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  • Location: BEDFORDSHIRE 
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    Annual report and accounts 2011

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    easyJet plc Annual report and accounts 2011 Europe by easyJet 1 Overview 4 Corporate responsibility Highlights 02 Introduction 32 Chairman’s introduction 03 Safety 32 Turning Europe Orange 04 People 33 Our cause 06 Environment 36 2 Business review 5 Governance Our long-term strategy 08 Chairman’s introduction 41 Chief Executive’s introduction 09 Board of directors 42 Strategic position 10 Executive management team 44 Strategy implementation 13 Corporate governance 46 Market review 13 Shareholder information 51 Looking forward to 2012 14 Report on Directors’ remuneration 52 Key performance indicators 16 Statement of Directors’ responsibilities 62 3 Performance and risk 6 Accounts & other information Financial review 19 Independent auditors’ report 64 Introduction 19 Consolidated income statement 65 Financial performance 22 Consolidated statement of Earnings per share 24 comprehensive income 66 Cash flows and financial position 24 Consolidated statement of financial position 67 Going concern 25 Consolidated statement of changes in equity 68 Significant contracts and creditor policy 25 Consolidated statement of cash flows 69 Principal risks and uncertainties 27 Notes to the accounts 70 Company statement of financial position 98 Directors’ report Company statement of changes in equity 99 easyJet plc is incorporated as a public limited company and is registered in Company statement of cash flows 100 England with the registered number 3959649. easyJet plc’s registered office is Hangar 89, London Luton Airport, Bedfordshire LU2 9PF. The Directors Notes to the Company accounts 101 present the Annual report and accounts for the year ended 30 September 2011. Five year summary 103 References to ‘easyJet’, the ‘Group’, the ‘Company’, ‘we’, or ‘our’ are to easyJet plc or to easyJet plc and its subsidiary companies where appropriate. Pages Glossary 104 01 to 62, inclusive, of this Annual report comprise the Directors’ report that has been drawn up and presented in accordance with English company law and the liabilities of the Directors in connection with that report shall be subject to the limitations and restrictions provided by such law.

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    Overview Business review Performance and risk Corporate responsibility Governance Accounts & other information 01 3 3 3 3 04 06 02 03 OVERVIEW OVERVIEW Turning Europe Orange Chairman’s introduction 1 Our cause Highlights

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    02 easyJet plc Annual report and accounts 2011 Highlights Our results £3,452m £248m £248m Total revenue Profit before tax – reported Profit before tax – underlying1 (2010: £2,973m) + 16.1% (2010: £154m) +60.8% (2010: £188m) +31.5% 7.2% 12.7% 52.5p Pre-tax margin – underlying1 Return on Capital Employed Basic earnings per share (pence) (2010: 6.3%) +0.9ppt (2010: 8.8%) +3.9ppt (2010: 28.4p) +84.9% 10.5p 34.9p Proposed dividend – Proposed dividend – ordinary (pence per share) special (pence per share) (2010: nil) (2010: nil) Operational highlights – easyJet has made excellent progress over the past year – Underlying cost1 per seat (excluding fuel and currency and has delivered a strong set of results with underlying movement) fell by 1.3% for the full year and was flat on profit before tax up by £60 million to £248 million a reported basis with strong performances in ground despite a £100 million increase in unit fuel costs. This handling, maintenance and disruption related costs strong performance is due to firm control of costs, – The year saw strong operating cash generation of effective yield management, the strength of easyJet's £424 million, resulting in net cash of £100 million as at network and focus on customers 30 September 2011 – Return on Capital Employed (ROCE) improved by – The Board has recommended a one-off return to 3.9 percentage points to 12.7% shareholders, structured as a special dividend, of – On time performance improved by 13 percentage £150 million. Taken together with the ordinary dividend points to 79% with the strong performance across the of 10.5 pence per share, this provides an estimated total network leading to a six percentage point improvement cash return to shareholders for the year of £195 million in customer satisfaction or 45.4 pence per share to be paid on 23 March 2012 to those shareholders on the register at the close of – Total revenue per seat up 4.1% (3.4% at constant business on 2 March 2012 with an ex dividend date of currency) to £55.27, as capacity investments made 29 February 2012 in FY’10 and the first half of FY’11 matured combined with a strong performance from ancillary revenue, up – Earnings per share improved by 24.1 pence to 52.5 pence per share, of which around nine pence 12.9% to £11.52 per seat following decisive management resulted from changes in the UK corporation tax rate action in the second quarter and the resolution of various tax enquiries – Passenger numbers rose 11.8% to 54.5 million and – Forward bookings are in line with the prior year. load factor improved by 0.3 percentage points to With around 45% of winter seats now booked, first half 87.3%. Passengers originating outside of the UK now total revenue per seat at constant currency is expected account for 56%, an increase of 3 percentage points to be up by mid single digits compared to the prior year. Passengers travelling with Note 1: Underlying measures exclude £27 million of cost relating to easyJet on business increased by almost one million to the volcanic ash cloud and £7 million loss on disposal of A321 aircraft 9.5 million in 2010. There were no underlying adjustments in 2011.

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    03 Overview easyJet plc Chairman’s introduction Annual report and accounts 2011 Business review Performance and risk I am pleased to report that your Company has easyJet is well placed and the Board is confident in delivered a good financial performance this year confirming our first ever dividend of £45 million for and the business has strengthened. financial year 2011 and a special dividend of £150 million. Progress this year Industry regulation In its first full year in charge the management team It is important that our industry ensures that we play has made excellent progress in implementing the our part in tackling climate change. However, if this is strategy laid out in last year’s annual report and driving done through only constraining demand the economic improvement in processes and capability. and social benefits of travel will be put at risk. In the UK alone aviation contributes £11 billion to GDP. As a result both unit revenues and costs have improved to drive a substantial improvement in profitability and Environmental measures must deliver real gains in returns. environmental efficiency and cannot be used as a way to simply tax passengers. easyJet continues to support Corporate responsibility We have refreshed the Board with the appointments aviations’ entry to EU ETS, however we are disappointed of Charles Gurassa as Deputy Chairman and Senior by the UK Government’s proposal to increase the tax on Independent Director, Andy Martin and Adele Anderson short-haul travel and reduce it for long-haul travel. This and strengthened the Board’s capabilities in the areas proposal will reduce growth and jobs, as the majority of of aviation, and risk and financial management. the UK’s tourists come from Europe, and it will increase Returns to shareholders emissions, as long-haul flights are responsible for much The Board is committed to delivering returns in excess greater emissions than short-haul flights. of the cost of capital and returning excess capital to We are also concerned about the apparent lack of shareholders. In the past year, earnings per share has Government commitment to expanding runway increased by 24.1 pence to 52.5 pence and Return on capacity in the South East. This will have negative Capital Employed improved by 3.9 percentage points consequences for the London and wider UK economy to 12.7%. and easyJet supports projects, such as a second Governance The weak consumer environment with rising fuel costs runway at Gatwick, the most congested runway and taxation will continue to present challenges for the in Europe. aviation industry. We have proactively put in place Finally, we call for the end of inconsistent application actions to ensure the business navigates a difficult of consumer rules across Europe. We are proud of environment by maintaining a strong balance sheet our commitment to ensuring our passengers receive and by curtailing growth over winter 2012 and 2013. the support they deserve if they are disrupted, and This combined with our strong network and focus on that our website provides clear and transparent improving revenues and cost control means that information on fares. easyJet led the way in Europe in providing passengers with simple fares. However, we Sir Michael Rake have seen regulators across Europe applying the rules Non Executive Chairman in different ways, and making inconsistent demands on us and so we are campaigning to ensure there is a level playing field across Europe. Accounts & other information Conclusion Finally I would like to thank all of easyJet’s people for their efforts in the past year, their commitment and enthusiasm is core to easyJet’s success. Sir Michael Rake Non Executive Chairman

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    04 easyJet plc Annual report and accounts 2011 Turning Europe Orange In 2011 we started to implement our strategy to “Turn Europe Orange”, expanding our network and presence across Europe. We continue to grow our capacity easyJet continues to grow its seats and passengers and improve our load factor, Seats flown Total number of Load factor increasing the number of people million 62.5 passengers million 54.5 % 87.3 flying with us by 2011 62.5 2011 54.5 2011 87.3 11.8% in 2011. 2010 56.0 2010 48.8 2010 87.0 2009 52.8 2009 45.2 2009 85.5 2008 51.9 2008 43.7 2008 84.1 2007 44.5 2007 37.2 2007 83.7 We have increased Our network is truly pan-European the number of routes offered to our passengers Number of routes Capacity growth and focused this by country by country % growth across continental Europe. UK 300 Italy 8.6 Switzerland 72 France 29.1 France 67 Spain 10.5 Italy 59 Switzerland/Germany 21.7 Germany 30 London 6.6 Spain 19 UK regions 6.0 In 2011, 56% of our We attract customers We grow talent across Europe customers did not originate from the from across Europe UK, up 3 percentage Passengers by country 2011 Total headcount 2011 points from 2010. % A A In 2011, we F E have increased F our employee D E numbers across our network, with larger C D increases across continental Europe. B C B A UK 44 A UK 5,116 B Italy 13 B Italy 797 C France 13 C France 774 D Spain 7 D Spain 614 E Switzerland/Germany 13 E Switzerland/Germany 986 F Other Europe 10 F Other Europe 1

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    05 Overview easyJet plc Annual report and accounts 2011 Business review 19 bases 204* aircraft 547 Performance and risk routes Corporate responsibility Governance France Germany Italy Spain 22 aircraft Number of routes 8 aircraft Number of routes 21 aircraft Number of routes 8 aircraft Number of routes Lyon 22 Berlin – Schöenefeld 24 Milan – Malpensa 41 Madrid 19 Paris – Rome – Fiumicino 18 Accounts & other information Charles de Gaulle 29 Paris – Orly 16 Switzerland UK 18 aircraft Number of routes 120 aircraft Number of routes Edinburgh Glasgow 17 12 London – Luton London – Stansted 36 27 Basel 31 Belfast 15 Liverpool 32 Manchester 24 *7 of which are on Geneva 41 Bristol 40 London – Gatwick 90 Newcastle 13 standby cover

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    06 Our cause We are using this cause as a test in our day-to-day operations. It applies throughout the passengers’ journey with us – from end to end. If we get it right it will enable us to deliver our ambition of becoming Europe’s preferred short-haul airline making market leading returns. We’re passionate about connecting people by making travel easy and affordable. We’re on our customers’ side and our people make the difference. We have a big ambition, to be Europe’s preferred short-haul airline, delivering market-leading returns.

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    07 Overview BUSINESS REVIEW Business review Performance and risk Our long-term strategy 08 3 Chief Executive’s introduction 09 3 Strategic position 10 3 Strategy implementation 13 3 Market review 13 3 Looking forward to 2012 14 3 Key performance indicators 16 3 Corporate responsibility Governance 2 Accounts & other information

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    08 easyJet plc Annual report and accounts 2011 Our long-term strategy Safe and sustainable We will never compromise our commitment to safety, which is always the first priority for all our people, and we continually strive to improve our sustainability. Focus on customer Focused on network development Improving our customer's experience We are focusing on improving our routes, We are focused on improving the slots and bases to build on our leading experience of travelling with us for all presence across Europe. our passengers. Operational excellence We focus on maintaining a strong operation that delivers for our customers. Where people make the difference We are committed to ensuring high employee engagement levels across the business. Financial discipline We are committed to improving shareholder returns whilst remaining prudently financed with a strong, liquid balance sheet.

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    09 Overview easyJet plc Chief Executive’s introduction Annual report and accounts 2011 Business review Performance and risk Introduction Returns to shareholders In light of the strong performance of the business over easyJet has made strong progress this year in the the past 12 months, management’s current medium– execution of its strategy. Our strong operational and term expectations for easyJet’s financial performance financial performance is a result of the hard work and and a prudent approach to maintaining balance sheet commitment of easyJet’s people to make travel easy strength, the Board has recommended a one-off and affordable for customers. The business has return to shareholders, structured as a special dividend, strengthened despite the headwinds of fuel costs, of £150 million or 34.9 per share. Taken together with rising aviation taxes and a weak economy. The the ordinary dividend of 10.5 pence per share this management team has introduced an enhanced focus provides an estimated total cash return to shareholders on financial discipline, financial return and operational for the year of £195 million or 45.4 pence per share to performance and constantly takes a rigorous look at be paid on 23 March 2012 to those shareholders on the the Company’s network and profitability. register at the close of business on 2 March 2012 with Corporate responsibility an ex dividend date of 29 February 2012. The special Financial performance dividend will be accompanied by an associated share easyJet delivered record profit before tax of £248 consolidation. The consolidation factor will be million up by £60 million from an underlying profit of announced in due course. £188 million in 2010 despite a £100 million increase in unit fuel costs. Underlying profit per seat (including fuel, Operational performance adjusting for last year’s volcano effect and loss on Investment in operational robustness has delivered a disposal of A321 aircraft) rose by 61 pence to £3.97. strong improvement in easyJet’s On Time Performance This strong performance was driven by: (OTP) with a 13 percentage point improvement across – Passenger numbers rose 11.8% to 54.5 million and the network across the year with an increase of 25% in load factor improved by 0.3 percentage points to the fourth quarter and our performance is now in line 87.3%. Passengers originating outside of the UK now or ahead of our key competitors. account for 56%, an increase of 3 percentage points OTP % arrivals within 15 minutes Governance compared to the prior year. Passengers travelling Q1 Q2 Q3 Q4 Full year with easyJet on business increased by almost 2010 75% 66% 64% 60% 66% one million to 9.5 million 2011 65% 81% 84% 85% 79% – Total revenue per seat up 4.1% (3.4% on a constant The focus of the operations team in the coming currency basis) to £55.27 as capacity investments financial year will be on maintaining the current made in 2010 and the first half of 2011 matured, performance whilst at the same time reducing cost combined with a strong performance from ancillary through standardisation and simplification. revenue up 12.9% to £11.52 per seat following decisive management action in the second quarter Carolyn McCall OBE – Underlying cost per seat (excluding fuel and currency Chief Executive movement) fell by 1.3% for the full year and was flat on a reported basis with strong performances in Accounts & other information ground handling, maintenance and disruption related costs easyJet delivered ROCE of 12.7% in the year and generated cash from operations of £424 million resulting in net cash as at 30 September 2011 of £100 million.

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    10 easyJet plc Annual report Chief Executive’s introduction and accounts 2011 Continued Customer satisfaction Strategic position The improvement in operational performance has been reflected in increased customer satisfaction. easyJet business strengths Overall satisfaction was up by six percentage points to easyJet is the fourth largest short-haul carrier in Europe 79% compared with the same period last year. with a market share of 7.6%3. easyJet derives its competitive advantage from the following attributes: easyJet continues to develop its end-to-end customer proposition and announced on 15 November 2011 that – leading short-haul network in Europe with the highest it will start trialing allocated seating on selected routes number of market pairs within Europe’s top 100 from spring 2012. market pairs3 and strong market shares in valuable markets such as London Gatwick, Paris, Milan Engagement Malpensa, Amsterdam and Geneva At easyJet people are at the heart of delivering for our customers and executing the strategy to create – low cost and efficient business model derived from value for shareholders. Consequently improving scale and cost advantage, high asset utilisation, a communication and engagement have been given a young efficient fleet with low cost of ownership and high priority this year as the whole of the Executive industry leading load factors Management Team have travelled extensively across – financial and balance sheet strength the network. Note 3: Market share data from OAG. europe by easyJet easyJet has made good progress implementing its new Competitive and regulatory environment European structure. Country managers are now in In the past year capacity in European short-haul grew place in each of our key European markets and are by 2.8%, and by 3.1% on easyJet’s routes3. It is expected focused on improving the end to end customer that due to higher fuel costs, rising airport costs, proposition driving better route decisions and better taxation on air travel and a weak economic engagement and lobbying with key regulatory and environment that over the coming year capacity governmental agencies. growth will be at lower rate as carriers seeks to rebuild margins. In September easyJet launched its new advertising campaign "europe by easyJet". We have seen A significant proportion of easyJet’s cost base is promising initial results from the campaign with a 250% determined by governments and regulators and increase2 in customers describing themselves as “much easyJet continues to constructively engage with them more likely to buy from easyJet” on a number of issues that will impact easyJet’s cost base in the future Note 2: source – Gfk Brand tracking. Example only. Not a current offer.

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    11 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk easyJet remains concerned that monopoly After providing appropriate returns for shareholders, infrastructure providers across Europe, of both airports and airspace, continue to impose higher charges, capital is allocated to support the network. Capital expenditure will be principally allocated to the following 12.7% ROCE achieved in year despite the uncertain economic climate. Consequently activities: there is now an increased focus on regulated airport charges, and easyJet has actively participated in the regulatory dialogue for Spanish; French; UK; Dutch; – maintaining fleet size through the replacement of leased aircraft as they exit the fleet and the 79% maintenance, repair and overhaul of engines 13 ppt improvement German; and Italian airports in 2011. Monopoly airports in OTP (an overhaul being required when an aircraft has need to become more efficient, with infrastructure and operated for between eight and nine years in easyJet associated charges built around the needs of service in accordance with the manufacturer’s passengers on point-to-point carriers such as easyJet. maintenance programme) This will bring wider economic benefits by promoting tourism and trade. – new network opportunities where the Board is Corporate responsibility satisfied that they can deliver on-target returns within The UK Government has reversed its election promise a tight and defined timescale to turn Air Passenger Duty into a per plane tax. Instead it is proposing to lower the tax on long-haul flights and In the past year, easyJet has implemented a new and increase it on short-haul flights. Evidence shows this is more rigorous approach to assessing network returns. both economically and environmentally damaging. Routes are measured on the returns they are delivering Aviation’s entry into the European Union Emissions against the Company's 12% ROCE target. Capacity on Trading System means that there is no longer any underperforming routes is reallocated, or performance environmental case for taxes on aviation. managed and profitability improved, to deliver an appropriate return. In a dynamic market place, Pleasingly the European Commission is planning in 2012 profitability of routes can change over time and by to propose reforms to the consumer rules that govern ensuring that route returns are continually monitored aviation. easyJet welcomes this announcement and will the Company is most effectively able to drive ROCE. be working to ensure the proposals give passengers Governance the rights they deserve, but do not expose airlines to Capacity is also principally deployed on routes which unmanageable risks of the type we saw arising from operate on a year-round basis, with less than 5% of the ash clouds of 2010. The Commission will also be easyJet’s capacity allocated to summer-only routes, all working on a reform of the slot regulation. We hope of which are intended to deliver upper quartile ROCE this will give a renewed opportunity to ensure that slots (on average delivering ROCE above 12%). are allocated to airlines such as easyJet which will use them efficiently. Fleet plan and growth easyJet has built flexibility into its fleet planning Capacity planning and capital allocation arrangements such that it can increase or decrease The Board is focused on driving returns for capacity deployed, subject to the opportunities shareholders and consistent with this focus has available and prevailing economic conditions. The outlined a clear set of financial objectives and metrics. Company also has flexibility to move aircraft between routes and markets to improve ROCE. The Board’s objective is to achieve returns in excess Accounts & other information of the cost of capital and this will be measured by the ROCE achieved within a financial year. The Board has set a target of 12% ROCE through the five years planning cycle and for the financial year ended 30 September 2011 easyJet achieved a ROCE of 12.7%.

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    12 easyJet plc Annual report Chief Executive’s introduction and accounts 2011 Continued During the past financial year, the Company took The current contracted fleet plan over the period to advantage of the agreement signed with Airbus in 30 September 2013 as set out below: 2002 and converted 15 A320-family aircraft that had been under option to the Company since June 2007 GB into firm orders for 15 A320 aircraft, primarily to replace easyJet Airways Total A320 Boeing A320 contracted existing aircraft that will be retiring from the fleet in 2013. family 737-700 family4 aircraft In the year, easyJet took delivery of 13 A319 aircraft and At 30 September 2011 202 2 – 204 12 A320 aircraft under the terms of the Airbus easyJet At 30 September agreement. The two remaining Boeing 737-700s have 2012 213 – – 213 been withdrawn from service and will be returned to At 30 September their lessors in the first half of 2012. 2013 216 – 2 218 Note 4: To be delivered as part of a GB Airways commitment. The total fleet at 30 September 2011 comprised 204 aircraft. Fleet as at 30 September 2011: Future Unexercised Operating Finance Changes committed purchase rights Owned leases leases Total in year deliveries5 and options6 easyJet A319 105 56 6 167 8 – – easyJet A320 24 6 5 35 12 35 73 Boeing 737-700 – 2 – 2 -6 – – GB Airways A320 family – – – – -6 2 – 129 64 11 204 8 37 73 Note 5: The 35 future easyJet deliveries and 2 ex-GB Airways deliveries are anticipated to be delivered over the next three financial years; 20 in 2012, 12 in 2013 and 5 in 2014. Note 6: Purchase options and rights may be taken on any A320 family aircraft and are valid until 2015. A further 35 easyJet specification aircraft deliveries are currently planned for arrival over the next three years, which will be offset by 24 planned exits from the fleet. The high cost of jet fuel and uncertain consumer demand across Europe means that easyJet is taking a cautious approach to capacity, utilising the flexibility in its fleet planning arrangements to ensure the fleet is held constant for the next two winters at 204 aircraft, as announced on 10 May 2011. Thereafter, the Company has sufficient flexibility in its fleet planning arrangements to adapt to market and economic conditions, which the Board continues to keep under review.

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    13 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk Strategy implementation easyJet lean easyJet has continued to make excellent progress in easyJet’s lean projects are set up under the sponsorship of the Chief Financial Officer and the goal +18.6% Growth in mainland executing the strategy as outlined in November 2010 is to maintain its cost advantage by ensuring below Europe capacity to drive sustainable planning cycle. An update against inflation non-fuel cost per seat increases. This will be the pillars of the programme is set out below. Network optimisation achieved by driving cost efficiencies through best in class procurement, leveraging our scale, tight control of c£90m overhead costs, greater crew flexibility and improved Savings identified easyJet’s goal is to improve the underlying ROCE of the for 2012 operational performance. network through optimisation of the schedule and route portfolio. Progress in 2011 – Unit costs (excluding fuel) fell by 1.3% at constant Progress in 2011 currency with strong performances in ground – Strong growth in mainland Europe with seats flown Corporate responsibility handling, maintenance and disruption related costs up 18.6% – Process re-engineering to deliver cost optimisation – Valuable peak times slots obtained at London e.g. de-icing in Malpensa; ground handling contracts Gatwick, Paris Charles de Gaulle, Amsterdam – Implemented plans to increase proportion of lower – Clinical approach to reviewing route performance unit cost A320 in the fleet e.g. dropping Gothenburg from the network – Improvement in operational resilience. OTP improved – New capital allocation framework introduced by 13 percentage points to 79% focusing on return on capital metrics by route – £92 million of savings identified in 2012 which will – Supporting business traveller strategy partially offset inflationary increases and investment Passengers travelling on business in initiatives such as allocated seating easyJet’s goal is to drive additional contribution of £100 Governance million from passengers travelling on business through Market review delivering improvements in product and distribution The UK macroeconomic environment remains difficult, Progress in 2011 especially in the travel and tourism sector as the – Frequency increased on key business routes such as number of UK residents taking an overseas holiday Gatwick to Milan Malpensa up from four to five times over the three months to August 2011 fell by 4% a day compared to the same period in 2010. The competitive – Rollout of flexifare on easyJet.com environment remained tough with capacity increases in 2011. Against this backdrop easyJet performed well – Sales force starting to deliver, significant enterprise with total revenue per seat growth of mid single digits. contracts signed At London Gatwick easyJet significantly increased – Agreements reached with travel management frequency on many of the busiest business routes such companies as Madrid, Milan, Rome and Amsterdam. easyJet also Accounts & other information increased its market share at bases such as Bristol as – Key business to business deals negotiated with carriers such as Ryanair retreated, and in Glasgow after pipeline of corporate growth deals BMI withdrew services to Heathrow from the airport. – New commercial freedom in Global Distribution Despite the Euro-crisis German consumer confidence System (GDS) contracts remained positive. However, the introduction of APD in Germany in January 2011 has damaged profitability across all airlines operating in Germany. easyJet’s focus in 2011 has been on maintaining our market leadership on key city routes from Berlin with increased frequencies on routes to London Gatwick, Copenhagen, Basel and Barcelona. easyJet

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    14 easyJet plc Annual report Chief Executive’s introduction and accounts 2011 Continued Example only. Not a current offer. has gained share on routes to London, Milan and easyJet consolidated its position as the number two Madrid as competitors have retreated. Switzerland has airline in France and increased its capacity by 29% as it also seen a stable economic environment and easyJet’s continued with its strategy to build its position as the focus in 2011 has been on defending its leading position alternative airline to Air France in major French airports. at Basel and Geneva whilst increasing its focus on easyJet’s share of the French short-haul market is now passengers travelling on business. 12%. easyJet also announced that it intends to open bases in 2012 at Toulouse and Nice. easyJet already has Spain continues to be one of the most competitive a 20% market share at these airports. markets in Europe. In 2011 easyJet refocused capacity to enable the network to improve profitability and attract more passengers travelling on business. In Spain Looking forward to 2012 more than 60% of air travel is purchased in offline channels and consequently easyJet is implementing Hedging positions measures to improve its presence in these areas. easyJet operates under a clear set of treasury policies agreed by the Board. The aim of easyJet’s hedging Despite a difficult economic environment in Italy the policy is to reduce short-term earnings volatility. short-haul intra-European market remains buoyant Therefore easyJet hedges forward, on a rolling basis, easyJet grew capacity by around 11% as it built its between 65% and 85% of the next 12 months presence in selected key Italian markets of Milan, Rome, anticipated fuel and currency requirements and Naples and Venice. At Milan Malpensa easyJet further between 45% and 65% of the following 12 months consolidated its leading share as Lufthansa announced anticipated requirements. the closure of its base. Details of our current hedging arrangements are set out below: Percentage of anticipated requirement / surplus hedged Fuel requirement US dollar requirement Euro surplus sale Six months ending 31 March 2012 80% 80% 76% Rate/$ per MT $950 per MT $1.60 €1.13 Full year ending 30 September 2012 73% 69% 71% Rate/$ per MT $956 per MT $1.59 €1.13 Full year ending 30 September 2013 49% 46% 50% Rate/$ per MT $979 per MT $1.61 €1.14 Sensitivities in the first half of the year is planned to be flat – A $10 movement per metric tonne impacts the 2012 (adjusting for disruption in the first part of the prior fuel bill by $5 million year), with growth of around 4% for the full year. – A one cent movement in £/$ impacts the 2012 profit With around 45% of winter seats now sold, in line with before tax by £3 million the prior year, first half passenger revenue per seat is expected to grow by mid-single digits with planned Outlook improvement in yields, bag charges and other ancillary The macroeconomic environment remains challenging revenues. for all airlines as weak consumer confidence across Europe slows the rate at which higher fuel prices and Cost per seat excluding fuel and currency7 impact is increased taxation can be passed on to passengers. expected to grow by 2 to 3% for the full year and by Against this backdrop easyJet is taking a cautious 4% in the first half, assuming normal levels of disruption, approach to capacity deployment. As a result, capacity of the year driven by price increases at regulated airports and investments in new revenue streams.

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    15 Overview easyJet plc Annual report and accounts 2011 Business review Performance and risk At current fuel7 and exchange rates easyJet’s fuel bill is anticipated to increase by £220 million in 2012 compared to 2011. Despite the headwinds of higher fuel costs and a weak and uncertain economic outlook, our focus on customers, robust operational performance, the strength of easyJet's network combined with cost control and capital discipline means that easyJet is well placed to succeed. Note 7: Rates as at 14 November 2011: US$1.59/£, €1.17/£ and US$1,075 per metric tonne. Financial objectives and metrics Objectives Measures Return targets – Earn returns in excess of cost of capital – After tax ROCE of 12% through the cycle through the cycle – Improve profit before tax per seat to £5 – Invest in growth opportunities where returns are attractive Corporate responsibility Capital structure – Ensure robust capital structure – Maximum gearing of 50% (gearing meaning – Maintain sufficient liquidity to manage through debt plus seven times annual lease payments and liquidity less cash) divided by (shareholders’ equity plus the cycle and industry shocks debt plus seven times annual lease payments – Return excess capital to shareholders less cash) – Cap of £10 million adjusted net debt per aircraft Target £4 million cash per aircraft Dividend policy – Target consistent and continuous dividend – Five times cover, subject to meeting gearing payout and liquidity targets – Annual payment based on full year profits after tax; introduced for year ended 30 September 2011, payable 2012 Governance – Consider returns over five times cover to reduce excess capital Aircraft ownership – Maintain flexibility around fleet deployment – Target of 70% owned aircraft, 30% leased and size aircraft Fuel hedging – Insulate short-term operating performance – 65%–85% of the next 12 months’ anticipated against adverse movements in fuel price and requirements exchange rates – 45%–65% of the following 12 months’ anticipated requirements Accounts & other information Carolyn McCall OBE Chief Executive

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    16 easyJet plc Annual report and accounts 2011 Key performance indicators We monitor the performance of the business and performance against our strategic objectives using the following key performance indicators. Financial Revenue per seat Cost per seat excluding fuel (underlying) £ £ discipline We are committed to improving +4.1% Flat 2011 55.27 2011 36.62 shareholder returns whilst remaining 2010 53.07 2010 36.62 prudently financed with a strong, liquid 2009 50.47 2009 34.36 balance sheet. 2008 29.49 2007 26.55 Profit before tax (underlying) / per seat Return on capital employed £ ppt +17.9% +3.9ppt 2011 3.97 2011 12.7 2010 3.36 2010 8.8 2009 0.83 2009 3.6 2008 2.37 2008 7.3 2007 4.30 2007 11.7 Gearing Net cash ppt £ million -4ppt +£140m 2011 28 2011 100 2010 32 2010 -40 2009 38 2009 -46 2008 29 2008 236 2007 20 2007 393 Safe and Composite risk value (CRV) index sustainable 1.2 No compromise on safety 1.0 0.8 0.6 0.629 We will never 0.4 compromise our 0.2 commitment to 0.0 safety, which is always Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug the first priority for 08 08 09 09 09 09 09 09 10 10 10 10 10 10 11 11 11 11 all our people. Control carbon Fuel burn footprint (USG/BH) We control our fuel usage on our flights. 715 2011 715 2010 715 2009 715

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    17 Overview easyJet plc Annual report and accounts 2011 Business review Focus on Presence on top 100 routes Airports where we are Ranked by primary airport No.1 or No.2 airline customer Focused on network easyJet 49 2011 19 development BA/Iberia 41 2010 19 We are focused on improving our Lufthansa Group 40 2009 18 routes, slots and bases to build Air France-KLM 23 on our leading Alitalia 19 presence across Europe. Air Berlin – NIKI 15 Performance and risk SAS 14 Vuelling 13 Norwegian 15 Ryanair 42 Primary airports Non-primary airports Improving our Overall satisfaction on this occasion Likely to recommend customers’ experience % % We are focused on improving 2011 79 2011 82 the experience Corporate responsibility of travelling 2010 73 2010 80 with us for all 2009 85 2009 89 our passengers. Operational On time performance Bags shortshipped per thousand passengers % excellence We have built a 2011 79 2011 0.9 strong operation, 2010 66 2010 1.0 that delivers for our customers. 2009 80 2009 1.0 Governance Flights cancelled on the day* 2011 4,703 2010 15,976 *2010 figure includes 7,314 flights cancelled due to volcanic dust cloud 2009 1,102 Where Employee engagement (uSay) Staff turnover % % people make the 2011 40 2011 9.7 Accounts & other information difference 2010 35 2010 7.6 We are committed 2009 66 2009 6.9 to ensuring high employee Attendance engagement across % the business. 2011 96 2010 95 2009 95

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    18 OVERVIEW PERFORMANCE AND RISK Financial review 19 3 Introduction 19 3 Financial performance 22 3 Earnings per share 24 3 Cash flows and financial position 24 3 Going concern 25 3 Significant contracts and creditor policy 25 3 Principal risks and uncertainties 27 3 3

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    19 Overview easyJet plc Financial review Annual report and accounts 2011 Business review Performance and risk Introduction During 2011 easyJet continued to grow its network successfully with an increase in seats flown of 11.5%, principally in London Gatwick, France and Switzerland. £225m easyJet produces a strong Load factor was marginally higher at 87.3% and Profit after tax for 2011 passengers increased by 11.8% to 54.5 million. financial performance despite Total revenue grew by 16.1% to £3,452 million resulting £195m continuing pressures from the in growth of 4.1% in revenue per seat, driven by increases in ancillary revenue and maturing of capacity Proposed dividend macroeconomic environment. investments made in previous years. This was achieved despite a significant increase in passenger taxes, and continuing economic uncertainty across Europe. Excluding the impact of volcanic ash disruption and the Corporate responsibility loss on the sale of four A321 aircraft in 2010, profit 2011 2010 before tax increased by £60 million (£0.61 per seat) to £ per Pence £ per Pence £248 million. With the exception of external industrial £ million seat per ASK £ million seat per ASK action in the first quarter and a period of severe winter Total weather around Christmas, the business benefited revenue 3,452 55.27 4.98 2,973 53.07 4.72 from significantly lower levels of operational disruption Profit than last year, with on the day cancellations and before tax (underlying) 248 3.97 0.36 188 3.36 0.30 overnight delays reducing by 46%. Profit Return on capital employed increased by 3.9 before tax percentage points to 12.7%, driven by the improved (reported) 248 3.97 0.36 154 2.75 0.24 levels of profit. Gearing remains low at 28% and the Profit business had cash and money market deposits totalling after tax £1.4 billion at 30 September 2011. Governance (reported) 225 3.60 0.32 121 2.17 0.19 After taking into consideration the level of liquidity in the business, and contracted commitments to acquire further aircraft, the Board is proposing to pay an ordinary dividend of £45 million (10.5 pence per share) and a special dividend of £150 million (34.9 pence per share) and resolutions to this effect will be tabled at the Annual General Meeting in February next year. Chris Kennedy Profit before tax per seat Chief Financial Officer % 5.5 Accounts & other information 1.80 1.59 5.0 4.5 0.88 3.97 4.0 3.36 0.07 0.41 3.5 0.00 3.0 2010 Currency Revenue Fuel Crew Disruption Other 2011 PBT impact (inc costs PBT per (exc fuel) currency per seat impact) seat

  • Page 22

    20 easyJet plc Annual report Financial review and accounts 2011 Continued Operational measures 2011 2010 Change Seats flown (millions) 62.5 56.0 11.5% Passengers (millions) 54.5 48.8 11.8% Load factor 87.3% 87.0% +0.3ppt Available Seat Kilometres (ASK) (millions) 69,318 62,945 10.1% Revenue Passenger Kilometres (RPK) (millions) 61,347 56,128 9.3% Average sector length (kilometres) 1,110 1,123 (1.2)% Sectors 393,147 353,080 11.3% Block hours 761,708 689,316 10.5% Number of aircraft owned/leased at end of year 204 196 4.1% Average number of aircraft owned/leased during year 198.8 187.9 5.8% Number of aircraft operated at end of year 197 186 5.9% Average number of aircraft operated during year 185.4 174.9 6.0% Operated aircraft utilisation (hours per day) 11.3 10.8 4.2% Number of routes operated at end of year 547 509 7.5% Number of airports served at end of year 123 125 (1.6)% Financial measures 2011 2010 Change Return on equity 14.0% 8.6% +5.4ppt Return on capital employed 12.7% 8.8% +3.9ppt Underlying measures Profit before tax per seat (£) 3.97 3.36 17.9% Profit before tax per ASK (pence) 0.36 0.30 20.9% Revenue Revenue per seat (£) 55.27 53.07 4.1% Revenue per seat at constant currency (£) 54.87 53.07 3.4% Revenue per ASK (pence) 4.98 4.72 5.4% Revenue per ASK at constant currency (pence) 4.94 4.72 4.7% Costs Per seat measures Total cost per seat (£) 51.30 49.71 3.2% Total cost per seat excluding fuel (£) 36.62 36.62 Flat Total cost per seat excluding fuel at constant currency (£) 36.15 36.62 (1.3)% Operational cost per seat (£) 47.78 46.13 3.6% Operational cost per seat excluding fuel (£) 33.10 33.04 0.2% Operational cost per seat excluding fuel at constant currency (£) 32.75 33.04 (0.9)% Ownership cost per seat (£) 3.52 3.58 (1.6)% Per ASK measures Total cost per ASK (pence) 4.62 4.43 4.2% Total cost per ASK excluding fuel (pence) 3.30 3.26 1.2% Total cost per ASK excluding fuel at constant currency (pence) 3.26 3.26 Flat Operational cost per ASK (pence) 4.30 4.11 4.7% Operational cost per ASK excluding fuel (pence) 2.98 2.94 1.3% Operational cost per ASK excluding fuel at constant currency (pence) 2.95 2.94 0.3% Ownership cost per ASK (pence) 0.32 0.32 Flat

  • Page 23

    21 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk Total revenue Exchange rates 2011 currency split Capacity growth in the year of 6.5 million seats flown, around two-thirds was deployed in bases outside the A euro 44% UK, resulting in the following exposures to foreign A currency: B sterling 47% C C other (principally swiss franc) 9% Revenue Costs 2011 2010 2011 2010 Sterling 47% 48% 24% 27% Euro 44% 44% 35% 34% US dollar – – 35% 33% Other (principally Swiss franc) 9% 8% 6% 6% Corporate responsibility B Average exchange rates 2011 2010 Change Euro €1.15 €1.15 nil US dollar Total costs (sterling weaker) $1.61 $1.64 -1.8% 2011 currency split Swiss franc CHF CHF (sterling weaker) 1.45 1.64 -11.6% A euro 35% A B sterling 24% D Although a substantial proportion of both revenue and C US dollar 35% costs is denominated in euros, there was no change D other (principally year-on-year in the euro exchange rate, and hence no swiss franc) 6% impact on the reported result. The impact of changes Governance in the Swiss franc and US dollar were. Favourable / (adverse) Swiss franc US dollar Total B £ million £ million £ million C Revenue 24 – 24 Fuel – (17) (17) Costs excluding fuel (21) (8) (29) Total 3 (25) (22) Accounts & other information

  • Page 24

    22 easyJet plc Annual report Financial review and accounts 2011 Continued Financial performance Costs 2011 2010 Revenue Underlying £ per Pence £ per Pence 2011 2010 costs * £ million seat per ASK £ million seat per ASK £ per Pence £ per Pence Operating £ million seat per ASK £ million seat per ASK costs Passenger excluding revenue 2,733 43.75 3.94 2,402 42.87 3.81 fuel 2,067 33.10 2.98 1,852 33.04 2.94 Ancillary Fuel 917 14.68 1.32 733 13.09 1.17 revenue 719 11.52 1.04 571 10.20 0.91 Ownership Total costs 220 3.52 0.32 200 3.58 0.32 revenue 3,452 55.27 4.98 2,973 53.07 4.72 Total costs 3,204 51.30 4.62 2,785 49.71 4.43 Revenue per seat improved by 4.1% compared with last year reflecting a strong summer performance from the Total costs excluding UK and the steady maturing of significant capacity fuel 2,287 36.62 3.30 2,052 36.62 3.26 investments made in mainland Europe during the last few years. * Underlying measures exclude (in 2010) costs of £27 million relating to the volcanic ash cloud and a loss of £7 million on disposal of four Passenger revenue contributed 2% of this increase, A321 aircraft. There are no underlying adjustments made in 2011. held back by significant increases in APD, VAT and similar taxes levied on passengers. Overall these taxes, Total cost per seat increased by 3.2% to £51.30; driven by a further increase in UK APD and the however excluding fuel, cost per seat was flat at introduction of APD in Germany, increased by 19.8% £36.62, and down by 1.3% at constant currency. This to £6.26 per seat. result was driven by savings from renegotiation of key contracts with ground handlers and lower levels of We remain convinced that taxes of this nature are a operational disruption, offset by some significant price blunt instrument that does not achieve their stated increases at regulated airports and planned investment objective and will continue to press our case for such in crew standby levels. taxes to be levied on aircraft and not passengers. Operating costs excluding fuel Ancillary revenue grew strongly, up by 12.9% to £11.52 per 2011 2010 seat. This improvement was driven by the introduction Underlying £ per Pence £ per Pence of higher charges for hold baggage on longer sectors, costs * £ million seat per ASK £ million seat per ASK and revised speedy boarding and booking fees. Ground operations 923 14.79 1.33 805 14.36 1.28 Crew 407 6.51 0.58 336 6.00 0.53 Navigation 285 4.56 0.41 256 4.57 0.41 Maintenance 179 2.86 0.26 177 3.16 0.28 Selling and marketing 102 1.64 0.15 92 1.64 0.14 Other costs 171 2.74 0.25 186 3.31 0.30 2,067 33.10 2.98 1,852 33.04 2.94 Operating costs per seat excluding fuel increased by 0.2% to £33.10. At constant currency, operating costs per seat excluding fuel fell by 0.9% to £32.75 per seat. Ground operations cost per seat increased by 3.0% of which around half was due to changes in exchange rates. Good progress was made in renegotiating contracts with ground handlers and reducing the use of optional services at airports, however this was more than offset by price increases at regulated airports,

  • Page 25

    23 Overview easyJet plc Annual report and accounts 2011 Business review Performance and risk Fuel cost to $818 per tonne; in sterling terms an increase of £63 £ million to £508. Of the total increase in fuel costs of £184 292 million, £100 million (£1.59 per seat) is due to this 1,100 186 increase in fuel prices. 1,000 For the coming financial year we have hedged 73% of 917 our anticipated fuel requirements at $956 per tonne. 6 900 72 Ownership costs 800 2011 2010 733 Underlying £ per Pence £ per Pence costs * £ million seat per ASK £ million seat per ASK 700 Aircraft dry 600 leasing 109 1.75 0.16 102 1.82 0.16 2010 Volume Market Jet Foreign 2011 Corporate responsibility price hedging exchange Depreciation 83 1.33 0.12 72 1.29 0.12 hedging Amortisation 7 0.12 0.01 6 0.11 0.01 notably London Gatwick and the AENA airports in Interest receivable (9) (0.15) (0.01) (7) (0.13) (0.01) Spain. Successful delivery of easyJet’s strategy requires the use of more expensive, often regulated, primary Interest payable airports, and we will continue to develop more efficient and other ways of working to contain cost per seat in this area. financing Crew cost per seat increased by 8.6%, driven by charges 24 0.38 0.03 20 0.36 0.03 continued growth of crew based in mainland Europe Net and an overall increase in crew numbers of 19%. This exchange losses 6 0.09 0.01 7 0.13 0.01 increase in headcount allowed us to increase the 220 3.52 0.32 200 3.58 0.32 number of standby crews and made the operation more resilient during the summer, contributing to lower Governance Ownership costs declined slightly to £3.52 per seat; disruption costs and significant improvements in on continuing recent strong performance. This is particularly time performance and customer satisfaction. pleasing given that changes in average exchange rates Navigation costs were flat at £4.56 per seat despite increased total ownership cost per seat by £0.13. regulated cost increases averaging 2%. The benefits seen in recent years from the move away Continuing the improvement shown last year, from more expensive leased Boeing aircraft are now maintenance costs declined by 9.5% to £2.86 per seat, virtually all realised. The last two Boeing aircraft will be with further cost initiatives offsetting supplier price withdrawn from service and returned to their lessors increases. However the benefits seen in prior years during the first half of the coming year. We have from the reduction in the number of leased aircraft in therefore now reached the objective of a standardised the fleet have now run their course, and it is likely that fleet with two gauges of Airbus aircraft. Going forward cost savings will now level off. we will increase the proportion of A320 aircraft in the fleet which will deliver an overall reduction in Accounts & other information Other costs were down 17.2% at £2.74 per seat, mainly depreciation and aircraft dry leasing cost per seat. due to significantly reduced levels of operational disruption. Interest rates continue at historically low levels; while this adversely impacts interest income, we also benefit Fuel from lower interest payable and, to an extent, lower 2011 2010 lease payments as 20 aircraft are subject to floating Underlying £ per Pence £ per Pence rate lease arrangements. There is no immediate end in costs * £ million seat per ASK £ million seat per ASK Fuel 917 14.68 1.32 733 13.09 1.17 sight to this period of exceptionally low interest rates. Exchange losses arise from changes in the value of The market price for jet fuel rose sharply over the year. monetary assets and liabilities denominated in Our hedging activities shielded us from the full impact currencies other than sterling. of this rise and the average price paid increased by $86

  • Page 26

    24 easyJet plc Annual report Financial review and accounts 2011 Continued Earnings per share Cash flow £ million Profit after tax was £225 million (2010: £121 million) resulting in basic earnings per share of 52.5 pence 2,000 357 481 (2010: 28.4 pence), an increase of 84.9%. The tax charge was £23 million resulting in an effective tax rate 1,800 of 9% (2010: charge of £33 million and effective tax 84 91 1,600 90 rate of 21%. 269 1,400 45 150 The difference between the effective tax rate and 1,400 standard UK rate is principally driven by the reduction 1,172 1,205 in the UK deferred tax rate to 25% and the resolution 1,200 and reassessment of various tax matters following 2010* 2011* 1,000 Operating profit Depn & amort Working capital Other Financing Capex Proposed ordinary dividend Proposed special devidend 2011 proforma discussions with the UK and European tax authorities. Cash flows and financial position Summary consolidated statement of cash flows 2011 2010 Change Net loan and lease drawdown comprised proceeds £ million £ million £ million received from the sale and leaseback of 18 aircraft Net cash generated from operating activities 424 363 61 (three on finance leases), and the mortgage of nine Net capital expenditure * (478) (482) 4 aircraft, net of repayments on mortgages and finance Net loan and lease finance leases. drawdown 357 177 180 At 30 September 2011 easyJet had £1.4 billion of cash Net (increase) / decrease in and money market deposits. Board policy is to hold a money market deposits (38) 31 (69) cash reserve of £4 million per aircraft, so £584 million is Other including the effect of available to finance committed aircraft orders and pay exchange rates (77) 34 (111) the proposed ordinary and special dividends. Net increase in cash and cash equivalents 188 123 65 Summary consolidated statement of financial position Cash and cash equivalents 2011 2010 Change at beginning of year 912 789 123 £ million £ million £ million Cash and cash equivalents Goodwill 365 365 – at end of year 1,100 912 188 Property, plant and equipment 2,149 1,928 221 Money market deposits Net working capital (765) (590) (175) at end of year 300 260 40 Restricted cash 123 56 67 Cash and money market deposits Net cash / (debt) 100 (40) 140 at end of year 1,400 1,172 228 Current and deferred taxation (188) (176) (12) *stated net of disposal proceeds of £75 million in 2011. Other non-current assets and liabilities (79) (42) (37) In line with prior years, easyJet generated strong Net assets 1,705 1,501 204 operating cash flow in the year principally driven by growth in forward bookings and revenue per seat. Opening shareholders’ equity 1,501 1,307 194 Net capital expenditure principally comprises the Profit for the year 225 121 104 acquisition of 25 aircraft (13 A319 and 12 A320) and Change in hedging reserve (21) 59 (80) payments in connection with the new order for aircraft Other movements – 14 (14) announced in January 2011; net of proceeds received 1,705 1,501 204 for the disposal of the remaining four A321 aircraft acquired with GB Airways.

  • Page 27

    25 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk Net assets increased by £204 million over the year Going concern driven by the profit for the year offset by a small net change in the hedging reserve. easyJet’s business activities, together with factors likely to affect its future development and performance, are The net book value of property plant and equipment described in the business review on pages 8 to 17. increased by £221 million driven principally by the Principal risks and uncertainties are described on pages acquisition of a net ten owned A320 family aircraft, and 27 to 30. Note 22 to the accounts sets out the Group’s advance payments under the new aircraft order objectives, policies and procedures for managing its announced in January 2011. capital and gives details of the risks related to financial Net working capital improved by £175 million to a net instruments held by the Group. negative £765 million. Passengers pay for their flights in The Group holds cash and cash equivalents of £1.1 full when booking, therefore the key component of this billion as at 30 September 2011. Total debt of £1.3 billion balance is unearned revenue, which increased by £115 is free from financial covenants, with £155 million due Corporate responsibility million. The increase in restricted cash is connected for repayment in the year to 30 September 2012. with this increase due to contractual arrangements with certain card acquirers. The business is exposed to fluctuations in fuel prices and US dollar and euro exchange rates. The Group’s policy is to hedge between 65% and 85% of estimated 2011 2010 Change exposures 12 months in advance, and 45% and 65% of £ million £ million £ million estimated exposures from 13 up to 24 months in Cash and cash equivalents 1,100 912 188 advance. The Group was compliant with this policy at Money market deposits 300 260 40 the date of this Annual report and accounts. 1,400 1,172 218 After making enquiries, the Directors have a reasonable Bank loans (1,079) (1,057) (22) expectation that the Company and the Group will be Finance lease obligations (221) (155) (66) able to operate within the level of available facilities and cash for the foreseeable future. Accordingly, they Governance (1,300) (1,212) (88) continue to adopt the going concern basis in preparing Net cash / (debt) 100 (40) 140 the accounts. easyJet ends the year with £1,400 million in cash and money market deposits; an increase of £218 million Significant contracts and compared with 30 September 2010. Net borrowings creditor policy increased by £88 million. The majority of bank loans and finance leases and all money market deposits are Significant contracts denominated in US dollars and the sterling value of this easyJet operates a fleet constituted mainly of Airbus* net liability increased by £8 million during the year as a aircraft with two Boeings which will have left the fleet consequence of exchange rate changes. by 30 September 2012. Engines are provided by CFM International and the maintenance of the aircraft Net cash at 30 September 2011 were £100 million and engines is undertaken by SRT, Virgin Atlantic Accounts & other information compared with net debt of £40 million at 30 Engineering*, Aerotron*, GE, MTU, BF Goodrich and September 2010. Strong operating cash flow and the Lufthansa Technik. The major lessors of aircraft to increase in net assets delivered a reduction in gearing easyJet are Amentum Capital, AWAS*, GECAS*, of five percentage points to 28% at 30 September 2011. Nomura Babcock & Brown*, Royal Bank of Scotland*, Sumisho*, and Santander*. The major lenders to easyJet for aircraft purchase are Alliance & Leicester*, Bank of Tokyo-Mitsubishi*, BNP Paribas*, Calyon*, Commerz, HSH Nordbank*, KfW*, Natixis*, PK AirFinance*, Royal Bank of Scotland*, Sumitomo Mitsui Banking Corporation* and WestLB*.

  • Page 28

    26 easyJet plc Annual report Financial review and accounts 2011 Continued Our main insurers are Global, La Reunion, AXA, Canada Our main ancillary partners are Gate Gourmet, who Life, QBE and Houston Casualty Company Europe. provide our in-flight merchandise, Europcar, who provide car rental services, Hotelopia and Laterooms One of our biggest costs is fuel and our main suppliers who broker hotels, Low Cost Holidays who provide are Shell, Air BP, Exxon, Air Total and Q8. Our IT systems accommodation and transfers for easyJet Holidays include agreements with AIMS, who provide crew, and Alvia who, through the Mondial brand, provide aircraft and flight management control and operation travel insurance. software; SAVVIS who provide data centre hosting facilities and our data network; Lufthansa Systems who Our credit card acquirers are Elavon, Lloyds TSB, provide flight planning systems; SOPRA who develop Barclays Merchant Services and American Express. and support our reservations system and other areas Our payment service providers are CyberSource. of system development; AD OPT Technologies who The Company is regulated in the UK by the CAA and provide our pairings and roster optimiser; and Agresso easyJet Switzerland is regulated by FOCA. We have who provide our accounting system. important relationships with NATS and Eurocontrol in As at 30 September 2011 easyJet had 19 bases and relation to air traffic services. they were operated by: The main employee unions we deal with in the UK are BAA BALPA, UNITE and Prospect; in France they are SNPL Global Infrastructure Partners and UNAC/SNPNC/CFTC; in Spain they are SEPLA, AdP STAVLA and CCOO; in Italy IPA, FIT-CISL and FILT-CGIL; EuroAirport Basel-Mulhouse-Freiburg in Germany Ver.di; and in Switzerland SSP/VPOD. Manchester Airports Group We use contract pilots from Airline Recruitment and South West Airports Parc Aviation and flight simulation services from CAE. Abertis Peel Holdings We have a key relationship with easyGroup IP Licensing Aeroports de Lyon who own the easyJet brand, and with Sir Stelios Flughafen Berlin-Schoenefeld Haji-Ioannou through the Agreement Letter. Aeroporti Di Milano *These contracts contain provisions giving the other party the right to Newcastle Airport terminate if there is a change in control in easyJet. Geneva International Airport AENA Policy and practice on payment of creditors Aeroporti di Roma easyJet aims to have partnership agreements with suppliers, which stresses the importance of strong At these airports our ground handling was carried suppliers aligned to the success of easyJet as a out by: business. Many of our supply agreements are unique Menzies Aviation and tailored to the needs of the business, to make sure Servisair that suppliers are rewarded appropriately for delivering Group Europe Handling services which meet pre-agreed performance targets Aviapartner and align with easyJet’s own internal performance Swissport goals. Our practice is to: SEA Handling – Agree the terms of payment at the start of business Globeground Berlin with the supplier Swissport Menzies Gate Aviation – Ensure that those suppliers are made aware of the Aviation Service terms of the payments – Pay in accordance with contractual and other legal obligations At 30 September 2011, the number of creditors days outstanding for the Group was 8 days (2010: 6 days), and for the Company was nil days (2010: nil days).

  • Page 29

    27 Overview easyJet plc Annual report and accounts 2011 Business review Performance and risk Principal risks and uncertainties The risks and uncertainties described below are considered to have the most significant effect on easyJet’s business, financial results and prospects. This list is not intended to be exhaustive. easyJet carries out a detailed risk management process, to ensure that risks are identified and mitigated where possible, although many remain outside our full control, for example adverse weather, pandemics, acts of terrorism, changes in government regulation and macroeconomic issues. A more detailed overview of the risk management process and internal control can be found in our Corporate Governance section on pages 49 and 50. The trend line highlighted represents the prevailing inherent risk trend being faced by easyJet. Inherent risk is assessed prior to the determination of all current mitigation. Corporate responsibility Prevailing Strategic inherent impact Risk description and potential impact risk trend Current mitigation Major safety incident / accident Our number one priority is the safety of our customers and Failure to prevent a major safety incident or deal with it people. We operate a strong safety management system effectively. through: This could adversely affect our reputation, operational and – Fatigue Risk Management System financial performance. – Incident reporting NO COMPROMISE ON SAFETY – Safety Review Board p – Safety Action Group Management and control system for our operations. Weekly operations meetings and reporting. Regular review by the Board of Directors. We have response systems in place and provide training for crisis management; combined with full crisis management Governance exercises performed at least three times a year. Insurance is held which is believed to be in line with other airlines. Security and terrorist threat or attack Our number one priority is the safety, including security, of Failure to prevent a major security related threat or attack our customers and people. We operate a strong safety from either internal or external sources or deal with it management system as set out above. effectively. We constantly ensure that regulations required by relevant This could adversely affect our reputation, operation and financial performance. i governments are enforced. Crew are trained within the current guidelines. We have response systems in place and provide training for crisis management; combined with full crisis management exercises performed at least three times a year. Insurance is held which is believed to be in line with other airlines. Accounts & other information

  • Page 30

    28 easyJet plc Annual report Financial review and accounts 2011 Continued Prevailing Strategic inherent impact Risk description and potential impact risk trend Current mitigation Financial impact of mass disruption in peak seasonal Processes in place to adapt to widespread disruption. months A full crisis management exercise is performed at least A number of factors can lead to widespread disruption to three times a year and a business continuity programme our network, including epidemics / pandemics, forces of is in place. nature (extreme weather, volcanic ash, etc), acts of Significant analysis and senior management focus has terrorism, union activity and strike action. Any widespread disruption could adversely effect our reputation, operation and financial performance. If the widespread disruption occurred during our peak p resulted in additional crewing solutions being put into place to further recognise the external factors and volatility that impact the airline industry. easyJet has a strong financial balance sheet allowing the summer months then easyJet’s financial results would be Company to be in a strong position to withstand potential significantly impacted. As load factors are also higher events that result in periods of reduced revenues. during this period, it would potentially take longer to recover from any significant disruption. Single fleet risk The efficiencies achieved by operating a single fleet type easyJet is dependent on Airbus as its sole supplier are believed to outweigh the risks associated with the for aircraft, with two aircraft types (A319 and A320). Company’s single fleet strategy. All Boeing 737’s are planned to be exited by the end of 2012 A rigorous established maintenance programme is OPERATIONAL EXCELLENCE There are significant cost and efficiency advantages in a followed. single fleet, however there are two main associated risks: – Technical or mechanical issues that could ground the full fleet or part of the fleet which could cause negative perception by the flying public p Constant reviews of the second-hand market and managing exit strategies for the aircraft. easyJet has a number of different options when looking at exit strategies. – Valuation risks which crystallise on the ownership exit of the aircraft. The main exposure is with the A319 fleet, where we are reliant on the future demand for second-hand aircraft IT system failure A business continuity programme, including disaster easyJet is dependent on a number of key IT systems and recovery, is in place and will be further developed over the processes operated at London Luton airport and other key facilities. A loss of systems and access to facilities could lead to significant disruption and have an operational, reputational p coming year. This covers alternative sites being available should there be a need to relocate at short notice due to loss of facilities. and financial impact. Dependence on third-party service providers Processes are in place to manage third-party service easyJet has entered into agreements with third-party provider performance. service providers for services covering a significant Centralised procurement department that negotiates key proportion of its operation and cost base. Failure to adequately manage third-party performance would affect our reputation, operation and financial performance. Loss of these contracts, inability to renew or i contracts. Most developed markets have suitable alternative service providers. negotiate favourable replacement contracts could have a material adverse effect on future operating costs. Industrial action Employee and union engagement takes place on a regular Large parts of the easyJet workforce are unionised. Similar basis. issues exist at our key third-party service providers. If any action was taken this could impact on easyJet’s ability to maintain its flight schedule. This could adversely effect our reputation, operation and p Significant analysis and senior management focus has resulted in additional crewing solutions being put into place that recognises the external factors and volatility that impact the airline industry. financial performance.

  • Page 31

    29 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk Prevailing Strategic inherent impact Risk description and potential impact risk trend Current mitigation Competition and industry consolidation Regular monitoring of competitor activity and potential easyJet operates in competitive marketplaces against both impact of any consolidation activity. flag carriers and other low-cost airlines. Industry consolidation will affect the competitive environment in a number of markets. p Rapid response in anticipation of, and to, changes. EXTERNAL RISKS This could cause a loss of market share and erosion of revenue. Regulator intervention easyJet has a key role in influencing the future state of The airline industry is currently heavily regulated, with regulations. expected increased regulator intervention; this includes A Regulatory Affairs Group coordinates the work and effort environmental, security and airport regulation in which in this area. Corporate responsibility charges are levied by regulatory decision rather than by commercial negotiation. easyJet is exposed to various regulators across our network, which will increase as the Company grows geographically. This could have an adverse impact to our reputation, cost i base and market share. An inadequate knowledge or misinterpretation of local regulations could result in fines or enforcement orders. Major shareholder / investor relationship issues Dedicated Investor Relations team, utilising a shareholder easyJet has a major shareholder (easyGroup Holdings engagement programme. Limited) controlling over 25% of ordinary shares. Significant Board and Senior management time dedicated Shareholder activism could adversely impact the reputation of the Company and cause a distraction to management. easyJet does not own its company name or branding which is licensed from easyGroup IP Licensing. As for all brand i to engage with major shareholders. Governance licensees, the easyJet brand could be impacted through REPUTATIONAL RISKS actions of the easyGroup or other easyGroup licensees. Ineffective or non delivery of the business strategy Programme management office (PMO) and experienced A number of key projects have been set up to deliver key project teams have been set up to oversee delivery and elements of the strategy. If these projects do not deliver the benefits and cost savings planned we could fall short of our planned financial results. p track the budget and benefits realisation of all projects. Steering Group set up with full key senior management involvement to ensure monitoring, challenge and key decisions are being made at the appropriate level. Information security Systems are secured and monitored against unauthorised easyJet faces external and internal information security access; this will receive continued focus. risks. The Company receives most of its revenue through credit cards and operates as an e-commerce business. A security breach could result in a material adverse impact for the business and reputational damage. i Scanning software for fraudulent customer activity is monitored and controlled by the Revenue Protection team. Bribery Act 2010 easyJet has a strong ethical tone from the top. Accounts & other information The Bribery Act 2010 came into force in April 2011. To date Risks assessments have been completed and appropriate there are no precedents set in respect of how this will be enforced. As with all companies, if we were found to be in breach of the Act this could adversely affect us financially and reputationally. i actions taken where necessary. General awareness training has been provided, with additional targeted training given to higher risk groups.

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    30 easyJet plc Annual report Financial review and accounts 2011 Continued Example only. Not a current offer. Prevailing Strategic inherent impact Risk description and potential impact risk trend Current mitigation Missing optimisation opportunities for aircraft fleet and A Network Portfolio Management Strategy is in place which network portfolio looks to take a balanced approach to the route portfolio that END TO END CUSTOMER PROPOSITION easyJet has a leading presence on the top 100 routes in we fly to ensure that we optimise each aircraft to get the Europe and positions at primary airports that are attractive best return for each time of day, each day of the week. to time sensitive consumers. easyJet manages the Route performance is monitored on a regular basis and performance of its network by careful allocation of aircraft to routes and optimisation of its flying schedule. If we fail to continue to optimise our network and fleet plan this will have a major impact on easyJet’s ability to grow and s operating decisions are made to improve performances where required. gain the required yield. In addition, poor planning of the correct number of aircraft to fly the schedule would have a critical impact on the Company’s costs and reputation. Exposure to fuel price fluctuations and other Board approved hedging (jet fuel and currency) in place that macroeconomic shifts is consistently applied. Policy is to hedge within a percentage Sudden and significant increases in jet fuel price and band for rolling 24 month periods. movements in foreign exchange rates would significantly To provide protection, the Group uses a limited range of impact fuel and other costs. Increases in fuel costs have a hedging instruments traded in the over the counter (OTC) direct impact on the financial performance of the Company. If not mitigated, this could have a material adverse effect on financial performance. easyJet’s business can also be affected by macroeconomic i markets, principally forward purchases, with a number of approved counterparties. A strong balance sheet supports business through fluctuations in the economic conditions for the sector. issues outside of its control such as weakening consumer Regular monitoring of markets and route performance by confidence, inflationary pressure or instability of the euro. our network and fleet management teams. This could give rise to adverse pressure on revenue, load factors and residual values of aircraft. Financing and interest rate risk Group interest rate management policy aims to provide All of the Group’s debt is asset related, reflecting the capital certainty in a proportion of its financing. intensive nature of the airline industry. Operating lease rentals are a mix of fixed and floating rates Market conditions could change the cost of finance which p (currently 68% to 32%). FINANCIAL DISCIPLINE may have an adverse effect on the financial performance. All on balance sheet debt floating rate, repriced up to six months. None of the agreements contain financial covenants. A portion of US dollar mortgage debt is matched with US dollar money market deposits. Liquidity risk Board policy is to maintain an absolute minimum level of free The Group continues to hold significant cash or liquid funds cash and money market deposits. as a form of insurance. Lack of sufficient liquid funds could result in business disruption and have a material adverse effect on financial performance. p Allows business to ride out downturns in business or temporary curtailment of activities (e.g. fleet grounding, security incident, extended industrial dispute at key supplier). Credit risk Cash is placed on deposit with institutions based upon credit Surplus funds are invested in high quality short-term liquid instruments, usually money market funds or bank deposits. Possibility of material loss arising in the event of non- performance of counterparties. i rating with a maximum exposure of £100 million for AAA ratings. Chris Kennedy Chief Financial Officer

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    Overview Business review Performance and risk Corporate responsibility Governance Accounts & other information 31 3 3 3 3 36 32 32 33 RESPONSIBILITY CORPORATE EW OVERVI 4 Environment Introduction People Safety

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    32 easyJet plc Annual report and accounts 2011 Corporate responsibility At easyJet we view ourselves as a responsible Safety first and foremost European airline. We want to achieve our ambition of becoming Europe’s preferred short-haul airline and in The safety of our customers and staff is easyJet’s order to do so we are always looking at safer, more number one priority; it remains a core part of our DNA. sustainable and innovative ways of running things, but From all across the business, the boardroom to the place just as much importance on nurturing the flight deck and the check-in desk to the maintenance well-being and happiness of our people. As we bay, safety informs everything we do and is the starting continue along the path of Turning Europe Orange point for every decision, at all times. there is no substitute to having a responsible approach. The evolution of our open and just culture continues We know that that our success is inextricably linked to with easyJet being at the forefront of promoting open the well-being of our customers, our people and the reporting of all safety-related incidents, no matter how communities in which we operate and work. minor they may appear at first glance. At easyJet, we Our foremost responsibility is towards the safety of all aim to maintain processes and structures to monitor of our people, from our customers through to our hard and manage safety related risk throughout the working staff both on the ground and onboard our business. aircraft. This is core to the business and something we Our Chief Executive Officer, Carolyn McCall, and communicate on at all times to all our partners and Director of Group Operations, Warwick Brady, are stakeholders, be they European governments, responsible for all aspects of safety delivery, including regulators, or other stakeholders central to our business our compliance obligations under the Air Operator’s operations and commercial success. Certificate (AOC). The Accountable Safety Executive is But it is the strength of our people which above all Carolyn McCall and she chairs our Safety Review Board others marks us apart. Their passion, expertise and which meets monthly to assess reports from the Safety commitment is at the heart of what we do. Over the Action Groups across the business. This review and past year we have continued to build up connection assessment process delivers monthly reports to both with our people. We’re evolving and changing the way the UK Civil Aviation Authority (UK CAA) and the we communicate to them all across our European easyJet Board. In addition to our internal safety and operations. In turn, our long-term performance and compliance oversight regime, our Director of Safety sustainability are dependent upon their understanding, and Security, Captain David Prior delivers an goodwill and active support so that they continue to independent safety report to the Board each month improve the experience for our customer. which underlines how serious this issue is for our Board. Safety is taken very seriously by the Board right down We believe in the positive contribution flying brings to to regular day-to-day communication. The Board even Europe, particularly during these difficult economic has direct phone line through to our Director of Safety. times, and is central to many Europeans’ businesses and way of life. At easyJet we are rightly pursuing our Any reported safety-related incidents are assessed and ambitious path towards minimising our environmental categorised, with risk values assigned and aggregated footprint both in the air and on the ground. This is to form our Composite Risk Value (CRV) index. During central to the ongoing success and sustainable the year, the index showed a steady improvement, development of the business. Operating across an continuing a long-term trend reducing risk to well within increasingly environmentally conscious Europe, we can the assigned boundary level. justly lay claim to having one of the youngest and most fuel-efficient fleets around. We are proud of this, and proud of our role in helping shape a greener future for European aviation. There is little doubt that by continuing to act in a responsible manner this will help us to achieve our ambition of becoming Europe’s preferred short haul airline by making travel easy and affordable and generating market leading returns.

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    33 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk The Safety Management System (SMS) launched in easyJet has since become the first airline to start trials 2009 has continued to extend its influence across the organisation to ensure that the highest standards of of the AVOID. 8,288 The safety of our passengers once they have left the Number of people safety risk management and oversight are embedded across easyJet network aircraft is also important to us. Last year easyJet in everything that we do. We have now successfully worked with the EU to help raise awareness of the embedded the concept of Operational Readiness and this process now applies to all our major operational initiatives such as the ground de-icing programme. pan-European emergency number 112. Several activities were carried out including onboard announcements 5,000 and a permanent mention in the in flight magazine. Number of Spirit During 2011 we configured a number of SMS tools and recognitions in first four All of this to help our millions of customers feel safer months since launch carried out a range of activities. We are in the process on their European travels. of integrating our bespoke safety data system into our operations. easyJet has developed the capability to Connecting with our customer is also core to the generate risk based safety oversight through the use of easyJet strategy. The past year has seen a raft of Corporate responsibility intelligent systems. These new initiatives will deliver innovations introduced across the business to improve further cost efficiencies whilst maintaining high levels the communication with the customer, from new of safety. website information tools, an improved booking process, an expanded customer experience team. As an acknowledged leader in the field of Fatigue Risk Throughout the disruptions, be it the bad winter, the Management Systems (FRMS) easyJet continues political and industrial unrest, and the latest Icelandic to work with other world class entities to ensure eruption, we have been there for our customer maximum benefit is gained in terms of cost efficiencies throughout. We spent the year introducing a raft of and crew utilisation. In 2012 we will see FRMS linked as new measures to help better deal with disruption, an integral part of the operations team. In this position including leaflets, improved accommodation and the system will be well placed to deliver Quality catering support, and more efficient communication Assurance of roster delivery whilst maintaining strict tools. Throughout these events we also added rescue regulatory compliance. flights to our schedule to ensure that our customers Governance easyJet is working closely with UK, EU and European reached their destinations as soon as possible. governments and agencies to ensure there is a Finally at easyJet we take the welfare of our coordinated response to any future large scale air passengers extremely seriously whatever their needs traffic disruption caused by volcanic activity or weather and disabilities. In 2010/2011 we carried over 350,000 events. During this year’s Icelandic volcanic eruption passengers with reduced mobility from across Europe easyJet worked closely with the British authorities to and have worked closely with European disability provide advice on the whereabouts of the latest ash groups across various countries to improve our service cloud. easyJet has since been appointed as one of the offering for this group of travellers, but without Government’s strategic partners on this issue. compromising our safety. easyJet has also taken part in several international exercises simulating the effects of large scale volcanic eruptions. In parallel continued work alongside the Connecting with our people Accounts & other information Norwegian Institute for Air Research, to support the Our people make the difference, across all areas of our development of the innovative on board ash detection team, from cabin crew and pilots through to our radar AVOID, invented by Dr Fred Prata. AVOID engineering teams and management and admin (Airborne Volcanic Object Identifier and Detector) teams. Our focus is to attract the right person technology is a system which uses infrared technology regardless of level within the business, and to keep built on the aircraft, similar to weather detectors them engaged in making travel easy and affordable for currently used, to enable pilots and flight control to see our passengers. an ash cloud up to 100km ahead and at altitudes between 5,000ft and 50,000ft, and to amend their We also look for ways to operate more efficiently course to miss areas of ash cloud, and in effect open across all areas of the business to provide the best up a larger area of airspace than might be available returns for our shareholders whilst maintaining the level using existing data methods alone. of service and satisfaction among our people to provide a quality service to our customers.

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    34 easyJet plc Annual report Corporate responsibility and accounts 2011 Continued 2011 saw a lot of work on ensuring a stable and efficient In addition to this and to ensure that our people remain crew planning and rostering approach to ensure that at their highest level and support their progression, this we could operate effectively through our busiest past year we have provided training at our bespoke summer months. We increased standby across the easyJet training Academy to ensure our crews are all network, resourced at a base level and not a network up-to-date on the latest industry developments. level as in previous years and worked on the resource planning and the rostering robustness. Given this Engagement summer’s results, this has all been to good effect. Recognising that there are proven links between an engaged workforce and excellence in customer service People strategy and business delivery, we have continued to focus on We have continued to implement our three-part the engagement of our people. strategy to find and retain the best people to deliver We have focused on making it easy for our people to our ambition of becoming Europe’s short-haul airline of do their work and listened to their ideas and feedback choice with market leading returns. through various communication channels, including a Talent weekly CEO call, EMT base visits across the European During the year we added to our existing talent pool by network, and web chats and videos directly to our recruiting some 1,371 cabin crew, 395 new pilots and people. 228 management and administrative staff. We understand that good communication is vital within Following the appointment of the new CEO towards a business – especially one which has such an the end of the last financial year, we have grown and extensive and multinational staff base – to ensuring developed our Executive Management Team (EMT), that key issues and matters are discussed with staff with a new structure focused on building capability so that we can react quickly and ensure our people across Europe, developing our business traveller remain engaged in the business. Communication is a proposition and focusing on the customer. This resulted two way task, enabling us to both listen to our peoples’ in new roles for some of the existing EMT members views and disseminate messages to them, but also and the appointment of a new Group Director IT, respond to their concerns. Group Director Marketing, Group Director Our flat management structure enables us to pass Communications, Group Director People and Group messages across the team, directly to our people. Director Europe. In support of our strategy to become In addition, through our company intranet, our people Europe’s preferred short-haul airline, we have appointed have an opportunity to use the various forums to Senior roles in each of our European countries to help highlight and discuss issues that affect them, and to us drive the implementation of our strategy and raise issues. maximise our potential in each of these countries. More formally, we communicate and discuss matters This year we have also made three new Non Executive with our employee representatives and partner a appointments to our PLC Board. number of trade unions across Europe, ensuring two We have spent time building our leadership teams and way communication across these partnerships. capability, ensuring that our leaders understand the All of our locations have funds allocated for the local evolving strategy, the associated business challenges groups to support local engagement initiatives at base. and their roles in leading and engaging their teams to deliver on this. We have also begun a new redevelopment programme of our main base crew rooms, including And the talent development doesn’t only stop at the the construction of new offices and rest facilities at top. As part of our plans to build a talent pool for the specified locations. As a part of this we have been future, 17 graduates from across Europe have been engaging with our people to ensure that the design recruited this year and a new graduate programme and refurbishment are reflective of what works well for introduced. As a result we plan to have introduced our teams locally, as well as meeting the needs of the approximately 100 highly capable graduates into our business going forward. management pipeline within the next five years.

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    35 Overview easyJet plc Annual report and accounts 2011 Business review Performance and risk uSay Turning Europe Orange For the second year running, we have conducted our Following the growth of our network, we continue to uSay staff survey, aimed at obtaining employee grow our presence across Europe to continue to feedback from everyone across our European strengthen our position as Europe’s only truly pan- organisation as well as each of our main communities. European air transport network. In 2011 our overall score has improved to 40%. We will be using the results to identify improvement areas and As at 30 September 2011, easyJet employed 8,288 action on suggestions. people (2010: 7,359), based throughout Europe as illustrated below; Organisation To succeed in our corporate ambitions, we need to have high quality people with the right skills in the right United Kingdom 5,116 place at the right time. Our aim is to ensure that our Switzerland 666 Corporate responsibility people contribute more to our business than they France 774 would for any other employer. We aim to ensure that Spain 614 we continue to recruit the best people in the roles and Italy 797 keep these people engaged in the business so that we Germany 320 can achieve these objectives. Netherlands 1 Total 8,288 Following our strategic review we reshaped the organisation around a few key principles: Equality and diversity – the customer is at the centre of all that we do; align easyJet is an equal opportunities employer. We ensure the structure around our product delivery, ensuring that our people and applicants do not receive less robust tracking systems monitor and advise on that favourable treatment on the basis of their age, colour, needs to be achieved, ensuring clear accountability, creed, disability, full or part-time status, gender, marital roles and responsibilities for our fundamental status, nationality or ethnic origin, race, religion or sexual Governance processes, putting in place simplified structures and orientation. Applications from disabled people are processes to facilitate good coordination securing always fully considered, bearing in mind the aptitudes the right people in the right places and improving of the applicant concerned. In the event that one of tools and processes across the organisation our people becomes disabled every effort is made to ensure that their employment at easyJet continues and This year we have looked to improve all our recruitment training is arranged where appropriate. programmes, placing emphasis on the candidate experience and the assessment tools we use so that We are pleased to report that our gender ratio across we attract and retain the best. the organisation is 51:49 (male : female) and in the last year we have increased our female representation on We have also begun a programme of investment in the both the PLC Board and the EMT. relationships we have with our people forums, such that we can have more of a partnership dialogue about Reward what is best for easyJet and our people. In addition we easyJet offers a competitive rewards package and Accounts & other information are establishing a European Works Council which is reviews salaries annually in line with market rates to currently at the stage of electing appropriate ensure continued alignment to the market. The representatives across all countries. rewards package includes an annual performance- As with all businesses there are levels of staff attrition driven bonus, based on personal and Company that will occur and in 2011 our overall unforced staff performance, which encourages all our people to turnover was 9.69%, which was a slight increase contribute towards achieving our strategic objectives. on 2010. Our UK people are also eligible to participate in a Group personal pension towards which easyJet contributes to, as well as having the option to make their own contributions through salary sacrifice.

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    36 easyJet plc Annual report Corporate responsibility and accounts 2011 Continued Share schemes Charitable donations We once again offered all our people the opportunity easyJet has continued to support the Alzheimer’s to join its popular all-employee share plan, easyJet Society as its European charity partner. Through Shares 4 Me. The plan has won five major awards to onboard collections we have managed to raise over date, and involves three elements: Save As You Earn £800,000 for this charity. (SAYE); Buy As You Earn (BAYE) and Free Shares. Each Our charitable support also focuses on our employees scheme is Her Majesty’s Revenue & Customs (HMRC) and their efforts to raise funds for local charities across approved and is open to all our people on the UK our pan-European bases. This has involved raising payroll. For our people who are on non-UK payrolls, funds for a number of different charities and has seen international schemes have been established, with our staff undertake numerous activities including, the similar terms and conditions to the UK scheme, albeit London and Paris marathons, and the Three Peaks without the UK tax benefits. Participation in the challenge to name a few. scheme remains very strong, with over 80% of our eligible people taking part in one or more of the plans. Political donations easyJet does not make donations to any political party. Your benefits This in not in line with our values and would be deemed Our UK people continued to be entitled to select from as inappropriate. a number of flexible benefits. This enables our people to access programmes and savings which would not Gifts and gratuities be available to them on an individual basis. A “lifestyle easyJet employees are sometimes sent gifts from benefits” scheme also remained in the year offering various companies throughout the year. In order to discounts on a wide range of products and services. provide clear guidance to employees and avoid Our people make further savings in tax and National potential conflicts of interest, we have a strict policy Insurance for many of these benefits, through salary that prevents any employee accepting gifts over a sacrifice. easyJet’s National Insurance savings nominal value of £35. When required, easyJet holds a contribute to the financing of the scheme, which is fully staff raffle of all the gifts that are received. Every outsourced. employee across Europe is entered into the draw and allocated a unique reference number. Numbers are easyJet Spirit Awards then drawn at random and winners have the gifts sent In 2010 we launched a new employee awards scheme; directly to their home. Spirit. This scheme rewards our people for their commitment and hard work, and recognises where our people go above and beyond to enable our business to easyJet and the environment succeed. During the course of the year, we have Efficiency is in our DNA and this applies to our monthly, quarterly and annual recognising achievement environmental impact as well. We believe the most across the different communities within our business. important environmental issue facing the industry is This year we also launched the easyJet Spirit Awards climate change and addressing our environmental Portal, a section of our intranet where employees can impact is part of our responsibility as an airline. As an recognise each other, and nominate their colleagues airline easyJet is constrained in what it can do in the for Spirit Awards. This has been really well received with area of CSR as we are heavily constrained by the more than 5,000 nominations for Spirit Awards during technology available to us, the development of which the first four months, representing an over 500% is a highly regulated and lengthy process. increase on the number of our people formally Fuel is our largest single cost item, so we are heavily recognised during the previous year. We will be holding incentivised to minimise its use and therefore CO2 our second annual awards event in February 2012. emissions As we grow we are replacing less efficient operators and therefore reducing emissions on routes where we are replacing capacity.

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    37 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk Environment Progress over time and environmental data The aim of our business is to be as efficient as we can – Over the last ten years easyJet has successfully be – this applies to our environmental impact as well. improved our CO2 efficiency every single year. Our environmental policy is governed by three However, this year our CO2 efficiency declined promises: slightly. This is due to a number of factors including shorter sector lengths, increased fuel burn in the first – To be efficient in the air half of the year due to winter weather and disruption. – To be efficient on the ground Emissions per passenger km (the standard industry measure of efficiency) increased in 2011 to 84.6g/km – To lead the move to more efficient flying from 84.4g/km in 2010. Emissions per passenger We have also focused on ensuring the industry plays its journey also increased, rising from 82.3 kg per sector role in tackling climate change. Our next financial year to 84.6 kg. We redoubled our efforts to improve fuel is an important one for aviation and the environment as efficiency in the second half of the year and this will Corporate responsibility it will encompass the first year aviation will play a full continue to be a significant focus in 2012 role in the European Union's Emission Trading System (ETS), ensuring that aviation emissions are part of Aviation and the environment Europes efforts to tackle climate change. Aviation has three main environmental impacts: To significantly reduce our environmental impact On climate change further will require technological change across the Aviation contributes to climate change through both industry, so our environment policy focuses on these the direct emission of CO2 from fuel burn, and due to long-term gains. other non-CO2 effects from the emission of Nitrogen Oxides (NOx), particles and aerosols and cloud CO2/passenger Km formation. The science surrounding the impact of g aviation’s CO2 emissions is very well developed, while the science surrounding non-CO2 effects remains +0.2ppt uncertain. It is clear however that the long-lasting 2011 84.60 impact is from CO2 emissions. Governance On local air quality 2010 84.40 Local air quality impacts arise from NOx emissions 2009 87.30 during aircraft take-offs and landings. We have upgraded 40% of our engines with the tech insertion 2008 90.31 upgrade. This reduces emissions but also reduces NOx 2007 95.56 emissions by 10%. These engines are the best in class and help minimise our impact on local air quality. 2006 95.70 On noise levels 2005 98.80 Aircraft noise clearly has an impact on residents around 2004 104.50 airports. easyJet complies with local rules that govern Accounts & other information noise at airports (such as curfews and routeings to 2003 110.00 avoid built up areas). Our aircraft meet the tightest 2002 106.90 international noise standards [ICAO chapter 4]. Our focus on improving the efficiency of our flying has also 2001 112.50 reduced our noise impact; by changing the flap settings used for landings we have both improved fuel efficiency and reduced noise levels at landing.

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    38 easyJet plc Annual report Corporate responsibility and accounts 2011 Continued We believe the most significant environmental impact Delivering our environmental promises is on climate change. This is the dominant global Our promises revolve around actions we can take in environmental issue, and it also is of long-term strategic the short term to directly improve the environmental importance to the airline industry. We have therefore efficiency of our business, and at the same time focused our reporting and public policy work on this working to deliver a sustainable long-term outcome issue. for the industry. The latter involves changing the framework within which the industry operates to Why the environment matters ensure it delivers sustainable outcomes. Addressing our environmental impact is clearly part of our responsibility as an airline. However, it is also a Governance business imperative. Environmental concerns have a Many people within easyJet help deliver our significant impact on public policy towards aviation, environmental aims. Oversight of our environment from restrictions on airport expansion to passenger policy is carried out by a manager in our regulatory taxes. It is therefore in our own interest to ensure that team, and the EMT receives regular updates on both we and the wider industry properly address environmental policy as part of our reporting on environmental concerns. This is why we have focused regulatory issues. on considering public policy solutions to the challenges the industry faces. easyJet’s actions Long-term sustainability of the industry How we fly our aircraft has an effect on the Aviation emissions have increased steadily over time, environment and finding new innovative ways of doing despite significant improvement in environmental so continues to drive us. efficiency – the growth in air traffic has outweighed the efficiency gains. Over the last ten years global We are continually working to improve the aviation traffic has grown by over 5% a year, while environmental impact of our current operations, efficiency gains have been about 2%. This has led to by increasing fuel efficiency. We have a fuel efficiency concerns that aviation emissions will continue to grow programme which is continually monitored, with new into the future, and that this will be inconsistent with measures being regularly implemented. While some of the overall reductions in greenhouse gas emissions these measures save relatively small amounts of CO2 that are needed to limit the impact of climate change. per flight, as we have an average of over 1,000 flights a This is clearly unsustainable and needs to change day the total savings can be very large. going forward. Examples of fuel efficiency programmes are: We believe that the main environmental key challenge facing the industry is to ensure that emissions are put – Ground power usage on a downwards path. There is a real risk that if the We have instituted a policy of using ground based industry does not achieve this on its own, it will have power where possible (rather than the Auxiliary Power growth constraints placed on it. We have already seen Unit on the aircraft); this is considerably more efficient. suggestions of this in the UK, where the Committee This saves 13 kg of CO2 per turnaround, and in total we on Climate in its December 2009 report on aviation have saved 44,000 tonnes of CO2 over the year based emissions suggested the growth of the industry would on current usage levels. need to be limited to 60% over the next 40 years to control UK emissions. – Landing lights To ensure the industry does not face any artificial We have lowered the height at which the landing lights constraints we need to significantly improve the are lowered on landing (reducing drag). This saves efficiency of flying, through step-changes in 150 grams of CO2 per flight, and 550 tonnes of CO2 technology, and the right incentives to ensure that per year. airlines and passengers fly as efficiently as possible. – One engine taxi on departure

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    39 Overview easyJet plc Annual report and accounts 2011 Business review Example only. Not a current offer. Performance and risk We now use a single engine to taxi the aircraft before – Aviation in ETS departure at airports where it is possible to do this. This Aviation entered the EU Emissions Trading Scheme (EU saves 7.9 kg of CO2 per departure, and across the ETS) in 2010, and airlines will have to surrender permits network we have saved 1,380 tonnes of CO2 in the year in 2013 to cover their 2012 emissions. We were a strong based on current usage. supporter of aviation’s entry and we continue to believe New technologies and design that this is the best way to ensure aviation makes its fair In 2011 we were the first commercial airline to trial a contribution to tackling climate change. revolutionary nano-technology coating on our aircraft – Ensuring any taxes support environmental objectives aimed at reducing drag and increasing fuel efficiency. We are also regularly looking at ways to reduce weight We do not support the imposition of aviation specific onboard and are currently looking at lighter seats in taxes. However, where they are in place (such as the the cabin. UK) we believe they must be designed to provide incentives for more environmentally efficient flying. Corporate responsibility Entry into ETS This means the tax base must be flights, not passengers. Aviation entered ETS in 2010. In 2010 we were required to report our CO2 emissions and the Revenue Tonne – Minimum standards for aircraft Kilometres flown by easyJet. In 2012 we will be required International minimum standards are needed to drive to surrender permits to cover CO2 emissions. ETS the development of new technology aircraft. compliance is overseen by our finance team. We have put in place the appropriate mechanisms to monitor and report the required data and to manage our exposure to the carbon market. Changing the industry framework Achieving step change in the environmental efficiency of aviation will require significant progress in the Governance development of next-generation aircraft. Without significant improvements in fuel efficiency it will not be possible to increase the rate of environmental efficiency improvement. While we have seen some progress in the short-haul market, with the development of the Airbus A320 NEO and Boeing B737 MAX, we remain concerned that the current effective duopoly in the production of large commercial aircraft is restricting the development of next-generation aircraft. There has been limited progress on the development of a next-generation short-haul aircraft and it is clear that it will be many Accounts & other information years before there is a new short-haul aircraft. We are continuing to push the manufacturers to develop a next-generation short-haul aircraft. It is also vital that the policy framework set out by governments supports the objective of increasing the environmental efficiency of aviation. We believe there are three parts to this, only one of which is in place.

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    40 GOVERNANCE Chairman’s introduction 41 3 Board of directors 42 3 Executive management team 44 3 Corporate governance 46 3 Shareholder information 51 3 Report on Directors’ remuneration 52 3 Statement of Directors’ responsibilities 62 3 5

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    41 Overview easyJet plc Chairman’s introduction Annual report and accounts 2011 Business review easyJet welcomes the introduction of the UK have strengthened the Board in the areas of finance Corporate Governance Code 2010 (“the Code”), which and risk management and have added to the balance has applied to the Company from 1 October 2010. of experience and skills on the Board. The diversity of The Code gives me the opportunity to set out how, as opinions, perspectives and insights given by the Non Chairman, I have been fulfilling my responsibility for Executives with their variety of backgrounds and leadership and effectiveness of the Board. experience has inevitably benefitted the Executive Management Team through the feedback gained from In October 2010, easyJet signed an amended brand having members of the management team attending licence with easyGroup IP Holdings Limited and a letter Board meetings. of agreement with the Company’s founder, Sir Stelios Haji-Ioannou. This has given us greater certainty and I am satisfied that the members of the Board, in freedom to pursue the Company’s strategy which was particular the Non Executive Directors, have sufficient explained to our stakeholders in November by our time to undertake their roles at Board and Committee Chief Executive Officer, Carolyn McCall. At the same level with the Company, so as to be able to discharge Performance and risk time the Relationship Agreement was terminated their responsibilities effectively which meant that easyGroup Holdings and Sir Stelios The Company has carried out an in-depth review of no longer had the right to appoint two directors and Sir the quality and quantity of information provided to Stelios no longer had the right to be chairman of the Board and, following input from all of the Directors, easyJet. is now providing information in an updated format. This The strategy presented in November has been further ensures a regular supply of tailored information allowing rigorously reviewed and challenged by the Board, in the Directors to assess the performance of the June 2011 we had a two day session devoted to Company in the most efficient and effective manner. debating and refining the strategy. The Board has appointed Lintstock to assist with an The Board also undertook a two day visit to easyJet’s external evaluation of the Board’s effectiveness to be largest base at Gatwick which included a detailed carried out over the next few months and we expect tour of the operations to assist the Non Executives’ that such an external review will be carried out every Corporate responsibility understanding of the day-to-day operational issues three years. Between these external reviews, we will facing the Company. This was in addition to the use an external evaluation tool to carry out annual introduction of an enhanced induction programme for Board performance review. our new non executive directors during the course of At our AGM in February 2011, we put all of our Directors the year. up for re-election in compliance with the Code and There have been a number of changes to the Board anticipate continuing to put all Directors up for during the year with the addition of three new Non re-election annually. Executive Directors and the resignation of Sir David During the year the UK Bribery Act came into effect Michels and Sven Boinet. Further details of the and the Board has overseen a review of its appointments are described in the section on the requirements to ensure that the Company is well Nominations Committee. The additions to the Board placed to adhere to it in full. Governance Sir Michael Rake Non Executive Chairman Accounts & other information

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    42 easyJet plc Annual report and accounts 2011 Board of Directors Sir Michael Rake Michael (1948) was appointed to the Board of easyJet as Deputy Chairman Non Executive Chairman (1948) on 1 June 2009 and became Chairman on 1 January 2010. He is Chairman of BT Group plc, as well as a Non Executive Director of Barclays PLC, McGraw Hill Inc and the Financial Reporting Council. He is also Chairman of the private equity oversight group; the Guidelines Monitoring Committee. From May 2002 to September 2007, Michael was Chairman of KPMG International. Prior to his appointment as Chairman of KPMG International he was Chairman of KPMG Europe and Senior Partner of KPMG in the UK. Michael is a Governor of Wellington College, a Board member of Guards Polo Club and is a member of the Prime Minister’s Business Advisory Group. Charles Gurassa Charles (1956) was appointed to the Board of easyJet as Independent Non Non Executive Deputy Chairman and Executive Director on 27 June 2011 and became Deputy Chairman and Senior Independent Director (1956) Senior Independent Director on 1 September 2011. He is currently Non Executive Chairman of Tragus, MACH, Parthenon Entertainment and Genesis Housing Association. His career has been primarily in the travel, tourism and leisure industries in a number of senior positions including Chief Executive of Thomson Travel Group Plc, Executive Chairman TUI Northern Europe and Director Passenger and Cargo at British Airways. Previously he was Non Executive Chairman of LOVEFiLM, Phones4U, Virgin Mobile plc, Alamo/National Rent a Car, 7Days and has been a Senior Independent Director of Merlin Entertainments, a Non Executive Director at Whitbread plc and an advisory Board member of Alpitour. Carolyn McCall OBE Carolyn (1961) joined easyJet on 1 July 2010 as Chief Executive and was Chief Executive (1961) appointed to the Board. Prior to this, she was Chief Executive of Guardian Media Group. She was a Non Executive Director of Lloyds TSB from 2008 to 2009, Non Executive Director of Tesco Plc from 2005 to 2008 and Non Executive Director of New Look from 1999 to 2005. She was Chair of Opportunity Now and a former President of Women in Advertising and Communications London (WACL). She was awarded the OBE for services to women in business in 2008. In April 2008, she was named Veuve Clicquot Business Woman of the Year. Carolyn graduated from Kent University with a BA in History and Politics and from London University with a Masters in Politics. Chris Kennedy Chris (1964) joined easyJet on 1 July 2010 as Chief Financial Officer and was Chief Financial Officer (1964) appointed to the Board. Chris joined easyJet from EMI Music where he has had a successful career covering a range of international roles including Chief Financial Officer. Chris has considerable experience of working within a high profile international, fast changing consumer facing business, strong financial skills and a demonstrable track record of delivering operational improvement. Adèle Anderson Adèle (1965) was appointed to the Board of easyJet on 1 September 2011. Independent Non Executive Director (1965) She previously worked for KPMG and became a partner in 1997. She was the youngest member of the KPMG UK Board when appointed in 2000 and was appointed CFO in 2001. She became Chief Executive Officer of KPMG’s captive insurer in 2003 and in 2009 moved to KPMG Europe where she was Head of Financial Analysis, Risk and Control and then Europe Chief Financial Officer before leaving in July 2011. Adèle graduated from Kent University with BSc Hons in Mathematics & Computer Science.

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    43 Overview easyJet plc Annual report and accounts 2011 Business review David Bennett David (1962) was appointed to the Board of easyJet on 1 October 2005 Independent Non Executive Director (1962) and is Chairman of the Audit Committee. He is currently Chairman of Pacnet, a Pan-Asian provider of telecommunications / internet systems connectivity, and a Non Executive Director of CMC Markets plc, Jerrold Holdings Ltd and Clarity Commerce, a software solutions provider. He has had a long career in the financial services sector and was both Group Finance Director and Group Chief Executive of Alliance & Leicester plc until its sale to Santander in 2008. David has also held a number of positions in Abbey, Cheltenham & Gloucester, Lloyds TSB and the National Bank of New Zealand. Performance and risk John Browett John (1963) was appointed to the Board of easyJet on 27 September Independent Non Executive Director (1963) 2007. He is currently Chief Executive Officer of Dixons Retail plc, a position he has held since December 2007. Prior to joining Dixons Retail, John was the Operations Development Director of Tesco plc. He joined Tesco as Group Strategy Director in 1998 and held a number of Executive Director positions in the company including running Tesco.com from 2000 to 2004 where he was responsible for formulating and delivering its strategy from launch to profitability. Between 1993 and 1998, John was at the Boston Consulting Group. John is a graduate of Cambridge University and Wharton Business School. Corporate responsibility Professor Rigas Doganis Rigas (1939) was appointed to the Board of easyJet on 1 December 2005. Independent Non Executive Director (1939) Rigas is an aviation consultant and strategy adviser to airlines, airports, banks and governments around the world. He is Chairman of the European Aviation Club in Brussels and a Non Executive Director of GMR Hyderabad International Airport, India. He is a former Chairman / CEO of Olympic Airways and was formerly a Non Executive Director of South African Airways. Rigas is also a visiting Professor at Cranfield University and the author of books on aviation economics and management. Governance Keith Hamill Keith (1952) was appointed to the Board of easyJet on 1 March 2009 Independent Non Executive Director (1952) and is Chairman of the Remuneration Committee. He has considerable experience as a Director of listed companies and is currently the Chairman of Tullett Prebon. He is also is Deputy Chairman of Travelodge, which he previously chaired for eight years, and a Director of Samsonite. He was previously Chairman of Go, prior to its acquisition by easyJet in 2002, Alterian, Collins Steward, Heath Lambert, Luminar, and Moss Bros and Director of Electrocomponents, Cadmus Communications Corp. He was Finance Director of WH Smith, Forte and United Distillers and a partner in PricewaterhouseCoopers. Keith is a Fellow of the Institute of Chartered Accountants and also chairs the Board of the University of Nottingham. Andy (1960) was appointed to the Board of easyJet on 1 September 2011. Accounts & other information Andy Martin Independent Non Executive Director (1960) He is currently Group Finance Director of Compass Group PLC. Prior to joining the Compass Group in 2002, Andy was a partner with Arthur Andersen and held senior financial positions with Forte PLC and Granada Group PLC. Following the disposal of the Hotels Division in 2001, Andy joined First Choice Holidays PLC (now TUI Travel PLC) as Group Finance Director. Andy graduated from Manchester University with a BA in Economics and is a member of the Institute of Chartered Accountants of England & Wales.

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    44 easyJet plc Annual report and accounts 2011 Executive Management Team Alita Benson Alita (1967) joined easyJet in February 2011 as Head of HR Central Services People Director (1967) and in June 2011 was appointed as People Director. Before joining easyJet, Alita was Head of HR Business Partners at T-Mobile for nine years and led the T-Mobile UK HR input for the merger with Orange. Alita is a fellow of CIPD and graduated from Southampton University with a BA (Hons) in English Literature and obtained a Post Graduate Diploma in Personnel Development at Manchester Polytechnic. Warwick Brady Warwick (1964) joined easyJet in May 2009 as Procurement Director and Director of Group Operations (1964) in October 2010 was appointed Director of Group Operations. He has significant experience of leading low cost airlines in areas ranging from high growth and restructuring, through to turnarounds. Before joining easyJet, Warwick was Deputy Operations Director at Ryanair from 2002 to 2005, where he held various executive roles including Deputy CEO of Buzz, following its acquisition from KLM. He also spent two years as Chief Operations Officer of Air Deccan. His role focused on delivering high growth at the lowest cost and during this time he was instrumental in listing the company on the Bombay stock exchange. Most recently, Warwick was CEO at Mandala Airlines where he turned a legacy brand into a modern, low cost carrier. Mike Campbell Mike (1957) joined easyJet in October 2005 as People Director and in April Europe Director (1957) 2011 was appointed Europe Director. Before joining easyJet, Mike worked at Wedgwood in a broad role as Director of People and Brands and Managing Director for Canada, Australia and Pan-Asia. Prior to that, Mike worked for 14 years at Fujitsu in a variety of development and personnel roles across Europe, Asia, Africa and the Middle East, ending up as Chief Personnel Officer. His early career was in education and research. Mike has a BSc in Mathematics and Masters in Fluid Dynamics. Trevor Didcock Trevor (1963) joined easyJet in September 2010 as Chief Information Chief Information Officer (1963) Officer. Before joining easyJet, Trevor was CIO at Homeserve plc, The AA and RAC Motoring Services and spent nine years in IT management roles at Mars, Inc. His earlier career was in IT, Finance and Engineering roles at J P Morgan and Esso. Trevor has an MBA from Cranfield and a BSc in Mechanical Engineering from Nottingham University. Peter Duffy Peter (1966) joined easyJet in February 2011 as Marketing Director. Marketing Director (1966) Before joining easyJet, he was Marketing Director for Audi in the UK where he oversaw a period of rapid and profitable growth. Prior to that, Peter was Marketing Services Director at Barclays. Peter has a degree in Economics and an MBA.

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    45 Overview easyJet plc Annual report and accounts 2011 Business review Chris Kennedy See Directors’ profiles. Chief Financial Officer (1964) Performance and risk Cath Lynn Cath (1964) joined easyJet in 2002 following the merger with Go, in which Customer and Revenue Director (1964) she played an active role. Cath has successfully carried out a number of senior leadership roles at easyJet including Head of Ground Operations, Head of Airport Development and Procurement and Head of Network Development. In April 2011, she was appointed as Customer and Revenue Director. Before joining easyJet, Cath spent 12 years in retail for J Sainsbury before being head hunted in 1998 by Barbara Cassani for the start up of Go where she was part of the management buy out team and headed up cabin services, ground operations and customer service. Corporate responsibility Carolyn McCall See Directors’ profiles. Chief Executive Officer (1961) Governance Paul Moore Paul (1962) joined easyJet in November 2010 as Communications Director. Communications Director (1962) Before joining easyJet, Paul was Group Public Affairs and Communications Director for FirstGroup, the world’s largest private sector transport operator. Prior to that Paul worked for Virgin Atlantic Airways for ten years as its Director of Corporate Affairs during a period when the airline significantly grew its worldwide network while delivering award winning customer service. Highlights included managing the communications of several crises, winning PR Week Award for Crisis Communications in 2002, coordinating the airline’s lobbying activities and organising several successful world records. Paul started his career as a civil servant and first joined the transport sector with the Department of Transport. Accounts & other information Giles Pemberton Giles (1968) joined easyJet in April 2006 as General Counsel and Company General Counsel and Group Secretary. He has been on the Executive Management Team since July 2010. Company≈Secretary (1968) Before joining easyJet, Giles was Assistant General Counsel and Director of Compliance at Cable & Wireless plc where he spent ten years as a legal adviser within the UK and Australian operating divisions and then in its head office. He is a qualified solicitor (England & Wales) who spent the first four years of his career with the City law firm Freshfields. Giles holds an LLB (Hons) degree from Nottingham University and obtained his professional qualification from The Guildford College of Law.

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    46 easyJet plc Annual report and accounts 2011 Corporate governance Principles statement The Board meets regularly, with 11 scheduled easyJet is committed to meeting the required meetings having been held during the year ended standards of corporate governance. 30 September 2011 with a further four ad hoc meetings. All members of the Board are supplied in Statement of compliance advance with appropriate information covering During the year, the Board considers that it and the matters which are to be considered. The Non Company have complied without exception with the Executive Directors have met without any Executive provisions of the Code. The Code is issued by the Directors present during the year from time to time, Financial Reporting Council and is available for review usually prior to or immediately after Board meetings. on the Financial Reporting Council’s website http://www.frc.org.uk/corporate/ukcgcode.cfm. The matters reserved for the Board had originally been drafted at the time of flotation and was Leadership reviewed during the year. As a result, an updated As at 30 September 2011, the Board comprised eight terms of reference was approved during the year to Non Executive Directors (including the Chairman) and bring it into line with current best practice as set out two Executive Directors. by the Institute of Company Secretaries and Administrators. It is available on easyJet’s website. The roles of Chairman and Chief Executive are Day-to-day management responsibility rests with the separated, clearly defined, and approved by the Executive Management Team (“EMT”), which Board. comprises ten Executives (including the Executive Sir David Michels was, until 26 August 2011 the Senior Directors of the main operating company, easyJet Independent Non Executive Director and held the Airline Company Limited). The first reports of the EMT post of Deputy Chairman. Both posts are now filled by then form the Executive Leadership Team. Charles Gurassa. Meetings attended during the financial year ended 30 September 2011 plc Board Scheduled Additional meetings Scheduled meetings Additional eligible to meetings eligible to meetings attend attended attend attended Executive Directors Chris Kennedy 11 11 4 4 Carolyn McCall OBE 11 11 4 4 Non Executive Directors Sir Michael Rake 11 11 4 4 Charles Gurassa (joined 27 June 2011) 3 3 3 2 Sir David Michels (left 26 August 2011) 10 8 3 2 David Bennett 11 7 4 4 Keith Hamill 11 10 4 4 John Browett 11 9 4 2 Rigas Doganis 11 10 4 4 Sven Boinet (left 30 September 2011) 11 7 4 1 Adèle Anderson (joined 1 September 2011) 1 1 1 1 Andy Martin (joined 1 September 2011) 1 0 1 0

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    47 Overview easyJet plc Annual report and accounts 2011 Business review Board Committees Audit Remuneration Nominations Litigation Committee Committee Committee Committee Executive Directors Chris Kennedy 3* 2* n/a n/a Carolyn McCall 3* 3* n/a n/a Non Executive Directors Sir Michael Rake n/a 1* n/a n/a Charles Gurassa (joined 27 June 2011) n/a n/a n/a n/a Sir David Michels (left 26 August 2011) n/a n/a 1 n/a David Bennett 3 2 0 n/a Performance and risk Keith Hamill 2 6 n/a n/a John Browett 2 n/a n/a n/a Rigas Doganis n/a 4 1 n/a Sven Boinet (left 30 September 2011) n/a 3 n/a n/a Adèle Anderson (joined 1 September 2011) n/a n/a n/a n/a Andy Martin (joined 1 September 2011) n/a n/a n/a n/a *By invitation. Effectiveness Board engagement with investors The Company regards David Bennett, Professor Rigas The Board continues to consider that it is appropriate Doganis, John Browett, Keith Hamill, Charles Gurassa, for the Chairman to be the primary conduit with Adèle Anderson and Andy Martin as Independent investors given his experience in liaising with Non Executive Directors and also considered shareholders. Corporate responsibility Sven Boinet and Sir David Michels as independent The Chairman has made himself available for investor during their tenure. meetings and questions, in person, during the year All new Directors are given a tailored induction upon and has updated the whole Board on the results of appointment which provides them with information these meetings and the opinions of investors. about the Company, the matters reserved for the The Senior Independent Non Executive Director has Board, minutes of Board and Committee meetings also acted as an alternative point of contact and both and share dealing code. In addition, meetings are incumbents in the role during the year have attended arranged with key executives and managers within meetings in order to help develop a balanced the business. The Board are also kept up to date with understanding of the issues and concerns of major developments in law, regulation and best practice. shareholders. Regular feedback is provided to the Board on the opinions of shareholders and an investor Directors and officers’ insurance cover has been perception audit is carried out by an independent third established for all Directors to provide cover against Governance party on an annual basis. their reasonable actions on behalf of the Company. During the year, a performance review of the Board Board Committees was undertaken using an external evaluation tool Remuneration Committee provided by a corporate advisory company. This At 30 September 2011, the Remuneration Committee process involved a detailed questionnaire completed comprised three Independent Non Executive by each of the Directors and one-on-one discussions Directors, namely Keith Hamill (Chairman), with individual Directors. The performance of the David Bennett and Professor Rigas Doganis. This Board (including the Chairman), the Board’s Committee, which meets at least twice per year, has Committees and also that of the individual Board responsibility for making recommendations to the Directors was reviewed as part of the same process. Board on the compensation of senior executives and determining, within agreed terms of reference, the The Senior Independent Director led the Non specific remuneration packages for each of the Accounts & other information Executive Directors in a review of the Chairman’s Executive Directors and the Chairman. In addition to performance which also involved feedback from the meetings to allot shares under the Company’s share Executive Directors. The Company has now engaged option schemes, the Remuneration Committee has an independent external facilitator to carry out the met two times during the year. next review of the Board’s effectiveness in accordance with the Code provision B 6.2. The facilitator has no connection with the Company beyond evaluating the Board.

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    48 easyJet plc Annual report Corporate governance and accounts 2011 Continued The Board has reviewed the composition of the – Review and monitor the effectiveness of the Remuneration Committee during the year and is internal audit function and management’s satisfied that the Directors who are currently members responsiveness to any findings and of this Committee are those who are best able to recommendations; and contribute to the Committee’s objectives. – Assess potential conflicts of interest of Directors Shareholders are generally required to approve all on behalf of the Board new Long Term Incentive Plans and significant The Audit Committee has the responsibility changes to existing plans. Further details of these for appointing the external auditors. plans can be found in the Report on Directors’ PricewaterhouseCoopers LLP were reappointed remuneration and the full text of the terms of auditors of the Group at the Annual General Meeting reference for the Remuneration Committee is held in February 2011. In order to preserve auditor available in the governance section of easyJet’s objectivity and independence, corporate website, http://corporate.easyJet.com. PricewaterhouseCoopers LLP will not be asked to Audit Committee provide consulting services unless this is in the best The Audit Committee comprises four Non interests of the Company. The Audit Committee’s Executive Directors, all of whom are independent. terms of reference set out that they are responsible At 30 September 2011, the Audit Committee for the formal policy on the award of non-audit work members were David Bennett (Chairman), to the auditors. The Audit Committee has, during the John Browett, Keith Hamill and Adèle Anderson. year, updated the policy, which can be found in the This Committee meets at least three times per year. governance section of easyJet’s corporate website, http://corporate.easyJet.com. The auditors are asked The primary function of the Audit Committee is to on an annual basis to articulate the steps that they assist the Board in fulfilling its oversight responsibilities have taken to ensure objectivity and independence. by reviewing the financial reports and other financial easyJet monitors the auditors’ performance, behaviour information in advance of publication, reviewing on a and effectiveness during the exercise of their duties, continuing basis the systems of internal controls which informs, on an annual basis, the Audit regarding finance and accounting that management Committee’s decision to recommend reappointment. and the Board have established and reviewing This included this year obtaining a report on the generally the auditing, accounting and financial auditors own quality control procedures and a reporting processes. The ultimate responsibility consideration of their annual quality and transparency for reviewing and approving the annual and other report. In the financial year, easyJet spent £nil million accounts remains with the Board. The Audit with PricewaterhouseCoopers LLP (2010: £0.1 million) Committee has met three times during the course in respect of non-audit services. There are no of the year. contractual obligations which restrict the choice The terms of reference of the Audit Committee are of external auditors. documented and agreed by the main Board. The full Both internal and external auditors are given the text of the terms of reference is available in the opportunity to meet privately with the Audit governance section of easyJet’s corporate website, Committee without any member of management http://corporate.easyJet.com. The key terms set out present. It is standard practice for the external auditors that the Audit Committee will: to meet with the Audit Committee without the – Serve as an independent and objective party to Executive Directors being present at each Audit monitor the quality and timeliness of the financial Committee meeting. reporting process and monitor the internal The Board is satisfied that the Directors who are financial control system currently members of this Committee are those who – Review and appraise the audit efforts of the are best able to contribute to the Committee’s external auditors objectives. David Bennett has served as the Chairman of the Committee during the year. David has – Provide an open avenue of communication previously been an Executive Director of Abbey among the external auditors, financial and senior National plc prior to which he was Chief Executive management and the Board Officer and Finance Director of Alliance and Leicester – Confirm and assure the independence and plc, experience which the Board considers to be objectivity of the external auditors (in particular, in recent and relevant for the purposes of undertaking the context of the provision of additional services the role as Chairman of the Committee. to the Company) – Review and ensure the effectiveness of the risk management processes of the Company

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