20 May 2021

easyJet plc

Results for the six months ending 31 March 2021

 easyJet's H1 2021 results are in line with expectations and it maintains significant liquidity while also delivering Q2 cash burn¹ slightly better than guidance.

easyJet is encouraged by the reopening of travel across much of Europe and will maximise opportunities for European flying.  easyJet is the largest operator from the UK to Green list countries and is looking forward to taking customers on a long-awaited holiday this summer.

Commenting on the results, Johan Lundgren, easyJet Chief Executive said:

"With leisure travel taking off in the UK again earlier this week where we are the largest operator to Green list countries and with so many European governments easing restrictions to open up travel again, we are ready to significantly ramp up our flying for the summer with a view to maximising the opportunities we see in Europe.  We have the ability to flex up quickly to operate 90% of our current fleet over the peak summer period to match demand.

"We know there is pent-up demand - we saw this again when Green list countries were released and added more than 105,000 seats - and so we look forward to being able to help many more people to travel this summer supported by our industry-leading flexible customer policies which means they can book with confidence. 

"Over the past six months, we have successfully undertaken a major restructuring and cost reduction process alongside maintaining an investment-grade balance sheet with significant liquidity and managing our cash burn¹ better than expectations. This has delivered results in line with guidance. Our agility, trusted brand and famous value means we are well placed to bounce back in the recovery."

Summary

·     In the six months ending 31 March 2021, easyJet operated a disciplined flying programme whilst continuing to deliver a major restructuring and cost reduction programme 

·     Passenger numbers² for the six months ending 31 March 2021 decreased by 89.4% to 4.1 million (H1 2020:  38.6 million)

·     Capacity³ decreased by 85.0% to 6.4 million seats, representing 14% of H1 2019 capacity levels (H1 2020: 42.7 million)

·     Load factor⁴ decreased by 26.6 percentage points to 63.7%

·     Total revenue decreased by 90% to £240 million (H1 2020: £2,382 million) with passenger revenue decreasing by 91% to £170 million and ancillary revenue decreasing by 87% to £70 million

·     Group headline costs excluding fuel decreased by 59% to £844 million (H1 2020: £2,041), driven by a decrease in capacity flown and the material savings achieved across many areas of the business from easyJet's major cost-out programme.  We recorded a £24 million credit from foreign exchange, related to the impact of stronger Sterling on our foreign currency-denominated liabilities, which is being included within headline costs. 

·     easyJet's cost-out programme aims to deliver c.£500 million of savings in FY'21

·     Non-headline items for the six months ending 31 March 2021 were a £56 million net credit before tax (H1 2020: £160 million net charge) were comprised principally of gains related to sale and leaseback transactions, with a net charge related to fuel hedge discontinuation being largely offset by a release of restructuring provisions

·     Headline loss before tax of £701 million (H1 2020: £193 million loss), within the guidance range of £690 to £730 million loss

·     Reported loss before tax of £645 million (H1 2020: £353 million loss)

·     Robust balance sheet strength, with total liquidity raised during the pandemic of over £5.5 billion, a net debt position of £2.0 billion (H1 2020: net debt of £467 million) and investment grade credit ratings 

Outlook

·    Based on current travel restrictions in the markets in which we operate, easyJet expects to fly c.15% of 2019 capacity levels in Q3 with an expectation that capacity levels will start to increase from June onwards.  Late announcements of changes to travel restrictions will impact load factors due to late capacity additions/cancellations to meet surges in demand, driving an even later booking behaviour. 

·    We maintain significant flexibility to ramp capacity up or down quickly depending upon the unwinding of travel restrictions and expected demand, with the flexibility to maximise European opportunities.  This ramp up will involve increased variable costs during Q3 as we bring pilots and crew off furlough in readiness for the peak summer season in Q4.  We remain focused on a disciplined schedule of cash generative flying

·    Cost-out programme to generate c.£500 million of savings in FY'21 to help offset cost headwinds

·    At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any further financial guidance for the 2021 financial year

For further details please contact easyJet plc: 

Institutional investors and analysts:

Michael Barker                  Investor Relations                           +44 (0)7985 890 939

Holly Grainger                   Investor Relations                           +44 (0)7583 101 913

Media:

Anna Knowles                   Corporate Communications          +44 (0)7985 873 313

Edward Simpkins              Finsbury                                            +44 (0)7947 740 551 / (0)207 251 3801

Dorothy Burwell               Finsbury                                            +44 (0)7733 294 930 / (0)207 251 3801

Conference call

There will be an analyst presentation at 09.30am BST on 20 May 2021. Given the UK Government's current restrictions on public gatherings, we regret that it will not be possible for analysts or investors to attend in person.

A webcast of the presentation will be available both live and for replay.  Please register on the following link:

https://webcasting.brrmedia.co.uk/broadcast/60a219078d9817323e2fbdfb

Please note that participants will not be able to ask questions via the webcast.  Should you wish to ask question, please dial in using the details below:

Overview

easyJet operated a disciplined flying programme over the winter months whilst continuing to deliver a major restructuring and cost reduction programme.  As a result, easyJet has reported a first half headline loss before tax of £701 million, which is within the guidance range.  The effects of the cost-out programme will support improved margins and reduce the impact of seasonality for the future.  Our capacity forecasting has been accurate and disciplined throughout the pandemic, which has allowed for strong cost control.  Our focus on cash generative flying over the winter season minimised cash burn, with cash burn in the second quarter better than guidance.

As at 31 March 2021 easyJet has unrestricted access to c.£2.9 billion of liquidity having raised over £5.5 billion since the beginning of the pandemic, and is well positioned to capitalise on the recovery of travel once restrictions are eased across the network. 

easyJet has maintained a high level of operational flexibility to respond to rapidly-changing travel restrictions.  We will continue to operate a reduced schedule throughout much of Q3 but are ready to ramp up our operations to match the level of demand we see in the market and we anticipate an increase in flying from June.

Revenue

Total revenue decreased by 90% to £240 million (H1 2020: £2,382 million) with capacity decreased to 6.4 million seats (2020: 42.7 million) as a result of pandemic-related travel restrictions and national lockdowns. 

Passenger revenue decreased by 91% to £170 million (H1 2020: £1,833 million) and ancillary revenue decreased by 87% to £70 million (H1 2020: £549 million) as we flew an optimal schedule with a focus on domestic routes. 

Airline revenue per seat decreased by 34% to £36.93, driven by:

·    A £2.11 or 3.8% decrease from external events, namely the strong prior year comparison of H1 2020 which included the bankruptcy of Thomas Cook

·    A £2.44 or 4.4% decrease in ancillary revenues, including the impact of the pandemic

·    A £15.05 or 27.1% decrease due to the pandemic

·    A £0.93 increase due to foreign exchange impacts

Analysis of revenue on a per seat basis is not meaningful when capacity is at extremely low levels. 

Costs & Cash Burn

Group headline costs excluding fuel and FX gains for the first half decreased by 59% to £844 million (H1 2020: £2,041 million), driven by a decrease in capacity flown and the material savings achieved across many areas of the business from easyJet's major cost-out programme.  We recorded a £24 million credit from foreign exchange, related to the impact of stronger Sterling on our foreign currency-denominated liabilities, which is being included within headline costs. 

The structural cost-out programme we announced last year, easyJet's largest ever, is on track to achieve our targeted cost savings and will position easyJet well to lead the recovery in aviation.  We aim to deliver c.£500million of savings in FY'21 from the cost-out programme. 

Airline headline cost per seat increased by 148% at constant currency to £148.39 (H1 2020: £59.75).  This increase in headline cost per seat was comprised of:

·    A £3.85 decrease in airports, ground handling and other operating costs, driven by lower flying volumes

·    A £24.96 increase in crew costs, driven by adverse volume productivity partially offset by use of furlough schemes

·    A £33.60 increase in ownership costs, driven by reduced flying volumes and greater number of leased aircraft and additional debt facilities, partially offset by reduced maintenance-related depreciation

·    A £18.55 increase in overheads and other income, driven by fixed costs and reduced flying volumes

·    A £0.12 increase in navigation costs driven by an increased sector length, partially offset by a Eurocontrol rate reduction

·    A £12.45 increase in maintenance costs, driven by reduced flying volumes offset by line maintenance benefits from insourcing and parked fleet

·    A £2.81 increase in fuel costs, driven by increased effective price

easyJet maintained a disciplined approach to capacity and cash management.  As a result cash burn (on a fixed costs plus capex basis) during the first quarter was £39 million per week on average and during the second quarter was £38 million per week on average, outperforming the guidance for £40 million per week given at the Q1 trading update.  easyJet paid a further £254 million of customer refunds during the first half. 

Non-Headline Items

Non-headline items are material non-recurring items or are items which do not reflect the trading performance of the business.  These costs are separately disclosed and further detail can be found in the notes to the accounts. Non-headline items for the six months ending 31 March 2021 were a £56 million net credit (H1 2020: £160 million net charge) include:

·    £60 million gain as a result of the sale and leaseback of 35 aircraft in the period (H1 2020: £1 million gain)

·    £29 million charge related to fair value adjustment on fuel hedge discontinuation (H1 2020: £164 million charge).  Fair value movements after the hedges have been marked ineffective are now shown within Headline Items. These movements generated a £12m credit in Headline Items during H1

·    £25 million credit arising from a release of restructuring provisions (H1 2020: nil), following constructive negotiations with our trade unions.  These discussions have led to further concessions, which have allowed for a reduction in the estimated costs associated with the restructuring as at 31 March 2021

Strategy Update

easyJet has prioritised six strategic initiatives that will continue to build on our structural advantages in the European aviation market and enable us to lead the recovery as travel returns.

·    Network strategy

·    Customer excellence

·    Product portfolio evolution

·    easyJet Holidays

·    Cost reduction programme

·    Sustainability

These initiatives, alongside our continued focus on our people and on operational and digital safety, provide easyJet the tools to achieve industry-leading returns and resilience. 

Network Strategy

easyJet has a strong network of leading number one and number two positions in primary airports, which has proven during Covid-19 to be amongst the highest yielding in the market and which enables us to be efficient with our network choices, with an emphasis on maximising returns.  We will seek to strengthen and defend these positions as the competitive landscape evolves.  The scale and flexibility of our network will provide us with opportunities to take advantage of changes in the competitive landscape during the recovery phase.  easyJet will act quickly to selectively acquire attractive slots made available in locations where the opportunity arises. 

As part of the restructuring programme easyJet has closed its bases in Southend, Stansted and Newcastle, although Stansted and Newcastle continue to be served on an inbound flying basis.  We have also cut capacity materially in some French and Italian bases, as well as in Berlin.  This capacity has been allocated to higher yielding airports within our network.  Further opportunities are likely to arise at these primary airports over the coming months as legacy carriers withdraw capacity and restructure, for example at Paris-Orly, Milan-Linate or Amsterdam-Schipol.  To better capture summer leisure demand, easyJet is opening seasonal bases in Malaga and Faro on 1 June 2021. 

easyJet remains extremely disciplined in focusing on flying which generates a positive contribution and during H1 easyJet flew 14% of H1 2019 capacity. 

Over the last six months we have taken a number of key decisions to further optimise our schedule development.  Our schedule for the summer '22 season went on sale far earlier than it would have done under normal circumstances, in order to enable our customers to easily transfer any bookings which were cancelled due to Covid-19.  This represents the first time that easyJet has ever had four seasons available for sale at the same time and it significantly reduced customers' propensity to request refunds. 

In response to international travel restrictions we have shifted capacity onto domestic routes, particularly in the UK, France and Italy.  We have been disciplined about focusing on cash generative flying and many of these domestic routes are performing very well.  We have also launched new domestic leisure routes to capitalise on the increase in staycations.  These have included Belfast-Inverness, Glasgow-Newquay, Manchester-Newquay and Gatwick-Newquay in the UK, Bergamo-Olbia in Italy and additional capacity from mainland France to Corsica.  In order to capitalise on expected leisure demand this summer we have opened a summer base in Birmingham served by aircraft and crew based around Europe.  We have been able to acquire scarce slots at Milan's city centre airport, Linate and have used these to boost our Italian domestic leisure portfolio with new routes to Catania and Palermo.

easyJet's response to changes in demand due to travel restrictions or competitor announcements has been extremely agile.  Within 24 hours of the UK Government's announcement of the green list on 7 May easyJet had added 80,000 seats of additional capacity to Portugal for early summer and also added a further 20,000 seats within a week of the announcement. The addition of this capacity saw a strong increase in demand.  Since February we have added over 2 million seats throughout our network into new and existing markets to respond to the evolving demand environment.  To date, we have launched 55 new routes for Summer '21, covering a range of domestic leisure destinations, Greek Islands, Egypt and Spain amongst others.

Our focused network strategy can be summarised as follows:

1.    Lead in our Core Markets

easyJet prioritises slot-constrained airports because they are where customers want to fly from, we are able to achieve cost leadership and preserve our scale.  We provide a balanced network portfolio across domestic, city and leisure destinations.  Our scale enables us to provide market leading networks and schedules.  We are maintaining our focus on country leadership in the UK, France and Switzerland and our city focus in the Netherlands, Italy and Germany. 

2.    Accelerate investment in Destination Leaders

We will build on our existing leading position in Western Europe's top leisure destinations to provide network breadth and flexibility.  This will also unlock cost benefits, enabling us to manage seasonality and support the growth of easyJet holidays.  It also ensures that easyJet remains top of mind for customers and is seen as the 'local airline' for governments and hoteliers looking to lend their support. 

3.    Build our network in Focus Cities

easyJet is building a network of key cities, broadening our presence across Europe.  This is a low-risk way of serving large origin markets.  We will base assets in Focus Cities where it makes sense from a cost perspective. 

Customer Excellence

easyJet aims to deliver a seamless and digitally enabled customer journey at every stage:

·    Prior to travel - our 'direct is best' strategy is led by our digital channels, with an app/mobile-first mindset.  Initiatives include rebuilding our web booking interface; driving app usage and improving the overall experience; enhancing self-service booking management such as changing passenger details or baggage booking; improving online redemption management such as vouchers; developing full pre-order capability for retail onboard; and payments innovation. 

·    In airport - moving customers from kerb to aircraft without the need for human interaction.  This involves improving boarding in order to improve CSAT and reducing queuing, which our new cabin bag policy is helping with; streamlining the boarding experience, improving the automatic gates process, pushing for 100% digital boarding passes; developing 'virtual boarding'; building the London Gatwick 'Model Customer Journey' and expanding this to other big cities; reducing the need for check-in. 

·    In flight - our warm welcome and personal service to get you to your destination on time.  We are committed to improving On-Time Performance (OTP) - on time, every time - by managing suppliers, empowering crew, implementing pre-tactical planning and strategic ATC planning, carrying out base operating reviews, building a customer-level data view to enable targeted offers such as inflight retail and reviewing the CRM lifecycle for more relevant customer engagement. 

·    Support - we aim to give customers the digital tools to easily self-serve when things do not go to plan, or to engage after their flight.  As part of this initiative we will deliver Self-Service Disruption Management (SSDM) to let customers quickly self-serve in disruption; we are launching a new social strategy to engage with our customers, we are building a hub of 'Voice of Customer' insights, creating an 'always on' feedback loop and shifting focus from CSAT to life time value of the customer. 

Actions delivered in H1 as part of our customer excellence initiative include:

·    We updated our protection promise to give customers even more flexibility this summer:

o  Freedom to change: Gives the customer the ability to transfer their flight fee free this summer, anytime up to two hours before departure to any flights currently on sale and to any destination on our network

o  Travel Restriction Protection: If a trip is impacted by a lockdown travel ban or mandatory hotel quarantine this summer, the customer can transfer their flight for free to a later date, anytime up to two hours before departure, or opt for a voucher or refund, even if their flight is still operating

·    All easyJet flight vouchers can be redeemed online, quickly and easily when making a booking

·    Processing time of refunds has been further decreased to ensure customers are getting their money back as quickly as possible

·    The launch of our chatbots, giving customers the opportunity to get answers to their queries quickly and easily without having to pick up the phone

This focus on customer excellence has continued to drive the strength of our brand and delivered strong customer satisfaction scores through the first half of the year. easyJet remains first choice low cost carrier (LCC) in the UK, France, Switzerland and Berlin, best value airline in the UK and France ahead of LCCs and legacy carriers and best value LCC in Italy, Switzerland and Berlin. Our customer satisfaction for H1 was 80% which is up 3 percentage points on H1 2020.

In the six months to 31 March 2021, On Time Performance increased by 3 percentage points to 94%. This reflects the temporary decrease in congestion of European airspace and the strides we are taking towards leaving 'on time, every time'.

On Time Performance is crucially important for our operational efficiency, as well as customer satisfaction.  Thanks to a relentless focus from our teams, OTP has been excellent, with D15 (doors closed within 15 minutes of scheduled departure time) across the full day of 93% year-to-date in FY'21, compared to 84% in 2020 and 75% in 2019.  Achieving D15 for the first wave of flights each morning is vital importance (since this tends to have a knock-on effect through the day as delays build up), so we are extremely pleased with having reached 96% first wave D15 year-to-date in FY'21, compared to 91% in 2020 and 89% over 2019. 

Product Portfolio Evolution

easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to increase revenue per seat and margins in the coming years.

Earlier this year easyJet launched a new fare class called Standard Plus which makes it easier for customers to buy a package which includes Up front seat selection, access to easyJet Plus Bag Drop, Speedy Boarding, one cabin bag and an additional under seat cabin bag in one easy step on the website. We had identified a gap in our current propositions in terms of fare offerings and during testing the new fare class has meaningfully increased average booking values.

We also updated our cabin bag policy in February this year. The ability to bring a large overhead cabin bag on board is going to be bundled with Up front and Extra legroom seating. The seating and bag packages will be actively yield managed and will be dynamically priced from £7.99 per bag per flight.

easyJet holidays

We are continuing to build on our significant opportunity within the holidays sector, offering the most flexible holidays at the best prices in the market through to October 2022, underpinned by our industry leading 'Protection Promise' which has meant that we have retained over 60% of those customers whose holidays were affected by Covid-19 in the first half of 2021.  We are also proud to announce that easyJet holidays is now the first major tour operator to offset the carbon emissions directly associated with its holidays - the fuel from flights and transfers plus the energy from hotel stays. 

Our highly scalable business model ensures low fixed costs (93% variable) with strong marginal profit contribution. We continue to enjoy strong partnerships with leading hotels without the need for financial commitments or inventory risk and during the first half we signed over 40 additional flagship beach hotels which were previously under exclusive contracts with our competitors, whilst establishing connectivity with some of the world's largest hotel chains including Hilton, Accor, Radisson and Intercontinental Hotel Group to offer range to our cities offering.

Four- and five-star hotels now account for c.70% of all holidays sold, generating a significant margin premium. Our low cost base ensures that we are able to offer outstanding value, with c.75% of our holidays offering the best value in the market on like-for-like searches, whilst still providing strong marginal profit contribution. 

Holidays for Winter 2021/22 were launched in December and are experiencing very positive demand. Bookings for Summer 2021 are currently significantly ahead of last year, although it is evident that many customers are looking for further certainty around quarantine rules prior to booking.

Cost Reduction Programme

In response to the Covid-19 pandemic easyJet launched its largest ever cost efficiency programme, which aims to deliver c.£500 million in savings in FY'21, to help mitigate some of our cost headwinds.  Significant work has been done across the business already, including a cost programme in H1'21 which delivered savings, ahead of internal expectations.  Savings have been delivered across every cost line.  This was a major factor in outperforming our cash burn guidance, on a fixed costs and capital expenditure basis, during Q2 and supports our confidence in the guidance going forwards. 

We have now successfully concluded trade union agreements in every country except in Italy, where negotiations will begin shortly and are in the process of concluding crew agreements in Germany.  As a result of highly constructive relationships with our trade union partners and our people, we have been able to deliver significant cost and productivity savings, including:

•     Reducing the number of full-time equivalent (FTE) crew per aircraft in all bases (excluding Italy at this stage) for our summer '21 flying programme.   This has enabled significant improvements in our crew ratios and productivity in preparation for our return to flying

•     Minimised redundancy costs by agreeing innovative part-time and seasonal contracts with our unions.  This improves productivity on a sustainable basis and allows the capacity to grow if required, without needing to hire new people

•     Re-balancing of the number of seasonal contracts we have across the network

•     Reductions in base pay in some of our higher-cost jurisdictions, with easements in rostering rules also being agreed and two-year pay freeze agreements in most jurisdictions

•     Furlough agreements in all jurisdictions, which will continue to support us throughout FY21

These measures have reduced our overall cost of crew whilst addressing structural and productivity challenges with our old crew model.  They have also enabled the investment in seasonal bases in Faro and Malaga which open on 1 June, continuing to improve efficiency at a lower cost base. 

Airports and ground handling costs represent a major part of our cost base and have been a particular focus.  We continue in negotiations with airports across our network, to secure the best long-term deals.  We continue to review ground handling costs on a line-by-line basis and have renegotiated 132 major ground handling contracts, with permanent savings achieved in Ground Operations and Customer Management Centres.  New contracts focus on driving safety and OTP while reducing costs.  We have achieved a 25% reduction in call centre costs with new contracts to 2027 and improved customer service. 

Significant progress on costs has also been made in engineering, whilst maintaining 95% of our aircraft in a flight-ready condition across the winter and with safety the number one priority.  easyJet outsources the majority of heavy maintenance where it is cost effective.  We have extended our contracts to 2025 and to 2023, with cost savings and simpler work packages.  We have also extended our low-cost engine shop visit contract out to 2023 and concluded a cost-effective deal on Leap engines and ongoing support.  Our components deal has been extended to 2027 with additional cost savings and a Milan parts hub.  We have worked closely with Airbus to create more efficient 6- and 12-year checks.  We have completed insourcing of line maintenance in Berlin, Glasgow, Edinburgh and Bristol, which has delivered cost savings and higher quality.  All line maintenance at Gatwick is now done in-house, with the addition of a completed third hangar bay in March '21. 

Sustainability

Despite the impact of the pandemic, easyJet has continued to reaffirm its commitment to sustainability, which is of significant and growing importance to our customers. 72% of consumers say that the sustainable behaviour of a company is now a more important factor in a purchase decision since the global outbreak of Covid-19. The likelihood of consumers choosing easyJet over another airline as a direct result of our carbon offsetting policy continues to increase steadily, rising to 45% for YTD 2021 (an increase of 4 percentage points compared to FY20 figures).  We are also proud to announce that easyJet holidays is now the first major tour operator to offset the carbon emissions directly associated with its holidays - the fuel from flights and transfers plus the energy from hotel stays. 

In November 2019 we established our new Sustainability Strategy, focused on driving down our environmental impact. Our strategy has three pillars: tackling our carbon emissions; stimulating carbon innovation; and going beyond carbon.

·    Tackling carbon emissions: We were the world's first major airline to operate carbon neutral flying across our entire network, and we continue to work tirelessly to minimise carbon emissions across our operations. We continue to operate a fleet of modern, fuel efficient aircraft and are always looking for more ways to be fuel efficient and emit less carbon. Alongside our continued efficiency efforts, we believe that radical action to address the impact of climate change is also needed. In 2019 we became the only major airline worldwide to offset all our organisation's direct carbon emissions (scope 1 and 2), through programs that plant trees or avoid the release of additional carbon dioxide. Since then we have retired over 3 million carbon credits from high-quality projects to provide carbon neutral flights to our customers at no additional cost to them. We remain committed to our approach on carbon offsetting and have continued to offset all our flights through the pandemic. We also continue to advocate smarter regulation for aviation that rewards carbon efficiency.

·    Stimulating carbon innovation: We are supporting the development of new technologies to reinvent aviation as quickly as possible. Offsetting can only be an interim solution, while zero emissions technology is developed. We are collaborating with several industry leaders to support technological step change: Wright Electric in their development of 'Wright 1' - an all-electric 186-seater; and a strategic partnership with Airbus in their ambition to develop a zero-emission commercial aircraft by 2035. We are excited to see the growing momentum behind these disruptive technologies such as all electric, hybrid and hydrogen. There is significant potential for these technologies, particularly on short-haul networks such as our own.

·    Going beyond carbon: We are constantly looking for more ways to take action outside of carbon reductions including having taken steps to reduce the amount of plastic used on our services but are also now debuting new crew and pilot uniforms made from recycled plastic, which is our latest initiative in our drive to reduce waste. To date we have already removed over 27 million individual items of plastic from our inflight retail. We are also aiming to reduce waste and plastic at easyJet and within our supply chain. We are creating a culture where employees can champion sustainability and in the future we will focus our charitable efforts on environmental sustainability. We are also particularly pleased that easyJet's long-term work with our charity partner UNICEF, who we have supported through on-board collections since 2012, will continue with the focus of collections this summer supporting Unicef to fund COVAX global vaccinations, with Unicef's aim being to deliver 2 billion vaccines by the end of 2021.  Hundreds of easyJet crew members have volunteered to help at vaccination centres across Europe, with many of them having trained to deliver the vaccines. 

Fleet

easyJet's fleet is a major component of its business model and a competitive advantage. easyJet's total fleet as at 31 March 2021 comprised 330 aircraft (30 September 2020: 342 aircraft) with the decrease driven principally by the redelivery to lessors of A319 aircraft. The average gauge of the fleet is now 177.6 seats per aircraft, an increase from 177 seats at 30 September 2020. The average age of the fleet increased slightly to 8.6 years (30 September 2020: 8.0 years). 

Fleet as at 31 March 2021:

Our flexible fleet plan allows us to expand or contract the size of the fleet depending upon the demand outlook.  The variance between 307 and 310 aircraft for FY2021 is due to three leased aircraft which are due to be redelivered to lessors very close to the end of 2021 financial year.  Through the 2021 financial year, easyJet will be storing 12 leased aircraft on behalf of their respective lessors.  These are held at zero rent unless flown and are therefore not included within our fleet numbers.  The prior plan for 302 aircraft in FY21 was predicated on commercial negotiations we were in at the time, which, given the current market environment it did not make economic sense to complete on.  

Capital Expenditure

Over the next three years easyJet's gross capital expenditure is expected to be as follows:

Capex in FY'21 is comprised principally of safety- and maintenance-related expenditure as well as lease payments.  Growth capex is set to resume from FY'22 and our capex projections assume zero aircraft deliveries in FY'21, 8 deliveries in FY'22 and 7 deliveries in FY'23. 

Sale and Leaseback Transactions

Sale and leaseback transactions on 23 aircraft were concluded during H2 2020, raising £608 million gross proceeds and adding c.£50 million to pro forma per annum headline costs.  During H1 2021 transactions were concluded on 35 aircraft, raising £842 million gross proceeds and adding a further c.£90 million to pro forma per annum headline costs.  We retain ownership of 55% of the total fleet, with 41% unencumbered. 

Liquidity

easyJet has taken swift and decisive action successfully raising over £5.5 billion in liquidity since the beginning of the pandemic, from a diversified range of funding sources: c.£0.4 billion from drawing down a Revolving Credit Facility, c.£0.4 billion from two term loans, £0.6 billion from the Covid Corporate Financing Facility, c.£1.4 billion from sale and leaseback transactions, c.£0.4 billion from an equity placing, c.£1.4 billion from the UK Export Finance facility and a c.£1.0 billion bond.  The €1.2 billion bond (c.£1.0 billion) issued in March by easyJet's subsidiary easyJet FinCo B.V. under our Euro Medium Term Note (EMTN) programme matures in March 2028 and has a coupon of 1.875%.  There was good market appetite for the bond, which was heavily oversubscribed.  The Revolving Credit Facility, term loans and first £300 million tranche of the CCFF have been repaid.  easyJet continues to maintain access to a diverse range of funding sources and continues to review its debt maturity profile. 

As at 31 March 2021 easyJet has unrestricted access to c.£2.9 billion of liquidity, comprising cash and cash equivalents plus the undrawn portion of the UKEF facility.  The first £300 million tranche of easyJet's borrowings from the CCFF was repaid in March 2021 and the remaining £300 million is due in November 2021.  easyJet has no other debt maturities outstanding until the 2023 financial year. 

As previously indicated, easyJet will continue to review its liquidity position on a regular basis and will continue to assess further funding opportunities.

Balance Sheet

easyJet's funding position remains solid with net debt at 31 March 2021 of £2,015 million (H1 2020: £467 million), which comprised cash and cash equivalents of £2,335 million (H1 2020: £1,388 million), borrowings of £3,323 million (H1 2020: £1,319 million) and lease liabilities of £1,027 million (2020: £536 million).

Liquidity per 100 seats was £5.2 million (H1 2020: £3.2 million), representing material headroom compared to our target of a liquidity buffer of £2.6 million per 100 seats, defined as cash plus Business Interruption insurance.

Headline return on capital employed (ROCE) for the six months ending 31 March 2021 fell to negative 16.8% (H1 2020: negative 4.8%).  Total ROCE fell to negative 14.7% (H1 2020: negative 4.8%).

Fuel & FX

Due to the sustained lower capacity during the Covid-19 pandemic, easyJet saw hedge ratios moving over 100% from both a Jet Fuel and FX perspective.  easyJet has taken action to close out over-hedged positions, to manage its exposure to volatility in the fair value of discontinued hedges.  easyJet continues to hedge contractual exposures (such as leases and capex) and has decreased the amount of operational hedging that is taken out for future periods until there is greater clarity over demand.  As noted in the 'Non-Headline Items' section above, a £28 million net charge was recognised in H1'21 for fair value adjustments related to the discontinuation of hedge accounting (H1 2020: £164 million charge).  Additionally there was further fair value movement on discontinued hedges in H1 2021 up until the point these positions were closed out.  This movement resulted in a £12 million credit to headline items. 

Board

During the period Stuart Birrell joined the Airline Management Board as Chief Data & Information Officer and Sophie Dekkers was promoted to the AMB as Chief Commercial Officer.

David Robbie joined the Board in November 2020 and Kenton Jarvis in February 2021 as Chief Financial Officer.  Anastassia Lauterbach, Charles Gurassa and Moya Greene stood down from the Board in December 2020.

John Barton will have served nine years as Chairman in May 2022, which is the recommended maximum under UK corporate governance. As a result the Board will take appropriate steps to identify potential successors and will provide further updates as appropriate.  John remains fully committed to easyJet.

EU Ownership

On 23 December 2020, easyJet announced that the Board had passed resolutions as part of its contingency plan to ensure continued compliance with EU ownership and control requirements following the end of the Brexit transition period on 31 December 2020.  Accordingly, and in line with its contingency plan, easyJet announced on 4 January 2021 that it had commenced steps to suspend voting rights in respect of certain shares held by relevant persons in accordance with easyJet's articles of association, so that a majority of the voting rights in easyJet are held by EU persons⁸.  As at 20 May 2021, a majority of the voting rights in easyJet are held by EU persons.

Outlook

Based on current travel restrictions in the markets in which we operate, easyJet expects to fly c.15% of 2019 capacity levels in Q3 with an expectation that capacity levels will start to increase from June onwards.  Late announcements of changes to travel restrictions will impact load factors due to late capacity additions/cancellations to meet surges in demand, driving an even later booking behaviour. 

We maintain significant flexibility to ramp capacity up or down quickly depending upon the unwinding of travel restrictions and expected demand, with the flexibility to maximise European opportunities.  This ramp up will involve increased variable costs during Q3 as we bring pilots and crew off furlough in readiness for the peak summer season in Q4.  We remain focused on a disciplined schedule of cash generative flying. 

Our cost-out programme is expected to generate c.£500 million of savings in FY'21 to help offset the cost headwinds related to the lower volume of flying and increased ownership and financing costs. 

At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any further financial guidance for the 2021 financial year.  Customers are booking closer to departure and visibility remains limited. 

Footnotes

(1) On a fixed cost and capital expenditure basis. 

(2) Represents the number of earned seats flown. Earned seats include seats which are flown whether or not the passenger turns up, as easyJet is a no-refund airline and once a flight has departed, a no-show customer is generally not entitled to change flights or seek a refund. Earned seats also include seats provided for promotional purposes and to staff for business travel.

(3) Capacity based on actual number of seats flown. 

(4) Represents the number of passengers as a proportion of the number of seats available for passengers. No weighting of the load factor is carried out to recognise the effect of varying flight (or "sector") lengths. 

(5) easyJet holidays forms a separate operating segment to the Airline. Therefore all per seat metrics are for the Airline business only, as the inclusion of hotel-related revenue and costs from the Holidays business will distort the revenue per seat and cost per seat metrics as these are not directly correlated to the seats flown by the Airline business

(6) Constant currency is calculated by comparing 2021 financial year performance translated at the 2020 financial year effective exchange rate to the 2020 financial year reported performance, excluding foreign exchange gains and losses on balance sheet revaluations. 

(7) On-time performance is defined as the percentage of flights which arrive within 15 minutes of the scheduled arrival time and is measured by internal easyJet systems

(8) 'EU persons' refers to nationals of EU member states plus Switzerland, Norway, Iceland, Liechtenstein, but excludes the UK.

PRINCIPAL RISKS AND UNCERTAINTIES

easyJet faces a range of risks that, if they materialise, could impact delivery of our corporate and strategic objectives. A risk identification, assessment and monitoring framework is imperative for any organisation to manage its risks and achieve its set goals and objectives. The easyJet Board is responsible for determining the nature of these risks and ensuring appropriate mitigating actions are in place to manage them.

easyJet has adopted a scenario analysis led risk management approach to ensure risks are identified, assessed, monitored and appropriately treated. easyJet can monitor existing and emerging risks and be prepared for scenarios outside of the corporate and strategic plan, the root causes of many risks are not within easyJet's control, for example adverse weather, pandemics, acts of terrorism, changes in government regulation and macroeconomic issues.

The principal risks and uncertainties set out in the 2020 Annual Report and Accounts have not changed materially, and include the following types of risks:

·    Asset Efficiency & Effectiveness

·    Environment & Sustainability

·    Legislative / Regulatory Landscape

·    Macro-economic & Geopolitical

·    People

·    Safety, Security, and Operations

·    Technology & Cyber

For the second half of FY21, the Directors consider that the principal risks and uncertainties detailed in the 2020 Annual Report and Accounts remain representative of the potential impacts on the Group's performance. In addition to the 2020 Annual Report and Accounts disclosure, there are three risks areas the Board continues to monitor, and the current position is set out below.

Brexit: risks and uncertainties develop alongside the new relationship between the UK and EU. The focus remains to limit the impact of Brexit, and the success of our planning was evident by the lack of operational issues from 1 January 2021. The cross functional Brexit programme continues to oversee the evolving impacts of Brexit and will monitor the risks and uncertainties as the flying schedule expands in line with the reopening of European airspace.

Covid-19: the global crisis created by the Pandemic has impacted every aspect of business in general and the effects continue into H2 2021. Since 1 October 2020, easyJet has operated a significantly reduced flying schedule as it navigates the uncertainty caused by the spread of Covid-19 and associated flying restrictions. Safety of our passengers and employees remains the highest priority, and our measures outlined on page 67 of the 2020 Annual Report and Accounts remain in place.

The risk of a prolonged recovery from the impacts of Covid-19 without any sector specific support and the potential of limited access to financial markets may impact our liquidity position. In response, easyJet has acted decisively. The largest cost efficiency programme in easyJet's history was launched, removing costs at every level of the business. Fleet flexibility has been retained, at the same time as reducing Capex, allowing further responses to any risks and opportunities as they arise. In addition to the £4.5 billion in liquidity raised by January 2021, easyJet announced in February 2021 it had raised a further €1.2 billion from a seven-year bond issue.  These actions strengthen our balance sheet. This is in addition to retained ownership, as at 31 March 2021, of 55% of the total fleet with 41% of the total fleet unencumbered. During the pandemic, the market for aircraft transactions has slowed significantly. However, asset recoverable amounts, based on value in use, exceed the carrying values as at 31 March 2021. Management will continue to keep these valuations under review.

In adopting the going concern basis of preparation for these interim financial statements, the Directors have considered easyJet's liquidity position, financial forecasts, stress testing of principal risks and uncertainties and the committed funding facilities. The Directors have a reasonable expectation that the Group has sufficient resources to continue in operation for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the Group financial statements. In the unlikely event that the risks outlined combine to result in the low levels of flying experienced in the last 12 months to be repeated and also impact forward bookings for summer 2022, the Group will need to secure additional funding. This represents a material uncertainty at the date of this report that could cast significant doubt upon the Group's ability to continue as a going concern (see Going Concern in Note 1).

A level of unpredictability remains as the flying programme restarts due to the risk of further waves of infection. Each country within the easyJet network has developed their own approach to dealing with the effects of the pandemic. This variation in approach, including from a legislative perspective, increases complexity and the risk of regulatory action. The requirements for customer COVID testing is increasing the cost of air travel, which conflicts with our ethos of providing affordable, accessible travel for all. There is a risk of easyJet not having the ability to be flexible and missing the opportunity to meet the pent up customer demand. These risks are being actively managed through the business and several measures have been introduced to ensure, where possible, easyJet can service customers wishing to visit friends and family, and taking a much deserved holiday. These measures include lobbying governments and policymakers across our network on both the use of tests and their affordability, increasing resources to understand and ensure government restrictions and requirements are adhered to, retaining flexibility in the fleet programme, increasing the number of aircraft on standby, operating a dynamic planning and capacity management process and maintaining crew recency through continuation of the training programme. In addition to ensuring our own people are prepared for the restart, plans have been implemented to reduce the risk around third party preparedness. easyJet identified that, due to use of furlough schemes and reduced flying schedules, inactivity within our supply chain has the potential to cause an increase in safety and disruption events and the risks and uncertainties, including supplier insolvency, needed to be closely managed. Pre- and post-event plans are in place and include comprehensive risk assessments detailing hazard states associated with returning to historic movement levels, collaborating with industry peers and regulators, continual assessment and validation of third party plans and monitoring post event procedures to ensure efficacy. All activity is tracked through internal safety meetings, including the Summer 2021 Readiness Forum on a fortnightly basis.

At the time of writing, many of our people are on furlough or equivalent, or working remotely. This has increased our people and wellbeing risk. Measures implemented in response to these risks are still in place and detailed on page 67 of the 2020 Annual Report and Accounts.

Data Breach: On 19 May 2020, easyJet announced that it had been the target of a cyber-attack from a highly sophisticated source. The email address and travel details of approximately 9 million customers were accessed and for a very small subset of customers (2,208), credit card details were accessed. The Information Commissioner's Office (ICO) has opened an investigation into the cyber-attack, and a class action law firm has filed a claim against easyJet in the High Court. The merit, likely outcome and potential impact on easyJet of both the investigation by the ICO, and the class action claim 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.

OUR FINANCIAL RESULTS

Headline loss before tax increased from £193 million for the six months ended 31 March 2020 to £701 million for the six months ended 31 March 2021. This was mainly driven by the continued impact of Covid-19 resulting in reduced commercial flying as travel restrictions across Europe have been in place, to varying levels, throughout the period. easyJet flew only 4.1 million passengers (H1 2020: 38.6 million), down 89.4% on the prior period. At constant currency, headline loss before tax for the six months ended 31 March 2021 was £728 million, giving a favourable foreign exchange impact of £27 million compared to last year.

Total loss before tax increased from £353 million for the six months ended 31 March 2020 to £645 million for the six months ended 31 March 2021. Included in total loss before tax was a sale and leaseback gain of £60 million (H1 2020: £1 million), a restructuring provision release of £25 million (H1 2020: £nil) and a fair value charge of £29 million (H1 2020: £164 million).

Our easyJet Holidays business forms a separate operating segment to the Airline. All per seat metrics are for the Airline business only, as the inclusion of hotel-related revenue and costs from the Holidays business will distort the RPS and CPS metrics as these are not directly correlated to the seats flown by the Airline business. The segmental note within the abbreviated consolidated financial statements shows the contribution of each operating segment towards the Group's performance. All seats flown directly relate to the Airline business and are therefore included in total for the per seat metrics. The overall contribution of the Holidays segment to the financial performance of the consolidated Group for the six months ended 31 March 2021 is not significant. In presenting the Airline-only financial performance metrics below this does not materially distort the financial performance of the Group as a whole.

Amounts presented at constant currency are an alternative performance measure and not determined in accordance with International Financial Reporting Standards but provide relevant and comparative reporting for users.

FINANCIAL OVERVIEW