20 July 2021

easyJet Trading Update for the Quarter ended 30 June 2021

easyJet's Q3 performance is in line with management expectations with the continued delivery of the cost programme and cash burn outperforming

easyJet's cost programme, leading network, step change in ancillary revenue and the development of easyJet holidays will see the airline emerge transformed post pandemic.

Summary

easyJet has maintained its disciplined approach to capacity and cash management during Q3 and, as a result, total cash burn during the quarter reduced to £55 million.  Fixed costs plus capex have averaged £34 million per week, outperforming the £40 million per week guidance given at Q1.  This disciplined cost and cash management has enabled easyJet to maintain net debt broadly flat at c.£2.0 billion and a headline loss before tax of £318 million, which is in line with expectations. 

easyJet's capacity in Q4 will be up to 60% of 2019 levels, up from 17% in Q3 2021.  In order to capitalise on the opening-up of travel in continental Europe and the easing of restrictions for the fully vaccinated in the UK, easyJet continues to pivot capacity towards popular routes where we see rising customer demand. 

easyJet will emerge from the pandemic transformed, driven by a cost programme that is delivering, industry-leading network / schedule flexibility, a step change in ancillary revenue and with easyJet holidays taking market share.

Commenting on Q3 trading, Johan Lundgren, CEO of easyJet, said:

"During this quarter we have successfully managed through the continued challenges of the pandemic, using our operational responsiveness to capture demand while focusing on cost control and minimising cash burn.  

"We have used our existing strengths like our network with renewed purpose - pivoting capacity to Europe where we saw the strongest demand and the very way we have approached the challenges that we faced means we have adapted and built back stronger for the future. 

"As a result, we will emerge from the pandemic with longer-term wins along-side baked in sustainable cost reductions, responding effectively and in ways our competitors don't or can't. 

"This is all underlined by our proven business model, low fares, unrivalled network and brand trust which will be crucial going forward. So, while we know the road to recovery from the pandemic isn't going to be a straight line we are ready to compete using these new-found strengths with everything we have learned leaving a long-term, positive imprint on the airline, transformed ready for the post-pandemic era." 

Revenue

Passenger numbers¹ for the quarter ending 30 June 2021 increased to 3.0 million, in line with an increase in capacity² to 4.5 million seats, representing 17% of Q3 2019 capacity levels. As a result of the Covid pandemic, easyJet's fleet had been fully grounded for all but two weeks of the third quarter 2020, flying just 117,000 seats.

This led to total group revenue for the quarter ending 30 June 2021 increasing to £212.9 million (2020: £7.2 million), with passenger revenue increasing to £151.9 million (2020: £3.6 million) and ancillary revenue increasing to £61.0 million (2020: £3.6 million).  Ancillary revenue per passenger continues to increase as a percentage of total revenue. Phase two of the cabin bags product is on track for delivery later this year. 

Cost / Cash Burn

Group headline costs for the quarter ending 30 June 2021 were £531.2 million (2020: £354.0 million ³), driven by a low level of capacity flown and by the material savings achieved across many areas of the business from easyJet's major cost-out programme. 

easyJet maintained a disciplined approach to capacity and cash management and, as a result, total cash burn during the quarter was reduced to £55 million.  Cash burn on a fixed costs plus capex basis during the quarter was £34 million per week on average, outperforming the guidance for £40 million per week given at the Q1 trading update.  easyJet paid a further £122 million of customer refunds during the quarter and the total value of vouchers in issuance is currently c.£230 million.  easyJet has paid a cumulative total of £1.2 billion customer refunds during the pandemic. 

As previously announced, easyJet's structural cost-out programme is on target to deliver c.£500 million of savings in FY21 of which almost half will be sustainable on an ongoing basis.  The cost-out programme will help to mitigate expected cost headwinds in ownership costs and navigation charges and improve margins.  Cost actions for FY22 are underway.  We continue to utilise furlough schemes across Europe. 

Headline loss before tax for the quarter decreased by 8.2% to £318.3 million (2020: £346.8 million ³). 

Capacity

During the third quarter easyJet flew 17% of Q3 2019 capacity, slightly ahead of our expectations.  Our capacity forecasting has been accurate and disciplined throughout the pandemic, which has helped deliver strong cost control. 

easyJet maintains significant operational flexibility and has kept the fleet in a flight-ready condition.  95% of easyJet crew are trained to operate flights from mid-July.  Safety is our number one priority. 

Network

easyJet's market-leading European short-haul network is focused on number one and two positions at primary airports and enables us to be efficient with our network choices, with an emphasis on maximising returns.  The scale and flexibility of our network also provide us with the opportunity to realign capacity to take advantage of these changes in the competitive landscape, including:

·    Switching capacity from UK-touching to EU-touching for this summer, taking advantage of the considerable flexibility afforded by our destination base strategy to serve some of the stronger traffic flows we are seeing within Europe.  On 22 June we launched 21 new routes using capacity based in Palma de Mallorca (PMI), Faro and Malaga, representing 286,000 seats.  In particular this has given us the opportunity to increase our presence in Scandinavia to serve new network points, including Stockholm Arlanda and Copenhagen.  We have also switched capacity which was planned for UK/Palma de Mallorca to operate instead on Berlin/Palma de Mallorca. 

·    Pivoting capacity towards popular routes showing rising customer demand in order to capitalise on the opening-up of travel in continental Europe, including adding further seats to our intra-European network, such as:

o  Increased flying from Berlin to Faro and Lisbon

o  Increased flying from Amsterdam to Tenerife, Palma de Mallorca and Malaga

·    Increasing flying from Paris-CDG to Corsica and from Milan-Malpensa and Milan-Linate to Olbia, Catania and Palermo in order to capitalise on strong domestic demand within our continental European markets

·    Topping up and launching new routes related to changes in UK Government travel restrictions such as the addition of destinations like Malta and Madeira to the Green list on 25 June when we put c.60,000 additional seats on sale and launched two new routes, Bristol/Malta and Luton/Malta. 

·    Increasing capacity to Amber list countries when the UK government announced on 8 July that fully vaccinated passengers would be able to fly back from these countries without quarantine. We topped up capacity on 74 UK/Amber routes, notably to Spain, Greece, Portugal, and Cyprus. 

·    Launching eight new routes from EU and Swiss bases to cover flying for August that was previously operating from the UK, in order to maintain our strong slot portfolio in Greece.  These new routes are operating from Geneva and Basel to Corfu and Cos, to Crete from both Paris-CDG and Amsterdam, Basel to Santorini and Naples to Rhodes. 

·    Further building out our UK domestic leisure portfolio, including back-filling some of the capacity left by the failure of Stobart Air on 12 June.  On 17 June we launched 12 new UK domestic routes, representing 267,000 seats and including three new network points in Belfast City, East Midlands and Leeds Bradford.  Furthermore, we topped up capacity on former Aer Lingus routes from Belfast International to Glasgow, Edinburgh, Birmingham and Manchester, representing 60,000 seats.  Routes to and from Belfast are currently amongst some of the best performing in our network.  In response to the continuing UK government travel restrictions we have focused capacity on UK domestic leisure opportunities, notably to Jersey, Bournemouth and Newquay. 

As a result of the current divergence in government travel policies, easyJet's bookings for this summer are heavily skewed towards continental Europe.  Whilst our business is normally split 50:50 between the UK and Europe, at present two thirds of bookings are coming from Europe. 

easyJet will act quickly to selectively acquire attractive slots which may become available in primary, slot-constrained airports.  We have recently acquired slots in Milan-Linate, Amsterdam-Schiphol and Paris-Orly. 

Forward Bookings

Customers are currently booking much closer to departure due to market conditions with 49% of our Q4 schedule booked, which compares to 65% in 2019. Booking rates on UK-touching flights have been lower than intra-EU flying due to the uncertainty around government restrictions. easyJet expect this to improve quickly as restrictions are lifted over the coming period.

UK-touching capacity is 44% sold (compared to 69% at this point in 2019) and intra EU capacity is 53% sold (compared to 64% at this point in 2019).

We remain confident about demand for travel this summer and into autumn, due to the bookings surges experienced following selective easing of travel restrictions, such as the 400% increase in week-on-week flight bookings seen following the waiving of quarantine for fully vaccinated passengers returning from Amber list destinations.  No-shows rates have dropped to average just 4% across the network as consumer confidence to fly is increasing.  CSAT and On-Time Performance rates continue above target.  We are also encouraged by high consumer savings rates and high balances of employees' annual leave.  We expect a relatively benign pricing environment for the coming months. 

Fleet

easyJet's fleet size has been reduced by c.10% in response to the Covid-19 pandemic.  Our fleet plans allow flexibility to tailor the size of the fleet according to market conditions. In 2022 we plan to grow to 317 aircraft enabling easyJet to meet the high levels of pent-up demand expected in summer 2022 and also to take advantage of the post-pandemic opportunities to grow and strengthen our network.

Deliveries of new A320neo family aircraft will resume from this autumn.  easyJet will take delivery of eight new aircraft in FY22, seven in FY23 and 18 in FY24.  These Neo family aircraft burn 15% less fuel than the aircraft they replace, generating 15% less carbon emissions.  They also generate 50% less noise footprint on take-off. In total we have 101 Neo aircraft on order, 20 purchase options and 58 unexercised purchase rights 

We retain significant flexibility with regards to the size of our leased fleet.  There are 38 leased aircraft due to be re-delivered to lessors over the coming 15 months.  We have already committed to extend some of these aircraft on very favourable operating lease conditions that are available in the current market.  We can also retain use of further aircraft on advantageous terms as we see demand returning. 

Balance Sheet & 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.

As at 30 June 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 remaining £300 million of easyJet's borrowings from the CCFF 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, as part of the capital structure review, assess all further funding opportunities.

Sustainability

easyJet continues to lead the way in Europe as the world's first major airline to offset all of the carbon emissions from its flights on behalf of its customers and we continue to work tirelessly to minimise carbon emissions across our operations alongside supporting the development of new technologies to reinvent aviation as quickly as possible. Offsetting is an interim solution, while zero emissions technology is developed. We are excited to see the growing momentum behind disruptive technologies such as all electric, hybrid and hydrogen.  We continue to advocate smarter aviation regulation which rewards carbon efficiency and we believe that radical action to address the impact of climate change is needed.  

We are also proud 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 July we will be launching our 'Travel Better' marketing campaign across social media, in all of our customer service messaging and on board our aircraft, in order to improve customer understanding of the important steps we are taking on sustainability. 

Outlook

Based on current travel restrictions in the markets in which we operate:

·    In Q4 easyJet expects to fly up to 60% of Q4 2019 capacity

o  Capacity plans are flexible, depending upon the status of travel restrictions

o  Intra-EU flying represent 60% of currently scheduled capacity

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

KEY Q3 FINANCIALS

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 details

There will be a conference call for analysts and investors at 08.45am BST on 20 July 2021. 

Telephone dial-in:     +44 (0) 330 551 0200

Password:               easyJet analyst

A copy of this Trading Statement is available at http://corporate.easyjet.com/investors 

Notes:

1.  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. 

2.  Capacity based on actual number of seats flown.

3.  Headline loss before tax for Q3 2020 has been restated by a further £22 million. The increase in headline costs aligns to the categorisation adopted during FY 2021, whereby foreign exchange gains or losses arising from the re-translation of monetary assets and liabilities, as well as fair value movements after hedges have been marked as discontinued, have been reclassified from non-headline items to headline items.  There is nil impact of this reclassification to the total loss before tax for Q3 2020, H2 2020 or FY 2020.  At H1 2021 no reclassification was made to the H1 2020 result due to the immaterial value.

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.