EasyJet : Half year results statement

24 June 2020

easyJet plc

Results for the six months ending 31 March 2020

easyJet delivers strong first half results in light of Covid-19

Equity placing further supplements strong liquidity position and investment grade balance sheet

Decisive action taken to cut costs and capex

Summary

•  easyJet has been decisive in meeting the challenges of Covid-19:

  • o Driving down costs

  • o Delivering vastly reduced capex whilst retaining excellent fleet flexibility

  • o Secured c£1.7bn of funding already with a further £200-350m anticipated from final sale and leaseback transactions

•  easyJet announces today that its strong liquidity position and investment grade balance sheet are being further boosted by an equity placing. As at 22 June our current cash position is c.£2.4bn, before proceeds from the equity placing or the remaining sale and leaseback transactions

•  easyJet's business model means that we are well positioned for the recovery from Covid-19:

  • o Delivered strong first half results, with underlying trading ahead of expectations

  • o easyJet's brand drives confidence in European travellers, who are focused on trust, sustainability and value for money

  • o easyJet's industry-leading network, serving primary airports, provides a customer offering that cannot be matched by any other airline

  • o Cost-out programme to deliver sustainable savings in all areas of the cost base

•  Passenger numbers for the six months to 31 March 2020 decreased by 3.0 million (7.4%) to 38.6 million due to the impact of Covid-19

•  Capacity1 decreased by 7.6% due to the very significant number of flight cancellations in March related to Covid-19. Load factor increased by 0.2 percentage points to 90.3%

•  Total Group revenue increased by 1.6% to £2,382 million (H1 2019: £2,343 million) due to self-help measures such as our late yields initiative, network optimisation in Germany, the bankruptcy of Thomas Cook and strong ancillary revenue growth, offset by national strikes in France, storms Ciara and Dennis and the impact of Covid-19. Airline revenue per seat2 increased by 9.6% to £55.60 (H1 2019: £50.71), with an increase of 10.2% at constant currency3

•  Airline headline cost per seat excluding fuel increased by 8.2% to £47.24 (H1 2019: £43.64). Airline headline cost per seat excluding fuel at constant currency increased by 9.5%

•  Group headline loss before tax was £193 million (H1 2019: loss of £275 million) reflecting the above revenue and cost drivers as well as easyJet's normal seasonality

•  Total Group loss before tax of £353 million for the six months ended 31 March 2020 (H1 2019 loss of £272 million) reflecting a net charge of £160 million from non-headline items, relating principally to the discontinuation and ineffectiveness of fuel hedges resulting from Covid-19 related flying restrictions

•  Net debt position at 31 March 2020 of £467 million (H1 2019: £201 million)

Outlook

•  Capacity is expected to build through the summer season, with Q4 at 30% of planned, pre-Covid-19 capacity

•  Booking numbers for easyJet Holidays are encouraging.

•  easyJet expects to deliver circa flat CPS ex fuel at constant currency in full year 2021 vs full year 2019

•  At this stage, given the continued level of uncertainty, it is not possible to provide financial guidance for the remainder of the FY20 financial year.

H1 2020	H1 2019	Change Favourable/(adverse)
Capacity (millions of seats) Load factor (%) Passengers (millions) Total Group revenue (£ million) Headline Group loss before tax (£ million) Total Group loss before tax (£ million) Headline basic loss per share (pence) Airline revenue per seat (£) Airline constant currency revenue per seat (£) Total Airline headline cost per seat (£) Headline Airline constant currency cost per seat excluding fuel (£)	42.7 90.3 38.6 2,382 (193) (353) (49.4) 55.60 55.87 59.75 47.80	46.2 90.1 41.6 2,343 (275) (272) (56.1) 50.71 50.71 56.66 43.64	(7.6) +0.2 (7.4) 1.6 +£82 (£81) 6.7 9.6 10.2 (5.5) (9.5)	% ppts % % m m pence % % % %

Commenting on the results, CEO of easyJet Johan Lundgren said:

"easyJet delivered a strong performance in the first half prior to the onset of the Covid-19 pandemic, resulting in a 30% improvement in headline loss before tax versus the same period last year.

"We have been decisive in meeting the challenges of the pandemic by cutting costs, vastly reducing our capex while retaining our industry leading fleet flexibility and having already secured £1.7bn of an expected £2.0bn in additional funding.

"After grounding our fleet in March, we successfully resumed operations on 15 June, incorporating new enhanced bio security measures to ensure our staff and customers can fly safely. We will gradually ramp up our flying to around 75% of our routes in August, albeit with lower frequencies, so our customers can go on summer holidays.

"We are also continuing to work to strengthen our balance sheet. Today we have announced plans for an equity placing which will further enhance easyJet's liquidity position, credit metrics and already strong balance sheet through the Covid-19 recovery.

"I am extremely proud of all the easyJet team has done to bring us through this exceptionally challenging period. As Europe emerges from the Covid-19 crisis, easyJet is well placed to strengthen its leading position as a trusted brand offering value for money with an industry-leading network of primary airports."

For further details please contact easyJet plc:

Institutional investors and analysts:

Michael Barker	Investor Relations	[phone]
Holly Grainger	Investor Relations	[phone]
Media:
Anna Knowles	Corporate Communications	[phone]
Edward Simpkins	Finsbury	[phone] / (0)207 251 3801
Dorothy Burwell	Finsbury	[phone] / (0)207 251 3801
Conference call

There will be a conference call at 17:30 BST on 24 June 2020.

Telephone dial-in:
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Overview

Replay available for 7 days afterwards:

During the first half of financial year 2020 easyJet was materially impacted by the Covid-19 pandemic. Government restrictions on flying during the pandemic caused 18,000 flight cancellations in March. Passenger numbers during March were halved compared to the year earlier. Across the first half passenger numbers decreased by 7.4% to 38.6 million, capacity decreased by 7.6% and total revenue grew by 1.6% to £2,382 million.

Revenue

Total revenue increased by 1.6% to £2,382 million (H1 2019: £2,343 million). Airline revenue per seat increased by 9.6% to £55.60, and by 10.2% at constant currency to £55.87. This was driven by:

•  Strong underlying trading, driven by self-help measures such as our late yield initiative, network optimisation, notably in Germany, market consolidation and route maturity

•  The bankruptcy of Thomas Cook on 23rd September 2019 meant that through our late yield initiatives we were able to capitalise on increased demand, particularly during October

•  Continued strength in ancillary revenue, predominantly driven through first bag, where we annualised the improved bag yield algorithm, which was launched in April 2019, as well as strong performance of allocated seating initiatives such as the fourth seating band and seasonal pricing

Offset by:

•  National strikes in France, which had a significant impact in the first quarter

•  Storms Ciara and Dennis in second quarter

•  The impact of Covid-19, which began with severe disruption and cancellations in our Italian flying programme, later spreading to Spain. The fleet was fully grounded on 30 March. Approximately 18,000 flights were cancelled in the period due to Covid-19, resulting in lost revenue of circa £0.2 billion

Cost

easyJet's underlying cost performance has been solid despite external inflationary pressures. Airline headline cost per seat including fuel increased by 5.5% to £59.75 (H1 2019: £56.66). Airline headline cost per seat at constant currency increased by 7.2% to £60.75.

Airline headline cost per seat excluding fuel increased by 9.5% at constant currency to £47.80 (H1 2019: £43.64). This cost increase was driven by:

•  Overheads and other costs comprised mainly Covid-19-related disruption costs

•  Maintenance costs and an expected one-off maintenance charge

•  Ownership costs, reflecting new aircraft year on year

•  Crew costs, namely annualisation of previous pay increases, higher than expected crew retention and low productivity during March 2020

•  Inflationary pressure from regulated airports and lower incentives due to reduced passenger numbers, partially offset by a continued focus on airport procurement activity

Offset by:

•  Lower navigation charges, due to a reduction in rates from Eurocontrol

Of the 9.5% increase in Airline headline cost per seat excluding fuel at constant currency, c4.5% was driven by the impact of Covid-19. This led to:

•  Significant increase in disruption costs

•  Full pilot and crew rosters through to March when many flights were being cancelled (furlough arrangements only started after the end of the first half)

•  Lower seat capacity driven by cancellations

Fuel cost per seat decreased by 3.9% to £12.51 (H1 2019: £13.02) and by 0.5% at constant currency, driven by favourable price movements, lower volume requirements due to Covid-19 related cancellations and continued investment into more fuel efficient aircraft. The sale of certain carbon assets resulted in a remeasurement of our EU ETS liability which has reduced H1 2020 fuel costs in the income statement by £55 million.

Non-headline items

easyJet had a net £160 million non-headline charge during the first half of financial year 2020 (H1 2019: £3 million gain). These items are separately disclosed as non-headline loss before tax items. The most significant items were as follows:

•  £164 million fair value net charge due to easyJet's significantly over-hedged position from both a jet fuel and FX perspective, following the full grounding of the fleet and the lower capacity expected for several months thereafter (H1 2019: nil)

•  £3 million foreign exchange gain arising from the retranslation of foreign currency monetary assets and liabilities held in the statement of financial position (H1 2019: £3 million gain)

•  £1 million gain from the sale and leaseback of 10 A319 aircraft resulting in a profit on disposal of the assets (H1 2019: £2 million gain)

There were minimal non-headline charges relating to Brexit (H1 2019: charge of £4 million) and no further commercial IT platform items (H1 2019: £2 million release of provision).

Non-headline items are material non-recurring items or are items which do not reflect the trading performance of the business. Further detail can be found in the notes to the interim financial statements.

Strategic progress

Delivering Our Plan easyJet has a well-established business model that provides a strong foundation to drive profitable growth and long term shareholder value. easyJet is delivering its strategy through its new strategic framework which is called 'Our Plan'. The five priorities are:

•  Network - number one or number two in primary airports

•  Winning our customers' loyalty

•  Value by efficiency

•  The right people

•  Innovating with data

Progress on a number of our key strategic initiatives has been unavoidably delayed by the shift of resources to managing the impact of the Covid-19 pandemic and by the furloughing of a large proportion of our people. We will return to these initiatives in due course.

Network - number one or number two in primary airports

Grounding and restart

The easyJet fleet was fully grounded on 30 March 2020 as a result of the unprecedented travel restrictions imposed by governments in response to the Covid-19 pandemic and the implementation of national lockdowns across many European countries.

easyJet resumed flying on 15 June 2020, servicing a small number of routes where we predicted sufficient customer demand to support profitable flying. The initial schedule comprised mainly domestic flying in the UK, France and Italy with just 10 lines of flying.

This is expected to ramp up through July, starting with 85 aircraft, building to 100 by mid-month and around 150 during August. This will include international flying. This reduced network has been carefully selected following analysis of customer demand and government restrictions across Europe, in order to prioritise cash generative flying.

Further routes will be announced as customer demand increases and government restrictions across Europe are relaxed. We hope to be able to serve around 75% of our previous route network by the end of August, albeit on reduced frequencies.

Booking trends on resumed flights have been encouraging, and the demand indications for summer 2020 are improving, albeit from a low base. Bookings for winter are well ahead of the equivalent point last year, which includes customers who are rebooking Covid-19-disrupted flights for later dates.

easyJet currently expects to fly around 30% of the planned capacity, on average, for Q4 2020. This will continue to be evaluated to reflect changing regulations and customer demand. Our commercial planning and data science teams have built demand forecasts around various route clusters, as we move through summer and into winter 2020/21.

In line with IATA projections, easyJet believes that the levels of market demand seen in 2019 are not likely to be reached again until 2023. As a low cost airline with a strong network, we believe we are well placed to benefit from customers seeking great value during that recovery period.

Network strength easyJet aims to provide customers with the leading, best value offer for the destinations they want to fly to. easyJet's strategy is driving both leisure and business travel by focusing on the key airports which serve valuable