EasyJet : Annual Report 2018

THE WARMEST WELCOME IN THE SKY

2018 at easyjet

STRATEGIC REPORT

• 1 Chairman's letter

• 2 Highlights

• 3 Investment case

• 4 At a glance

  easyJet has a well-established business model that provides a strong foundation to drive profitable growth and long-term shareholder returns.

• 6 Market review

• 7 Our business model

• 8 Our strategy

• 10 Chief Executive's review

• 10 Overview

• 13 Strategic progress

• 21 Outlook

• 28 Key performance indicators

• 30 Financial review

• 36 Going concern

  During the year easyJet has reviewed and refreshed its strategic framework which is now called 'Our Plan'.

• 36 Viability statement

• 37 Key statistics

• 38 Risk

• 49 Corporate responsibility

CORPORATE GOVERNANCE

• 59 Chairman's statement on corporate governance

• 61 Board of Directors

• 64 Airline Management Board

  This plan includes 'Our Purpose', 'seamlessly connecting Europe with the warmest welcome in the sky'.

• 67 Corporate governance report

• 87 Directors' remuneration report

• 106 Directors' report

• 110 Statement of Directors' responsibilities

ACCOUNTS

• 111 Independent auditors' report to the members of easyJet plc

  'Our Promise' to ourselves is that we will be:

• 118 Consolidated accounts

• 123 Notes to the accounts

• 150 Company accounts

• 153 Notes to the Company accounts

• 155 Five-year summary

  • • Safe and responsible

• 156 Glossary

• • On our customers' side

• • In it together

• • Always efficient

• • Forward thinking

VISIT OUR WEBSITE FOR OTHER INVESTOR INFORMATIONhttp://corporate.easyJet.com/investors

CHAIRMAN'S LETTER

Delivering long-term value

The 2018 financial year has been a tough but successful one for easyJet, with industry-wide disruption being more than offset by record revenues. Uncertainty around Brexit, high oil prices and the wider macro-economic environment have led to a recent fall in the share price which is disappointing, but easyJet is well positioned to face current market challenges and take advantage of any opportunities arising. In 2018 the Group has increased the number of passengers flown by over 10.2% to 88.5 million passengers (2017: 80.2 million) and revenue has increased to £5,898 million (2017: £5,047 million). In the year, we acquired part of Air Berlin's operations at Tegel, the integration of which is progressing well. This acquisition is an important strategic move that secures a leading position in one of Europe's biggest markets.

BOARD

Johan Lundgren became Chief Executive on 1 December 2017 and during his first year has taken the opportunity to meet many employees, customers, regulatory bodies and other stakeholders to seek their views on, amongst other things, the Group's strategy and culture. This has culminated in the presentation to the

Board of 'Our Plan', which is an evolution of our existing strategy, incorporating a number of new strategic initiatives. On behalf of the Board I would like to thank Johan and his team for their contribution during his first year; the Group continues to go from strength to strength under his refreshed and focused leadership.

In addition to Johan's arrival as Chief Executive there have also been other changes on the Board. We welcomed Julie Southern on 1 August 2018, who brings extensive experience of the airline industry and a background in commercially-oriented finance roles. Julie will assume the role of Audit Committee Chair on 1 January 2019. After seven years with easyJet, Adèle Anderson has recently notified us of her intention to step down and will be leaving with effect from the AGM on 7 February 2019. On behalf of the Board, I would like to thank Adèle for her important contribution to easyJet and specifically in her role as Audit Committee Chair. Keith Hamill OBE also stepped down from the easyJet Board in December 2017 following completion of nine years on the Board. On behalf of the Board, I would like to reiterate my thanks to Keith for his important contribution to the easyJet Board and to easyJet's success.

RESULTS easyJet's results this year have been driven in particular by a strong revenue performance, which increased by 16.8% to £5,898 million (2017: £5,047 million), including £198 million from Tegel routes. This was partially offset by costs, which were negatively affected by severe disruption, an industry-wide issue, combined with inflationary pressures. This resulted in headline profit before tax increasing by £170 million to £578 million andbasic headline earnings per share increasing by 43.4% to 118.3 pence (2017: 82.5 pence). Total profit before tax increased by £60 million to £445 million. Non-headline costs of £133 million (2017: £23 million) included a £40 million transition cost of Tegel and a £65 million charge relating to a change in our approach to technology development. Basic total earnings per share increased by 17.4% to 90.9 pence (2017: 77.4 pence).

DIVIDENDS easyJet's dividend policy is to pay shareholders 50% of headline earnings, reflecting the Board's confidence in the long-term prospects of the business. I am pleased to recommend to shareholders a dividend of 58.6 pence for the 2018 financial year, an increase of 43.3% from the previous year.

BERLIN TEGEL

As noted above, easyJet acquired part of Air Berlin's operations at Berlin Tegel Airport, completing the transaction in December 2017. This secured a market-leading position across the Berlin market, which is one of Europe's biggest, and Berlin is now our second biggest city base after London. The start-up of operations has gone well and the total loss before tax this year of £152 million was broadly in line with initial expectations. We will continue to optimise both our operations and schedule in Berlin to underpin its long-term success.

OUR PEOPLE

I would like to thank all of easyJet's employees and in particular the crew who, despite all the disruption experienced this year, ensure easyJet provides the warmest welcome in the sky. We are committed to investing in creating a great place to work, on the ground as well as in the sky.

During the year we have introduced a number of new people to the Airline Management Board ('AMB'), who have market-leading expertise and experience that is aligned with the new strategic priorities and who will lead the business in its next stage of development.

THE FUTURE easyJet continues to be well positioned for the future, with a sound business model and strong financial base. Whilst there are some challenges to face in the next 12 months, including the impact of Brexit, there are also significant opportunities and the business is well set to sustain our leading position in Europe's aviation market.

JOHN BARTON Non-Executive Chairman

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HIGHLIGHTS

Strong performance

5,898

TOTAL REVENUE 2013 TO 2018 (£M)

4,258

4,527

4,686

4,669

5,047

2018 TOTAL REVENUE

£5,898m

2017: £5,047M

£578m£445M

2017: £408M

2017: £385M

90.9p2017: 2017: 77.4 pence

118.3p

82.5 pence

2013

2014

2015

2016

2017

2018

LOAD FACTOR

SEATS FLOWN

TOTAL ANCILLARY REVENUE

92.9%

95.2M

£1,210M

2017: 92.6%

2017: 86.7M

2017: £986M

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easyJet plc Annual Report and Accounts 2018

STRATEGIC REPORT

HEADLINE PROFIT	REPORTED PROFIT	BASIC TOTAL	BASIC HEADLINE
BEFORE TAX	BEFORE TAX	EARNINGS PER SHARE	EARNINGS PER SHARE

INVESTMENT CASE

Investing in our strengths

We continue to invest in what differentiates us, strengthening our long-term customer offer.

Driving	88.5M
revenue
growth
PASSENGERS3
2017: 80.2M
66%	NO.1 OR 2
		Customer
		Loyalty
Read more	RETURNING CUSTOMERS3,5	AIRLINE BRAND IN THE UK,
on page 26			2017: 66%	FRANCE AND SWITZERLAND2,6
£396m	14.4%
		Strong
		Balance
Sheet	NET CASH2
	2017: £357M

979
ROUTES OPERATED2
2017: 862
15%
	LOW-
	COST
	MODEL
FUEL BURN REDUCTION
FROM NEW GENERATION
Read more	AIRCRAFT4
on page 24

value by efficiency

HEADLINE ROCE3 2017: 11.9%

(1)	As at 30 September 2018 - airports where easyJet is the number one	(4) A320neo vs previous generation A320
or number two carrier based on short-haul capacity	(5) Percentage of seats booked by customers who made a booking in the
(2)	As at 30 September 2018	preceding 24 months
(3)	In the year ended 30 September 2018

(6) Millward Brown brand tracker

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