EasyJet 2013 Annual Report Download

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Annual report and accounts 2013

Table of contents

  • Page 1
    Annual report and accounts 2013

  • Page 2
    STRATEGIC REPORT Our business model easyJet at a glance Our journey so far Chairman's statement Chief Executive's review Financial performance Market overview Strategic progress Looking forward Our strategy in action Key performance indicators Financial review and risk Corporate responsibility 2 4 6...

  • Page 3
    ... market leading returns to our shareholders through maintaining a leading European network at primary airports with a clear focus on making travel easy and affordable for our customers. Delivering a friendly and efficient service, at a low cost, will see us realise our vision. Strategic report...

  • Page 4
    Strategic report Our business model How we Drive Growth and returns WHAT WE DO WE ARE A LOW-COST EUROPEAN POINTTO-POINT SHORT-HAUL AIRLINE We use our cost advantage and number 1 and number 2 network positions in strong markets to deliver point-to-point low fares and operational efficiency, with ...

  • Page 5
    ... business model makes travel easy and affordable and drives growth and returns for shareholders. Strategic report HOW WE DO IT OUR FIVE DRIVERS CAPITAL DISCIPLINE COMPELLING NETWORK CULTURE, PEOPLE AND PLATFORM Our people are passionate and friendly. We strive for simple systems and processes...

  • Page 6
    Strategic report easyJet at a glance Where we are now WE CONTINUE TO GROW OUR SEATS AND PASSENGERS We continue to grow our capacity and improve load factor, increasing the number of people ï¬,ying with us by 4.0% in 2013. OUR NETWORK IS TRULY EUROPEAN We have increased the number of routes offered...

  • Page 7
    ... EUROPE Strategic report UK London Gatwick Bristol London Luton Manchester Liverpool Edinburgh London Stansted Belfast Glasgow London Southend Newcastle Other 102 44 38 33 33 31 29 24 15 15 14 1 GERMANY Berlin Other 41 20 Italy Milan Malpensa Rome Fiumicino Sardinia Venice 59 42 2 Naples Sicily...

  • Page 8
    ... a year later. The second base opens in Liverpool with ï¬,ights to Amsterdam. '00 '95 easyJet launches its inaugural ï¬,ights from London Luton to Glasgow and Edinburgh with fares starting at £29 one way. easyJet ï¬,oats on the London Stock Exchange at an offer price of 310p valuing the Company at...

  • Page 9
    ... from London Gatwick, its largest base. easyJet is awarded the rights to ï¬,y between Moscow and London. Strategic report 20 easyJet opens its 20th base >50% of passengers originate from outside the UK 135 new aircraft ordered '11 easyJet announces 2 new bases in France at Nice and Toulouse...

  • Page 10
    ... performance of the business in the year, and a special dividend of 44.1 pence per share. Thus the Board is proposing to return £308 million to shareholders, an increase of 262% over the dividend paid last year. John Barton Non-Executive Chairman 8 easyJet plc Annual report and accounts 2013

  • Page 11
    ... revenue without impacting on-time performance or unit costs; • returns focused changes to the easyJet network including the reallocation of the eight Madrid based aircraft to bases and routes with the potential to drive higher returns including Edinburgh, Manchester, London Gatwick, Geneva...

  • Page 12
    Strategic report Chief Executive's review continued has recently acquired the remaining stake in Vueling. The majority of these initiatives are at the early stages of development with lower levels of customer awareness of the new low-cost brands. As these transformations progress, there is a trend ...

  • Page 13
    ..., with a new set of rules expected next year. easyJet believes in the importance of providing passengers with the right level of protection, but also the protection passengers value and want to pay for. The airports easyJet ï¬,ies to are central to its business model. easyJet's network focuses on...

  • Page 14
    ... and ï¬,exible growth. In July 2013, following an 18 month process, easyJet's shareholders approved new ï¬,eet arrangements with Airbus which provide the platform (2) Source: Market share figures from OAG. Size of European market based on internal easyJet definition. Historical data based on 12...

  • Page 15
    ... is in a strong position to drive returns when the new Berlin airport eventually opens. From March 2014, easyJet will open its 23rd base in Hamburg and by basing aircraft in the two largest German cities will further grow and secure its position in the country. Portugal/Spain easyJet is the third...

  • Page 16
    ... working with pilots, cabin crew and ground handling partners to review all policies and procedures associated with turning round an aircraft and unnecessary processes were removed and operations streamlined. As a consequence, easyJet maintained its industry leading levels of on-time performance...

  • Page 17
    ... markets to improve returns. easyJet's total ï¬,eet as at 30 September 2013 comprised 217 aircraft, split between 156 seat Airbus A319s and 180 seat A320s. During the year, easyJet took delivery of ten A320 aircraft under the terms of the current generation Airbus agreement and seven A319 aircraft...

  • Page 18
    ... only through indirect channels. easyJet has in excess of ten million business passengers(10) travelling on a rolling 12 month basis and has increased its share of the business travel market by 4%(11). £62.58 revenue per seat (2012: £58.51) 16 easyJet plc Annual report and accounts 2013

  • Page 19
    ...2014. The ordinary and special dividends will be paid on 21 March 2014 to shareholders on the register at close of business on 28 February 2014. (10) Source: internal easyJet definition based on booking algorithm. (11) Source: Business travel market share from PhoCusWright report. www.easyJet.com...

  • Page 20
    ... per seat increase will principally be driven by charges at regulated airports and the increased maintenance costs associated with the ï¬,eet ageing in the transition to the new generation of Airbus aircraft arriving in the ï¬,eet. Carolyn McCall OBE Chief Executive 18 easyJet plc Annual report...

  • Page 21
    ... OUR GOAL A clear strategy which makes travel easy and affordable and drives growth and returns for shareholders. BUILD STRONG NUMBER 1 AND 2 NETWORK POSITIONS MAINTAIN COST ADVANTAGE DRIVE DEMAND, CONVERSION AND YIELDS ACROSS EUROPE DISCIPLINED USE OF CAPITAL Strategic report www.easyJet.com 19

  • Page 22
    Strategic report Our strategy in action continued BUILD STRONG NUMBER 1 AND 2 NETWORK POSITIONS 13 aircraft based in Geneva 20 easyJet plc Annual report and accounts 2013

  • Page 23
    ... London Gatwick, Geneva, Milan Malpensa, Paris Charles de Gaulle, Paris Orly and Berlin Schönefeld. One example of how easyJet has built a strong network position in an attractive market is Geneva where the base was opened in 1999. easyJet's capacity at Geneva has increased from 4 million seats...

  • Page 24
    Strategic report Our strategy in action continued MAINTAIN COST ADVANTAGE 7%-8% cost per seat savings between a current generation A319 and a current generation A320 aircraft 22 easyJet plc Annual report and accounts 2013

  • Page 25
    ... to secure a further 4% to 5% cost per seat saving. The new ï¬,eet arrangements will help easyJet maintain its cost advantage, which is one of the critical factors in its future success and will enable easyJet to continue its successful strategy of offering customers low fares to convenient airports...

  • Page 26
    Strategic report Our strategy in action continued DRIVE DEMAND, CONVERSION AND YIELDS ACROSS EUROPE 5% improvement in passengers' boarding experience 24 easyJet plc Annual report and accounts 2013

  • Page 27
    ... currency increase in revenue per seat. In addition, easyJet now appeals to a broader range of passengers, such as retirees and business passengers, who value the certainty of an allocated seat. Strategic report November 2012 allocated seating rolled out across the entire network www.easyJet.com...

  • Page 28
    Strategic report Our strategy in action continued DISCIPLINED USE OF CAPITAL 33.5 pence per share proposed ordinary dividend (2012: 21.5 pence per share) 26 easyJet plc Annual report and accounts 2013

  • Page 29
    ...gearing and the highest profit after tax in the Company's history. Following the payment of these dividends, easyJet will have returned £589 million to shareholders since its maiden dividend in 2011. Strategic report 44.1 pence per share proposed special dividend (2012: nil) www.easyJet.com 27

  • Page 30
    Strategic report Key performance indicators SAFETY FIRST No compromise on safety We will never compromise our commitment to safety, which is always the first priority for our people. Composite risk value (CRV) index 1.2 0.9 0.6 0.3 Sep Nov Jan Mar May 09 09 10 10 10 Jul Sep Nov Jan Mar May ...

  • Page 31
    ... 11 12 13 A A London Gatwick B Geneva C Milan Malpensa B C D E D Lisbon E Paris CDG FINANCIALLY STRONG We are committed to improving shareholder returns whilst remaining prudently financed with a strong, liquid balance sheet. Revenue per seat Cost per seat excluding fuel Profit before...

  • Page 32
    ... after tax was £398 million, an increase of 56.1% from £255 million last year. Chris Kennedy Chief Financial Officer Financial performance per seat 2013 £ million £ per seat Pence per ASK £ million £ per seat 2012 Pence per ASK Total revenue Costs excluding fuel Fuel Profit before tax Tax...

  • Page 33
    ...year, the Board is additionally proposing to pay a special dividend of £175 million (44.1 pence per share). The ordinary and special dividends are subject to shareholder approval at the Company's Annual General Meeting on 13 February 2014. Return on capital employed and capital structure 2013 2012...

  • Page 34
    ... EXCHANGE RATES The proportion of revenue and costs denominated in currencies other than sterling was little changed year on year. The slight reduction in revenues denominated in euros was the result of improved yields earned across the UK. Revenue 2013 2012 2013 Costs 2012 Sterling Euro US dollar...

  • Page 35
    ... ï¬,eet order to acquire new generation A320neo aircraft, due for delivery from 2017. Other costs have increased by 8.5% to £3.31 per seat, mainly as a result of an increase in those performance-related employee costs which are based on either return on capital employed or total shareholder return...

  • Page 36
    ...of 12 new A320 aircraft and 12 mid-life A319 aircraft. Seven A319 aircraft were returned to lessors, so overall the number of leased aircraft increased by 17 to 72. Leased aircraft represent 33% of the ï¬,eet at year end, which allows easyJet to eliminate their future residual value risk and provide...

  • Page 37
    ... FINANCIAL POSITION Summary consolidated statement of cash ï¬,ows 2013 £ million 2012 £ million Change £ million Strategic report Net cash generated from operating activities (excluding dividends) Ordinary dividend paid Special dividend paid Net capital expenditure Net loan and lease finance...

  • Page 38
    ... to affect its future development and performance, are described in this strategic report on pages 2 to 57. Principal risks and uncertainties are described on pages 38 to 43. Note 22 to the accounts sets out the Group's objectives, policies and procedures for managing its capital and gives details...

  • Page 39
    KEY STATISTICS Operational measures 2013 2012 Change Strategic report Seats ï¬,own (millions) Passengers (millions) Load factor Available seat kilometres (ASK) (millions) Revenue passenger kilometres (RPK) (millions) Average sector length (kilometres) Sectors Block hours Number of aircraft owned/...

  • Page 40
    ...easyJet's safety processes and systems; • a Safety Review Board (at Executive Management Team level) responsible for directing overall safety policy and governance; • airline and departmental Safety Action Groups responsible for the identification, evaluation and control of safety-related risks...

  • Page 41
    ...exposure at this time is with the ageing A319 ï¬,eet, where easyJet is reliant on the future demand for second-hand aircraft. 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...

  • Page 42
    Strategic report Financial review and risk continued OPERATIONAL RISKS CONTINUED Risk description and potential impact Current mitigation Scalability and ï¬,exibility of key IT systems The rapid growth of easyJet over recent years, through the introduction of new sales channels and initiatives, ...

  • Page 43
    ... impact Current mitigation Strategic report Asset allocation easyJet has a leading presence on the top 100 routes in Europe and positions at primary airports that are attractive to time sensitive consumers. easyJet manages the performance of its network by careful allocation of aircraft to...

  • Page 44
    ..., report and ensure appropriate management of security incidents; • systems which are secured and monitored against unauthorised access; • quarterly review of the security of internal systems and easyJet.com through penetration testing; • pre-employment screening checks performed for all new...

  • Page 45
    ... new policies, including an anti-bribery and corruption policy; • development of an online training module and mandatory training for all managers and administrative employees in the UK and across the easyJet network; • targeted face-to-face training for employee groups perceived as higher risk...

  • Page 46
    ... performance in our key CR areas. These are safety, our people, our customers, the environment and the community. Further details in relation to each of these areas can be found on our web site at http://corporate.easyjet.com/sustainability. Carolyn McCall OBE Chief Executive As the UK's largest...

  • Page 47
    ... are responsible for all aspects of safety delivery, including compliance obligations under the Air Operator's Certificate (AOC). The AOC Accountable Manager is Carolyn McCall and she chairs the Company's Safety Review Board which meets monthly to assess reports from the Safety Action Groups across...

  • Page 48
    ... fatigue and alertness measures. The results of this ground breaking research will help inform easyJet's future rostering strategies and ensure measures are in place to mitigate against fatigue risk as the network and operations evolve and develop. 46 easyJet plc Annual report and accounts 2013

  • Page 49
    ...our people strategy. HR service delivery We successfully transferred 237 of our people from Madrid to 17 bases around our network and are delighted that 195 of these employees remain with us 10 months later. This year we have recruited a total number of 989 cabin crew, 98 cabin managers, 160 cadets...

  • Page 50
    ... 40,333 km 1,667 km 711 km Our fundraising target was £20,000 and we were pleased to beat it and raised £21,863, which is enough to buy 54,872 vaccines. So not only did our people get fitter and have some fun but we helped UNICEF save some lives. 48 easyJet plc Annual report and accounts 2013

  • Page 51
    ... a new commercial awareness programme which helps our people understand how we drive commercial success and the associated impact of their role; we have launched a new online learning management system which has opened up learning and development to all of our people across the network (currently we...

  • Page 52
    Strategic report Corporate responsibility continued Talent and succession planning This year we held our first succession review and we are confident that this will support us going forward and become a key people process that is part of our way of life at easyJet. In support of developing our ...

  • Page 53
    ... of the Company, senior managers and other employees as at 30 September 2013, is set out below. Our gender diversity throughout the Group remains strong, especially at the senior level. Out of two current Executive Directors, our Chief Executive is female. We are continuing to work towards improving...

  • Page 54
    ...11 12 13 Projection of CO2 Emissions from UK Aviation easyJet was among the first supporters of aviation's entry into the European Union's Emission Trading System (ETS), an important step to ensuring that aviation is helping to tackle climate change. The Company is disappointed that the scope of...

  • Page 55
    Strategic report savings in fuel consumption expected from new generation A320neo aircraft 13%-15% REDUCING OUR CARBON EMISSIONS In July 2013, easyJet confirmed an order for 100 new generation Airbus A320neo aircraft for delivery from 2017 to 2022 and has taken purchase rights on a further 100 ...

  • Page 56
    ...time performance and boarding the plane. The introduction of allocated seating in November 2012 increased satisfaction with boarding the plane with easyJet being recognised by the Family and Parenting Institute with their 'Family friendly award 2013'. 54 easyJet plc Annual report and accounts 2013

  • Page 57
    ... as allocated seating, online check-in, the easyJet app, and discussed important themes such as eAccessbility, boarding processes, airport services and in-ï¬,ight requirements. An important addition to the group has been representatives from easyJet's legal and operations units. With the help of the...

  • Page 58
    Strategic report Corporate responsibility continued COMMUNITY AND CHARITABLE ACTIVITIES easyJet undertakes a number of community activities. These are focused on supporting the local communities where the Company is based as well as harnessing the fundraising power of employees and customers. To ...

  • Page 59
    ... of 2013, a group of easyJet staff including pilots and cabin crew travelled to Ghana, West Africa, to see how money raised through customer donations is being used to help children in the region. The team visited the rural districts of Northern Ghana to see how UNICEF delivers life-saving vaccines...

  • Page 60
    ...of easyJet's "back to the shop ï¬,oor" programme, which has allowed me to spend time within the operational environment seeing the commitment given every day by our pilots, cabin crew, maintenance, base staff and others to deliver the easyJet service. 58 easyJet plc Annual report and accounts 2013

  • Page 61
    ...detail on the operation of the new Fleet Oversight and Governance Committee and the Safety Committee can be found in the corporate governance report. During the year, the Board also continued its programme of visiting its overseas bases and meeting local management. Board members undertook a trip to...

  • Page 62
    ... Ltd. David has had a long career in the financial services sector and was both Group Finance Director and Group Chief Executive of Alliance & Leicester plc until its sale to Santander in 2008. David has also held a number of senior positions in 60 easyJet plc Annual report and accounts 2013

  • Page 63
    ...is also the author of books on aviation economics and management. 10. Andy Martin Independent Non-Executive Director Andy (1960) was appointed to the Board of easyJet on 1 September 2011. He is currently Group Chief Operating Officer-Europe, UK and Japan for Compass Group PLC. Prior to joining the...

  • Page 64
    ... Management Team Executive management team 1. 2. 1. Alita Benson Group People Director Alita (1967) joined easyJet in February 2011 as Head of HR Central Services and in June 2011 was appointed as Group People Director. Before joining easyJet, Alita was Head of HR Business Partners at T-Mobile...

  • Page 65
    ...of Network Development. In April 2011, she was appointed as Customer and Revenue Director, and to Group Commercial Director in April 2012. Cath spent 12 years in retail for J Sainsbury before joining Go where she was part of the management buy-out team and headed up cabin services, ground operations...

  • Page 66
    ... responsibility rests with the Executive Management Team, listed on pages 62 and 63. These ten individuals also make up the Executive Directors and the Company Secretary of the main operating company, easyJet Airline Company Limited. The Directors' attendance record at the scheduled Board meetings...

  • Page 67
    ..., knowledge and familiarity with the Company, visits to network bases are organised for the Board periodically to assist their understanding of the operational issues that the business faces; the Board visited Charles de Gaulle Airport, Paris in November 2012. The Board is also regularly kept up to...

  • Page 68
    ... of the Company's annual safety plan. The Committee also examines specific safety issues as requested by the Board. Where appropriate, the Committee reviews relevant reports published by the UK Air Accident Investigation Branch (AAIB), major incidents that have affected other operators, and other...

  • Page 69
    ..., http://corporate.easyJet.com. On joining the Board, new members receive a full and tailored induction. Following this induction, meetings are arranged with key executives and managers within the business to provide ongoing education and information about the business. Shareholders are offered the...

  • Page 70
    ...m tio en n t Ri sk Pr io STRATEGIC RISK ASSESSMENT FUNCTIONAL RISK ASSESSMENT COUNTRY / BASE RISK ASSESSMENT KEY PROJECT / PROGRAMME RISK ASSESSMENT KEY SUPPLIER RISK ASSESSMENT STRATEGIC OPERATIONAL Sponsorship and risk appetite assessment 68 easyJet plc Annual report and accounts 2013

  • Page 71
    ... of the Company's safety processes and systems; • regular commercial, financial and IT functional meetings are held to review performance and to consider key issues and risks; • the Executive Management Team meets regularly to consider significant risks and overall business performance; and...

  • Page 72
    ... recommendations of other corporate governance organisations, and believe that the revised Code allows the Audit Committee at easyJet to further strengthen its role as a key independent oversight Committee which has also added value to the Group. 70 easyJet plc Annual report and accounts 2013

  • Page 73
    ... Board has fulfilled its obligations under the Code. The Audit Committee continues to be responsible for reviewing the adequacy and effectiveness of the Company's on-going risk management systems and processes. easyJet's system of internal controls, along with its design and operating effectiveness...

  • Page 74
    ... the current senior statutory auditor. There are no contractual obligations that restrict the choice of external auditors. Non-audit services The Audit Committee's terms of reference set out that they are responsible for the formal policy on the award of non-audit work to the auditors. In order to...

  • Page 75
    ...tax value of shares after vesting. Aligning remuneration policy with Company principles Simple and cost effective approach - In line with our low cost and efficient business model, the Committee has chosen to set a simple pay package against the market. For example, our Executive Directors receive...

  • Page 76
    ...setting remuneration? When setting the policy for Executive Directors' remuneration, the Committee takes into account total remuneration levels operating in companies of a similar size and complexity, the responsibilities of each individual role, individual performance and an individual's experience...

  • Page 77
    ... of the Group. Salary levels for current incumbents for the 2014 financial year are as follows: • Chief Executive: £681,600. • Chief Financial Officer: £420,250. Benefits In line with the Company's strategy to keep remuneration simple and consistent. Executive Directors receive modest...

  • Page 78
    ... time of vesting and may assume the reinvestment of dividends. Matching Share Awards vest based on three year performance against a challenging range of financial targets and relative Total Shareholder Return (TSR) performance set and assessed by the Committee in its discretion. Financial targets...

  • Page 79
    ... and Share Incentive Plan will be as permitted under HMRC rules and the Listing Rules. Details of share awards granted to existing Executive Directors are set out on page 85 of the Annual Report on Remuneration. These remain eligible to vest based on their original award terms. www.easyJet.com 77

  • Page 80
    ... performance measure), have different award levels and may be earned in line with the terms of their grant in due course. Details of all the outstanding share awards granted to existing Executive Directors are set out in the Annual Report on Remuneration. 78 easyJet plc Annual report and accounts...

  • Page 81
    ...% Fixed pay Annual bonus LTIP (Performance and Matching Shares) If the Executive Director ceases to be an employee or Director of easyJet as a result of death, injury, retirement, the sale of the business or company that employs the individual or any other reason at the discretion of the Committee...

  • Page 82
    ...' remuneration report continued What would the remuneration policy be if a new Director was appointed? Base salary levels will be set in accordance with easyJet's remuneration policy, taking into account the experience and calibre of the individual (e.g. typically up to median market levels but...

  • Page 83
    ... in executive pay and on the operation of easyJet's incentive plans. The total fees paid to NBS in respect of service to the Committee during the year were £143,000. NBS is a signatory to the Remuneration Consultants' Code of Conduct. Aon plc also assisted easyJet with operating an employee...

  • Page 84
    .... The Executive Directors have confirmed that they will retain the after tax value of shares for a minimum of six months from the vesting of this award. These targets will require management to deliver strong, sustainable performance over the period. 82 easyJet plc Annual report and accounts 2013

  • Page 85
    ...77 10,907 1 Appointed to the Board on 1 May 2013 2 Retired from the Board on 1 May 2013 3 Benefits relates to the cost to the Company of personal accident and life assurance cover and the value of free and matching shares during the year under the Company's Share Incentive Plan. 4 One third of the...

  • Page 86
    ...Face value calculated based on the grant date share price of 737p on 18 December 2012. 2 Performance conditions are set out on pages 76 and 77. 3 Matching awards are granted over an equal number of shares as the Executive Directors voluntarily defer bonus (pre-tax). 4 ROCE (including operating lease...

  • Page 87
    ...Award 1 (up to 100% of salary) Award 2 (over 100% of salary) 9.0% 11.0% Target (50% vesting) 12.0% 13.0% Maximum (100% vesting) 15.0% 15.0% D Share Incentive Plan - Matching Shares E Save As You Earn Awards (SAYE) As disclosed in last year's remuneration report, ROE in the year to 30 September 2012...

  • Page 88
    ... subject to performance. Note: Changes to the position above since 30 September 2013 can be found at our corporate website, http://corporate.easyjet.com Executive Directors are deemed to be interested in the unvested shares held by the easyJet Share Incentive Plan and the easyJet plc Employee Bene...

  • Page 89
    ... 2013 1 March 2012 1 September 2011 - - 2 years 7 months 9 months 11 months 1 year 2 years 11 months 1 year 2 months 1 year 5 months 11 months Review of past performance The chart below, sets out the total shareholder return performance of the Company relative to the FTSE 250, FTSE 100 and a group...

  • Page 90
    ...share price for the three months to 30 September 2013) an increase of 292% on the share price at grant of £3.379. How does the change in CEO pay for the year compare to that for easyJet employees? The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned...

  • Page 91
    ...://corporate.easyjet.com/investors. Registered office Hangar 89 London Luton Airport Luton Bedfordshire LU2 9PF Company registrar Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA Employee share schemes - rights of control The trustee of the easyJet UK Share Incentive Plan...

  • Page 92
    ... that information. The Annual Report on pages 1 to 90 was approved by the Board of Directors and authorised for issue on 18 November 2013 and signed on behalf of the Board by: Carolyn McCall OBE Chief Executive Chris Kennedy Chief Financial Officer 90 easyJet plc Annual report and accounts 2013

  • Page 93
    ...view, warranted reporting for qualitative reasons. What we have audited The Group accounts and Company accounts (the "accounts"), which are prepared by easyJet plc, comprise: • the Group consolidated and Company statements of financial position as at 30 September 2013; • the Group consolidated...

  • Page 94
    ... Strategic Report and the Directors' Report for the financial year for which the accounts are prepared is consistent with the accounts; and • the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. 92 easyJet plc Annual...

  • Page 95
    ... the Annual Report taken as a whole to be fair, balanced and understandable and provides the information necessary for members to assess the Group's performance, business model and strategy. On page 71, as required by C3.8 of the Code, the Audit Committee has set out the significant issues that...

  • Page 96
    ... Consolidated income statement Notes

  • Page 97
    ... Consolidated statement of comprehensive income Accounts & other information $FFRXQWV RWKHULQIRUPDWLRQ Notes

  • Page 98
    ...237) 1,794 108 656 42 1 987 1,794 The accounts on pages 94 to 125 were approved by the Board of Directors and authorised for issue on 18 November 2013 and signed on behalf of the Board. &DURO\Q0F&DOO2%( #HQDBSNQ  &KULV.HQQHG\ #HQDBSNQ  96 easyJet plc Annual report and accounts 2013

  • Page 99
    ... capital £ million Share premium £ million Hedging reserve £ million Translation reserve £ million Retained earnings £ million Total £ million At 1 October 2011 Total comprehensive income Dividends paid Share incentive schemes Proceeds from shares issued Value of employee...

  • Page 100
    ... proceeds from issue of ordinary share capital Purchase of own shares for employee share schemes Repayment of bank loans Repayment of capital elements of finance leases Net proceeds from sale and operating leaseback of aircraft Net decrease in money market deposits Decrease/(increase) in restricted...

  • Page 101
    ... value. The accounting policies set out below have been applied consistently to all years presented in these accounts. easyJet's business activities, together with factors likely to affect its future development and performance, are described in the strategic report on pages 2 to 57. Principal risks...

  • Page 102
    ...The bases of all estimates are reviewed annually, and also when information becomes available that is capable of causing a material change to an estimate, such as renegotiation of end of lease return conditions, increased or decreased utilisation, or changes in the cost of heavy maintenance services...

  • Page 103
    ... write off their cost, less estimated residual value, on a straight line basis over their expected useful lives. Expected useful lives and residual values are reviewed annually. Expected useful life Computer software Contractual rights 3 years Over the length of the related contracts /QNODQSX OK...

  • Page 104
    ... value. Derivative financial instruments designated as cash flow hedges are used to mitigate operating and investing transaction exposures to movements in jet fuel prices and currency exchange rates. Hedge accounting is applied to these instruments.  102 easyJet plc Annual report and accounts...

  • Page 105
    ... leased aircraft is described in the accounting policy for property, plant and equipment. easyJet has contractual obligations to maintain aircraft held under operating leases. Provisions are created over the term of the lease based on the estimated future costs of major airframe checks, engine...

  • Page 106
    ...) for awards based on total shareholder return (TSR) performance targets. The fair value of all other awards is the share price at the date of grant. The fair value of the estimated number of options and awards that are expected to vest is expensed to the income statement on a straight line basis...

  • Page 107
    ... held under finance leases Operating lease rentals Aircraft Other assets 90 7 89 5 TCHSNQR²QDLTMDQ@SHNM During the year easyJet obtained the following services from easyJet's auditors and their associates (including foreign partners):  Â...PLOOLRQ 2012 £ million Group audit fee Fees...

  • Page 108
    ... of the Executive Management Team are easyJet's key management as they have collective authority and responsibility for planning, directing and controlling the business. Emoluments paid or payable to the Directors of easyJet plc were:  Â...PLOOLRQ 2012 £ million Remuneration Gains made on...

  • Page 109
    ... is a credit to the income statement tax charge and so lowering the overall effective tax rate to 17% (2012: 20%). 1DBNMBHKH@SHNMNESGDSNS@KS@WBG@QFD The tax for the year is lower than the standard rate of corporation tax in the UK as set out below:  Â...PLOOLRQ 2012 £ million Profit on...

  • Page 110
    ... million (2012: £14 million). No deferred tax liability has been recognised on the unremitted earnings of overseas subsidiaries as no tax is expected to be payable in the foreseeable future based on the current repatriation policy of easyJet.  108 easyJet plc Annual report and accounts 2013

  • Page 111
    ...to exchange those landing rights during the coming financial year, further consideration totalling £13 million will become payable. As these obligations had not been met at 30 September 2013, this amount has not been recognised as a liability in the statement of financial position. www.easyJet.com...

  • Page 112
    ... been derived from the strategic plan approved by the Board for the period up to 2018, using the following key assumptions: Pre-tax discount rate (derived from weighted average cost of capital) Fuel price (US dollars per metric tonne) Exchange rates: US dollar euro Swiss franc 10.2%-10.5% 1,100 1.55...

  • Page 113
    ...lenders as loan security. Aircraft with a net book value of £147 million (2012: £154 million) are held under finance leases. easyJet is contractually committed to the acquisition of 144 (2012: 18) Airbus A320 family aircraft, with a total list price of US$12.4 billion (2012: US$1.0 billion) before...

  • Page 114
    ...from trade receivables are short-term in nature and largely comprise credit card receivables due from financial institutions with credit ratings of at least A and, accordingly, the possibility of significant default is considered to be unlikely.  112 easyJet plc Annual report and accounts 2013

  • Page 115
    ... Payment card acquiring Aircraft operating lease deposits Other 130 25 4 159  7UDGHDQGRWKHUSD\DEOHV  Â...PLOOLRQ 2012 £ million Trade payables Unearned revenue Accruals Leased aircraft - surplus on sale and leaseback Other taxes and social security Other payables 109 496 327...

  • Page 116
    ... was no change in the total value of the Company's issued share capital. The weighted average share price for options exercised during the year was £10.57 (2012: £4.57). easyJet's employee benefit trusts hold the following unvested shares. The cost of these has been deducted from retained earnings...

  • Page 117
    ...number of awards exercisable at each year end and their weighted average exercise price is as follows: Price £  2012  Number million 2012 Discretionary schemes Long Term Incentive Plan Sharesave Share Incentive Plan 2.11 - 2.43 - 1.6 0.3 0.2 0.8 2.9 www.easyJet.com www.easyJet...

  • Page 118
    ... to dividends and to vote at shareholder meetings. Employees on the Swiss payroll may save under similar terms and conditions, albeit without tax benefits. Subject to company performance, easyJet also issues free shares under the new approved share incentive plan of up to £3,000 in value. There...

  • Page 119
    ... 2009 and 5 July 2010 31 March 2011 4 January 2012 18 December 2012 - ROCE 18 December 2012 - TSR 6KDUHVDYH 1 July 2011 1 July 2012 1 July 2013 Share price £ Exercise price £ Expected volatility % Option life years Risk-free interest rate % Fair value £ 3.80 1.81 2.88 3.49 3.41 3.92...

  • Page 120
    ... to the accounts continued  5HFRQFLOLDWLRQRIQHWFDVKIORZWRPRYHPHQWLQQHW GHEW IXQGV 1 October 2012 £ million Exchange differences £ million Loan issue costs £ million Net cash flow £ million 6HSWHPEHU  Â...PLOOLRQ Cash and cash equivalents Money market deposits 645 238...

  • Page 121
    ... period in which the hedged item affects the income statement. easyJet uses forward contracts to hedge US dollar transaction currency risk (comprising fuel, leasing and maintenance payments), jet fuel price risk and euro and Swiss franc revenues. Where these hedges are assessed as highly effective...

  • Page 122
    ... exchange contracts. Net US dollar monetary liabilities were as follows: 2012 $ million Cash and money market deposits Borrowings Maintenance provisions Other Net monetary liabilities Forward US dollar contracts 619 (1,245) (280) 39 (867) 850 (17)  120 easyJet plc Annual report and accounts...

  • Page 123
    ... lease costs Operating profit - adjusted Operating profit after tax - adjusted Return on capital employed 1,794 957 (883) 1,868 665 2,533 331 32 363 276 11.3% The percentage of operating leased aircrafts at 30 September 2013 was 33% (2012: 26%). Board policy is to hold around 30% of the fleet...

  • Page 124
    ...close of business on 30 September each year. "QDCHSQHRJL@M@FDLDMS easyJet is exposed to credit risk arising from cash and money market deposits, derivative financial instruments and trade and other receivables. Credit risk management aims to reduce the risk of default by setting limits on credit...

  • Page 125
    ... reflected in the medium term profile of easyJet's borrowings and operating leases. As at 30 September 2013, the Company had 78 (2012: 69) unencumbered aircraft. %TDKOQHBDQHRJL@M@FDLDMS easyJet is exposed to fuel price risk. The objective of the fuel price risk management policy is to provide...

  • Page 126
    ... 35 (1) - - 111 The market risk sensitivity analysis has been calculated based on spot rates for the US dollar, euro and jet fuel at close of business on 30 September each year.  /HDVLQJFRPPLWPHQWV Commitments under operating leases  Â...PLOOLRQ Aircraft 2012 £ million  Â...PLOOLRQ...

  • Page 127
    ... a beneficial interest and holds 25.91% of the issued share capital of the Company. Under the Amended Brand Licence signed in October 2010, an annual royalty of 0.25% of total revenue is payable for a minimum term of ten years. The full term of agreement is 50 years. A new brand protection protocol...

  • Page 128
    ... earnings 108 656 380 1,144 The accounts on pages 126 to 130 were approved by the Board of Directors and authorised for issue on 18 November 2013 and signed on behalf of the Board. &DURO\Q0F&DOO2%( #HQDBSNQ  &KULV.HQQHG\ #HQDBSNQ  126 easyJet plc Annual report and accounts 2013

  • Page 129
    ... Company statement of changes in equity Accounts & other information $FFRXQWV RWKHULQIRUPDWLRQ 6KDUH FDSLWDO Â...PLOOLRQ 6KDUH SUHPLXP Â...PLOOLRQ 5HWDLQHG HDUQLQJV Â...PLOOLRQ 7RWDO Â...PLOOLRQ At 1 October 2012 Total comprehensive income Profit for the year Dividends paid Share...

  • Page 130
    ... &DVKIORZVIURPLQYHVWLQJDFWLYLWLHV Capital distributions &DVKIORZVIURPILQDQFLQJDFWLYLWLHV Net proceeds from issue of ordinary share capital &DVKDQGFDVKHTXLYDOHQWVDWEHJLQQLQJDQGHQGRI\HDU c 54 10 130 (196) - (2) - 2 -  128 easyJet plc Annual report and accounts 2013

  • Page 131
    ... the current or prior year. The Company has eight employees at 30 September 2013 (2012: eight). These are the Non-Executive Directors of easyJet plc; their remuneration is paid by easyJet Airline Company Limited. The Executive Directors of easyJet plc are employed and paid by easyJet Airline Company...

  • Page 132
    ... on intercompany accounts with no specified credit period, are unsecured, and bear market rates of interest. For full details of transactions and arrangements with easyGroup, easyJet's largest shareholder, see note 26 of the Group accounts.  130 easyJet plc Annual report and accounts 2013

  • Page 133
    ... 2012 £ million 2011 £ million 2010 £ million 2009 £ million ,QFRPHVWDWHPHQW Revenue EBITDAR Operating profit Profit before tax Profit for the year Earnings per share (basic) - pence Earnings per share (diluted) - pence Ordinary dividend per share - pence Special dividend per share...

  • Page 134
    ... of opening and closing shareholders' equity. %ORFNKRXUV Hours of service for aircraft, measured from the time that the aircraft leaves the terminal at the departure airport to the time that it arrives at the terminal at the destination airport. 5HYHQXH  The sum of seat revenue and non-seat...

  • Page 135
    ... from well managed, responsible, FSC® certified forests. The pulp used in this product is bleached using an elemental chlorine free (ECF) process. This report is available at: http://corporate.easyjet.com/investors/reports-and-accounts.aspx Designed and produced by Black Sun Plc www.blacksunplc...

  • Page 136
    Hangar 89 London Luton Airport Luton Bedforshire LU2 9PF www.easyJet.com