easyJet plc · LSE:EZJ
easyJet — FY2006 Earnings Presentation
42 slides from easyJet's earnings presentation, Nov 14, 2006
Slide 1: 2006 Preliminary Results
2006 Preliminary Results 14 November 2006 1
Slide 2: Business highlights
Business highlights 4 Record profit before tax of £129 million 4 Passenger numbers up 11.5% to 33 million 4 Fleet increased to 122 aircraft, new order announced today 4 58 new routes launched bringing total to 262 routes on offer 4 11 new airports incorporated into network bringing total to 74 airpo
Slide 3: Business highlights
Business highlights 4 Return on equity increased by 3.0pp to 10.1% 4 Passenger revenue growth of 5.9% per seat 4 Ancillary revenue increased by 34% per seat 4 Unit costs excluding fuel down 1.5% – Unit fuel costs up 33% – Unit costs including fuel up 5.7% 4 Balance sheet strong with cash of £861 mil
Slide 4: Profit and loss account
Profit and loss account £m FY 2006 FY 2005 Change Total revenue 1,620 1,341 + 21% Operating costs (1,341) (1,134) + 18% EBITDAR 279 207 + 35% Finance and ownership (150) (124) + 21% Pre-tax profit 129 83 + 56% Margin 8.0% 6.2% +1.8pp Strong revenue growth driving margin improvement 4
Slide 5: Profit per seat build-up
Profit per seat build-up £m £19m £8m 250 21p £33m 49p 86p (£1m) (£10m) £83m 200 213p (2p) (25p) £129m 150 332p £83m £10m (£96m) 100 238p (248p) 50 0 v ev e 06 05 d el st ip g re m ea in Fu co sh lr 20 20 lu as x rh ci er Pa Vo ps FY FY le ve An wn O et O O W 5
Slide 6: Passenger revenue: H2 growth strong across network
Passenger revenue: H2 growth strong across network FY 2006 FY 2005 Change Passengers (m) 33.0 29.6 + 11% Load factor 84.8% 85.2% - 0.4pp Seats (m) 38.9 34.7 + 12% Pax revenue (£m) 1,488 1,254 + 19% Per seat £38.28 £36.15 + 5.9% Growth by half year H1 H2 FY 2006 Pax rev per seat - 1.5% + 11.2% + 5.9%
Slide 7: Ancillary revenues: all areas growing
Ancillary revenues: all areas growing FY 2006 FY 2005 Change Ancillary revenue (£m) 131 87 +51% Per seat £3.37 £2.51 +34% Change per seat FY 2006 Card fees + 24% Change fees / Rescue fees + 20% Partner + 83% Excess baggage / Sporting goods + 53% In-flight + 13% Ancillary revenue per seat in order of
Slide 8: Cost per seat: maintenance reduction leading the way
Cost per seat: maintenance reduction leading the way Cost/seat Change vs Change vs FY 2006 FY 2005 FY 2005 Maintenance £ 2.82 - 18% - £ 0.62 Overheads £ 4.11 - 5% - £ 0.21 Better Airports / handling £ 10.35 - 0% - £ 0.04 Navigation £ 3.12 - 0% - £ 0.01 Ownership £ 3.59 + 1% + £ 0.02 Worse Crew £ 4.1
Slide 9: Costs: still falling ex fuel
Costs: still falling ex fuel FY 2006 FY 2005 Change Total (ex fuel) per seat £28.36 £28.78 -1.5% Total (ex fuel & wet leasing) £28.11 £28.78 -2.3% per seat 4 1.5% full year unit cost reduction was lower than planned with a number of items impacting H2 performance – August 10th disruption and passeng
Slide 10: Maintenance
Maintenance Change in maintenance cost per seat £1.50 £0.75 £- -£0.75 - 62p -£1.50 2002 2003 2004 2005 2006 4 Full year SRT contract savings on Airbus airframe maintenance 4 Exit of older, more expensive 737-300s; out of service end FY06 4 Higher proportion of owned A319s reducing maintenance reserv
Slide 11: Overheads
Overheads Change in overhead cost per seat £1.50 £0.75 £- - 21p -£0.75 -£1.50 2002 2003 2004 2005 2006 4 Increased marketing investments supporting yield improvements 4 August 10th disruption and passenger assistance added costs 4 Impact of performance related compensation 4 Full year benefit from r
Slide 12: Airports and ground handling
Airports and ground handling Change in airport / handling cost per seat £1.50 £0.75 £- - 4p -£0.75 -£1.50 2002 2003 2004 2005 2006 4 Significant progress on self and third party handling in Spain 4 Volume discounts achieved in Geneva and Basel 4 Adverse mix impact due to higher volumes in primary ai
Slide 13: Aircraft ownership
Aircraft ownership Change in aircraft ownership cost per seat £1.50 £0.75 + 2p £- -£0.75 -£1.50 2002 2003 2004 2005 2006 4 +23p from increase in USD interest rates 4 Improved financing and fleet mix helping to offset 4 Increase in owned A319s 4 Better end of lease management on the 737-300s deliveri
Slide 14: Crew
Crew Change in crew / training cost per seat £1.50 £0.75 + 19p £- -£0.75 -£1.50 2002 2003 2004 2005 2006 4 Pay deals agreed: cabin crew to Sep 2008; flight deck to Sep 2007 4 Impact of crew deals on unit costs is 16p in 2006 4 Focus on crew resourcing and productivity for 2007 14
Slide 15: Net income, EPS and ROE
Net income, EPS and ROE £m FY 2006 FY 2005 Change Pre-tax profit 129 83 + 56% Tax 35 24 + 49% Effective tax rate 27% 29% - 2pp Net profit 94 59 + 59% EPS (fully diluted) 22.6p 14.4p + 57% Return on Equity 10.1% 7.1% + 3.0pp 4 FY 2007 tax rate expected to be slightly down on FY 2006 15
Slide 16: Strong balance sheet
Strong balance sheet £m Sep 06 Sep 05 Aircraft (incl. deposits) 699 421 Cash 861 667 Goodwill 310 310 Other assets 254 232 Total assets 2,124 1,630 Debt 480 217 Other liabilities 661 550 Shareholders’ funds 983 863 Total equity and liabilities 2,124 1,630 Gearing 31% 31% Gearing defined as (debt + 7
Slide 17: Good cash generation
Good cash generation £m £285m 1200 1100 1000 £73m £4m £861m 900 £118m £28m (£314m) 800 £667m 700 600 500 IT ex 06 05 t. t l g ta or in in EB ap 9/ 9/ pi m nc et ca /a tc h h /n na as s k Ne Ca n Fi W C x ep Ta D 17
Slide 18: Aircraft Ownership
Aircraft Ownership 4 Shift to owned A319s Airbus A319s Boeing (leased) Owned Leased 300s 700s FY05 18 37 22 32 FY06 44 43 3 32 +26 +6 -19 - 4 In FY07 20 new A319s entering the fleet – 3 operating leases – 17 on balance sheet 4 $250m Standby facility to 2011 in place since July 2006 18
Slide 19: Forward hedging: US$
Forward hedging: US$ US$:£ weighted average values 2.00 fwd @ $1.91 7% H1 20% H2 1.90 $1.88 $1.86 60% collars 1.80 72% collars $1.77 $1.75 1.70 H1 79% H2 80% 1.60 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 4 80% exposure hedged for FY07 19
Slide 20: Forward hedging: fuel
Forward hedging: fuel Jet A1 price per tonne (US$) 800 weighted average values $776 750 22% collars $739 43% collars $699 700 $679 650 24% fwd @ $670 32% fwd @ $648 600 550 H1 75% H2 46% 500 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 4 59% exposure hedged for FY07 20
Slide 21: Business Review
Business Review Andy Harrison 21
Slide 22: Priorities and focus: network
Priorities and focus: network Revenue Costs People Network 22
Slide 23: 15% annual capacity growth planned
15% annual capacity growth planned Committed aircraft owned / leased at end of financial year 122 137 149 174 Planned seat growth + 15% + 15% + 15% Actual Expected Expected Expected FY 2006 FY 2007 FY 2008 FY 2009 23
Slide 24: Airbus A319s: ordering for future growth
Airbus A319s: ordering for future growth 4 52 purchase rights converted into firm orders – Delivery mainly in 2009 and 2010 – Takes total firm Airbus aircraft to 192 4 Plus an additional 75 further purchase rights granted – Substantially the same terms as original deal – Now have 123 purchase rights
Slide 25: Base expansion concentrated in Europe
Base expansion concentrated in Europe Base 9/06 9/07 Base 9/06 9/07 Gatwick 18 +2 Madrid +4 Luton 17 Belfast 5 Stansted 13 Paris Orly 5 Bristol 9 +1 Basel 4 Berlin 8 Dortmund 4 Liverpool 8 Glasgow 4 Geneva 6 +2 Edinburgh 3 Newcastle 6 E Midlands 3 Malpensa 3 +3 Tactical 6 +3 Total 122 137 25
Slide 26: Strategic Network Development
Strategic Network Development Primary Secondary Tertiary Increased Heartland Frequency Join the Dots New New Frontier Airports 4 Balanced network development focusing on each area 26
Slide 27: Portfolio management approach
Portfolio management approach 4 Improving schedule quality and frequencies; disciplined growth New Capacity Growth 2003 – 2006 100% 4% 19% 80% 27% 41% 64% 60% 48% 40% 69% 43% 20% 27% 33% 16% 9% 0% 2003 2004 2005 2006 Frequency increase Join the dots New airports 27
Slide 28: Priorities and focus: revenue
Priorities and focus: revenue Revenue Costs People Network 28
Slide 29: High impact and targeted marketing
High impact and targeted marketing 4 ‘Objects’ advertising campaign 4 Better use of e-mail to customers 4 Balanced pan-European and local promotional focus +40% increase in monthly unique website visitors 29
Slide 30: Marketing to the business traveller
Marketing to the business traveller 30
Slide 31: Marketing to the business traveller
Marketing to the business traveller 31
Slide 32: Schedule improvement is also driving performance
Schedule improvement is also driving performance Milan-Gatwick Madrid-Gatwick Belfast-Gatwick Amsterdam-Gatwick W05/06 W06/07 W05/06 W06/07 W05/06 W06/07 W05/06 W06/07 Departures 06:00 07:00 07:30 07:25 08:50 08:50 08:00 08:55 09:00 09:20 10:00 10:45 11:00 11:00 11:45 11:45 12:10 12:10 12:00 12:15 1
Slide 33: Improved yield management
Improved yield management 4 Leading proprietary system – Benchmarked as “best in class amongst low cost carriers”* 4 Continual refinement and development carried out nonetheless – Increase in the number of algorithms – More refinements in terms of days of week and time of day 4 Pricing reviews and i
Slide 34: Ancillary revenue growth +34% per seat
Ancillary revenue growth +34% per seat 4 Partner revenues – Tender process for all major partners completed in year – Dynamic packaging of cars in all languages at all airports 4 Improving in-flight – Retail training for new starters – Review of offering: scratch cards, hot food 4 Speedy boarding –
Slide 35: Priorities and focus: people
Priorities and focus: people Revenue Costs People Network 35
Slide 36: People: planning for growth
People: planning for growth 4 Annual employee survey carried out – Good overall satisfaction – Feedback used to target areas for improvement 4 easyJet Academy opened Nov 2005 – Cabin simulator and aircraft slides – Training and recruitment departments – Low cost 4 Head office staffing improvements –
Slide 37: Crew recruitment
Crew recruitment FY 2007F Pilots 1,534 Pilot requirement +275 Cabin crew 2,705 Cabin crew requirement +468 Average FTE crew numbers and net increase for financial year FY 2007F Recruited to date: to go: Pilots Captains 66% 34% First Officers 50% 50% Recruitment data based on gross increase for finan
Slide 38: Current trading and outlook
Current trading and outlook 4 Today’s Airbus order underpins our future growth and we expect to increase capacity in 2007 by 15%. 4 Current trading is in line with our expectations and we see yields for winter broadly in line with last year. As we look further forward we anticipate more pressure on
Slide 39: Appendix
Appendix
Slide 40: Operating statistics
Operating statistics 2006 2005 Change Seats (m) 38.9 34.7 + 12% Load Factor (%) 84.8 85.2 - 0.4pp Passengers (m) 33.0 29.6 + 11% ASKs (m) 37,088 32,141 + 15% RPKs (m) 31,621 27,448 + 15% Stage Length (km) 954 926 + 3% Sectors 253,548 229,068 + 11% Operated aircraft 11.6 11.7 - 1% utilisation (hours
Slide 41: Calculated amounts
Calculated amounts 2006 2005 Change Total Revenue per pax (£) 49.15 45.38 + 8% Cost / ASK (p) 4.02 3.92 + 3% Cost / ASK (ex fuel) (p) 2.97 3.11 - 4% RASK 4.37 4.17 + 5% 41
Slide 42: Financial promotion notice
This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth b