EasyJet 2011 Annual Report Download - page 30

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28
Financial review
Continued
easyJet plc
Annual report
and accounts 2011
Strategic
impact Risk description and potential impact
Prevailing
inherent
risktrend Current mitigation
OPERATIONAL EXCELLENCE
Financial impact of mass disruption in peak seasonal
months
A number of factors can lead to widespread disruption to
our network, including epidemics / pandemics, forces of
nature (extreme weather, volcanic ash, etc), acts of
terrorism, union activity and strike action. Any widespread
disruption could adversely effect our reputation, operation
and financial performance.
If the widespread disruption occurred during our peak
summer months then easyJet’s financial results would be
significantly impacted. As load factors are also higher
during this period, it would potentially take longer to recover
from any significant disruption.
p
Processes in place to adapt to widespread disruption.
Afullcrisis management exercise is performed at least
three times a year and a business continuity programme
isin place.
Significant analysis and senior management focus has
resulted in additional crewing solutions being put into place
to further recognise the external factors and volatility that
impact the airline industry.
easyJet has a strong financial balance sheet allowing the
Company to be in a strong position to withstand potential
events that result in periods of reduced revenues.
Single fleet risk
easyJet is dependent on Airbus as its sole supplier
foraircraft, with two aircraft types (A319 and A320).
All Boeing 737’s are planned to be exited by the end of 2012
There are significant cost and efficiency advantages in a
single fleet, however there are two main associated risks:
– Technical or mechanical issues that could ground the full
fleet or part of the fleet which could cause negative
perception by the flying public
– Valuation risks which crystallise on the ownership exit of
the aircraft. The main exposure is with the A319 fleet,
where we are reliant on the future demand for
second-hand aircraft
p
The efficiencies achieved by operating a single fleet type
are believed to outweigh the risks associated with the
Company’s single fleet strategy.
A rigorous established maintenance programme is
followed.
Constant reviews of the second-hand market and
managing exit strategies for the aircraft. easyJet has a
number of different options when looking at exit strategies.
IT system failure
easyJet is dependent on a number of key IT systems and
processes operated at London Luton airport and other key
facilities.
A loss of systems and access to facilities could lead to
significant disruption and have an operational, reputational
and financial impact.
p
A business continuity programme, including disaster
recovery, is in place and will be further developed over the
coming year. This covers alternative sites being available
should there be a need to relocate at short notice due to
loss of facilities.
Dependence on third-party service providers
easyJet has entered into agreements with third-party
service providers for services covering a significant
proportion of its operation and cost base.
Failure to adequately manage third-party performance
would affect our reputation, operation and financial
performance. Loss of these contracts, inability to renew or
negotiate favourable replacement contracts could have a
material adverse effect on future operating costs.
i
Processes are in place to manage third-party service
provider performance.
Centralised procurement department that negotiates key
contracts.
Most developed markets have suitable alternative service
providers.
Industrial action
Large parts of the easyJet workforce are unionised. Similar
issues exist at our key third-party service providers. If any
action was taken this could impact on easyJet’s ability to
maintain its flight schedule.
This could adversely effect our reputation, operation and
financial performance.
p
Employee and union engagement takes place on a regular
basis.
Significant analysis and senior management focus has
resulted in additional crewing solutions being put into place
that recognises the external factors and volatility that
impact the airline industry.