easyJet plc (LON:EZJ) has announced its results for the twelve months ending 30 September 2023
· Record H2 profit before tax despite challenging external operating environment
– FY23 headline profit before tax of £455 million (£633 million year on year improvement)
– easyJet holidays profits grew 221%, delivering £122 million profit before tax
· Positive outlook for FY24
– October RPS +12% (Q1 RPS expected to be ahead YoY despite being impacted by Middle East conflict)
– Q2 to Q4 RPS all ahead YoY
– H1 CPS ex fuel to be broadly flat YoY
– easyJet holidays expected to grow >35% in FY24 with ASP up high single digits
· Remain on track to deliver disciplined growth of c.9% in FY24
– H1’24 c. 42m seats, +11% YoY
– H2’24 c. 59m seats, +8% YoY
· Financial strength
– £41 million net cash with £4.7 billion liquidity
– BBB/Baa3 credit ratings, both with positive outlook
· Dividends reinstated
– 4.5p per share payable in early 2024
– Expect pay out to increase to 20% of headline PAT on FY24’s result
– Potential to increase level of future returns to be assessed over the coming years
Commenting on the results, Johan Lundgren, easyJet’s Chief Executive Officer, said:
“Our record summer performance demonstrates the success of our strategy and that demand for easyJet remains strong as customers choose us for our network and value.
“We see a positive outlook for this year with airline and holidays bookings both ahead year on year and recent consumer research highlights that around three quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending.
“We are confident about the future and the opportunity ahead, focusing on capital discipline and driving our low cost model to achieve our ambitious medium term targets.”
Overview
easyJet achieved a record performance during summer 2023, despite high fuel costs and the challenges arising from the external operational environment, thanks to initiatives implemented over the past year and a half. Supported by strong consumer demand and easyJet’s leading brand position, the Company’s success is driven by the low-risk expansion at primary airports, significant increases in ancillary revenue, market beating growth for easyJet holidays and a constant focus on cost. This led to a pre-tax headline profit of £455 million for the 2023 financial year, an improvement of £633m year on year.
Medium-term targets
easyJet has ambitious and credible medium-term targets, that provide the building blocks to achieve a Group PBT per seat of between £7 to £10. The levers to achieving this are: reducing winter losses, growing easyJet holidays to deliver over £250 million of PBT and the cost savings that our current Airbus order book will deliver from fleet efficiency and upgauging. In addition to the delivery of our strategy, these targets are integral to achieving easyJet’s ambition to deliver more than £1 billion PBT.
Shareholder Returns
Considering easyJet’s strong financial results in FY23 and robust liquidity position, the board is proposing an ordinary dividend of 4.5 pence per share, amounting to £34 million, at the upcoming Annual General Meeting. This represents 10% of the after-tax headline profit. The expectation is that this will rise to 20% of headline profits after tax in FY24, payable in early 2025. The Board is committed to maintaining regular returns to shareholders, with the level of future return to be assessed over the coming years, taking into account market conditions, capex requirements and progress towards the Group’s new medium-term targets.
Proposed aircraft purchase and conversion
easyJet has an existing order book with Airbus to FY29 for a further 158 A320neo family aircraft still to be delivered. Alongside this, as announced on 12 October 2023, easyJet has entered into conditional arrangements with Airbus to secure the delivery of a further 157 aircraft (56 A320neo & 101 A321neo) between FY29 – FY34 as well as 100 purchase rights (the “Proposed Purchase”). This provides easyJet with the ability to complete its fleet replacement programme of A319 aircraft and replace approximately half of the A320ceo aircraft as well as providing the foundation for disciplined growth. The Company is in exclusive negotiations with CFM for the supply of engines for the Proposed Purchase.
easyJet has also agreed to exercise conversion rights within its current order book to convert 35 A320neo deliveries into A321neo aircraft (the “Conversion”). This alongside the Proposed Purchase will deliver lower fuel burn, CO2 emissions and operating costs per seat.
A circular is expected to be published on 29 November 2023 giving further details of the Proposed Purchase and seeking shareholder approval at a General Meeting on 19 December 2023.
FY23 Financial Summary
– Headline profit before tax of £455 million (2022: £178 million loss)
o Total revenue increased by 42% to £8,171 million (2022: £5,769 million) predominantly due to pricing strength, increased flown capacity, improved load factors and the continued growth of easyJet holidays.
o Group headline costs increased by 30% to £7,716 million (2022: £5,947 million), primarily due to the increase in flown capacity, significantly increased fuel costs and industry wide inflationary pressures, combined with resilience measures as part of the summer 2023 ramp up preparations and 15 wet lease aircraft which were within the fleet for the month of October. The continued growth of easyJet holidays, with 77% customer growth has seen costs increase, although at a slower rate than revenue resulting in improved margins.
– Reported profit before tax of £432 million (2022: £208 million loss)
o Non-headline loss of £23 million (2022: £30 million loss). Non-headline items consist primarily of returning final slots at Berlin Brandenburg airport following the rightsizing of the operation from 18 to 11 aircraft and an adjustment to right of use asset depreciation to correct a historic non-cash foreign currency translation error.
Fuel & FX Hedging
| Jet Fuel | H1’24 | H2’24 | H1’25 | USD | H1’24 | H2’24 | H1’25 | |
| Hedged position | 76% | 51% | 25% | Hedged position | 76% | 53% | 27% | |
| Average hedged rate ($/MT) | 867 | 823 | 832 | Average hedged rate (USD/GBP) | 1.22 | 1.24 | 1.24 | |
| Current spot ($/MT) at 27.11.23 | c.900 | Current spot (USD/GBP) at 27.11.23 | c.1.25 | |||||
– Carbon obligation including free allowances
o 100% covered for CY23 at €42/MT
o 86% covered for CY24 at €41/MT
– USD Lease payments hedged for the next three years at 1.29
– Capex hedged for the next 12 months in EUR & USD
Key Stats
| 2023 | 2022 | Changefavourable/(adverse) | ||
| Capacity1 (millions of seats) | 92.6 | 81.5 | 14% | |
| Passengers2 (millions) | 82.8 | 69.7 | 19% | |
| Load factor3 (%) | 89% | 86% | 3ppt | |
| Average sector length (km) | 1,224 | 1,193 | 3% | |
| Airline revenue per seat (£) | 79.84 | 66.23 | 21% | |
| Airline RASK (p) | 6.52 | 5.54 | 18% | |
| Fuel cost per seat (£) | 21.95 | 15.68 | (40)% | |
| Airline headline cost ex fuel per seat (£) | 54.30 | 53.20 | (2)% | |
| Airline headline cost per seat (£) | 76.25 | 68.88 | (11)% | |
| Airline headline CASK ex fuel (p) | 4.44 | 4.45 | 0% | |
| Airline EBITDAR per seat (£) | 10.96 | 6.46 | 70% | |
| Airline EBIT per seat (£) | 3.94 | (0.43) | 1,016% | |
| Airline headline PBT/(LBT) per seat (£) | 3.59 | (2.65) | 235% | |
| Group headline PBT/(LBT) per seat | 4.91 | (2.19) | 324% | |
| Holidays passengers (m) | 1.9 | 1.1 | 77% | |
| Holidays profit before tax (£m) | 122 | 38 | 221% | |
| Headline EBITDAR Margin | 14% | 10% | 4ppts | |
| Headline ROCE | 13% | 0% | 13ppts | |
| Dividend (pence per share) | 4.5 | 0 | – | |
Outlook
The 2024 financial year has begun positively with strong year-on-year profit growth in October and revenue per seat on early bookings for Q2-Q4 pleasingly ahead of last year. There’s also strong growth in easyJet holidays’ bookings for all periods on sale, continuing the upward trend. Consequently, easyJet aims for continued progress towards our medium-term profitability ambitions.
Early winter results for FY24 will see an impact from the conflict in the Middle East, which started on 7th October. In our planned winter schedule, flights to Israel, Jordan (both temporarily paused) and Egypt represented 4% of capacity and 10% ASKs. Additionally there was a broader impact on near term flight searches and bookings across the industry, though this seems to be coming back with a recent improvement in trading. Accordingly, despite positive underlying strength, easyJet does not currently expect its Q1 loss to improve year on year. The present booking strength for summer 2024, coupled with supply constraints in Europe, provide a positive outlook for the year as a whole.
Revenue
Total revenue saw a significant rise of 42%, reaching £8,171 million, compared to £5,769 million in 2022. This is primarily due to an increase in capacity to 92.6 million seats from 81.5 million in 2022, coupled with strong ticket yield and a continued increase in ancillary revenue generation.
Passenger revenue climbed by 37% to £5,221 million, up from £3,816 million in 2022, as we operated with higher capacity compared to the prior financial year. The Passenger Revenue Per Seat (RPS) also saw a 20% increase to £56.37, up from £46.80 in 2022. This growth is driven by easyJet’s optimised network at primary airports, as demand remained strong through the year.
Group ancillary revenue saw a 51% increase to £2,950 million, up from £1,953 million in 2022. This is due to increased capacity and the rapid growth of easyJet holidays (with a 77% YoY increase in customers). Airline ancillary revenue per seat also rose by 21% to £23.47, compared to £19.43 in 2022. This is a result of easyJet’s ongoing efforts to increase conversion and revenue management, generating additional revenue for the airline.
Costs
Group headline costs, excluding fuel, rose by 22% to £5,683 million, up from £4,668 million in 2022. This increase is attributed to higher capacity, industry-wide inflation, rapid expansion of easyJet holidays, and resilience measures implemented ahead of Summer 2023.
easyJet reported a gain of £27 million from foreign exchange on balance sheet revaluations, benefiting from the strengthening of sterling against the USD during the period on our net USD-denominated liabilities. This compares to a £64 million loss recorded in 2022.
Headline Airline cost per seat, excluding fuel, saw a marginal increase of 2% to £54.30 from £53.20 in 2022, aligning closely with the sector length increase of 3%. This is despite inflation being seen across the cost base, including within airport, navigation and staffing expenses, and a 3-percentage point increase in load factor observed during the year, which affects per passenger charges within airports.
Non-Headline Items
Non-headline items are those where, in management’s opinion, separate reporting provides an additional understanding to users of the financial statements of easyJet’s underlying trading performance, and which are significant by virtue of their size and/or nature. These costs are separately disclosed and further detail can be found in the notes to the financial statements. Group non headline loss of £23 million (2022: £30 million loss) was recognised in the 2023 financial year. The significant items are the return of final slots at Berlin Brandenburg airport following the rightsizing of the operation from 18 to 11 aircraft and an adjustment to right of use asset depreciation to correct an historic non-cash foreign currency translation error.
Balance Sheet
During the 2023 financial year easyJet has focused on reducing its gross debt. This has included the repayment of a €500 million bond in February 2023 and the refinancing of the $1.8bn UKEF facility where an additional $950 million of gross debt was repaid. During the first quarter of the 2024 financial year, easyJet has also repaid a €500 million Eurobond which matured in October 2023.
As at 30 September 2023 our net cash position was £41 million (30 September 2022: £670 million net debt) including cash and cash equivalents and money market deposits of £2.9 billion (30 September 2022: £3.6 billion).
Fleet
easyJet’s total fleet as at 30 September 2023 comprised 336 aircraft (30 September 2022: 320 aircraft, excluding three A319 aircraft held on a zero rent basis). The increase was driven by:
· Delivery of ten new A320neo aircraft, including accelerating two FY25 scheduled orders into FY23.
· Acquisition of eight mid-life A320 leased aircraft.
· Re-entry into the fleet of one former easyJet A319 aircraft, and the return to service of three aircraft held on a zero-rental agreement in 2022.
Six older leased aircraft exited the fleet at the end of their lease-term (three A319 aircraft, and three A320 aircraft), as easyJet continues its journey of retiring older, less efficient, aircraft whilst benefitting from the A320neo family aircraft with their superior fuel efficiency and greater number of seats.
easyJet already has 69 A320neo family aircraft within its fleet and an existing order book with Airbus to FY29 for a further 158 A320neo family aircraft still to be delivered. Alongside this, easyJet has now entered into conditional arrangements with Airbus to secure the delivery of a further 157 aircraft (56 A320neo & 101 A321neo) between FY29 – FY34 as well as 100 purchase rights (the “Proposed Purchase”). This provides easyJet with the ability to complete its fleet replacement programme of A319 aircraft and replace approximately half of the A320ceo aircraft, alongside providing the foundation for disciplined growth.
The average age of the fleet increased to 9.9 years (30 September 2022: 9.3 years). The average gauge of the fleet is currently 179 seats per aircraft (30 September 2022: 179 seats).
Fleet as at 30 September 2023
| Owned | Leased | Total | % of fleet | Changes since Sep-22 | FirmOrders | |
| A319 | 29 | 66 | 95 | 28% | 1 | – |
| A320 | 103 | 69 | 172 | 51% | 5 | – |
| A320neo | 47 | 7 | 54 | 16% | 10 | 90a |
| A321neo | 4 | 11 | 15 | 5% | – | 68a |
| 183 | 153 | 336 | 158 | |||
| Percentage of total fleet | 54% | 46% |
a) easyJet retains the option to alter the aircraft type of future deliveries, subject to providing sufficient notification to the OEM. The presented number assumes the conversion of 35 A320neo deliveries into A321neo deliveries as set out in the proposed aircraft purchase and conversion section of this release. It does not reflect the proposed aircraft order from FY29 to FY34.
Our flexible fleet plan allows us to expand or contract the size of the fleet depending on the demand outlook.
| Number of aircraft | FY24 | FY25 | FY26 | |
| Current contractual maximum | 346 | 373 | 395 | |
| Base fleet plan | 346 | 358 | 370 | |
| Current contractual minimum | 337 | 338 | 313 | |
| New aircraft deliveries | 16 | 19 | 27 | |
| Gross capital expenditure (£’m) | c.1,300 | c.1,500 | c.1,900 | |
Capex is comprised of new fleet delivery payments, maintenance related expenditure, lease payments and other capital expenditure such as IT development.
Strategy
easyJet’s purpose is to make low-cost travel easy. Our strategy is built around four key priorities that leverage our structural benefits in the European aviation market. These strategic initiatives guide easyJet towards its goal of becoming Europe’s most loved airline, delivering value for our customers, shareholders, and people. The details of our strategic priorities are as follows:
· Building Europe’s best network
· Transforming our revenue capability
· Driving our low-cost model
· Delivering ease and reliability
Building Europe’s best network
easyJet has a strong network of number one and number two positions in primary airports, which has proven to be amongst the highest yielding in the market. This allows us to make efficient network choices, focusing on maximising returns.
easyJet constantly reviews its network to ensure capacity is allocated to markets where demand and returns are highest. From Summer 2019 to 2023, we’ve reallocated 47 aircraft, leading to stronger returns at bases where aircraft have been added and at those where capacity has been streamlined. Alongside this, we’ve expanded customer options by introducing over 80 new routes this year. Our investment into Italy and capacity rationalisation in Berlin saw routes mature during FY23, delivering an 45% and 83% profit improvement respectively. We expect to see continued route maturity in these locations through FY24 alongside maturity from the investments we made through FY23 in Porto and Lisbon.
We aim to further strengthen our position in key markets as the competitive landscape evolves. easyJet remains ready for opportunistic growth alongside growth on our existing network, through leveraging slot growth in core markets and upgauging which allows expansion at slot constrained airports. In 2023, 42% of capacity was in fully constrained airports (+5 ppts vs 2019) and 39% of capacity was in airports that are constrained at peak times (+9 ppts vs 2019), which demonstrates our increased concentration at airports that deliver the highest returns.
Our focused network strategy can be summarised as follows:
1. Lead in our Core Markets
easyJet prioritises slot-constrained airports as these are where customers want to fly to and from, which as a result have superior demand and yield characteristics. In our core markets, we are able to achieve cost leadership and preserve scale. We provide a balanced network portfolio across domestic, city and leisure destinations. Our scale enables us to provide a market leading network and schedule.
2. Investment in Destination Leaders
We will build on our existing leading positions 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.
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.
Transforming revenue
easyJet recognises that the continued evolution of our product portfolio represents a significant opportunity to build on spend per customer and deliver enhanced sustainable returns.
Airline Ancillaries:
Cabin bags and our leisure bundles, amongst other ancillary products, have continued to deliver incremental revenue through the period. Additionally, easyJet’s inflight retail offering, introduced last year, has resulted in a profit per seat increase of +42% in FY23 compared to the former model. These initiatives have led to the Airline’s ancillary yield being £11.95 higher than the same period in 2019.
Integrated pricing has been implemented for cabin and hold bags on 16% of the network, delivering a £0.43 per seat benefit on the test routes, with the roll out to be continued to the rest of the network in FY24. This is a step towards the long-term strategy of total basket optimisation. Further initiatives are underway with data science in revenue management, gauge optimisation and e-commerce enabling us to unlock further merchandising capability.
easyJet holidays:
easyJet holidays continues its rapid growth, becoming a major player within the sector and doubling its UK market share year on year. easyJet holidays has recorded 77% customer growth year on year and a profit before tax of £122 million in the 2023 financial year.
As the holidays business grows in scale, targeted investments will continue to be made to strengthen the customer base. Future initiatives are underway to optimise pricing alongside enhancing the product offering through room options and ancillary products.
The UK market has further opportunities for growth in Leisure, City Breaks and new products, to continue to increase our market share. Our multi-currency technology platform also enables easy and rapid expansion into other source markets. This year we launched Switzerland, which is on sale for departures from early 2024. We already have a leading leisure network from Geneva and Basel to destinations including the Balearics, Canaries and Greece, where Switzerland’s package holiday market of 1.1 million customers offers an excellent opportunity for easyJet holidays to continue its growth.
Moving into the 2024 financial year, easyJet holidays expects to grow by more than 35% taking its UK market share from 5% to 7%. The business will also launch French and German source markets as the holidays business continues to expand its presence as a pan European holiday company.
Driving our low-cost model
easyJet has a cost advantage over its major competitors within its primary airport network. Alongside cost actions, easyJet is focused on improving margins through its network optimisation, effective pricing management and ancillaries driving higher yields.
easyJet has delivered a number of cost actions:
· Descent profile optimisation software: the upgraded technology retrofit has been completed on our CEO aircraft, achieving fuel savings through lower thrust and fuel burn during descent not only providing a cost saving but also achieving a permanent carbon emissions saving.
· Insourcing line maintenance at LGW, BER, GLA, EDI, BHX, BFS, MAN and BRS: enabling easyJet to have greater control over maintenance, reducing cost incurred and improving the quality of maintenance fulfilled.
o Since opening our Berlin hangar in January, we have seen a 38% average cost saving per aircraft visit.
o Line maintenance insourcing at Birmingham, Manchester and Belfast resulting in line maintenance being fully insourced in the UK.
· Increasing automation of self-service management: increasing digitalisation of customer flows and reducing the need for contact centre support.
o 80% of customers are now using the self-service platform as our Generative AI tool is assisting customer queries, resulting in a 50% reduction in response processing times and a 30% reduction in processing cost of each email received.
Cost remains a core emphasis for the business for the coming year, with cost benefits to come through:
· Fleet upgauging: As we replace A319s with A320 family aircraft, we will unlock efficiency benefits, increasing the average gauge from 179 to the low 190s by FY28 and to the low 200s by FY34. The delivery of NEO aircraft from easyJet’s new and existing orders will also bring additional fuel and airport incentive benefits.
· Increased productivity: capacity restoration through Winter 24 will promote productivity and additional cost savings. Further efficiency will be driven through data and IA.
Delivering ease and reliability
easyJet aims to deliver a seamless and digitally enabled customer journey at every stage and is continuously working to enhance the customer experience. The focus areas to deliver ease in the customer experience are:
· Communications: providing helpful and timely information flows and creating cohesion across the end-to-end experience.
· Airport journey: improving the airport experience by optimising core processes including boarding and bag drop like providing twilight check in at more airports and the application of technology enhancements such as biometric automation to reduce queuing.
· Inflight offering: creating a more personalised service enabled through the use of connected technology and enhancing the current crew’s engagement.
· Disruption management: focusing on improvements to streamline policies, simplify processes and automate solutions, alongside more efficient communications via connected devices.
easyJet also aims to deliver reliable performance through:
· Process oversight: a focus on base driven reporting, with station level ownership and control.
· Prior to departure: optimising planning activities such as crew rostering and standby allocation.
· On the day turn execution: key to delivery, with elements including supply chain, event communications management, hand luggage policies and inventory optimisation.
Despite the operational challenges seen during the year, we executed on our plan for FY23, ranking either first or second in on time performance in our top 10 airports. Our focus on resilience will continue as we look ahead to FY24, we are investing to ensure we are well prepared for external challenges that may happen in Summer 24.
Gatwick continues to be a clear focus, and we have looked to further optimise our schedule and increased the level of standby aircraft here.
Our enhanced use of technology is also being applied to improve and speed up every aspect of the customer experience. More than three quarters of customers exclusively use our digital self-service platforms to self-serve, and we have also implemented A.I to help speed up the time it takes to resolve customer queries.
There are many benefits of travel and tourism. It connects people, countries and cultures and supports the aspirations and livelihoods of millions of people. If lost, it would have a devastating global impact on economic prosperity and social mobility. Clearly, we need to find a balance that both lowers the impact of aviation and safeguards these benefits. This is why we developed and published a SBTi-aligned net zero roadmap, and secured validation from SBTi for our interim target of 35% greenhouse gas emissions intensity reduction by 2035 (against a FY19 baseline). We are collaborating in multiple cross-sector partnerships and have invested multimillions of pounds in the development of zero carbon emission technology. It is very pleasing to see that this work is being recognised, with each of our ratings from CDP, Sustainalytics and MSCI either improving or being maintained. During 2023 we were also included into FTSE 4 Good.
We’re also making significant breakthroughs. We partnered with Rolls-Royce to set a world first by successfully running a modern aero engine on green hydrogen. A test on a key component in a Pearl 700 engine in September further proves hydrogen’s suitability for aviation, and – in addition to continued partnerships with Airbus, GKN Aerospace and Cranfield Aerospace Solutions – easyJet has played the lead role in establishing the Hydrogen in Aviation Alliance (HIA) to help ensure the infrastructure and supply exists, so we can capitalise on this opportunity when it becomes available.
We’re also making substantial operational efficiencies. A fifth of our fleet comprises the highly efficient NEO aircraft and we’ve invested heavily in state-of-the-art software to drive flight efficiencies – all of which are contributing to easyJet’s best-ever carbon intensity performance in FY23.
Looking beyond our operations, we continue to support the vital work of UNICEF and many charitable and local community focused projects. At the same time, easyJet holidays is working to maximise the socio-economic benefits of tourism to destination communities, while managing environmental impacts.
Sustainability is at the heart of our strategy and everyone at easyJet is dedicated to building a sustainable and thriving aviation sector that will serve and benefit countless generations to come.
Our People
easyJet continues to have a market leading reputation as an employer of choice, as evidenced through our Glassdoor rating of 4.2.
In a recruitment market that remains competitive, we continue to improve how we attract and retain diverse talent that reflects the communities we serve. We have evolved our Employee Value Proposition (EVP) and launched a more compelling careers website to deliver a much-improved candidate experience and to convert more of the interest generated by our recruitment advertising into applications.
When people join easyJet, our proactive and rewarding health and wellbeing strategy empowers them to take small, easy steps to better wellbeing every day. By giving colleagues the tools, support and confidence they need to take care of themselves and each other, they will have the energy to enable us to perform at our best and win together.
By building an inclusive culture and living our behaviours, we create a place where everyone can not only be themselves but also thrive, grow to their full potential and be at their best.
Footnotes
(1) Capacity based on actual number of seats flown.
(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) 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.
