31% focusing on the key markets of France, Italy and Spain.
Network performance
easyJet continues to manage its network performance by optimising
routes, actively managing yields through its proprietary yield management
system and continuing to focus on a broad range of customer groups.
During the year, 24 underperforming routes were closed and it was
announced that Dortmund would be closed as a base in October.
In the UK, the summer performance was pleasing with particular strength
at Gatwick and Newcastle. Yields at Belfast remained challenging, however,
it is pleasing that customers continue to prefer easyJet with load factors
being significantly ahead of the competition on key overlapping routes.
Over the past year, easyJet continued the development of its business
in Italy. 11 aircraft are now based at Milan Malpensa covering a network
of 21 destinations including domestic routes such as Naples, Palermo
and Bari. easyJet has now displaced Alitalia to become the number
one short-haul airline at Malpensa.
In the year, two new bases were opened in France, one at Paris Charles
de Gaulle and one at Lyon. There are now 12 aircraft operating out of
the French bases, further developing market share and consolidating
easyJet’s position as France’s premier low fares carrier.
Performance of the Madrid base has been challenging but has improved
during the year as weaker competitors have started to consolidate
and withdraw capacity.
Switzerland continues to be an important market for easyJet where
it holds the leading position at Basel and Geneva.