Last checked at 23 Nov 2020 09:08
23 November 2020
easyJet plc
(the "Company")
Annual Report and Notice of Annual General Meeting
The Company confirms that the following documents are being posted or have been made available to shareholders today:
· Annual Report and Accounts for the year ended 30 September 2020 ('2020 Annual Report');
· Notice of Annual General Meeting ('AGM Notice'); and
· Form of Proxy for Annual General Meeting.
In accordance with Listing Rule 9.6.1 copies of the above documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism The documents are also available on the Company's website at http://corporate.easyjet.com.
The appendix to this announcement contains additional information which has been extracted from the 2020 Annual Report for the purposes of compliance with the FCA's Disclosure Guidance and Transparency Rules and should be read together with the Final Results announcement from 17 November 2020, which can be found at http://corporate.easyjet.com/investors/regulatory-news. Together these constitute the information required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This information is not a substitute for reading the full 2020 Annual Report.
Annual General Meeting arrangements
The AGM will take place on Wednesday, 23 December 2020 at 11.00 a.m. The Board takes the well-being of its employees, customers and shareholders very seriously. Given the UK Government's current restrictions on public gatherings in place at the date of this announcement, and in accordance with the regulations set out in Schedule 14 of the Corporate Insolvency and Governance Act 2020, we regret that it will not be possible for shareholders to attend the AGM in person.
The Company is offering facilities for shareholders to attend and to vote at the AGM electronically and to attend by conference call to ask questions in real time should they wish to do so. Further details are set out in Part III of the AGM Notice and a user guide to the electronic facilities is available on our website at:
https://corporate.easyjet.com/investors/shareholder-services/shareholder-meetings/agm-december-2020
We strongly encourage shareholders to vote on all resolutions in advance of the AGM by completing an online proxy appointment form appointing the Chairman of the meeting as their proxy and to register any questions in advance. Further details are included in the AGM Notice.
The Board will keep the situation under review and may need to make further changes to the arrangements relating to the AGM, including how it is conducted, and shareholders should therefore continue to monitor the Company's website and announcements for any updates.
Shareholders are urged to submit their votes by proxy before 11.00 a.m. on Monday, 21 December 2020.
For further details please contact easyJet plc:
Institutional investors and analysts:
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Michael Barker | Investor Relations | +44 (0) 7985 890 939 |
Holly Grainger | Investor Relations | +44 (0) 7583 101 913 |
Media:
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Anna Knowles | Corporate Communications | +44 (0) 7985 873 313 |
Dorothy Burwell | Finsbury | +44 (0) 207 251 3801 |
+44 (0) 7733 294 930 | ||
LEI: 2138001S47XKWIB7TH90
Appendix: additional information required by DTR 6.3.5
Page and note references in this appendix refer to page numbers and notes in the 2020 Annual Report.
Directors' Responsibilities and Statements
The following responsibility statement is extracted from the Statement of Directors' Responsibilities on page 132 of the 2020 Annual Report and Accounts and is repeated here solely for the purpose of complying with DTR 6.3.5. The statement relates to the full 2020 Annual Report and Accounts and not the extracted information presented in this announcement or the Final Results announcement.
The Directors are responsible for preparing the Annual Report and Accounts ('accounts') in accordance with applicable law and regulations.
Company law requires the Directors to prepare accounts for each financial year. Under that law the Directors have prepared the Group and Company accounts in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period.
In preparing the accounts, the Directors are required to:
· select suitable accounting policies and then apply them consistently
· make judgements and accounting estimates that are reasonable and prudent
· state whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the accounts
· prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company. This enables them to ensure that the accounts and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group accounts, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of, amongst other things, the financial and corporate governance information provided on the easyJet website http://corporate.easyjet.com/. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's and the Company's position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 80 to 83, confirm that, to the best of their knowledge:
· the Group and Company accounts, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group and profit of the Company
· the strategic report, included in the Annual Report, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
In accordance with section 418 of the Companies Act 2006, each Director in office at the date the Directors' Report is approved, confirms that:
· so far as the Director is aware, there is no relevant audit information of which the Group and Company's auditor is unaware
· he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Group and Company's auditor is aware of that information.
The Annual Report on pages 1 to 132 was approved by the Board of Directors and authorised for issue on 17 November 2020 and signed on its behalf by:
JOHAN LUNDGREN Chief Executive ANDREW FINDLAY Chief Financial Officer
Principal Risks and Uncertainties
The risks and uncertainties set out below are extracted from the pages 66 to 77 of the 2020 Annual Report and Accounts and are repeated here solely for the purpose of complying with DTR 6.3.5.
Our risk Profile
The principal risks and uncertainties faced by the Group remain largely unchanged from 2019 and include the following types of risks:
· Impact of COVID-19 - the impacts of government imposed travel restrictions in response to the COVID-19 pandemic, including their effects on consumer demand, the competitive landscape, and the financial markets (see page 67)
· Asset efficiency and effectiveness - making the best use of capacity/slots and fleet mix in the right airports at the right prices, and driving value through our supply chain
· Environment and sustainability - the impacts of climate change on our business and operations, carbon credit programmes, regulation/ taxation, and changing customer and people expectations
· Legislative/regulatory landscape - being aware of, and compliant with, legislation and regulation affecting our business
· Macro-economic and geopolitical - events that can affect our financial performance including supply/ demand imbalance, general economic trends, Brexit (see page 68), as well as impact of fuel cost, foreign exchange rates, and counterparty performance
· People - having the right people through talent acquisition, retention, engagement, and succession planning
· Safety, security, and operations - the delivery of a safe and secure operation which meets the needs and expectations of our customers
· Technology and cyber - the availability, security, compliance and performance of website and critical technologies, and the protection of company and customer data including the impact of the data breach announced in May 2020 (see page 68).
As with all businesses, our principal risks and uncertainties are continually evolving.
IMPACT OF COVID-19
The impact the COVID-19 pandemic continues to evolve. Travel restrictions continue to be imposed by governments across our markets. Due to these restrictions, a portion of the easyJet fleet has remained grounded since 30 March 2020. The risks and uncertainties, stated in the first half of our 2020 financial year results, remain and continue to be actively managed:
In order to manage both high levels of volatility in demand and to protect the business from the risk of heavily loss making flying, we have put into place a dynamic planning and capacity management process over summer 20 and winter 20/21. This allows the review of planned capacity at three key intervals:
1. Six weeks prior to departure: On sale capacity is reduced significantly to remove the majority of loss making capacity. This is the biggest capacity modification.
2. Four weeks prior to departure: A further check is conducted on the forecast performance of the capacity that is left with further underperforming capacity removed at this point.
3. Three weeks prior to departure any flights with a very low load factor are removed.
Ensuring the safety of our passengers and people is, and always will be, easyJet's highest priority. Whilst the rate of transmission of COVID-19 decreased from the peaks seen earlier in 2020, there continue to be new cases of infection in many countries and the rates have been increasing since the summer. The measures implemented by easyJet are based on our risk assessments and government, WHO, EASA, ICAO and public health guidance. easyJet has a comprehensive set of biosecurity standards in place to minimise the risk of transmission of infectious diseases which have been developed and are constantly under review by our Biosecurity Standards Group. These include all of our aircraft having industry leading filtration systems, to keep the cabin air as clean as possible. We have also implemented additional daily cleaning and disinfection of our aircraft. Furthermore, passengers and crew are required to wear masks on board all our flights.
Due to the extreme level of uncertainty created by the global COVID-19 pandemic, there remains a risk that multiple and prolonged waves of the pandemic could affect our markets, leading to further travel restrictions being imposed at short notice, which could reduce customer confidence in travelling at this time. Accordingly, easyJet has modelled severe but plausible downside scenarios based on further extended waves of the pandemic. These downside scenarios include combinations of a prolonged recovery period, decrease in yield, increased in forecast costs, planned cost initiatives not being achieved to the level forecast, adverse variations in fuel price, significant deterioration of relationships with card acquirers, cash collateralisation and unfavourable foreign exchange rate movements. Although these severe downside scenarios are not considered likely, in the event of some or all of these occurring, and to ensure the business meets its obligations for the next 12 months, the Group may need to secure additional funding, which is not contractually committed at 30 September 2020.
easyJet has taken several measures to preserve cash, reduce costs and generate liquidity. These include signing two secured term loans totalling circa £400 million, maturing in 2022. We have also successfully issued £600 million of Commercial Paper through the Covid Corporate Financing Facility (CCFF) as well as fully drawing down on a $500 million Revolving Credit Facility. This facility is secured against aircraft. In the second half of the financial year, easyJet raised £608 million through the sale and leaseback of 23 aircraft. Furthermore, during the 2021 financial year, easyJet continues to engage with an active lessor market interested in acquiring further aircraft from easyJet's fleet on a sale and leaseback basis, including a recently announced sale of 30 additional aircraft for proceeds of £717 million. In June 2020, easyJet also went to the equity market and successfully raised £409 million through a placing of new shares. In total, between March and September 2020, easyJet has secured more than £2.4 billion to protect it against the impact of COVID-19. easyJet continues to take decisive action to remove cost and non-critical expenditure from the business at every level. This includes reaching agreement with Airbus to delay the delivery of 24 aircraft, with easyJet now expecting its year end 2021 fleet size to be around 302 aircraft.
easyJet utilised Government support available across its network to furlough employees. To reflect the reduced fleet, and proposals relating to the optimisation of our network and bases, easyJet announced that it may need to reduce staff numbers by up to 30% subject to consultation with its employee representatives; several of those consultation processes are ongoing. During the organisation design process, the Group has considered the critical skills and capabilities needed to ensure it remains successful in the future. As easyJet progresses through the consultation process, there is a heightened risk of industrial action that may disrupt our operations.
In light of the global pandemic, the market for aircraft transactions has slowed significantly. However, asset recoverable amounts remain, based on value in use, in excess of the carrying values as at 30 September 2020. Management will continue to keep these valuations under review.
The significant increase in employees working at home has increased our IT and information security risks. We have an ongoing communication and awareness programme to remind all users of the associated risks, and have issued advice on secure home-working best practices. We have also changed our multi-factor authentication and password complexity controls to reflect changing IT Security threats. Furthermore a comprehensive wellbeing support microsite was launched to support people to work remotely as well as manage the personal impact of COVID-19.
To help mitigate the risks from working from home, and meet our duty of care obligations, our Occupational Health and Safety team has issued guidance and a method of self-assessment to support employees. This includes information on how to correctly set up a home working environment and the need to take regular breaks. Those who are identified through this process as needing additional support due to health and safety concerns are being supported, and provided with equipment, as required.
Further support is being given to employees as the Group moves to a position where working from home is regularly required via our Remote Working Policy. This includes a support package to help facilitate a better, more productive homeworking environment. The policy also details support given via our Employee Assistance Programme (EAP) and the #YOUMATTER initiative, which helps to support our employee's wellbeing.
Brexit
easyJet preparations for the Brexit trade deal continue and the plan has not changed. The focus remains ensuring that our network is unaffected by Brexit and that our operations are uninterrupted by any eventual Brexit trade deal outcome, including a no deal exit. The cross functional Brexit programme continues to oversee Brexit planning, led by the Group General Counsel & Company Secretary. The Board has also had oversight of the preparations and is regularly briefed.
easyJet has in place a series of measures to protect our flying rights regardless of the Brexit trade deal outcome, these included:
· Implementing a new operating model, with easyJet operating as a pan-European airline group with three operating airlines: in Austria, Switzerland and the UK. This will ensure we can continue to maintain our networkafter Brexit
· Ensuring that we meet the requirements that EU airlines are majority EU27 owned and controlled, through our investor relations programme and, if needed, activating our contingency plan that could involve suspending a small number of shareholders' voting rights
· Ensuring that our operation is robust to the UK leaving EASA, the European Aviation Safety Agency, including transferring our EU27 based pilots to Austrian pilot licences and ensuring we have sufficient pilots and cabin crew of EU27 nationality
· Continuing to engage with European governments, aviation regulators and the European Commission on Brexit issues
Of particular focus has been ensuring that easyJet is robust to a no deal Brexit outcome and that flights are able to continue between the EU and the UK.
To further support the robustness of our operation to a no deal outcome we have invested in operational measures to ensure that there is no reliance on EU/UK trading links in case these are disrupted, including putting in place stores for spare parts within the EU27.
A no deal Brexit carries potential financial risks for instance from changes in airport and tax charging structures and any unexpected outcomes. Alongside this there remains uncertainty about the economic effects of a no deal Brexit.
IMPACT OF DATA BREACH
On 19 May 2020, easyJet announced that it had been the target of a cyber attack from a highly sophisticated source. The attacker had access to the email address and booking details which had been input by approximately nine million bookers and, for a very small subset of customers (2,208), payment card details. The Information Commissioner's Office (ICO) has opened an investigation into the cyber attack. A class action law firm has filed a group claim against easyJet in the English High Court and claims have also been commenced or threatened in certain other courts and jurisdictions. The likely outcome and potential impact on easyJet of the investigation by the ICO, and the claims, are subject to a number of significant uncertainties and, therefore, any assessment of the likely outcome or quantum cannot be made at the date of this disclosure.
asset efficiency and effectiveness
We maintain our competitive cost advantage by making the best use of capacity/slots and fleet mix in the right airports at the right prices, and driving value through our supply chain.
airport Infrastructure Flying to primary airports is an important element of our customer proposition. The airports to which we fly may already be or may become congested. | Potential causes · Increased competitor capacity · Environmental restrictions/ pressure restricting airport expansions · Delays in airport infrastructure expansion · Increase in airport charges · Changes in regulation · Ineffective slot management Potential consequences · Weakened customer proposition · Loss of market share · Inefficient use of crew/aircraft · Significant increase in costs | Controls and mitigations · Where easyJet is affected by industrial action or other service interruption by a key supplier, resources are deployed to manage this as effectively as possibleSee the significant operational disruption risk on page 76 for further details · Sophisticated processes and systems to ensure slot transactions are made in an efficient and effective manner. · Effective cross-functional governance to ensure optimal business decisions are made · easyJet closely monitors airport capacity through a dedicated airport development team. The team works with airports to ensure the development of appropriate capacity for easyJet in a cost efficient and timely manner · Managing aircraft gauge to improve our ability to grow |
Continuity of services easyJet is dependent on a mixture of critical IT systems and processes, employees, buildings/facilities and third-party suppliers. A loss of one or more of the above components could lead to significant disruption to operations and could have an adverse reputational, financial or legal impact. | Potential causes · Failure of critical IT system · Destructive cyber-attack(i.e. ransomware) · Significant external incident (terrorism, weather, activism) · Failure of third-party · Industrial action Potential consequences · System unavailability for customers and/or staff · Inability to access key buildings/facilities · Unavailability of critical staff · Reliance on inadequate supplier recovery plans · Operational disruption · Brand/ reputation impact · Sustained adverse media coverage | Controls and mitigations · The four key areas of business resilience (IT and processes, people, premises, and suppliers) all form part of easyJet's functional business and airport Business Continuity Plans · Critical IT systems are identified with ongoing efforts to match the business needs with recovery capabilities. The risk of system unavailability is now mitigated further, thanks to the adoption of the cloud, in addition to easyJet's two data-centres · Incident Management and Resilience teams are in place and ready to respond to any IT related incident · Time-critical staff have been identified via Business Impact Assessments and Business Continuity Plans, with regularly tested recovery desks allocated at alternate locations should the usual place of work be unavailable. An increased provision of laptops and tablets also enables greater mobility and remote ways of working · Enhanced procurement processes include risk assessments aligned with business objectives. These require relevant third parties to have their own Business Continuity/Disaster Recovery plans and we are implementing a process to review a sample of these each year · Maintain close working relationships with key stakeholders including, but not limited to, airport authorities and slot coordinators lobbying where appropriate |
Non-delivery of strategic initiatives The business continues to undertake a number of initiatives to support its strategy. | Potential causes · Resource dedicated to change delivery and oversight · Changes in organisation's priorities (may be driven by internal or external factors) · Scope change/time available Potential consequences · Business benefits not realised · Financial underperformance · Inefficient use of resource | Controls and mitigations · Complex, large-scale programmes have been initiated, prioritised and are managed through the Project Management Office · A project management framework, which sets out approval processes, governance requirements, and key ongoing processes and controls, is followed by all projects and programmes, and reviews are undertaken to ensure continuous improvement in this approach · Each strategic initiative has an executive sponsor from the AMB and its own steering group which provides oversight and challenge to the project, monitors progress against programme objectives and ensures that decisions are made at the appropriate level · Key strategic initiatives are managed by experienced programme managers, complemented by appropriate subject matter specialist resource where appropriate · A Project Management Office is in place to oversee delivery of projects and programmes, including the allocation of support resource, budget tracking and realisation of benefits · The executive sponsor provides routine updates to the AMB and can use this as an escalation channel for any issue resolution · The Board also receives updates on key strategic initiatives including any risks or issues associated with their delivery · The Internal Audit function provides independent programme assurance over our most significant initiatives, drawing upon independent subject matter expertise where appropriate |
Single fleet supplier easyJet is dependent on Airbus as its sole supplier for aircraft. The Board considers that the efficiencies achieved by operating a single fleet type outweigh the risks associated with easyJet's single fleet strategy. | Potential causes · Delays in the delivery of new aircraft · Technical/mechanical issues · Fluctuating second-hand market Potential consequences · Schedule reductions/cancellations · Grounding of all/part of the fleet · Loss of customer confidence · Financial impact when aircraft leave the fleet | Controls and mitigations · There are approximately 8,672 A320 family (A319, A320, A321) aircraft operating, with a proven track record for safety and reliability · Introduction of the A320neo in part mitigates this single fleet supplier risk as the aircraft is equipped with a different engine type · easyJet continues to work closely with Airbus to ensure full visibility of the delivery schedule for new aircraft. In the event that there are material delays, appropriate mitigation is put in place; for example short-term wet lease arrangements are used to minimise any operational impact · easyJet operates a rigorous established aircraft maintenance programme. Maintenance schedules are approved by the relevant regulatory body · easyJet regularly reviews the second-hand-market and has a number of different options when looking at fleet exit strategies. Sale and leaseback facilitates the exit of aircraft from the fleet by transferring residual value risk, and also provides flexibility in managing the fleet size |
environment and sustainability
The impacts of climate change on our business and operations, carbon credit programmes, regulation/taxation, and changing consumer and colleague expectations. easyJet's promise in Our Strategy is to be a safe and responsible airline. This is what guides our approach to sustainability, whether that be related to climate change, health and safety, diversity, or employee engagement. More information is in the Sustainability section on page 36.
carbon trading schemes Adverse changes to carbon trading schemes, including the existence and/or cost of the scheme. | Potential causes · Political change · Uncertainty driven by Brexit · International alignment · External pressure groups Potential consequences · Closure of existing scheme · Loss of free allocations, leading to significant cost impact · Introduction of new schemes · Inability to hedge in line with fuel policy | Controls and mitigations · easyJet influences future and existing policy and regulations which affect the airline industry through a number of different channels, including working with relevant industry bodies to assist in this · easyJet looks to optimise fuel usage to reduce emissions and therefore reduce the potential impact of those schemes, for example ensuring optimal routings as well as using climb, descent and landing techniques to improve efficiency · easyJet has an appropriate hedging strategy (to the extent possible) |
climate change Weather patterns including, but not limited to, winds, storms, extreme temperatures, are becoming increasingly difficult to predict. | Potential causes · Increased CO2 emissions Potential consequences · Adverse customer experience · Injury to customers · Operational disruption (including airspace and runway closures) · Aircraft damage · Customers consider alternatives to air travel | Controls and mitigations · easyJet continues to bring Airbus neo aircraft into its fleet which are significantly more fuel efficient than the standard variant · easyJet offsets the carbon emissions from the fuel used on every plan flown · easyJet implements a range of fuel and carbon saving initiatives, for instance operating flights at high load factors and using only one engine when taxiing on the ground · Disruption management measures include advanced winter planning, standby crews and aircraft, as well as the continual review of flight plans to ensure the optimal routings. In addition, to reduce the time it takes to resolve aircraft technical faults, easyJet has a contract for two light aircraft and crew to transport engineers and spare parts around its network, with dedicated engineers on standby to travel |
IncreasedTaxation Future policy measures and regulation to tackle the impact of aviation on climate change could impact easyJet's business if they impose limitations and cost on how easyJet operates and the services it can provide. | Potential causes · Political change · External pressure groups · Customer demand Potential consequences · Significant increase in cost of existing aviation taxes/levies · Future expansion of taxes/levies · Policies to constraingrowth/capacity · Increasing noise curfews · Pressure on margins | Controls and mitigations · By engaging with key stakeholders, easyJet seeks to reach a common understanding on the drive to impose policy measures and regulation to address the impact of aviation on climate change · easyJet continues to explain its environmental performance, and the further action it is taking, to its customers and other stakeholders. For example, this has included highlighting the introduction of the A320neo and A321neo aircraft and their reduced emissions compared to previous generation aircraft,and work with partners in regards to new technologies to radically reduce the carbon footprint of flying · easyJet is able to operate flexible routings in the event of constraints being brought in · The new generation Airbus A320neo and A321neo aircraft are 50% quieter during takeoff and landing than the equivalent previous generation aircraft |
legislative/regulatory landscape
The airline industry is heavily regulated and there is a continual need to keep well informed and adapt (as required) to any legislative or regulatory changes across the jurisdictions in which easyJet operates.
brand license and major shareholder easyJet has two major shareholders (easyGroup Holdings Limited and Polys Holdings Limited) which, as a concert party, control approximately 28.69% of its ordinary shares. easyJet does not own its company name or branding, which is licensed from easyGroup Ltd. The licence includes certain minimum service levels that easyJet must meet in order to retain the right to use the name and brand. | Potential causes · Shareholder activism · Actions of easyGroup or other easyGroup licensees Potential consequences · Eventual loss of the brand licence | Controls and mitigations · Active shareholder engagement programme · Regular engagement with easyGroup Holdings Limited alongside other major shareholders · Representatives from the Board and senior management take collective responsibility for addressing issues arising from any activist approach adopted by the major shareholder. The objective is to address issues when they arise and anticipate and plan for potential future activism · Quarterly meeting of senior representatives from both sides, attended by the Chief Financial Officer and the Group General Counsel & Company Secretary, to actively manage brand-related issues as they arise · easyJet makes contributions to the joint brand protection fund |
legal/regulatory non-compliance Failure to comply with legislation and regulation, such as local consumer laws, new case law or policy changes in relation to customer compensation, environmental or airport regulation, in the jurisdictions in which easyJet operates, or data protection/ information protection regulations could have an adverse reputational and financial impact. | Potential causes · New or changes to existing legislation/regulation · Employee/agent ignorance · Rogue employee/agent behaviour Potential consequences · Sustained adverse media coverage · Fines/regulatory sanctions · Reduction in future revenue · Operational disruption · Loss of operating licence · Significant spike in costs · Share price movement · Loss of colleague/customer trust | Controls and mitigations · Compliance framework including, but not limited to, policies, procedures, and mandatory training programmes · easyJet has an in-house team of Legal experts to advise on legal issues and developments, and to assist the business in interpreting any formal regulatory requirements. Where appropriate, this expertise is supplemented with specialist external support relevant to a specific discipline or jurisdiction · Panel of external legal advisers, both in the UK and in key easyJet markets, are briefed to keep easyJet informed of any changes or new legislation and to assist easyJet in developing appropriate responses to such legislation · easyJet influences future and existing policy and regulations which affect the airline industry through a number of different channels, including working with relevant industry bodies to assist in this · easyJet adapts to new legislation and regulation, where possible adapting existing compliance frameworks (for example mandatory training programmes and clear policies and associated guidance) |
macro-economic and geopolitical
The airline industry can be sensitive to macro-economic and geopolitical conditions. These risk events can affect our financial performance including supply/demand imbalance, general economic trends, Brexit (discussed on page 22), as well as impact of fuel cost, foreign exchange rates, and counterparty performance.
supply/demand imbalance easyJet's success in the highly competitive European short-haul aviation market is built on our key competitive advantages: our network, cost base, brand, digital innovation and efficient and robust capital structure. In FY20 the pandemic has impacted the balance, decreasing demand significantly. | Potential causes · Increased capacity · Industry consolidation · Increased competition from other airlines and transport providers · Government interventions · Fall in consumer demand (including but not limited to macro-economic conditions and environmental concerns) · Internal growth plans Potential consequences · Loss of market positions (relative market share) · Pressure on margins · Adverse financial position · Share price movement | Controls and mitigations · Enhancements to our Commercial organisation to provide even further focus on existing and new initiatives to optimise the revenue position · Weekly trading meeting to review performance - attended by senior managers, including members of the AMB · Relentless focus on maintaining easyJet's competitive advantages · The Network Development Forum, a cross-functional panel of senior managers, including members of the AMB, approves the allocation of assets around the network in the context of expected market conditions · Competitor and consolidation activity is monitored in detail bythe Network team, enabling strategic decision making on key market positions · Fleet framework arrangements, together with the Group's leasing policy, provide easyJet with significant flexibility in respect of scaling the fleet according to business requirements · Implemented a dynamic planning and capacity management process of summer 20 and winter 20/21 to manage supply and demand fluctuations |
VOLATILITY IN FINANCIAL MARKETS easyJet is exposed to a variety of financial markets, volatility in which could give rise to adverse pressure on the cash flows of the Group. | Potential causes · Market price risk: volatility in jet fuel prices, foreign exchange rates, carbon prices, inflation rates or interest rates · Counter-party risk: default of counter parties used for depositing surplus cash and hedging · Liquidity risk: inability to raise funds when required Potential consequences · Insufficient cash to meet financial obligations as they fall due and/or the inability to fund the business when needed leading to insolvency · Significant increase in costs | Controls and mitigations · The Finance Committee (a committee of the plc Board) oversees the Group's treasury and funding policies and activities. See page 107 for further details · Treasury policy sets out plc Board approved strategies for market price risk management, counter-party credit risk management and liquidity risk management. Monthly reporting on all treasury activity including reporting on compliance with treasury policy · Maintaining a liquidity buffer supported by cash and a business interruption insurance policy · Ability to access diverse sources of funding to support liquidity requirements · Rolling hedging programmes on jet fuel and foreign exchange market price exposure |
people
Having the right people is a key part of Our Strategy. In today's environment, we need to create an inclusive and energising environment that attracts the right people and inspires everyone to learn and grow.
industrial action easyJet, and the aviation industry in general, has a significant number of employees who are members of trade unions. Each of the European countries in which easyJet operates has localised employment terms and conditions. As such its pilots, crew and engineers are members of 24 trade unions across eight countries. There are also an additional seven consultative bodies including five Works Councils and a European Works Council. | Potential causes · Adverse employee experience · Changes to terms and conditions · Political unrest Potential consequences · Sustained adverse media coverage · Operational disruption · Significant spike in costs · Reduction in future revenue · Share price movement · Loss of colleague/ customer trust | Controls and mitigations · easyJet seeks to maintain positive working relationships withall trade unions and other representative bodies and has a framework in place for consulting and engaging with tradeunions and consultative bodies · In the event of industrial action or expected disruption, easyJet has processes to mitigate the impact to our operations. The Operations department also has specific procedures to deal with such events · In summer 2020, agreement with BALPA that avoids involuntary redundancies by moving to part time working patterns |
talent acquisition and retention In today's shifting environment, we need to place even more focus on recruiting the right people and building the right talent. | Potential causes · Uncompetitiveremuneration packages · Lack of career progression · Outdated ways of working Potential consequences · Sustained inability to deliver key strategic initiatives | Controls and mitigations · Benchmarking of reward packages · Quarterly employee listening tool with action plans to addressissues raised · Talent mapping of senior employees to ensure continued investment and development of top talent · Succession planning of key roles · Diversity and inclusion strategy · Strategic programme to enhance ways of working for headoffice staff |
safety, security and operations
easyJet's number one priority is the safety and security of its customers, colleagues, and contractors. The delivery of a safe and secure operation which meets the needs and expectations of our customers is critical to our business.
significant safety or security event easyJet's number one priority is the safety and security of its customers, colleagues, and contractors. The Safety Committee (a committee of the Board) provides oversight of the management of easyJet's safety processes and systems. See pages 98 to 99 for further details. The easyJet Safety Board, chaired by the Chief Executive and including the Chief Operating Officer and AOC Accountable Managers, are responsible for directing overall safety and security policy and governance. The Safety Board meets every month to review safety performance and any emerging security issues. | Potential causes · Flight safety incident · Health and safety incident including biosecurity incidents such as cases of COVID-19 · Major security threat Potential consequences · Significant injury/loss of life · Sustained adverse media coverage · Reduction in future revenue · Fines/regulatory sanctions · Operational disruption · Significant spike in costs · Share price movement | Controls and mitigations · Functional Safety Action Groups from across the airline are chaired by the appropriate senior manager and are responsible for the identification, evaluation and control of safety-related risks · The easyJet Safety Board meets monthly to review safety, security and compliance performance across all Air Operator Certificates (AOC) chaired by the Chief Executive Officer, attended by the three AOC Accountable Managers and periodically by AOC regulators · Safety Review Boards are held locally, including at AOC level, and are open for the local regulator to attend · A Safety Policy is published that promotes the incident reporting process and supports this safety culture · easyJet operates a Safety Management System using leading software systems to: · report incidents and identify events; · identify hazards and threats and take appropriate risk-mitigating actions; · collect and analyse safety data (enabling potential areas of risk to be projected); and · enable learning from easyJet and industry events/incidents to be captured and embedded into future risk mitigations. · Timely, credible and reliable information upon which to base operational decisions · easyJet has an emergency response process and performs crisis management exercises · Hull (all risks) and liabilities insurance (including spares) is held · Security cleared specialists continually review geopolitical developments across the easyJet network in particular those countries deemed to be higher risk and report back to the Board any areas of concern · easyJet maintains an inspection regime of all our airports to ensure the security elements are being effectively managed · easyJet continually reviews and develops its safety management processes · easyJet maintains a comprehensive set of biosecurity standards to minimise the risk of transmission of infectious diseases, such as COVID-19. Their efficacy is monitored by the Biosecurity Standards Group |
significant operational disruption Non-cancellation disruption events reduced significancy in 2020 due to reduced ATC and airport congestion. Reduced flying in Europe, OTP Arrivals within 15 Minutes improved greatly: FY19 75% vs FY20 84%. Pandemic related reduced traffic demand resulted in The European Air Traffic Control system seeing significant reduction in ATM delays. | Potential causes · Adverse weather · Industrial action · Technology failure · Destructive cyber-attack(i.e. ransomware) · Supplier failure · Infrastructure failure · Airspace/airportrestrictions/closure Potential consequences · Customer dissatisfaction · Compensation and welfare payable to customers · Inefficient use of crew/aircraft · Adverse media coverage · Share price movement | Controls and mitigations · Key strategic project, Operational Resilience, focusing on: · Building appropriate resilience into the flying schedule · Aircraft and crew standby · Operations Control Centre reporting on the day of operations, including customer communication · Airport performance and strategic supply chain · Air traffic control system lobbying and flight planning enhancements · The use of data across the operation to predict and manage events and aid decision support · Liquidity buffer to better manage the impact of downturns in business or temporary curtailment of activities (see the volatility in financial markets risk outlined on page 73) · Business interruption insurance which provides some cover for very significant shock events such as extreme weather, air traffic management issues and loss of access to key airports. The policy would allow us to claim in the event of a very substantial number of cancellations. This is included within our definition of liquidity |
technology and cyber
The nature of these risks, easyJet's reliability on technology (particularly online devices) and the ever-increasing sophistication of serious organised crime groups, terrorists, nation states and even lone parties means that, despite all the mitigation detailed, easyJet will inevitably retain an element of vulnerability regarding the availability, confidentiality and integrity of its information and data.
data breach A data breach involves the unauthorised access to customer or employee data. Protecting that data and its privacy remains a priority for easyJet. | Potential causes · Cyber attack · Third-party incident · User error · Misconfigured systems Potential consequences · Sustained adverse media coverage · Fines/regulatory sanctions · Third-party liability/class actions · Reduction in future revenue · Operational disruption · Significant spike in costs · Share price movement · Loss of colleague/customer trust | Controls and mitigations · A data and cyber risk governance structure exists to regularly review the data and cyber risk landscape and determine required action to take place in order to manage risk effectively · Dedicated Information Security team who provide assurance over third parties, proactively monitor threats and respond to incidents · Employee education and awareness programme including a network of champions, online training and awareness campaigns · Security logging and monitoring · Vulnerability scanning and penetration testing · Digital Safety programme to ensure compliance with various and ensure data control and protection · Credit card data is protected through PCI DSS compliance as a Level 1 Merchant. This is revalidated annually by an external body, which we (and they) attest to |
Failure of critical technology easyJet relies on a number of critical technologies that are key to the delivery of essential business processes. These include, but are not limited to, operational, commercial and financial systems. A critical technology failure includes any technical failure which is sufficient enough to interrupt critical business operations (which may include one or more systems). This includes system unavailability or a failure which results in the loss or corruption of data. | Potential causes · Destructive Cyber attack(i.e. ransomware) · Hardware failure · Aged infrastructure · Data Centre Outage · Third-party Outage · TechnologicalDependency Failure · IT change Potential consequences · Sustained adverse media coverage · Reduction in future revenue · Fines/regulatory sanctions · Operational disruption · Significant spike in costs · Share price movement | Controls and mitigations · Monitoring and alerting of availability of critical technologiesand their inter-dependencies · Security logging and monitoring · Vulnerability scanning and penetration testing · Business Interruption Insurance in place · IT Change Management Process embedded to assess risk ofall changes to technology including changes made by third-party providers · Critical technologies are either cloud hosted, hosted across two data centres or at third-party provider locations with necessary failover protocols and security perimeters in place · IT Major Incident Management team is in place to respond rapidly to any unforeseen critical technology incidents including those of a security nature · IT Supplier Relationship Management process to ensure thatthird-party services and associated risks are regularly reviewed and assessed · easyJet are progressing the delivery of a hosting and network programme that will further improve the resiliency of core infrastructure and cloud connectivity capabilities · Digital Safety Policies and Standards that set out the technical and organisational measures for keeping our data and systems safe · As an Operator of Essential Services under the NIS regulation In the UK, we have to comply with the requirements laid out in the CAF for Aviation which focuses on critical systems availability |