EasyJet 2015 Annual Report Download

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Annual report and accounts 2015

Table of contents

  • Page 1
    Annual report and accounts 2015

  • Page 2
    ... AT http://corporate.easyJet.com/ investors GOVERNANCE Chairman's statement on corporate governance Board of Directors Executive Management Team Corporate governance report Directors' remuneration report Directors' report Statement of Directors' responsibilities Independent auditors' report to the...

  • Page 3
    ... its inaugural ï¬,ights from London Luton to Glasgow and Edinburgh. 310p easyJet ï¬,oats on the London Stock Exchange at an offer price of 310p valuing the Company at £777 million. 120 NEW AIRCRAFT ORDERED easyJet's shareholders approve the purchase of 120 aircraft from Airbus with the option to...

  • Page 4
    ... LONDON GATWICK easyJet signs a new seven-year deal at its largest base, London Gatwick, and announces new bases in Amsterdam and Porto. '06 '08 '11 '12 '13 '14 '15 135 NEW AIRCRAFT ORDERED easyJet's shareholders approve the purchase of 35 current generation Airbus A320 aircraft and 100 new...

  • Page 5
    Strategic report Governance Accounts 2015 £29.99 FARES STARTING PRICE ONE WAY After 20 years we can still offer a one way ï¬,ight for less than £30. Over the past 20 years easyJet has built Europe's leading short-haul airline, delivering market-leading returns to our shareholders. Our network ...

  • Page 6
    ... £140 1,386 EASYJET EMPLOYEES BY 30 SEPTEMBER 2000 £77 £46 £17 1.7 1.0 1997 1998 3.1 18 AIRCRAFT IN FLEET BY 2000 0.4 1996 1999 2000 £66m NET ASSETS IN 2000 +93% COMPOUND ANNUAL GROWTH RATE OF NUMBER OF PASSENGERS BETWEEN 1996 AND 2000 2 easyJet plc Annual report and accounts 2015

  • Page 7
    ... strategy Strategic report Governance Accounts 735 ROUTES OPERATED BY 2015 Net revenue (£ million) Number of passengers (million) £2,973 68.6 10,104 EASYJET EMPLOYEES BY 30 SEPTEMBER 2015 48.8 £1,341 £264 29.6 241 AIRCRAFT IN FLEET BY 2015 5.6 2000 2005 2010 2015 £2,249m NET ASSETS...

  • Page 8
    ..., Pula and Preveza. We are continuing to expand in 2016, adding over 90 further routes to serve our customers' demands. ICELAND UK SPAIN PORTUGAL www.easyJet.com/EN/routemap To see our entire network PONTA DELGADA MOROCCO BASES OTHER AIRPORTS 4 easyJet plc Annual report and accounts 2015

  • Page 9
    ... N D S GERMANY CZECH REPUBLIC FRANCE SWITZERLAND AUSTRIA HUNGARY SLOVENIA new routes planned new aircraft ordered for 2016 CROATIA SERBIA Over 90 135 ITALY BULGARIA OVO KOS TURKEY GREECE 136 135 airports new aircraft in 31ordered different countries ISR AE L EGYPT www.easyJet.com 5

  • Page 10
    ...shareholders. OUR VALUES SAFETY We will never compromise our commitment to safety, which is always the first priority for our people. WHAT 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...

  • Page 11
    ... day, and also through mobile devices. People are attracted to the well-known easyJet brand and service offering. MAINTAIN COST ADVANTAGE We are able to provide low fares to our customers by maintaining a low-cost base and by delivering operational excellence. We have low overhead costs and use...

  • Page 12
    ... that our business model and strategy will deliver long-term value to shareholders. Our clear focus is to fulfil our customers' needs via a network of airports, routes, frequencies and slots that is unrivalled in European short-haul aviation. This, combined with our ï¬,eet expansion plans, gives us...

  • Page 13
    ... travel market that prizes both ï¬,exibility and value. easyJet has positioned its network and product to capitalise on these trends and has delivered again during the year. Our business model and strategy are continuing to deliver profitable growth and increasing annual returns to shareholders...

  • Page 14
    ... for our services. The total European short-haul market(2) grew by 5% year-on-year in the 12 months to 30 September 2015, sustained in part by a continued low fuel price. Low cost carrier share of the short-haul market increased by around one percentage point to 42%. In the same period, easyJet...

  • Page 15
    ... to Munich, Milan Linate to Paris Charles de Gaulle and Milan Linate to Amsterdam. Switzerland easyJet is Switzerland's second largest airline with a 23% total market share. At year end Switzerland had 23 based aircraft. easyJet is the number one operator at both Geneva and Basel airports, with the...

  • Page 16
    ... of business products performed well, with a 58% increase in the sale of ï¬,exible business fares when compared to 2014. Sales through Global Distribution Systems grew by 32% in the year as easyJet continued to leverage its relationships with the Travel Management Companies. Bookings from corporate...

  • Page 17
    Strategic report 3 MAINTAIN COST ADVANTAGE 4 DISCIPLINED USE OF CAPITAL easyJet has a strong cost-focused culture, with a number of structural advantages in key areas that enable it to combine the offering of a primary airport network with good value fares. Every year easyJet delivers ...

  • Page 18
    ...help support our growth, adding over 290 pilots and 1,300 cabin crew, as well as 390 people within the management, administration, engineering and maintenance departments. Retention rates remain good with employee turnover of 6.6% (2014: 6.7%). DELIVERING SHAREHOLDER RETURNS Our high revenue growth...

  • Page 19
    ... business markets. OUTLOOK We remain confident in our ability to deliver growth and returns for shareholders as we continue to execute our strategy. For the year to 30 September 2016 we plan to increase capacity by c.7% and by c.8% in the first half of the year as we invest in profitable growth...

  • Page 20
    ... at constant currency due to anticipated increases in charges at regulated airports, increased disruption costs and costs associated with building a resilient operation ahead of new crew base openings. See Financial review on pages 18-22 for more information Performance: Increased disruption due to...

  • Page 21
    ... EMPLOYEE ENGAGEMENT (USAY)(1) (%) Strategic report 76 55.27 58.51 62.58 63.31 62.48 78 75 83 83 Governance Accounts 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2014 2015 Definition: Revenue divided by seats ï¬,own. Definition: Customer satisfaction index, based on results...

  • Page 22
    Financial review OUR FINANCIAL RESULTS FINANCIAL OVERVIEW 2015 £ million £ per seat pence per ASK £ million £ per seat 2014 pence per ASK Total revenue Costs excluding fuel Fuel Profit before tax Tax charge Profit after tax Operating profit* * Operating profit represents profit before ...

  • Page 23
    ... per share, which is subject to shareholder approval at the Company's Annual General Meeting on 11 February 2016. This will be paid on 18 March 2016 to shareholders on the register at close of business on 26 February 2016. Â,eturn Governance on capital employ ! "Â,#$i e 2015 2014 Change ROCE...

  • Page 24
    ...of 1.8% (increased by 1.0% at constant currency). Costs excluding fuel 2015 £ million £ per seat pence per ASK £ million £ per seat 2014 pence per ASK Operating costs Airports and ground handling Crew Navigation Maintenance Selling and marketing Other costs Ownership costs Aircraft dry leasing...

  • Page 25
    ... currency. Accounts NET CASH AND FINANCIAL POSITION Summary net cash reconciliation 2015 £ million 2014 £ million Change £ million Operating profit Depreciation and amortisation Net working capital movement Net tax paid Net capital expenditure Purchase of own shares for employee share schemes...

  • Page 26
    ...a prolonged grounding of a substantial portion of the ï¬,eet; and • in the event that the UK votes to leave the European Union, the terms of exit are such that easyJet would be able to continue to operate over broadly the same network as at present. 22 easyJet plc Annual report and accounts 2015

  • Page 27
    ... Strategic report 2015 2014 Increase/ (decrease) 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/leased at end of year...

  • Page 28
    ... SAFETY RISKS* RISK EVALUATION GROUP PRIORITISES AND FILTERS PRINCIPAL BUSINESS RISKS EXECUTIVE MANAGEMENT TEAM PLC BOARD PROJECT/ PROGRAMME RISKS FEEDBACK FROM THE BOARD COUNTRY/ BASE RISKS THIRD PARTY RISKS * A separate management system monitors ï¬,ight safety risks (easyJet's safety...

  • Page 29
    ...Review Board (at Executive Management Team level) is responsible for directing overall safety policy and governance. Safety Action Groups from across the airline are responsible for the identification, evaluation and control of safety-related risks. easyJet operates a Safety Management System using...

  • Page 30
    ... number of key projects and programmes to deliver key elements of the strategy. If these projects and programmes fail to deliver the business benefits and cost savings planned, easyJet could fall short of its planned financial results. A Steering Group, consisting of the Executive Management Team...

  • Page 31
    ... same time. Processes are in place to adapt to disruptions as a result of industrial action. Governance Link to strategy: 2 3 5 Accounts Senior management succession easyJet's current and future success is reliant on having the right people with the right capabilities in key leadership positions...

  • Page 32
    ... management, counterparties and cash deposit limits; and • reviewing and reporting on compliance with Board treasury policies. The policy is to hedge within a percentage band for a rolling 24-month period. Board policy is to maintain target liquidity at £4 million per aircraft, which is supported...

  • Page 33
    ... of the controls is under continuous review. Governance Link to strategy: 2 3 5 Accounts Competition and industry consolidation easyJet operates in competition with both ï¬,ag carriers and other low-cost airlines. easyJet's key competitive advantages include its network, cost base, digital...

  • Page 34
    ... of female new entrant pilots over two years, as the first phase of a long-term strategy to increase the proportion of female pilots in the airline and bring more women into more senior ranks and management roles. CAROLYN MCCALL OBE Chief Executive 30 easyJet plc Annual report and accounts 2015

  • Page 35
    ...the airline's Executive Board, where he had responsibility for operational planning and delivery, whilst also developing the company's risk management system. He later became aviation safety adviser to Rio Tinto, the global mining company. Throughout his career Geoff has worked closely with aviation...

  • Page 36
    ... maintained optimum employee levels and recruited over 290 pilots and over 1,300 cabin crew during the year. In addition, the Company has recruited 390 people within the management and administration and engineering and maintenance teams to support the growth of the business. In line with retention...

  • Page 37
    ... and ongoing training for its pilots and cabin crew. To meet the airline's future training needs it has this year opened a new training centre at London Gatwick Airport, which will be used by crew from across the easyJet network. The airline has an established pilot cadet programme, in partnership...

  • Page 38
    ... development opportunities. Pilot focus groups are carried out to give pilots the opportunity to ask questions and provide feedback to the management team face-to-face. Since the programme began in 2013 sessions have been held at London Gatwick, Milan, Paris Charles de Gaulle, Bristol and Manchester...

  • Page 39
    .... FEMALE REPRESENTATION Board of Directors 8 Executive Management Team 6 Strategic report 2 20% 5 45% Governance Senior Management Team (including the Executive Management Team) 50 15 23% All easyJet employees 5,671 Male Female 4,717 45% Accounts NUMBER OF EMPLOYEES BY NATIONALITY 14...

  • Page 40
    ..., pilots and cabin crew, there are a range of regulatory requirements on health and physical ability which all applicants and current employees must comply with. People reporting easyJet is currently carrying out a project to improve its employee data management system. The Company does not hold...

  • Page 41
    ... female pilots. Female captains will be given further development support so they can take on leadership roles such as training and base management roles. easyJet will also introduce training loan underwriting for A320 type ratings for female pilots entering from other airlines. www.easyJet.com 37

  • Page 42
    ... partner The 'Change for Good' partnership offers easyJet customers the opportunity to support some of the world's most vulnerable children by donating their spare change and leftover foreign currency whilst on board. This year the partnership added a third standard collection period in spring 2015...

  • Page 43
    ...a large number of employees are based. The airline's first ï¬,ight 20 years ago was from Luton Airport and easyJet continues to proudly call Luton its home. easyJet is a long-term supporter of Luton Town Football Club and in the 2014/15 football season easyJet was the main shirt sponsor of the team...

  • Page 44
    ...aircraft types. easyJet has also worked with Airbus on a new cabin design for A320 family aircraft, which will add a further six seats, whilst maintaining the current level of passenger comfort. The first new aircraft with this cabin design is due to be delivered by Airbus in May 2016 and the cabin...

  • Page 45
    ... and reduced noise levels at landing. At London Gatwick, easyJet's largest base, the airline is a leader in the use of Continuous Descent Approaches in which aircraft descend more efficiently and quietly. This year the Company has worked to further reduce aircraft noise in response to comments from...

  • Page 46
    ... experience easyJet uses digital technology to improve the customer experience. This year it launched further innovations to help make it easier to book, manage travel and ï¬,y with easyJet. Its digital platform is a key point of differentiation. easyJet believes it has significant advantages...

  • Page 47
    ... the best performance and can meet its aim of being a leading airline for performance and customer service. For example, easyJet's customer experience improvement plan, Triple C - Customer, Communication, and Consistency involves working with its ground handling partners to improve the boarding...

  • Page 48
    ... on the overall delivery process. easyJet took delivery of its 250th Airbus family aircraft in spring 2015. EASYJET'S SUPPLIERS easyJet's suppliers have an important role in making travel easy and affordable for the airline's customers. The Company seeks to have an open, constructive and effective...

  • Page 49
    ... programme of training at every level has helped to support staff in doing a better job with greater job satisfaction. The group takes a pan-European approach and includes members from key easyJet markets: the UK, France, Switzerland and, most recently, Italy. One of our meetings was hosted in Paris...

  • Page 50
    ... applies to the Company for its 2015 financial year. The Code is issued by the Financial Reporting Council and is available for review on the Financial Reporting Council's (FRC's) website: https://www.frc.org.uk JOHN BARTON Non-Executive Chairman 46 easyJet plc Annual report and accounts 2015

  • Page 51
    ... board Strategic report Governance 1. JOHN BARTON, Non-Executive Chairman 2. CHARLES GURASSA, Non-Executive Deputy Chairman and Senior Independent Director Accounts 3. CAROLYN MCCALL OBE, Chief Executive 4. ANDREW FINDLAY, Chief Financial Officer 5. ADÈLE ANDERSON, Independent Non-Executive...

  • Page 52
    Board of Directors continued What they bring to the table 1. John Barton Non-Executive Chairman First appointed: May 2013 Key areas of prior experience: Finance, Governance Current external appointments: Chairman, Next plc. Director of Matheson & Company Limited and SSP Limited. Previous relevant ...

  • Page 53
    ... Executive Officer of Dixons Retail plc (2007-2012). John has also held a number of Executive Director positions at Tesco plc, including CEO of Tesco.com, Operations Development Director and Group Strategy Director (1998-2007). John was at the Boston Consulting Group Limited (1993-1998). Current...

  • Page 54
    ...: Strategy and Implementation 8. CATH LYNN, Group Commercial Director: Markets, Network and Pricing 9. CAROLYN MCCALL OBE, Chief Executive 10. PAUL MOORE, Communications Director 11. KYLA MULLINS, General Counsel and Director of Regulation & Corporate Governance 50 easyJet plc Annual report...

  • Page 55
    ...Head of Network Development, Network and Planning Director, Customer and Revenue Director and Group Commercial Director. Prior to easyJet Cath spent 12 years in retail for J Sainsbury before joining Go (1998-2002) where she was part of the management buy-out team and headed up cabin services, ground...

  • Page 56
    ... and monitor the implementation of the Company's annual safety plan. The Committee also examines specific safety issues as requested by the Board or any member of the committee. Where appropriate, the Committee reviews relevant reports published by the UK Air Accident Investigation Branch, major...

  • Page 57
    ...the Executive Directors and the Chairman, as well as the level and structure of remuneration for senior management. Highlights of the 2015 financial year • The Committee reviewed and put forward a revised Long Term Incentive Plan which was approved at the Company's 2015 Annual General Meeting as...

  • Page 58
    .... The Committee welcomes the changes to the revised 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 apply to the Group for the first time this year and have been areas...

  • Page 59
    ... Review of the financial statements and announcements relating to the financial performance and governance of the Group at year end and half year. The Committee also considered the material areas in which significant judgements have been applied based on reports from both the Group's management...

  • Page 60
    ... Committee reviewed the maintenance provision at the year end. A number of judgements are used in the calculation of the provision, primarily pricing, utilisation of aircraft and timing of maintenance checks. The Committee addressed these matters using reports received from management which underpin...

  • Page 61
    ...assessment criteria. Governance Accounts Internal Audit The Audit Committee is responsible for overseeing the work of the Internal Audit function. It reviews and approves the scope of the Internal Audit annual plan and assesses the quality of Internal Audit reports, along with management's actions...

  • Page 62
    ... of the new Chief Financial Officer and a new Non-Executive Director. • Consideration of the appointments to the Board Committees following the change in Board composition. • Reviewing management's succession plans for senior executive positions. 58 easyJet plc Annual report and accounts 2015

  • Page 63
    ...of foreign exchange and interest rate hedging strategies; and • a review of the unearned revenue and cash position. Highlights of the 2015 financial year The Committee has reviewed: • the prioritisation and sequencing of the various IT programmes; • the tender process for systems relating to...

  • Page 64
    ...: http://corporate.easyJet.com. Day-to-day management responsibility rests with the Executive Management Team, listed on pages 50 to 51. These individuals are also the Directors and Company Secretary of the principal operating company, easyJet Airline Company Limited. The Board meets regularly...

  • Page 65
    ... things, the time commitment required. The Executive Management Team are permitted to hold one appointment on a Board or committee of a listed company so long as this is not thought to interfere with the business of the Group. B.4 Development On joining the Board, new members receive a tailored...

  • Page 66
    ... communication with institutional investors on key business issues. During the course of the year the Chairman and Chief Executive have both met with a representative of easyGroup Holdings Limited, the Company's largest shareholder, to discuss relevant matters. The Chief Financial Officer, Chris...

  • Page 67
    ... the business operations; • regular operational (including safety), commercial, financial and IT functional meetings are held to review performance and to consider key risks and issues; (please refer to pages 52-53 for details of the Safety Committee); and • the Executive Management Team meets...

  • Page 68
    ... point growth in return on capital employed (ROCE) (including lease adjustments) from 20.5% in 2014 to 22.2% in 2015; • increased ordinary dividend with a proposed ordinary dividend of 55.2 pence per share; • on-time performance was 80%, marginally above the threshold for the year; and • total...

  • Page 69
    ... 2006 and Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. The report has been prepared in line with the recommendations of the UK Corporate Governance Code and the requirements of the UKLA Listing Rules. The Directors' remuneration...

  • Page 70
    ... with long-term savings via pension provisions in line with the Company's strategy to keep remuneration simple and consistent. Defined contribution plan with the same monthly employer contributions as those offered to eligible employees in the wider UK workforce, of 7% of base salary. A cash...

  • Page 71
    ... of tax balancing cash payment be made. Not applicable. Governance Accounts LTIP Performance Share Award 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 LTIP awards...

  • Page 72
    .... However, in line with the Company's policy to keep remuneration simple and consistent, the benefit and pension arrangements for the current Executive Directors are on the same terms as those offered to eligible employees in the wider workforce. 68 easyJet plc Annual report and accounts 2015

  • Page 73
    ... 2015 financial year; and • Free and Matching Shares under the all-employee share incentive plan. The scenarios do not include any share price growth or dividend assumptions. What are the Executive Directors' terms of employment? Strategic report Under the Executive Directors' service contracts...

  • Page 74
    ...of a listed company so long as this is not thought to interfere 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...

  • Page 75
    ...Board Committee responsibilities. The Chairman and Non-Executive Directors do not participate in any of the Company's incentive arrangements. Governance Fee levels are reviewed on a periodic basis, and may be increased, taking into account factors such as the time commitment of the role and market...

  • Page 76
    ... tax On-time performance Customer satisfaction Operating costs (excluding fuel) per seat at constant currency Departmental objectives 70% 10% 10% 10% - 60% 10% 10% 10% 10% The proposed target levels for the 2016 financial year have been set to be challenging relative to the business plan. The...

  • Page 77
    ...performance period. The weighting on ROCE and TSR has been rebalanced for the 2016 financial year from an equal split to a 70/30 split in favour of ROCE. Targets are set taking account of management's strategic plan, market consensus and the Board's strong focus on driving value from its increasing...

  • Page 78
    ... to 14.6%; • on-time performance was 80%, marginally above the threshold for the year; and • total cost per seat (excluding fuel at constant plan currency) and customer satisfaction target threshold levels were not met. The awards made to Executive Directors in December 2012 were subject to...

  • Page 79
    ... leave easyJet in order to become Chief Financial Officer of ARM Holdings plc. Following his resignation, no payments were made in connection with his notice period following the agreement of a mutually convenient leaving date. In line with the Company's remuneration policy, this was not as a good...

  • Page 80
    ... closing share price of the Company's ordinary shares at 30 September 2015 was £17.77 and the closing price range during the year ended 30 September 2015 was £13.06 to £19.15. Key: A Long Term Incentive Plan - Performance Shares B Long Term Incentive Plan - Matching Shares C Share Incentive Plan...

  • Page 81
    ... LTIP awards made in December 2013, 50% of vesting is based on three-year average ROCE (including lease adjustment) performance for the three financial years ending 30 September 2016 and 50% of vesting is based on relative total shareholder return performance compared to companies in the top decile...

  • Page 82
    ... Shares in October and November 2015. Any changes subsequent to the date of this report may be found on 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...

  • Page 83
    ... airlines(1). The FTSE 100 and FTSE 250 were chosen as easyJet has been a member of both indices during the period. TOTAL SHAREHOLDER RETURN VALUE (LOCAL CURRENCY) 700 600 500 400 300 200 Governance Accounts 100 30 Sep 2008 30 Sep 2009 30 Sep 2010 30 Sep 2011 30 Sep 2012 30 Sep 2013 30 Sep 2014...

  • Page 84
    ... 2015 and the year ended 30 September 2014 for the Chief Executive, compared to the average earnings of all other easyJet UK employees. % Salary Benefits Annual bonus What have Executive Directors earned for holding external appointments? Carolyn McCall joined the board of Burberry Group plc...

  • Page 85
    ...per share. The ordinary dividend is subject to shareholder approval at the Company's Annual General Meeting to be held on 11 February 2016. ŽŽÂ'tment during 2015 financial year Financial instruments and financial risk management Greenhouse gas emissions Corporate governance report Future...

  • Page 86
    ... the Board in line with the Company's Articles of Association. Directors have a continuing duty to update any changes to their conï¬,icts of interest. Employee share schemes - rights of control The trustee of the easyJet UK Share Incentive Plan (the Plan) will, on receipt of any offer, compromise...

  • Page 87
    ... compensation 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. Governance Substantial interests...

  • Page 88
    ... the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and the Company's position and performance, business model and strategy. Each of the Directors, whose names and functions are listed...

  • Page 89
    ... Companies Act 2006 and, as regards the Group accounts, Article 4 of the IAS Regulation. What we have audited Strategic report The accounts, included within the Annual Report, comprise: • the Group consolidated and Company statements of financial position as at 30 September 2015; • the Group...

  • Page 90
    ..., euros, Swiss francs and South African rand. These transactions primarily affect revenue, fuel and aircraft dry leasing costs, and the carrying value of owned aircraft. The Group also uses jet fuel forward contracts to hedge fuel price risks. At 30 September 2015, cash and money market deposits...

  • Page 91
    ...The results of our evaluation proved to be satisfactory. We also challenged the key assumptions for fuel prices, exchange rates and long-term growth rates in the forecasts by comparing them to economic and industry forecasts; and the discount rate by assessing the cost of capital for the Company and...

  • Page 92
    ... the UK Corporate Governance Code (September 2014) (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 materially...

  • Page 93
    ... Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to ten further provisions of the 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...

  • Page 94
    ...September 2015 £ million Year ended 30 September 2014 £ million Seat revenue Non-seat revenue Total revenue Fuel Airports and ground handling Crew Navigation Maintenance Selling and marketing Other costs EBITDAR Aircraft dry leasing Depreciation Amortisation of intangible assets Operating profit...

  • Page 95
    ... £ million Year ended 30 September 2014 £ million Strategic report Profit for the year Other comprehensive income/(expense) Cash flow hedges Fair value losses in the year Losses transferred to income statement Losses transferred to property, plant and equipment Related tax credit/(charge) Total...

  • Page 96
    ...2,172 Net assets Shareholders' equity Share capital Share premium Hedging reserve Translation reserve Retained earnings 17 2,249 108 659 (239) 1 1,720 2,249 108 658 (17) 1 1,422 2,172 The accounts on pages 90 to 117 were approved by the Board of Directors and authorised for issue on 16 November...

  • Page 97
    ... earnings £ million Strategic report Total £ million At 1 October 2014 Total comprehensive (expense)/income Dividends paid (note 7) Share incentive schemes Proceeds from shares issued Value of employee services Related tax (note 5) Purchase of own shares At 30 September 2015 108 108 Share...

  • Page 98
    ...own shares for employee share schemes Repayment of bank loans Repayment of capital element of finance leases Net decrease/(increase) in money market deposits Net decrease/(increase) in restricted cash Net cash generated from/(used by) financing activities Effect of exchange rate changes Net increase...

  • Page 99
    ...their present value. When applying this method, easyJet relies on a number of estimates including its strategic plans, fuel prices, exchange rates, long-term economic growth rates for the principal countries in which it operates, and its pre-tax weighted average cost of capital. www.easyJet.com 95

  • Page 100
    ... 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 duty and similar charges...

  • Page 101
    ... 5 years Governance 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...

  • Page 102
    ... are designated as cash flow hedges. easyJet uses foreign currency forward exchange contracts to hedge foreign currency risks on transactions denominated in US dollars, Euros, Swiss francs and South African rand. These transactions primarily affect revenue, fuel, aircraft dry leasing costs, and the...

  • Page 103
    ... in the period in which the dividends are approved by the Company's shareholders. Share-based payments easyJet has a number of equity-settled share incentive schemes. The fair value of share options granted under the Save As You Earn scheme is measured at the date of grant using the Binomial...

  • Page 104
    ... on monetary assets and liabilities Interest payable and other financing charges Interest payable on bank loans Interest payable on finance lease obligations Other interest payable Net finance charges 5 5 1 11 2 6 5 - 11 - (3) (6) (9) (4) (7) (11) 100 easyJet plc Annual report and accounts 2015

  • Page 105
    ... was: 2015 £ million 2014 £ million Short-term employee benefits Share-based payments 7 3 10 7 6 13 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...

  • Page 106
    ...) to other comprehensive income Deferred tax on change in fair value of cash flow hedges Credit/(charge) to shareholders' equity Current tax credit on share-based payments Deferred tax (charge)/credit on share-based payments 13 (9) 4 7 1 8 56 (10) 102 easyJet plc Annual report and accounts 2015

  • Page 107
    ... million Short-term timing differences £ million Fair value gains/ (losses) £ million Share-based payments £ million Strategic report Total £ million At 1 October 2014 Charged to income statement Credited to other comprehensive income Charged to shareholders' equity At 30 September 2015 171...

  • Page 108
    ... route network. Pre-tax cash flow projections have been derived from the strategic plan presented to the Board for the period up to 2020, 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...

  • Page 109
    ... management's view of reasonable average rates. Operating margins are sensitive to significant changes in these rates. Cash flow projections beyond the forecast period have been extrapolated using growth rate scenarios ranging from zero up to an estimated average of long-term economic growth rates...

  • Page 110
    ... value of £149 million (2014: £142 million) are held under finance leases. easyJet is contractually committed to the acquisition of 150 (2014: 170) Airbus A320 family aircraft, with a total list price of US$13.0 billion (2014: US$14.6 billion) before escalations and discounts for delivery in 2016...

  • Page 111
    Restricted cash comprises: 2015 £ million 2014 £ million Strategic report Pledged as collateral to third parties: Security deposits Aircraft operating lease deposits - 12 23 9 13. Trade and other payables 2015 £ million 2014 £ million Governance Trade payables Accruals Leased aircraft - ...

  • Page 112
    ...average share price for options exercised during the year was £15.84 (2014: £14.46). easyJet's employee benefit trusts hold the following shares. The cost of these has been deducted from retained earnings: 2015 2014 Number of shares (million) Cost (£ million) Market value at year end (£ million...

  • Page 113
    ... on return on capital employed (ROCE) targets and a positive total shareholder return (TSR) compared to FTSE 51-150 companies performance conditions measured over the three financial years ended 30 September 2015. Save As You Earn scheme The scheme is open to all employees on the UK payroll...

  • Page 114
    ... assumptions are used: Share price £ Exercise price £ Expected volatility % Option life years Risk-free interest rate % Fair value £ Grant date Long Term Incentive Plan 31 March 2011 4 January 2012 18 December 2012 - ROCE 18 December 2012 - TSR 17 December 2013 - ROCE 17 December 2013 - TSR 19...

  • Page 115
    ... 2015 £ million Strategic report Cash and cash equivalents Money market deposits 424 561 985 33 5 38 (19) (13) (32) 6 193 (277) (84) 80 11 91 7 650 289 939 Governance Bank loans Finance lease obligations (377) (186) (563) (316) (188) (504) 435 Net cash 422 Accounts 21. Financial...

  • Page 116
    ... rates and by applying year end exchange rates. Fair value of derivative financial instruments At 30 September 2015 Designated as cash flow hedges US dollar Euro Swiss franc South African rand Jet fuel 2,614 2,360 329 479 3 18 23 2 - 1 44 Non-current assets £ million Quantity million Non-current...

  • Page 117
    ... authorised to use in managing financial risks. The policy is regularly reviewed to ensure best practice, however there have been no significant changes during the current year. Strategic report Governance Capital employed Capital employed comprises shareholders' equity, borrowings, cash and money...

  • Page 118
    ...operating leases. At 30 September 2015, the Company had 114 (2014: 94) unencumbered aircraft. Fuel price risk management easyJet is exposed to fuel price risk. The objective of the fuel price risk management policy is to provide protection against sudden and significant increases in jet fuel prices...

  • Page 119
    ... 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. 23. Leasing commitments Commitments under operating leases Aircraft 2015 £ million 2014 £ million 2015 £ million Other 2014 £ million Total...

  • Page 120
    ...'s results, cash flows or financial position. At 30 September 2015 easyJet had outstanding letters of credit and performance bonds totalling £44 million (2014: £39 million), of which £33 million (2014: £34 million) expires within one year. The fair value of these instruments at each year end was...

  • Page 121
    ...Holdings Limited and Polys Holding Limited) holds, in total, 33.73% of the issued share capital of easyJet plc as at 30 September 2015. Under the Amended Brand Licence signed in October 2010 and approved by the shareholders of easyJet plc in December 2010, an annual royalty of 0.25% of total revenue...

  • Page 122
    ...Net assets Shareholders' equity Share capital Share premium Retained earnings 108 659 788 1,555 108 658 729 1,495 677 1,555 (1) (5) (6) 1,186 1,495 684 1,192 c 878 309 The accounts on pages 118 to 122 were approved by the Board of Directors and authorised for issue on 16 November 2015 and signed on...

  • Page 123
    Company statement of changes in equity Share capital £ million Share premium £ million Retained earnings £ million Strategic report Total £ million At 1 October 2014 Total comprehensive income Profit for the year Dividends paid Share incentive schemes Proceeds from shares issued Movement ...

  • Page 124
    Company statement of cash flows Notes Year ended 30 September 2015 £ million Year ended 30 September 2014 £ million Cash flows from operating activities Cash (used by)/generated from operations (excluding dividends) Interest received Dividends received Dividends paid Net cash used by operating...

  • Page 125
    ...when the right to receive payment is established. The Company recognised no other income or expenses in either the current or prior year, other than the profit for each year. The Company has eight employees at 30 September 2015 (2014: ten). These are the Non-Executive Directors of easyJet plc; their...

  • Page 126
    ... 2015 £ million 2014 £ 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: Decrease in tax recoverable (Increase...

  • Page 127
    ... assets Net cash Operating activities Investing activities Financing activities (excluding movements in borrowings and money market deposits) Loan issue costs Exchange gains/(losses) Increase/(decrease) in net cash Key performance indicators Return on capital employed Gearing Net cash/(debt) Profit...

  • Page 128
    ... (Cash includes money market deposits but excludes restricted cash). Reported operating profit adjusted for one-third of operating lease costs incurred in the year, less tax at the prevailing UK corporation tax rate at the end of the financial year. Average number of block hours per day per aircraft...

  • Page 129
    ... 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 130
    Hangar 89 London Luton Airport Luton Bedfordshire LU2 9PF www.easyJet.com