COMPANY PROFILE

easyJet plc

REFERENCE CODE: 2E6ADD86-5D3A-4E9C-A7FE-1CC3DE06A90F

PUBLICATION DATE: 5 Dec 2014
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easyJet plc
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

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easyJet plc
Company Overview

COMPANY OVERVIEW
easyJet plc (easyJet or the company) is a pan-European low-cost airline carrier company. The
company flies on over 600 routes across 30 countries. It primarily operates in the UK and Southern
Europe. easyJet is headquartered in Luton, the UK and employed 8,945 people as on September
30, 2013.
The company recorded revenues of 4,258 million ($6,649.2 million) during the financial year ended
September 2013 (FY2013), an increase of 10.5% over FY2012. The operating profit of the company
was 497 million ($776.1 million) during FY2013, an increase of 50.2% over FY2012. The net profit
was 398 million ($621.5 million) in FY2013, an increase of 56.1% over FY2012.

KEY FACTS
Head Office

easyJet plc
Hangar 89
London Luton Airport
Luton
Bedfordshire LU2 9PF
GBR

Phone

44 871 244 2366

Fax
Web Address

http://www.easyjet.com/en/

Revenue / turnover 4,258.0

(GBP Mn)
Financial Year End

September

Employees

8,945

London Stock
Exchange Ticker

EZJ

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SWOT Analysis

SWOT ANALYSIS
easyJet is a pan-European low-cost airline carrier company. The companys strong position in the
key aviation markets of Europe backed by its competitive business model supports the company in
delivering sustainable operational and financial performance. However, the regulatory price increases
at the company's primary airports could increase its overall cost base and negatively impact its
efforts to streamline its costs.
Strengths

Weaknesses

Strong positions in the key aviation markets

of Europe
Robust capital structure and liquidity
Competitive and flexible business model

Lack of geographic diversification

Dispute between the founder and the board
of easyJet adversly impacts the brand
image

Opportunities

Threats

Growing international tourism

Network expansion to enhance coverage
and drive growth
Key agreements

Increasing charges at regulated airports

Intense competition and price discounting

Strengths

Strong positions in the key aviation markets of Europe

easyJet enjoys strong position in the key aviation markets of Europe. The company operates through
pan-European network which connects more of the top 100 city to city market pairs than any other
airline. It is the fourth largest short-haul carrier in Europe with a market share of 8%. easyJet has
the number one or two market share position in 25 major slot constrained airports such as London
Gatwick, Paris Orly, Milan Malpensa, Amsterdam and Geneva. It has strong position in the major
and valuable European aviation markets comprising the UK, Switzerland, France, Italy and Portugal.
In the UK, easyJet is one of the largest carriers with a market share of around 31% in the total
intra-European market. Moreover, easyJet is the third most searched for airline globally with close
to 370 million visits to easyJet.com over the last 12 months. Switzerland is one of the focus markets
for easyJet. With 13% capacity growth, easyJet has consolidated its leadership position in both
Geneva with around 40% market share and Basel with 50% market share. In France, the company
is the second largest carrier with over 13% market share and bases 25 aircraft in France. easyJet
is the third largest carrier in Italy, with a market share of 12%. The company has 25 aircraft based
in Italy with a leading market share in its main Milan Malpensa base and a strong presence in Rome

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Fiumicino, Venice, and Naples. easyJet is the third largest carrier in Portugal with a market share
of around 13% and is also the second carrier in Lisbon Portela airport.
easyJet's strong position in the key aviation markets of Europe supports the company in delivering
sustainable operational and financial performance.
Robust capital structure and liquidity
Over the years, easyJet has consistently delivered strong financial performance and has one of the
strongest and liquid balance sheets in the European aviation market. More importantly, the robustness
of its balance sheet has helped the company in comfortably sailing through the current global
macroeconomic fluctuations.
The company's FY2013 revenue grew by 10.5% over FY2012. Likewise, it's operating profit registered
growth of 50.2% and the net profit of 56.1% over the same period. The company also enjoys strong
financial position. In FY2013, the company reported non-current borrowings of 592 million ($924.4
million) which translates to a strong debt to equity ratio of 0.71. easyJet also holds significant cash
and liquid funds to mitigate the impact of potential business disruption events with board approved
policy stating a target level of liquidity of 4 million ($6.24 million) per aircraft in the fleet. The total
cash (excluding restricted cash) and money market deposits at FY2013 were 1,237 million ($1,931.6
million). Also, the company has consistently generated improved returns and growth for its
shareholders. It recorded 17.4% of return on capital employed (ROCE) in FY2013 against 11.3% in
FY2012, an increase of 6.1 percentage points.
Moreover, in the recent past, easyJet has effectively managed its surplus cash on its books as well
as benefitted in marketplace through robustness of its balance sheet. For instance, in FY2013, the
company reduced its excess liquidity and capital by paying a special dividend of 175 million ($273.2
million). In addition, easyJet is currently in the process of closing sale and leasebacks for aircraft.
The tender process, which was heavily oversubscribed, would allow easyJet to close deals at
attractive lease rates. This demonstrates the benefit of the company's strong balance sheet.
Thus, a strong balance sheet helps easyJet in gaining a competitive advantage through access to
funding at a lower cost as well as by supporting its business in volatile economic environment.
Competitive and flexible business model
easyJet conducts its business through low cost and flexible business model which ultimately helps
in generating strong cash flow and creating long-term shareholder value. The company's competitive
business structure is derived from its scale and cost advantage, high asset utilization, a young fleet
with low cost ownership, one of the leading online and digital offerings, and industry-leading load
factors. The company has a cost advantage over its competitors in the airports that it operates from,
allowing it to offer competitive and affordable fares. Its key competitors in these airports tend to be
legacy carriers with older, less efficient aircraft, lower asset utilization, lower seat densities and load
factors, and higher levels of fixed costs. This lower cost base enables easyJet to offer lower fares.

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In addition, easyJet's asset utilization of 11 block hours per day for owned aircraft is amongst the
highest in the industry.
easyJet has built up key positions in slot constrained airports over a number of years which provide
the company with a competitive and resilient network platform for its operations. Also, the company's
'easyJet Lean' initiative has helped the company identify areas for cost reduction, such as airports,
ground handling, engineering and fuel. The key objective of easyJet Lean is to protect easyJet's
structural cost advantage by ensuring below inflation non-fuel cost per seat increases.
Thus, the competitive and flexible business model supports the company's business performance
and helps in reducing the uncertainties in the internal and external operating environments.

Weaknesses

Lack of geographic diversification

As a pan-European low-cost airline carrier company, easyJet faces significant risk associated with
the current political and economic uncertainty of the European region. The company primarily derives
all of its revenue from its operation based in the European region. Moreover, air traffic control costs
are approximately double in Europe than they are in the US. In spite of trimming down legacy costs
through mergers, consolidation and restructuring, European carriers are still facing various challenges
of regulation and government.
Hence, lack of geographic diversification could make easyJet susceptible to the changes in the
operating environment of the European aviation market which in turn may negatively impact its
overall business result as well as its competitiveness against peers which operates through relatively
balanced geographic presence.
Dispute between the founder and the board of easyJet could adversely impact the brand image
In the recent past, easyJet founder Sir Stelios Haji-Ioannou has been involved in dispute with the
board of easyJet with regard to the company's strategy of focusing on revenue growth rather than
profit margin improvement.
In 2012, the company announced its plans to buy 100 more new aircraft, to replace some of its older
planes or to expand flights into new areas. In this regard, in January 2013, Sir Stelios Haji-Ioannou
warned easyJet's board over further aircraft purchases by disposing off its 0.34% of its holding in
the company. Also, he has threatened to sell more of his shares in the airline if it places an order
for more planes. Sir Stelios Haji-Ioannou has accused easyJets board of enriching themselves
without taking risks. In early 2014, he voted against the 2013 pay plans of the airline's directors.
Moreover, Sir Stelios Haji-Ioannou has been arguing against the company's expansion plan since
2008 as it would negatively impact shareholder value in the future. Further, in 2010, Sir Stelios
Haji-Ioannou quit the company's board because of disagreements over strategy.

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Hence, such recurrent disagreement between the founder and the board of easyJet, in future, could
adversely impact the company's brand image.

Opportunities

Growing international tourism

The tourism sector plays a vital role in the growth of the airline industry. The tourism industry, which
is the world's second largest industry, has witnessed a strong recovery worldwide since its downfall
due to recession in 200809. The recovery was primarily boosted by improved economic conditions
worldwide. According to the World Tourism Organization (UNWTO), international tourist arrivals to
Europe, the most visited region in the world, increased more than 5% during 2013. The total arrivals
reached 563 million, 29 million more than in 2012. By sub-region, Central and Eastern Europe
destinations (+7%) experienced the best results, followed by Western and Northern Europe each
(4%). Destinations in Southern Mediterranean Europe (+6%) consolidated their performance of 2012
and returned in 2013 to their normal growth rates.
Furthermore, UNWTO forecasts international tourist arrivals to increase by 4% to 4.5% in 2014, in
line with its long term forecast for 2030: +3.8% a year on average between 2010 and 2020. In
addition, the overall demand for European point-to-point leisure and business travel in the medium
term is expected to grow. Thus, a growing tourism sector auger well for easyJet as it could result in
increase in passenger volume which in turn may boost its overall business performance.
Network expansion to enhance coverage and drive growth
easyJet focuses on the continuous expansion of its bases and addition of new routes to enhance
its competitiveness and grow business. For instance, in March 2014, easyJet launched five new
routes from Rome Fiumicino to Montpellier, Thessaloniki, Belgrade and the islands of Menorca and
Rhodes. Similarly, in August 2013, easyJet planned to introduce two new routes for Bristol Airport
with flights to Reykjavik and Marrakech.
Further in October 2013, easyJet added 10 new routes from its London Gatwick, Edinburgh, Glasgow,
Newcastle and Belfast bases to destinations across the UK and Europe. In November 2013, easyJet
planned to introduce a new route to Catania, Sicily. In the same month, easyJet launched two new
routes to Brussels and Strasbourg from London Gatwick. In December 2013, easyJet planned to
connect Milan with the popular destination of Tel Aviv in Israel. Further in the same month, easyJet
planned a third route between the UK and Tel Aviv. Hence, continued focus on network expansion
would help the company to cater to the new passenger-base in the region which in turn could drive
its market presence as well as enhance its revenue and earnings potential in the long run.
Key agreements

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easyJet has entered into few agreements to expand its business in order to offer its customers wider
travel options. For instance, in February 2014, easyJet renewed its distribution agreement with
Travelport, a distribution services and e-commerce provider for the global travel industry. Earlier, in
January 2014, easyJet holidays became a major pan-European tour operator through a new
partnership with the online travel agency Hotelopia. Further in the same month, easyJet signed a
deal in Europe to extend the airlines offerings among corporate travelers through BCD Travels
global network.
In November 2013, Bristol Airport and easyJet had entered into a new five year agreement that
confirmed the continued growth of easyJet at the South Wests leading airport. Furthermore, in
October 2013, easyJet and Sabre Travel Network, a global technology company, joined together to
enhance the experience of travel bookers using the Sabre travel marketplace.
These key agreements will help the company in expansion of its business along with better offerings
to its customers, thus resulting in increased revenues.

Threats

Increasing charges at regulated airports

easyJet faces significant threat from the continual increase in taxes on aviation across Europe. The
current regulatory environment continues to have a significant impact on easyJet and over the last
year monopoly infrastructure providers have pushed through unreasonable increases in charges.
easyJet's strategy is focused around building strong positions at primary airports where there is
inherent demand and thus higher yields are available. Consequently around 70% of easyJet's airport
costs come from regulated airports and there have been above inflationary cost increases in the
period, especially in Italy and Spain.
There is cost pressure from regulated airports across Europe from a combination of lower passenger
volumes, restricted access to finance and upcoming regulatory reviews particularly at Gatwick,
Geneva and Stansted.
easyJet faces significant risks in its domestic market. According to The World Economic Forum, the
UK has one of the highest aviation taxes and charges in the world. Furthermore, the UK government
levies an Air Passenger Duty (APD) of 13 ($20.3) per passenger. In Germany, the government
introduced an air passenger tax of E8 ($11.1) in January 2011 which was subsequently reduced to
E7.5 ($9.6) in January 2012. In Austria, the government also introduced an ecological air travel levy
of E8 ($11.1) in January 2011.
For FY2014, the company expects that the cost increases will be predominantly driven by increases
in charges at regulated airports. easyJet expects cost per seat (excluding fuel and currency
movements) to increase by around 2% for the full year and by around 2% for the first half assuming
normal levels of disruption and constant load factors.

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SWOT Analysis

Thus, the regulatory price increases at the company's primary airports could increase its cost base
and negatively impact its efforts to streamline its costs.
Intense competition and price discounting
The airline industry is highly competitive. The principal competitive factors in the airline industry
include fares, customer service, routes served, flight schedules, types of aircraft, safety record and
reputation, code-sharing relationships, capacity, in-flight entertainment systems and frequent flyer
programs. Airline profits are sensitive to even slight changes in average fare levels and passenger
demand. easyJet's main competitors include Air France, British Airways, Ryanair, Lufthansa, and
Alitalia, among others. The price competition between airlines occurs through price discounting, fare
matching, increased capacity, targeted sale promotions and frequent flyer travel initiatives. A relatively
small change in pricing or in passenger traffic could have a disproportionate effect on an airline's
operating and financial results. Therefore, intense competition may result in price discounting and
may thus pressurize the operating margins of easyJet.

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