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Making travel
easy and
affordable
Annual report and accounts 2014

Table of contents

  • Page 1
    Making travel easy and affordable Annual report and accounts 2014

  • Page 2
    ... Key performance indicators Financial review Risk Corporate responsibility 18 20 28 36 Governance Chairman's statement on corporate governance Board of Directors Executive Management Team Corporate governance report 52 54 56 58 Directors' remuneration report Directors' report Statement of Directors...

  • Page 3
    ... Our aim is to deliver 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...

  • Page 4
    ... WE DO WE ARE A LOW-COST EUROPEAN POINT-TO-POINT SHORT-HAUL AIRLINE We use our cost advantage and number one and number two network positions in strong markets to deliver point-to-point low fares and operational efficiency, with our people making the difference by offering friendly service for our...

  • Page 5
    ... the well-known easyJet brand and service offering. DISCIPLINED USE OF CAPITAL We maintain a strong balance sheet so that we can withstand external shocks, such as airspace closure. We maximise the use of our aircraft and have a policy of returning excess cash to shareholders. CULTURE, PEOPLE AND...

  • Page 6
    ...15 easyJet Ryanair SAS 5 Primary airports Non-primary airports Our network is truly European Number of routes by country UK France Italy Portugal and Spain Switzerland Germany Other EU Non-EU 399 192 167 167 110 67 198 50 4 easyJet plc Annual report and accounts 2014 Turkish Airlines 25...

  • Page 7
    ...across Europe - number of routes touching each location Strategic report UK London Gatwick Bristol London Luton Manchester Edinburgh Liverpool London Stansted Belfast Glasgow Newcastle London Southend Other 107 46 39 35 32 29 26 24 16 14 12 19 NETHERLANDS Amsterdam 20 Bases Other airports SPAIN...

  • Page 8
    ...-largest scheduled airline at the airport. £29 fares starting price one way '97 easyJet launches its website with online bookings available a year later. The second base opens in Liverpool with flights to Amsterdam. 5th base is opened by easyJet 6 easyJet plc Annual report and accounts 2014

  • Page 9
    '14 easyJet signs a new seven-year deal at its largest base, London Gatwick, and announces new bases in Amsterdam and Porto. '08 easyJet opens bases at Paris Charles de Gaulle and Lyon to bring the number of bases to 20. '11 easyJet announces two new bases in France at Nice and Toulouse, bringing ...

  • Page 10
    ... share, an increase of 35.5% over the ordinary dividend paid last year. Conclusion easyJet has built the leading business model in European short-haul aviation. The Company's pan-European network, cost advantage at the primary airports it flies from, focus on customer service and capital allocation...

  • Page 11
    ... per seat rose by £1.09 year-on-year to £8.12. Return on capital employed grew by 3.1 percentage points to 20.5%(1). In light of the continued strong financial performance and confidence in the future, the Board has decided to increase the ordinary dividend pay-out ratio from one third of profit...

  • Page 12
    Chief Executive's review continued funding to support operations and strengthen balance sheets. For example, UK-based airline Monarch has announced a restructuring programme including a material reduction in its fleet size. Etihad made an investment for a 49% stake in Alitalia which is undergoing ...

  • Page 13
    .... The Company has consolidated its number one positions at Geneva and Basel by increasing its market share by 0.4 and 1.2 percentage points to 40.5% and 52.4% respectively. France easyJet is the largest low-cost airline in France with a market share of around 14% and 26 based aircraft. In the 2014...

  • Page 14
    ... 27 aircraft based in Italy, grew capacity by 6.2% in the 2014 financial year and has number one or number two positions at its key bases of Milan Malpensa, Rome Fiumicino and Naples. easyJet opened its Naples base in March 2014 with two based aircraft. easyJet also has a strong structural position...

  • Page 15
    ...airports it operates from are legacy carriers with older, less efficient aircraft, lower asset utilisation, lower seat densities, lower load factors and higher levels of fixed costs and low-cost carriers. easyJet's lower cost base enables it to offer the affordable fares its customers value. easyJet...

  • Page 16
    ... to the opportunities available and prevailing economic conditions. easyJet uses the flexibility it has to move aircraft between routes and markets to improve returns. easyJet's total fleet as at 30 September 2014 comprised 226 aircraft, split between 156-seat Airbus A319s and 180-seat A320s. During...

  • Page 17
    ... right sized aircraft to meet peak demand and take advantage of opportunities; • improved conversion and yield from more sophisticated pricing for customers through further developments of the bespoke revenue management system; • performance of allocated seating and the yield management of bag...

  • Page 18
    ... Company's Annual General Meeting on 12 February 2015. Objective Capital discipline High asset efficiency Maintain high level of fleet flexibility Capital structure Ensure robust capital structure Retain ability to invest in profitable growth opportunities Liquidity Returns Dividend policy Metric...

  • Page 19
    ... delivering a resilient operation ahead of new base openings, charges at regulated airports, particularly in Germany and Italy, increased navigation charges and increased maintenance costs associated with the planned ageing of the fleet. It is estimated that at current exchange rates and with jet...

  • Page 20
    ... for more information 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 * In 2013 we undertook a review and subsequently decided to commission a new supplier to conduct the survey. As a result, the survey was delayed until early in 2014. 18 easyJet plc Annual report and accounts 2014

  • Page 21
    ...21 Market share of airports % 56 49 43 41 41 9-17 See Chief Executive's review for more information 2010 2011 2012 2013 2014 FINANCIALLY STRONG We are committed to improving shareholder returns whilst remaining prudently financed with a strong, liquid balance sheet. Revenue per seat £ +1.2% 58...

  • Page 22
    ...pence per share Basic earnings per share (2013: 101.3 pence per share) In the 2014 financial year, easyJet ï¬,ew 64.8 million passengers (2013: 60.8 million) and grew revenue by 6.3% from £4,258 million to £4,527 million, compared with 5.1% growth in seats ï¬,own. Financial overview A good cost...

  • Page 23
    ... UK corporate tax rate to 20% with effect from 1 April 2015. easyJet made corporation tax payments totalling £96 million during the 2014 financial year. Earnings per share and dividends per share 2014 pence per share 2013 pence per share Change Basic earnings per share Proposed ordinary dividend...

  • Page 24
    ... easyJet has a surplus of euro revenue over euro costs, on average, revenue cash inflows occur several months before cost cash outflows, resulting in a short-term benefit to the income statement that will not continue into the next financial year. 22 easyJet plc Annual report and accounts 2014

  • Page 25
    ... length. Revenue per passenger was £69.90, down by 0.3% compared with the 2013 financial year, but up by 0.5% at constant currency. Costs excluding fuel 2014 £ million £ per seat pence per ASK £ million £ per seat 2013 pence per ASK Operating costs Airports and ground handling Crew Navigation...

  • Page 26
    ... to £0.10 per seat as easyJet continued to repay mortgage and finance lease debt. The impact of movements in currency exchange rates is a gain of £7 million compared with a loss of £8 million in the prior year, in each case driven mainly by changes in the euro exchange rate. A fluctuation of this...

  • Page 27
    ... (252) easyJet generated strong operating cash flow during the 2014 financial year, at a level similar to the prior year, which benefited from improved credit card settlement terms. Net capital expenditure includes the acquisition of nine aircraft (2013: ten aircraft), the purchase of life-limited...

  • Page 28
    ... 2015. Net current liabilities at 30 September 2014 were £159 million but included unearned revenue (payments made by customers for flights scheduled post year end) of £572 million. The Group is exposed to fluctuations in jet fuel prices and US dollar and euro exchange rates. The Group's policy...

  • Page 29
    Key statistics Operational measures 2014 2013 Change Strategic report Seats flown (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 30
    ...m t io 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 28 easyJet plc Annual report and accounts 2014

  • Page 31
    ... Board (at Executive Management Team level) is 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; and • weekly operations meetings, safety reporting...

  • Page 32
    ... exposure at this time is with the ageing A319 fleet, 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 or access to...

  • Page 33
    ... issues of scalability, which could increase cost and cause delays when implementing required business change. Enterprise architecture is reviewed and improvements are made where opportunities arise. easyJet plans for, and maintains, appropriate capacity for key systems, and performs structured...

  • Page 34
    ...of approved counterparties. A strong balance sheet supports the business through fluctuations in the economic conditions for the sector. Regular monitoring of markets and route performance is undertaken by easyJet's network and fleet management teams. 32 easyJet plc Annual report and accounts 2014

  • Page 35
    ... with US dollar money market deposits. Operating lease rentals are a mix of fixed and floating rates. Liquidity risk A misjudgement in the level of liquidity required could result in business disruption and have an adverse effect on easyJet's financial performance. Board policy is to maintain...

  • Page 36
    ... the year, the business has initiated a number of key projects and programmes to deliver key elements of the strategy. If these projects and programmes do not deliver the benefits and cost savings planned, easyJet could fall short of its planned financial results. A portfolio management office and...

  • Page 37
    ...RISKS Risk description and potential impact Current mitigation Strategic report Competition and industry consolidation easyJet operates in competitive market places against both flag carriers and other low-cost airlines. easyJet's key competitive advantages are its network, cost base and efficient...

  • Page 38
    ... understand how they can deliver the promises in the Customer Charter. Improving the customer experience at times of disruption has also been a focus this year. New developments have included connecting our Operation Control Centre at Luton directly with customers so they can keep in touch with live...

  • Page 39
    ... Air Operator's Certificate. The Chief Executive chairs the Company's Safety Review Board which meets monthly to assess reports from the Safety Action Groups across the airline. This review and assessment process delivers monthly reports to both the UK Civil Aviation Authority and the easyJet Board...

  • Page 40
    ...2013: 8,945) people across Europe. Our effective recruitment processes are supported by continued high retention rates. In the year ended 30 September 2014, employee turnover was 6.7%, reflecting our ongoing commitment to growing and developing our people. 38 easyJet plc Annual report and accounts...

  • Page 41
    ...% Employee attendance rates % 9.7 Strategic report 6.7% 97% 7.5 6.5 6.7 95 97 96 +0.2ppt from 2013 2011 2012 2013 2014 +1ppt from 2013 2012 2013 2014 On board - living our values Once on board we work with our people to help them understand easyJet's values and their role in the business and...

  • Page 42
    ... the emphasis on cash and variable pay rather than fixed benefits. The reward package includes an annual performance-driven bonus (based on personal and Group performance) and grants of share awards (based on the financial performance of the Group). 40 easyJet plc Annual report and accounts 2014

  • Page 43
    ... on non-UK payrolls, international schemes have been established with similar terms and conditions. easyJet also offers a small number of associated airline benefits in line with our cost-focused approach. These include insurances and access to travel on easyJet services at cost price. In the UK and...

  • Page 44
    ... is female. Board of Directors Executive Management Team 12 $emale Male 11 & 2 Male Female 7 4 Senior Management Team All easyJet employees 63 Male Female 49 14 9,649 Male Female 5,194 4,455 Based on employees as at 30 September 2014. 42 easyJet plc Annual report and accounts 2014

  • Page 45
    ... development plan, can gain credits towards a Masters level programme (e.g. MBA). The University acknowledged that the programme was 'very well thought out, promoting personal development with a knowledge of corporate impact and containing robust and well researched underpinning'. www.easyJet...

  • Page 46
    ... employees and significant customer base. Our fundraising activities are driven through our partnership with UNICEF, the world's leading organisation focusing on children and their rights, under the "Change for Good" partnership established in 2012. 44 easyJet plc Annual report and accounts 2014

  • Page 47
    ...communities Strategic report Across our network easyJet seeks to develop relationships with local communities and support local initiatives. Our links are particularly strong around our headquarters in Luton where the majority of our employees are based. • We are long-term supporters of Luton Town...

  • Page 48
    ...easyJet have supported UNICEF's goal of increasing immunisation coverage from 80% to 85% for children living in Liberia over the past two years. We would like to thank our customers and employees for their ongoing support for our fundraising activity. 46 easyJet plc Annual report and accounts 2014

  • Page 49
    ... step-changes in technology and the right incentives, to ensure that airlines and passengers fly as efficiently as possible. Strategic report Net CO2 emissions from UK aviation 2.5 Fuel-burn reduction 2.0 1.5 Carbon Fuels trading 1.0 0.5 2010 2020 2030 2040 2050 Demand growth Operations...

  • Page 50
    ...that govern noise at airports (such as curfews and routings to avoid built-up areas). easyJet aircraft meet the tightest international noise standards (ICAO chapter 4). The Company's focus on improving the efficiency of flying has also reduced the noise impact; by changing the flap settings used for...

  • Page 51
    ...percentage points to 80%. To support the Triple C programme we have sought to reduce customer waiting times and have introduced customer hosts at the bag drop in our 30 largest operations. These initiatives are supported by the introduction of our Customer Services Manual which sets out the policies...

  • Page 52
    ...customers' experience during disruption using digital technology both through mobile, easyJet.com and within the airport environment. On-time performance Strong operational performance is critical to easyJet. Ensuring the aircraft depart and arrive on time minimises the cost of disruption, improves...

  • Page 53
    ..., as a result of air traffic control strikes and severe weather-related disruption, as well as a number of resilience issues at Gatwick which impacted all airlines at the airport. This is reflected in the reduction in our on-time performance from 87% in the year ended 30 September 2013, to 85%, and...

  • Page 54
    ... right balance of skills and experience, maintaining a strong level of independence and objectivity and ensuring that all Directors have a good knowledge of the Group and the context in which it operates. There have been a number of key changes to the Board since the end of the 2013 financial year...

  • Page 55
    ...diagram of the Board governance structure is set out on page 58. The Fleet Oversight and Governance Committee (FOGC) continued to meet during the year to provide governance oversight over the engine selection process following the fleet order deal which was approved by shareholders in July 2013. The...

  • Page 56
    ... was Professor and Head of the Air Transport Department at Cranfield University and is still a Visiting Professor there. He is also the author of books on aviation economics and management. Rigas is stepping down from the Board on 1 December 2014. 54 easyJet plc Annual report and accounts 2014

  • Page 57
    ... was appointed to the Board of easyJet on 1 March 2009. He has considerable experience as a director of listed companies and is currently a Non-Executive Director of Samsonite International SA and Max Property Group plc, as well as being chairman of a number of private equity-financed and AIM Listed...

  • Page 58
    ... of the management buy-out team and headed up cabin services, ground operations and customer service. Cath graduated from the University of Leicester with a BA (Hons) in Geography. Carolyn McCall OBE Chief Executive See Board of Directors' profiles. 56 easyJet plc Annual report and accounts 2014

  • Page 59
    ... been a member of the Executive Management Team since July 2010. Before joining easyJet, Giles was Assistant General Counsel and Director of Compliance at Cable & Wireless plc where he spent 10 years as a legal adviser within the UK and Australian operating divisions, and then in its head office. He...

  • Page 60
    ... Professor Rigas Doganis (Chair) • Keith Hamill • Carolyn McCall (Executive Director - appointed to Committee on 1 July 2014) • Geoff Want (independent safety expert) Meetings held in the 2014 financial year: The Board of easyJet plc Chairman: John Barton See pages 58 to 59 See pages 59 and...

  • Page 61
    ... Term Incentive Plan for shareholder approval at the Company's 2015 Annual General Meeting as part of the remuneration policy. • The Committee reviewed other share scheme matters, including the share purchase monetary limits for the HMRC-approved all-employee Save As You Earn and Buy As You Earn...

  • Page 62
    ... UK Corporate Governance Code, and the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, published in September 2014. These changes will apply to the Company from its 2015 financial year and allow the Committee to further strengthen its role as a key...

  • Page 63
    ... control Review of the adequacy and effectiveness of the Group's ongoing risk management systems and processes, through risk and assurance plans and reports, including: • risk assessments; • information security and business continuity; • control themes; and • internal financial control...

  • Page 64
    ... the Financial reporting and significant financial issues section below. Other items which the Committee looked at during the financial year in addition to its core responsibilities included reviewing: • the management of change initiatives in the business; • information security policies and...

  • Page 65
    ... in the review. Further details of risk management and internal control are provided on page 70. Non-audit services In the 2014 financial year, easyJet did not incur any costs with PricewaterhouseCoopers LLP in respect of non-audit services (2013: £0.3 million). In order to preserve objectivity...

  • Page 66
    ... found in the Corporate responsibility section on pages 41 to 42. This year, for example, the number of women on the Executive Management Team increased from three to four (out of 11 positions). 3 Key responsibilities • Keeping under review the composition, structure and size of, and succession...

  • Page 67
    ... aligned with Group strategy and support Group financial performance. Next year, the Committee will assist the Board in providing an improved and broader assessment of the Group's long-term solvency and liquidity in light of the revised UK Corporate Governance Code which requires on-going...

  • Page 68
    ... on easyJet's corporate website. The Chairman's role is to lead the Board and ensure that it operates effectively. The Chief Executive's role is the day-to-day running of the Group's businesses and the development and implementation of strategy. 66 easyJet plc Annual report and accounts 2014

  • Page 69
    ...at Burberry Group plc starting in September 2014. Appointment to such positions is subject to the approval of the Board which considers, amongst other things, the time commitment required. The Executive Directors and members of the Executive Management Team are only allowed to hold one non-executive...

  • Page 70
    ... on a number of key areas including Board and Committee composition, dynamics, time management, support, strategic oversight, risk management, succession planning and priorities for change. Parts of the questionnaires were consistent with previous years so as to measure any perceived improvement or...

  • Page 71
    C. Accountability C.1 Financial and Business Reporting Please refer to: • page 92 for the Board's statement on the Annual report and accounts being fair, balanced and understandable; • page 26 for the statement on the status of the Company and the Group as a going concern; and • the Strategic ...

  • Page 72
    ... of the Safety Committee); and • the Executive Management Team meets regularly to consider significant risks and overall business performance. To mitigate any significant risks identified, the Directors review the effectiveness of internal controls, including operating, financial and compliance...

  • Page 73
    ... 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 minimal benefits (see page 74). Support...

  • Page 74
    ... of shares for 24 months from the vesting date. To ensure that easyJet remains competitive in the market for executive talent, at the same time as adhering to the principle of operating in a cost effective manner, there are to be changes to the Chief Financial Officer's maximum bonus opportunity...

  • Page 75
    ... which Executive Directors will be required to retain the after-tax value of shares for 24 months from the vesting date. To address the below market total remuneration positioning of the Chief Financial Officer, his annual bonus opportunity is to increase to 175% of salary from 150%. The change to...

  • Page 76
    ...significant increase in the scale of the role and/or size, value and/or complexity of the Group. Salary levels for current incumbents, effective from 1 January 2015 are as follows: • Chief Executive: £698,600. • Chief Financial Officer: £430,800. Benefits In line with the Company's policy to...

  • Page 77
    ... points). Governance LTIP Matching Share Award (operating for the final time in the financial year commencing 1 October 2014) To incentivise and recognise execution of the business strategy over the longer term. Rewards strong financial performance and sustained increase in shareholder value...

  • Page 78
    ... the year ending 30 September 2015 and under a replacement LTIP for the year ending 30 September 2016. To incentivise and recognise execution of the business strategy over the longer term. Rewards strong financial performance and sustained increase in shareholder value. Each year Performance Shares...

  • Page 79
    ... 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. How does the executive pay policy differ from that for other easyJet employees...

  • Page 80
    ... the revised policy that will operate in the financial year ending 30 September 2016 (based on salaries as at 1 October 2014). Under the current Chief Executive's contract, the Company, by mutual consent, may elect to make a payment in lieu of notice equivalent in value to 12 months' basic salary...

  • Page 81
    ...with the business of the Group. Any fees received in respect of these appointments are retained directly by the relevant Executive Director. 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...

  • Page 82
    ...the Company in 2004. NBS advises the Committee on developments in executive pay and on the operation of easyJet's incentive plans. Total fees paid to NBS in respect of services to the Committee during the 2014 financial year were £161,000. NBS is a signatory to the Remuneration Consultants' Code of...

  • Page 83
    ... of Performance Shares for the Executive Directors in the 2015 financial year are as per the policy approved by shareholders at the 2014 AGM at 200% of salary for the Chief Executive and 150% of salary for the Chief Financial Officer. The annual bonus plan operated in 2014 was the last opportunity...

  • Page 84
    ... Board on 1 May 2013. How was pay linked to performance in the 2014 financial year? As a percentage of maximum bonus opportunity Measure CE CFO Threshold Performance required On-Target Maximum Actual Payout Profit before tax (£m) On-time performance Customer satisfaction targets(1) Cost per seat...

  • Page 85
    ...2014: • customer satisfaction targets - 78% of customers satisfied with the service; • total cost per seat excluding fuel at constant currency - 0.6% increase; and • Chief Financial Officer's departmental objectives - these were exceeded. Annual bonus % Profit before tax On-time performance...

  • Page 86
    ...year ended 30 September 2014 was £12.00 to £18.27. Notes A Long Term Incentive Plan - Performance Shares B Long Term Incentive Plan - Matching Shares C Share Incentive Plan - Performance (Free) Shares D Share Incentive Plan - Matching Shares E Save As You Earn Awards (SAYE) 84 easyJet plc Annual...

  • Page 87
    ...awards made in December 2012, 50% of vesting is based on three year average ROCE (including operating lease adjustment) performance for the three financial years ending 30 September 2015 and 50% of vesting is based on relative total shareholder return performance compared to companies ranked FTSE 51...

  • Page 88
    ...Earn scheme. All staff subject to minimum service were granted shares during the year. Executive Directors may also participate in these plans on the same terms as other eligible staff. They are summarised in the Corporate Responsibility report on page 41. 86 easyJet plc Annual report and accounts...

  • Page 89
    ... 2014 1 year 7 months 2 years - - 2 years - 2 years 9 months 1 year 11 months 2 months 5 months 2 years 2 years 9 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 of European airlines...

  • Page 90
    ... below shows the total pay for all of easyJet's employees compared to other key financial indicators. Year ended Year ended 30 September 30 September 2014 2013 Change % Employee costs (£m) Ordinary dividend (£m) Special dividend (£m) Average number of employees Revenue (£m) Profit before tax...

  • Page 91
    ...40% of profit after tax, of £180 million or 45.4 pence per share. The ordinary dividend is subject to shareholder approval at the Company's Annual General Meeting to be held on 12 February 2015. Membership of Board during 2014 financial year Financial instruments and financial risk management See...

  • Page 92
    ... for loss of office or employment resulting from a change of control on takeover, except that provisions of the Company's share schemes and plans may cause options and awards granted to employees under such schemes and plans to vest on a takeover. 90 easyJet plc Annual report and accounts 2014

  • Page 93
    ... 30 September 2014 can be found at easyJet's corporate website: http://corporate.easyjet.com/investors Independent auditors A resolution to reappoint PricewaterhouseCoopers LLP as auditors of the Company will be put to shareholders at the forthcoming Annual General Meeting. Relationship agreement...

  • Page 94
    ... assets, liabilities, financial position and profit of the Group and Company; and • the Strategic report, included in the annual report, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and...

  • Page 95
    ... easyJet plc's accounts comprise: • the Group consolidated and Company statements of financial position as at 30 September 2014; • the Group consolidated income statement and consolidated statement of comprehensive income for the year then ended; • the Group consolidated and Company statements...

  • Page 96
    ... of the business, the Group also makes use of derivative financial instruments. Forward contracts are used to hedge transaction currency risk (comprising fuel, leasing and maintenance US dollar payments), jet fuel price risk, and euro and Swiss franc revenue receipts. At 30 September 2014, cash and...

  • Page 97
    ... asset) are considered by management to have an indefinite useful life as they will remain available for use for the foreseeable future. Goodwill and landing rights are tested for impairment at least annually at the cash-generating unit ('CGU') level. The Group has one CGU, being its route network...

  • Page 98
    ... of the UK Corporate Governance Code dated September 2012 (the "Code"), that they consider 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 and Company's performance, business model and strategy is...

  • Page 99
    ... of the Corporate Governance Statement relating to the Company's compliance with nine provisions of the UK Corporate Governance Code. We have nothing to report having performed our review. RESPONSIBILITIES FOR THE ACCOUNTS AND THE AUDIT Our responsibilities and those of the Directors As explained...

  • Page 100
    ...) (12) 581 11 (11) s' eres 4Â-yable and o her financing charges Ne Dtnance charges Profit before tax Tax charge Profit for the year Earnings per share, pence Basic Dilu "d 3 F 5 - 581 (131) 450 @3R9 @01) RUV @VH9 F1V 6 6 114.5 113.2 0H0IF 0HHIH 98 easyJet plc Annual report and accounts 2014

  • Page 101
    ... YTfSdc Year ended 30 September 2014 £ million rtuvs wx €euvmber Â,xƒw £ million Year ended Profit for the year Other comprehensive income Cash flow hedges Fair value losses in ‡ˆ year Losses/(gainÂ'Â" ‡Â"•nÂ'ferÂ"Â- ‡™ fngome s‡a‡ehn‡ Rela‡Â- ‡•x (charge)/credi‡ Total...

  • Page 102
    ...186) (890) Net assets Shareholders' equity Share capital Share premium Hedging reserve Translation reserve Retained earnings 2,172 ‹ 108 658 (17) 1 1,422 2,172 The accounts on pages •‹ to oved by the Board of Directors and authorised for issue on Â" November signed on behalf of...

  • Page 103
    ... capital £ million Share premium £ million Hedging reserve £ million Translation reserve £ million Retained earnings £ million Total £ million o nsive Dividend ntive sche dÆ Í¹¾Á sh¿¹¸Æ Ässued Value ¾Í eÁpÀ¾yee Ƹ¹vices Relate Pu¹¶has es At 30 September 2014...

  • Page 104
    ...share capital Purchase of own shares for employee share schemes Repayment of bank loans Repayment of capital element of finance leases Net proceeds from sale and operating leaseback of aircraft Net (increase)/decrease in money market deposits Net (increase)/decrease in restricted cash Net cash (used...

  • Page 105
    ... of end of lease return conditions, increased or decreased utilisation, or changes in the cost of heavy maintenance services. C99DE0FF Â-6D FÂ-6D06G 10GQ4A sB947 8) Goodwill and landing rights are tested for impairment at least annually. easyJet has one cash-generating unit, being its route network...

  • Page 106
    ... statement. Non-monetary assets and liabilities denominated in foreign currencies are translated into sterling at foreign exchange rates ruling at the dates the transactions were effected. Revenue recognition Revenue comprises seat revenue, being the value of airline services (net of air passenger...

  • Page 107
    ...shorter 5 years Aircraft held under finance leases are depreciated over the shorter of the lease term and their expected useful lives, as shown above. Residual values, where applicable, are reviewed annually against prevailing market rates at the balance sheet date for equivalently aged assets and...

  • Page 108
    ...line basis Â,vez qhe li‰e Â,‰ qhe }ease. bez Â,‰ Â,Šwz|q†x leases zwÂ"ܠzw w|{yJeq qÂ, ‡|ke €Â,xq†xwxq zwxqal Š|Â...‡enqs base~ Â,n vaziab}w †xqwze{q z|qw{Â" q„w{w |zw exŠensed |s †xcuzzedÂŒ Finance leases... †n{qzu‡wxqsÂŒ ¯wz 106 easyJet plc Annual report and accounts 2014

  • Page 109
    .... 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 shop visits and end of lease liabilities. These costs are discounted to present value where...

  • Page 110
    ... Executive Management Team, which is easyJet's Chief Operating Decision Maker. Resource allocation decisions are made for the benefit of the route network as a whole, rather than for individual routes within the network. Performance of the network is assessed based on the consolidated profit or loss...

  • Page 111
    ... the International Accounting Standards Board have been implemented for the year ended 30 September 2014: IFRS 1 IFRS 7 IAS 19 IAS 27 IAS 28 First-time Adoption of International Financial Reporting Standards - Government Loans Financial Instruments: Disclosure - Offsetting Financial Assets and...

  • Page 112
    ... persons employed by easyJet was: 2014 Number 2013 Number Flight and ground operations Sales, marketing and administration 8,400 587 8,987 7,812 531 8,343 Employee costs for easyJet were: 2014 £ million 2013 £ million Wages and salaries Social security costs Pension costs Share-based payments...

  • Page 113
    ... Short-term employee benefits Share-based payments 7 6 13 8 6 14 The Directors of easyJet plc and the other members 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...

  • Page 114
    ... liability in the statement of financial position is as follows: Accelerated capital allowances £ million Short-term timing differences £ million Fair value gains £ million Share-based payments £ million Total £ million At 1 October 2013 Charged/(credited) to income statement Charged to other...

  • Page 115
    ... 398 2014 pence 393 5 398 2013 pence Earnings per share Basic Diluted 114.5 113.2 101.3 100.0 7 Dividends An ordinary dividend in respect of the year ended 30 September 2014 of 45.4 pence per share, or £180 million, is to be proposed at the forthcoming Annual General Meeting. These accounts do...

  • Page 116
    ... based on value in use calculations of the route network. Pre-tax cash flow projections have been derived from the strategic plan approved by the Board for the period up to 2019, using the following key assumptions: Pre-tax discount rate (derived from weighted average cost of capital) Fuel price...

  • Page 117
    ... £ million Cost At 1 October 2012 Additions Transfer to intangible assets Aircraft sold and leased back Transfer to maintenance provision Disposals At 30 September 2013 Depreciation At 1 October 2012 Charge for the year Aircraft sold and leased back Disposals At 30 September 2013 Net book value At...

  • Page 118
    ... The Airline Group Limited in order to acquire a non-controlling interest in NATS, the company that owns the UK air traffic control system. easyJet's investment is principally in the form of unsecured loan notes bearing interest at a fixed rate of 8%. Interest receivable is settled by the issue of...

  • Page 119
    ... proceeds over fair value of aircraft that have been sold and leased back under operating leases. This balance will be realised in the income statement over the next nine years. 17 Maintenance provisions £ million At 1 October 2013 Exchange adjustments Charged to income statement Transferred from...

  • Page 120
    ...10.57). easyJet's employee benefit trusts hold the following shares. The cost of these has been deducted from retained earnings: 2014 2013 Number of shares (million) Cost (£ million) Market value at year end (£ million) 3 26 39 4 24 50 19 Share incentive schemes easyJet operates the following...

  • Page 121
    ...Sharesave is open to all employees on the UK payroll. Participants may elect to save up to £350 per month (2013: £250 per month) under a three-year savings contract. An option is granted by the Company to buy shares at a discount of 20% from market price at the time of the grant. At the end of the...

  • Page 122
    ... are used: Share price £ Exercise price £ Expected volatility % Option life years Risk-free interest rate % Fair value £ Grant date Discretionary schemes 8 December 2004 Long Term Incentive Plan 31 March 2011 4 January 2012 18 December 2012 - ROCE 18 December 2012 - TSR 17 December 2013 - ROCE...

  • Page 123
    ... Reconciliation of operating profit to cash generated from operations 2014 £ million 2013 £ million Operating profit Adjustments for non-cash items: Depreciation Loss on disposal of property, plant and equipment Amortisation of intangible assets Share-based payments Changes in working capital and...

  • Page 124
    ...contracts that are valued based on market rates and market-accepted models. Fair value for financial instruments held at amortised cost has been estimated by discounting cash flows at prevailing interest rates and by applying year end exchange rates. 122 easyJet plc Annual report and accounts 2014

  • Page 125
    ... the income statement. easyJet uses forward contracts to hedge transaction currency risks comprising fuel, leasing and maintenance US dollar payments, euro and Swiss franc revenue receipts and jet fuel price risk. Where these hedges are assessed as highly effective, gains and losses are deferred...

  • Page 126
    ...jet fuel price risk Related deferred tax (31) (12) (43) (21) (7) (28) (52) (19) (71) 16 (55) 2013 £ million 2014 £ million (Losses)/gains on cash flow hedges recycled from other comprehensive income in income statement captions: Revenue Fuel Maintenance Aircraft lease costs Other costs 14 (56...

  • Page 127
    ...the end of the current and prior year and the return earned during those years were as follows: 2014 £ million 2013 £ million Shareholders' equity Borrowings Cash and money market deposits (excluding restricted cash) Reported capital employed Operating leases adjustment Capital employed including...

  • Page 128
    ... money market deposits but excluding restricted cash) plus seven times aircraft operating lease payments. Capital employed is defined as shareholders' equity plus debt as previously defined. Gearing has increased to 17% (2013: 7%). Liquidity risk management The objective of easyJet's liquidity risk...

  • Page 129
    ... and significant increases in jet fuel prices, thus mitigating volatility in the income statement in the short term. In order to manage the risk exposure, forward contracts are used in line with Board approved policy to hedge between 65% and 85% of estimated exposures up to 12 months in advance, and...

  • Page 130
    ... 102 505 1 3 3 7 2 4 3 9 easyJet holds 72 aircraft (2013: 72 aircraft) under operating leases, with initial lease terms ranging from five to ten years. 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...

  • Page 131
    ... border between Italy and Switzerland, plus France. easyJet's non-current assets principally comprise its fleet of 143 owned and 11 finance leased aircraft. A further 72 aircraft are held under operating leases, giving a total fleet of 226 at 30 September 2014. All of these aircraft are registered...

  • Page 132
    ...assets Shareholders' equity Share capital Share premium Retained earnings 108 658 729 1,495 108 657 347 1,112 1,186 1,495 (274) - (274) 826 1,112 1,090 10 1,100 c 309 286 The accounts on pages 130 to 134 were approved by the Board of Directors and authorised for issue on 17 November 2014 and signed...

  • Page 133
    ... dividend of 44.1 pence per share, or £175 million, in respect of the year ended 30 September 2013 were both paid in the year ended 30 September 2014. The disclosures required in respect of share capital are shown in note 18 to the consolidated accounts. Accounts & other information www.easyJet...

  • Page 134
    ... from investing activities Capital distributions Cash flows from financing activities Net proceeds from issue of ordinary share capital Cash and cash equivalents at beginning and end of year 1 - 1 - - 15 d 295 12 - (308) - (1) 27 9 40 (85) (7) (16) 132 easyJet plc Annual report and accounts 2014

  • Page 135
    ... dividends received of £650 million (2013: £40 million - cash), which are recognised when the right to receive payment is established. The Company recognised no other income or expenses in either the current or prior year. The Executive Directors of easyJet plc are employed by easyJet Airline...

  • Page 136
    ... the year to cash generated from operations 2014 £ million 2013 £ million Profit for the year Adjustments for: Finance and other similar income Unrealised foreign exchange differences Tax charge Dividends received Operating cash flows before movement in working capital Changes in working capital...

  • Page 137
    ... Net assets Statement of cash flows Operating activities (net of dividend payments) Investing activities Financing activities Exchange (losses)/gains Net (decrease)/increase in cash and cash equivalents Key performance indicators Return on capital employed Gearing Net cash/(debt) Profit before...

  • Page 138
    ... less profit before tax, plus fuel costs, divided by seats flown. ROCE Return on capital employed. ROCE (excluding lease adjustments) Operating profit, less tax at the prevailing UK corporation tax rate at the end of the financial year, divided by average capital employed. EBITDAR Earnings before...

  • Page 139
    ... 100% virgin fibre sourced 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...

  • Page 140
    Hangar 89 London Luton Airport Luton Bedfordshire LU2 9PF www.easyJet.com