Easyjet Plc · LSE:EZJ
Easyjet — Investor Day (September 2017)
90 slides from Easyjet's investor day presentation, Sep 27, 2017
Slide 1: Capital markets day
Capital markets day 27th September 2017
Slide 2: Agenda
Agenda Time Agenda item Led by Time Agenda item Led by 11.00 Introduction Carolyn McCall 14:15 TEA & COFFEE BREAK 11.05 1. Market / Network 14.30 4. Making travel easy & affordable > Airline industry trends Robert Carey > A winning network strategy Andrew Hodges > The easyJet operation / Chris Brown
Slide 3: Introduction
Introduction Carolyn McCall
Slide 4: European Aviation
European Aviation Robert Carey – Director Strategy & Network
Slide 5: Europe faces a challenging landscape ahead
Europe faces A challenging landscape ahead Fragmented Europe appears to be arriving at an inflection point Consolidation Full service carriers (FSCs) are now offering identical products to low costs (LCCs) Convergence Cost pressure Factor cost inputs continue to rise Congestion Passenger numbers wil
Slide 6: European consolidation is finally starting
European consolidation is finally starting North American airline market European airline market Ryanair American Other Other 25% 51% Lufthansa Group Alaskan United Further consolidation SouthWest to come IAG easyJet Delta Top 4 airlines Top 4 airlines 70% of market 49% of market European airline ma
Slide 7: Airline business models are converging
Airline business models are converging Charge for Charge for Charge for on-board Flexi reserved hold food fares seating baggage offering Prior offering Current offering Charge for Charge for Charge for on-board Flexi reserved hold food fares seating baggage offering Prior offering
Slide 8: Traditional advantages of a Hub feeder model are eroding
Traditional advantages of a Hub feeder model are eroding 8
Slide 9: Factor cost pressures continue to rise
Factor Cost pressures continue to rise Fuel 150 $ per barrel 100 50 Labour 50 average wage index, U.S. 40 30 20 0 200 Maintenance cost Indexed 19801, U.S. market data, per aircraft 150 100 Sources: Form 41 via OAG Aviation Solutions; MRO development team; Office of the Chief Actuary; Air Transport A
Slide 10: Passenger volumes and associated congestion is growing
passenger volumes and associated congestion is growing Looking at Easyjet Markets by 2035… +50% Growth in the UK 7,200,000,000 +50% Growth in France Number of passengers predicted by 2035, ~2x today’s volume +40% Growth in Spain +35% Growth in Germany +30% Growth in Italy Source: IATA 20 year passen
Slide 11: Data and digital are driving a new focus on customer
Data and digital are driving a new focus on Customer PRE- LOYALTY EXPLORE BOOK AIRPORT IN-FLIGHT ARRIVAL DEPARTURE INDUSTRY Integrated loyalty Creates buzz Opaque pricing Self-serve mobile Redesigned Allows Allows and data with around its brand model that rebooking in airport passengers order custom
Slide 12: Implication: very different growth reality by airline
Implication: very different growth reality by airline Yearly growth Category Rationale expectation > Cost position to succeed Pure LCCs High > Long term profitable growth through organic demand and market share gain > Can continue grow through the cycle to achieve long term ambition > Multiple chall
Slide 13: Current trends support the easyJet model
current trends support THE easyJet model Strong network and balance sheet allow it to take advantage of market consolidation Consolidation Structural lower cost is an advantage versus FSC competitors, as well as Convergence innovative ancillary offerings Cost LEAN approach and relentless cost focus
Slide 14: The easyJet Network
The easyJet Network Andrew Hodges – Head of Network & Scheduling
Slide 15: Winning network strategy
winning network strategy Purposeful investment Protect the profitable core + Capture the national opportunity in France Disciplined use of capital Target investment in key cities + Efficient basing Well positioned in an evolving market 15
Slide 16: #1 positions deliver sustainable returns
PURPOSEFUL INVESTMENT #1 positions deliver sustainable returns Being number 1 delivers returns #1 positions Constrained, Superior product not #1 Neither constrained Returns > widest range of routes > best frequencies / times nor #1 > strongest brand awareness Cost advantage > negotiated airport fees
Slide 17: Strong progress over last five years
PURPOSEFUL INVESTMENT Strong progress over last five years easyJet capacity split by airport position, FY17 airports 138 europe 28 bases 98% of seats are on routes that touch a #1 or #2 position FY17 31 routes countries 874 2013 2017 279 86 m seats over p.a. Airports in #1/2 positions 44 47 aircraft
Slide 18: Delivering superior market positions
PURPOSEFUL INVESTMENT Delivering Superior market positions Airport position IATA definition Share of 2017 capacity Total #1 #2 Other Level 3 – demand significantly exceeds airports capacity Level 3 constrained 32% 20% 21% 72% Level 2 – potential for congestion at Level 2 constrained 12% 2% 3% 16% so
Slide 19: Significant scope for further profitable growth
PURPOSEFUL INVESTMENT Significant scope for further profitable growth CITY-PAIR > Over the next 3 years our fleet will grow by easyJet Routes around 40 aircraft FY17 capacity (m) 68.2 86.9 > On existing routes alone there remains Equivalent to 371 easyJet significant scope to grow through: 123.4 air
Slide 20: Targeted investment to create winning competitive positions
PURPOSEFUL INVESTMENT Targeted investment to create winning competitive positions Indicative allocation of growth to FY21 > Growth balanced between strengthening current positions and seeding new opportunities Maintain existing #1 positions > This will create 5 - 10 additional #1 positions 30%-40% A
Slide 21: Portfolio approach to route management
DISCIPLINED USE OF CAPITAL Portfolio approach to route management Mature Portfolio Under Review RETURN 12% ROCE • Clear performance targets & actions for each route • self-dilution • fix • churn • invest for strategic position • Re-allocation of aircraft into advantaged positions • Strong and resili
Slide 22: Weaker competitors are retreating
WELL POSITIONED IN AN EVOLVING MARKET Weaker competitors are retreating European short haul capacity growth YOY % Norwegian: LGW-FCO/SXF & CPH-SXF from S17 Total Markets easyJet Markets eurowings: MXPSTR from S17 8.7 7.7 Monarch: LGW-VRN from S17 7.4 6.6 6.4 6.0 6.0 6.1 Ryanair: GLA-STN from S17 5.7
Slide 23: Winning network strategy
winning network strategy Purposeful investment Protect the profitable core + Capture the national opportunity in France Disciplined use of capital Target investment in key cities + Efficient basing Well positioned in an evolving market 23
Slide 24: Driving Revenue
Driving Revenue Peter Duffy – Chief Commercial Officer
Slide 25: Strong foundations for revenue growth
Strong Foundations for revenue growth > Strong network > Responsible and stable social model > Resonant customer proposition > Affluent and loyal passengers > Compelling and trusted brand 25
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Slide 27: Data foundations
Data foundations During the past two years, the world generated a zettabyte of data - more information than in all of history. With a growing array of data available the key to unlocking its value is through focus and simplicity. 27
Slide 28: Data applications
Data applications Data Hub 28
Slide 29: CRM case study
Crm case study Customer value Marketing +30% booking propensity cost per seat -25% +50% Marketing CPS higher flight revenue +47% higher ancillary revenue Constant currency; FY17 projected 29
Slide 30: New definition for ancillary revenue
New definition for ancillary revenue Seat Low fares – right times, right places Partner Ancillary revenue performance Extending across the travel value chain Old FY14-17P (£m)1 “non-seat” Inflight definition World class retail offer with brands you love Product c. £1bn Curated choice aligned to cust
Slide 31: Delivering in data and digital
Delivering in DATA AND DIGITAL PERSONALISED BUYING COMMERCIALISED PERSONALISED PRODUCT CONNECTED DIGITAL INFLIGHT EXPERIENCE CUSTOMER JOURNEY AND OFFERS PEOPLE EXPERIENCE Recognising customer Use mobile to improve Optimising cross and Empowering our people Using innovative digital history, profile a
Slide 32: World leading pricing system
World leading pricing system 90% of flight pricing interventions are automated c.30,000 daily inventory adjustments 100% automation of bag and allocated seat pricing adjustments 32 32
Slide 33: AI initiatives continuing to drive seat revenue
AI initiatives continuing to drive seat revenue 1. Market diagnostics Better understand the impact of market dynamics on RMS Example projects: Competitor pricing; major events 3. Simulation More accurate scenario development to inform commercial decision making Example projects: 2. Short-term foreca
Slide 34: Using mobile to commercialise the customer journey
Using mobile to Commercialise the customer journey > Europe’s most loved airline app • 24% of customers using mobile boarding passes1 • 15.6m personalised push notifications sent2 • App opened over 600,000 times each day2 > 21m + downloads since launch > Apple Pay 12% of all transactions1 > 62% incr
Slide 35: Personalised product and offers
Personalised product and offers > Allocated seat conversion +6 ppt since launch of new website > Focus on broadening product choice & personalised merchandising • Brand aligned partners • Helping customers in destination, eg GetyourGuide • Extending across the value chain to target customer groups >
Slide 36: Connected people
Connected people > Empowering our people to better serve using digital tools and relevant data > Creates new revenue platform 18,000 people strong IN AIRPORT IN CONTACT CENTRE ON BOARD > New EPOS > Flight information updates > Cross Channel case management > Customer profiles > Digitised processes >
Slide 37: Digital disrupting inflight retail
Digital disrupting inflight retail Right product and crew tools (FY16/17) Disruptive ecommerce platform (FY17/18) > Premiumisation of product to match customer base > Enhanced customer proposition > Increased appetite from premium brands to be listed > Improved service efficiency with easyJet onboar
Slide 38: Digital disrupting onboard
Digital disrupting onboard The opportunity Launching a new digital entertainment platform onboard in partnership with Rakuten > Captive audience of 80m customers > Average elapsed time on board c.110 mins 38
Slide 39: Digital disrupting airline partnership models
Digital disrupting airline partnership models LAUNCH TODAY’S NEW PARTNERS PARTNERS 39
Slide 40: Summing up
Summing up > Data and digital enabling brand new commercial platforms and structural cost reduction > Constant innovation > Customer centricity > Clear vision and programme of delivery > Sustainable revenue growth model 40
Slide 41: Cost control & strong balance sheet
easyJet cost control & strong balance sheet Andrew Findlay – Chief Financial Officer
Slide 42: Our relative cost position
Our relative cost position CASK ex fuel (GBP pence)* We are the cost winner in the airports we operate 2016 > easyJet operates in desirable primary (many slot constrained) airports - the home of legacy airlines > easyJet’s strong cost control and reduced complexity means it continues to operate with
Slide 43: Our cost base
Our cost base Due to our Strategic focus on Primary airports, c.40% of our non-Fuel costs is regulated in some way: P&L Split (FY16) Cost by Driver Maintenance Driven by Pax Regulated Airports 5.7% Crew Regulated and Fuel Ground 14% 13.0% 27% c.30% Handling 30.5% Navigation Driven by 8.1% Sector 15%
Slide 44: easyJet Lean continues to deliver
easyJet lean continues to deliver After a few years of increasing CPS ex fuel (at CC); Constant currency headline cost per seat ex fuel in FY17 will be marginally down on FY15…. CPS ex fuel target: flat 2015 vs 2019* This is despite our investment in Lean programme offsets inflation operational resi
Slide 45: Key principles of lean and cost in easyJet
Key principles of lean and cost in easyJet (A) Cost efficiency compared to our peers in the markets (E) Cost culture embedded we operate Embed cost focus and discipline and focus throughout the Drive our relative cost competitive position against peers to entire organisation, everyone will be forens
Slide 46: How we deliver our cost focus
HOW WE DELIVER OUR COST Focus easyJet Lean is our programme to drive both long term sustainable and short term efficiencies and cost savings Lean delivers sustainable savings* Lean (embedded) work streams Forensic focus and delivery of work streams in 315 each main cost drivers + 95 Cost Strategic I
Slide 47: Airports and Ground Handling
Airports and Ground Handling CPS: £15.86 ( 1.5% at CC from FY15) Pax regulated 23% easyJet operates in high demand regulated airports (80% of outbound airports). Pax non-regulated 47% Sectors regulated This differs to a low cost, less congested secondary airport, supply driven model. Sectors non-re
Slide 48: easyJet - highly attractive proposition to airports
easyJet - highly attractive proposition to airports Growth potential & Airports case study: France market stimulation > Increasingly commercial airports, supported by part privatisation trend Higher Network Load > Ability to conduct bilaterals and long term deals breadth factor > Low cost infrastruc
Slide 49: Crew
Crew Sectors non-regulated Aircraft related 18% 81% CPS: £6.78 ( 2.2% at CC from FY15) Context > Average salary inflation and union agreements 2.1% (FY17) Structural Benefits > Managing crew productivity Low turnover > Congested primary airports add complexity > Employing crew in eight separate ju
Slide 50: Engineering & maintenance
Engineering & maintenance Sectors non-regulated Aircraft related 27% 73% CPS: £2.97 ( 5.3% at CC from FY15) Context Engineering & Maintenance Innovation > Increasing average age of fleet (easyJet 6.7yrs) leads to higher maintenance costs > Regulatory requirements, e.g. service bulletins requiring
Slide 51: Ownership & Fleet management
Ownership & Fleet management Aircraft related 100% CPS: £3.45 ( 0.8% at CC from FY15) Context > Fleet ownership mix – residual value management on A319 fleet > Heavy maintenance event increases (ageing A319 fleet) > Retrofitting existing fleet of 180 seat A320s from winter 2016, to be completed by
Slide 52: Case study: Upgauging
CASE STUDY: UPGAUGING Up-gauging: A structural advantage Our planned fleet up-gauging will give easyJet the opportunity 5% -6% to add capacity where others can’t. The move from an A319 to 6% -7% 8% -9% a 186-seat A320 represents a capacity increase of 32% and the move from the A320 to an A321 anothe
Slide 53: Overheads
Overheads Sectors regulated Fixed/discretionary 28% 71% CPS: £3.71 ( 1.9% at CC from FY15) Context > Staff – cost of attracting and retaining high quality staff > Contact Centre – continued drive to increase quality of service > IT – investment to support an increasingly systems and data-focused bu
Slide 54: Capital structure underpinned by financial strength
Capital structure underpinned by financial strength Key elements of easyJet’s capital structure 97% of on-balance sheet aircraft unencumbered* A319 A320 A320 Total Owned/ Liquidity buffer NEO Leased Unencumbered 89 111 2 202 74% Operating Residual value risk Finance Lease 0 5 0 5 performance Total B
Slide 55: A strong balance sheet to fund growth
A strong balance sheet to fund growth Strong net debt/cash position* Long term funding profile** Net cash Strong opening balance sheet and long term funding profile create flexibility to support FY17 to FY20 plans Source: easyJet annual report * On balance sheet net debt as at 31/03/2017 (excluding
Slide 56: Sources & Uses of Cash in FY16 and beyond
Sources & Uses of Cash in FY16 and beyond FY16 Outlook - FY17 & FY18 Sources Uses > Significant Funds from Operations Capital > Access to diverse sources of funding Funds from > Ability to maximise working capital Operations (FFO) Dividend Funding Interest Tax Working capital Other > Retain investme
Slide 57: Fuel and hedging
Fuel and hedging Fuel 100% CPS: £13.95 ( 13% from FY15) Fuel Hedging Fuel Lean > FY18 and FY19 hedged rates in line with key competitors > Successful execution of initiatives to reduce fuel burn > Leveraging our strong credit rating, easyJet has the > Collaboration with suppliers to achieve ongoin
Slide 58: Summary
summary > 40% of our non-fuel cost is regulated > easyJet lean is working: FY17 CPS (ex fuel) @ CC < FY15 > Opportunities to leverage our scale, growth and supplier relationships > Fleet up-gauging provides an underpin and competitive advantage > Committed to deliver FY19 vs FY15 flat CPS @ CC at no
Slide 59: Making travel easy & affordable
Making travel easy & affordable Chris Browne – Chief Operating Officer
Slide 60: Our operation - September 2017
Our operation - September 2017 2007 2017 Change easyJet network Passengers 37m 78m + 110% Aircraft 137 279 + 104% Routes 289 874 + 202% Airports 77 138 + 79% Countries 21 31 + 48% Bases 19 28 + 47% Crew 5, 074 10, 340 + 104% Head office staff 500 700 + 40% 60
Slide 61: Making travel easier and more affordable: Airport of the future
Making travel easier and more affordable Airport of the future Transforming the way you travel 61
Slide 62: The operational environment has dramatically changed
The operational environment has dramatically changed 100m more short haul seats in The Market is Growing Europe in 2 years – 15m in London 72% of easyJet capacity touches slot constrained airports Airports are More Congested LGW has 57 days with 900+ movements (5 days in 2014) Delays due London TMA
Slide 63: Avoiding Customer Disruption
Avoiding Customer Disruption Prevent disruption & stay on schedule Minimise Impact to the Customer > Re-examine building blocks Minimise Schedule > Enhanced Ops Parameters > 2 x Recovery aircraft > Systems implementation > Optimised spares positioning > Invest in additional spare parts inventory > P
Slide 64: Successful execution of our fleet programmes
Successful execution of our fleet programmes Fleet introductions and upgrades Fleet exits Aircraft Redeliveries to Lessors 100% 70 100% CUMULATIVE REDELIVERIES 60 78% % REDELIVERED ON-TIME 80% 50 40 60% 30 40% 20 20% 10 0 0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 % ontime Cumulative redeliveri
Slide 65: Case study: 186 seat conversion
Case study: 186 seat conversion 49 aircraft in one winter; 5 Seating systems and IT Worldwide logistics network, concurrent inputs in 4 locations, system changes dedicated kitting warehouse downtime reduced from 21-11 days Full strip out of every aircraft, extensive underfloor structural work Extens
Slide 66: Our journey to minimise CPS
Our journey TO MINIMISE CPS ‘09 A320 with Tech Insertion Engines 24 more seats ‘16 more efficient engines A320 configuration ‘03 -8% upgrade to 186 seats 6 more seats A319 baseline CPS -2.5% ‘13 ‘18 A320 with Sharklets and A321 neo with lightweight seats 235 seats better aerodynamics 49 more seats l
Slide 67: Digital Operations – components of the transformation
Digital Operations – components of the transformation Connected People Connected Cabin Connected Aircraft Connected Flight Deck Connected Engineering Connected Ground Ops 67
Slide 68: Digital Operations – key drivers for adoption
Digital Operations – key drivers for adoption End-to-end customer Efficiency in an Economy of scale – engagement integrated operation growth without cost Automation – speed & Leverage the operation- Single version of the accuracy wide data truth 68
Slide 69: Case study - Palma
Case study - PALMA > In March the airline opened its first seasonal base in Palma de Majorca. > Palma-based pilots and cabin managers have been issued with iPads, which allow them to complete their pre-flight briefing digitally and more efficiently. > iPads are used across the industry extensively,
Slide 70: Aircraft nose-to-tail connectivity enables a Connected Operation
Aircraft nose-to-tail connectivity enables a Connected Operation Connected Flight Deck Connected Cabin Connected People EFB & e-Techlog Digital Content on Board Flight Crew & Cabin Crew Cabin Wi-Fi Cockpit Onboard Data Customer Wi-Fi Server Server Cabin Cockpit Internet Satellite 4G Link Link Connec
Slide 71: LGW Landscape
LGW Landscape The world’s busiest runway > North Terminal Development #1 easyJet (42%) > Terminal Consolidation 2017 #2 BA (14%) > New Contract APR 2017 #3 Norwegian (9%) > Terminal Expansion 2019 Airline by seat capacity 71
Slide 72: Gatwick Operational Performance
Gatwick Operational Performance JULY 2017 v JULY 2016 7% increase OTP 13% less late inbound aircraft delays 99.2% Flights <3 hr delay 15% reduction in average delay > Investment in schedule is delivering OTP benefits > OTP improved year on year every month of Summer Over 90% flights > OTP and Turn c
Slide 73: Gatwick – easyJet Airport of The Future
73 Gatwick – easyJet Airport of The Future 5.5m 90% 3x 10, 000 Mobile Host Pax wait <5 Increase in Processing Crew Trained in Users mins at Bag rate in Security Gatwick Academy Drop 73
Slide 74: North Terminal – Vision 2014
North Terminal – Vision 2014 74
Slide 75: North Terminal Level 10 prior to upgrade
North Terminal Level 10 prior to upgrade 75
Slide 76: North Terminal Level 10 Today
North Terminal Level 10 Today 76
Slide 77: World’s Largest Auto Bag Drop
World’s Largest Auto Bag Drop 77
Slide 78: Future Transformation
Future Transformation Airport of the Future Next Generation Ground Handling > Strategic Partnership with DHL > Commences NOV 2017 > Applying logistics capability > Innovation to drive performance 78
Slide 79: Conclusion
CONCLUSION Carolyn McCall easyJet
Slide 80: Appendix
appendix
Slide 81: Presenters
presenters Carolyn McCall, DBE Robert Carey Andy Hodges Chief Executive Director of Strategy and Network Head of Network and Schedule Development Carolyn joined easyJet on 1 July 2010 as Chief Executive Robert joined easyJet in September 2017 from McKinsey and was appointed to the Board of easyJet.
Slide 82: Presenters
presenters Simon Cox Andrew Findlay Paul Ablin Head of Airport Development and Central Chief Financial Officer Finance Director Procurement Andrew Findlay joined easyJet on 2 October 2015 as Paul joined easyJet in Summer 2010 as the Head of Risk Simon joined easyJet in 2014 ago with over 15 years of
Slide 83: Presenters
presenters Mike Hirst Peter Duffy James Millett Director of Treasury and Tax Chief Commercial Officer Director of Digital, Marketing and Brand Mike joined easyJet in March 2014. He is currently Peter is currently Chief Commercial Officer, and is James joined easyJet in September 2011 as Head of resp
Slide 84: Presenters
presenters Ian Cairns Lis Blair Andrew Middleton Customer Director CRM and Insight Director Ancillary Revenue Director After 13 years in the advertising industry, Ian moved to Lis originally joined easyJet in 2012 as Head of CRM. In Andrew has been with easyJet since 2014, initially as easyJet in 20
Slide 85: Presenters
presenters Chris Browne Gary Smith Chris Hope Chief Operations Officer Head of Engineering Head of Gatwick Chris joined the Executive Management Team as Chief Gary joined easyJet in 2000 as head of Powerplant, Chris joined easyJet in 2007 and has now worked in the Operating Officer on 1 October 2016
Slide 86: Notes
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