Easyjet Plc · LSE:EZJ
Easyjet — Investor Presentation (September 2013)
70 slides from Easyjet's investor presentation, Sep 10, 2013
Slide 1: Driving returns and profitable growth in European aviation
Driving returns and profitable growth in European aviation 10 September 2013 1
Slide 2: Agenda
Agenda Introduction Carolyn McCall, CEO Build No.1 and No.2 network positions Carolyn McCall, CEO Maintain cost advantage Warwick Brady, Chief Operations Officer Drive demand, conversion and yield Peter Duffy, Group Marketing Director Capital discipline Chris Kennedy, CFO Summary Carolyn McCall, CEO
Slide 3: Europe's leading short haul air travel network
Europe's leading short haul air travel network • 60.5m passengers, 67.8m seats flown load factors 89.2% (1) • fleet of 212 aircraft with an average fleet age of 4.9 years • leading presence on Europe’s top 100 routes • over 612 routes across more than 30 countries • strong position in key markets: N
Slide 4: Delivering returns and profitable growth
Delivering returns and profitable growth Growing returns ROCE incl. lease adjustments 16% 11% 10% 7% Competitive advantages 4% 1. Efficient, low cost model 2009 2010 2011 2012 Mar'13 (annualised) 2. Strong network and market positions Profit per seat and margin growth 8 c.11% 7 3. easyJet.com and br
Slide 5: Evolving industry dynamics
Evolving industry dynamics Competition Consumers & supply • Continue to value low • Restructuring fares and convenience and • Price, frequency and consolidation availability are key • Legacy losses • Convergence of models well • New fleet positioned orders from to be a successful airlines structural
Slide 6: easyJet's competitive position
easyJet’s competitive position On an airport pairs basis, easyJet’s main competitors are the legacy carriers 60% 50% IAG Air France KLM 40% % Overlap on a city basis Ryanair 30% Network / legacy carriers Lufthansa Grp Low-cost competition 20% Alitalia Charter carriers CompDrop CompDrop CompDrop 10%
Slide 7: Structural advantage against legacies
Structural advantage against legacies On-going cost advantage Typical A320 aircraft easyJet Typical Legacy against legacies and Seats 180 156 charter airlines Load factor 90% 70% • Seat density Passengers / flight 162 109 • Load factors Daily sectors 5.45 4 • Point to point vs. feeder Revenue / a.c.
Slide 8: Winning against low-cost competition
Winning against low-cost competition London Gatwick arrival / departures slots • Strength of network 0600-0855 Summer ‘13 • Pan-European network and market presence Norwegian Other 4% 12% • No. 1 or 2 positions at primary airports Thomas Cook 4% easyJet • Peak slots Monarch 41% 6% • Strong balance s
Slide 9: Strategy to drive growth and returns
Strategy to drive growth and returns Leverage easyJet’s cost advantage, leading market positions and brand to deliver point-to-point low fares with operational efficiency and friendly service for our customers 1. Build strong number 1 and 2 • Sustainable growth network positions • slightly in excess
Slide 10: Building strong no 1 and no 2 Network positions
Building strong no 1 and no 2 Network positions Carolyn McCall Chief Executive Officer 10
Slide 11: European airport landscape
European airport landscape Capacity across all European airports Slot constrained airports • easyJet has c.70% of its capacity at ‘Level 3’ slot constrained airports Top 20 • ‘Level 3’ airports are slot airports constrained airports where c.40% airlines are allocated slots Remaining and fines are in
Slide 12: easyJet has strong positions in key cities
easyJet has strong positions in key cities Paris Milan Beauvais Malpensa Bergamo Charles de Gaulle Linate Orly Milan Malpensa Charles de Gaulle • Largest airport in Milan with c.17m passengers a year • 3rd largest airport in Europe • Attractive catchment area, also near Italy’s 4th • c.43m seats a y
Slide 13: Leading positions across Europe
Leading positions across Europe easyJet capacity easyJet’s #1 and #2 positions EDI Other 16m 24% LPL No.1 LTN STN SEN 31m LGW 46% CDG BSL GVA No. 2 LYS 21m 30% OLB ALC AGP • Majority of easyJet’s capacity is in airports where it has leading positions Source: OAG 13
Slide 14: Leading position on top 100 European markets
Leading position on top 100 European markets Presence in top 100 market pairs 50 45 1 Non primary airports 40 35 30 16 25 45 2 20 15 33 24 21 22 10 20 18 16 15 14 5 - 3 • easyJet has a strong position across much of Europe on the top 100 markets • From all the EU city pairs, the top 100 routes have
Slide 15: easyJet is the No.1 airline at Geneva
easyJet is the No.1 airline at Geneva Increase in capacity… …has delivered sustainable returns easyJet Lufthansa Grp Seats Air France-KLM Grp IAG Returns Seats Returns Seats 8 £2,500 7.5 7 Millions Millions 6 £2,000 6.0 5 £1,500 4.5 4 3 £1,000 3.0 2 £500 1.5 1 0 £0 0.0 2006 2007 2008 2009 2010 2011
Slide 16: easyJet is the No.1 airline at London Gatwick
easyJet is the No.1 airline at London Gatwick Increase in capacity…. …driving returns at London Gatwick easyJet British Airways Monarch Seats Returns Seats Seats Norwegian Ryanair Returns 18 £1,800 18 16 £1,600 16 Millions 14 £1,400 14 Millions 12 £1,200 12 10 £1,000 10 8 £800 8 6 £600 6 4 £400 4 2
Slide 17: Many further opportunities in core markets
Many further opportunities in core markets Share of traffic at easyJet’s top 20 airports Growth in existing markets • easyJet has approximately 22% share of capacity at its top 20 airports – equating to around 46m seats EZJ 46m seats Other LCC • Other low cost carriers (LCCs) have 51m seats ~25% sha
Slide 18: Maintain cost advantage
Maintain cost advantage Warwick Brady Chief Operations Officer 18
Slide 19: Our operation is pan European and large scale
Our operation is pan European and large scale Flight Operations • 2,300 Pilots Cabin Services • 4,800 Cabin Crew Ground Operations • 628 routes across 137 airports in 34 countries Engineering & Maintenance • 212 aircraft • 7 maintenance bases • 22 line maintenance bases Operations Control • 22 aircr
Slide 20: The easyJet way
The easyJet way • Committed to providing the safest, most efficient and most reliable service to our customers • Lean, low-cost operating model • Strong safety culture, with advanced safety management tools • Industry-leading On Time Performance CASK ex. fuel On Time Performance – FY12 easyJet 3.29
Slide 21: Rigorous turn process drives OTP
Rigorous turn process drives OTP Turnround Ground Handlers 21
Slide 22: Improved OTP has increased customer satisfaction
75.00% 70.00% 60.00% 65.00% 90.00% 95.00% 80.00% 85.00% Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Improved OTP has increased customer satis
Slide 23: Cost: maintaining our advantage
Cost: maintaining our advantage easyJet’s cost base – FY12 27% 32% Ground operations Fuel ~ £1.1bn £1.0bn 12% 8% Crew £0.4bn Navigation ~ £0.3bn 3% 6% Marketing - £0.1bn 6% Maintenance £0.2bn Fixed/other - £0.2bn Innovating and re-engineering processes to deliver sustainable savings 23
Slide 24: easyJet lean – lowest cost for our network
easyJet lean – lowest cost for our network • Programme with governance Fuel and milestones efficiency Airports • Aimed at both long term and & ground Crew short term handling • Embedding a lean culture and easyJet continuous improvement lean Sales and Engineering • Operationally focused but marketin
Slide 25: Driving ground operations efficiencies
Driving ground operations efficiencies Airports Ground handling cost per turn • Sophisticated approach to working with regulated airports • Marketing support, bilateral deals, infrastructure initiatives Ground Handling • Consolidating the market • Efficient procurement tendering FY09 FY10 FY11 FY12
Slide 26: Engineering and maintenance
Engineering and maintenance • Already a source of competitive advantage to easyJet and continually improving through lean process management • 95% of the annual easyJet E&M spend is up for re-tender by 2017 • This is a huge opportunity to make a step change in our costs, and we will review the full
Slide 27: Progressive approach to crew costs
Progressive approach to crew costs • No seniority system – rewards given based on performance • Different pay in our different jurisdictions to reduce costs • Local contracts in line with latest European Regulations • Improved flexibility through new entrant contracts • Offer lifestyle choices - sel
Slide 28: Fuel – our biggest expense
Fuel – our biggest expense • One engine taxiing • Flap 3 landings • Delayed engine start • Engine washing • Lightweight seats and trolleys • Fuel burn information shared with flight crew • Implementation of fuel burn analysis tools • New aircraft with sharklets • Zonal drying • Continuous improvemen
Slide 29: New fleet enhancing easyJet's advantage
New fleet enhancing easyJet’s advantage Chart assumes fuel at US$1,100/tonne 29
Slide 30: Summary
Summary • Rigorous cost control across all departments • Leading OTP in Europe • High customer satisfaction • Advantageous operating model • Cost containment program on track 30
Slide 31: Drive demand, conversion and yield across Europe
Drive demand, conversion and yield across Europe Peter Duffy Marketing Director 31
Slide 32: Who are our customers?
Who are our customers? Booking volume by market • Increasingly European profile - over the last 5 years, the FY 08 FY 13 percentage of bookings originating in the UK has fallen by c.10% • 40% UK • 15% France • 13% Italy • 50%+ of bookings are made Time between booking and departure inside 4 weeks of
Slide 33: Who are our customers
Who are our customers Average age by market • The current average age of bookers on the database is 41.5 • The oldest market is the UK (42.6) and the youngest is Germany (38.2) • The average age has risen by 1.2 years since 2009 • We drive 60 million seat sales Booker age from 21 million bookings 33
Slide 34: Brand performance Q3 13
Brand performance Q3 13 Awareness, preference and consideration are strong in all markets with the exception of Germany where our footprint is concentrated mainly on Berlin Q3 13 Awareness Consideration Preference 99 61 16 97 62 19 86 28 4 93 59 20 100 66 36 34
Slide 35: Industry drivers of consideration
Industry drivers of consideration When asked directly most people state price/value for money, safety and punctuality as their primary drivers of choice 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 friendli
Slide 36: How easyJet fares on the things that matter
How easyJet fares on the things that matter 1 2 3 1 2 3 1 2 3 1 2 3 1 2 3 Costs the least Makes travel easier Flies to/from convenient locations Has a good reputation for safety Friendly and approachable staff 36
Slide 37: Understanding customer service
Understanding customer service • We understand the relative importance of the different components of the customer journey • Our action areas do not involve layering cost – they are about the way we do things 37
Slide 38: How we sell
How we sell High volume Demand based Conversion Pricing Model focused e-Commerce engine Proposition Structured re-design and re-targetting segmentation customers and prospects 38
Slide 39: E Commerce engine
E Commerce engine • 370M visits • 17.5M sales • Common pan-European content managed platform • Personalisation/conversion • Structured test and learn programme • Integrated email – abandoned basket • Integrated digital re-targeting • 6M app downloads • 5%+ digital bookings • c.9% visits to easyjet.c
Slide 40: Pricing
Pricing Days To Go Yield curve Price paid Supply Selling Available Profile Capacity 0 50 100 150 200 Optimal Special Events Yield Sector Days to departure Costs Demand Costs Competitor DOW & Incremental Capacity Flight Passenger Fuel Price & Fares Time Costs 40
Slide 41: Structured re-targetting
Structured re-targetting • 53.4M customers on the database – 40% marketable • 414K added last month – 86% marketable • Data driven creative approach • Customers in the contact programme are 30% more valuable than those who are not • Emailed customers book 11% more frequently than non-emailed custome
Slide 42: Proposition re-design - Cost reduction initiatives
Proposition re-design - Cost reduction initiatives • Online check-in and mobile boarding cards to facilitate auto- bag drop off and optimise ground handling costs • Best in class flight digitised flight information and automated disruption management process to minimise contact centre costs 42
Slide 43: Proposition re-design - Allocated seating
Proposition re-design - Allocated seating • Delivered against all objectives • No impact on asset utilisation. No long term erosion of strong operational performance. No negative impact on cost per seat • Improved customer satisfaction with boarding experience - increased by 5% to 73.5% • In Q3 2013
Slide 44: Proposition re-design - Business travel
Proposition re-design - Business travel Building blocks FY11 FY12 FY13 FY14 FY15 Proposition improve punctuality Delivered o add new network points Ongoing o increase frequency Ongoing Product launch & develop flexi fare Delivered deploy allocated seating Delivered o enable Fast Track Security
Slide 45: Summary
Summary • Strong European footprint • Well positioned brand against the broad range of criteria that are important to customers • Leading digital presence • Advanced pricing model • Integrated customer relationship management • Focus on driving cost saving and RPS growth through sensible product des
Slide 46: Capital Discipline
capital Discipline Chris Kennedy Chief Financial Officer 46
Slide 47: Financial principles
Financial principles • Absolute focus on ROCE • Invest in growth opportunities where returns are attractive and are in excess of cost of capital • Maintain strong balance sheet • Maximum gearing of 50% • Target £4m cash per aircraft • Cap of £10m adjusted net debt per aircraft • Policy of returning
Slide 48: easyJet's hedging policy
easyJet’s hedging policy • Clear hedging policy to reduce short term earnings volatility • easyJet hedges forward, on a rolling basis, between: • 65% and 85% of the next 12 months anticipated fuel and currency requirements; and • 45% and 65% of the following 12 months’ anticipated requirements Fuel
Slide 49: Capital allocation process
Capital allocation process • Set strategic direction • Focus markets Strategic • Scenario planning Plan • Portfolio review of network performance • Asset allocation • ROCE performance Long term by route vs. budget Weekly route - management • Competitor activity Capital meeting • Pricing and promotio
Slide 50: Use of Capital: focus on network returns
Use of Capital: focus on network returns Returns by base - July 2012 Rolling 12 months returns: April – March ‘13 vs. April to March ‘12 Returns Market attractiveness Liv’pool Madrid Rolling 12 to March 12 Rolling 12m to March 13 12% ROCE 0% ROCE R o utes FY returns (network touching) Decisive actio
Slide 51: New route selection process
New route selection process • New route process looks at areas of Market Attractiveness strategic focus • Detailed financial and operational Competitive Bilateral evaluations carried out Environment Constraints • Evaluation based on taking fair share of existing revenue pools Detailed financial eval
Slide 52: Building a sustainable model
Building a sustainable model easyJet five year plan 2011 to 2015 Maintenance Growth Replacement Cash generated Special dividend Ordinary dividend Expenditure on Sale and Lease Debt reduction Free cash from Operations £150m (March @20% payout engine Back 2012) maintenance and aircraft 52
Slide 53: Strong balance sheet
Strong balance sheet £m Mar ‘13 Sep’12 Property, plant and equipment 2,192 2,395 Goodwill and other intangible assets 456 456 Other assets 554 561 Liabilities (excluding debt) (1,968) (1,544) 1,234 1,868 Debt 761 957 Cash and money market deposits (1,194) (883) Net debt / (cash) (433) 74 Shareholder
Slide 54: Profit & loss
Profit & loss £m F ’12 F ’11 Change Total revenue 3,854 3,452 11.6% Fuel (1,149) (917) (25.3)% Operating costs excluding fuel (2,174) (2,067) (5.1)% EBITDAR 531 468 13.5% Ownership costs (214) (220) 2.7% Profit before tax 317 248 27.9% PBT margin 8.2% 7.2% 1.0 ppt Tax charge (62) (23) (169.6)% Profi
Slide 55: Cashflow
Cashflow £m 45 28 109 46 389 331 1,400 364 150 25 883 Sep 2011 * Operating Depn & Net Working Tax, net Ordinary CAPEX Financing Special FX Sep 2012 * Profit amort Capital int & other dividend dividend paid paid * Includes money market deposits but excludes restricted cash 55
Slide 56: Fleet flexibility
Fleet flexibility Maximum, minimum and base case fleet size under New Framework agreement 306 300 301 298 279 262 247 276 276 237 269 261 264 226 256 241 231 223 215 217 185 177 167 165 162 FY'14 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 FY'22 Max Base case Min Flexible fleet arrangements to respond
Slide 57: Fleet expenditure broadly in line with current levels
Fleet expenditure broadly in line with current levels 1 2 2 2 2005-2012 2013 – 2014 2015-2017 2018-2022 Additional aircraft 49% 37% 48% 16% Replacement 42% 39% 12% 54% aircraft Maintenance 9% 24% 40% 30% Total 100% 100% 100% 100% Total expected fleet acquisition and overhaul expenditure 18% 10% c.8%
Slide 58: Increasing the proportion of A320s in the fleet
Increasing the proportion of A320s in the fleet 2014 2015 2016 2017 2018 2019 2020 2021 2022 Fleet plan – base case1 226 231 241 256 261 264 269 276 276 Current Generation 32% 36% 39% 42% 41% 41% 40% 39% 39% A3201, 2 Current Generation 68% 64% 61% 57% 52% 44% 41% 33% 25% A3191, 2 New Generation - -
Slide 59: Strategy has delivered improved margins
Strategy has delivered improved margins easyJet’s RASK – CASK vs. competitors RASK - CASK (pence) 2010 2012 Change 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8 -1.0 -1.2 easyJet Ryanair Vueling Norwegian IAG Lufthansa Grp Air France-KLM 2010 0.33 0.40 0.40 -0.01 -0.92 -0.22 -0.76 2012 0.46 0.49 0.21 0.16 -1.
Slide 60: easyJet generates highest returns in sector
easyJet generates highest returns in sector Key competitors Legacy carriers easyJet Ryanair Vueling Norwegian Air Berlin IAG Air France Lufthansa ROCE 16% 16% 7% 9% 3% 1% 0% 9% 3.2 Median: 4.8% 2.7 Lufthansa 9% Adj. Asset Turnover 2.2 IAG Vueling easyJet 1% 7% 16% 1.7 Median: 1.6x 1.2 Norwegian Air
Slide 61: Summary
summary Carolyn McCall Chief Executive Officer 61
Slide 62: Summary: strategy continues to deliver
Summary: strategy continues to deliver Strategy is delivering Favourable Further opportunities Modest capacity growth competitive to take profitable share environment 1. Efficient, low cost Strong unit revenue growth • Legacy carriers’ losses model Controlling costs • Weaker carriers 2. Strong
Slide 63: ADR details and investor relations contacts
Adr details and investor relations contacts 63
Slide 64: Sponsored ADR programme
Sponsored ADR programme easyJet has established a sponsored Level I ADR programme in the US. The ADRs trade on the premier tier of Over-The-Counter (“OTC”) market in the US. Details are as follows: Ticker Symbol ESYJY CUSIP 277856209 Ratio 1 ADR : 4 Ordinary Shares ADR depositary Deutsche Bank Share
Slide 65: Investor relations contacts
Investor relations contacts Rachel Kentleton Director of Investor Relations, Strategy and Regulatory Affairs rachel.kentleton@easyjet.com +44 (0) 7961 754 458 Tom Oliver Group Investor Relations Manager tom.oliver@easyjet.com +44 (0) 7950 996 262 Will MacLaren Group Investor Relations Manager willia
Slide 66: Appendix
appendix 66
Slide 67: Outlook – Q3 IMS 24 July 2013
Outlook – Q3 IMS 24 July 2013 Capacity (seats flown) • Q4 c.+3.1% (assuming no further significant disruption) • H2 c.+3.3% (assuming no further significant disruption) Revenue per seat (constant currency) • H2 up to 6% (assuming no further significant disruption) Cost per seat ex fuel (constant cur
Slide 68: easyJet generates highest returns in sector
easyJet generates highest returns in sector All figures expressed in reported easyJet Ryanair Vueling Norwegian Air Berlin IAG Air France Lufthansa local currency units (LCU) LCU LCU LCU LCU LCU LCU LCU LCU EBIT 390 718 34 1,047 31 -52 -219 1,257 Interest on leases (33%) 31 33 43 346 198 143 322 33
Slide 69: List of awards easyJet has won
List of awards easyJet has won 2013 2012 • Best Airline - airline retail • Family Engagement Award - Family Friendly awards - (Private Sector) conference awards 2013 • Best Low-Cost Airline in Europe - World Airline Awards 2012 • Best Airline for Inflight Food • Number 1 airline - The Kaizo Advocacy
Slide 70: 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