Easyjet Plc · LSE:EZJ
Easyjet — Investor Day (September 2014)
115 slides from Easyjet's investor day presentation, Sep 18, 2014
Slide 1: Investor day
Investor day 18 September 2014
Slide 2: Agenda
Agenda Time Agenda item Led by Page 14.00 Proven strategy, execution and returns Carolyn McCall 3 14.15 A. Future profitable growth • Future growth opportunities Cath Lynn 12 • Bringing it all together - France Francois Bacchetta 27 • Panel Q&A 14.45 B. Industry leading return on capital employed an
Slide 3: Proven strategy, execution and returns
Proven strategy, execution and returns Carolyn McCall Chief Executive Officer
Slide 4: Continuing to deliver
Continuing to deliver 1• easyJet has built the industry leading business model in European short-haul aviation 2• Team, processes and culture will ensure continued successful execution 3• easyJet will continue to deliver A. Future profitable growth B. Industry leading return on capital employed and
Slide 5: Proven strategy and execution
Proven strategy and execution 2010 - 2014 Culture & Compelling Customer & Capital Cost advantage people network product discipline Strengthened team, Passengers grew by 12 Introduced the easyJet lean delivered Rigorous focus on succession planning million1 Customer Charter c.£170m of return on capit
Slide 6: easyJet has delivered on key financial metrics
easyJet has delivered on key financial metrics Revenue per seat Profit per seat £65 £62.58 £7.03 £8 £60 £6 £55 £53.07 £4 £2.75 £50 £2 £45 £0 2010 2013 2010 2013 PBT Margin ROCE 15% 20% 17.4% 11.2% 10% 15% 5.2% 10% 6.9% 5% 5% 0% 0% 2010 2013 2010 2013 Dividends £308m £196m £85m 2011 2012 2013 Ordinar
Slide 7: ROCE and shareholder return versus FTSE 100 and airlines
BskyB 37.2% Shire 30.6% Intercontinental 28.0% easyJet NEXT 27.3% 261% Croda 25.9% ITV 24.9% BAT 24.4% Petrofac 23.8% Norwegian 134% Reckitt Benckiser 23.2% Antofagasta 21.8% GSK 19.7% ARM 19.2% 1st Quartile Fresnillo 19.0% Delta 37.2% - 16.1% 97% Astrazeneca 19.0% Sage 18.4% Unilever 18.3% Burberry
Slide 8: Business model and brand to succeed in a dynamic environment
Business model and brand to succeed in a dynamic environment easyJet Valuable markets Cost advantage 60 other airlines hold a Air France lower than Alitalia 2.5% share 60 Non primary airports CASK( p) British Airways Airport; ground handling, 1 KLM 50 8.0 navigation and en-route charges 20 1 Number
Slide 9: Team, processes and culture in place for continued execution
Team, processes and culture in place for continued execution • Customer is in our DNA • Engaged team working to deliver our cause To be Ambition Europe’s • Strong focus on ensuring easyJet preferred short-haul has the necessary “bench airline, delivering market strength” leading returns • Talent dev
Slide 10: Continuous pipeline of innovation
Continuous pipeline of innovation 2015 onwards Culture & Compelling Customer & Capital Cost advantage people network product discipline Succession planning Opening Amsterdam New brand campaign easyJet lean pipeline Ordinary dividend and talent and Porto in 2015 of initiatives payout ratio from one P
Slide 11: easyJet best positioned to deliver what consumers want
easyJet best positioned to deliver what consumers want Most important factors for European consumers when choosing an airline 1. Price/value 1. Price/value 1. Price/value 1. Staff/service 1. Price/value 2. = Comfort 2. Safety 2. Reliability 2. Price/value 2. Staff friendliness /service 2. = Staff 3.
Slide 12: Future growth opportunities
Future growth opportunities Cath Lynn Group Commercial Director: Markets, Network & Pricing 12 12
Slide 13: Agenda - future profitable growth opportunities
Agenda - future profitable growth opportunities 1 • Quality of the network and how easyJet drives returns 2 • Opportunities available to easyJet 3 • Case study - France 13
Slide 14: easyJet has leading positions across European airports
easyJet has leading positions across European airports easyJet capacity easyJet’s #1 and #2 positions EDI Other 23% of LPL capacity easyJet No.1 LTN STN 17 million seats SEN 48% of LGW capacity CDG easyJet No.2 35 million seats BSL 29% of GVA capacity LYS 21 million seats OLB ALC AGP Majority of eas
Slide 15: Convenient airports
Convenient airports Paris Large addressable market for easyJet Charles de Gaulle Beauvais • 4th largest airport in • Over 300 million people live 60 Europe, c.45m seats a year minutes, or less, travelling • easyJet No.2 with 11% market share distance from an easyJet airport Orly Charles • 13th large
Slide 16: Strong market share delivers value for customers
Strong market share delivers value for customers Great product • Range of destinations for business and leisure Great schedule • Frequencies • Choice of time of day Source: Millward Brown Brand Tracker 2014 16
Slide 17: Strong market share delivers financial value
Strong market share delivers financial value easyJet generates highest returns where it hold a No.1 or No.2 network position Returns vs. network position • Strong correlation between market share and returns easyJet No.1 easyJet No2 Other • Scale at No.1 or No.2 positions delivers • Cost advantage •
Slide 18: Network structure delivers flexibility
Network structure delivers flexibility London • Base to base Luton flying • Revenue Belfast optimisation • No dead-legs • High asset utilisation Malaga 18
Slide 19: Compelling network positions take time to develop
Compelling network positions take time to develop • Constraints London Gatwick - Market Share • Slot allocation 50% FY 2006 vs. FY 2014 2006 2014 • Timing of slots 40% • Airport capacity 30% • London, Paris, Milan, Berlin, Geneva, Rome attractive both outbound and 20% inbound 10% • Maximise revenue
Slide 20: Rigorous capital allocation framework
Rigorous capital allocation framework easyJet delivers superior returns by allocating assets in positions where it can leverage its sources of competitive advantage • Reposition • Opportunity to increase returns by reallocating assets to more profitable network areas, or reposition to drive higher r
Slide 21: Granular approach to route planning
Granular approach to route planning easyJet capacity increase on an individual route £9 0.6 • Dedicated business plan for every £8 0.5 Seat growth (million) route £7 £6 0.4 • Detailed financial and operational £5 Returns 0.3 analysis undertaken £4 £3 0.2 • Approach to route evaluation £2 0.1 £1 • Me
Slide 22: Low risk opportunities within the current network footprint
Low risk opportunities within the current network footprint Opportunity at easyJet’s top 20 airports Other easyJet LCC 1. 28 million seats on existing easyJet airport pairs Non LCC o Low risk opportunities to consolidate transfer (est.) Non existing market positions by thickening LCC P2P routes (est
Slide 23: Significant number of low risk opportunities for easyJet to pursue
Significant number of low risk opportunities for easyJet to pursue Granular approach to fleet planning Range of easyJet FY19 fleet size 3 350 22 Load factor: 90.3%1 1 3 30-45 Average utilisation: 11 hours 300 2 / day 1 40-65 Number of aircraft 250 10-20 20-30 200 226 296- 204 304 316 150 356 100 50
Slide 24: Time sensitive opportunities
Time sensitive opportunities easyJet H1 2015 capacity growth London Gatwick Switzerland +6.3% Netherlands +13.4% • 9% capacity growth following purchase of Flybe slots United Kingdom +2.5% • Thickening routes such as Amsterdam, Inverness and Vienna Amsterdam France +4.6% • New base opening in Spring
Slide 25: Strong market share gives easyJet relevance
Strong market share gives easyJet relevance • Local employment • Relationships with government and regulators • In-market management with good local knowledge • Airports like to work with easyJet: quality of network and sustainable partner Footer box on intersect of lines line h=8.03 9 and v=8.75 wi
Slide 26: Bringing it all together – easyJet Country Directors
Bringing it all together – easyJet Country Directors Local marketing Public Affairs / Relations Local sales (B2B) Regulatory affairs Employee / Industrial Customer Relations Country experience Director People management Airports Country performance Day-to-day Country plans Footer box on intersect of
Slide 27: Bringing it all together - France
Bringing it all together france Francois Bacchetta Country Director - France 27 27
Slide 28: easyJet in France – strong progress
easyJet in France – strong progress easyJet in France 2006 Jan 2012 2014 Routes 53 157 176 Market share 5% 12% 14% Business travel 17% 21% 24% Routes with min 2 dailies 6 17 24 Customer satisfaction1 #2 #2 Since January 2012 investor day • Steady profitable growth: capacity increase of 5% • Business
Slide 29: easyJet has built a strong position in France
easyJet has built a strong position in France Network built on No1 and No2 positions….. …delivering capacity growth and strong returns easyJet capacity in France Ranking – Capacity share 18 #2 – 18% 16 #2 - 16%* 14 #2 – 14% 12 (seats million) #2 - 13%* 10 8 6 4 #2 – 19% 2 #2 – 21% 0 2008 2009 2010 2
Slide 30: Significant market for easyJet
Significant market for easyJet European market easyJet network1 Million seats Million seats % weight on 2014 (OAG) FY13 easyJet network 250 9 12% 12% 13% 8 11% 200 7 9% 6 150 5 7% 5% 5% 5% 5% 5% 4 4% 4% 4% 5% 100 3 3% 2 50 1 1% 210 205 169 136 133 0 0 -1% Spain-UK Germany-UK Swiss-UK Italy- Dom Fran
Slide 31: Where is the future opportunity for easyJet
Where is the future opportunity for easyJet “Be the challenger brand to Air France” 1 Take advantage of main competitor restructuring and limited presence of other low cost carriers 2 Profitably grow market share over time by offering affordable fares and reliable product 3 Use the easyJet network t
Slide 32: Respected in the French community
Respected in the French community Employ over 1,000 people Development of regions • Under French pay system, paying • Connecting France through French social service the network • Social responsibility Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold 32
Slide 33: easyJet is the only significant competitor to Air France
1 easyJet is the only significant competitor to Air France Full year 2014 – French market share (in seats)1 100% Others 90% 21% Vueling Airlines 29% 34% Ryanair 80% 42% 2% 49% 1% 7% easyJet 70% 5% 4% Air France 60% 5% 2% 21% 20% 1% 50% 10% 1% 19% 40% 25% 30% 47% 49% 45% 20% 36% 25% 10% Footer box on
Slide 34: Gaining market share
2 Gaining market share 12% Market excl. easyJet LCC FSC Legacy easyJet Capacity in France 7.8% • Market capacity flat in FY14 driven 8% by Air France reduction 4.5% 3.4% 4.7% 4% 3.2% • LCC penetration in France lower 0.8% than Europe average 0% -1.1% -0.8% • Increase in 2014 driven by easyJet and -4
Slide 35: World’s leading tourist destination
3 World’s leading tourist destination France is the leading tourist destination in the world • 85 million arrivals in 20131: • 83% being from countries within easyJet network • Paris is the number one city in terms of visitors, with 32 million arrivals in 2013 • 38 easyJet network points connect wit
Slide 36: Business passenger opportunity in France
4 Business passenger opportunity in France Most popular business • Multiple frequencies to EU cities • Domestics routes (Paris to regions and inter regional network) Continue to increase share of business / high yield passengers through • Targeted deals with main TMCs and corporate accounts and deve
Slide 37: Brand awareness industry leading in France
5 Brand awareness industry leading in France Brand consideration closing gap with Air France and strengthening against competition easyJet Air France Ryanair Vueling First choice Would seriously consider Might consider Would not consider 19 21 54 6 9 5 58 4 • Brand awareness recovered 23 31 31 30 fr
Slide 38: How we sell
How we sell Peter Duffy Group Commercial Director: Customer, Product & Marketing
Slide 39: Agenda
Agenda 1. Driving demand through brand and communication investment 2. Digital conversion 3. Highly differentiated revenue management system 4. Examples of revenue initiatives • Non-seat revenue (easyJet Holidays, in-flight) • Business passenger Footer box on intersect of lines line h=8.03 9 and v=8
Slide 40: Universal brand awareness in our key markets
Universal brand awareness in our key markets Awareness Serious Preference consideration 2014 (Q3) 2014 (Q3) 2014 (Q3) 98% 62% 15% 98% 66% 19% 91% 28% 5% 97% 68% 22% 100% 71% 40% Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold Source: easyJet Brand ranking stud
Slide 41: Strong brand awareness delivers sales
Strong brand awareness delivers sales Passenger origination million Catchment easyJet 64 passengers database 300 57 million contacts 22.6 million bookings million million 10.5 customers 41
Slide 42: Improving customer experience
Improving customer experience • Customer satisfaction improved • 56% of customers have now flown with us before • Average age of customers increasing Average age by market Average age at departure Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold 42
Slide 43: Structured re-targeting
Structured re-targeting • 57 million customers on the database • 41% marketable • Marketable customer base has increased three-fold since 2012 • Data driven creative approach • Customers in the contact programme are 33% more valuable than those who are not • Emailed customers book 24% more frequentl
Slide 44: Digital strategy
Digital strategy • +500 million visits • +26% - overall traffic increase (including mobile) • c.15% - step 1 web conversion improvement • 8.6% - mobile (% ecommerce bookings) Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold 44
Slide 45: Pricing
Pricing • Low fares offered across the entire network – c.45% of passengers pay under £50 per flight • Simple demand based system • Every flight to deliver positive contribution • Continued innovation • Allocated seating • Bag charges Footer box on intersect of lines line h=8.03 9 and v=8.75 with fo
Slide 46: Non-seat revenue
Non-seat revenue • £64 million1 • New deals with Europcar & Allianz • Leverage CRM platform to deliver sales • Significant Pan-European holiday options • Hotelopia – flight sales and holidays • Series seat sales • In-flight Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Ari
Slide 47: Quality revenue streams - easyJet Holidays
Quality revenue streams - easyJet Holidays • Major opportunity for easyJet • 10 million European flight package bookings in UK - significant market in Germany, Switzerland & across Europe • New deal with Hotelopia Proposition • Package holidays as beach, city and ski - full European coverage • Exclu
Slide 48: Quality revenue streams - Inflight
Quality revenue streams - Inflight • New differentiated award winning products • Best Airline - Inflight Retail and Food & Beverage • New products e.g. coffee sales up 17% • Margin improvements – up 9% • New brochure design from specialist consultant to Waitrose • Stock loss, wastage and accuracy im
Slide 49: Business travel
Business travel Anthony Drury Director, Head of Business
Slide 50: Business journey
Business journey Flexible corporate Travel agency fares agreements Inclusive fares +12 million business Dedicated sales team Fast track Allocated passengers and in core markets security seating growing Business easyJet plus cards Contracted orientated Corporate network Accounts Distribution Online b
Slide 51: Delivering expected results
Delivering expected results • 12 million business passengers per YOY business passenger growth annum Millions 13 • 20% business passenger 12 penetration 11 • +280 corporate agreements 10 9 • +80 travel management companies 8 contracted 7 • Distribution agreements with all 6 major GDS and self bookin
Slide 52: What is the future opportunity
What is the future opportunity • EMEA short haul market opportunity is estimated at £20 billion pa (165 million seats) European short haul market1 • 35% of the short haul market is direct to easyJet market easyJet market airline websites share across the share across the direct segment is managed se
Slide 53: Seizing the opportunity
Seizing the opportunity • Market share growth opportunity across all markets • Focused strategy to capitalise on the Product Network opportunity across Europe through both the managed and direct channels Sales • Four strategic pillars supporting our sales approach Marketing Distribution Footer box o
Slide 54: “Multi channel” sales approach
“Multi channel” sales approach • Contracted relationships • TMC supported (Online/Offline) • Dedicated stakeholder management Corporate • Savings / ROI value proposition Corporate spend contracts • Management reporting • Corporate discounts Travel Management • Distribution channel Company (TMC) • Mi
Slide 55: Seamless distribution through all channels
Seamless distribution through all channels • GDS connectivity improvements across all channels • Self Booking Tool integration with consistent display • Flexibility to book direct • Supporting the TMC’s preferred booking channel across Europe Self booking tools • 100% YOY GDS penetration improvement
Slide 56: Delivering tailored business products
Delivering tailored business products • Tailored fares and products for the corporate customer • Fares distributed through the TMC’s GDS systems • Fares available online through all self booking tools • Fast track for Flexi fares & easyJet plus at more than 35 airports £ growth £ growth Footer box o
Slide 57: Building a stronger business network
Building a stronger business network Presence in top 100 market pairs • Largest footprint in the largest 60 Non primary airports 50 1 European markets 20 1 Number of market pairs operated 40 between 2 primary airports 30 - - 2 • Flying to more business friendly - - 20 - - 10 - 48 23 39 24 24 21 18 1
Slide 58: Stakeholder focussed marketing campaigns
Stakeholder focussed marketing campaigns • Targeted stakeholder advertising • Product re-enforcement • Leverage all media channels • Influencing behaviour • Brand awareness and perception • Educating the corporate traveller Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Ari
Slide 59: Summary
Summary • Opportunity to grow market share across both managed and direct segments in all markets • Largest opportunity across the managed sector through TMC channel development • Marketing investment to increase consideration • On-going focus on evolving the suite of business products • Continue to
Slide 60: Low cost everyday
Low cost everyday Chris Kennedy Chief Financial Officer 60 60
Slide 61: Low cost everyday
Low cost everyday Capacity deployed on easyJet network1 Low cost allows easyJet to: easyJet 60 Other Air France airlines hold a Alitalia lower than Offer affordable fares 2.5% share British Airways KLM TAP Thomson Other Continue to compete successfully Cost base allows easyJet access to the opportun
Slide 62: easyJet lean will deliver £30 million - £40 million in sustainable savings
easyJet lean will deliver £30 million - £40 million in sustainable savings per annum over the next 5 years easyJet lean has delivered c.£170 million in sustainable cost savings lean principles: • Governance and milestones • Covers the total cost base • Long and short term savings • Embedded througho
Slide 63: Cost opportunities
Cost OPPORTUNITIES Warwick Brady Chief Operations Officer 63 63
Slide 64: Our operation in 2014
Our operation in 2014 Flight Operations • 2,440 Pilots Cabin Services • 5,221 Cabin Crew Ground Operations • 704 routes across 134 airports in 32 countries Engineering & Maintenance • 226 aircraft • 6 maintenance bases • 27 line maintenance bases Operations Control • 26 aircraft/crew bases • c. 1,35
Slide 65: Leading asset utilisation
Leading asset utilisation Operational efficiency On Time Performance 100% 87.0% • Low overhead costs 80% 66.0% • Highest load factor 60% • Uses its aircraft efficiently 40% • Maintains industry leading on-time performance 20% 0% 2010 2013 Innovate to maintain cost advantage 90.3% Load factor 1 Foote
Slide 66: Maintaining cost advantage
Maintaining cost advantage easyJet cost base 1 Crew Maintenance 13% • Overall operational cost 6% £454m base of £3.5 billion £212m Airports & • Ex-fuel cost base of £2.4 ground handling 31% billion £1,078m • Ex-fuel costs are 67% of the overall operational cost base Fuel • easyJet has the ability to
Slide 67: Pipeline of initiatives to maintain cost advantage
Pipeline of initiatives to maintain cost advantage Increased pipeline of initiatives • easyJet lean continues to deliver and develop significant cost reductions • Rolling 5 year plan to identify future initiatives across • Airport charges • Ground Handling • Navigation • Crew • Engineering and maint
Slide 68: Airport costs: the facts
31% Airport costs: the facts • 80% are regulated airports • 20% are non-regulated • Price deals: • London Gatwick price cap over 7 years • Luton 10 year growth deal allowing doubling of passengers • Spain 10 year price freeze (18 Airports) • Copenhagen price increase capped for 4 years, low-cost ter
Slide 69: Airport costs: delivering savings
31% Airport costs: delivering savings Airport deals Regulated airports • Deals recently completed: • Participate in price regulation process in major • Gatwick airports • Luton • Work with regulators to ensure a fair price setting • Bristol process is developed and adhered to • Develop relationships
Slide 70: Ground handling costs: the facts
31% Ground handling costs: the facts • Over 50 handling partners across our network • Our top 10 partners handle c.80% of our turns • Menzies Aviation & Swissport are our biggest partners • 98% of our customers now use online Check-in • Misrouted bag rate of 0.4 per 1000 bags, one of the lowest in t
Slide 71: Ground handling costs: delivering savings
31% Ground handling costs: delivering savings To deliver an easy, efficient and friendly service at competitive prices Competitive market Leverage new contracts based on our volume Evolving airport processes • Online Check-in • Carry on bags Automation Airports of the future Auto bag drop and auto g
Slide 72: Crew: the facts
13% Crew: the facts • 13% of cost base • Are represented by 16 recognised unions • Crew are rewarded on productivity and performance • e-Learning and bespoke training programs are offered that continually develop our crew • Our crew are a major reason why passengers enjoy flying and continue to fly
Slide 73: Crew: delivering a sustainable cost base
13% Crew: delivering a sustainable cost base To deliver an easy, efficient and friendly service at competitive IT systems prices Industrial Relations Optimisation software ensures our crew are as Specialised employee relations productive as possible team regularly liaises with our 14 recognised unio
Slide 74: Fuel costs: the facts
Fuel costs: the facts 33% • 33% of the cost base • easyJet’s single largest cost line • Since 2011 our baseline fuel initiatives have made savings of £22 million • A $10 movement per metric tonne impacts the FY’14 fuel bill by +/-$1.0 million1 1. Q3 IMS, 24 July 2014 74
Slide 75: Fuel: delivering savings
Fuel: delivering savings 33% What has been done so far Continuing to deliver savings • Introduction of Sharklets for new • Analysis tools to identify opportunities for deliveries since August 2013 cost savings • Retrofitted 6 additional Sharklet aircraft • Zonal drying trial • Aircraft weight reduct
Slide 76: Disruption management
Disruption management Will Facey Head of Operations Control Centre 76 76
Slide 77: Role of the Operations Control Centre (OCC)
Role of the Operations Control Centre (OCC) • Deliver the daily network • Maintaining operational resilience • Mitigation of operational risk • Centralised network decision making • Crew support & co-ordination • Manage disruption • Communication flows • Crisis response Footer box on intersect of li
Slide 78: OCC in disruption – considerations & outcomes
OCC in disruption – considerations & outcomes OCC Role Action / Process Outcome Operational routines Control Business disruption teams Increased customer satisfaction Legal liabilities • Increased OTP and service completion React to any Realistic and pre-emptive rates situation decision making • Hig
Slide 79: Case study: disruption incident management
Case study: disruption incident management Bird strike Decision process Considerations Aircraft scheduled to travel too and Initial assessment return from BSL to Aircraft at LGW undertaken LGW suffers bird strike (LGW / BSL flight delayed) Quick decision required due to Basel curfew limited options
Slide 80: Engineering and maintenance
Engineering and maintenance Gary Smith Head of Powerplant and Fleet Transition 80 80
Slide 81: Background to E&M re-tender
Background to E&M re-tender • ‘Vision 2015 – engineering – the future’ launch • Fleet selection announcement • GB Airbus and Boeing 737s • Significant lease extensions • Implementation of exited fleet beyond 12 years re-tender with • 11 year SRT contract signed – • New fleet evaluation • Engineering
Slide 82: How the E&M cost base breaks down
How the E&M cost base breaks down easyJet Engineering & Maintenance cost base Engineering by Category Primary Activity Description Engines Engine maintenance Engine workshop visits, unscheduled and scheduled (every 9 years approx.) Engine LLPs Cost of engine life limited parts, replaced at scheduled
Slide 83: Implications of fleet transition on heavy maintenance
Implications of fleet transition on heavy maintenance Increase in maintenance volume gives opportunity to leverage cost • A320 family requires a heavy Type of check maintenance check at 6 and 12 years 6 Years 8 Years 10 Years 12 Years 14 Years 16 Years (14 and 21 days downtime respectively) 100 94 •
Slide 84: Vision 2015
Vision 2015 In spring 2013, easyJet engineering launched ‘Vision2015’ • Cost benchmarking exercise carried out by independent experts • Objective of delivering best-in-class engineering cost, reliability and safety • Implementation to coincide with exit points from existing contracts Outcome • easyJ
Slide 85: Significant opportunities
Significant opportunities Key areas of focus following the benchmarking exercise Categories Component Heavy Current aircraft Line support maintenance engine maintenance maintenance Strategy • Re-tender • Re-tender • Current • Continue current • Investigate dis- • Review maintenance strategy of aggre
Slide 86: Engine selection
Engine selection Rigorous, thorough and competitive process • CFM International selected to provide 270 engines to power 35 current generation A320s and 100 A320neos • Will also supply engines for any future exercise of the 100 purchase rights over new generation aircraft • The A320neos will be powe
Slide 87: Next steps
Next steps Today Jan 2014 March 14 April 14 May 14 June 14 July - Oct Oct-Dec FY15 FY15-16 New contract(s) Supplier Broad Issue of Round 1 Supplier Round 2 Supplier Finalise meetings, Implementation supplier RFP bids meetings bids and selection Contract site visits, base down select Footer box on in
Slide 88: Engineering & Maintenance cost per seat
Goal of benchmarking exercise Engineering & Maintenance cost per seat 2014 CPS 2019e Up-gauging, fleet Engine E&M re- 2019e increase management Selection tender Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold • No management action would • Up-gauging, engine s
Slide 89: Innovation driving cost reduction
Innovation driving cost reduction Ian Davies Head of Engineering 89
Slide 90: Continuous improvement by innovation
Continuous improvement by innovation • Eliminate operational disruption due to aircraft technical Objective defects by 2020 • Prevent events occurring by intelligent prediction • Mitigate or resolve impact of technical issues by the application of technology • Improved passenger experience and satis
Slide 91: Development of bespoke software to drive efficiencies
Development of bespoke software to drive efficiencies Rapid software change – Fan blades management • Development of bespoke apps to optimise existing processes • Fan blade management to help engineers replace damaged blades • More time efficient • Optimises selection of replacement blades reducing
Slide 92: Using technology to reduce delays
Using technology to reduce delays Front line support – real time video transmission • Enable remote engineering teams to engage using virtual technology • Allows engineers to hold live video calls with front line engineers, workshops and manufacturers • easyJet flies to 138 airports o Problems at re
Slide 93: Damage assessment time minimised
Damage assessment time minimised Dent and buckle – augmented reality • Aircraft damage causes multiple delays per day, complex assessment processes • All damage has to be recorded and tracked for the life of the aircraft • Augmented reality allows pilots and engineers to see previous damage super- i
Slide 94: Drone and robotic technology
Drone and robotic technology Remote inspections - drones • Modify existing technology • Drones programmed to scan and assess any damage • Enhanced ability to undertake remote checks o More time efficient o Greater accuracy • In development with Coptercraft, Measurement Solutions and Bristol Robotics
Slide 95: What can prognosis do for us?
What can prognosis do for us? • Prognosis systems can be used to send real time data of components (e.g. time to open and close, temperature, pressure) • Live data can be used to establish when a unit is about to fail • Ability to monitor each individual unit and predict a failure before it actually
Slide 96: Summary
Summary • Innovation cost saving improvements in easyJet engineering is part of the Company’s DNA • Innovations are a mix of shorter term solutions which have already been implemented and longer term research projects • A focus on efficiency allows easyJet to ‘future-proof’ easyJet’s operation and l
Slide 97: Capital discipline and returns
Capital discipline and returns Chris Kennedy Chief Financial Officer 97
Slide 98: Agenda
Agenda 1 • Capital discipline has driven industry leading ROCE 2 • Strong balance sheet, prudent levels of liquidity and fleet flexibility are sources of competitive advantage 3 • Highly cash generative model delivers continuous and consistent dividends 4 • Clear set of financial policies and metric
Slide 99: 1. Capital discipline has driven industry leading ROCE
1. Capital discipline has driven industry leading ROCE Returns • Rigorous approach to allocation of capital • Network Development Forum • ROCE is now embedded through the organisation • Network decisions • Route planning Routes • Remuneration 12m to 30/6/2011 12m to 12m to 30/6/2012 30/6/2014 • Cont
Slide 100: 2. Strong balance sheet provides competitive advantage
2. Strong balance sheet provides competitive advantage Between FY15-17, easyJet will target a gearing range of between 15% and 30% Adj. ROCE1 30.0% Target range easyJet historical gearing 25.0% easyJet 21.5% 35% 33% 20.0% 28% 29% Ryanair 30% 15.6% Lufthansa 27% (historical 15.0% 11.6% 25% average) I
Slide 101: 2. Prudent levels of liquidity source of competitive advantage
2. Prudent levels of liquidity source of competitive advantage Target of £4 million per aircraft • Sufficient liquidity in the event of external shocks • Target cash balance reflects the significant amount of unearned revenue held by easyJet from prepaid bookings easyJet’s historic cash1 per aircraf
Slide 102: 2. Fleet flexibility is a source of competitive advantage
2. Fleet flexibility is a source of competitive advantage Maximum, minimum and base case fleet size following exercise of 27 purchase rights Contracted Max Contracted Min Fleet Plan Previous Plan 350 330 327 325 316 317 296 300 311 311 281 304 304 275 259 250 261 241 250 225 226 226 200 214 204 197
Slide 103: 2. Additional aircraft to deliver flexibility
2. Additional aircraft to deliver flexibility • easyJet has exercised its New Framework Arrangements remaining 27 purchase rights over current 2015 - 2017 Bridge 2017 - 2022 generation aircraft • Will further increase • 35 A320 current generation • 100 new generation A320neo with CFM engines for del
Slide 104: 2. Fleet expenditure broadly in line with current levels
2. Fleet expenditure broadly in line with current levels 2005-20121 2013-142 2015-20173 2018-20223 Additional aircraft 49% 52% 66% 26% Replacement aircraft 42% 28% 9% 45% Maintenance 9% 20% 25% 30% Total 100% 100% 100% 100% Total expected fleet acquisition and overhaul expenditure 18% 9% 11% 10% - 1
Slide 105: 3. Highly cash generative model
3. Highly cash generative model Self funding ordinary dividend and capex 161 69 85 112 416 497 148 25 £million 2 1,237 316 283 883 Sep 2012 * Operating Depn & Net Tax, net Ordinary CAPEX Borrowings Sale & Restricted Other FX Sep 2013* Profit * amort Working int & other dividend Leaseback Cash Capita
Slide 106: 3. Consistent and continuous dividend payments
3. Consistent and continuous dividend payments • easyJet will increase the ordinary dividend payout ratio from one third of profit after tax to 40% from the financial year ending 30 September 2014 Special Ordinary £ million 175 40% of FY14 profit after tax1 150 133 85 46 FY2011 FY2012 FY2013 FY2014e
Slide 107: 4. Clear set of financial policies and metrics in place
4. Clear set of financial policies and metrics in place Objectives Metric • High asset efficiency Fleet size flexibility of Capital discipline • Maintain high level of fleet flexibility between 204 and 316 aircraft by 2019 + • Ensure robust capital structure Gearing: 15% to 30% Capital structure • R
Slide 108: Summary
Summary 1 • Capital discipline has driven industry leading ROCE 2 • Strong balance sheet, prudent levels of liquidity and fleet flexibility are sources of competitive advantage 3 • Highly cash generative model delivers continuous and consistent dividends 4 • Clear set of financial policies and metri
Slide 109: Summary
Summary Carolyn McCall Chief Executive Officer
Slide 110: Summary
Summary 1• easyJet has built the industry leading business model in European short-haul aviation 2• Team, processes and culture will ensure continued successful execution 3• easyJet will continue to deliver A. Future profitable growth B. Industry leading return on capital employed and margins throug
Slide 111: Presenters
presenters
Slide 112: Presenters
Presenters Carolyn McCall, OBE – Chief Executive Carolyn joined easyJet on 1 July 2010 as Chief Executive and was appointed to the Board of easyJet. Prior to this, she was Chief Executive of Guardian Media Group. She was a Non-Executive Director of Lloyds TSB from 2008 to 2009, Non-Executive Directo
Slide 113: Presenters
Presenters Peter Duffy – Group Commercial Director: Customer, Product & Marketing Peter joined easyJet in February 2011 as Marketing Director and leads on all aspects of easyJet’s marketing, e-commerce, contact centre and customer programme across Europe. Before joining easyJet, he was Marketing Dir
Slide 114: Presenters
Presenters Gary Smith – Head of Powerplant and Transition Gary joined easyJet in 2009 as part of the engineering insourcing project as Head of Powerplant and Transition, responsible for all aspects of engine management, new aircraft delivery and fleet exit management. Prior to joining easyJet, Gary
Slide 115: Disclaimer
Disclaimer 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