Capital markets day 27 th September 2017 Agenda Time Agenda item - PowerPoint PPT Presentation

Capital markets day 27 th September 2017

Agenda Time Agenda item Led by Time Agenda item Led by 14:15 TEA & COFFEE BREAK 11.00 Introduction Carolyn McCall 11.05 1. Market / Network 14.30 4. Making travel easy & affordable > Airline industry trends Robert Carey > The easyJet operation / Chris Browne > A winning network strategy Andrew Hodges avoiding disruption Gary Smith > Q&A > Digital operations Chris Hope 11.45 2. Driving Revenue > Gatwick Airport > Q&A Peter Duffy James Millett Andrew Middleton 15.15 Wrap up and close Carolyn McCall Lis Blair 12:30 LUNCH 15:30 Gatwick North Terminal tour / Chris Hope 13.30 3. easyJet cost control & a strong balance sheet Innovation presentation easyJet’s cost position 17:30 End of day > easyJet LEAN Andrew Findlay > Airports and ground handling Paul Ablin > Strong balance sheet Simon Cox > Q&A Mike Hirst 2

Introduction Carolyn McCall

European Aviation Robert Carey – Director Strategy & Network

Europe faces A challenging landscape ahead Fragmented Europe appears to be arriving at an inflection point Consolidation Full service carriers (FSCs) are now offering identical products to low costs (LCCs) Convergence Cost Factor cost inputs continue to rise pressure Congestion Passenger numbers will double in 20 years and infrastructure is strained Customer focus Introduction of digital and rapid innovation making this the next battleground 5

European consolidation is finally starting North American airline market European airline market Ryanair American Other Other 25% 51% Lufthansa Group Alaskan Further United consolidation SouthWest to come IAG easyJet Delta Top 4 airlines Top 4 airlines 70% of market 49% of market European airline market based on total short haul capacity 6 6

Airline business models are converging Charge for Charge for Charge for on-board Flexi reserved hold food fares seating baggage offering     Prior offering     Current offering Charge for Charge for Charge for on-board Flexi reserved hold food fares seating baggage offering     Prior offering     Current offering 7

Traditional advantages of a Hub feeder model are eroding 8

Factor Cost pressures continue to rise Fuel 150 $ per barrel 100 50 Labour 50 average wage index, U.S. 40 30 20 0 Maintenance cost 200 Indexed 1980 1 , U.S. market data, per aircraft 150 100 Sources: Form 41 via OAG Aviation Solutions; MRO development team; Office of the Chief Actuary; Air Transport Association 1 1980 values: 429.24bn ASM, 4.69mn flight cycles, 7.53 mn A/C hours, $3.27bn maintenance spend, 2265 active A/C, average fleet age 9.38 years 9

passenger volumes and associated congestion is growing Lookin ing g at Easyje jet Markets by 2035… +50% 0% Growth in the UK +50% 0% Growth in France 7,200, 7, 00,000 000,0 ,000 00 Number of passengers predicted by +40 40% 2035, ~2x today’s volume Growth in Spain +35% Growth in Germany +30% 0% Growth in Italy 10 Source: IATA 20 year passenger forecast

Data and digital are driving a new focus on Customer PRE- LOYALTY TY EXPLORE E BOOK AIRPORT IN-FL IN FLIG IGHT HT ARRIV IVAL DEPARTU TURE INDUSTRY Integrated loyalty Creates buzz Opaque pricing Self-serve mobile Redesigned Allows Allows and data with around its brand model that rebooking in airport passengers order customers to hotel, shared ride during holidays creates bundles case of delays/ experience (e.g. food and drinks track the status and special of multiple trips cancellations pre order coffee through its IFE and location of occasions pickup) baggage in real easyJet 11

Implication: very different growth reality by airline Yearly growth Category Rationale expectation > Cost position to succeed > Long term profitable growth through organic demand and market share gain High Pure LCCs > Can continue grow through the cycle to achieve long term ambition > Multiple challenges: uncompetitive costs, labour, Middle East/LCC long haul impact Legacy full > Recent low fuel and benign conditions have provided temporary respite Low service carriers > Longer term, growth will rely on power of constrained hub airports > Mitigate lack of competitive legacy cost base LCC > Initially used defensively, taking over capacity no longer flown by mainline Medium subsidiaries > Currently critical for FSC strategies and therefore likely to endure > Weak high-cost (legacy) airlines without sustainable competitive advantages Negative > Received cash injections from shareholders and government support Restructuring to zero > Current yield environment is forcing restructuring to warrant cash injections 12 12

current trends support THE easyJet model Strong network and balance sheet allow it to take advantage of market consolidation Consolidation Structural lower cost is an advantage versus FSC competitors, as well as innovative ancillary offerings Convergence LEAN approach and relentless cost focus keep cost pressure down Cost pressure Smart builds to account for disruption, as well as leveraging digital/innovation to Congestion minimise impact on the customer Customer focus End to end thinking, including airport of the future, leveraging pioneer position in advanced data and digital position to create industry leading offer 13

The easyJet Network Andrew Hodges – Head of Network & Scheduling

winning network strategy Purposeful investment Protect the profitable core + Capture the national opportunity in France Disciplined use of capital Target investment in key cities + Efficient basing Well positioned in an evolving market 15

PURPOSEFUL INVESTMENT #1 positions deliver sustainable returns Being number 1 delivers returns #1 positions Constrained, Neither Superior product not #1 Returns constrained > widest range of routes nor #1 > best frequencies / times > strongest brand awareness Cost advantage > negotiated airport fees > procurement of ground handling > economies of scale from media spend > Strong correlation between strong performance and #1 positions and constrained airports Operational advantage > improved crew productivity > We have a targeted plan to build more airports into #1 > more flexible scheduling (larger slot portfolio) positions and to secure slots at constrained airports 16

PURPOSEFUL INVESTMENT Strong progress over last five years easyJet capacity split by airport position, FY17 airports europe bases 138 28 98% of seats are on routes that touch a #1 or #2 position FY17 31 routes 874 countries 2013 2017 86 over m seats 279 p.a. Airports in #1/2 positions 44 47 aircraft Market share at #1/2 positions 24% 26% Capacity at #1/2 positions (m) 52.5 64.5 17

PURPOSEFUL INVESTMENT Delivering Superior market positions IATA definition Airpo port t posit sition ion Share of 2017 7 capac acity Tota tal Level 3 – demand significantly exceeds #1 #2 Other airports capacity Level 3 constrained 32% 20% 21% 72% Level 2 – potential for congestion at Level 2 constrained 12% 2% 3% 16% some times of day, week or season Other 5% 5% 2% 12% Level 1 – infrastructure generally adequate to meet demands at all times Total 48% 26% 26% 100% LCCs Legacies > Over time we can drive superior yield Primary Sources of Competitive performance > Customer focus > Sustainably Advantage > Advantaged lower unit cost > Larger gauge aircraft leverage ongoing network value from these positions 18

PURPOSEFUL INVESTMENT Significant scope for further profitable growth CITY-PAIR > Over the next 3 years our fleet will grow by easyJet Routes around 40 aircraft FY17 capacity (m) 68.2 86.9 > On existing routes alone there remains Equivalent to significant scope to grow through: 371 easyJet 123.4 aircraft • natural market growth easyJet Legacies • stimulating new demand AIRPORT-PAIR • winning share from inefficient legacy carriers easyJet Routes FY17 capacity (m) 32.6 > We have a c.9% share of the total European 86.9 Equivalent to market - new route opportunities support further 61 183 easyJet significant profitable growth aircraft easyJet Legacies Other LCCs 19

PURPOSEFUL INVESTMENT Targeted investment to create winning competitive positions Indicative allocation of growth to FY21 > Growth balanced between strengthening current positions and seeding new opportunities Maintain existing #1 positions > This will create 5 - 10 additional #1 positions 30%-40% Achieve #1 40%-50% position - current bases > We will continue to take share and grow market positions by competing with inefficient Seed new #1/2 positions legacy carriers 15%-25% 20

DISCIPLINED USE OF CAPITAL Portfolio approach to route management Mature Portfolio Under Review RETURN 12% ROCE • Clear performance targets & actions for each route • self-dilution • fix • churn • invest for strategic position • Re-allocation of aircraft into advantaged positions • Strong and resilient portfolio – allows consolidation of position for long term returns 21