easyJet makes travel easy | My Assignment Tutor

ANNUAL REPORT AND ACCOUNTS 2019resilientfocuseddata drivenWho we areeasyJet makes travel easy, enjoyableand affordable for customers, whetherit is for leisure or business.We use our cost advantage and leadingpositions in primary airports to deliverlow fares and operational efficiency,seamlessly connecting Europe withthe warmest welcome in the sky.Our well-established business modelprovides a strong foundation to driveprofitable growth and long-termshareholder returns.We are proud to have been awardedBest Low-Cost Airline in Europe at theSkytrax World Airlines Awards 2019.‘Our Promise’ is that we will be:SAFE ANDRESPONSIBLEON OURCUSTOMERS’SIDEIN ITTOGETHERALWAYSEFFICIENTFORWARDTHINKINGSTRATEGIC REPORT2 At a glance3 Chairman’s letter10 Highlights12 Business model14 Market review15 Stakeholder engagement16 Chief Executive’s reviewand Our Strategy26 Key performance indicators28 Financial review35 Viability statement36 Summary statistics37 Risk48 SustainabilityCORPORATE GOVERNANCE66 Chairman’s statementon corporate governance68 Board of Directors72 Airline Management Board75 Corporate governance report96 Directors’ remuneration report116 Directors’ report120 Statement of Directors’responsibilitiesACCOUNTS121 Independent auditors’ reportto the members of easyJet plc128 Consolidated accounts133 Notes to the accounts174 Company accounts176 Notes to the Company accounts179 Five-year summary180 Glossary181 Shareholder informationVISIT OUR WEBSITE FOR MOREINVESTOR INFORMATIONcorporate.easyJet.com/investorsour valuecreationframeworkPAGEPAGEPAGEour pLANourperformanceThe foundationfor who we areand what we doKey highlightsof the year’sperformanceThe strategic plan whichwe announced last yearis now fully embeddedacross easyJetSustainability is a key partof Our PromisePAGE2our commitment161048www.easyJet.com 1CONTENTSAT A GLANCEeasyJet’s value creation framework is the foundation for who we are andwhat we do. This provides context for how our wider purpose drives ourbusiness model and strategic plan, both of which are underpinned by ourresponsible and sustainable way of doing business and our core values.our value creationframeworkSEAMLESSLY CONNECTING EUROPE WITH THE WARMESTWELCOME IN THE SKYeasyJet makes travel easy, enjoyable and affordable, whether it isfor leisure or businessPURPOSE-DRIVEN,VALUE CREATION BUSINESS MODELOUR SUSTAINABILITY STRATEGYOUR PLANOUR PURPOSEOur purpose defines whowe are and guides ouractions and decisions.OUR BUSINESSMODELOur well-established businessmodel provides a strongfoundation for deliveringlong-term value to all ofour stakeholders.OUR STRATEGYOur strategic priorities are aplan of action designed tomove us closer to fulfillingour purpose.OUR PROMISEWe have a set of valueswhich support andguide Our Strategy.OUR SUSTAINABILITYFRAMEWORKOur sustainable growth issupported by a responsibleway of doing business.Number oneor numbertwo inprimaryairportsWinning ourcustomers’loyaltyValue byefficiencyThe rightpeopleInnovatingwith dataSafe andresponsibleOn ourcustomers’sideIn it together AlwaysefficientForwardthinkingSafety is our number one priorityHonest and fair with ourcustomers and suppliersA responsible and responsive employerA guardian for future generationsA good citizenDETAILS CAN BE FOUND ON PAGE 12DETAILS CAN BE FOUND ON PAGE 12DETAILS CAN BE FOUND ON PAGE 19DETAILS CAN BE FOUND ON PAGE 15DETAILS CAN BE FOUND ON PAGE 482 easyJet plc Annual Report and Accounts 2019CHAIRMAN’S LETTER2019 has been a challenging year for easyJet with a tough start inthe first half. This was followed by success from our self-helpinitiatives over the summer, with decisive management actionsensuring a record summer profit performance. The strength of ouroffering has ensured that customer demand has remained strongin spite of uncertain times for consumer confidence and continueddisruption at airports. In 2019 the Group increased the numberof passengers flown by 8.6% to 96.1 million passengers(2018: 88.5 million). Our strong business model and robust balancesheet mean we are well positioned to succeed in the years ahead.RESULTSeasyJet has faced a challenging year, with consumer confidencehaving been impacted by the ongoing uncertainty around the UK’sexit from the EU. This uncertain demand environment and theannualisation of some one-off benefits we experienced last yearwere the main factors behind the significant reduction in ourprofits this year. However, the measures we have taken toincrease late yields and manage costs have enabled us to meetrevised stock market expectations and to stabilise and repositionour business for this new environment. A discussion of the currentdynamics influencing our industry can be found in the MarketReview on page 14.Revenue for the full year increased by 8.3% to £6,385 million(2018: £5,898 million). Despite a difficult disruption environment,our Operational Resilience programme ensured that costsremained under control.This resulted in headline profit before tax of £427 million(2018: £578 million) and basic headline earnings per share of88.7 pence (2018: 118.3 pence). Total profit before tax of£430 million (2018: £445 million) and non-headline items ofa £3 million gain (2018: £133 million cost) led to basic totalearnings per share of 88.6 pence (2018: 90.9 pence).DIVIDENDSeasyJet’s dividend policy is to pay shareholders 50% ofheadline earnings after tax, reflecting the Board’s confidencein the long-term prospects of the business. I am pleased torecommend to shareholders a dividend of 43.9 pence pershare for the 2019 financial year (2018: 58.6 pence per share).HOLIDAYSLast year easyJet identified a significant opportunity to developa financially meaningful holidays business, to better serve theeasyJet generation. Around 20 million customers per year fly witheasyJet to Europe’s largest leisure destinations, but only 0.5 millionbook accommodation with us. We will launch in the UK beforeChristmas, selling holidays for winter 2019 and summer 2020.OUR BOARDeasyJet’s Board has been further strengthened this year by theappointment of two new Independent Non-Executive Directors.Dr Anastassia Lauterbach and Nick Leeder were both appointedto the Board on 1 January 2019. Both bring different perspectiveson technology and data and in-depth knowledge of a range ofbusinesses. Adèle Anderson stepped down from the board on7 February 2019 and I would like to reiterate my thanks to Adèlefor her important contribution. Further details of these changesare included in the Governance report on page 66.OUR PEOPLEI would like to extend my thanks to all of easyJet’s employees,but especially to the wonderful crew, who continue to provide thewarmest welcome in the sky. The inclusive culture and people ateasyJet are vital to our success.There have been a number of changes to the Airline ManagementBoard over the course of the year which are detailed in theGovernance report on page 72.Details of how we engage with our stakeholders can be foundon page 15.SUSTAINABILITYIn the past year we have seen increased debate about climatechange. As an airline this is our most significant sustainabilityimpact and challenge. This is why we announced in November2019 that we would become the world’s first major airline tooperate net-zero carbon flights across its whole network. We aredoing this by offsetting the carbon emissions from the fuel usedfor all of our flights.We recognise that this is an interim measure, but at the momentwe believe it’s the best way we have to remove carbon from theatmosphere. At the same time, we will continue to support thedevelopment of new technologies to decarbonise aviation for thelonger-term, on top of all the other initiatives we are taking toreduce carbon.THE FUTUREAs ever there will be challenges to face during the coming year.We continue to believe that easyJet’s well-established businessmodel and solid financials provide a strong foundation to weatherthese challenges, and to drive profitable growth and long-termshareholder returns.JOHN BARTONNon-Executive Chairmanfocused ondeliveringlong-term valuewww.easyJet.com 3STRATEGIC REPORT CHAIRMAN’S LETTER24% 25%As we were planning for summer 2019, we facedincreasing airport and airspace congestion, withEurocontrol predicting 15% more air traffic delaysyear on year.The skies are busier than ever, and our own fleetcapacity is growing, so we took action to evolve theway we planned for and managed disruption on theday, and recover faster when disruptive events occur.This involved a co-ordinated, airline-wide effort toidentify improvements across the business, including:• Re-designing our flying schedules and rosters,making over 50,000 updates to the schedule tohelp us avoid disruption where possible and to bebetter positioned to manage where we cannot• Increasing investment in standby aircraft• Optimising our maintenance planning• Communicating with and supporting ourcustomers during disruption• Using data and analytics to make the bestnetwork-wide decisionsFEWERCUSTOMERSDELAYED >3HOURSFEWER DISRUPTION EVENTSWITHIN OUR CONTROLresilient73%REDUCTION INTIME TO PAY CLAIMS4 easyJet plc Annual Report and Accounts 2019FLIGHTCOMPLETION RATEFEWERCANCELLATIONS99.4% 46%www.easyJet.com 5Our growth is targeted in the areas where we see longterm returns, within our core business as a low-costEuropean point-to-point airline.• Our network strategy of focusing our capacity onslot-constrained primary airports is improvingresilience through the cycle and driving revenue perseat and profitability, as we take market share fromlegacy carriers.• Our new Holidays initiative is focusing initially on the19.5 million leisure customers who flew easyJet lastyear but booked accommodation elsewhere. TheHolidays team is targeting the needs of the easyJetgeneration with an all-new offering and website.We have identified that this represents a significantgrowth opportunity with low capital requirements.• Our late yield initiative has enabled us to optimisepricing for super late bookings, in instances wherewe saw a wide pricing gap relative to ourcompetitors, whilst still maintaining ourcommitment to offer great value.“WE HAVE THEAMBITION,EXPERIENCE ANDDIVERSITY NEEDEDTO BECOME AMAJOR PLAYER INTHE HOLIDAYMARKET”Garry Wilson, Chief Executive Officerof easyJet Holidaysfocused61m FLOWN BY LEGACY CARRIERS FROM OUR EXISTING TARGETAIRPORTS – A MAJORGROWTHseats OPPORTUNITY19.5m CustomersWHO FLEW WITH EASYJET FORLEISURE BUT BOOKEDACCOMMODATION ELSEWHEREOUR CEO REVIEW CONTAINS FURTHER INFORMATIONON OUR CUSTOMER-FOCUSED STRATEGY– PAGE 216 easyJet plc Annual Report and Accounts 20191-2weeksbeforedepartureWINDOW TOIMPROVE YIELDSwww.easyJet.com 7AIRCRAFTTECHNICALFAULTS DETECTEDBEFORE THEYINTERRUPTEDOPERATIONS631data driven21 NEW DATA TOOLSCREWPAIRINGSPROACTIVELY900 SPLITAt easyJet, we put data to work for the benefitof our customers and employees.We have designed prediction models which allow our operationsteam to intervene early when crew duty hour limits are likely todisrupt our schedule, enabling us to create highly resilient rosters andschedules. This is critical to crew wellbeing, reducing out-of-hourstravel to cover duties while also enabling greater roster stability andminimising customer disruption.We are equipping all of our aircraft with ‘big data’ servers, which allowsus to capture, store and interrogate the aircraft data after every flight.Looking for patterns in this data enables us to intervene early, beforean aircraft potentially develops a technical fault and impacts uponour operation.Data from our maintenance systems is also being used to predictwhen we are most likely to find faults and need extended maintenancedowntimes. This allows us to ensure we have the right spare parts andpersonnel available, and have standby aircraft ready if necessary.Congestion in European airspace has had a huge impact on ouroperations, especially during summer 2018 and 2019. We havedeveloped data tools allowing us to predict which flights are most likelyto experience delays and impact upon our flying programme. Thesedata tools recommend where to intervene to reduce these delays andhelp to shape how we build our future schedules in a more resilient way.The use of data has been fundamental to our success in reducing theimpact of disruption. These are early successes in building a data drivenoperation and we have a full pipeline of data projects for the future.– CEO REVIEW PAGE 25 – RISK MANAGEMENT 37 – SUSTAINABILITY 48FURTHER INFORMATION ON OURFOCUS ON DATA CAN BE FOUND8 easyJet plc Annual Report and Accounts 2019www.easyJet.com 9HIGHLIGHTSOur performanceLOAD FACTOR91.5%2018: 92.9%DIVIDEND PER SHARE105.0m2018: 95.2M43.9p2018: 58.6pTOTAL REVENUE (£M)TOTAL PROFIT BEFORE TAX(£M)BASIC HEADLINE EARNINGSPER SHARE1 (PENCE)TOTAL ANCILLARYREVENUE2 (£M)SEATS FLOWNHEADLINE PROFIT BEFORETAX1 (£M)BASIC TOTAL EARNINGS PERSHARE (PENCE)1. Headline performance measures were implemented from 2016 onwards2. Ancillary revenue reporting was implemented from 2018 onwards201920182017201620155,8985,0474,6694,6862019 6,38520182017201620154453855076864302019201820172016201590.977.4110.9139.188.6 2019201820172016118.382.5108.488.7201920182017201657840849442720192018 1,2101,37610 easyJet plc Annual Report and Accounts 2019We continue to invest in the core strengths of our network,operational efficiency and customer service.focusing on our strengths562018: 511,0512018: 979£139m2018: £107munparallelednetworkNUMBER ONEOR TWO IN PRIMARYAIRPORTS115%low-costmodel£(326)m2018: 396Mstrongbalancesheet68%2018: 66%no.1 or 2customerloyalty11.4%2018: 14.6%value byefficiency96.1m2018: 88.5MdrivingrevenuegrowthNEW GENERATIONAIRCRAFT REDUCEEMISSIONS AND FUELCONSUMPTION3NUMBER ONE AIRLINEBRAND IN THE UK,FRANCE & SWITZERLAND2,5HEADLINE ROCE8PASSENGERS6RETURNING CUSTOMERS 6,7NET (DEBT)/CASH4ROUTES OPERATED2 COST SAVINGS1. As at 30 September 2019 – airports where easyJet is the numberone or number two carrier based on short-haul capacity2. As at 30 September 20193. A320neo vs previous generation A3204. Includes lease liabilities upon adoption of IFRS 16 in FY 20195. Millward Brown brand tracker6. In the year ended 30 September 20197. Percentage of seats booked by customers who made a bookingin the preceding 24 months8. 2019 post IFRS 16, 2018 using adjusted capital employed and restatedSTRATEGIC REPORT FINANCIAL REVIEWwww.easyJet.com 11STRATEGIC REPORT HIGHLIGHTSOur robust business model makes it easy, affordable and sustainableto travel, which drives growth and returns for our shareholders.OUR PURPOSE: OUR RESOURCES:our business modelFINANCIAL CAPITALeasyJet has a strong capital base, with a market capitalisationof £4.6 billion1 and very low net debt position of £326 millionat 30 September 20192 (2018: £396 million net cash).easyJet’s credit ratings are amongst the strongest in theworld for an airline.PEOPLEeasyJet has a highly skilled workforce of over 15,000 people,including nearly 4,000 pilots and over 9,000 cabin crew members.5The employee engagement score of 8 out of 10 on ouremployee listening platform Peakon reflects our strong culture,which is unique in the airline industry.SLOTS AND BRANDeasyJet has a valuable portfolio of slot pairs at slot-constrainedprimary airports, as well as flying rights across Europe and AOCs6in the UK, Switzerland and Austria.easyJet has a strong brand and has been named the best low-costairline in Europe at the Skytrax World Airlines Awards 2019.AIRCRAFTeasyJet operates a modern fleet of Airbus A320 familyaircraft, of which 70% are owned outright. We are investingin new generation aircraft which are more fuel efficient3 andenvironmentally friendly,4 leading to lower operating costsand lower carbon emissions over time.SUPPLIERSeasyJet partners with key suppliers to deliver many of itsoperational and commercial activities. Our partners are carefullyselected and significant emphasis is placed on managing theserelationships, with the aim of extracting incremental innovationand performance. Currently, our top 300 suppliers areresponsible for around 97% of our spend.TECHNOLOGY AND DATAeasyJet is aiming to become the world’s most data-drivenairline. We are seeing significant benefits already fromoperational resilience processes and predictive maintenance.Our revenues are benefiting from data projects in late yieldinitiatives and differential seat pricing.OVER15,000EMPLOYEES52018: 14,000700MVISITS TO ALL DIGITALPLATFORMS2018: 615m331AIRCRAFT52018: 31588%CAPACITY AT SLOTCONSTRAINED AIRPORTS72018: 89%CREDIT RATINGbbb+/Baa185%SUPPLIERPAYMENTS ON TIME2018: 87%SEAMLESSLYCONNECTINGEUROPE WITHTHE WARMESTWELCOME INTHE SKY.WE MAKE TRAVELEASY, ENJOYABLEAND AFFORDABLEFOR CUSTOMERS,WHETHER ITIS FOR LEISUREOR BUSINESS,THROUGH OURUNIQUE ANDSUSTAINABLEBUSINESS MODEL.1. Based on share price of £11.50 at 30 September 20192. With the adoption of IFRS 16, leases are now on the balance sheet3. 15% fuel saving A320neo vs previous generation A3204. Around 50% quieter on takeoff and landing than previous generation aircraft5. As at 30 September 20196. Air operator certificates7. Based on level 2 and level 3 airports as updated by IATA on 10 November 2018 and defined within IATA Worldwide Slot Guidelines as at 1 August 2019BUSINESS MODEL12 easyJet plc Annual Report and Accounts 2019easyJet continues to go from strength to strengthacross Europe, adding more top destinations toour market-leading network and increasing ourpresence at slot-constrained primary airports.1592018: 1561,0512018: 979AIRPORTSINCREASING NO 1 POSITIONSACROSS THE NETWORKROUTESDestinations2019201820172016201525181717271. Based on sectors flown, as reported by OAG as at September 2019BUSINESS ACTIVITIES:WHAT WE DOWe are a low-cost Europeanpoint-to-point airline. We useour cost advantage, operationalefficiency and leading positionsin primary airports to deliver lowfares, seamlessly connectingEurope with the warmestwelcome in the sky.easyJet is the seventh1largest airline in the world,with 331 aircraft and 96 millioncustomers across 34 countriesand 159 airports.In time for the 2020 summerseason we are launching a neweasyJet Holidays business, inorder to capture additionalrevenues from the 97% of ourleisure customers who bookaccommodation elsewhere.HOW WE DO IT• Our leading position atslot-constrained airportswith high customer demandallows us to deliver profitablegrowth and resilient returnsover the long term• We continually evaluateopportunities to extendour network profitably• Our cost efficiency isachieved through long-termstrategic partnerships withkey airports and groundhandling operators• easyJet has a focus onproviding services whichour customers value• The new easyJet Holidaysoffering has been tailoredto the needs of the easyJetgenerationwww.easyJet.com 13STRATEGIC REPORT BUSINESS MODELDEMANDThe airline industry is a cyclical one, with demand for flights driven byeconomic growth.Low-cost carriers such as easyJet continue to take market share fromlegacy carriers.The aviation industry has been affected by a number of geopoliticalevents in recent years, such as terror attacks and extreme weatherevents. These have both short-term and long-term consequences fordemand and the structure of the industry.The UK’s decision to leave the EU has led to considerable uncertaintyfor people booking flights, as well as operational challenges for airlines.The outcome of the Brexit process may continue to affect GDP andthe propensity to travel.HOW WE ARE RESPONDINGOur dense, Europe-focused networkenables economies of scale and allowsus some flexibility, to move capacity inresponse to local demand.easyJet’s Brexit preparations are extensiveand have addressed both operational andfinancial issues. Further details can befound on page 18.FUELFuel is one of the biggest costs which airlines face and one of themost volatile. Fuel represented 24% of easyJet’s cost base for the2019 financial year. During the year the average price of Brent crudeoil fell by 6% from $70 to $66. The price of jet fuel is stronglycorrelated to the price of crude oil.ENVIRONMENTAL AND SOCIALEnvironmental factors are a major issue for the airline industry,affecting both passenger demand and operating parameters.Customers are increasingly aware of their carbon footprint and areconsidering alternatives to air travel, which accounts for around 3%of global carbon emissions.SUPPLY AND AIRSPACE MANAGEMENTEuropean short-haul capacity increased by 3.6% in total and by 5.3% ineasyJet’s markets during 2019.The Air Traffic Control environment in Europe has continued to worsen,with delay minutes rising from 14.1 million in 2015 to 24.5 million by 2019,according to Eurocontrol data.FOREIGN EXCHANGEeasyJet is exposed to foreign exchange rate movements, particularlySterling against the US dollar and the Euro.Sterling has fallen in value since the UK voted to leave the EU in the 2016referendum. Sterling’s depreciation continues to impact negatively uponeasyJet’s costs and capital expenditure. A strong US dollar increases theprice of fuel, one of easyJet’s biggest costs. A strong Euro typically has anet benefit for easyJet’s European operations. See page 30 for details ofthe impact from foreign exchange on our results for the 2019 financial year.Market dynamicsHOW WE ARE RESPONDINGeasyJet continues to hedge fuel costs inorder to mitigate against the risk of majorvolatility in fuel prices.HOW WE ARE RESPONDINGeasyJet is now the world’s first majorairline to operate net-zero carbon flights.Our first comprehensive SustainabilityReport begins on page 68 and containsfurther details of this and all of ourSustainability initiatives.HOW WE ARE RESPONDINGeasyJet is taking steps to address thedifficult ATC environment and the risingcosts of disruption. Our OperationalResilience programme is proving verysuccessful and further details can be foundon page 23.HOW WE ARE RESPONDINGWe hedge foreign exchange exposures inorder to mitigate against volatility.MARKET REVIEWThe key factors which influence easyJet and all operatorswithin the European airline industry14 easyJet plc Annual Report and Accounts 2019WHO THEY ARE HOW WE ENGAGESTAKEHOLDER ENGAGEMENTOur stakeholders are an important part of our operations and arereferenced throughout this report. Details of our key stakeholdersand how we engage with them are set out below.our stakeholdersCUSTOMERSWe flew 96 million passengers in 2019. Theyinclude individuals who book flight-only tripswith us for leisure or business, as well as thosewho also book holidays.SUPPLIERSOur current fleet of 331 aircraft is supplied by Airbus.The fleet is maintained by specialist suppliers.Ground handling agents manage the logisticsoperations at airports, such as baggage handlingand aircraft loading and unloading. We have astrategic partnership with DHL to provide theseservices at Gatwick, Bristol and Manchester.We have a number of critical technology suppliers.COMMUNITIESWe operate out of 30 bases across Europe andfly from 159 airports. Our head office is based atLondon Luton Airport, where we have a trainingacademy for crew.We opened our first European pilot trainingcentre near Milan in 2019.EMPLOYEESWe have 15,000 employees across eight countriesin Europe, including 4,000 pilots and 9,000cabin crew.SHAREHOLDERSAs a company listed on the London StockExchange, our shares are publicly traded.Our major shareholders are set out on page 117.REGULATORS AND GOVERNMENTSOur three pan-European airlines are regulated byAustrocontrol (Austria), the Civil Aviation Authority(UK) and the Federal Office of Civil Aviation(Switzerland).We engage with governments, policy makers,Air Traffic Control operators, airline associationsand tourism bodies.• Our crew interact with customers on a daily basis,providing the warmest welcome in the sky.• When customers need extra support, our customerservices teams help with special assistance requestsor arrangements when their travel is disrupted.• We also regularly survey our customers to find outabout their experiences.• We aim to have an open, constructive and effectiverelationship with all suppliers, as we believe they areintegral to the Group’s success.• We have an established supplier relationshipmanagement framework, which provides a toolkit and guidancefor easyJet managers who lead relationships with key partners.• Our IT supplier relationship management process is designedto ensure that third-party services and associated risks areregularly reviewed and assessed.• In addition to Peakon, our employee engagementplatform, we have country and base teams which manageand interact with staff on a daily basis.• We have a number of employee representative groupsacross Europe. We also engage with 20 trade unionsacross eight countries.• Moya Greene engages with employees through herrole as the Employee Representative Director.• Community engagement is typically coordinated bylocal management teams. In the community aroundour head office, we support Luton Town Football Club’scommunity sport programme and the ‘Love Luton’economic development campaign.• We have an active engagement programme with institutionalinvestors through our Investor Relations department.Shareholders can also attend our AGM and ask questions.• We engage with our major shareholders on a regular basisaround specific issues.• Our regulatory affairs team engages with regulators ona regular basis. We also engage with governments in all marketswhere we have bases, at both a national and regional level.• Our operations team engage with Air Traffic Controloperators and airline associations. We also work withbusiness and tourism bodies across our network.www.easyJet.comSTRATEGIC REPORT FINANCIAL REVIEW15STRATEGIC REPORT STAKEHOLDER ENGAGEMENTCHIEF EXECUTIVE’S REVIEWJOHan lundgrenChief Executive Officerour plan forthe futureOVERVIEWeasyJet delivered a resilient performance in the 2019 financial year.Our financial results reflect the underlying strength of easyJet’snetwork and brand. We continue to see easyJet as a structuralwinner in the European short-haul airline market, across theeconomic cycle.easyJet is reinforcing its competitive advantage by buildingleading positions at the primary airports which our customerswant to fly to. This customer-focused strategy is driving profitablegrowth and delivering resilient returns for the long term. We havemade significant progress with the Berlin operations which weacquired last year and they have been successfully integratedinto our network.We believe that it is the strength of this network, combined withour welcoming people and all-round value, which are enablingeasyJet to deliver robust bookings and continue to take marketshare from the legacy carriers.Our revenues on a per seat basis were negatively impacted byuncertainty around the original March 2019 Brexit date, althoughhave since recovered well, supported by a number of self-helpinitiatives, such as our late yield pricing programme.Operational performance has remained strong as we haveinvested in operational resilience initiatives to reduce the impactof industry disruption for our customers.Cost control continues to be a core focus and our underlyingcost per seat has remained broadly stable this year, despitesome industry-wide issues in the fourth quarter such as summerstorms and disruption at London Gatwick.Our all-new easyJet Holidays platform will launch in the UK marketbefore Christmas, taking bookings for the winter 2019 and summer2020 seasons. Our new holidays website and mobile app will offera simple-to-use, streamlined search and booking process withinspiring content. We are excited about the opportunity to builda financially meaningful holidays business for a low upfrontinvestment and limited risk. We expect easyJet Holidays to be atleast breakeven in the financial year to 30 September 2020.REVENUETotal revenue increased by 8.3% to £6,385 million (2018: £5,898million) due to our increase in capacity1. Total revenue per seatdecreased by 1.8% to £60.81 (2018: £61.94), reflecting economicuncertainty across our markets, weakness in the second quarterand subsequent recovery in the second half. Revenue per seatat constant currency2 decreased by 2.7%.Passenger revenue grew by 6.9%. The drivers of thisperformance were:• The self-help initiatives delivered in the second half, mainlyfocusing on optimising late yield, whilst maintaining ourcommitment to offer great value• Strength in the UK regions and in France• A full year’s contribution from our Tegel base in Berlin• Positive impact from strikes at British Airways and RyanairOffset by:• A tougher comparison as the previous year had benefitedfrom the collapse of Monarch, cancellations at Ryanair andindustrial action in France• Economic uncertainty in core markets• Weakness in the second quarter, as customers’ propensityto book flights was impacted by uncertainty surrounding theoriginal date of 29 March 2019 proposed for the UK to leavethe European Union• Softer London market• Drone sightings at London GatwickAncillary revenue grew 13.7% to £1,376 million (2018: £1,210 million).This reflected our continued focus on a data-driven programmeof products and services which our customers value, including:• Seasonal pricing on allocated seating• Introduction of the fourth band of seat pricing• Loss of revenue from changes to admin fees more thanoffset by strong performance of ancillary revenues generallyCOSTeasyJet’s underlying cost performance has been strong in the2019 financial year. Headline cost per seat including fuel increasedby 1.5% to £56.74 (2018: £55.87). Headline cost per seat atconstant currency 2 increased by 0.4% to £56.08 (2018: £55.87).1. Capacity represents the number of earned seats flown. Earned seats include seats which are flown whether or not the passenger turns up, as easyJet is ano-refund airline and once a flight has departed, a no-show customer is generally not entitled to change flights or seek a refund. Earned seats also includeseats provided for promotional purposes and to staff for business travel.2. Constant currency is calculated by comparing performance for the 2019 financial year, translated at the effective exchange rate for the 2018 financialyear, with the 2018 financial year reported performance, excluding foreign exchange gains and losses on balance sheet revaluations.16 easyJet plc Annual Report and Accounts 2019There were no non-headline charges relating to Tegel, which isnow fully integrated into the underlying business (2018: chargeof £40 million).TOTAL PROFITTotal profit before tax fell to £430 million (2018: £445 million),including a £3 million positive impact (2018: £133 million adverse)from non-headline items.Headline profit before tax fell to £427 million (2018: £578 million).Headline profit per seat fell to £4.07 (2018: £6.07). The taxcharge for the year was £81 million (2018: £87 million). Theeffective tax rate for the period was 18.9% (2018: 19.7%).Basic earnings per share fell to 88.6 pence (2018: 90.9 pence) afterthe impact of non-headline items. Basic headline earnings pershare fell by 25% to 88.7 pence (2018: 118.3 pence). Subject toapproval by shareholders, the Board is recommending that thedividend per share decreases by 25% to 43.9 pence (2018: 58.6pence), in line with the Company’s stated dividend policy of apayout ratio of 50% of headline profit after tax.FLEETeasyJet’s fleet is a major component of its business model and acompetitive advantage. easyJet’s total fleet as at 30 September2019 comprised 331 aircraft (2018: 315 aircraft) with the increasedriven by the addition of new aircraft from the A320 family.The average gauge of the fleet is now 175 seats per aircraft, anincrease from 172 seats at 30 September 2018. The average ageof the fleet increased slightly to 7.4 years (2018: 7.0 years). Duringthe year easyJet’s asset utilisation across the network decreasedslightly to an average 10.9 block hours per day (2018: 11.1 hours).easyJet is pleased to announce that it has reached anagreement with Airbus which ensures continued delivery ofaircraft from 2024 and executes some fleet flexibility.Specifically, the agreement includes:• The exercise of 12 purchase options resulting in 12 firm ordersof A320neo aircraft for delivery in 2024 under the existing2013 agreement• The deferral of delivery dates of nine A320neo aircraft and threeA321neo aircraft resulting in 2021 deliveries reducing by 12 aircraft,and being deferred to delivery dates starting from 2023The agreement secures valuable delivery slots in 2024 at a listprice of $1,368.4m for the 12 new firm orders of A320neo aircraft.Under the terms of the 2013 agreement between easyJet andAirbus, the actual cost of the aircraft is subject to a substantialdiscount from the list price. Following this agreement, easyJethave 13 purchase options and 58 purchase rights remaining.The agreement also allows the fleet to meet the planned fleetsize for 2021 and is a key demonstration of easyJet’s fleetflexibility which means the airline is able to either increase ordecrease the fleet growth programme as well as increase ordecrease deployed capital.FLEET AS AT 30 SEPTEMBER 2019:Owned Leased Total % of fleetChangessince Sept2018FuturedeliveriesPurchaseoptionsUnexercisedpurchaserightsA319 69 56 125 38% (7) – – –A320 180 seat 17 23 40 12% (35) – – –A320 186 seat 109 20 129 39% 36 – – –A320 neo 31 – 31 9% 18 79 25 58A321 neo 6 – 6 2% 4 24 – –232 99 331 16 103 25 58Percentage of total fleet 70% 30%Headline cost per seat excluding fuel decreased by 0.8% atconstant currency2 to £43.11 (2018: £43.43). This costperformance was driven by:• Investment in operational resilience, which drove decreases incancellations and delays over three hours despite experiencingthe drone issue at Gatwick as well as summer thunderstormsacross many markets• Lower navigation costs due to reduction in Eurocontrol rates• Favourable impact of IFRS 16 in relation to maintenance costsoffset by increased underlying costs of maintenance• Fleet up-gauging from A319ceo to A320neo and A321neo albeitthis has been somewhat lower than planned due to Airbusdelivery delays• Established strategic relationships with key suppliers, particularairports and ground handling agents, to drive long-term costefficiencies• Lower de-icing costs due to relatively benign weatherPartially offset by:• Annualisation of previously agreed crew pay deals• Price increases from both regulated and non-regulated airports• Ownership costs reflecting new aircraft year on year andthe impact of IFRS 16 accounting changes. The net impact ofIFRS 16 is an £8 million decrease in headline costs• The cost impact of the drones at Gatwick relating to customerwelfare costs. The incident affected around 82,000 customersand led to over 400 flights being cancelled.Fuel cost per seat increased by 8.4% to £13.48 (2018: £12.44) andby 4.3% at constant currency2, driven by a higher hedged fuelprice compared to the prior year, partially offset by a continuedinvestment into more fuel efficient aircraft.NON-HEADLINE ITEMSeasyJet incurred a net benefit of £3 million in non-headlineitems during the 2019 financial year (2018: £133 million cost).Non-headline items are material non-recurring items or itemswhich do not reflect the trading performance of the business.These costs are separately disclosed and further detail can befound in the notes to the accounts. These include:• £2 million gain as a result of the sale and leaseback of ten A319aircraft in the period (2018: charge of £19 million)• £2 million gain from the retranslation of balance sheetmonetary assets and liabilities (2018: nil)• £2 million credit related to the commercial IT platformprogramme (2018: £65 million charge)• £4 million charge for ongoing organisational and legalcosts associated with easyJet’s Brexit-mitigationprogramme (2018: £7 million)• £1 million credit related to fair value adjustments(2018: £1 million charge)www.easyJet.com 17STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEWHEDGINGDetails of hedging arrangements as at 30 September 2019 are set out below:Fuel requirement US Dollar requirement Euro surplus CHF SurplusSix months to 31 March 2020Percentage of anticipated requirement hedged 74% 70% 68% 76%Average rate $632 / metric tonne $1.36 €1.11 CHF 1.27Full year ending 30 September 2020Percentage of anticipated requirement hedged 68% 66% 67% 73%Average rate $655 / metric tonne $1.36 €1.11 CHF 1.27Full year ending 30 September 2021Percentage of anticipated requirement hedged 45% 46% 52% 52%Average rate $643 / metric tonne $1.31 €1.10 CHF 1.231. Unit fuel calculated as the difference between latest estimate of 2020 fuel costs less 2019 fuel cost per seat multiplied by 2020 seat capacity2. Based on rates as at 30 September 2019 of US$ to £ Sterling 1.28, Euro to £ Sterling 1.15. Currency, capital expenditure and fuel increases are shownnet of hedging impactBALANCE SHEETeasyJet’s business model and strategy are underpinned bysector-leading balance sheet strength. easyJet is committed to itsinvestment grade rating, with a BBB+ (stable) rating fromStandard & Poor’s and a Baa1 (stable) rating from Moody’s.Of easyJet’s 331 aircraft on the balance sheet at 30 September2019, the 232 owned aircraft are unencumbered, representing70% of the total fleet (unchanged year-on-year).Over the next four years easyJet’s gross capital expenditure,including the impact of new IFRS accounting standards isexpected to be as follows:Year 2020 2021 2022 2023Gross capital expenditure (£ million) 1,350 950 1,200 1,100easyJet’s funding position is strong with net debt at 30 September2019 of £326 million, which comprised cash and money marketdeposits of £1,576 million (2018: £1,373 million) and borrowings of£1,902 million (2018: £977 million).Borrowings as at 30 September 2019 include £578 million oflease liabilities, with the majority added as a result of theadoption of IFRS 16.After allowing for the impact of aircraft operating leases, aspreviously adjusted (seven times operating lease costs incurredin the 12 months ending 30 September 2018), adjusted net debt asat 30 September 2018 was £738 million.Liquidity per 100 seats was £3.6 million (2018: £3.9m), which representscomfortable headroom compared to our target of a liquidity bufferof £2.6 million per 100 seats, defined as cash plus undrawnrevolving credit facilities and business interruption insurance.Headline return on capital employed (ROCE) fell to 11.4% (2018:14.6%), driven by the weaker performance in Q2. Total ROCE fellto 11.4% (2018: 11.7%). On a like-for-like accounting basis, totalROCE decreased to 10.0%.BREXITeasyJet is well prepared for the UK’s departure from the EuropeanUnion and has been operating in a ‘No-Deal Brexit’ environmentsince March 2019.Since March easyJet has been structured as a pan-European airlinegroup with three airlines based in Austria, Switzerland and the UK.This ensures that easyJet will continue to be able to operate flightsboth across the EU and domestically within EU countries after theUK has left the EU, regardless of the Brexit outcome.easyJet has made good progress in meeting the Europeanownership requirements and our equity capital is currently aroundthe 50% threshold of qualifying nationals (EU member states plusSwitzerland, Norway, Iceland, Liechtenstein, but excluding the UK).In the event that the UK were to leave the EU without a deal and ifthe European ownership of easyJet were to fall below 50% theneasyJet could invoke the provisions within its Articles of Associationwhich allow for suspension of rights to attend and vote at shareholdermeetings and/or sale of shares by non-qualifying nationals toqualifying nationals. Similar powers exist in the articles of associationof other airlines, as well as in the articles of companies in othersectors which have national share ownership requirements. WhilsteasyJet has no current intention of exercising these powers, theposition will be kept under review pending the outcome of Brexitnegotiations between the UK and the EU, along with other options.easyJet continues to closely monitor demand on all of our routes,in the event that political events may affect our customers’propensity to travel.Having started our Brexit preparations early and with contingencyplans in place, we are confident that easyJet will keep flying andthat our operations will not be materially affected, whatever theoutcome of the current political situation.OUTLOOKeasyJet continues to see the current market environment asan opportunity to build and strengthen its network, operationalresilience and customer experience for the long term.For the 2020 financial year easyJet plans to grow capacity atthe lower end of our medium-term 3-8% guidance. Scheduledcapacity growth in Q1 is currently around 2% and is expected tobe less than 2% for the first half.Forward bookings for the first half of the 2020 financial year arereassuring. Bookings are slightly ahead of last year (recognisingthat the second quarter is a weak comparative).Revenue per seat for the first half of the 2020 financial yearis expected to be up low to mid single digits year-on-year.This excludes the incremental revenues associated witheasyJet Holidays.Disruption costs are expected to continue improving next year,driven by our Operational Resilience programme. A lower rateof capacity growth will make it more challenging to deliver lowercosts per seat on an underlying basis. Headline cost per seatexcluding fuel at constant currency for the 2020 financial year isexpected to increase by low single digits, assuming normal levelsof disruption. This guidance excludes the incremental costsassociated with easyJet Holidays, which is expected to be at leastbreakeven for the financial year ending 30 September 2020.Capital expenditure for the 2020 financial year is expected to bec.£1.35 billion (including the effect of new IFRS accounting standards).Based on today’s fuel prices, unit fuel costs1 for the year to 30September 2020 are expected to result in a headwind of between£70 million and £140 million, due to easyJet’s advantaged hedgingposition. Total fuel bill is expected to be around £1.62 billion(includes £10 million of the headline foreign exchange impact) andthis figure includes c.£25 million investment in carbon offsetting.The total expected headline foreign exchange impact2 for the yearto 30 September 2020 is expected to be a positive movement ofaround £40 million.CHIEF EXECUTIVE’S REVIEW CONTINUED18 easyJet plc Annual Report and Accounts 2019our planThe strategic plan which we announced last year is now fullyembedded across easyJet, to help build on our strengths andchart our path into an even more successful future.Customers do notjust want a greatdeal on price – theywant to fly from theairports which workbest for them.We will continue totarget being themarket share leaderat our primaryairports, offering themost compellingnetwork ofdestinations anddriving greaterreturns andfrequencies fromthese markets.Customers haveincreasing choiceand theirexpectationsare rising.We will givecustomers reasonsto choose to spendmore with us,including growingour end-to-endholiday offer,expandingour business traveland offering acompelling customerloyalty programme.People are at theheart of everythingwhich easyJet does.Our customer-facingemployees are thevery best in theindustry and providethe warmestwelcome in the sky.The positiveexperience whichthey provide forcustomers leads toincreased loyalty andrepeat business.We continue to drivea number of costand efficiencyprogrammes in orderto mitigate theeffects of inflationand to build furtherresilience into ourbusiness model.Our improvedoperational resilienceprocedures andefficient new aircraftnot only reduce costbut also reduce theimpact on theenvironment.Our team hasidentified a richpipeline of dataprojects. The earlyresults have beenextremely positive,improvingscheduling, seatband pricing, lateyield pricing andoperationalresilience.OUR PRIORITIES:NUMBER ONEOR NUMBERTWO INPRIMARYAIRPORTSGiving customersthe leading offer inthe airports theywant to fly toMaking it easy,enjoyable andaffordable to travelagain and again forbusinessand holidaysWe control ourcosts and focus ourinvestments whereit matters most toour customersand our peopleCreating aninclusive andenergisingenvironment thatattracts the rightpeople and inspireseveryone to learnand growUsing data tomake smartdecisions andshape the future oftravel, to becomethe world’s leadingdata-driven airlineWINNINGOURCUSTOMERS’LOYALTYVALUEBYEFFICIENCYTHERIGHTPEOPLEINNOVATINGWITH DATAFOR MORE DETAILSPLEASE SEE PAGE 20FOR MORE DETAILSPLEASE SEE PAGE 21FOR MORE DETAILSPLEASE SEE PAGE 22FOR MORE DETAILSPLEASE SEE PAGE 24FOR MORE DETAILSPLEASE SEE PAGE 25www.easyJet.com 19STRATEGIC REPORT OUR STRATEGYCHIEF EXECUTIVE’S REVIEW CONTINUEDOUR STRATEGY CONTINUED99% of easyJet’s seat capacity touches these key, primaryairports, positioning the airline strongly against its competitors.During the year easyJet established a number one position attwo more airports, taking the total to 27.Looking forward, easyJet has identified a number of potentialtarget airports for the coming years where GDP and passengervolumes are high, and where there is a weak incumbent orfragmented competition. By being number one in key airports,with the strongest brand and delivering the best value, we canbecome the first choice airline for our customers. easyJetestimates that within its existing target airports there are61 million head-to-head seats being flown with legacy airlines.This represents a significant opportunity for growth.easyJet regularly reviews its route network in order to maximisereturns and exploit demand opportunities in the market. Duringthe 2019 financial year easyJet added 112 routes to the network.Reflecting the airline’s discipline, it also discontinued 40 routeswhich either did not meet expected return criteria or becamesecondary to a more attractive route elsewhere. We will continueto monitor any additional opportunities for growth which maybecome available in our target airports.easyJet’s network decisions are not driven solely by cost butby the desire to secure long-term, sustainable and profitablepositions in our customers’ favourite airports, which in turn willdrive long-term, sustainable competitive advantage and returnsfor shareholders, throughout the cycle.easyJet’s strategy is a winning one and customers continue tochoose to fly with us. This is due to our fantastic staff, ourefficiency and our all-round value proposition in short-haulEuropean flights.easyJet continues to target growth in regional France, leveragingits long-established brand and network presence. In April easyJetopened a new base in Nantes, which brings its number onepositions in France to six, including Nice, Lyon, Bordeaux, Lilleand Grenoble as well as a number two position in Paris-Charlesde Gaulle and Toulouse.easyJet also consolidated its position as the UK’s leading airlinein the domestic market, with growth at Manchester, Edinburgh,Glasgow, Belfast, Liverpool, Southend and Bristol, as well ascontinuing to strengthen its number one positions in Italy atMilan Malpensa, Venice and Naples.During the 2019 financial year, easyJet grew capacity by 9.8mseats (+10.3%). This was a faster rate of growth than our markets,which grew capacity by 5.3%.Our growth came predominantly from the UK, French, Spanishand Italian operations, as well as from Germany where webenefited from a full year of operations at our Tegel base. 25%of easyJet’s capacity growth during 2019 was from domesticflights, in markets we already knew very well.Shortly after the end of the financial year easyJet acquiredThomas Cook’s slots at Gatwick Airport (12 summer slot pairs and8 winter slot pairs) and Bristol Airport (6 summer slot pairs andone winter slot pair) for £36 million. We are in the process offinalising the schedules and will be flying these routes as earlyas February 2020.Number one ornumber two inprimary airportseasyJet aims to provide customerswith the leading, best value offer forthe destinations they want to fly to.easyJet’s strategy is driving bothleisure and business travel by focusingon the key airports which servevaluable catchment areas andrepresent Europe’s largest markets byGDP. easyJet has a portfolio of slotsat customer-friendly times in thesecapacity-constrained airports, whichreinforces its competitive advantageagainst airlines which cannot matchits breadth of destinations andfrequencies.#1 POSITIONSINCREASE IN #1 & #2POSITIONS272018: 2566%since 201220 easyJet plc Annual Report and Accounts 2019easyJet will offset carbon emissions from the fuel used for everyflight across its whole network. Through carbon offsetting easyJetwill invest in projects to reduce carbon and carbon equivalentsfrom the atmosphere. easyJet will compensate for every tonneof CO2 emitted from fuel used for its flights, by ensuring there isone tonne less in the atmosphere – whether by reducing CO2 byphysically removing it from the air (for example by planting moretrees) or by avoiding the release of additional CO2.easyJet has undertaken a rigorous process in selecting its carbonoffset programmes. Only programmes which meet either the GoldStandard or Verified Carbon Standard (VCS) accreditation, whichare globally recognised and respected for their standards ofoffsetting, will be used.These accreditors ensure that the carbon reductions claimed byindividual programmes would not have happened without thatproject, or that by reducing carbon emissions in one place theydo not inadvertently increase them elsewhere.easyJet has partnered with Climate Focus to help with theappointment of the projects. Climate Focus is an internationaladvisory company committed to the development of policiesand programmes that mitigate and adapt to the impacts ofclimate change.This action on easyJet’s carbon emissions is an interim measure,and will be in place until new carbon-reducing technologiesbecome available and commercially viable. The airline will continueto support innovative technology, including the development ofhybrid and electric planes, working with others across the industryto reinvest aviation over the long-term so that European aviationcan become net-zero carbon. The aim will be for easyJet toreduce the amount of carbon offsetting it does as newtechnologies emerge.As part of this work, the easyJet and Airbus partnership has beenestablished, to jointly research the opportunities and challenges ofintroducing hybrid and electric aircraft for short haul flying in Europe.easyJet has been supporting Wright Electric over the last twoyears, which is aiming to produce an all-electric commercialaircraft which could be used for short haul flights. The airline is alsoworking with Rolls Royce and Safran on new technologies toreduce the carbon footprint of flying.easyJet’s focus on operational efficiency also continues to deliverfuel and carbon emissions savings. The airline is transitioning itsfleet to increasingly more modern, fuel efficient aircraft; operatingthe aircraft in ways which avoid the unnecessary use of fuel; andmaximising passenger load factor as much as possible. Since2000 easyJet has reduced its carbon emissions per passengerkilometre by over one third. Its carbon dioxide emissions perpassenger kilometre in the 2019 financial year were 77.07 grams,down from 78.46 grams in the 2018 financial year.HOLIDAYSLast year easyJet identified a significant opportunity to developa financially meaningful holidays business. We have built a brandnew organisation from the ground up to replace the previouslyoutsourced commission-based model, so we can directly sell tocustomers and grow our business quickly and at scale.Around 20 million customers per year fly with easyJet toEurope’s largest leisure destinations, but only 0.5 million bookaccommodation with us. These 19.5 million leisure customers areour initial target market. The total European package holidaysmarket is worth around £61 billion per year. The UK alone is a£13 billion market and has grown by 6% annually.easyJet Holidays has built an entire organisation focused ontechnology, digital and data, working alongside our experiencedlocal hotel sourcing team and supported by our commercial,marketing, finance, HR, legal and customer functions. Our peopleare a mix of industry and tech specialists and easyJet talent.easyJet makes travel easy, enjoyableand affordable for customers whetherit is for business or leisure – seamlesslyconnecting Europe with the warmestwelcome in the sky.Winning ourcustomers’loyaltyRETURNING CUSTOMERSCUSTOMER SATISFACTION68%2017: 66%74%2018: 75%We are making great progress in strengthening our brand acrossEurope, with record brand scores across many markets and moreconsumers now saying that we are their first choice airline in themarkets where we operate. Consumers are choosing us becausethey want to fly easyJet, and not just because of our great pricesand strong network.SUSTAINABILITYFrom 19 November 2019 easyJet will offset the carbon emissionsfrom the fuel used for all its flights on behalf of customers. Indoing so easyJet will become the world’s first major airline to havenet-zero carbon emissions from all its flights. The airline will alsocontinue its long-term work to support the development of newtechnology, including electric planes, so that European aviationcan move towards becoming net-zero carbon. At this stage theexpected cost will be c.£25m for 2020.www.easyJet.com 21STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEWCHIEF EXECUTIVE’S REVIEW CONTINUEDOUR STRATEGY CONTINUEDeasyJet has built a sustainablecost advantage based on ongoingefficiency and cost control. Wecontinue to drive a number of costand efficiency programmes in orderto mitigate the effects of inflationand to build further resilience intoour business model.VALUE BYEFFICIENCYFEWER CANCELLATIONSCOST SAVINGS46%£139MThe all-new easyJet Holidays offering will be launching in the UKmarket before Christmas, taking bookings for the winter 2019 andsummer 2020 seasons. Our new holidays website and mobileapp will offer a simple-to-use streamlined search and bookingprocess with inspiring content.The way that customers are taking holidays is changing and weknow customers want holidays with various durations and not justthe traditional seven and 14 nights. Our research tells us thateasyJet customers will value easyJet Holidays’ unrivalled flightflexibility, curated portfolio of hand-picked hotels and compellingpricing. easyJet Holidays is well placed to provide customers withthis level of flexibility and the tailored holidays they want, and ourbusiness is built to respond to this.easyJet is excited about the opportunity to build a major player in theholidays market for a low upfront investment and with limited risk.BUSINESSeasyJet is proud that it has been voted UK Business Airline ofthe Year at the Business Travel Awards (UK).easyJet has a well-established and attractive business passengeroffer, based on its network of primary airports, its slot portfolioand high frequency on Europe’s major commercial routes. easyJethas built its business customer base from 10 million in 2012 toalmost 17 million in 2019. The increase in business passengersduring 2019 was 11.0% and has been driven by a B2B sales focuson promoting a new Flexi Fare proposition and Inclusive productson our UK, French and German domestic routes, which saw a 13%increase in business passenger numbers. Overall penetration ofbusiness rose by 0.5 percentage points to 17.5%. The businesspricing premium decreased by 4% reflecting tougher marketconditions, however continued investment in its business offer willhelp easyJet reach a higher market share of European short-haulbusiness travellers. We now proactively work with 40% of theFTSE 100 and our dedicated business travel team is activelyengaged with a high proportion of DAX30 and CAC40 companies.LOYALTYeasyJet has a great offer and a great brand which continue todrive customer loyalty. Loyal customers are much more valuableto us, with returning customers buying twice as many flights peryear as first timers.Brand affinity is at an all-time high across our major markets, withboth affinity and preference increasing to our highest ever levelscompared to 2018 in the UK, France, Germany, Italy, Netherlandsand Switzerland.The easyJet brand is considered of equal status to many of ourfull-service competitors.In the 2019 financial year, 68% of easyJet seats were booked bycustomers who had made a booking in the preceding two years,representing 65 million passengers. This is a 7 million increasecompared to 2018.Membership of easyJet’s invitation-only loyalty programme,Flight Club (for those who fly more than 20 times a year witheasyJet) also grew strongly, with Flight Club members increasingby 24% in 2019 and accounting for 9% of all bookings made.easyJet Plus membership rose by 17% over the 2019 financial year.easyJet’s ambition is to drive customer loyalty further whilstproving that expensive and complex structures are not needed inorder to be innovative. Whilst our internal resources have beenfocused on the easyJet Holidays launch during 2019, easyJet willcontinue to evolve its loyalty offering during 2020 to grow thetotal value per passenger through a customer-centric loyaltyprogramme that enhances the end-to-end travel experience,driving loyalty through personalised benefits which offer fair valueand relevancy.22 easyJet plc Annual Report and Accounts 2019easyJet is committed to maintaining its structural cost advantagein the markets in which it operates, particularly compared to thelegacy airlines. easyJet is low cost, driving efficiency and investingonly where it matters most to our customers and our people.Through its Cost and Efficiency Programme, easyJet continues todrive both short-term efficiencies and longer term structural costsavings across all areas of the business, leveraging its increasingscale. These savings enable the airline to offset the effects ofunderlying inflation and build flexibility to help mitigate revenuepressure. Data is playing an increasingly large part in identifyingand delivering cost savings.The Cost and Efficiency Programme has been able to deliversustainable reductions this period: £139 million of savings havebeen achieved in the financial year (2018: £107 million), principally in:• airport deals: easyJet continues to benefit from economiesof scale and delivering passenger growth to its network of airports• ground handling costs• disruption cost savingseasyJet expects to deliver at least £80 million incremental savingsin the 2020 financial year.DISRUPTIONIn addition to our structural cost programme initiatives to leverageour scale, easyJet sees opportunities to address the difficultaviation operating environment and the associated cost ofdisruption. This in turn will drive better On Time Performance(OTP) and customer satisfaction, as well as reduce costs.The Air Traffic Control (ATC) environment in Europe remainschallenging, experiencing 24.5 million delay minutes in 2019,compared to 14.1 million in 2015, as reported by Eurocontrol.During the financial year easyJet has made significantprogress in its Operational Resilience (OR) programme, usingdata and resource from across the company to plan for thisdifficult environment.The OR Programme has resulted in improvements in severalkey areas:• Schedule design – for the summer 2019 schedule easyJethas improved automation and increased the number ofparameters used in the planning process, including factoringin longer turn times for bigger aircraft such as the A320s andA321s and buffers for congested airspace or curfew-constrainedairports. As easyJet operates more slots at constrained airportsthan any other airline in the world this is a key developmentwhich will continue to be enhanced in the future• Crew cost and resilience – standby has been increasinglyshifted to afternoon/evening duties, and around 900prioritised pairings have been proactively split• Aircraft planning – increased standby aircraft to 13 aircraft• First wave and turn – re-timed first wave processes andintroduced new hot turn/hot arrival processes• Operations Control Centre (OCC) resilience – new operatingmodel rolled-out including specialist ‘pods’ or sub teams tomanage each cluster of bases• Customer management – reduced unnecessary or duplicativecustomer communications, and increased automation inclaims processing• Data products – introduced 21 new data products, tosupport operational decision making including• Crewing Analyser, to predict crew pairings which wouldbenefit from being split• OTP Simulator, to predict EU 261 events and enableproactive action.easyJet has successfully reversed the trend of increasingdisruption events and costs (this includes delays over 3 hours,overnight delays and cancellations) during the 2019 financialyear thanks to our resilience work.Our Operational Resilience programme has yielded tangiblepositive results (2019 compared to 2018) including:• 30% reduction in total events• 46% reduction in cancellations• 24% reduction in 3 hour delaysIn mitigating the impact of ATC delays our pre-flight tacticalplanning team avoided over 550 hours of forecast delay and theflight planning team is re-routing on the day to avoid a further20,000 minutes of delay per week.Overall we have managed to keep net total minutes of delay perflight broadly flat this year, in extremely challenging conditions.For the first time in the last four years easyJet has seen areduction in disruption costs year-on-year.ON-TIME PERFORMANCEIn the year to 30 September 2019, OTP was flat year on yearat 75%. This reflects our renewed focus on operational resiliencein order to counteract the effects of operating at scale inincreasingly congested airspace. This is despite OTP in thefourth quarter being significantly affected by the impact oflightning storms across Europe.OTP % ARRIVALS WITHIN 15 MINUTES1Q1 Q2 Q3 Q4 Full year2019 Network 79% 82% 74% 66% 75%2018 Network 81% 82% 73% 68% 75%1. On-time performance is defined as the percentage of flights which arrivewithin 15 minutes of the scheduled arrival time and is measured byinternal easyJet systemswww.easyJet.com 23STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEWCHIEF EXECUTIVE’S REVIEW CONTINUEDOUR STRATEGY CONTINUEDPeople are at the heart of everythingeasyJet does. Our customer-facingemployees are the very best in theindustry and provide the warmestwelcome in the sky. The positiveexperience which they provide forcustomers leads to increased loyaltyand repeat business.THE RIGHTPEOPLEEMPLOYEE TURNOVER6%20%As our business continues to evolve and grow, easyJetremains committed to fostering an inclusive and energisingenvironment which attracts the right people and inspireseveryone to learn and grow.This commitment is demonstrated in an Employee Net PromoterScore (eNPS) of 23 and an overall engagement score of 8 out of10, which are both strong results. easyJet also has a Glassdoorrating of 4.1, which puts us in the Top 50 places to work in theUK and the best airline.easyJet’s business model of employing crew on local contractsacross Europe delivers significant value in attracting andretaining high quality crew. easyJet believes this is the bestlong-term and sustainable resourcing model in the marketswhere we operate. easyJet’s investment in this area has drivenstructural benefits including employee turnover being amongstthe lowest in the industry.EMPLOYEE TURNOVEREmployee turnover remains at very low rates, at 5% for cabincrew, 6% for pilots and 6% in total over the year.Our employees tell us that they value our friendly, positive andupfront atmosphere, our famous ‘orange spirit’ and ourcompetitive remuneration policies.easyJet is investing significant resources to improve scheduleand rostering efficiency, which will improve crew productivityand create a more stable working environment.FEMALE PILOTSeasyJet’s Amy Johnson Flying Initiative continues to address thesignificant gender imbalance in the worldwide pilot community.This programme promotes and supports female recruits and hasseen considerable success. Activity this year has included over180 visits to schools and youth organisations, sponsorship of anAviation Badge for Brownies (a division of Girlguiding in the UK)and highlighting female easyJet pilots in the media. From just 5%of our pilot intake in 2015, the proportion of new entrant pilotswho were female continues to rise and is on track to meet our20% target in 2020. We will continue to work to influence theissue of diversity on the flight deck in the coming years.TARGET FOR NEWFEMALE PILOTS24 easyJet plc Annual Report and Accounts 2019easyJet is aiming to become theworld’s most data-driven airline. OurChief Data and Information OfficerSam Kini has built a team of datascientists and data analysts to help usachieve this goal. We have identified arich pipeline of projects to optimiserevenues and costs throughout easyJet.INNOVATINGWITH DATAPIECES OF PAPER TO BESAVED EVERY DAY WITHCREW I-PADSSUMMER SCHEDULEUPDATES30,000>50,000Over the 2019 financial year our teams have been working in acoordinated, airline-wide way to identify improvements acrossthe end-to-end process, from designing our flying schedulesand rosters, managing our fleet, communicating with andsupporting our customers, and using data to make the bestnetwork-wide decisions.Our data scientists now use analytics in a much moresophisticated way to inform every part of our plan. We haveintroduced new data products, upgraded core systems andcreated a new team to provide rapid insights on recent events,and identify any systemic patterns or opportunities to improve.This has included activating over 50,000 updates to the summer2019 schedule to help us avoid disruption where possible, and tobe better positioned to manage where we cannot. easyJet hasalso optimised our maintenance planning and used analytics tobetter predict where and when standby aircraft might berequired, reducing delays and speeding up recovery whendisruption occurred.easyJet has invested in a new team to work directly with externalbodies involved in air traffic management, so we can improvehow we plan our flight slots and work together to avoid delays.Notable successes in 2019 included:• taking predictive data analysis into our schedule design, in orderto manage disruption. This has resulted in our disruption costsactually falling this year, for the first time in the last four years• testing the impact of what is placed in the booking funnel andwhere, in order to maximise ancillary revenue• analysing the results of our fourth band of seat pricing, whichis delivering well• voted best airline app at the World Aviation Awards• starting the roll-out of iPads for our crew, to improve OTP,reduce disruption, improve customer service and save30,000 pieces of paper a dayFUTURE PROJECTSeasyJet’s current pipeline of data projects include:• our late yield initiative, which was introduced after the softertrading in Q2, in order to capture some of the pricing gap insuper-late bookings, relative to our competitors. easyJetnow has a new data team working side-by-side with a muchlarger trading team, identifying the best performing flights toget more yield, generating tens of millions of pounds inincremental revenue. Initial results have been very encouragingand we will roll out a further wave in 2020• ongoing operational resilience processes, such as the OTPsimulator, which has helped us to keep net total minutesof delay per flight broadly flat year-on-year, in extremelychallenging conditions• continued roll-out of our predictive maintenance capabilities,with 56 aircraft already benefiting from the Advanced Activesoftware. The predictive maintenance programme notifiesus in advance of potential issues and has avoided 318cancellations and 47 major delays already since launch• analysis of onboard purchasing decisions to assess whetherchanges should be made to our offering• continual innovation in our offer such as the new Bag Sizeron the easyJet app and the roll-out of Auto Bag Drop,which is now offered in 19 airportsThis exciting pipeline of projects for the coming year willcontinue to drive cost efficiency and operational excellencein 2020 and beyond.www.easyJet.com 25STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEWWHY IT IS IMPORTANTAs a low cost business, we focus onefficiency to produce customer solutionswhilst also driving operational efficiencieswhich will maximise our return oninvestment.WHAT WE MEASUREHeadline operating profit after tax, dividedby average capital employed.WHY IT IS IMPORTANTDelivering sustainable shareholder value isa fundamental part of our mindset as wemanage our business.WHAT WE MEASUREHeadline profit after tax divided by theweighted average number of shares inissue during the period (adjusted forshares held in employee benefits trusts).HOW WE PERFORMEDHeadline ROCE decreased to 11.4%(2018: 14.6%) driven by a reduction inheadline profit in the year. Total ROCEdecreased to 11.4% (2018: 11.7%).Without the adoption of IFRS 9, 15 and16 headline ROCE would have been9.9% and total ROCE 10.0%.HOW WE PERFORMEDHeadline EPS decreased to 88.7(2018: 118.3) driven by a reductionin profit in the year. Total EPSdecreased to 88.6 (2018: 90.9).HEADLINE RETURN ON CAPITAL EMPLOYED (%)HEADLINE EARNINGS PER SHARE (P)2019201820172016201514.611.915.022.211.420192018201720162015118.382.5108.4139.188.72015 as reported, not headline.2016 as restated, headline.2015-2018 pre IFRS 16: normalised operatingprofit after tax divided by average adjustedcapital employed. 2019 post IFRS 16.2015 as reported, not headline.2016 and 2018 restated, headline.KEY PERFORMANCE INDICATORSmeasuring our performanceWHY IT IS IMPORTANTIncremental improvements in profitabilityensure that we have a platform forlong-term growth while generatingvalue for all stakeholders.WHAT WE MEASUREHeadline profit before tax divided bythe number of seats flown.HOW WE PERFORMEDHeadline profit before tax per seatdecreased to £4.07 (2018: £6.07).Revenue per seat decreased primarilydue to Brexit-related market uncertaintycoupled with a wider macroeconomicslowdown in Europe. This was partiallyoffset by the reduction in headline costper seat excluding fuel due to our strongcost focus and operational resilience.HEADLINE PROFIT BEFORE TAX PER SEAT (£)easyJet has six Key Performance Indicators, aligned to Our Plan, which weuse to measure progress.201920182017201620156.074.716.189.154.072015 as reported, not headline.2016 as restated, headline.26 easyJet plc Annual Report and Accounts 2019WHY IT IS IMPORTANTAn important part of Our Promise to be asafe and responsible airline is to help tackleclimate change. In the short-term ourfocus is over being as efficient as we can,to reduce carbon emissions.WHAT WE MEASUREHow much carbon dioxide is produced foreach passenger, for each kilometre theyfly with us.HOW WE PERFORMEDIn 2019 our carbon emissions perpassenger kilometre were 77.07g, downfrom 78.46g in 2018. Since 2000, wehave reduced our carbon emission perpassenger kilometre by over one third.CO2 EMISSIONS PER PASSENGER2019201820172016201578.4678.6279.8981.0577.07WHY IT IS IMPORTANTReliable operational performance is a keyfactor in our customers’ perceptions oftheir experience with us. Managing OTPand minimising disruption will positivelyimpact on the likelihood of our customerschoosing to fly with us on a repeat basis.WHAT WE MEASUREPercentage of flights which arrive within15 minutes of the scheduled arrival time.WHY IT IS IMPORTANTCustomers have increasing choice andtheir expectations are rising. Ensuringwe meet their evolving needs will positionus as the brand of choice when flyingwithin Europe.WHAT WE MEASUREOur customer satisfaction index is basedon the results of a customer satisfactionsurvey measuring how satisfied thecustomer was with their most recent flight.HOW WE PERFORMEDOur OTP is flat year on year at 75%(2018: 75%). This is in spite of increasedcongestion in air traffic on our network,continued adverse weather conditions,and disruption at London Gatwick.HOW WE PERFORMEDOverall customer satisfaction was lowerthis year primarily due to delays causedby ongoing air traffic congestion.ON-TIME PERFORMANCE (%)CUSTOMER SATISFACTION (%)201920182017201620157576778075201920182017201620157573768074Revised calculation in 2019,2015-2018 restated.www.easyJet.com 27STRATEGIC REPORT STRATEGIC REPORT KEY PERFORMANCE INDICATORS KEY PERFORMANCE INDICATORSFINANCIAL REVIEWOUR FINANCIALRESULTSandrew findlayChief Financial OfficerIn the 2019 financial year, easyJet flew 96.1 million passengers (2018: 88.5 million) and delivered a headline profit before tax for the yearof £427 million (2018: £578 million) or £4.07 per seat (2018: £6.07 per seat). Total reported profit before tax for the year was £430 million(2018: £445 million) or £4.10 per seat (2018: £4.68 per seat).IFRS 9, 15 and 16 have been adopted with effect from 1 October 2018, applying the standard prospectively for IFRS 9 and using thecumulative catch-up (‘modified’) transition method for IFRS 15 and 16. This means that the prior year comparatives have not beenrestated. The impact on the 2019 financial results of the adoption has been disclosed in the income statement to allow comparabilitywith the 2018 financial year.Amounts presented at constant currency are an alternative performance measure and not determined in accordance with InternationalFinancial Reporting Standards but provide relevant and comparative reporting for users.FINANCIAL OVERVIEW2019 2018£m (reported)Amounts withoutadoption of new IFRSs Impact of new IFRSs As reported As reportedRevenue 6,408 (23) 6,385 5,898Headline costs excluding fuel (4,568) 26 (4,542) (4,136)Fuel (1,416) – (1,416) (1,184)Headline profit before tax 424 3 427 578Headline tax charge (78) – (78) (112)Headline profit after tax 346 3 349 466Non-headline items 18 (15) 3 (133)Non-headline tax (charge)/credit (3) – (3) 25Total profit/(loss) after tax 361 (12) 349 3582019 2018£ per seat (reported)Amounts withoutadoption of new IFRSs Impact of new IFRSs As reported As reportedRevenue 61.03 (0.22) 60.81 61.94Headline costs excluding fuel (43.51) 0.25 (43.26) (43.43)Fuel (13.48) – (13.48) (12.44)Headline profit before tax 4.04 0.03 4.07 6.07Headline tax charge (0.75) – (0.75) (1.18)Headline profit after tax 3.29 0.03 3.32 4.89Non-headline items 0.17 (0.14) 0.03 (1.39)Non-headline tax (charge)/credit (0.02) – (0.02) 0.26Total profit/(loss) after tax 3.44 (0.11) 3.33 3.76REVENUEHEADLINE PROFITBEFORE TAX TOTAL PROFIT AFTER TAX6,385m2018: 5,898m427m2018: 578m349m2018: 358m28 easyJet plc Annual Report and Accounts 2019Total revenue increased by 8.3% to £6,385 million (2018: £5,898 million), and increased by 7.3% at constant currency. Excluding theimpact of IFRS 15, which changes the recognition of certain fees from the time of booking to the time of flying and reclasses anelement of disruption costs to offset revenue, total revenue would have been £6,408 million. The increase in total revenue reflected anincrease in passenger numbers of 8.6% to 96.1 million. Within total revenue, ancillary revenue increased by 13.7% reflecting easyJet’scustomer-focused products and improved ancillary conversion.Total revenue per seat decreased by 1.8% to £60.81 (2018: £61.94), with a decrease of 2.7% at constant currency. Excluding the impactof IFRS 15, total revenue per seat would have fallen 1.5% to £61.03, or 2.3% at constant currency. The decrease in revenue per seat is aconsequence of a number of contributors including Brexit-related market uncertainty coupled with a wider macroeconomic slowdown inEurope. In addition, the dilutive impact of a full period of Tegel flying, and the non-repeat of one-off benefits in 2018, such as thebankruptcies of Monarch and Air Berlin, also impacted our performance.Headline cost per seat excluding fuel decreased by 0.4% to £43.26, and decreased by 0.8% at constant currency. The key drivers werelower disruption costs, benefiting from easyJet’s Operational Resilience programme, reduced navigation charges and lower wet leasingcosts, as well as unit cost savings from the up-gauging of the fleet to larger and more efficient aircraft. easyJet continues to negotiatevolume deals on airport contracts, and obtain savings through our cost programme initiatives. This decrease in cost was achieved in spiteof an environment of continued inflationary pressure and significant air traffic congestion. Excluding the impact of the adoption of IFRS15 and 16, headline cost per seat excluding fuel decreased by 0.2%, and decreased by 0.5% at constant currency.Fuel cost per seat increased by 8.4% to £13.48 (2018: £12.44) and by 4.3% at constant currency, driven by hedging fuel at higher ratescompared to the prior year.A non-headline profit of £3 million (2018: £133 million charge) was recognised in the period, consisting of a £2 million gain as a result ofthe sale and leaseback of 10 A319 aircraft, a £2 million gain for balance sheet revaluations, a £2 million credit from releasing the balanceof the non-headline 2018 Commercial IT platform close down accrual no longer required, a £1 million gain on fair value adjustments,partially offset by a £4 million charge in relation to Brexit-related plans.The total tax charge for the year was £81 million (2018: £87 million). The effective rate for the year was 18.9% (2018: 19.7%). This is in linewith the standard UK rate of 19% (2018: 19%).Due to the recognition of the post-employment obligation for the Swiss retirement benefit scheme, a change was reflected as arestatement of previous financial statements. In addition, easyJet has presented other income as a separate line on the face of theconsolidated income statement. Prior year comparatives have been reclassified from other costs and other financing income lines to beconsistent with the change in presentation. Please refer to note 1 of the Annual Report and Accounts for full details of both changes.EARNINGS PER SHARE AND DIVIDENDS PER SHARE2019 2018Pence per share Pence per shareChange inpence per shareBasic headline earnings per share 88.7 118.3 (29.6)Basic total earnings per share 88.6 90.9 (2.3)Diluted headline earnings per share 87.8 117.4 (29.6)Proposed ordinary dividend per share 43.9 58.6 (14.7)Basic headline earnings per share decreased to 88.7 pence (2018: 118.3 pence) and basic total earnings per share decreased to 88.6pence (2018: 90.9 pence).In line with the stated dividend policy of a pay-out ratio of 50% of headline profit after tax, the Board is recommending an ordinarydividend of £174 million or 43.9 pence per share which is subject to shareholder approval at the Company’s Annual General Meeting on6 February 2020. This will be paid on 20 March 2020 to shareholders on the register at close of business on 28 February 2020.RETURN ON CAPITAL EMPLOYED (ROCE)2019 2018Pre IFRS 9, 15 and 16adoption Reported RestatedHeadline return on capital employed 9.9% 11.4% 14.6%Total return on capital employed 10.0% 11.4% 11.7%www.easyJet.com 29STRATEGIC REPORT FINANCIAL REVIEWHeadline ROCE for the period was 11.4%, a decline of 3.2 percentage points on the prior year, driven by the decrease in profit for theperiod, partially offset by a decrease in the average adjusted capital employed due to the adoption of IFRS 16. Total ROCE for theperiod was 11.4%, a decline of 0.3 percentage points from last year.For 2018, the ROCE calculation includes an adjustment for the capital implicit in aircraft operating lease arrangements. This adjustment iscalculated by multiplying the annual charge for aircraft dry leasing by a factor of seven. Upon adoption of IFRS 16 in 2019, the recognitionof newly-capitalised lease liabilities results in this lease adjustment no longer being required.Headline ROCE without adopting IFRS 9, 15 and 16 would be lower at 9.9%, due to the adverse impact of the lease adjustmentdescribed above.EXCHANGE RATESThe proportion of revenue and costs denominated in currencies other than Sterling remained broadly consistent year on year:Revenue Costs2019 2018 2019 2018Sterling 43% 45% 30% 29%Euro 46% 44% 38% 39%US dollar 1% 1% 26% 26%Other (principally Swiss franc) 10% 10% 6% 6%AVERAGE EXCHANGE RATES2019 2018Euro – revenue €1.13 €1.15Euro – costs €1.13 €1.13US dollar $1.32 $1.37Swiss franc CHF 1.27 CHF 1.31Foreign exchange rate movements arise as easyJet’s foreign currency risk management policy is to hedge between 65% and 85% ofthe next 12 months’ forecast surplus cash flows on a rolling basis, and hence a portion of cash flows remains unhedged. Additionallythe Group’s foreign currency risk management policy is aimed at reducing the impact of a fluctuation in exchange rates on future cashflows, however the timing of cash flows can be different to the timing of recognition within the income statement resulting in foreignexchange movements.HEADLINE EXCHANGE RATE IMPACTFavourable/(adverse)Euro£ millionSwiss franc£ millionUS dollar£ millionOther£ millionTotal£ millionTotal revenue 37 16 3 (1) 55Fuel – – (54) – (54)Headline costs excluding fuel – (11) (3) (1) (15)Headline total 37 5 (54) (2) (14)NON-HEADLINE EXCHANGE RATE IMPACTFavourable/(adverse)Euro£ millionSwiss franc£ millionUS dollar£ millionOther£ millionTotal£ millionNon-headline profit excluding prior yearbalance sheet revaluations – – 4 3 7Prior year balance sheet revaluations 3 1 (4) (1) (1)Non-headline total 3 1 – 2 6There was an £8 million adverse (2018: £1 million adverse) impact on total profit due to the year-on-year changes in exchange rates.A £14 million adverse (2018: £8 million favourable) impact on headline profit was partially offset by a £6 million favourable(2018: £9 million adverse) impact on the non-headline items. The adverse impact of the Sterling/US dollar exchange rate movementon fuel costs was offset by a favourable impact on revenue mainly driven by the continued weakening of Sterling against the Euro.FINANCIAL REVIEW CONTINUED30 easyJet plc Annual Report and Accounts 2019FINANCIAL PERFORMANCERevenue2019 2018£ million (Reported)Amounts withoutadoption of IFRS 15 Impact of IFRS 15 As reported As reportedPassenger revenue 5,030 (21) 5,009 4,688Ancillary revenue 1,378 (2) 1,376 1,210Total revenue 6,408 (23) 6,385 5,898£ per seat (Reported)Amounts withoutadoption of IFRS 15 Impact of IFRS 15 As reported As reportedPassenger revenue 47.91 (0.20) 47.71 49.23Ancillary revenue 13.12 (0.02) 13.10 12.71Total revenue 61.03 (0.22) 60.81 61.94Total revenue increased by 8.3% to £6,385 million (2018: £5,898 million), and increased by 7.3% at constant currency. Excluding theimpact of IFRS 15, total revenue would have been £6,408 million. The number of passengers increased by 8.6% to 96.1 million (2018: 88.5million) driven by a growth in capacity of 10.3% to reach 105.0 million seats (2018: 95.2 million). Load factor decreased by 1.4 percentagepoints to 91.5% (2018: 92.9%).Revenue per seat (RPS) decreased by 1.8% to £60.81 (2018: £61.94), with a decrease of 2.7% at constant currency. Excluding theimpact of IFRS 15, total revenue per seat would have fallen 1.5% to £61.03, or 2.3% at constant currency.Despite Brexit-related market uncertainty coupled with a wider macroeconomic slowdown in Europe, there has been strength inunderlying trading, with easyJet’s brand recognition supporting demand, as well as the success of a number of self-help initiativesincluding a focus on late yields. This helped to partially offset a number of other adverse contributors such as the impact of IFRS 15,the dilutive impact of a full period of Tegel flying, as well as the non-repeat of one-off benefits in 2018 such as the bankruptcies ofMonarch and Air Berlin.The increase in ancillary revenue of 13.7% has been mainly driven by the capacity growth. On a per seat basis, ancillary revenue hasincreased by 3.1%, with product and pricing initiatives and improved conversion rates offsetting lower load factor.HEADLINE COSTS EXCLUDING FUELHeadline cost per seat excluding fuel decreased by 0.4% to £43.26 (2018: £43.43) and decreased by 0.8% at constant currency.2019 2018Amountswithoutadoptionof new IFRSs£ millionImpact of newIFRSs£ millionAs reported£ millionCost per seat£ millionAs reported£ millionCost per seat£ millionOperating costs/(income)Airports and ground handling 1,848 (3) 1,845 17.57 1,649 17.32Crew 859 – 859 8.18 754 7.92Navigation 409 – 409 3.89 400 4.20Maintenance 387 (85) 302 2.88 313 3.28Selling and marketing 157 – 157 1.50 143 1.50Other costs 480 (24) 456 4.36 507 5.32Other Income (29) – (29) (0.27) (13) (0.13)4,111 (112) 3,999 38.11 3,753 39.41Ownership costsAircraft dry leasing 187 (182) 5 0.05 152 1.59Depreciation 240 244 484 4.61 199 2.09Amortisation 15 – 15 0.14 15 0.15Net finance charges 15 24 39 0.35 17 0.19457 86 543 5.15 383 4.02Total headline costs excluding fuel 4,568 (26) 4,542 43.26 4,136 43.43Headline airports and ground handling cost per seat increased by 1.5%, and by 1.1% at constant currency. Airport charges wereadversely impacted by the change in airport mix, which is driven by the annualisation of Tegel flying and continued inflationaryincreases at regulated airports. This was partially offset by cost savings obtained by our continued focus on airport procurementactivity and cost initiatives.Headline crew cost per seat increased by 3.3% to £8.18, and by 2.9% at constant currency. This was driven by agreed inflationaryincreases in crew and pilot pay, low attrition rates and investment in operational resilience over the summer peak period.Headline navigation cost per seat decreased by 7.5% to £3.89, and decreased by 7.6% at constant currency, resulting fromlower Eurocontrol rates from January 2019.www.easyJet.com 31STRATEGIC REPORT FINANCIAL REVIEWHeadline maintenance cost per seat decreased by 12.3% to £2.88, and decreased by 13.2% at constant currency. Underlying increasesin maintenance costs from inflationary price rises and unanticipated heavy maintenance findings were offset by the impact of theintroduction of IFRS 16, which reclassifies maintenance provision charges out of the maintenance line into depreciation expense.Headline other costs per seat decreased by 17.9% to £4.36 per seat, and by 18.6% at constant currency. There has been a significantdecrease in disruption costs as a result of our investment in operational resilience, which resulted in a lower number of disruption eventsand cost in 2019 and a small reclassification of disruption costs to revenue from the introduction of IFRS 15. In addition, there was areduction in wet leasing charges, due to the high level of Tegel wet lease flying in 2018 whilst our own fleet was being introduced andlower staff incentive payments.Headline other income is an additional line item in the income statement that separately recognises income not originating fromcustomers, which includes items such as insurance receipts, compensation (including Airbus delay compensation) and dividendsreceived, which have been reclassified in both 2018 and 2019.OWNERSHIP COSTSOwnership cost per seat has been significantly impacted by the adoption of IFRS 16. Under IFRS 16, all aircraft and properties previouslyheld under operating leases have been capitalised. Annual operating lease and maintenance costs, which would have been recognisedunder the existing leases accounting standard, are replaced by similar aggregated levels of depreciation and interest expense.Dry lease costs have decreased from £152 million in 2018 to only £5 million in 2019. Only those leases which are exempt under IFRS 16,due to their short duration or low value, are now recognised within this line item.Depreciation costs have increased from £199 million in 2018 to £484 million in 2019. Excluding the impact of the adoption of IFRS 16,depreciation increased to £240 million, being driven by the additional depreciation charged as a result of the annualisation of the 28aircraft delivered in 2018, and 22 new aircraft delivered in 2019.Net finance charges have increased by £22 million to £39 million in 2019. Excluding the impact on interest expense from the adoptionof IFRS 16, the net charge decreased by £2 million from 2018. This was mainly due to income from higher yield deposits, partially offsetby an increase in interest payable as a result of the issuance of a €500m bond in June 2019.FUEL2019 2018£ million £ per seat £ million £ per seatFuel 1,416 13.48 1,184 12.44Total fuel cost for the year was £1,416 million (2018: £1,184 million). Fuel cost per seat of £13.48 increased by 8.4% and by 4.3% atconstant currency.The operation of easyJet’s fuel and US dollar hedging policy meant that the average effective fuel price movement saw an increase of5.5% to an actual cost of £458 per tonne from £434 per tonne in the previous year.The increase in fuel costs also reflects increased fuel fees and an increase in the price of ETS (Emission Trading System) permits.NON-HEADLINE ITEMSNon-headline items are non-recurring items or items which are not considered to be reflective of the trading performance of the business.2019 2018£ million £ per seat £ million £ per seatCommercial IT platform credit/(charge) 2 0.02 (65) (0.68)Tegel integration – – (40) (0.42)Sale and leaseback gain/(loss) 2 0.02 (19) (0.20)Brexit-related costs (4) (0.04) (7) (0.07)Organisational review – – (1) (0.01)Fair value adjustment 1 0.01 (1) (0.01)Balance sheet foreign exchange gain 2 0.02 – –Non-headline profit/(charge) before tax 3 0.03 (133) (1.39)Non-headline profit before tax items of £3 million comprise:• a £2 million credit for releasing the balance of a 2018 non-headline commercial IT platform close down accrual no longer required(2018: £65 million charge);• there were no further non-headline integration costs in relation to the operations in Tegel in 2019 (2018: £40 million charge);• a £2 million gain as a result of the sale and leaseback of 10 A319 aircraft in the period (2018: £19 million charge as a result of thesale and leaseback of 10 A319 aircraft);• a £4 million charge in relation to our Brexit-related preparation plans (2018: £7 million charge) principally due the cost of transferringpilot licenses and re-registering aircraft to Austria;• there were no further organisational review costs classified as non-headline during 2019 (2018: £1 million charge);• £1 million fair value gain (2018: £1 million charge); and• a £2 million gain for balance sheet revaluations (2018: £nil).FINANCIAL REVIEW CONTINUED32 easyJet plc Annual Report and Accounts 2019SUMMARY NET CASH RECONCILIATION2019 2018 Change£ million £ million £ millionOperating profit 466 463 3Depreciation and amortisation 499 214 285Loss on disposal of intangibles – 4 (4)Commercial IT platform charge (2) 60 (62)Net movement in working capital and other items of an operating nature 118 446 (328)Net tax paid (58) (74) 16Net capital expenditure (984) (1,012) 28Net proceeds from sale and operating leaseback of aircraft 121 106 15Purchase of own shares for employee share schemes (16) (17) 1Decrease/(increase) in restricted cash 7 (4) 11Repayment of capital element of finance leases arising under IAS 17 – (6) 6Repayment of capital element of leases arising under IFRS 16 (174) – (174)Other (including the effect of exchange rates) 65 21 44Ordinary dividend paid (233) (162) (71)Net (decrease)/increase in net cash (191) 39 (230)Net cash at closing of the prior period 396 357 39IFRS 16 implementation impact at 1 October 2018 (531) – (531)Net (debt)/cash at the beginning of the period (135) 357 492Net (debt)/cash at end of year (326) 396 (722)Operating lease adjustments (7x basis) – (1,134) 1,134Adjusted Net debt (326) (738) 412Net debt as at 30 September 2019 was £326 million (30 September 2018: net cash £396 million) and comprised cash and money marketdeposits of £1,576 million (30 September 2018: £1,373 million) and borrowings of £1,902 million (30 September 2018: £977 million).Borrowings as at 30 September 2019 include £578 million of lease liabilities as a result of the adoption of IFRS 16. On 1 October 2018,£531 million of lease liabilities were recognised, and £98 million of existing finance lease obligations within borrowings in the financialstatements were reclassified as lease liabilities.After allowing for the impact of aircraft operating leases (calculated as seven times operating lease costs incurred in the year), adjustednet debt as at 30 September 2018 was £738 million, with no operating lease adjustment required to the £326 million net debt balance asat 30 September 2019 due to the recognition of lease liabilities upon adoption of IFRS 16.The movement in net working capital has decreased by £328 million, driven by a decrease in trade and other payables as a result oftiming of invoices, movement in short-term derivative financial instruments and provisions.Net capital expenditure includes final delivery payments for the acquisition of 22 aircraft (2018: 28 aircraft), the purchase of life-limitedparts used in engine restoration, and pre-delivery payments relating to aircraft purchases. The number of aircraft in the fleet increasedfrom 315 as at 30 September 2018 to 331 as at 30 September 2019. The sale and leaseback of 10 aircraft in 2019 resulted in a net cashinflow of £121 million (2018: £106 million).easyJet made corporation tax payments totalling £58 million during the period (2018: £74 million).The depreciation and amortisation charge of £499 million includes £244 million depreciation arising from adoption of IFRS 16 wherebyoperating lease and maintenance costs, which would have been recognised under the existing leases accounting standard, are replacedby similar aggregated levels of depreciation and interest expense.SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION2019 2018 ChangePre IFRS 9, 15 and16 adoption£ millionReported£ millionReported£ million(restated) £ millionGoodwill and other intangible assets 561 561 546 15Property, plant and equipment (excluding RoU assets) 4,732 4,661 4,140 521Right of use (RoU) assets under IFRS 16 – 502 – 502Derivative financial instruments 49 63 364 (301)Equity investments – 48 – 48Other assets (excluding cash and money market deposits) 550 542 539 3Unearned revenue (977) (1,069)

(877)(1,023)
(192)(27)

Trade and other payables (1,065) (1,050) Other liabilities (excluding debt) (952) (947) (852) (95)Capital employed 2,898 3,311 2,837 474Cash and money market deposits1 1,576 1,576 1,373 203Debt (excluding lease liabilities) (1,420) (1,324) (977) (347)Lease liabilities under IFRS 16 – (578) – (578)Net assets 3,054 2,985 3,233 (248)Net (debt)/cash 156 (326) 396 (722)1. Excludes restricted cashwww.easyJet.com 33STRATEGIC REPORT FINANCIAL REVIEWSince 30 September 2018 net assets have decreased by £248 million. This reflects payment of the 2018 ordinary dividend and theunfavourable mark-to-market movement in jet fuel forward contracts, partially offset by retained earnings in the period, and therecognition of the equity investment in The Airline Group required under IFRS 9.The net book value of property, plant and equipment excluding right of use assets, recognised due to adoption of IFRS 16, hasincreased by £521 million as a result of the acquisition of 22 aircraft and pre-delivery payments relating to future aircraft purchases,offset by depreciation.Upon adoption of IFRS 16, all operating leases have been capitalised on the balance sheet with a £497 million opening right of useasset adjustment being recognised, with a corresponding lease liability of £531 million representing easyJet’s obligation to make leasepayments. Previously recognised finance leases of £73 million were reclassified to right of use assets as at 1 October 2018.At 30 September 2019, right of use assets amounted to £502 million. Lease liabilities amounted to £578 million which includes additionsduring the year as a result of aircraft sale and leasebacks, as well as the impact of lease payments and extensions.Net derivative financial instruments have decreased by £301 million. This movement is largely due to mark-to-market losses on jet fuelcontracts and cross currency interest rate swaps, partially offset by mark-to-market gains in US dollar contracts.The equity investment of £48 million represents a 13.2% shareholding in a non-listed entity, The Airline Group Limited, which has ashareholding of 41.9% in NATS Holdings Limited – the provider of air traffic control services for the UK. This investment has been held atcost by easyJet since 2001. With the adoption of IFRS 9, this asset is now required to be recognised at fair value.Unearned revenue increased by £192 million. This is due to the increase in capacity and the adoption of IFRS 15 which changes the timingof the recognition of certain fees from the time of booking to being recognised at the time of flying.Other liabilities include a £47 million post-employment benefit obligation in relation to a Swiss retirement benefit scheme (2018: £29million). In the current year, easyJet has assessed options to extend the pension scheme insurance it holds. It has been identified as partof this work that, despite the scheme being fully insured, it meets requirements to be accounted for as a defined benefit plan underIAS 19, primarily due to the legal obligation to accrue interest on the pension accounts and the payment of lifetime pension benefits.Actuarial valuations have been performed to calculate the valuation of the scheme assets and liabilities under IAS 19. The scheme wasrecognised with effect from 1 October 2017 and the impact on the 30 September 2018 statement of financial position was recognition ofa net defined benefit obligation with a corresponding reduction in retained earnings of £26 million. Refer to note 1 in the Annual Reportand Accounts for further details.Debt has increased by £347 million in the period, primarily due to the issuance of a €500 million bond in June 2019.GOING CONCERNeasyJet’s business activities, together with factors likely to affectits future development and performance, are described in theStrategic report on pages 2 to 48. Principal risks anduncertainties are described on pages 37 to 47. Note 24 to theaccounts sets out the Group’s objectives, policies andprocedures for managing its capital and gives details of the risksrelated to financial instruments held by the Group.At 30 September 2019, the Group held cash and cashequivalents of £1,285 million and money market deposits of £291million. Total debt including lease liabilities of £1,902 million isfree from financial covenants, with £219 million due forrepayment in the year to 30 September 2020.Net current liabilities at 30 September 2019 were £549 millionand included unearned revenue (payments made by customersfor flights scheduled post year end) of £1,069 million.The business is exposed to fluctuations in fuel prices and USdollar and euro exchange rates. The Group’s policy is to hedgebetween 65% and 85% of estimated exposures 12 months inadvance, and between 45% and 65% of estimated exposuresfrom 13 up to 24 months in advance. Specific decisions mayrequire consideration of a longer term approach. Treasurystrategies and actions will be driven by the need to meettreasury, financial and corporate objectives. The Group wascompliant with this policy at the date of this Annual report andAccounts.After making enquiries, the Directors have a reasonableexpectation that the Company and the Group will be able tooperate within the level of available facilities and cash anddeposits for the foreseeable future. Accordingly, they continueto adopt the going concern basis in preparing the AnnualReport and Accounts.FINANCIAL REVIEW CONTINUED34 easyJet plc Annual Report and Accounts 2019Viability StatementASSESSMENT OF VIABILITYThe Directors have assessed easyJet’s viability over a three-year period. This is based on a three-year strategic plan, which givesgreater certainty over the forecasting assumptions used and is also in line with the long term management incentives.The assessment of the long-term viability of the company includes the following factors:• The strategic plan – which takes into consideration new initiatives such as easyJet holidays as well as market conditions, futurecommitments and funding requirements.• The fleet plan – the plan provides significant levels of flexibility to ramp up or reduce the size of the fleet in response toopportunities or risks.• The strong investment grade credit ratings from Standard & Poor’s and Moody’s – this demonstrates the sustainable strengthof the balance sheet and gives access to capital markets.• Brexit planning – with a multi Air Operator Certificate structure already in place easyJet is well prepared for Brexit.• Risk assessment – see below.RISK ASSESSMENTThe corporate risk management framework facilitates the identification, analysis, and response to plausible risks, including emergingrisks as our business grows and evolves in an increasingly volatile environment. Through cross-functional risk governance groups arobust assessment of the principal risks facing the organisation has been performed (see pages 37 to 47 in the strategic report)along with the controls and mitigations.Risk theme Potential impact on viabilityAsset efficiency and effectiveness Unavailability of slots or fleetEnvironment and sustainability Weather pattern disruptionExpectations of customers and employeesEnvironmental legislationLegislative and regulatory landscape Licence impactReputational damageMacroeconomic and geopolitical Fuel price fluctuationsExchange rate fluctuationsRestrictions in Europe following BrexitSupply/demand imbalancePeople Industrial actionSafety, security, and operations Major safety or security incidentTechnology and cyber Cyber attacks on critical technologiesData breachesAs part of the assessment of viability the potential financial and operational impact of the risks has been considered through severe butplausible scenarios. easyJet maintains a liquidity buffer including cash, insurance and an unutilised revolving credit facility which meanseasyJet could withstand a grounding of the entire fleet for at least one month at peak times, or at least two months at less busy times.CONCLUSIONBased on this assessment, the Directors have a reasonable expectation that the company and the Group will be able to continue inoperation and meet all liabilities as they fall due up to September 2022. In making this statement, the directors have made the followingkey assumptions:• Refinancing risk is minimal due to easyJet having access to a wide variety of funding options including capital markets, bank debtor aircraft financing. It is also assumed that funds will be available for capital projects as required in all plausible market conditions.• In the event that one or more risks occur, all available actions to mitigate the impact to the Group would be taken on a timely basis.easyJet has appropriate processes in place to identify potential risks and implement mitigating actions, as outlined in the risk sectionon pages 37 to 47.• Implausible scenarios, either through multiple risks occurring at the same time or risks which are not able to be mitigated bymanagement actions to the extent expected, do not occur.• There will not be a prolonged grounding of a substantial portion of the fleet.• The terms on which the United Kingdom leaves the European Union are such that easyJet will be able to continue to operate overbroadly the same network as at present and there will be no material and sustained economic downturn following the UnitedKingdom’s exit from the European Union.www.easyJet.com 35STRATEGIC REPORT FINANCIAL REVIEWSummary statisticsOPERATING MEASURES2019 2018Increase/(decrease)Seats flown (millions) 105.0 95.2 10.3%Passengers (millions) 96.1 88.5 8.6%Load factor 91.5% 92.9% (1.4ppt)Available seat kilometres (ASK) (millions) 116,056 104,800 10.7%Revenue passenger kilometres (RPK) (millions) 107,741 98,522 9.4%Average sector length (kilometres) 1,105 1,101 0.4%Sectors 605,899 559,857 8.2%Block hours (‘000) 1,184 1,088 8.8%Number of aircraft owned/leased at end of year 331 315 5.1%Average number of aircraft owned/leased during year 321.5 295.1 8.9%Number of aircraft operated at end of year 317 305 3.9%Average number of aircraft operated during year 297.0 269.0 10.4%Average operated aircraft utilisation (hours per day) 10.9 11.1 (1.8%)Number of routes operated at end of year 1,051 979 7.4%Number of airports served at end of year 159 156 1.9%FINANCIAL MEASURES2019 2018Increase/(decrease)Total return on capital employed (2018 restated) 11.4%

11.7%14.6%3.9
(0.3ppt)(3.2ppt)(7.7%)

Headline return on capital employed (2018 restated) 11.4% Liquidity per 100 seats (£m) 3.6 Total profit before tax per seat (£) 4.10 4.68 (12.4%)Headline profit before tax per seat (£) 4.07 6.07 (32.9%)Total profit before tax per ASK (pence) 0.37 0.42 (12.8%)Headline profit before tax per ASK (pence) 0.37 0.55 (33.2%)RevenueRevenue per seat (£) 60.81 61.94 (1.8%)Revenue per seat at constant currency (£) 60.28 61.94 (2.7%)Revenue per ASK (pence) 5.50 5.63 (2.2%)Revenue per ASK at constant currency (pence) 5.45 5.63 (3.1%)Revenue per passenger (£) 66.47 66.67 (0.3%)Revenue per passenger at constant currency (£) 65.90 66.67 (1.2%)CostsPer seat measuresHeadline cost per seat (£) 56.74 55.87 1.5%Non-headline cost per seat (£) (0.03) 1.39 (102.0%)Total cost per seat (£) 56.71 57.26 (1.0%)Headline cost per seat excluding fuel (£) 43.26 43.43 (0.4%)Headline cost per seat excluding fuel at constant currency (£) 43.11 43.43 (0.8%)Total cost per seat excluding fuel (£) 43.23 44.82 (3.6%)Total cost per seat excluding fuel at constant currency (£) 43.15 44.82 (3.7%)Per ASK measuresHeadline cost per ASK (pence) 5.13 5.08 1.1%Non-headline cost per ASK (pence) – 0.13 (100.0%)Total cost per ASK (pence) 5.13 5.21 (1.4%)Headline cost per ASK excluding fuel (pence) 3.91 3.95 (0.8%)Headline cost per ASK excluding fuel at constant currency (pence) 3.90 3.95 (1.2%)Total cost per ASK excluding fuel (pence) 3.91 4.08 (4.2%)Total cost per ASK excluding fuel at constant currency (pence) 3.90 4.08 (4.4%)FINANCIAL REVIEW CONTINUED36 easyJet plc Annual Report and Accounts 2019Our Corporate riskmanagement FrameworkGOVERNANCEAs part of the new framework, cross functional risk governancegroups and risk action groups are being established for each ofthe Principal Risks & Uncertainties. This is in addition to discussionof key risk topics and events, including emerging or changing risks,at the Airline Management Board (AMB), Audit Committee andplc Board as appropriate.HIGH IMPACT EVENT PREPAREDNESS ANDRESPONSEBeing prepared for unplanned or unwanted events of any scalethrough recovery activities is critical. Throughout 2019, therehave been further enhancements to the incident and crisismanagement framework to reflect the increasingly uncertainoperating environment.The Board is therefore satisfied that it has carried out a robustassessment of the principal risks facing the organisation,including those that would threaten the business model,future performance, solvency, or liquidity.The Board is ultimately responsible for determining the nature andextent of the principal risks it is willing to take to achieve itsstrategic objectives, its risk appetite, and maintaining the Group’ssystems of internal control and risk management systems. TheBoard has delegated aspects of this to the Audit Committee.Corporate risk management activities are coordinated by theRisk and Assurance team, which reports to the Chief FinancialOfficer, as well as having a direct reporting line to the Chair ofthe Audit Committee.During the course of this year, the Board approved the adoptionof a new corporate risk management framework. The Boardbelieves this new framework enables the organisation to be moreeffective in the identification, analysis, and response to risk,including emerging risks, in an increasingly volatile environment.There are three dimensions to this framework which are explainedfurther below. Implementation of this framework has commencedand full implementation is expected to be completed in 2020.METHODOLOGYAn effective corporate risk management framework has a simple,yet effective methodology. This helps encourage engagement at,and across, appropriate levels of the organisation. Themethodology at the heart of the new corporate risk managementframework is what is commonly known as the “bow tie” approach.This encourages a range of stakeholders to consider risk in astructured and consistent way, with the unwanted or unexpectedevent at the centre. Potential causes and consequences of thisevent are then identified together with an assessment of thecontrols and mitigations that may reduce the likelihood or impactof the unwanted or unexpected event.www.easyJet.com 37STRATEGIC REPORT RISKRISK CONTINUEDOur risk ProfileHaving reviewed our environment and sustainability risk profile andincluding emerging risks, we have identified a number of differentrisks, each with its own characteristics these relate to:• Carbon trading schemes• Climate change• Changes in the legislative/regulatory environmentFurther detail is outlined on page 41.BREXITeasyJet has continued its preparations for Brexit. The focus hasbeen on ensuring that our network is unaffected by Brexit andthat our operations are uninterrupted by any eventual Brexitoutcome, including a potential no deal exit. The cross functionalBrexit programme continues to oversee Brexit planning, led bythe General Counsel. The Board has also had oversight of thepreparations and is regularly briefed.Over the last three years easyJet has put in place a series ofmeasures to protect our flying rights regardless of the eventualBrexit outcome, these include:• Implementing a new operating model, with easyJet operatingas a pan-European airline group with three operating airlines:in Austria, Switzerland and the UK. This will ensure we cancontinue to maintain our network after Brexit.• Focusing our investor relations programme on ensuring that weremain majority EU27 owned and controlled and putting in placea contingency plan to ensure that we remain compliant with therequirement that EU airlines are majority owned and controlledby EU nationals.• Ensuring that our operation is robust to the UK leaving EASA,the European Aviation Safety Agency, including by transferringour EU27 based pilots to Austrian pilot licences and ensuringwe have sufficient pilots and cabin crew of EU27 nationality.• Continuing to engage with European governments, aviationregulators and the European Commission on Brexit issues.Of particular focus over the last year has been ensuring thateasyJet is robust to a no deal Brexit outcome and that flights areable to continue between the EU and the UK. We successfullyworked with the EU and UK governments to ensure that there isa legislative framework in place for flights to continue even in theevent of a no deal Brexit. Alongside this the EU and UK have putin place the necessary arrangements to govern safety issues.To further support the robustness of our operation to a no dealoutcome we have invested in operational measures to ensurethat there is no reliance on EU/UK trading links in case these aredisrupted, including putting in place stores for spare partswithin the EU27.A no deal Brexit carries potential financial risks for instancefrom changes in airport and tax charging structures and anyunexpected outcomes. Alongside this there remains uncertaintyabout the economic effects of a no deal Brexit.The key risks reviewed by the Board fall into seven broad themeslisted in alphabetical order:• Asset efficiency and effectiveness – making the best use ofcapacity/slots and fleet mix in the right airports at the rightprices, and driving value through our supply chain• Environment and sustainability – the impacts of climatechange on our business and operations, carbon creditprogrammes, regulation/taxation, and changing consumer andcolleague expectations• Legislative/regulatory landscape – being aware of, andcompliant with, legislation and regulation affecting our business• Macro-economic and geopolitical – events that can affect ourfinancial performance including supply/demand imbalance,general economic trends, Brexit, as well as impact of fuel cost,foreign exchange rates, and counterparty performance• People – having the right people through talent acquisition,retention, engagement, and succession planning• Safety, security, and operations – the delivery of a safe andsecure operation which meets the needs and expectations ofour customers• Technology and cyber – the availability, security, complianceand performance of website and critical technologies, and theprotection of company and customer dataCHANGES IN THE YEAROur principal risks and uncertainties continue to evolve over time.As we evolve our strategy in a dynamic industry against abackdrop of political and economic uncertainty, new risks emergeand we adapt our response activities as our risk exposurechanges. The roll out of the new corporate risk framework hasbeen a catalyst for reviewing the presentation of a number ofthese risks, including the new themes set out above. The followingchanges in our risk profile have been approved by the Board.Since 30 September 2018, risks associated with the followingthree themes have increased:• Asset efficiency and effectiveness• Environment and sustainability• Technology and cyberThese risks, together with our response plans, are monitoredregularly through our governance structure. Further detail on therisks, the potential causes and consequences, together with keycontrols and mitigations are detailed on the following pages.This year, we have incorporated our ‘third-party service providers’risk into a broader ‘continuity of services’ risk, due to theoutsourced nature of our business model and the similarity inmanagement response.38 easyJet plc Annual Report and Accounts 2019ASSET EFFICIENCY AND EFFECTIVENESSWe maintain our competitive cost advantage by making the best use of capacity/slots and fleet mix in the right airports at the rightprices, and driving value through our supply chain.Potential causes Potential consequences Controls and mitigationsAIRPORTINFRASTRUCTUREFlying to primary airportsis an important elementof our customerproposition. The airportsto which we fly mayalready be or maybecome congested.• Increasedcompetitorcapacity• Environmentalrestrictions/pressure restrictingairport expansions• Delays in airportinfrastructureexpansion• Increase in airportcharges• Changes inregulation• Ineffective slotmanagement• Weakenedcustomerproposition• Loss of marketshare• Inefficient use ofcrew/aircraft• Significant increasein costs• Where easyJet is affected by industrial action or otherservice interruption by a key supplier, resources aredeployed to manage this as effectively as possible.See the significant operational disruption risk onpage 46 for further details.• Sophisticated processes and systems to ensureslot transactions are made in an efficient andeffective manner.• Effective cross-functional governance to ensureoptimal business decisions are made.• easyJet places emphasis on the management ofairport capacity through a dedicated airportdevelopment team who ensure close collaborationon capacity plans. The team helps influence thedevelopment of appropriate capacity increases ina cost efficient and timely manner.• Managing aircraft gauge to improve our abilityto grow.CONTINUITY OFSERVICESeasyJet is dependent ona mixture of critical ITsystems and processes,employees, buildings/facilities and third-partysuppliers. A loss of one ormore of the abovecomponents could leadto significant disruption tooperations and couldhave an adversereputational, financial orlegal impact.• Failure of critical ITsystem• Significant externalincident (terrorism,weather, activism)• Failure of thirdparty• Industrial action• Systemunavailability forcustomers and/orstaff• Inability to accesskey buildings/facilities• Unavailability ofcritical staff• Reliance oninadequatesupplier recoveryplans• Operationaldisruption• The four key areas of business resilience (IT andprocesses, people, premises, and suppliers) all formpart of easyJet’s functional business and airportBusiness Continuity Plans.• Critical IT systems are identified with ongoing effortsto match the business needs with recovery capabilities.The risk of system unavailability is now mitigatedfurther, thanks to the adoption of the cloud, inaddition to easyJet’s two data-centres.• Incident Management and Resilience teams are inplace and ready to respond to any IT related incident.• Time-critical staff have been identified via BusinessImpact Assessments and Business Continuity Plans,with regularly tested recovery desks allocated atalternate locations, should the usual place of work beunavailable. An increased provision of laptops andtablets also enables greater mobility and remoteways of working.• Enhanced procurement processes include riskassessments aligned with business objectives.These require relevant third-parties to have their ownBusiness Continuity/Disaster Recovery plans and weare implementing a process to review a sample ofthese each year.• Maintain close working relationships with keystakeholders including, but not limited to, airportauthorities and slot coordinators lobbying whereappropriate.2 5Links to Our Plan1 B1 4 a dD2 5 b e3 cLINKS TO OUR PLANNetwork Data Safe andresponsibleAlwaysefficient IncreaseLoyalty Efficiency On ourcustomers’ sideForwardthinking No changePeople In it together DecreaseCHANGE IN RISK2 3 5a b d eLinks to Our Planwww.easyJet.com 39STRATEGIC REPORT RISKRISK CONTINUEDASSET EFFICIENCY AND EFFECTIVENESS CONTINUEDPotential causes Potential consequences Controls and mitigationsNON-DELIVERYOF STRATEGICINITIATIVESThe business continues toundertake a number ofinitiatives to support itsstrategy.• Resourcededicated tochange deliveryand oversight• Changes inorganisation’spriorities (may bedriven by internalor external factors)• Scope change/time available• Business benefitsnot realised• Financialunderperformance• Inefficient use ofresource• Complex, large-scale programmes have been initiated,prioritised and are managed through the ProjectManagement Office.• A project management framework, which sets outapproval processes, governance requirements, andkey ongoing processes and controls, is followed by allprojects and programmes, and reviews are undertakento ensure continuous improvement in this approach.• Each strategic initiative has an executive sponsor fromthe AMB and its own steering group which providesoversight and challenge to the project, monitorsprogress against programme objectives and ensuresthat decisions are made at the appropriate level.• Key strategic initiatives are managed by experiencedprogramme managers, complemented by appropriatesubject matter specialist resource where appropriate.• A Project Management Office is in place to overseedelivery of projects and programmes, including theallocation of support resource, budget tracking andrealisation of benefits.• The AMB meets twice monthly. The executive sponsorprovides routine updates and can use this as anescalation channel for any issue resolution.• The Board also receives updates on key strategicinitiatives including any risks or issues associatedwith their delivery.• The Internal Audit function provides independentprogramme assurance over our most significantinitiatives, drawing upon independent subjectmatter expertise where appropriate.SINGLE FLEETSUPPLIEReasyJet is dependent onAirbus as its sole supplierfor aircraft. The Boardconsiders that theefficiencies achieved byoperating a single fleettype outweigh the risksassociated with easyJet’ssingle fleet strategy.• Delays in thedelivery of newaircraft• Technical/mechanical issues• Fluctuating secondhand market• Schedulereductions/cancellations• Grounding of all/part of the fleet• Loss of customerconfidence• Financial impactwhen aircraft leavethe fleet• There are approximately 8,500 A320 family (A319,A320, A321) aircraft operating, with a proven trackrecord for safety and reliability.• Introduction of the A320neo in part mitigates thissingle fleet supplier risk as the aircraft is equippedwith a different engine type.• easyJet continues to work closely with Airbus toensure full visibility of the delivery schedule for newaircraft. In the event that there are material delays,appropriate mitigation is put in place; for exampleshort-term wet lease arrangements are used tominimise any operational impact.• easyJet operates a rigorous established aircraftmaintenance programme. Maintenance schedulesare approved by the relevant regulatory body.• easyJet regularly reviews the second hand market andhas a number of different options when looking atfleet exit strategies. Sale and leaseback facilitates theexit of aircraft from the fleet by transferring residualvalue risk, and also provides flexibility in managing thefleet size.2 3 4d eLinks to Our Plan3 5a dLinks to Our Plan40 easyJet plc Annual Report and Accounts 2019ENVIRONMENT AND SUSTAINABILITYThe impacts of climate change on our business and operations, carbon credit programmes, regulation/taxation, and changing consumerand colleague expectations. easyJet’s promise in Our Plan is to be a safe and responsible airline. This is what guides our approach tosustainability, whether that be related to climate change, health and safety, diversity, or employee engagement. More information is inthe Sustainability section on page 48.Potential causes Potential consequences Controls and mitigationsCARBON TRADINGSCHEMESAdverse changes tocarbon trading schemes,including the existenceand/or cost of thescheme.• Political change• Uncertainty drivenby Brexit• Internationalalignment• External pressuregroups• Closure of existingscheme• Loss of freeallocations, leadingto significant costimpact• Introduction ofnew schemes• Inability to hedgein line with fuelpolicy• easyJet influences future and existing policy andregulations which affect the airline industry througha number of different channels, including workingwith relevant industry bodies to assist in this;• easyJet look to optimise fuel usage to reduceemissions and therefore reduce the potential impactof those schemes, for example ensuring optimalroutings as well as using climb, descent and landingtechniques to improve efficiency; and• easyJet has an appropriate hedging strategy(to the extent possible).CLIMATE CHANGEWeather patternsincluding, but not limitedto, winds, storms,extreme temperatures,are becoming increasinglydifficult to predict.• Increased CO2emissions• Adverse customerexperience• Injury to customers• Operationaldisruption(including airspaceand runwayclosures)• Aircraft damage• easyJet continues to bring Airbus neo aircraft into itsfleet which are significantly more fuel efficient thanthe standard variant;• easyJet aircraft use only one engine when taxiing onthe ground;• easyJet operates flights with a high load factor, andis a short-haul operator, which has a lower carbonimpact per passenger kilometre than airlines whoseoperations include a significant amount of long-haulflight; and• Disruption management measures include advancedwinter planning, standby crews and aircraft, as well asthe continual review of flight plans to ensure theoptimal routings. In addition, to reduce the time ittakes to resolve aircraft technical faults, easyJet has acontract for two light aircraft and crew to transportengineers and spare parts around its network, withdedicated engineers on standby to travel.ECO-TAXESFuture policy measuresand regulation to tacklethe impact of aviation onclimate change couldimpact easyJet’s businessif they impose limitationsand cost on how easyJetoperates and the servicesit can provide.• Political change• External pressuregroups• Customer demand• Significant increasein cost of existingaviation taxes/levies• Future expansionof taxes/levies• Policies toconstrain growth/capacity• Increasing noisecurfews• Pressure onmargins• By engaging with key stakeholders, easyJet seeks toreach a common understanding on the drive toimpose policy measures and regulation to addressthe impact of aviation on climate change;• easyJet continues to explain it’s environmentalperformance, and the further action it is taking, to it’scustomers and other stakeholders. For example, thishas included highlighting the introduction of theA320neo and A321neo aircraft and their reducedemissions compared to previous generation aircraft,and work with partners in regards to new technologiesto radically reduce the carbon footprint of flying;• easyJet is able to operate flexible routings in theevent of constraints being brought in; and• The new generation Airbus A320neo and A321neoaircraft are 50% quieter during takeoff and landingthan the equivalent previous generation aircraft.2 25 33 4a 2 ad db be ea cdb eLinks to Our PlanLinks to Our PlanLinks to Our Planwww.easyJet.com 41STRATEGIC REPORT RISKRISK CONTINUEDLEGISLATIVE/REGULATORY LANDSCAPEThe airline industry is heavily regulated and there is a continual need to keep well informed and adapt (as required) to any legislative orregulatory changes across the jurisdictions in which easyJet operates.Potential causes Potential consequences Controls and mitigationsBRAND LICENSEAND MAJORSHAREHOLDER• easyJet has two majorshareholders(easyGroup HoldingsLimited and PolysHoldings Limited) which,as a concert party,control approximately33% of its ordinaryshares.• easyJet does not ownits company name orbranding, which islicensed fromeasyGroup Ltd. Thelicence includes certainminimum service levelsthat easyJet must meetin order to retain theright to use the nameand brand.• Shareholderactivism• Actions ofeasyGroup orother easyGrouplicensees• Eventual loss ofthe brand licence• Active shareholder engagement programme;• Regular engagement with easyGroup HoldingsLimited alongside other major shareholders;• Relationship agreement with easyGroup and PolysHoldings in line with the controlling shareholderregime set out in the Financial ConductAuthority’s Listing Rules;• Representatives from the Board and seniormanagement take collective responsibility foraddressing issues arising from any activist approachadopted by the major shareholder. The objective is toaddress issues when they arise and anticipate andplan for potential future activism;• Quarterly meeting of senior representatives from bothsides, attended by the Chief Financial Officer and theCompany Secretary and Group General Counsel, toactively manage brand-related issues as they arise; and• easyJet makes contributions to the joint brandprotection fund.LEGAL/REGULATORYNON-COMPLIANCEFailure to comply withlegislation and regulation,such as local consumerlaws, new case law orpolicy changes inrelation to customercompensation,environmental or airportregulation, in thejurisdictions in whicheasyJet operates, couldhave an adversereputational and financialimpact.• New or changes toexisting legislation/regulation• Employee/agentignorance• Rogue employee/agent behaviour• Sustained adversemedia coverage• Fines/regulatorysanctions• Reduction in futurerevenue• Operationaldisruption• Loss of operatinglicence• Significant spike incosts• Share pricemovement• Loss of colleague/customer trust• Compliance framework including, but not limited to,policies, procedures, and mandatory trainingprogrammes;• easyJet has an in-house team of Legal experts toadvise on legal issues and developments, and to assistthe business in interpreting any formal regulatoryrequirements. Where appropriate, this expertise issupplemented with specialist external support relevantto a specific discipline or jurisdiction;• Panel of external legal advisers, both in the UK andin key easyJet markets, are briefed to keep easyJetinformed of any changes or new legislation and toassist easyJet in developing appropriate responsesto such legislation;• easyJet influences future and existing policy andregulations which affect the airline industry through anumber of different channels, including working withrelevant industry bodies to assist in this; and• easyJet adapts to new legislation and regulation,where possible adapting existing complianceframeworks (for example mandatory trainingprogrammes and clear policies and associatedguidance).2 3 43 a abLinks to Our PlanLinks to Our Plan42 easyJet plc Annual Report and Accounts 2019MACRO-ECONOMIC AND GEOPOLITICALThe airline industry can be sensitive to macro-economic and geopolitical conditions. These risk events can affect our financialperformance including supply/demand imbalance, general economic trends, Brexit (discussed on page 18), as well as impact of fuel cost,foreign exchange rates, and counterparty performance.Potential causes Potential consequences Controls and mitigationsSUPPLY/DEMANDIMBALANCEeasyJet’s success in thehighly competitiveEuropean short-haulaviation market is built onour key competitiveadvantages: our network,cost base, brand, digitalinnovation and efficientand robust capitalstructure.• Increased capacity• Industryconsolidation• Increasedcompetition fromother airlines andtransport providers• Governmentinterventions• Fall in consumerdemand (includingbut not limited tomacro-economicconditions andenvironmentalconcerns)• Internal growthplans• Loss of marketpositions (relativemarket share)• Pressure onmargins• Adverse financialposition• Share pricemovement• Enhancements to our Commercial organisation toprovide even further focus on existing and newinitiatives to optimise the revenue position.• Weekly trading meeting to review performance –attended by senior managers, including membersof the AMB.• Relentless focus on maintaining easyJet’s competitiveadvantages.• The Network Development Forum, a cross-functionalpanel of senior managers, including members of theAMB, approves the allocation of assets around thenetwork in the context of expected market conditions.• Competitor and consolidation activity is monitored indetail by the Network team, enabling strategic decisionmaking on key market positions.• Fleet framework arrangements, together with theGroup’s leasing policy, provide easyJet with significantflexibility in respect of scaling the fleet according tobusiness requirements.VOLATILITY INFINANCIALMARKETSeasyJet is exposed to avariety of financialmarkets, volatility in whichcould give rise to adversepressure on the cashflows of the group.• Market price risk:volatility in jet fuelprices, foreignexchange rates,carbon prices,inflation rates orinterest rates• Counter-party risk:default of counterparties used fordepositing surpluscash and hedging• Liquidity risk:inability to raisefunds whenrequired• Insufficient cash tomeet financialobligations as theyfall due and/or theinability to fund thebusiness whenneeded leading toinsolvency• Significant increasein costs• The Finance Committee (a committee of the plcBoard) oversees the Group’s treasury and fundingpolicies and activities. See page 94 for further details.• Treasury policy sets out plc Board approved strategiesfor market price risk management, counter-partycredit risk management and liquidity risk management.Monthly reporting on all treasury activity includingreporting on compliance with treasury policy.• Maintaining a liquidity buffer supported by cash, arevolving credit facility (provided by a group ofrelationship banks) and a business interruptioninsurance policy.• Ability to access diverse sources of funding tosupport liquidity requirements.• Rolling hedging programmes on jet fuel and foreignexchange market price exposure.1 52 3 41 3 5b ddLinks to Our PlanLinks to Our Planwww.easyJet.com 43STRATEGIC REPORT RISKRISK CONTINUEDPEOPLEHaving the right people is a key part of Our Plan. In today’s environment, we need to create an inclusive and energising environment thatattracts the right people and inspires everyone to learn and grow.Potential causes Potential consequences Controls and mitigationsINDUSTRIALACTIONeasyJet, and the aviationindustry in general, has asignificant number ofemployees who aremembers of trade unions.Each of the Europeancountries in which easyJetoperates has localisedemployment terms andconditions. As such itspilots and crew aremembers of 22 tradeunions across eightcountries. There arealso an additional 11consultative bodiesincluding five WorksCouncils and a EuropeanWorks Council thatoperate under EUlegislative guidance.• Adverse employeeexperience• Changes to termsand conditions• Political unrest• Sustained adversemedia coverage• Operationaldisruption• Significant spikein costs• Reduction in futurerevenue• Share pricemovement• Loss of colleague/customer trust• easyJet seeks to maintain positive workingrelationships with all trade unions and otherrepresentative bodies and has a framework in placefor consulting and engaging with trade unions andconsultative bodies.• In the event of industrial action or expected disruption,easyJet has processes to mitigate the impact to ouroperations. The Operations department also hasspecific procedures to deal with such events.TALENTACQUISITION ANDRETENTIONIn today’s shiftingenvironment, we need toplace even more focus onrecruiting the right peopleand building the righttalent.• Uncompetitiveremunerationpackages• Lack of careerprogression• Outdated ways ofworking• Sustained inabilityto deliver keystrategic initiatives• Increased costs• Benchmarking of reward packages.• Quarterly employee listing tool with action plans toaddress issues raised.• Talent mapping of senior employees to ensurecontinued investment and development of top talent.• Succession planning of key roles.• Diversity and inclusion strategy.• Strategic programme to enhance ways of workingfor head office staff.3 42 4a cb cLinks to Our PlanLinks to Our Plan44 easyJet plc Annual Report and Accounts 2019SAFETY, SECURITY AND OPERATIONSeasyJet’s number one priority is the safety and security of its customers, colleagues, and contractors. The delivery of a safe and secureoperation which meets the needs and expectations of our customers is critical to our business.Potential causes Potential consequences Controls and mitigationsSIGNIFICANTSAFETY ORSECURITY EVENT• easyJet’s number onepriority is the safetyand security of itscustomers, colleagues,and contractors.• The Safety Committee(a committee of theBoard) providesoversight of themanagement ofeasyJet’s safetyprocesses and systems.See pages 85-86 forfurther details.• The easyJet SafetyBoard, chaired by theChief Executive andincluding the ChiefOperating Officer andAOC AccountableManagers, is responsiblefor directing overallsafety and securitypolicy and governance.The Safety Boardmeets every monthto review safetyperformance and anyemerging securityissues.• Flight safetyincident• Health and safetyincident• Major securitythreat• Significant injury/loss of life• Sustained adversemedia coverage• Reduction in futurerevenue• Fines/regulatorysanctions• Operationaldisruption• Significant spikein costs• Share pricemovement• Functional Safety Action Groups from across theairline are chaired by the appropriate senior managerand are responsible for the identification, evaluationand control of safety-related risks.• The easyJet Safety Board meets monthly to reviewsafety, security and compliance performance across allAir Operator Certificates (AOC) chaired by the CEO,attended by the three AOC accountable managersand periodically by AOC regulators.• Safety Review Boards are held locally and are open forthe local regulator to attend.• A Safety Policy is published that promotes the incidentreporting process and supports this safety culture;• easyJet operates a Safety Management System usingleading software systems to:• report incidents and identify events;• identify hazards and threats and take appropriaterisk-mitigating actions;• collect and analyse safety data (enabling potentialareas of risk to be projected); and• enable learning from easyJet and industry events/incidents to be captured and embedded into futurerisk mitigations.• Timely, credible and reliable information upon which tobase operational decisions.• easyJet has an emergency response process andperforms crisis management exercises.• Hull (all risks) and liabilities insurance (including spares)is held.• Security cleared specialists continually review geopoliticaldevelopments across the easyJet network in particularthose countries deemed to be higher risk and reportback to the Board any areas of concern.• easyJet maintains an inspection regime of all ourairports to ensure the security elements are being2 4 effectively managed.aLinks to Our Planwww.easyJet.com 45STRATEGIC REPORT RISKRISK CONTINUEDSAFETY, SECURITY AND OPERATIONS CONTINUEDPotential causes Potential consequences Controls and mitigationsSIGNIFICANTOPERATIONALDISRUPTION• This year there hasbeen a significantreduction in disruptionevents (three hourdelays, cancellationsand overnight delays).Events withineasyJet’s control(‘non-extraordinary’)have reduced against2018 by 25%, as a resultof the OperationalResilience programmeand a range of easyJetinterventions, andevents outside ofeasyJet’s control (e.g.weather, strikes) havereduced by 34%.• On Time Performancehas remained stableagainst 2018, despite asignificant reductionin cancellations.• The European AirTraffic Control systemexperienced fewer totaldelay minutes than in2018. easyJet flightplanning interventionsfurther reduced theproportion of thesedelay minutes thatimpacted easyJet.En-route delay minutesreduced, largely drivenby fewer ATC strikesthan in 2018. Airportdelay minutesworsened. The ATCsystem still performedworse than 2017.• Adverse weather• Industrial action• Technology failure• Supplier failure• Infrastructurefailure• Airspace/airportrestrictions/closure• Customerdissatisfaction• Compensation adwelfare payable tocustomers• Inefficient use ofcrew/aircraft• Adverse mediacoverage• Share pricemovement• Key strategic project, Operational Resilience,focusing on:• Building appropriate resilience into the flyingschedule;• Aircraft and crew standby;• Operations Control Centre reporting on the day ofoperations, including customer communication;• Airport performance and strategic supply chain;• Air traffic control system lobbying and flightplanning enhancements; and• The use of data across the operation to predictand manage events and aid decision support.• There is also continued focus on the EU261 claimsmanagement process which has been furtherstrengthened during the year by increasing thesize of the team handling legal claims.• New incident and crisis management frameworkto further enhance the effectiveness of response.• Liquidity buffer to better manage the impact ofdownturns in business or temporary curtailment ofactivities (see the volatility in financial markets riskoutlined on page 43).• Business interruption insurance which provides somecover for very significant shock events such asextreme weather, air traffic management issues andloss of access to key airports. The policy would allowus to claim in the event of a very substantial numberof cancellations. This is included within our definitionof liquidity.2 3 5b d eLinks to Our Plan46 easyJet plc Annual Report and Accounts 2019TECHNOLOGY AND CYBERThe nature of these risks, easyJet’s reliability on technology (particularly online devices) and the ever-increasing sophistication of seriousorganised crime groups, terrorists, nation states and even lone parties means that, despite all the mitigation detailed, easyJet willinevitably retain an element of vulnerability regarding the availability, confidentiality and integrity of its information and data.Potential causes Potential consequences Controls and mitigationsDATA BREACHA data breach involves theunauthorised access tocustomer or employeedata. Protecting that dataand its privacy remains apriority for easyJet.• Cyber attack• Third partyincident• User error• Misconfiguredsystems• Sustained adversemedia coverage• Fines/regulatorysanctions• Third party liability/class actions• Reduction in futurerevenue• Operationaldisruption• Significant spike incosts• Share pricemovement• Loss of colleague/customer trust• A data and cyber risk governance structure exists toregularly review the data and cyber risk landscape anddetermine required action to take place in order tomanage risk effectively.• Dedicated Information Security team who proactivelymonitor threats and respond to incidents.• Employee education and awareness programmeincluding a network of champions, online trainingand awareness campaigns.• Security logging and monitoring.• Vulnerability scanning and penetration testing.• Ongoing General Data Protection Regulation(GDPR) programme to ensure compliance withGDPR regulations in support of the DataProtection Officer (DPO).FAILURE OFCRITICALTECHNOLOGYeasyJet relies on anumber of criticaltechnologies that are keyto the delivery of essentialbusiness processes.These include, but are notlimited to, operational,commercial and financialsystems. A criticaltechnology failureincludes any technicalfailure which is sufficientenough to interruptcritical businessoperations (which mayinclude one or moresystems). This includessystem unavailability or afailure which results in theloss or corruption of data.• Cyber attack• Hardware failure• Agedinfrastructure• Data CentreOutage• Third Party Outage• TechnologicalDependencyFailure• IT change• Sustained adversemedia coverage• Reduction in futurerevenue• Fines/regulatorysanctions• Operationaldisruption• Significant spikein costs• Share pricemovement• Monitoring and alerting of availability of criticaltechnologies and their inter-dependencies.• Security logging and monitoring.• Vulnerability scanning and penetration testing.• Business Interruption Insurance in place.• IT Change Management Process embedded to assessrisk of all changes to technology including changesmade by third party providers.• Critical technologies are either cloud hosted, hostedacross two data centres or at third party providerlocations with necessary failover protocols andsecurity perimeters in place.• IT Major Incident Management team is in place torespond rapidly to any unforeseen critical technologyincidents including those of a security nature.• IT Supplier Relationship Management process toensure that third party services and associated risksare regularly reviewed and assessed.• easyJet are progressing the delivery of a hosting andnetwork programme that will further improve theresiliency of core infrastructure and cloud connectivitycapabilities.2 52 3a ab bd deLinks to Our PlanLinks to Our Planwww.easyJet.com 47STRATEGIC REPORT RISKSUSTAINABILITYOur Promise is to be a safe and responsible airline. This is whatguides our approach to sustainability.As an airline, we recognise that our most significant impact andsustainability challenge is climate change. This is an issue whichwe all have to tackle – including us at easyJet.In the past year we have seen increased debate about climatechange and the urgency in which action is needed. It is clear thatall companies will need a clear vision and plan to address this.People have a choice in how they travel and many more people arenow thinking about the potential carbon impact of different typesof transport. If people choose to fly, we want to be one of the bestchoices they can make for themselves and for the planet.We have continued to focus on being as efficient as we can;transitioning our fleet to more modern, fuel efficient aircraft; flyingthem in ways which avoid noise and flying them full of passengers.All these things help to reduce carbon emissions for eachpassenger we fly.This financial year our carbon emissions per passenger kilometrewere 77.07 grams, down from 78.46 grams last year. We havereduced this by over one-third since 2000 and our aim is tobring this down further.But in the long term this will not be enough. Aviation will have toreinvent itself and in our view move to electric and hybrid aircraftpowered by renewable energy, along with other carbon reductiontechnologies. However, these are some years away and wedecided at the beginning of the new 2020 financial year to takeaction on our carbon emissions.We announced that we would become the world’s first major airlineto operate net-zero carbon flights across our whole network.We are doing this by offsetting the carbon emissions from the fuelused for all of our flights through schemes accredited by two of thehighest verification standards, Gold Standard and Verified CarbonStandard (VCS).We recognise that offsetting is only an interim measure, but at themoment we believe it’s the best way we have to remove carbonfrom the atmosphere. At the same time, we will continue to supportthe development of new technologies to decarbonise aviation forthe longer term.We are focused on working with others across the industry onhybrid and electric aircraft and on the technologies which will beneeded to make these happen. This is why we are supportingWright Electric who are aiming to produce an all-electric planewhich could be used for short haul flights and have recentlyestablished a partnership with Airbus to jointly research theopportunities and challenges of introducing hybrid and electricaircraft for short haul flying in Europe.Sustainability for easyJet is of course much wider than climatechange and we have commitments on many important issues,such as health and safety, diversity, employee engagement andcustomer satisfaction. In the pages that follow we have highlightedour progress on all these issues.To better understand which sustainability issues are most importantto our business and our stakeholders, we have this year carried outa materiality assessment. We set out the results in this section.We have been using the materiality assessment to continue todevelop our sustainability strategy, so that it has a clear focus onour carbon emissions. We look forward to sharing more informationon this in our 2020 financial year.Sustainabilityat easyjetSUSTAINABILITY GOVERNANCEOur management of sustainability, including climate changerelated issues, is overseen by our sustainability lead, who is amember of the Airline Management Board (ExecutiveCommittee) and reports to the Chief Executive.Our target on carbon emissions per passenger kilometre is theresponsibility of our Operations function and will be overseenby the new Chief Operating Officer, who is a member of theAirline Management Board. In the interim, while we have nothad a Chief Operating Officer, this has been the responsibilityof our Head of Operations.Climate change related risks are also included in our RiskManagement Framework, which is overseen by the PLC Board.More information is p41.In addition to the existing oversight of the Airline ManagementBoard of sustainability issues, the PLC Board regularly discusssustainability issues and intends to continue to monitor progressin the coming year.Specific sustainability issues are also managed and overseen byissue-specific committees and these are detailed in this section.REPORTING FOR 2019 FINANCIAL YEARAt easyJet we recognise the need for structured and transparentsustainability reporting. As part of our work to increase andimprove our reporting, we have taken some initial, additionalactions in this financial year:• Carried out our first full materiality assessment – this isdetailed in this chapter.• Participated in the CDP climate change programme – for thefirst time since 2016We plan to build on these reporting improvements in futureyears, to ensure we continue to meet legal reportingrequirements but also provide our stakeholders with informationthat helps show our progress with our material issues.All references to ‘this year’ in this chapter refer to the easyJet2019 financial year (1 October 2018 to 30 September 2019),unless otherwise stated.JOHan lundgrenChief Executive Officer48 easyJet plc Annual Report and Accounts 2019OUR MATERIALITY PROCESSWe undertook our first formal materiality assessment from April toJune 2019. The assessment was carried out by an independentsustainability firm in consultation with easyJet.The process was carried out in line with the Global ReportingInitiative approach on materiality and involved:• A desktop review of internal and external information sources toproduce a long list of potential sustainability issues• In-depth interviews with key stakeholders – who were askedto rank a list of topics and identify those they felt were mostimportant. Interviews were carried out by the consultancy andviews were shared with easyJet without attribution. Thoseinterviewed were based across Europe and included:• PLC Board members• Investors• Suppliers• Regulators• Corporate customers• Employee representative groups and trade unions• NGOssustainability MaterialityDetermining materiality is an important aspect of operating sustainably; it involvesidentifying and prioritising a business’s most critical non-financial issues. Theseissues are the ones that have the greatest impact on the business, our stakeholdersand society in general. This matrix is based on our materiality assessment of themost important sustainability issues for easyJet. Some issues which are importantto the business as a whole may not be prioritised in this matrix.MATERIALITY MATRIXMORE INFORMATION ON THE EASYJET HOLIDAYS BUSINESSIS AVAILABLE ON P22.• Customer and employee surveys – which sought to identify andrank the most important issues for these groups.The final result is a materiality matrix that plots stakeholderprioritisation against business impact for each topic. Topics in thetop right of the matrix are the most material to easyJet’s business.The material topics identified by the assessment were used as afocus for the reporting in this section and are being used as aguide to further develop our approach to sustainability.EASYJET HOLIDAYS MATERIALITY ASSESSMENTSustainability has been a founding principle of the easyJetHolidays business. To inform the development of the easyJetHolidays sustainability strategy, a materiality assessment wascarried out in the latter part of the 2019 financial year. Theresults of this materiality assessment and more information onthe business’ sustainability strategy will be included in nextyear’s Annual Report.This sustainability chapter covers issues for the easyJetairline business, as easyJet Holidays was not launched inthis financial year.IMPORTANCE TO THE BUSINESSIMPORTANCE TO STAKEHOLDERSLower HigherLower HigherPRIORITY ISSUESCLIMATE CHANGE(including carbonemissions, climatechange adaptation, fuelefficiency and types)EMPLOYEES(including decentwork and labourrelations, employeeengagement)WASTE & PLASTICREDUCTIONEMPLOYEE HEALTH& SAFETYEmployeeHealth and SafetyClimatechangeEmployeesWaste and plasticsreductionCustomersatisfactionData protectionDiversity andinclusionTraining anddevelopmentWellbeingAircraft noiseEconomicperformanceHumanrights andhumantraffickingSecurityEmergencypreparednessLocal air qualityEthical supply chainmanagementTax practicesOver-tourismCharitable giving and community programmesWildlife conservationCustomeraccessibilityCorruptionEconomiccontributionTrack Actively monitor Prioritisewww.easyJet.com 49STRATEGIC REPORT SUSTAINABILITY1.SAFETY• Safety management and oversight• Employee health and safety• Preventing and addressing disruptivebehaviour on flights• Security management• Providing a whistleblowing process• Preparing to respond to emergencies andsignificant events2.HONEST ANDFAIRWITH OURCUSTOMERSAND SUPPLIERS• Reducing disruption through operationalresilience• Supporting customers during disruption• Supporting customers who need specialassistance• Protecting customer and employee data• Building positive supplier relationships• Preventing modern slavery and human trafficking• Preventing bribery and corruption3.A RESPONSIBLEAND RESPONSIVEEMPLOYER• Employing people locally• Engaging with our employees• Working collaboratively with trade unions• Supporting employees’ health and wellbeing• Encouraging a diverse workforce• Offering fair reward• Providing learning and development opportunities4.A GUARDIANFOR FUTUREGENERATIONS• Investing in efficient aircraft• Using operational efficiency measures• Flying aircraft with the majority of seatsoccupied by passengers• Removing plastic from our inflight foodand drink range• Managing Nitrogen Oxides (NOx) emissions• Reducing the aircraft noise that affectscommunities around airports5.A GOOD CITIZENTrack• Charitable giving andcommunity programmes• Tax practices• Raising funds for our charity partner Unicef• Making donations to charities nominated byemployees• Complying with the tax laws in the countries inwhich we operatePrioritise• Employee Healthand SafetyActively monitoring• Security• Emergency preparednessActively monitor• Customer satisfaction• Human rights and human trafficking• Data protection• Economic performanceTrack• Customer accessibility• Corruption• Ethical supply chain managementPrioritise• Employees• Strong work and labour relations• Employee engagementActively monitor• Diversity and inclusion• Training and development• Wellbeing• Economic performanceTrack• Economic contributionPrioritise• Climate change• Carbon emissions• Climate change adaption• Fuel efficiency and types• Waste and plastic reductionActively monitor• Aircraft noise• Local air qualityTrack• Over-tourism• Wildlife conservationSUSTAINABILITY DASHBOARDPRINCIPLES MATERIALITY ISSUES ACTIVITIESSUSTAINABILITY CONTINUED50 easyJet plc Annual Report and Accounts 2019• The Safety Committee regularly reviews theeffectiveness of the safety management processes.• The Audit Committee oversees our Whistleblowingprocess. In addition, the new Business Integrity Committeeis a management forum on Whistleblowing. It receivessummaries of all reported concerns; it monitors anyongoing concerns and ensures that the proposedoutcomes of investigations are fair, transparent and robust,with root causes identified and remedial actions agreed.• Our aircraft are equipped with defibrillators and we areintroducing inhalers and auto-injectors for breathlessnessand allergic reactions.• We are removing all food products containing nuts fromour inflight retail range.• Customer satisfaction this year was 74%, broadly flat from75% last year.• Customer satisfaction amongst our customers whoneed special assistance was 82.3% this year. This ishigher than the average for all customers for the sixthconsecutive year.• We appointed our first Special Assistance Manager, to leadour work on supporting customers with accessibility needs.• 85% of supplier invoices were paid on time in the year to30 September 2019 (2018: 87%).• We updated our due diligence questionnaire on modernslavery for suppliers this year.• We have created new training materials for all our cabinand ground crew on how to identify and report possiblehuman trafficking.• We established a Business Integrity Committee ethicspolicies and management.• We employ people on local contracts in eight countriesacross Europe, complying with national laws.• We work in partnership with 20 trade unions acrosseight countries.• Employee engagement, measured using our Peakonsurvey, was 7.9 out of 10 this year.• We are on track to achieve our target that 20% of the newentrant co-pilots we attract should be female by 2020.• Over 75% of our front-line people managers have receivedmental health awareness training. We expect all thesemanagers to have been trained by the end of 2019.• Employee turnover was 5.1% across easyJet this year,down from 6.5% last year.• Employees held interests in shares with a value of over£215 million, representing 5% of the total share value of thecompany (based on share price at 30 September 2019).• 80 apprentices are currently learning with easyJet.• We appointed our first Special Assistance Manager, to leadour work on supporting customers with accessibility needs.• This year carbon emissions were 77.07 grams perpassenger kilometre, down from 78.46 grams last year.This is a reduction of over one-third since 2000.• Our current target is a reduction in carbon emissions perpassenger kilometre by 2022 from our 2016 financialyear performance. Since 2016, this figure has now reducedby 3.64%.• Our A320neo and A321neo aircraft, which are 15% morefuel efficient and 50% quieter during takeoff and landingthan their equivalent previous generation aircraft, nowmake up 11% of our overall fleet.• Over half of all our aircraft are also now fitted with‘Sharklet’ wingtips, which can reduce fuel usage andcarbon emissions by up to 4%.• We participated in the CDP Climate Changeprogramme for the first time since 2016.• We have started to remove plastic items from our inflightretail food and drinks range and now offer a discount forcustomers who use their own reusable cup.• We have raised over £14 million for our charity partnerUnicef since 2012. This includes over £2 million raisedthis year.• We also held onboard fundraising appeals for ProstateCancer UK and Breast Cancer Now which raised over£438,000.• This year we awarded over 140 donations to localcharities nominated by our employees.MEASUREMENTS AND OUTCOMESwww.easyJet.com 51STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUED1.SafetyWHY IS THIS MATERIAL?Safety is easyJet’s highest priorityand the issue was also seen as highlyimportant by our stakeholders. Ourcustomers and employees trusteasyJet to keep them safe whiletravelling or working.In addition to flight safety, themateriality assessment alsohighlighted the importance ofwider employee health andsafety, which was seen as a keypart of a safety culture.MATERIAL ISSUESOUR APPROACHOur Plan includes our promise to be a safe and responsible airline.We have mature safety management processes and procedures,to ensure safe journeys for our customers and a safe workingenvironment for employees and suppliers.SAFETY MANAGEMENT AND OVERSIGHTThe ultimate responsibility for safety management lies witheasyJet’s Chief Executive. In addition, the Accountable Managersfor easyJet UK, easyJet Switzerland SA and easyJet Europe AirlineGmbH are accountable to the relevant regulator for safety andcompliance. easyJet’s Director of Safety, Security and Compliancehas a remit to act independently on safety and security matterswithout operational or commercial constraints. The Directorreports directly to the Chief Executive and has regular access tothe Chairman.The Safety Committee regularly reviews the effectiveness ofsafety management processes on behalf of the PLC Board. Thisincludes reviewing the ongoing development of our Safety Plan,which details planned improvements to the safety managementsystem. The Committee is made up of independent Non-ExecutiveDirectors: there are further details on page 85 to 86.SAFETY PROCESSESOur safety processes have risk management at the heart oftheir approach. There are a number of functional safety actiongroups responsible for identifying, evaluating and controllingsafety-related risks, chaired by the appropriate senior managers.The safety management system uses leading software systems(SafetyNet and RiskNet).The easyJet fleet is continually updated with new safety features,to supplement our operating procedures and training, as aircraftare replaced. A320neo and A321neo aircraft are fitted with anAutopilot Traffic Collision Avoidance System (APTCAS) and aRunway Overrun Prevention System (ROPS), which alerts pilots toavoid high-energy approaches that may lead to runway overruns.EMPLOYEE HEALTH AND SAFETYHealth and safety of employees and contractors is a materialfocus for easyJet. It is about holistic wellbeing and covers mentaland physical health, as well as safety in the air and on the ground.Aeromedical and health and safety risks are managed through anintegrated risk management framework, business processes andstructures. This is a proactive integrated approach to aeromedicaland occupational health management, human factors andoccupational safety. This may include the mental fitness of pilots,communicable disease concerns, health and safety andoccupational health issues.We do not tolerate disruptive or abusive behaviour on our flightsor towards our crew and ground agents. Crews are trained toavoid any risk to the safety of flights and passengers. We havemeasures to discourage and prevent disruptive behaviour, and tosupport our cabin crew to respond when it does occur. Cabincrew may refuse to serve alcohol to customers and customers arenot allowed to consume their own alcohol on easyJet flights.SECURITYOur security team work to protect customers and employeesagainst security threats, including working with the relevantgovernment and regulatory agencies. The team carries outsecurity risk assessments, tailored for each country and eachairport to which we fly. These assessments are also updated toreflect the latest geopolitical developments. Security effortsalso include business and personal data – see page 45 forEMPLOYEE HEALTH & SAFETY further detail.SECURITYEMERGENCY PREPAREDNESS52 easyJet plc Annual Report and Accounts 2019WHISTLEBLOWINGAll employees of easyJet and our suppliers should feel able toraise concerns about any safety, legal or ethical issues. If they feelunable to report these concerns to a manager, we also provide awhistleblowing process.The ‘Speak Up, Speak Out’ service is run independently of easyJetand reports can be made confidentially and anonymously. Inaddition to the existing phone service, this year – followingfeedback from trade unions – we added the ability to reportconcerns online or using a mobile app.All reports are investigated and followed up as necessary byan easyJet senior manager responsible for business integrity.The Audit Committee oversees the whistleblowing process. Inaddition, the new Business Integrity Committee is a managementforum on whistleblowing. It receives summaries of all reportedconcerns; it monitors any ongoing concerns and ensures that theproposed outcomes of investigations are fair, transparent androbust, with root causes identified and remedial actions agreed.We have a number of measures in place to support the safetyof our customers during our flights. All our cabin crew aretrained in first aid and how to respond to medical issues whichoccur onboard. Our aircraft are equipped with defibrillators(used when a person has a cardiac arrest) and our cabin creware trained to use these items.We are also currently introducing Salbutamol Inhalers (usedto relieve the symptoms of asthma and breathlessness)and auto-injectors for anaphylaxis (an allergic reaction) onour aircraft.HIGH IMPACT EVENT PREPAREDNESS AND RESPONSE’ IS ALSOONE OF THREE DIMENSIONS OF OUR RISK MANAGEMENTFRAMEWORK (MORE INFORMATION IS ON P45).EMERGENCY PREPAREDNESSWe prepare for emergencies through our business resilienceactivity, which aims to: safeguard customer and employeeinterests; minimise the financial impact of any incidents; andprotect the easyJet brand and reputation.We have a Business Resilience team which works to ensureeasyJet has the ability to anticipate and assess, protect andcontrol, plan and prepare, and respond and recover in thecontext of major disruptive or catastrophic risks, whether theyare internal or external, known or unknown.Any customer who has a nut allergy can give notification inadvance through our special assistance service, so that theground crew and cabin crew will be informed. Our cabin crewwill make an announcement to ask other customers not to eatany nut products for the duration of the flight. We will also stopthe sale of any products containing nut traces on board.This year we decided to go further and remove our inflight foodproducts which contain nuts. Most items were removed fromsale in March 2019 and one final item, a Baklava, will beintroduced in a new recipe without nuts before the end of 2019.CABIN SAFETYwww.easyJet.com 53STRATEGIC REPORT SUSTAINABILITYOUR APPROACHWe want to provide our customers with the warmest welcomein the sky.An important measure of our relationship with our customers iscustomer satisfaction. This is based on surveys of customers afterthey have travelled with easyJet. Overall customer satisfactionscore this year was 74%, compared to 75% last year. There ismore information on our customer priority on page 15.This year we established an Operational Resilience programme toreduce the amount of disruption to our flights and the impact thishas on our customers. More information on this is on page 4.We also recognise that we have additional responsibilities toprovide support for certain customers, including provision ofaccessible travel for people with additional needs and customerswho do experience disruption.ACCESSIBLE TRAVELThis year we appointed a dedicated Accessibility and AssistanceManager, who works with our existing easyJet Special AssistanceAdvisory Group (ESAAG), and across the Company on accessibletravel. There is also a dedicated customer management team foraccessibility-related complaints and support during disruption.The easyJet website Help pages have information on theassistance provided and encourage Customers to give notificationof their requirements in advance. We aim to comply with WebContent Accessibility Guidelines (WCAG) 2.1 guidelines.ESAAG was established in 2012; it includes members from keyeasyJet markets with experience of special assistance issues. It ischaired by former UK cabinet minister Lord David Blunkett. Itgives feedback and guidance that has led to measures such asonboard wheelchairs and more accessible toilets on aircraft.ESAAG has improved services in key airports and is continuing tolook at support for customers with hidden disabilities. Our cabincrew are also trained to recognise hidden disability lanyards andbadges. This year, ESAAG has had input into the easyJet responseto the UK Government’s Aviation 2050 strategy consultation,which considers accessible travel policy.Customer satisfaction amongst special assistance customers was82.3%, compared to 74% for all customers. This is the sixthsuccessive year that satisfaction is higher among customers whoneed special assistance than the average across all customers.DISRUPTION SUPPORTWhen disruption does happen, we also want to supportcustomers. Updates are provided by text message, email and liveupdates in our app, which includes the reason for the disruptionand what customers should do next.In the case of delays, we will provide support and overnightaccommodation as needed. If disruption is due to an airline issue,we make compensation payments in line with EU Regulation261/2004. Customers can find claim forms online, with paymentsmade by bank transfer. We are also a member of an alternativedispute resolution body approved by the UK Civil AviationAuthority (CAA).SUSTAINABILITY CONTINUED2.Honest andfair withcustomersand suppliersWHY IS THIS MATERIAL?Winning customers’ loyalty is one ofthe priorities in Our Plan. We believethat by making it easy, affordable,enjoyable and sustainable for ourcustomers to travel with us, easyJetwill be a more successful and resilientbusiness. We also aim to build strong,lasting relationships with all oursuppliers and partners, as they are anintegral part of easyJet’s success.MATERIAL ISSUESCUSTOMERSATISFACTIONDATA PROTECTIONETHICAL SUPPLYCHAIN MANAGEMENTCORRUPTIONHUMAN RIGHTS ANDHUMAN TRAFFICKINGCUSTOMERACCESSIBILITYECONOMICPERFORMANCE54 easyJet plc Annual Report and Accounts 2019INFORMATION SECURITYProtecting the information we hold on our customers andemployees is a high priority for easyJet. More information onhow we manage this is available on page 47.SUPPLIERSWe believe open, constructive and effective relationships, ensuringthat suppliers’ rights and responsibilities are clearly set out.Our supplier relationship management framework provides atoolkit and guidance for managers who lead relationships withkey partners.ETHICAL SUPPLY CHAIN MANAGEMENTOur Supplier Code of Conduct is based on easyJet’s Code ofBusiness Ethics and requires partners to comply with easyJetsocietal and environmental standards, and to ensure thecompliance of any subcontractors. In line with the Modern SlaveryAct, it prohibits modern slavery and human trafficking.MODERN SLAVERYTo help prevent modern slavery, this year we reviewed ourmodern slavery risk assessment in easyJet and our supply chain.This work was focused on identifying the areas of our businessand the third-party suppliers that are higher risk for occurrencesof modern slavery. An updated due diligence questionnaire wasalso introduced this year to strengthen the process.More information is available in our latest Modern Slavery Actstatement at corporate.easyjet.com.MORE INFORMATION IS AVAILABLE IN OUR LATEST MODERN SLAVERY ACTSTATEMENT AT CORPORATE.EASYJET.COM.I have been very pleased in the last yearto see the progress made and thewillingness to listen and adapt by keystaff at easyJet. The advisory group arevery clear that this is an ongoing task,not only in key aspects such asupdating training and improvingtechnology and communication butalso addressing new challenges,including hidden disabilities and thegrowing elder population, includingthose with the onset of dementia.This means that the work of the groupis critical in spotting where thingsrequire attention, need urgentlyresolving and the emergence ofproblems on an ongoing basis, butabove all thinking ahead and workingon prevention. The decision to appointa dedicated Accessibility andAssistance Manager is anotherindication of the seriousness with whicheasyJet take its responsibilities to alltravellers and their wellbeing.RT hon Lord David BlunkettChair of the easyJet SpecialAssistance Advisory GroupHUMAN TRAFFICKINGAll airlines and transport providers are at risk that their servicescould be used by human traffickers. We have created new trainingmaterials for all our cabin and ground crew on how to identify andreport possible human trafficking. Our security team also workwith authorities across our network on prevention activities andinvestigations.BUSINESS ETHICSWe have in place ethical and compliance policies, covering topicsthat include bribery and corruption, gift giving, fraud, human rightsand modern slavery. These policies and our commitment toHuman Rights statement are available to employees on theeasyJet intranet.All new entrants to easyJet receive mandatory ethics trainingduring the onboarding process. All employees are also requiredto complete annual online refresher training on ethics, anti-briberyand corruption.This year a Business Integrity Committee was established as amanagement forum for ethics policies and management. Thecommittee receives reports of suspected unethical behaviour,identifies Group-wide trends, and monitors follow up. Thecommittee’s remit includes disciplinary issues or grievancesraised with HR, environmental concerns and suspected fraud.Chair of the easyJetSpecial AssistanceAdvisory Groupwww.easyJet.com 55STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUEDOUR APPROACHAt easyJet we want to attract, retain and develop the right peopleas they are fundamental to our success. We seek to treat allemployees fairly, uphold their rights and reward themcompetitively.At 30 September 2019, we employed over 15,000 people in eightcountries across Europe.We employ people on local contracts and comply with therelevant national laws. Our approach is to ensure that working foreasyJet is an attractive option for local workers. This also helps tobuild and maintain our good relationships with local stakeholders.EMPLOYEE ENGAGEMENTWe maintain regular communications with our employees andencourage them to share feedback. Regular updates are providedto employees on key issues for the business, including our financialperformance. This includes a regularly updated intranet, a monthlyCEO update, a weekly all-staff newsletter, separate newsletters forpilots and cabin crew, staff events and inviting feedback anddiscussion on Workplace, our internal collaboration platform.This year we introduced the employee engagement platformPeakon, which seeks views and feedback on working at easyJet,following a successful trial last year. Last year we also introducedWorkplace by Facebook to encourage employees to collaborateand communicate within and between teams. More informationon both platforms is in the case study on page 57.This year our overall employee engagement score was 7.9 out of10 (average score for 2019 financial year). This is based on askingemployees the question “How likely is it you would recommendeasyJet as a place to work?” through our Peakon surveys. Thisremains closely in line with the Peakon trial data from last year(8.0 out of 10 based on 30% of employees) and demonstratesthat engagement with our people remains strong in a challengingoperating environment. Our engagement score is above themajority of companies who use Peakon.EMPLOYEE REPRESENTATIVE DIRECTORThis year the PLC Board appointed Moya Green DBE as theEmployee Representative Director. This role is intended to furtherbring the voice of easyJet employees, and consideration of howbusiness decisions may affect them, into Board discussions.Further details on this new role are on p79.EMPLOYEE REPRESENTATIVE GROUPS ANDTRADE UNIONSWe continue to invest in and value our relationship with ouremployee representative groups and trade unions across Europe.We work in partnership with 20 trade unions across eightcountries, along with our five national works councils in Europe,our European Works Council and a number of other internalemployee consultative groups. Despite increasing union activityin the aviation sector, we believe our willingness to workconstructively with trade unions and employee work groups haslimited the impact of industrial action on our operations and theresulting disruption for customers.3.A responsibleand ResponsiveemployerWHY IS THIS MATERIAL?We are a large European employerand rely on our people to provide thewarmest welcome to our customersand deliver our business priorities.Good employee relations, employeeengagement, diversity & inclusion andwellbeing were seen as importantissues in the materiality assessmentamongst stakeholders.MATERIAL ISSUESEMPLOYEES– DECENT WORK– EMPLOYEEENGAGEMENT– LABOUR RELATIONSECONOMICPERFORMANCEECONOMICCONTRIBUTIONWELLBEINGDIVERSITY ANDINCLUSIONTRAINING ANDDEVELOPMENT56 easyJet plc Annual Report and Accounts 2019MALE FEMALEPLC BOARDEXECUTIVE COMMITTEE (AIRLINE MANAGEMENT BOARD)70% (7)54% (6)30% (3)46% (5)ALL EMPLOYEES54% (8,399) 46% (7,119)We use two complementary employee engagementplatforms, to improve employee communications andstrengthen relationships.PEAKONPeakon is a survey platform which we use to gather feedbackfrom our employees. More than 7,500 employees have nowparticipated in Peakon surveys.Results from Peakon have helped us to identify the issues thatare most important for employee engagement, so that we canfocus resources on the things that matter most to ourworkforce. Managers – with teams of seven or more – have adashboard with engagement scores, and can create actionplans and reply directly and quickly to team comments.easyJet supports the Women in Hospitality 2020 group, whosepurpose is to increase gender representation at senior levels,sending employees to their masterclasses and return to workprogrammes.In September 2019 our Chief Executive, Johan Lundgren, wasnamed Number One Advocate on the list of 50 AdvocateExecutives by HERoes, which recognises leaders who havesupported the achievements of women in business.GENDERAs part of our work on Diversity & Inclusion, we are continuing toimprove the ratio of male to female employees in managementand leadership positions. We believe that a good gender miximproves decision making and better reflects our customer base.As at 30 September 2019:WELLBEINGWe are committed to supporting the health and wellbeing ofour employees.An important aspect of this is the wellbeing of our pilots andcabin crew. We carry out analysis of the working environment,ways of working, and the experience of crew during theirrostered duties, as well as how operational disruption affectsthe lives of our crew and other employees.We introduced an Operational Resilience programme this year(see case study on page 4), which aimed to reduce disruptionwhich affects working days for crew.People managers have also started to receive mental healthawareness training and as at 30 September 2019 over 75% ofour front-line people managers, including those who managecabin crew and pilots, have received this training. We expect tocomplete the training of all these people managers before theend of 2019.EMPLOYEE TURNOVER2019 2018Management & Administration 8.6% 10.1%Pilots 5.7% 4.9%Cabin Crew 4.2% 6.6%Total 5.1% 6.5%WORKPLACEWorkplace emphasises conversation and idea sharing, allowinginstant interaction between peers and from senior leaders inthe business. The Chief Executive and members of the AirlineManagement Board regularly use the platform to give businessupdates and engage with employees, including Q&A sessions.Employees have been able to ask the leadership team aboutsubjects such as the onboard retail technology, Brexit andcrew iPads.Crew often use it to pass on feedback, such as how a newinitiative is being received by customers. When easyJet wasrecognised by the Skytrax airline awards, employees said thatthey wanted easyJet to communicate this to customers. As aresult, Skytrax decals were added on to each aircraft.Workplace shows consistently high engagement rates, withover half of the workforce actively using the platform.building employee engagementwww.easyJet.com 57STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUEDThis year we introduced a new Diversity and Inclusion (D&I)strategy focusing on four pillars of activity:• Firm Foundations: embedding D&I into policies andprocesses• Increase the Mix: ensuring the employee mix reflects ourcustomer base• Training and Development: upskilling leaders to supportcultural change and maintain a welcoming employeeexperience• Partnerships: sourcing expert input and support to helpguide activitiesThe strategy is the result of an in-depth review across allteams, which established that efforts should focus on learningand development, communication and behaviour.A Head of Diversity & Inclusion and team have been appointed,who work across all functions to deliver the strategy. Thestrategy has also been endorsed by the Airline ManagementBoard.Activity that has already taken place this year includes:• The introduction of management courses on recognisingand valuing difference and how to model inclusive behaviour.• A development programme for women – this year 40high-performing middle managers took a residential course,[email protected], focusing on ‘Self’ and ‘Purpose’.• The establishment of a Trailblazer community of volunteersfrom around the business, who support all D&I initiatives andmake suggestions on future activity.Over the next year we intend to:• Engage employees with a voluntary D&I survey to betterunderstand their needs• Review the return to work processes after long-termabsence (for parental leave and ill health)• Embed D&I training into all people management training• Embed the Trailblazer community, who have been recruitedas D&I champions, across the business• Improve our Peakon engagement scores on D&I measures• Continue to develop our pipeline for female talent• Review and develop recruitment tools and processes• Create a D&I charter to use with our suppliers and partnersdiversity and inclusion strategy58 easyJet plc Annual Report and Accounts 2019FEMALE PILOTSOur work to help address the significant gender imbalance amongpilots globally has continued this year. The easyJet Amy JohnsonInitiative, which was set up in 2015 and named after a pioneeringBritish female pilot has this year included:• Over 180 visits by pilots to schools, youth and aeronauticalorganisations.• Sponsorship of the Aviation Badge for Brownies, the UKGirlguiding organisation for 7 to 10 year olds.• Highlighting female easyJet pilots in the media.We are on track to achieve our target that 20% of the newentrant co-pilots we attract should be female by 2020. Theequivalent figure was 5% when we started the initiative in 2015.We will provide a further update on this in 2020.GENDER PAYOur gender pay gap is influenced by the gender makeup of ourpilot community. Pilots are currently predominantly male; theirhigher salaries, relative to other employees, significantly increaseaverage male pay levels at easyJet.Pay rates for cabin crew and pilots are negotiated collectively ineach country. This ensures our pilots and cabin crew are paid thesame rate of pay per rank regardless of gender.GENDER PAY GAP IN HOURLY RATE OF PAYFOR UK EMPLOYEESMedian 47.9%Mean 54.1%This is the pay gap data published in our 2018 gender pay report,the latest published in March 2019. All data is for UK employees asspecified by UK reporting requirements.Our full gender pay report is available at corporate.easyjet.com.REWARDWe offer a competitive reward package, focused on cash andvariable pay rather than fixed benefits. All easyJet employees, witha minimum amount of service, have the opportunity to becomeshareholders in easyJet.As at 30 September 2019 our employees held interests in shareswith a value of over £215 million, representing 5% of the totalshare value of the company.TRAINING AND DEVELOPMENTAll easyJet employees have access to online learningopportunities, as well as career development planning tools. Allemployees receive feedback on their performance and support ontheir development. People managers are also given resources andadvice to help them support the development of their teams. Thisyear we launched ‘My Journey’, a support tool for performanceand personal development reviews in the management andadministration community.APPRENTICESHIPSWe have several apprenticeship programmes employingadvanced, higher and degree apprentices across variousleadership and technical disciplines. The apprenticeships helpdevelop new skills and build employees capabilities to build theirfull potential. In the next year, we plan to expand our offering ofapprenticeships across the company.EMPLOYEES WITH DISABILITIESeasyJet treats every applicant equally and supports employeeswho are or become disabled. This includes offering flexibility andmaking reasonable adjustments to the workplace to ensure theycan achieve to their full potential. However, for easyJet’s twolargest communities, pilots and cabin crew, there are a range ofregulatory requirements on health and physical ability with whichall applicants and current employees must comply.www.easyJet.com 59STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUED4.A guardianfor futuregenerationsWHY IS THIS MATERIAL?One of easyJet’s largest impacts is thecarbon emissions produced from ourflights. In the materiality assessment,all stakeholders believed climatechange was a very important issue foreasyJet, including carbon emissions,climate change adaptation, fuelefficiency and types.The assessment also highlighted thatstakeholders, particularly ourcustomers and crew, were alsointerested in other environmentalissues, particularly the use of plasticand waste management.MATERIAL ISSUESOUR APPROACHAt easyJet we are aware that our operations can have a range ofimpacts on the environment.We work to minimise that potential impact, complying with orexceeding the relevant regulations and continually looking forways to improve performance and reduce the use of resources.CARBON OFFSETTINGOn 19 November 2019, we announced that we will offset thecarbon emissions from the fuel used for all of our flights, tobecome the first major airline to operate net-zero carbon flightsacross its whole network. We are doing this through schemeswhich meet either the Gold Standard or Verified Carbon Standard(VCS) accreditation, which are globally recognised and respectedfor their standards of offsetting.As this change took place in our 2020 financial year, it is notcovered in detail in this sustainability report. Further informationis available on corporate.easyjet.com and we will report on thescheme in our 2020 Annual Report.CLIMATE CHANGE AND GREENHOUSE GASEMISSIONSTackling climate change is an important part of Our Promise to bea safe and responsible airline.In the short term we are focused on efficiency, including operatingmodern, fuel-efficient aircraft and flying them with most seatsoccupied by passengers, in fuel-efficient ways.To track our progress, we measure and report our carbon dioxideper passenger kilometre, which is the standard measure of airlineemissions. We also report on our total annual quantity of carbondioxide emissions from our aircraft operations.Carbon dioxide is our most material greenhouse gas and this iswhere we are focusing. We estimate that our non-carbon dioxideemissions, including Nitrogen Oxide and Methane, are in line withindustry averages of around 1%.In the long term, we are preparing for a move to electric andhybrid aircraft powered by renewable energy. We support WrightElectric in its work to develop an all-electric aircraft for short-haulflights and we are also working with Airbus, Derwent Engineeringand Safran on the development of new technologies.CARBON EMISSIONS TARGETAs part of our goal to reduce carbon emissions, we have set apublic target based on the carbon dioxide emissions producedfor each kilometre travelled by our passengers.Carbon dioxide emissions per passenger kilometre is a usefulmeasure, as it allows potential customers to understand thedifference in carbon impact between different airlines flying onthe same route. It is the way we express our emissions in a waywhich relates to our activities as an airline.The current target is to achieve a 10% reduction in carbondioxide emissions per passenger kilometre from our flights by2022, compared to our 2016 figures. This would equate to72 grams (g) per passenger kilometre in 2022.In the 2019 financial year our carbon dioxide emissions perpassenger kilometre were 77.07g. This is a reduction from78.46g in 2018.Since 2000, we have reduced our carbon emissions per passengerkilometre by over one-third. If we meet our target for 2022, we willhave reduced our carbon emissions by 38% since 2000.CLIMATE CHANGE– CARBON EMISSIONS– CLIMATE CHANGEADAPTATION– FUEL EFFICIENCYAND TYPESLOCAL AIR QUALITYWASTE AND PLASTICSREDUCTIONAIRCRAFT NOISEWILDLIFECONSERVATIONOVER-TOURISMCLIMATE CHANGE-RELATED RISKS ARE ALSO MANAGED AS PART OF OURRISK MANAGEMENT PROCESS. SEE MORE INFORMATION ON P41.60 easyJet plc Annual Report and Accounts 2019LOCAL AIR QUALITYNitrogen oxides (NOx) emissions during aircraft takeoffs andlanding can affect local air quality. Our new Airbus A320neoaircraft, equipped with LEAP-1A engines, produce up to 50% lowerNOx emissions than the CAEP/6 standard of the International CivilAviation Organization.ANNUAL CARBON DIOXIDE EMISSIONSeasyJet’s annual carbon dioxide emissions in the 2019 financialyear was 8.2 million tonnes, compared to 7.6 million tonnes in the2018 financial year. Our methodology for the calculation ofemissions is based on fuel burn measurement, which complieswith the EU’s Emissions Trading System requirements.The increase in emissions is due to the continued expansion ofeasyJet’s operations. In this financial year passenger numbersincreased by 8.6% from the 2018 financial year.NON-AIRCRAFT EMISSIONSOur non-aircraft operations, such as energy usage in the smallnumber of buildings we operate, also create carbon dioxide andother greenhouse gas emissionsHowever, we do not believe these emissions are material whencompared to the emissions from our aircraft operations.As part of our continued improvements to our sustainabilityreporting, we will be doing further work over the next financialyear on carbon emissions from energy usage at our facilities andemissions from our non-aircraft operations. This will includecomplying with the new UK Streamlined Energy and CarbonReporting (SERC) framework which will apply from our 2020financial year.EFFICIENT AIRCRAFTWe operate a fleet of modern, efficient Airbus A320 family aircraft.In 2017 we started to operate our first Airbus A320neo (NewEngine Option) aircraft, equipped with LEAP-1A engines. Last yearwe also started operating the larger Airbus A321neo aircraft.The Airbus neo aircraft (A320 and A321) are 15% more fuelefficient and 50% quieter during takeoff and landing than theirequivalent previous generation aircraft (A320ceo and A321ceo –current engine option).The A321neo aircraft, which have a larger capacity than theA320neo (235 seats compared to 186), also helps to maximise theuse of the airport capacity available, particularly at airports acrossEurope that have constrained capacity.These new generation aircraft currently make up over 11% of ouroverall fleet and will make up a larger proportion as we receivemore new aircraft. All future aircraft deliveries from easyJet’s orderbook will be new, more efficient A320neo and A321neo aircraft.Over half (57%) of all our aircraft are also now fitted with‘Sharklet wingtips, which can reduce fuel usage and carbonemissions by up to 4%.NUMBER OF AIRCRAFT BY TYPEAircraft type NumberPercentageof fleetA319 125 38%A320 169 51%A320neo 31 9%A321neo 6 2%EFFICIENT OPERATIONSOur business model is based on filling most seats on eachflight. This also means we make good use of each flight and itsassociated carbon emissions. This year our ‘load factor’, whichis the percentage of seats used by passengers, was 91.5%(2018: 92.9%).We continue to operate our aircraft as efficiently as possible, withinthe constraints of the operational environment. This includes:• The optimisation of flight plans to ensure the most efficientroutings and flight levels are selected by use of the latestflight plan and weather information.• The use of single engine taxi on arrival and departure.• The optimisation of climb and descent profiles for flights.• The optimisation of the use of ground power by our aircraftat airports.Reducing weight on each aircraft also helps to reduce fuel usage.This is why we have been introducing lightweight Recaropassenger seats and our pilots use electronic devices ratherthan paper documents on the flight deck.Over the next year we will also introduce electronic tablet devicesfor our cabin crew. In addition to providing them with more usefulinformation, we estimate that the change will avoid printing30,000 pieces of paper every day.7075808590951001051101151202000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Financial yearCO2 emissions – grams per passenger kilometrePercentage reduction since 2000

3.2%
8.0%
5.3%
10.1%
15.0%
17.6%
22.3%
24.9%
27.4%
26.4%
27.9%
29.4%
30.2%
31.2%
32.3%
33.7%

17.8%
27.2%
32.5%

EMISSIONS PER PASSENGER KILOMETRE SINCE 2000www.easyJet.com 61STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUEDCDP CLIMATE CHANGE PROGRAMMEThis year we participated in the CDP Climate Change programmefor the first time since 2016.The CDP Climate Change programme (CDP) is an internationalnot-for-profit organisation that provides a global system forcompanies and cities to measure, share and discloseenvironmental information.We have decided to begin participating again as we recognisethat CDP is a widely-used measure of environmental management.As part of the participation process this year, we have identified anumber of areas where we can make improvements to ourenvironmental management and reporting for future years.IATA INTERNATIONAL TARGETIn addition to our own action, we are part of industry-wide efforts.This includes the International Air Transport Association (IATA)target for a 1.5% improvement in fuel efficiency each year to2020, a cap on net emissions from 2020 onwards, and a 50%net reduction in emissions by 2050, compared to 2005 levels.INTERNATIONAL SCHEMESAll easyJet flights within the European Economic Area, whichmake up the large majority of all our flights, are covered by theEU Emissions Trading System scheme.PLASTICS REDUCTIONTo help reduce the amount of single use plastics used on ourflights, this year we have focused on changes to our inflight foodand drink products and service.We have prioritised our actions using the following principles:• Reduce the amount of plastic items that are used.• Replace plastic items with non-plastic alternatives.• Reduce the amount of plastics used in items.The initial changes have been to the ‘dry store’ items which areused to serve food and drink products. This has included:• Replacing a plastics drinks stirrer with a wooden alternative.• Introducing a new hot drinks cup which are now made ofsustainably-sourced cardboard, except for a plant-basedplastic lining, and that is compostable.• Offering a 50 pence / 50 cent discount on hot drinksfor customers who bring their own reusable cup.These are the first changes made and we are continuing to workwith our retail partner, Gate Gourmet, to introduce more ways toreduce the amount of plastic used.WASTE MANAGEMENTOur cabin crew collect waste in two bags, separating outrecyclable materials.As waste management was rated highly in our sustainabilitymateriality assessment, we intend to do further work over thenext year with our aircraft cleaning, ground handling andairport partners on the management of waste.AIRCRAFT NOISEWe recognise that our operations can affect those who live nearairports or under flight paths. We work with individual airports andair traffic control teams to implement noise mitigation activitiesthat best fit each location. Our pilots also use flying techniquesthat reduce the impact of aircraft noise, such as continuousdescent approaches.The new generation Airbus A320neo and A321neo aircraft are50% quieter during takeoff and landing than the equivalentprevious generation aircraft.We have also carried out a retrofit programme to address aparticular sound, associated with A320 family aircraft of allairlines, due to the airflow under the wing. This involved fittingaircraft with vortex generators.SUSTAINABLE TOURISMThe tourists that easyJet, other airlines and travel operators bringto destinations make a very significant contribution to localeconomies. However tourism also needs to have a sustainableimpact on the local environment and community.Sustainability has been a founding principle of the easyJet holidaysbusiness and we will provide further information on the business’sustainability strategy in next year’s Annual Report.WILDLIFE CONSERVATIONWildlife conservation was rated as a lower level materiality issuefor easyJet and we have not carried out any significant work inthis area. However we will continue to keep this under review aswe continue to develop the sustainability strategies for the airlineand easyJet holidays.Our A320 neo and A321 neo aircraft are 15% more fuel efficient and 50% quieter during takeoff and landing than their equivalentprevious generation aircraft.Efficient aircraft62 easyJet plc Annual Report and Accounts 2019OUR APPROACHWe want to contribute to local communities across our networkand society in general. This includes through a range of charitabledonations and initiatives in partnership with recognised charityorganisations.CHARITY COMMITTEEOur Charity Committee makes donations to support charitiesnominated by easyJet employees. This is to ensure that thecauses we support help the communities in which we operate,and have personal meaning to easyJet employees.Any employee can submit a nomination for an award for acharity of their choice. Nominations are considered anonymouslyand 12 charities are selected each month for a flight voucher fortwo people, or a financial donation of £250 / Euro 300.This year the Committee has made 144 awards of flight vouchersor financial donations.UNICEFWe have a pan-European charity partnership, Change for Good,with Unicef, the world’s leading children’s organisation. Our cabincrew make onboard appeals for customers to donate sparechange and unwanted foreign coins at certain times each spring,summer and winter. Since 2012 the partnership has raised over£14.0 million. This includes over £2.0 million raised in the 2019financial year.Collections during December and January support vaccinationprogrammes as part of the global initiative to eradicate polio,which has been running since 1985. Since it began, the initiativehas contributed to polio cases decreasing by 99%, with thedisease now found in only two countries: Afghanistan andPakistan. 2019 marks three years since any cases have beenreported in Nigeria, meaning that the whole African region isnow on the way to being certified polio free.To date, the partnership has helped vaccinate 5.3 millionmothers and babies against deadly diseases and protect morethan 30 million children against polio, as well as helped with theprocurement and distribution of 2,600 cold boxes, 6,000 vaccinecarriers and 22,280 ice packs, and the installation of 44 solarrefrigerators to improve vaccine storage capacity.Since summer 2018, the one-month spring holiday and threemonth summer collection periods support Unicef’s Education inEmergencies work, providing education for children in emergencysituations all over the world. easyJet funds are distributed towhere they are needed most. The money raised so far forEducation in Emergencies could provide over 14,500 School’s ina Box, with the potential to bring education to one millionchildren in emergencies.In 2019 we also supported Unicef’s UK Soccer Aid campaign bycollecting funds on inbound and outbound UK flights throughoutJune. Employees also took part in fundraising activities such asbake sales, quiz nights and raffles.This year the partnership won the Third Sector Business CharityAwards prize for best Charity Partnership, Sport, Travel & Leisure.5.A good citizenWHY IS THIS MATERIAL?We operate across Europe and wantto have a strong reputation andrelationships in our core markets.This means we need to make apositive contribution to these areasand society in general, as well asminimise our negative impacts.While charitable giving and communityprogrammes were rated at a lowerlevel by stakeholders in the materialityassessment, we believe it is still rightthat we support charitable organisationsin our network and more widely.MATERIAL ISSUESCHARITABLE GIVINGAND COMMUNITYPROGRAMMESTAX PRACTICESwww.easyJet.com 63STRATEGIC REPORT SUSTAINABILITYSUSTAINABILITY CONTINUEDIn 2019 easyJet was one of the official partners ofUnicef Soccer Aid in the UK.Unicef Soccer Aid’s aim is to make sure that more than 80,000children in Sierra Leone and Zambia can have a childhood fullof play. Where poverty and malnutrition unsettle childhoods,Unicef works to support its partners in caring for mums andnew babies. Unicef helps provide vaccinations so children canspend their time in the playground. In Zambia Unicef providespreschools in a box for stimulating playtimes.PROSTATE CANCER UK AND BREASTCANCER NOWIn addition to our long-running charity partnership with Unicef,we decided to help raise funds for two cancer charities in Autumn2018. This was in recognition that this is an important cause formany of our employees.Between October and November 2018, we partnered withProstate Cancer UK and Breast Cancer Now on a collectioncampaign on flights with UK-based crew. As the most commoncancers in men and women, one man and one woman die fromprostate and breast cancer every 45 minutes. The campaign wascalled Life-Saving Journeys.The campaign raised over £438,000, which was split equallybetween Breast Cancer Now and Prostate Cancer UK.COMMUNITY SUPPORT AROUND OURHEAD OFFICEIn addition to the charitable activities across our network, we alsoprovide more targeted support in the community around ourHead Office in Luton, UK. This includes supporting the Luton TownFootball Club Community Trust’s school sports programme and asa sponsor of Love Luton, a campaign which promotes the town.TAX PRACTICESWe are committed to complying with the tax laws of the countriesin which we operate. We seek to act with integrity in all taxmatters and to working openly with tax authorities.The Soccer Aid campaign culminated in a TV-broadcastcelebrity football match at Chelsea Football Club’s StamfordBridge. During the match half time, easyJet crewrepresentatives presented a cheque on behalf of easyJet’scustomers to Soccer Aid.easyJet’s support for Soccer Aid in 2019 raised £200,000.These funds were allocated to Unicef’s unrestricted fund, sowill be sent where the need is greatest and could be used aspart of any of Unicef’s core funding areas.UNICEF SOCCER AID64 easyJet plc Annual Report and Accounts 2019REPORTINGREQUIREMENT POLICIES RELEVANT INFORMATION1.ENVIRONMENTALMATTERS• As we are continuing to develop oursustainability strategy, a new EnvironmentalPolicy will follow on from this work• Materiality assessment, p49• Chief Executive’s introduction, p16• Climate change risks, p60• Carbon emissions, p60• Aircraft efficiency, p61• Plastics reduction, p62• Waste management, p62• Aircraft noise, p622.EMPLOYEES• Safety Plan• People Handbook, which includes:• Code of Ethics• Parental, paternity, maternity andadoption leave• Employee consultation• ‘Speak up Speak out’ policy onwhistleblowing• New Diversity & Inclusion Strategy endorsedby the Airline Management Board• Materiality assessment, p49• Chief Executive’s introduction, p16• Safety, p52• Employment approach, p56• Employee engagement, p56• Employee representative groups and trade unions,p56• Wellbeing, p57• Employee turnover, p57• Reward, p59• Diversity and inclusion, p58• Employees with disability, p593.HUMAN RIGHTS• Supplier Code of Conduct, including theprohibition of modern slavery and humantrafficking• Commitment on Human Rights statement• Modern Slavery Statement• Suppliers, p55• Modern Slavery, p55• Human trafficking, p55• Business ethics, p554.SOCIAL MATTERS• easyJet and Unicef charity partnership• Charity Committee• Customers who need special assistance, p54• Customers affected by disruption, p54• Charity partnership with UNICEF, p63• Local charity donations, p64• Aircraft noise, p625.ANTICORRUPTIONAND ANTIBRIBERY• Ethical and compliance policies, coveringtopics that include bribery and corruption,gift giving and fraud• Mandatory ethics training during theonboarding process• Annual online refresher training on ethics,anti-bribery and corruption• Business Integrity Committee establishedthis year to oversee ethics policies andmanagement• ‘Speak up Speak out’ policy onwhistleblowing• Supplier Code of Conduct• Suppliers, p55• Business ethics, p556.BUSINESS MODEL• Business model, p127.PRINCIPAL RISKSAND IMPACTOF BUSINESSACTIVITY• Safety risks, p45• People risks, p44• Compliance and regulatory risks, p42• Climate change risks, p418.NON-FINANCIALKEYPERFORMANCEINDICATORS• Carbon emissions per passenger kilometre, p27• Customer satisfaction, p27• On-time performance, p27NON-FINANCIAL INFORMATION STATEMENTeasyJet aims to comply with the Non-Financial Reporting Directive requirements. The table below sets out where relevant informationcan be found in the report.www.easyJet.com 65STRATEGIC REPORT SUSTAINABILITYCOMMITTED TOeffective corporategovernancejohn bartonNon-Executive ChairmanCHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCEI am pleased to introduce this report, which describes theactivities of your Board during the year, along with ourgovernance arrangements.The Board has continued to focus on providing effectiveleadership and oversight of the Group as it seeks to focus onits strategic priorities and create value for our shareholders.The role and effectiveness of the Board and the culture itpromotes are essential to a successfully run company; theway in which we discharge our duties is set out on thefollowing pages. A summary of Board activity during theyear can be found on page 78.CHANGES TO THE BOARDThe Board keeps its balance of skills, knowledge, experience,independence and diversity under regular review. As a resultthere have been a number of Board changes since the lastAnnual Report. Appointments have been subject to aformal, rigorous and transparent procedure, led by theNominations Committee.We welcomed Dr Anastassia Lauterbach as an IndependentNon-Executive Director and member of the Audit Committee,and Nick Leeder as an Independent Non-Executive Directorand member of the Safety Committee, on 1 January 2019. WitheasyJet having an increased focus on digital and the use ofdata as a source of competitive advantage, we were verypleased to welcome both Anastassia and Nick to the Board.They bring different perspectives on technology and artificialintelligence, with a depth of knowledge across a range ofbusinesses. Both are international in outlook and experience andfurther strengthen the diverse mix of approach and skills on theBoard. More detailed information on Anastassia and Nick’sinduction can be found on page 82.Adèle Anderson stepped down from the easyJet Board at theconclusion of the AGM on 7 February 2019. On behalf of theBoard, I would like to reiterate my thanks to Adèle for herimportant contribution to the easyJet Board and specificallyin her role as Audit Committee Chair until 1 January 2019.We also announced that after eight years Charles Gurassa is tostep down as Chair of the Remuneration Committee, but remaina member of the Committee, with effect from 21 October 2019.I would like to thank Charles for his wise and effective leadershipof the Committee during his tenure. Moya Greene has replacedCharles as Chair with effect from the same date.board activity in 2019The Board has an annual programme of activitywhich is designed to balance the need toprovide effective oversight of the Group’sactivities and the setting of strategic prioritiesfor the future.boardchangesDr Anastassia Lauterbachand Nick Leeder joined theBoard during the year,bringing a depth ofknowledge and experiencein technology and data,adding to the diversity ofskills amongst Boardmembers.PAGEstakeholderengagementThe Board continued tofocus on understandingthe views of itsstakeholders. MoyaGreene was appointedEmployee RepresentativeDirector in January 2019,enhancing the employeevoice in Board discussions.2019 governancehighlightsPAGEPAGE79788166 easyJet plc Annual Report and Accounts 2019CONTENTS OF THE CORPORATEGOVERNANCE REPORT68 Board and Airline Management Board (‘AMB’) profiles75 Our governance framework78 Board activity in 201985 Board Committee overview and activities during the year116 Directors’ reportCULTURE AND PURPOSEeasyJet has an open and collaborative culture which is underpinnedby the values and behaviours which we call ‘Our Promise’:• Safe & responsible: safety is our number one priority.• On our customers’ side: we always think about the customerand see things from their point of view.• In it together: we are one team and work together in all we do.• Always efficient: we will always be efficient and focus onwhat matters most.• Forward thinking: we anticipate what we need tomorrow andconsider how what we do today might affect us in future.easyJet’s purpose is also clearly defined as part of ‘Our Plan’and set out on page 2. As a Board, our purpose, values andbehaviours are always top of mind. We aim to lead by exampleby ensuring that the values are integrated into decision makingand that the policies and procedures we put in place maintain theopen and collaborative culture we have at easyJet. This includesthe Safety Committee monitoring the nature and frequency ofsafety incidents to determine whether there are any countercultural trends; the Board reviewing whistleblowing cases tounderstand the matters being reported; and the NominationsCommittee reviewing company-wide progress on culture, diversityand inclusion initiatives.UNDERSTANDING OUR STAKEHOLDERSThe Board continues to take account of the impact of its decisionson all of our stakeholders, who include customers, suppliers,shareholders, regulators and governments, including as set out insection 172 of the Companies Act 2006. The Board believes thatpart of that responsibility includes understanding the views of thosestakeholders and building constructive relationships with them.Last year we reported that we had begun to consider ways inwhich a stronger and more meaningful engagement could takeplace between the Board and the workforce. I am pleased toreport that Moya Greene took up the position of EmployeeRepresentative Director with effect from 1 January 2019 to betterreflect the employee voice in the boardroom. Further details onMoya’s activities are set out on page 79.The Board’s visit to Austria also allowed us to engage withstakeholders including Austrocontrol and local airportmanagement. More information can be found on page 77.During the year the Board received presentations from relevantparts of the business focusing on the customer, shareholdersand regulators. Further details of all our stakeholders and howwe have engaged with them are set out on page 15.SUSTAINABILITYAs clearly articulated by Johan Lundgren on page 48, sustainabilityhas been a key focus of the Board this year and will continue tobe over the coming year. It is important to the Board that weoperate a safe and responsible business and sustainability playsan important part in this.BREXITThe Board continued to closely oversee the implementationof easyJet’s planning for Brexit. This has involved regularmanagement updates on both the design and implementation ofeasyJet’s response to Brexit negotiations, and the likely impact onthe European airline industry. We are confident that easyJet’soperating model and network are unaffected by Brexit and thatflying rights between the EU and the UK will be maintained.This year the Board’s annual visit to our European operations tookplace in Vienna, which provided an opportunity to see at first handthe operation of the easyJet Europe airline, established in 2017 aspart of the Company’s Brexit preparations.DIVERSITYWe take the issue of diversity in the boardroom and throughoutthe business very seriously and are mindful of important recentdevelopments in this area.We remain focused on maintaining an inclusive and diverseculture. We believe this improves effectiveness, encouragesconstructive debate, delivers strong performance and enhancesthe success of the business. The Board has a Diversity andInclusion Policy that sets our objectives in this area. You canread more about this, and our overall approach to diversityand inclusion in our other senior leadership positions andacross easyJet, on page 88.BOARD EVALUATIONFollowing the externally facilitated Board evaluation conductedlast year, our Nominations Committee oversaw an internallyfacilitated review of the composition, diversity and effectivenessof the Board this year. A full report on the activities of theNominations Committee and the outcomes of the evaluationcan be found on pages 87 to 88.UK CORPORATE GOVERNANCE CODEI am pleased to report that we were in full compliance withthe requirements of the 2016 UK Corporate Governance Code(the ‘2016 Code’) during the year.We welcomed the publication by the FRC of the revised UKCorporate Governance Code in July 2018 (the ‘2018 Code’) and itsfocus on the themes of corporate and Board culture, stakeholderengagement and sustainability, which are critical factors for us aswe partner with our stakeholders to build a successful andenduring business. While the 2018 Code will not apply until ourfinancial year beginning on 1 October 2019, we have chosen toadopt some of its elements early and further details areincluded in this report.The following pages set out details of the composition of ourBoard, its corporate governance arrangements, processesand activities during the year, and reports from each of theBoard’s Committees.JOHN BARTONNon-Executive Chairmanwww.easyJet.com 67GOVERNANCE CHAIRMAN’S STATEMENT ON CORPORATE GOVERNANCEBOARD OF DIRECTORSAn experiencedand balanced Boardjohn barton (75)Non-Executive ChairmanCharles Gurassa (63)Non-Executive Deputy Chairman andSenior Independent Directorjohan lundgren (53)Chief Executive OfficerSkills & experienceJohn has significant board experiencehaving previously served as Chairman ofNext plc, Catlin Group Limited, Cable andWireless Worldwide plc, Brit Holdings plcand Wellington Underwriting plc. He waspreviously Senior Independent Director ofWH Smith plc, Hammerson plc and SSPGroup plc. He was also the Chief Executiveof insurance broker JIB Group plc. AfterJIB’s merger with Lloyd Thompson, hebecame Chairman of the combined Group,Jardine Lloyd Thompson Group plc, until2001. John is a qualified CharteredAccountant and has an MBA fromStrathclyde University.Skills & experienceCharles has extensive experience in thetravel, tourism and leisure industriesincluding having served as Chief Executiveof Thomson Travel Group plc, ExecutiveChairman of TUI Northern Europe Limitedand Director of Passenger and Cargo atBritish Airways plc. Charles retired in June2003 to pursue a portfolio career. He waspreviously Non-Executive Chairman ofGenesis Housing Association, LOVEFiLMInternational Ltd, Phones4U Ltd, VirginMobile plc, Alamo/National Rent a Car and7Days Ltd, a Non-Executive Director atWhitbread plc and Senior IndependentDirector at Merlin Entertainments plc.Charles has a bachelor’s degree inEconomics and an MBA from theInternational Management Centreat Buckingham.Skills & experienceJohan has more than 30 years’ experienceworking in the travel industry, starting hiscareer as a tour guide and occupyingvarious roles in travel marketing and sales.Prior to joining easyJet in December 2017as Chief Executive, Johan was the GroupDeputy Chief Executive Officer and ChiefExecutive Officer of Mainstream Tourismat TUI AG. Prior to this Johan was theManaging Director for the Northern Regionat TUI Travel plc from 2007 until 2011.From 2003 until 2007, he was theManaging Director and Chief ExecutiveOfficer of TUI Nordic. Johan led MyTravel’sbusinesses out of Canada and Swedenbetween 1999 and 2003, prior to which hewas Managing Director of Always TourOperations from 1996.Current external appointmentsSenior Independent Director of Luceco plcand member of its Audit, Remunerationand Nomination Committees. NonExecutive Director of Matheson & Co Ltd.Current external appointmentsNon-Executive Chairman of Channel 4 andmember of its Remuneration, Ethics andAudit Committees. Chairman of Great RailJourneys and Member of the Board ofTrustees at English Heritage and theMigration Museum.Current external appointmentsNone.Nationality:BritishNationality:BritishNationality:SwedishAppointed:May 2013Appointed:June 2011Appointed:December 2017Key areas of expertise:Finance, GovernanceKey areas of expertise:Aviation, Travel and Tourism andTelecommunicationKey areas of expertise:Travel and TourismF N RN68 easyJet plc Annual Report and Accounts 2019Nationality:BritishNationality:GermanNationality:British and Canadianandrew findlay (50)Chief Financial OfficerDr Andreas Bierwirth (48)Independent Non-Executive DirectorMOYA GREENE DBE (65)Independent Non-Executive Director &Employee Representative DirectorSkills & experienceAndrew was previously Chief FinancialOfficer at Halfords Group plc fromFebruary 2011 to October 2015. Prior tothis, Andrew was Director of Finance, Taxand Treasury at Marks and Spencer Groupplc. He has also held senior finance roles atthe London Stock Exchange and at Cableand Wireless, in the UK and the US.Andrew qualified as a CharteredAccountant with Coopers and Lybrand.Skills & experienceAndreas previously served as a Directorand Chief Commercial Officer at AustrianAirlines AG. Andreas also served as VicePresident of Marketing at DeutscheLufthansa AG (Frankfurt) and Chairman ofthe Supervisory Board at T-Mobile PolskaSA. Prior to this, Andreas was firstlyDeputy Managing Director and laterManaging Director at Germanwings.Skills & experienceMoya has wide-ranging strategic andleadership experience gained in both theprivate and public sectors. Moya served asChief Executive of Royal Mail Group foreight years. Prior to joining Royal Mail,Moya was Chief Executive Officer ofCanada Post. She also has a strong publicsector background, developed over a17-year period when she assumedprogressively more senior roles in sevendifferent Ministries of the Canadian FederalPublic Service. She has previously servedas a Non-Executive Director of Rio Tintoplc as well as Great-West Life co and TimHortons Inc, both publicly quoted in Canada.Current external appointmentsNon-Executive Director of Rightmove plc,Chair of its Audit Committee and memberof its Nomination Committee.Current external appointmentsChief Executive Officer of MagentaTelekom (formerly T-Mobile Austria).Chairman of the Supervisory Board ofDo&Co AG and Member of theSupervisory Board of Telekom DeutschlandGmbH, Casinos Austria AG, Avcon Jet AG,FK Austria Wien AG. He is also a Directorof Federation of Austrian Industry and theGerman Chamber of Commerce in Austria.Current external appointmentsMember of the Board of Trustees of theTate Gallery.Appointed:October 2015Appointed:July 2014Appointed:July 2017Key areas of expertise:FinanceKey areas of expertise:Aviation, European PerspectiveKey areas of expertise:Logistics and TransportS Safety CommitteeR Remuneration CommitteeA Audit CommitteeCommittee ChairN Nominations CommitteeF Finance CommitteeBOARD COMMITTEESS NS FRwww.easyJet.com 69GOVERNANCE BOARD OF DIRECTORSDR ANASTASSIA LAUTERBACH (47)Independent Non-Executive DirectorNICK LEEDER (50)Independent Non-Executive DirectorANDY MARTIN (59)Independent Non-Executive DirectorSkills & experienceAnastassia brings expertise in innovativetechnologies, including cyber securityand artificial intelligence. She served asthe Senior Vice President of GlobalBusiness Operations Europe at QualcommIncorporated, a world leader in 3G, 4Gand next-generation wirelesstechnologies. She also held several rolesat Deutsche Telekom AG, including SeniorVice President, Business Developmentand Investments, Acting Chief Productsand Innovation Officer, and Senior VicePresident, Planning & Developmentand served as a member of the ExecutiveOperating Board. Prior to this, she servedas Executive Vice President, GroupStrategy at T-Mobile International AG and,prior to T-Mobile, she served in variousoperational and strategic roles at DaimlerChrysler Financial Services, McKinsey &Company and Munich ReinsuranceCompany.Skills & experienceNick has substantial leadership experiencewith deep expertise of print to digitalbusiness transformation within the mediasector. Nick has spent the last eight yearsleading Google’s businesses in Australia,New Zealand and France before movingto Ireland. Prior to Google, Nick was atNews Corporation, firstly as ChiefOperating Officer of News Digital Mediaand latterly as Deputy Chief Executive ofnational broadsheet newspaper,‘The Australian’. Before that he wasChief Operating Officer of newspapergroup, Fairfax Digital. He has a degree inpure mathematics from University ofSydney and an MBA from Insead.Skills & experienceAndy was, until 2015, Group ChiefOperating Officer, Europe and Japan, forCompass Group plc, having previouslybeen their Group Finance Director from2004 to 2012. Before joining CompassGroup plc, Andy was Group FinanceDirector at First Choice Holidays plc(now TUI Group) and prior to that held anumber of senior finance roles at Forte plcand Granada Group plc (now ITV plc).Andy trained as a Chartered Accountantat Peat Marwick before moving to ArthurAndersen where he became a partner.Current external appointmentsDirector at Dun & Bradstreet, Member ofthe Supervisory Board at Wirecard AG andCenshare AG. Chief Executive Officer andfounder of Lauterbach Consulting &Venturing GmbH.Current external appointmentsVice President at Google Ireland, EMEAHeadquarters.Current external appointmentsNon-Executive Director of Intertek Groupplc and Chairman of its Audit Committee.Non-Executive Director of the John LewisPartnership and Chairman of its Audit &Risk Committee. Non-Executive Chairmanof Hays Group plc and Chairman of itsNomination Committee.Nationality:GermanNationality:AustralianNationality:BritishAppointed:January 2019Appointed:January 2019Appointed:September 2011Key areas of expertise:Information Technology, CyberKey areas of expertise:Information TechnologyKey areas of expertise:FinanceBOARD OF DIRECTORS CONTINUEDA SF R N A70 easyJet plc Annual Report and Accounts 2019Nationality:BritishJULIE SOUTHERN (59)Independent Non-Executive DirectorSkills & experienceJulie has significant board experience andhas held a number of commerciallyoriented finance and related roles duringher career. She was Chief CommercialOfficer of Virgin Atlantic Limited between2010 and 2013, responsible for thecommercial strategy of Virgin AtlanticAirways and Virgin Holidays. Prior to this,Julie was Chief Financial Officer of VirginAtlantic Limited for 10 years. In addition,Julie was previously Group FinanceDirector at Porsche Cars Great Britainand Finance and Operations Director atWH Smith – HJ Chapman & Co. Ltd. Shewas previously the Non-Executive Directorof Stagecoach Group plc, Cineworld plcand DFS Furniture plc. Julie holds a BA(Hons) in Economics from the University ofCambridge and is a qualifiedChartered Accountant.Current external appointmentsNon-Executive Director and Chair of theAudit Committees of Rentokil Initial plc andNXP Semi-Conductors N.V.. Non-ExecutiveDirector, Chair of the Audit Committee andmember of the Remuneration Committeeat Ocado plc.Appointed:August 2018Key areas of expertise:Finance, AviationDIVERSITY IN THE BOARDeasyJet recognises the benefits of having diversity across theBoard to ensure effective engagement with key stakeholdersand effective delivery of the business strategy.CHANGES TO THE BOARD DURING THEYEAR AND UP TO 18 NOVEMBER 2019:• Dr Anastassia Lauterbach and Nick Leeder were appointedto the Board on 1 January 2019.• Adèle Anderson stepped down from the Boardon 7 February 2019.TENURE0-3 years: 54-6 years: 37-9 years: 2GENDERMale: 7Female: 3AGE40-49: 250-59: 560+: 3A R Swww.easyJet.com 71GOVERNANCE BOARD OF DIRECTORSAIRLINE MANAGEMENT BOARDAn experienced and focusedmanagement teamELLA BENNETTGroup People DirectorMAAIKE DE BIEGroup General Counsel and CompanySecretaryLIS BLAIRChief Marketing OfficerSkills & experienceElla is a skilled Group HR Director withstrong experience in the UK andinternationally in lean and digitaltransformation, large-scale change as wellas talent development and reward. Ellajoined easyJet from Sainsbury’s Argos,where she led the integration of theirnon-food business to create a multiproduct, multi-channel business with fastdelivery networks. Ella was also Group HRDirector at Home Retail Group, leading thepeople aspects of Argos’ digitaltransformation. Prior to this she was amember of the executive managementteam at Fujitsu. She earned her BA (Hons)in English Literature from the University ofBristol and her Master’s Degree from theUniversity of London.Skills & experienceMaaike is an experienced internationallawyer with over 25 years’ practicalexperience in a variety of sectors. Maaikejoined easyJet in June 2019 from Royal Mailplc where she was Group General Counselaccountable for all legal, compliance, claimsmanagement, security and informationgovernance matters. Prior to Royal Mail,Maaike was a Legal Director and part of thegovernance body of EY LLP, Maaike alsospent six years with General Electric, fiveyears as General Counsel for one of itscapital companies in EMEA and thenpromoted into the HQ office of GE Capitalin Europe to lead the improvement ofenterprise risk management & corporategovernance across EMEA. She has also heldsenior international legal positions at theEuropean Bank for Reconstruction andDevelopment, LLP in London and White &Case LLP in New York.Skills & experienceLis joined the AMB as Chief MarketingOfficer in May 2018 after six years headingup Customer Relationship Management(CRM) and insight for the airline. Prior tojoining easyJet, Lis spent five years as amarketing consultant across multiplesectors, leading brands and marketingagencies including Audi, Barclaycard, Beluand Rapier London. Her marketing careerbegan with 10 years at Barclays,incorporating leadership roles in all areas ofmarketing, including digital, CRM, insight,brand and advertising. She graduated fromCambridge with an MA in Natural Sciences.Nationality:BritishNationality:DutchNationality:BritishAppointed:May 2018Appointed:June 2019Appointed:May 2018Key areas of expertise:People, Reward and Digital TransformationKey areas of expertise:Legal, Compliance and RegulatoryKey areas of expertise:Customer Insight, Digital and MarketingCHANGES TO THE AMB DURING THE YEARAND UP TO 18 NOVEMBER 2019:• Chris Browne stepped down as the Chief OperatingOfficer. David Morgan has been acting Head ofOperations on an interim basis since 7 March 2019.• Luca Zuccoli stepped down as Chief Data Officer.Sam Kini was appointed Chief Data and InformationOfficer from 1 August 2019.• Maaike de Bie was appointed General Counsel andCompany Secretary with effect from 3 June 2019.Daud Khan acted as interim General Counsel andCompany Secretary until Maaike’s appointment.72 easyJet plc Annual Report and Accounts 2019Nationality:FrenchNationality:DanishNationality:British / IrishROBERT CAREYChief Commercial OfficerTHOMAS HAAGENSENGroup Markets DirectorFLIC HOWARD-ALLENChief Communications OfficerSkills & experienceRobert joined from McKinsey & Companywhere he was a partner and leader in theAirline practice. Over the last 11 years,Robert has assisted airline clients aroundthe world on a range of strategy, revenue,commercial and operational issues. Prior toMcKinsey, Robert worked for Delta AirLines and America West Airlines in avariety of roles across revenue andoperations functions.Skills & experienceWith over 21 years’ experience inoperations management in a variety ofroles across Europe, Thomas has served aseasyJet’s Country Director for theGermany, Austria and Switzerland regionsince 2011, developing the market entrystrategy for Germany and the businesstraveller segment in Northern Europe. Mostrecently, Thomas was appointed ManagingDirector of our Austrian AOC, easyJetEurope GmbH, which forms a key part ofour Brexit plans, and managed thetransition of over 100 aircraft to easyJetEurope. Thomas holds a degree in businessadministration with a focus onmanagement and marketing fromUniversity of Lausanne.Skills & experienceFlic has over 20 years’ experience incorporate, consumer, internal, governmentrelations and crisis communications. Flicjoined easyJet from Associated BritishFoods, the owner of Primark, Twinings andmany other major brands, where sheheaded up external affairs. Flic waspreviously Director of Communications andCorporate Responsibility at Marks andSpencer Group plc where she led thecreation of ‘Plan A’, its CorporateResponsibility and Sustainability approach.Flic was also a Director at public relationsconsultancy Hill + Knowlton for a numberof years. She holds a BA (Hons) degree inEnglish Literature from the University ofLeeds.Appointed:September 2017Appointed:May 2018Appointed:August 2018Key areas of expertise:Aviation and StrategyKey areas of expertise:Commercial and Operations ManagementKey areas of expertise:Corporate Communications, SustainabilityDIVERSITY IN THE AIRLINEMANAGEMENT BOARDeasyJet recognises the benefits ofhaving diversity across the executiveleadership team to inspire innovationand increased performance.GENDERMale: 6Female: 5AGE40-49: 550-59: 6www.easyJet.com 73GOVERNANCE AIRLINE MANAGEMENT BOARDJOHAN LUNDGRENChief ExecutiveSAM KINIChief Data and Information OfficerDavid MorganInterim Head of OperationsGARRY WILSONChief Executive, easyJet HolidaysANDREW FINDLAYChief Financial OfficerSkills & experienceSam joined easyJet as Chief Data andInformation Officer in August 2019 fromTelenet, the largest provider of cablebroadband services in Belgium, where shehad been Chief Information Officer forthree years. She was responsible for data,IT, digital, systems and services across thecombined Telenet group. Before that, Samheld a number of positions at Virgin Media,including Director of Development,Delivery, Technology and Transformation.Sam brings with her significant experienceof leading data, IT, transformation andchange in complex organisations.Skills & experienceDavid Morgan joined easyJet inSeptember 2016 as the airline’s Chief Pilot.In December 2017 he took up the positionof Director of Flight Operations, takingresponsibility the safe and efficientoperation of the airline’s flights acrossEurope. In March 2019 David took up theinterim role of Head of Operations,reporting directly to the CEO. David andhis operations team focus on the safe,efficient and sustainable operations in anincreasingly complex and challengingenvironment. Prior to joining the airlineDavid was Chief Flight Operations Officerat Wizz Air. His long career in aviation hastaken him around the world includingAustralia and the Middle East. He is agraduate of the Royal Military AcademySandhurst.Skills & experienceGarry is a highly experienced commercialleader working across internationalorganisations, and has over 21 years’experience in the holiday and travel sector.He joined the business from TUI Groupwhere he most recently held the role ofManaging Director for Group Product andPurchasing, leading commercial strategiesacross a number of markets and headinga global team across 20 countries. Prior tothis, Garry worked in a number of seniorcommercial roles at TUI Group. He alsoheld the position of Director of Europe,Middle East and Africa for American travelgroup Orbitz Worldwide (now ExpediaInc.). Garry has worked extensively withoverseas governments, PwC and theTravel Foundation to create sustainabletourism policies to promote majoreconomic growth and positive socialchange whilst minimising negativeenvironmental impact. He holds aBCom (Hons) degree in BusinessManagement and Languages fromthe University of Edinburgh.Nationality:BritishNationality:BritishNationality:BritishSEE BOARD OF DIRECTORS’ PROFILESON PAGE 69.SEE BOARD OF DIRECTORS’ PROFILESON PAGE 68.Appointed:August 2019Appointed:March 2019Appointed:November 2018Key areas of expertise:Data and Information TechnologyKey areas of expertise:Flight OperationsKey areas of expertise:Travel, Business Transformation andGlobal MarketsAIRLINE MANAGEMENT BOARD CONTINUED74 easyJet plc Annual Report and Accounts 2019governance frameworkSHAREHOLDERSCHAIRMANResponsible for the leadership of the easyJet plc Board (the ‘Board’) and for ensuringthat it operates effectively through productive debate and challenge.THE BOARDThe Board is responsible for providing leadership to the airline. It does this by setting strategic priorities and overseeing their delivery in a way that isaligned with easyJet’s culture and enables sustainable long-term growth, whilst maintaining a balanced approach to risk within a framework of effectivecontrols and taking into account the interests of a diverse range of stakeholders. There are certain matters which are reserved for the Board’s decision.CHIEF EXECUTIVEResponsible for the day-to-day running of the Group’s business and performance,and the development and implementation of strategy.AIRLINE MANAGEMENT BOARD (‘AMB’)Led by the Chief Executive, the AMB members are collectively responsible for driving the performanceof the airline against strategic KPIs and managing the allocation of central funds and capital.BOARD COMMITTEESThe terms of reference of each Committee are documented and agreed by the Board. The Committees’ terms of referenceare reviewed annually and are available in the Governance section of easyJet’s corporate website at corporate.easyjet.com.The key responsibilities of each Committee are set out below.SAFETYCOMMITTEETo examine specific safetyissues as requested by theBoard or any member ofthe Committee.To receive, examine andmonitor reports on actionstaken by departments.To review and monitor theimplementation of easyJet’sannual safety plan.NOMINATIONSCOMMITTEETo keep under review thecomposition, structure andsize of, and succession to,the Board and itsCommittees.To provide successionplanning for seniorexecutives and the Board,leading the process for allBoard appointments.To evaluate the balance ofskills, knowledge, experienceand diversity on the Board.AUDITCOMMITTEETo monitor the integrity ofthe Group’s accounts, andthe adequacy andeffectiveness of thesystems of internal control(including whistleblowingprocedures).To monitor theeffectiveness andindependence of theinternal and externalauditors.FINANCECOMMITTEETo review and monitor theGroup’s treasury policies,treasury operations andfunding activities, along withthe associated risks.REMUNERATIONCOMMITTEETo set remuneration for allExecutive Directors, theChairman and the AMB,including pension rights andany compensationpayments.To oversee remunerationand workforce policies andpractices and take theseinto account when settingthe policy for Directors’remuneration.COMMITTEE REPORTON PAGES 85 TO 86COMMITTEE REPORTON PAGES 87 TO 88COMMITTEE REPORTON PAGES 89 TO 93COMMITTEE REPORTON PAGES 94 TO 95COMMITTEE REPORTON PAGES 96 TO 115www.easyJet.comGOVERNANCE CORPORATE GOVERNANCE REPORT75Division of responsibilitiesThe roles of Chairman and Chief Executive are separate, set out inwriting, clearly defined, and approved by the Board. They areavailable on easyJet’s corporate website at corporate.easyjet.com.The ChairmanThe Chairman, John Barton, is responsible for leadership of theBoard and ensuring effectiveness in all aspects of its role. He isresponsible for setting the Board’s agenda and ensuring adequatetime is available for discussion of all agenda items, includingstrategic issues. He is responsible for encouraging and facilitatingactive engagement by and between all Directors, drawing on theirskills, knowledge and experience.Senior Independent DirectorCharles Gurassa is the Senior Independent Non-Executive Directorand Deputy Chairman. He acts as a sounding board for theChairman and acts as an intermediary for the other Directorswhen necessary. He is also available to address shareholders’concerns that have not been resolved through the normalchannels of communication with the Chairman, Chief Executiveor other Executive Directors. He is responsible for evaluating theperformance of the Chairman in consultation with the otherNon-Executive Directors.Non-Executive DirectorsThe Non-Executive Directors provide an external perspective,sound judgement and objectivity to the Board’s deliberations anddecision making. With their diverse range of skills and expertise,they support and constructively challenge the Executive Directorsand monitor and scrutinise the Group’s performance againstagreed goals and objectives. The Non-Executive Directors arealso responsible for determining appropriate levels of executiveremuneration, appointing and removing Executive Directors andsuccession planning. The Non-Executive Directors together withthe Chairman meet regularly without any Executive Directorsbeing present.Chief Executive OfficerJohan Lundgren has specific responsibility for recommendingthe Group’s strategy to the Board and for delivering the strategyonce approved. In undertaking such responsibilities, the CEOtakes advice from, and is provided with support by, his seniormanagement team and all Board colleagues. Together with theChief Financial Officer, the CEO monitors the Group’s operatingand financial results and directs the day-to-day business of theGroup. The CEO is also responsible for recruitment, leadershipand development of the Group’s executive management teambelow Board level.Company SecretaryMaaike de Bie as Company Secretary supports and works closelywith the Chairman, the Chief Executive Officer and the BoardCommittee Chairs in setting agendas for meetings of the Boardand its Committees. She supports the accurate, timely and clearinformation flow to and from the Board and the BoardCommittees, and between Directors and senior management. Inaddition, she supports the Chairman in designing and deliveringDirectors’ induction programmes and the Board and Committeeperformance evaluations. She also advises the Board on corporategovernance matters and Board procedures, and is responsible foradministering the Company’s Share Dealing Code and the AnnualGeneral Meeting.COMPLIANCE WITH THE UK CORPORATEGOVERNANCE CODEAs a listed company easyJet follows the principles set out in the2016 UK Corporate Governance Code (the ‘2016 Code’), the fulltext of which is available at www.frc.org.uk, and is required todisclose whether it has complied with the provisions of the 2016Code during the financial year. The Board is pleased to confirmthat the Company complied with the 2016 Code throughout theyear and further details are set out in this section of the AnnualReport (together with the Directors’ remuneration report onpages 96 to 115 and the Directors’ report on pages 116 to 119).2018 UK GOVERNANCE CODEThe Board welcomed the introduction of the 2018 UK CorporateGovernance Code (the ‘2018 Code’) and its focus on the themesof corporate and Board culture, stakeholder engagement andsustainability. While it will only formally apply to the Companyfrom the financial year beginning 1 October 2019, the Board hasconsidered the requirements of the 2018 Code during the yearand taken the opportunity to adopt certain elements early. Themain changes that have been made are set out below.• Moya Greene has been appointed the Employee RepresentativeDirector from 1 January 2019, further details of which are set outon page 79.• The terms of reference for the Remuneration Committee havebeen updated to ensure that pay for senior management isformally set by the Committee.• Succession and development plans for the Board, AMB and ELThave been discussed on a regular basis and enhanced.• To ensure that stakeholder voices (which includes customers,suppliers, shareholders, regulators and governments) areunderstood by the Board, presentations on key stakeholdergroups have been given during the year and opportunitiesidentified to build relationships where appropriate.Further details of the Company’s compliance with the 2018 Codewill be provided in next year’s Annual Report.LEADERSHIPRole of the BoardThe Board is responsible for providing effective leadership to theCompany by setting the strategic priorities of the Group andoverseeing management’s execution of the strategy in a waythat enables sustainable long-term growth, while maintaining abalanced approach to risk within a framework of prudent andeffective controls. It is responsible for ensuring that it has theright mix of skills, knowledge, experience and diversity toperform its role effectively.The Board is collectively responsible for promoting the long-termsuccess of the Group for the benefit of its members as a whole,through the creation of sustainable shareholder value. In exercisingthis responsibility, the Board takes into account the needs of allrelevant stakeholders – including customers, suppliers,shareholders, regulators and governments – and the effect ofthe activities of the Company on the environment.The Board is provided with timely and comprehensiveinformation to enable it to discharge its responsibilities, toencourage strategic debate and to facilitate robust, informedand timely decision-making.The Board has a formal schedule of matters reserved for itsdecision and specific matters delegated to certain BoardCommittees. The matters reserved to the Board and the Termsof Reference of the Board Committees are available in theGovernance section of easyJet’s corporate website at corporate.easyjet.com. Day-to-day management responsibility rests with theAirline Management Board (‘AMB’), the members of which arelisted on pages 72 to 74.CORPORATE GOVERNANCE REPORT CONTINUED76 easyJet plc Annual Report and Accounts 2019Board activity in 2019The Board meets regularly, with 11 scheduled meetings havingbeen held during the year including the strategy days. Each Boardmeeting follows a carefully tailored agenda agreed in advance bythe Chairman, CEO and Company Secretary. A typical meeting willcomprise reports on current trading and financial performancefrom the CEO and CFO, legal and governance updates, Safety andInvestor Relations updates and deep dives into areas of particularstrategic importance.STAKEHOLDER ENGAGEMENT IN ACTIONBOARD VISIT, AUSTRIAIn addition, to allow for opportunities for the Board to engage withsenior management to discuss key elements of the business, anumber of Board dinners were held during the year.A summary of the key activities covered during the year is set outon page 78. Details of the Board’s stakeholder engagementactivities are also set out in this section, with information onthe visit to Austria included below and further details of MoyaGreene’s appointment as Employee Representative Directorset out on page 79.An understanding of, and connection with, easyJet’s business isfundamental for our Non-Executive Directors to enable themto maximise their contribution to Board discussions andunderstand our stakeholders. With this in mind, the Board visitsone of our European operations at least once a year. Thesevisits provide our Non-Executive Directors with a valuableopportunity to engage with local management and crew andgain insight into how the culture and values of the business aretranslated into day-to-day operations.In June 2019, all of the Board members visited our operations inVienna, Austria. This is also home to the ‘easyJet Europe’ airline,which was established in 2017 as part of the Company’s Brexitpreparations to allow easyJet to continue to operate flightsboth across Europe and domestically within European countriesafter the UK has left the EU.The Board toured the Vienna facilities and local managementprovided an overview of the local operating model, theestablishment of the new airline, and various activities acrossthe business including safety, training, ground and flightoperations, security and compliance. The Board were also ableto see how easyJet’s values and culture are brought to life onthe ground in Austria.The Board had the opportunity to hear first-hand from externalstakeholders by receiving a presentation from Austrocontrol,the air navigation services provider that controls Austrianairspace, and hosting a dinner with local management, theManaging Directors of Austrocontrol and the ManagingDirector of Vienna Airport.The Board found the visit informative and welcomed theopportunity to meet and discuss the progress of the businesswith local management and better understand the views oflocal external stakeholders.Our visit to Viennaallowed us to meetwith key stakeholdersand see the easyJETCULTURE in actionwww.easyJet.com 77GOVERNANCE CORPORATE GOVERNANCE REPORTboard activity in 2019SAFETYKEY ACTIVITIES• Received and discussed safety performance reports andupdates at each main Board meeting, presented by theDirector of Safety, Security and Compliance• Undertook deep dives on manual flight planning, aircraftdata security, and Regulatory Management Frameworkin relation to flight operations• Received updates from the Chair of the SafetyCommittee on its activitiesLEADERSHIP AND PEOPLEKEY ACTIVITIES• Continued to focus on the composition, balance andeffectiveness of the Board, approved the appointmentof Dr Anastassia Lauterbach and Nick Leeder on therecommendation of the Nominations Committee• Approved the appointment of Moya Greene as EmployeeRepresentative Director from 1 January 2019 and receivedan update on her activities since appointment• Reviewed the key operational roles and identified gapsin experience needed to deliver the Group’s strategy• Reviewed the Group’s culture, vision and values• Reviewed and approved the proposals for the Chairman’sand Non-Executive Directors’ fees• Held separate Non-Executive Director sessions with theChairman after every Board meeting to discussleadership and other Board mattersINTERNAL CONTROL AND RISKMANAGEMENTKEY ACTIVITIES• Reviewed the Group’s Risk Management Framework andprincipal risks and uncertainties• Reviewed and confirmed the Group’s Viability Statementand going concern status• Reviewed and validated the effectiveness of the Group’ssystems of internal controls and risk management• Reviewed updates on the information and cyber securitycontrol environmentGOVERNANCE AND LEGALKEY ACTIVITIES• Received and reviewed regular briefings on corporategovernance developments and legal and regulatory issues• Approved the Group’s Modern Slavery Statement forpublication• Received reports on engagement with institutionalshareholders, investors and other stakeholdersthroughout the year• Reviewed progress against the 2018 Board evaluationaction plan• Conducted an internally facilitated Board evaluationcovering the Board’s effectiveness, processes and waysof working with the outcome discussed by the full Board• Reviewed the terms of reference for the BoardCommittees and the matters reserved to the Board• Reviewed and approved changes to the delegatedauthority policy• Received regular reports from the Chairs of the Safety,Nominations, Audit, Finance and RemunerationCommitteesSTRATEGY, OPERATIONS AND FINANCEKEY ACTIVITIES• Monitored and received regular updates on Brexit and thelegislative landscape, including the potential impact ofBrexit on both easyJet and the aviation sector as a whole• Discussed developments around sustainability in the airlineindustry and the development of a sustainability strategy• Received updates on recent developments in thecompetitive landscape• Approved the Group’s five-year plan and strategic initiatives• Reviewed and approved the strategy and corporatestructure for easyJet Holidays and received updates onthe launch plans• Received regular status updates on the OperationalResilience programme• Received a presentation from management oncustomers and marketing• Received presentations from the Chief Executive Officerand Chief Financial Officer and senior management onstrategic initiatives and trading performance• Approved the annual budget, business plan and KPIs• Reviewed and approved the Group’s full year 2018 andhalf year 2019 results (including the final 2018 dividend),as well as its quarterly results.• Approved the Group’s 2018 Annual Report (including afair, balanced and understandable assessment) and2019 AGM Notice• Reviewed the Group’s debt, capital and fundingarrangements and approved the issuance of a €500million Eurobond under the EMTN programme• Considered fleet and engineering requirements andapproved various key operational and fleet agreementsSAFETY IS OUR NUMBER ONE PRIORITY: READ MORE ABOUT HOWWE ARE ENSURING THIS ON PAGES 85 TO 86TO SEE HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCECODE PLEASE TURN TO PAGE 76YOU CAN READ MORE ABOUT THIS ON PAGES 87 TO 88OUR RISK MANAGEMENT FRAMEWORK AND PRINCIPAL RISKS ARE SETOUT ON PAGES 37 TO 47THE STRATEGIC AND FINANCIAL REVIEW EXPLAINS THIS IN MOREDETAIL ON PAGES 16 TO 34CORPORATE GOVERNANCE REPORT CONTINUED78 easyJet plc Annual Report and Accounts 2019At easyJet we have a dedicated and hardworking workforceof over 15,000, including pilots and crew, and having the rightpeople is one of the Company’s strategic priorities. The Boardhas always considered employees when making strategicdecisions, but understanding their views and bringing them intothe boardroom has never been more important. This was alsorecognised by the 2018 Code, which recommends that Boardshave a specific method for engaging with the workforce.During the year the Board addressed this by appointing meas the Employee Representative Director from 1 January 2019.In this role I chair an Employee Liaison Committee and engagewith the two main employee engagement bodies that arealready well established at easyJet, the European WorksCouncil (‘EWC’) and Management & AdministrationConsultative Group (‘MACG’). The intention is that I meet withboth groups regularly and report any concerns that arise tothe relevant service head or corporate function, if necessary.Since my appointment I have met with each of the EWC andMACG to introduce myself and seek their feedback on a widerange of matters. When the Board conducted its visit to ViennaI took the opportunity to meet separately with a group ofAustrian employees to explain my Employee RepresentativeDirector role and understand their questions and concerns.In addition to meeting the EWC and MACG, I have access toeasyJet’s employee feedback and listening platform, Peakon,and the ‘Workplace’ internal communications platform, whichallows me to understand what matters are of importance toour colleagues.It is important to note that our employees continue to be ableto raise any concerns confidentially, should they wish to do so,using easyJet’s whistleblowing arrangements.I report to the Board at least twice a year on my activities, andbring the employee voice into conversations in the boardroomwhenever possible. This can be as simple as ensuring that thepotential impact on the workforce is part of the conversationwhen the Board discusses strategic matters, which issomething I have sought to do during the year.While the role remains relatively new, I am looking forward toengaging further with employees during the coming year andexploring ways to bring their views back to our discussions atthe Board.I am grateful to all those I have met with so far for theiropenness and insights.Understanding the views ofEMPLOYEES and bringingthem into the Boardroomhas never been moreimportantSTAKEHOLDER ENGAGEMENT IN ACTIONENHANCING THE EMPLOYEE VOICE IN THE BOARDROOMMoya Greene DBEwww.easyJet.com 79GOVERNANCE CORPORATE GOVERNANCE REPORTATTENDANCE AT MEETINGSThe Directors’ attendance at the Board and Committee meetings held during the year are shown in the table below. The core activitiesof the Board and its Committees are covered in scheduled meetings held during the year. Additional ad hoc meetings are also held toconsider and decide matters outside scheduled meetings. Non-Executive Directors are encouraged to communicate directly with eachother and senior management between Board meetings.If a Director is unable to attend a meeting because of exceptional circumstances, they still receive the papers in advance of the meetingand have the opportunity to discuss with the relevant Chair or the Company Secretary any matters on the agenda which they wish toraise. Feedback is provided to the Director on the decisions taken at the meeting.All Directors holding office at the time attended the Annual General Meeting held on 7 February 2019.For further information regarding when Board members joined or stepped down from Committees during and after the 2019 financialyear, please refer to the ‘Committee changes’ sections in the relevant Committee reports (pages 85 to 115).Board Audit Finance Nominations Remuneration SafetyNo of meetings 11 4 5 5 4 4Executive DirectorsJohan Lundgren 11/11 – – – – –Andrew Findlay 11/11 – – – – –Non-Executive DirectorsJohn Barton 11/11 – – 5/5 – –Charles Gurassa1 11/11 1/1 5/5 5/5 4/4 –Adèle Anderson2 3/4 1/1 – – 2/2 2/2Dr Andreas Bierwirth 11/11 – 5/5 – – 4/4Moya Greene DBE 10/11 – – 5/5 4/4 4/4Dr Anastassia Lauterbach3 9/9 3/3 – – – –Nick Leeder3 8/9 – – – – 3/3Andy Martin 11/11 4/4 5/5 5/5 4/4 –Julie Southern 11/11 4/4 – – 2/2 3/3Notes:1. Charles Gurassa stood down as a temporary member of the Audit Committee with effect from 1 January 2019.2. Adèle Anderson stepped down from the Board with effect from the conclusion of the AGM on 7 February 2019.3. Dr Anastassia Lauterbach and Nick Leeder joined the Board on 1 January 2019.Directors are encouraged to attend all Board and Committee meetings but in certain circumstances meetings are called at short notice and due to priorbusiness commitments and time differences Directors may be unable to attend. In these circumstances Directors receive relevant papers and are updatedon developments by either the Chairman or Group CEO.CORPORATE GOVERNANCE REPORT CONTINUED80 easyJet plc Annual Report and Accounts 2019EFFECTIVENESSCOMPOSITION AND INDEPENDENCE OFTHE BOARDThe Board currently comprises 10 Directors, two ExecutiveDirectors and eight Non-Executive Directors. Over half of ourBoard (excluding the Chairman) comprises independent NonExecutive Directors and the composition of all Board Committeescomplies with the 2016 Code. Additionally, the Chairman wasconsidered independent on his appointment. More informationabout the Board members is available on pages 68 to 71.The independence of the Non-Executive Directors is consideredby the Board and reviewed on an annual basis, as part of theBoard effectiveness review. The Board considers factors such aslength of tenure and relationships or circumstances that are likelyto affect, or appear to affect, the Directors’ judgement indetermining whether they remain independent. Non-ExecutiveDirectors do not participate in any of the Company’s share optionor bonus schemes.Following this year’s review, the Board concluded that all of theNon-Executive Directors continue to remain independent incharacter and judgement and are free from any business or otherrelationships that could materially affect the exercise of theirjudgement. The Board also reviews its Committee membershipannually to ensure that undue reliance is not placed on individuals.APPOINTMENTS TO THE BOARDThe Board has processes in place to appoint Non-ExecutiveDirectors who can apply their wider business skills, knowledge andexperience to the oversight of the Group, and provide input andchallenge in the boardroom to assist in the development andexecution of the Board’s strategy. Similarly, Executive Directorappointments are made to ensure the effective formulation andimplementation of the Group’s strategy.The Nominations Committee, on behalf of the Board, reviews theskills of Board members at least annually, identifying any areas ofskills, experience and knowledge that we can further strengthen.All director appointments are made by the Board and are subjectto a formal, rigorous, and transparent process.During the year, Dr Anastassia Lauterbach and Nick Leeder wereappointed as Non-Executive Directors. Both Anastassia and Nickpossess in-depth knowledge of IT and digital business and havean international outlook which brings a fresh perspective to theBoard. The Board plans to continue to execute against itssuccession plans and it is anticipated that there will be furtherchanges to the Board in the coming year.All Board appointments are subject to continued satisfactoryperformance following the Board’s annual effectiveness review.The Nominations Committee leads the process for Boardappointments and makes recommendations to the Board.The activities of the Nominations Committee and a descriptionof the Board’s policy on diversity and inclusion are on page 88.TIME COMMITMENTFollowing the Board evaluation process, detailed further below,the Board has considered the individual directors attendance, theircontribution, and their external appointments and is satisfied thateach of the Directors is able to allocate sufficient time to theGroup to discharge his or her responsibilities effectively.Contracts and letters of appointment with Directors are madeavailable at the Annual General Meeting or upon request.The standard terms and conditions of the appointment ofNon-Executive Directors are also available in the Governancesection of easyJet’s corporate website at corporate.easyjet.com.Executive Directors and the AMB are permitted to take upnon-executive positions on the board of a listed company so longas this is not deemed to interfere with the business of the Group.Andrew Findlay has acted as Non-Executive Director at Rightmoveplc since June 2017, with his time commitment for this role beingeight days per year. Executive Directors’ appointments to suchpositions are subject to the approval of the Board which considers,amongst other things, the time commitment required.DEVELOPMENTOn joining the Board, new members receive a tailored inductionorganised by the Company Secretary which covers, amongstother things, the business of the Group, their legal and regulatoryresponsibilities as Directors, briefings and presentations fromrelevant executives and opportunities to visit and experienceeasyJet’s business operations. For details of the Board inductionprogramme provided for Dr Anastassia Lauterbach and NickLeeder during the year, please see page 82.To update the Directors’ skills, knowledge and familiarity with theGroup and its stakeholders, visits to bases are organised for theBoard periodically, to assist Directors’ understanding of theoperational issues that the business faces. Details of the Boardvisit to Austria in 2019 are set out on page 77.In order to facilitate greater awareness and understanding of theGroup’s business and the environment in which it operates, regularbriefing papers are provided to Board members to update themon relevant developments in law, regulation and best practice,usually two to four times per year. Directors are encouraged tohighlight specific areas where they feel their skills or knowledgewould benefit from further development as part of the annualBoard evaluation process. Training opportunities are providedthrough internal meetings, workshops, presentations andbriefings by internal advisers and business heads, as well asexternal advisers.www.easyJet.com 81GOVERNANCE CORPORATE GOVERNANCE REPORTBOARD COMMITTEESCertain governance responsibilities have been delegated by theBoard to Board Committees, to ensure that there is independentoversight of internal control and risk management and to assistthe Board with carrying out its responsibilities. The BoardCommittees comprise Independent Non-Executive Directors and,in some cases, the Chairman. Each individual Committee’s Chairreports to the Board on matters discussed at Committeemeetings and highlights any significant issue that requiresBoard attention.The terms of reference for the Committees, approved bythe Board, are available on our corporate website atcorporate.easyjet.com.For a summary of the roles of each Committee see theframework on page 75.INFORMATION AND SUPPORTAll members of the Board are supplied with appropriate, clearand accurate information in a timely manner covering matterswhich are to be considered at forthcoming Board orCommittee meetings.Should Directors judge it necessary to seek independent legaladvice about the performance of their duties with the Group,they are entitled to do so at the Group’s expense. Directors alsohave access to the advice and services of the Company Secretary,who is responsible for advising the Board on all governancematters and ensuring that Board procedures are complied with.The appointment and removal of the Company Secretary is amatter requiring Board approval.RE-ELECTIONThe Company’s Articles of Association require the Directors tosubmit themselves for re-election by shareholders at least onceevery three years. The 2016 Code requires that all directors ofFTSE 350 companies should be subject to annual election byshareholders. In accordance with the Code, all continuingExecutive and Non-Executive Directors will stand for re-electionat the Company’s 2020 Annual General Meeting.Dr Anastassia Lauterbach and Nick Leeder, appointedNon-Executive Directors on 1 January 2019, followed a tailoredinduction programme covering a range of key areas of thebusiness, a flavour of which is given below.SAFETY• Attended a half-day session hosted by the Director of Safetywhich included briefings on the regulatory framework,compliance monitoring, health and human rightsperformance and safety operations and security.• Met with the Chair of the Safety Committee to discuss the roleof the Committee and key safety policies and procedures.GOVERNANCE AND REMUNERATION• Attended a briefing session with the Group People Directorand Head of Reward to discuss our approach to reward, ourremuneration policy and succession planning.• Met with the Chair of the Remuneration Committee tounderstand the remuneration framework.• Met with Group General Counsel and Company Secretary tounderstand the Board and Committee procedures, brandlicence, shareholder issues and Brexit planning.FINANCE AND AUDIT• Attended face-to-face briefing sessions on key risks, costsand revenue, balance sheet and financial metrics with theChief Financial Officer, Head of Risk and Assurance, and theFinance Director.• Met with the Chair of the Audit Committee to understandthe role of the Committee.BOARD AND SENIOR MANAGEMENT• Met separately with the Chairman and Senior IndependentDirector to understand the role of the Board and theindividual contribution required.• Met separately with the Chief Executive Officer and otherkey members of the Airline Management Board includingthe Chief Commercial Officer, Chief Operating Officer, ChiefMarketing Officer and Chief Data Officer.• Received a Board induction pack to assist with building anunderstanding of the nature of the Group, its business,markets and people, and to provide an understanding ofthe Group’s main relationships. The pack also includedinformation to help facilitate a thorough understanding ofthe role of Director and the framework within which theBoard operates.BUSINESS AND FUNCTIONS• Met with the Head of Airport and Central Procurement, tounderstand the relationship with airports and status of ourlargest bases.• Met with the Head of Investor Relations to understandrelationships with major shareholders and the marketenvironment.• Met with one of the Company’s brokers to understandeasyJet from a market and broker’s perspective.• Received a briefing from McKinsey which focused on keyissues facing easyJet, and the dynamics of the low-costairline market.NON-EXECUTIVE DIRECTOR INDUCTIONPROGRAMME 2019CORPORATE GOVERNANCE REPORT CONTINUED82 easyJet plc Annual Report and Accounts 20192018 BOARD AND COMMITTEE EXTERNAL EVALUATION: ACTION AND PROGRESSAs reported in the 2018 Annual Report, for the 2018 Board evaluation the Board engaged Dr Sabine Dembkowski of Better BoardsLimited who conducted an independent external evaluation of the performance of the Board, its Committees and the Chairman.The overall outcome was an understanding of the levers that individual Directors can personally pull to increase their impact in theboardroom in order to make the Board more effective and a collective action plan that allows the Board to focus on the rightand most crucial issues.AREAS OF FOCUS IDENTIFIED ACTIONS TAKENSuccession planning – continuedfocus on succession planning atBoard, AMB and executive leadershipteam levelThe Nominations Committee reviewed both the Board’s and the Group’s leadership andsuccession plans. During 2019, the Nominations Committee continued the process for theidentification and recruitment of additional independent Non-Executive Directors, whichculminated in the appointment of Dr Anastassia Lauterbach and Nick Leeder. It is anticipatedthat further changes will be made to the Board in the coming year as the Board executesagainst its succession plan.A comprehensive review of our talent and succession coverage across all business functionsand at executive and senior leadership level has been underway since 2018. This continuedover the course of 2019 and the Nominations Committee discussed detailed succession anddevelopment plans for the AMB and executive leadership team (ELT).Agenda planning and focus– enhancements to be made toagenda planning working practices toimprove the effectiveness andorganisation of Board meetingsThe Board agenda setting process has continued to evolve. The annual Board calendar wasshared with Directors during the year and efforts have been made to improve the balance oftime spent on commercial matters and more strategic discussion, including industryconsolidation, the competitive environment and the impact of Brexit on the business.Stakeholder views – integration of abroader set of stakeholders’ interestswithin Board decision makingprocessesThe Board appointed Moya Greene as the Employee Representative Director from 1 January2019 to further bring the employee voice into the boardroom. Presentations relating to keystakeholder groups are also now incorporated on the agenda, for example the Boardreceived a presentation on the Customer Voice during the year. Opportunities for engagingwith stakeholders are identified wherever possible, for example the Austrian visit as set outon page 77.2019 BOARD AND COMMITTEE INTERNAL EVALUATION: OUTCOMESHaving undertaken an external evaluation in 2018, an internal evaluation was undertaken during 2019. The review extended to all aspectsof Board and Committee performance including composition and dynamics, the Chairman’s leadership, agenda and focus, timemanagement, strategic oversight, overview of risk, succession planning and priorities for change.The review was conducted via an online questionnaire, which sought Directors’ feedback on the above areas and the extent to whichactions taken from the previous evaluation had been well implemented. The results of the questionnaire were collated by the CompanySecretary and anonymised before being discussed with the Chairman and the Board.The results of this year’s evaluation were positive overall, with the culture of openness and transparency in the boardroom highlightedas a particular strength. The key areas identified for increased focus and development during the 2020 financial year are set out below,which build on those raised in the previous evaluation. Progress against these areas will be reviewed as part of the 2020 evaluation andreported on next year.AREAS OF FOCUS IDENTIFIED ACTIONS TO BE TAKENContinued focus on successionplanning – continue the positiveprogress made on successionplanning at Board, AMB and ELTlevel, and share this with the full Boardat least annuallyAs highlighted above, good progress has been made on succession plans for the Board,AMB and ELT following the Nominations Committee’s attention during the year. TheNominations Committee will continue to focus on this area to ensure it is strengthenedfurther and kept updated.Communicating the succession plans beyond the Nominations Committee to the full Boardwas highlighted as an area that could be improved. All Non-Executive Directors will benotified when succession planning is on the agenda for discussion at the NominationsCommittee so that they can choose to attend if they wish, and a formal update onsuccession planning will be provided to the full Board at least annually.Stakeholder views – continue toenhance the integration of stakeholders’interests within Board decision makingprocessesThe Board is mindful of the requirement to provide information on how it has had regard tothe matters set out in section 172 of the Companies Act 2006, which it will do more fully innext year’s Annual Report. While there was significant stakeholder engagement during theyear and progress had been made, the Board will look to enhance further the integration ofstakeholders’ interests within Board decision making processes.Board papers – improve the consistencyand articulation of the Board ‘ask’ inpapersThe Company Secretariat team will arrange for training to be given to paper preparers andimprove the ‘briefing’ process to ensure that papers more succinctly address the key pointsand are consistent.www.easyJet.com 83GOVERNANCE CORPORATE GOVERNANCE REPORTREVIEW OF THE CHAIRMAN’S PERFORMANCECharles Gurassa, as Senior Independent Director, led a review ofthe Chairman’s performance and held a private meeting of theNon-Executive Directors without the Chairman being present todiscuss this. It was concluded that John Barton’s performance andcontribution remain strong and that he demonstrates effectiveleadership. The Executive Directors and the Non-ExecutiveDirectors also reviewed, and were satisfied with the Chairman’stime commitment to the Board and the business.ACCOUNTABILITYFINANCIAL AND BUSINESS REPORTINGThe Strategic Report on pages 2 to 65 explains the Group’sbusiness model and the strategy for delivering the objectivesof the Group.A Statement on Directors’ Responsibilities on the AnnualReport and Accounts being fair, balanced and understandablecan be found on page 120 and a statement on the Group as agoing concern and the Viability Statement are set out on pages34 and 35.RISK MANAGEMENT AND INTERNAL CONTROLRISK MANAGEMENTThe Board has overall responsibility for easyJet’s risk managementand systems of internal control. The Board has carried out arobust assessment of the principal risks facing the Group andhow those risks affect the prospects of the Group. Please refer topages 37 to 47 for further information on the risk managementprocess and the Group’s principal risks and uncertainties andpage 35 for their impact on the longer-term viability andprospects of the Group.Ongoing risk management and assurance is provided through thevarious monitoring reviews and reporting mechanisms that areembedded in the business operations. The results of these reviewsare reported to the Audit Committee and the Board, whichconsider whether these high-level risks are being effectivelycontrolled.Regular operational (including safety), commercial, financial andIT functional meetings are held to review performance and toconsider key risks and issues (please refer to page 85 fordetails of the Safety Committee).The executive management meets regularly to considersignificant risks, the status of risk mitigations and overall businessperformance; this ensures key issues are escalated through themanagement team and, as appropriate, ultimately to the Board.The Directors review the effectiveness of internal controls,including operating, financial and compliance controls.The Audit Committee undertakes an annual review of theappropriateness of the risk management processes to ensurethat they are sufficiently robust to meet the needs of theGroup (please refer to pages 89 to 93 for details of theAudit Committee’s responsibilities).INTERNAL CONTROLThe Group’s internal control systems are designed to manage,rather than eliminate, the risk of failure to achieve businessobjectives. By their nature, they can only provide reasonable, notabsolute, assurance against material misstatement or loss. Theoverall responsibility for easyJet’s systems of internal control andfor reviewing their effectiveness rests with the Board. The Boardhas conducted an annual review of the effectiveness of thesystems of internal control during the year under the auspices ofthe Audit Committee. Further information on the Group’s internalcontrol systems is set out on page 92.INTERNAL AUDITDetails of the Internal Audit function are provided within thisreport on page 92.AUDIT COMMITTEE AND AUDITORSFor further information on the Group’s compliance with theCode and provisions relating to the Audit Committee and auditors,please refer to the Audit Committee report on pages 89 to 93.REMUNERATIONThe responsibility for determining remuneration arrangements forthe Chairman and Executive Directors has been delegated to theRemuneration Committee. For further information on the Group’scompliance with the Code provisions relating to remuneration,please refer to the Directors’ remuneration report on pages 96 to115 for the level and components of remuneration; and page 107(the Remuneration Committee report) for procedures relating toremuneration.SHAREHOLDER ENGAGEMENTThe Group actively engages with investors and seeks theirfeedback. The Chairman and Deputy Chairman met withshareholders during the year to help maintain a balancedunderstanding of their issues and concerns. They also attendeda senior investor dinner in January and met with a number of theGroup’s top institutional investors. The Chairman has updated theBoard on the opinions of investors. The views of shareholdersand market perceptions are also communicated to the Boardvia presentations by the Head of Investor Relations at leastevery quarter.easyJet has an Investor Relations function which runs an activeprogramme of engagement with actual and potential investorsbased around the financial reporting calendar. This year theprogramme has included one-to-one meetings with institutionalinvestors, roadshows and conferences. easyJet has particularlytargeted and engaged with European investors during the yearas part of an enhanced programme related to potential futureownership changes. There is also regular communication withinstitutional investors on key business issues.During the year, the Chairman, Deputy Chairman and ChiefExecutive met with representatives of easyGroup HoldingsLimited, the Company’s largest shareholder, to discuss relevantmatters. The Chief Financial Officer and Company Secretary andGroup General Counsel have also met separately withrepresentatives of easyGroup Limited (an affiliate of easyGroupHoldings Limited) to discuss matters relating to the managementand protection of the ‘easyJet’ and ‘easy’ brands.CONSTRUCTIVE USE OF THE ANNUAL GENERALMEETINGThe Annual General Meeting (AGM) gives all shareholders theopportunity to communicate directly with the Board andencourages their participation. Shareholders are given theopportunity to raise issues formally at the AGM or informally withDirectors after the meeting. All Directors attend the AGM and theChairs of the Committees are available to answer questions.All the resolutions at the 2019 AGM were voted by way of a poll.The 2020 AGM will be held on Thursday, 6 February 2020. Aseparate circular, comprising a letter from the Chairman, Noticeof Meeting and explanatory notes on the resolutions proposed,will be issued separately and will also be published on easyJet’scorporate website at corporate.easyjet.com/investors.CORPORATE GOVERNANCE REPORT CONTINUED84 easyJet plc Annual Report and Accounts 2019Safety isFUNDAMENTAL TOEVERYTHING WE DOAT EASYJET. theCommittee’s role isto oversee theeffectiveness ofTHE safetyFRAMEWORKI am pleased to present the Safety Committee (the ‘Committee’)report covering the work of the Committee during the 2019financial year.Safety is fundamental to everything we do at easyJet, and part of‘Our Promise’ is to be safe and responsible. The Committee’s keyrole is to oversee the quality and effectiveness of easyJet’s safetystrategies, standards, policies and initiatives, together with riskexposures, targets and performance, in order to ensure that safetyreceives the highest level of Board attention.We do this through receiving regular reports on notable incidentsand the actions arising from them, reviewing and receivingupdates on the progress of the annual safety plan and reviewingthe resourcing and operation of the Safety, Security andCompliance team.The Committee has had an active year. Notable incidents includedthe drone incident at London Gatwick in December 2018, whereeasyJet’s response, and that of the whole aviation industry, hasreceived significant focus from the Committee. We also undertookan in-depth review of aircraft cyber security, crew health andwellbeing, and the compliance framework relating to compliancewith global safety regulations. The Committee also discussed thestrong safety culture at easyJet, and we look forward to exploringhow this can be maintained and improved in the future.Board committeesSAFETY COMMITTEEREPORTCORPORATE GOVERNANCE REPORTMEMBERSHIP, MEETINGS & ATTENDANCE• Dr Andreas Bierwirth (Chair)• Adèle Anderson (until 7 February 2019)• Moya Greene DBE• Nick Leeder (from 1 January 2019)• Julie SouthernAll members listed above are independent Non-ExecutiveDirectors. Member biographies can be found on pages 68 to 71.During the year Nick Leeder was appointed to the Board and amember of the Committee on 1 January 2019. Adèle Andersonstepped down as a Committee member and Non-ExecutiveDirector at the AGM on 7 February 2019. The Company Secretaryacts as Secretary to the Committee.Dr ANDREAS BIERWIRTHChair of the Safety Committeewww.easyJet.com 85GOVERNANCE CORPORATE GOVERNANCE REPORTThe Committee met four times during the year. The Director ofSafety, Security and Compliance has attended all SafetyCommittee meetings during the year. Other key invitees includethe Chief Executive Officer, the Chief Operating Officer, theinterim Head of Operations and the Head of Safety. Nominatedpersons for Flight Operations, Engineering and other functionshave attended as relevant.Meeting attendance can be found in the table on page 80. TheCommittee’s terms of reference can be found on the Company’swebsite at corporate.easyjet.com.KEY ACTIVITIES DURING THE YEARThe Safety Committee continues to ensure that safety receivesthe highest level of Board attention. The Director of Safety,Security and Compliance reports to the Chief Executive Officerand also has the right of direct access to Dr Andreas Bierwirth asCommittee Chair and to the Board Chairman, which reinforces theindependence of safety oversight. As Committee Chair,Andreas reports to the Board with his own assessment of safetymanagement within the airline throughout the year.The Committee continued to monitor the progress of the annualsafety plan, including reviewing the safety performance indicatorsfor the financial year. Standing items at each meeting includedprogress against the 2019 safety plan, employee health andwellbeing, notable incidents and actions, and a report oncompliance from the Head of Safety.The Committee also conducted deep dives into the Group’sbusiness areas, crew health and wellbeing, aircraft cyber securityand the scope and design of the Regulatory ManagementFramework (the ‘RMF’). The RMF is designed to achievecompliance with aviation, safety, security, occupational safetyand occupational health regulations across the three Air OperationCertificates (AOCs), integrating separate regulatory environmentsinto a single framework which enables synergies and improvescompliance overall. The RMF also establishes and maintains aprocess for monitoring, measurement, analysis and performanceevaluation.The Committee received regular reports from the Director ofSafety, Security and Compliance to ensure the safety team hadadequate resources and appropriate information to perform itsfunction effectively and in accordance with the relevantprofessional standards.The easyJet Safety Board (ESB), which reports to the AirlineManagement Board, supported the role of the Committee inensuring the safety risks and issues are identified and prioritisedand action plans are in place to mitigate any risks.CORPORATE GOVERNANCE REPORT CONTINUEDSAFETY COMMITTEE REPORT CONTINUEDAreas of focusOCCUPATIONALHEALTH ANDWELLBEINGReceived an update on health andwellbeing in support of the rightpeople priority in Our Plan.Discussed fatigue riskmanagement and the focus onmental health and physicalwellbeing amongst employeesFLIGHT DATAMONITORINGReviewed the core function of theFlight Data Monitoring (FDM)team, FDM safety performanceindicators and the reports receivedas part of FDM AssuranceprogrammeSECURITY Received an overview of the cybersecurity arrangements in relationto aircraft, and discussed easyJet’sresponse to the drone incident atLondon Gatwick in December 2018OPERATIONS Received an update on thecontractual relationshipsimplemented between the threedifferent AOCs, the decisionmaking framework and discussedthe development of the RMF toensure safety and securitycompliance across AOCsCOMPLIANCEMONITORINGReviewed the Compliance strategyand audit plan, which covered theapproach to compliancemonitoring and the methods ofdeveloping and agreeing thecompliance monitoringprogrammeLOOKING FORWARDOver the next year, the Committee will continue to monitor andreview the structure, content and operation of the Group’s safety,security and compliance activities. More generally, we will continueto provide support to management on embedding the strongsafety culture to ensure high standards of safety continue tobe delivered across the Group.86 easyJet plc Annual Report and Accounts 2019I am pleased to present the Nominations Committee (the‘Committee’) report covering the work of the Committee duringthe 2019 financial year.The main purpose of the Committee is to monitor and maintainan appropriate balance of skills, experience, independence anddiversity on the Board whilst regularly reviewing its structure, sizeand composition. It is also responsible for ensuring there is aformal, rigorous and transparent process for the appointment ofnew Directors to the Board.During the year the Committee oversaw the appointmentprocess which resulted in the appointment of Dr AnastassiaLauterbach and Nick Leeder to the Board with effect from 1January 2019. The Committee continues to review membershipand composition of the Board and it is anticipated that there willbe further changes in the coming year as it continues to executeagainst its succession plans.With the Board’s succession plans underway, the Committee hasalso focused on succession planning for the Airline ManagementBoard and Executive Leadership Team during the year. Thisincluded receiving presentations from the Chief Executive Officerand Group People Director on candidates identified and anyassociated development plans.Implementation of the annual Board evaluation process toassess the performance of individual Directors and theeffectiveness of the Board and its Committees is also one ofthe key responsibilities of the Committee. The Committee led aninternal evaluation process during the year which built on thecomprehensive external evaluation conducted by Better Boardslast year. I am pleased to report that the Board was deemed tooperate effectively, and the outcome of the evaluation and areasof focus are set out further on page 83.NOMINATIONSCOMMITTEE REPORTThe Committeemonitors andmaintains anappropriatebalance ofskills,experience,independenceand diversity onthe BoardMEMBERSHIP, MEETINGS & ATTENDANCE• John Barton (Chair)• Moya Greene DBE• Charles Gurassa• Andy MartinThe Committee consists of the independent Non-ExecutiveDirectors listed above. The Chairman of the Board acts asChairman of the Committee with members of the executivemanagement invited to attend meetings. During the year, therewere no changes to the membership of the Committee. TheCompany Secretary acts as Secretary to the Committee.All members of the Committee are independent Non-ExecutiveDirectors. Member biographies can be found on pages 68 to 71.John BartonChair of the Nominations Committeewww.easyJet.com 87GOVERNANCE CORPORATE GOVERNANCE REPORTThe Committee met five times in the year. Meeting attendancecan be found in the table on page 80. The Committee’s terms ofreference can be found on the Company’s website atcorporate.easyjet.com.KEY ACTIVITIES DURING THE YEARNON-EXECUTIVE DIRECTOR APPOINTMENTSThe Committee had previously identified the need for a numberof non-executive appointments as part of its succession plans,and during the year it oversaw the process which led to therecommendation that Dr Anastassia Lauterbach and Nick Leederbe appointed as additional Non-Executive Directors.Having identified the desired skills and experience sought in thenew Directors, the Committee engaged Russell Reynolds, after aselection process, to act as easyJet’s search consultants for theroles. The Committee considered a list of potential candidatesprovided by Russell Reynolds, and took into account the balanceof skills, knowledge, independence, diversity and experience ofthe Board together with an assessment of the timecommitment expected.Following an interview process, a shortlist of candidates wasdiscussed by the Committee and Nick and Anastassia’sappointments were recommended to the Board. They bring aninterest in technology and depth of knowledge across a range ofbusinesses. Their experience and international outlook furtherstrengthen the diverse mix of skills and experience on the Board.The Committee oversaw the induction programmes for Anastassiaand Nick, further details of which are set out on page 82.BOARD COMMITTEE MEMBERSHIPTo ensure that the Board Committees retain the correctbalance of skills and experience, the Committee monitorsoverall composition and membership. As a result of the changesto the Board during the year, a number of changes to themembership of Board Committees were recommended andapproved by the Board:• Adèle Anderson stepped down as the Chair of the AuditCommittee and Julie Southern was appointed in her placewith effect from 1 January 2019.• Dr. Anastassia Lauterbach was appointed a member of theAudit Committee on appointment to the Board.• Nick Leeder was appointed a member of the SafetyCommittee on appointment to the Board.• After eight years as Chair of the Remuneration Committee,Charles Gurassa decided to step down but remain a memberof the Remuneration Committee. Moya Greene replaced Charlesas Chair with effect from 21 October 2019.EMPLOYEE REPRESENTATIVE DIRECTORDuring the year the Committee recommended to the Board thatMoya Greene be appointed to the newly created role of EmployeeRepresentative Director with effect from 1 January 2019. Furtherdetails of the role and Moya’s activities are set out on page 79.SUCCESSION PLANNINGThe Board continues to be satisfied that plans are in place fororderly succession for appointments to the Board so that the rightbalance of appropriate skills and experience is represented,building on the work previously undertaken. During the year, theCommittee reviewed the balance of skill and experience andindependence of the Board members to ensure appropriatesuccession plans were in place. The Committee also received areport from the Group People Director on succession plans andleadership development plans for the members of the AMB andELT, satisfying themselves that significant progress had beenmade and that further initiatives in this area were planned.RE-ELECTION OF DIRECTORSThe effectiveness and commitment of each of the Non-ExecutiveDirectors is reviewed annually as part of the Board evaluation.The Committee has satisfied itself as to the individual skills,relevant experience, contributions and time commitment of allthe Non-Executive Directors, taking into account their otheroffices and interests held.The Board is recommending the re-election to office of all theother Directors at this year’s AGM. Details of the serviceagreements for the Executive Directors and letters ofappointment for the Non-Executive Directors, and theiravailability for inspection, are set out in the Directors’remuneration report on page 114.DIVERSITY AND INCLUSIONThe Committee and Board are committed to ensuring thattogether the Directors possess the correct diversity of skills,experience, knowledge and perspectives to support the long-termsuccess of the Company. In this regard, the role of diversity inpromoting balanced and considered decision-making which alignswith the Group’s purpose, values and strategy is fully recognised.All Board appointments are made on an objective and sharedunderstanding of merit, in line with required competenciesrelevant to the Company as identified by the Committee, andconsistent with the Company’s Board Inclusion and DiversityPolicy, which further requires processes to be employed suchthat a diverse pool of candidates can be identified and considered.This Policy was reviewed during the period to ensure that itremains appropriate and reflects recognised societal andstakeholder expectations.Following the annual review of the Board, the Committeediscussed the makeup of the Board and agreed annualobjectives on diversity for proposal to the Board, taking intoaccount the recommendations set out in the Hampton-AlexanderReview (which recommends that at least 33% of Board andexecutive committee members should be female), the McGregorSmith Review and the Parker Review (which recommends at leastone director of colour by 2021). At the year end, the Board had a30% female representation, close to the 33% recommended bythe Hampton-Alexander Review. The AMB has 45% femalerepresentation. Further details on Diversity can be foundon pages 57 to 59.The Nominations Committee also oversees the developmentof a diverse pipeline for future succession to Board and seniormanagement appointments, including the gender balanceof senior management and its direct reports. Where thereis a known requirement to improve the diversity at a certainlevel or in a certain function in the organisation, the recruitingteam will ask to see a higher proportion of candidates fittingthe diversity criteria. However, the final selection will always beon merit.easyJet’s People team monitors the Group’s diversity on at leastan annual basis and highlights any areas of concern to the AMB.The sustainability section of the Annual Report on pages 57 to 59reports in further detail on the approach being taken to diversityand inclusion, and the implementation of the policy across theGroup.BOARD EVALUATIONDuring the year an evaluation of the Board, its Committees andthe Chairman was undertaken in line with the Committee’s termsof reference. The evaluation process was internally facilitated bythe Company Secretary, details of which can be found on page 83.ADVISERSDuring the year, Russell Reynolds were engaged to identifycandidates for additional Non-Executive Director roles. RussellReynolds do not have any other connection with the Group.CORPORATE GOVERNANCE REPORT CONTINUEDNOMINATIONS COMMITTEE REPORT CONTINUED88 easyJet plc Annual Report and Accounts 2019the Committeecontinued to play akey role in assistingthe Board infulfilling itsoversightresponsibilityI am pleased to present my first Audit Committee (the‘Committee’) report covering the work of the Committee duringthe 2019 financial year, having taken over as Chair on 1 January2019. I would like to thank Adèle Anderson for her previousChairmanship of the Committee and supporting a smooth transition.During the year the Committee continued to play a key role inassisting the Board in fulfilling its oversight responsibility.Its activities included reviewing and monitoring the integrity offinancial information, the Group’s system of internal controlsand risk management, the internal and external audit processand the process for compliance with laws, regulations andethical codes of practice.We have considered the processes underpinning the productionand approval of this year’s Annual Report to enable the Board toconfirm that the Annual Report taken as a whole is fair, balancedand understandable and provides the information necessary forshareholders to assess the Company’s position and performance,business model and strategy. The Committee also assessed theviability of the Group over a three-year period.There were four meetings during the year and after eachCommittee meeting I provided an update to the Board on the keyissues discussed during our meetings. I have also met separatelywith the external audit partner and key management on a numberof occasions during the year.This report sets out details of the role of the Committee and howit has discharged its duties and responsibilities during the year.audit COMMITTEEREPORTJULIE SOUTHERNChair of the Audit CommitteeMEMBERSHIP, MEETINGS & ATTENDANCE• Julie Southern (Chair)• Adèle Anderson (Chair until 1 January 2019, member until7 February 2019)• Charles Gurassa (until 1 January 2019)• Dr Anastassia Lauterbach (from 1 January 2019)• Andy MartinThe Committee consists of independent Non-Executive Directorsand is chaired by Julie Southern. The Board has confirmed that itis satisfied that Committee members possess an appropriate levelof independence and offer a depth of financial and commercialexperience including the travel sector in which the Companyoperates. The Board also confirmed that both Andy Martin andJulie Southern have recent and relevant financial experience.www.easyJet.com 89GOVERNANCE CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE REPORT CONTINUEDAUDIT COMMITTEE REPORT CONTINUEDAdèle Anderson stepped down as Chair of the Committee on 1January 2019 and Julie Southern was appointed Chair from thesame date. Dr Anastassia Lauterbach was appointed to theCommittee on her appointment to the Board on 1 January 2019.Charles Gurassa stepped down as a temporary member of theCommittee on 1 January 2019. The Company Secretary acts asSecretary to the Committee.The Committee met four times during the year with members ofsenior management required to attend as and when required.The Committee also met with the internal and external auditorand Head of Risk and Assurance separately after each meeting.In addition, the Committee Chair holds regular private sessionswith the Chief Financial Officer, Group Finance Director, the Headof Risk and Assurance and the external audit team to ensure thatopen and informal lines of communication exist should they wishto raise any concerns outside formal meetings.Meeting attendance can be found in the table on page 80.ROLE OF THE COMMITTEEThe responsibilities of the Committee are set out in its terms ofreference, and include, but are not limited to:FINANCIALREPORTING• monitor the integrity of thefinancial statements of theCompany and the Group,preliminary results andannouncements• review the appropriateness andconsistency of significantaccounting policies• review and report to the Boardon significant financial issues andjudgementsINTERNALCONTROLAND RISKMANAGEMENT• carry out a robust assessment ofthe Company’s emerging andprincipal risks on an annual basis• review the effectiveness of theCompany’s risk managementsystem annually and theassurance reports frommanagement on the internalcontrol and risk managementsystemCOMPLIANCE,WHISTLEBLOWINGAND FRAUD• review the adequacy and securityof the Company’s arrangementsfor the employees to raiseconcerns about possiblewrongdoing in financial reportingor other mattersINTERNAL ANDEXTERNAL AUDIT• review and approve the role andmandate of Internal Audit, monitorand review the effectiveness of itswork and carry out a periodicassessment of the effectivenessof the Internal Audit function• consider and makerecommendations to the Board,to be put to shareholders forapproval at the AGM, in relation tothe appointment, reappointmentand removal of the Company’sexternal auditor• oversee the relationship with theexternal auditorThe Committee’s terms of reference are approved annually andare available on the Company’s website at corporate.easyjet.com.KEY ACTIVITIES DURING THE YEARThe main areas of Committee activity during the 2019 financialyear included the planning, monitoring, reviewing and approval ofthe following:FINANCIAL REPORTING• The integrity of the 2018 full year and 2019 half year financialstatements relating to the financial performance andgovernance of the Group• The material areas in which significant judgements were appliedbased on reports from both the Group’s management and theexternal auditor. Further information is provided in thesignificant judgements section on page 92• The information, underlying assumptions and stress-test analysispresented in support of the Viability Statement and goingconcern status• The consistency and appropriateness of the financial controland reporting environment• The impact of new accounting standards IFRS 9 (FinancialInstruments), IFRS 15 (Revenue from Contracts with Customers)and IFRS 16 (Leases)• The availability of distributable reserves to fund the dividendpolicy and make dividend payments• The fair, balanced and understandable assessment of theAnnual Report and Accounts for the 2018 financial year and the2019 half year statement• The five-year plan for the business.INTERNAL FINANCIAL CONTROLS AND RISKMANAGEMENT• The adequacy and effectiveness of the Group’s ongoing riskmanagement systems and control processes, through anevaluation of: the risk and assurance plans; Internal Auditreview reports; risk assessments; information and cybersecurity threats; and business continuity and control themes• The Group’s risk environment, including its significant andemerging risks register• The Group’s fraud detection, bribery prevention andwhistleblowing measures• The updated delegated authority policy• Regular updates and assurance in relation to IT strategy,including external assurance in relation to the progress of ourcommercial IT platform development• The financial controls relating to jet fuel supplier contracts.INTERNAL AUDIT EFFECTIVENESS AND REVIEWOF ACTIVITIES• An assessment of the effectiveness and independence of theInternal Audit function, including consideration of:• key Internal Audit reports• stakeholder feedback on the quality of Internal Audit activity• Internal Audit’s compliance with prevailing professionalstandards• the implementation of Internal Audit recommendations.90 easyJet plc Annual Report and Accounts 2019RELATIONSHIP WITH EXTERNAL AUDITOR• Reviewed the scope of, and findings from, the external auditplan undertaken by PricewaterhouseCoopers LLP (‘PwC’) as theexternal auditor• The effectiveness of the external audit process• The assessment of the performance, continued objectivity andindependence of PwC• The level of fees paid to PwC for permitted non-audit services• The reappointment of PwC as external auditorCOMPLIANCE, WHISTLEBLOWING AND FRAUD• Whistleblower reports, reports on anti-bribery and corruptionprocedures, reports on procedures for fraud and loss preventionand reports on credit card fraud, together with monitoring andinvestigationsOTHER SPECIFIC ITEMS CONSIDERED AS PARTOF MAIN ACTIVITIES• The Group’s exposure to fraud within the business andassociated mitigating controls and action• Regular updates including key milestones in regard to thepayroll accuracy project• The Group’s tax strategy• The Committee’s effectiveness and terms of reference• Compliance with the Code and the Group’s regulatory andlegislative requirementsFAIR, BALANCED AND UNDERSTANDABLEThe Committee assessed and recommended to the Board that,taken as a whole, the 2019 Annual Report and Accounts (whichthe Board subsequently approved) are fair, balanced andunderstandable and provide the necessary information forshareholders to assess the Group and Company’s position andperformance, business model and strategy.The Committee is satisfied that, taken as a whole, the AnnualReport and Accounts are fair, balanced and understandable. Inreaching this conclusion, the Committee considered the overallreview and confirmation process around the Annual Report andAccounts, including:• the input of subject matter experts, the AMB and other seniormanagement and, where applicable, the Board and itsCommittees;• the processes and controls which underpin the overall reviewand confirmation process, including the preparation, controlprocess, verification of content, and consistency of informationbeing carried out by an internal financial controls specialist(independent of the Finance function);• Internal Audit providing assurance over the audit trail formaterial data points relating to the non-financial statementaspects of the Annual Report and Accounts, and external auditproviding assurance over the financial statements; and• a full-day session to review the Annual Report and Accountsheld by senior management and other subject matter expertsto focus solely on the reporting being fair, balanced andunderstandable.The Committee was provided with, and commented on, a draftcopy of the Annual Report and Accounts. It also received aspecific paper from management to assist in its challenge andtesting of a fair, balanced and understandable assessment. Thispaper contained an agreed list of key positive and negativenarratives for the business in the 2019 financial year and asked theCommittee to confirm whether it feels each narrative was givendue prominence in the report and treated in a fair, balanced andunderstandable manner.In carrying out the above processes, key considerations includedensuring that there was consistency between the financialstatements and the narrative provided in the front half of theAnnual Report, and that there was an appropriate balancebetween the reporting of weaknesses, difficulties and challenges,as well as successes, in an open and balanced manner includinglinkage between key messages throughout the document.FINANCIAL AND BUSINESS REPORTINGThrough its activities, the Committee focuses on maintaining theintegrity and quality of our financial reporting, considering thesignificant accounting judgements made by management and thefindings of the external auditor. The Committee assesses whethersuitable accounting policies have been adopted and whethermanagement has made appropriate estimates and judgements.The Committee reviewed accounting papers prepared bymanagement which provided details of significant financialreporting judgements. The Committee also reviewed the reportsby the external auditor on the half year and full year 2019 results,which highlighted any issues with respect to the work undertakenon the audit.The Committee’s process included the comprehensive review offinancial issues through the challenge of management,consideration of the findings of the external auditor andcomparison with other organisations. The number of such issuescurrently considered significant is limited, reflective of easyJet’srelatively simple business model and group structure which areunencumbered by legacy issues. The significant issues consideredin relation to the financial statements are detailed below.REPORTING CONTROLSManagement is responsible for maintaining adequate internalcontrol over the financial reporting of the group. A summary ofthe group’s financial results and commentary on performancemeasures is provided to the Board each month. Controls are inplace over the preparation of financial data including; balancesheet reconciliations, review meetings on key balances,commentary on variances to forecast and prior periods. On amonthly basis, senior management, including the Group FinancialController and CFO review the management reporting packs.The Annual Report and Accounts is produced by the GroupFinancial Control team based on submissions from individualteams across the business including Investor Relations, Finance,Corporate Affairs, HR, Company Secretary and Risk & Assurance.The report contributors are required to maintain supportingevidence for their submissions and ensure they are reviewed. Thefigures are then independently validated by the Group FinancialControl team and the Risk and Assurance team perform sampletests of disclosures back to supporting evidence.The Annual Report and Accounts is reviewed by the AMB, Boardof Directors and Audit Committee for accuracy and to ensure afair, balanced and understandable view is presented. Seniormembers of the finance team including the CFO and GroupFinancial Controller meet with the Audit Committee to presentkey events and discuss areas of judgement or estimates asoutlined below. In depth presentations on significant areas areprovided throughout the year as appropriate.The finance team have regular proactive conversations with theexternal auditors on topics which are of audit relevance. Theexternal auditors perform audit procedures and challenge of theAnnual Report and Accounts and present their findings to theAudit Committee.www.easyJet.com 91GOVERNANCE CORPORATE GOVERNANCE REPORTRISK AND ASSURANCEThe Audit Committee is responsible for overseeing the work of theInternal Audit function. It reviews and approves the scope of theInternal Audit annual plan and assesses the quality of InternalAudit reports, along with management’s actions relating tofindings and the closure of recommended actions. The AuditCommittee also considers stakeholder feedback on the qualityof Internal Audit’s work.During 2019, a carefully targeted internal audit plan was agreedand undertaken across easyJet’s operations, systems and supportfunctions with subsequent reports, including managementresponses, recommended action plans and follow-up reviewsbeing considered by the Audit Committee at each of its fourmeetings held during the year.In order to safeguard the independence of the Internal Auditfunction, the Head of Risk and Assurance (who heads up theInternal Audit function) is given the opportunity to meet privatelywith the Audit Committee without any other members ofmanagement being present.RISK MANAGEMENT AND INTERNAL CONTROLThe Board as a whole, including the Audit Committee members,considers the nature and extent of easyJet’s risk managementframework and the risk profile that is acceptable in order toachieve the Group’s strategic objectives. The Audit Committee hasreviewed the work undertaken by management, the Committeeitself and the Board on the assessment of the Group’s principalrisks, including their impact on the prospects of the Group. As aresult, it is considered that the Board has fulfilled its obligationsunder the Code in relation to risk management and internalcontrols. Further details on the Group’s principal risks anduncertainties and their impact on the prospects of the Groupare set out on pages 37 to 47.easyJet’s system of internal controls, along with its design andoperating effectiveness, which includes the Group’s financialreporting process, is subject to review by the Audit Committee,through reports received from management, along with thosefrom both internal and external auditors. Any control deficienciesidentified are followed up, with action plans tracked by the AMBand the Committee.ANTI-BRIBERY AND WHISTLEBLOWINGThe Code includes a provision requiring the Audit Committee toreview arrangements by which staff of the Company may, inconfidence, raise concerns about possible improprieties in mattersof financial reporting or other matters. The Audit Committee’sobjective is to ensure that arrangements are in place for theproportionate and independent investigation of such matters andfor appropriate follow-up action.The Group is committed to the highest standards of quality,honesty, openness and accountability. The Group and all operatingcompanies have whistleblowing policies in place. Employees areencouraged to raise genuine concerns under the policy and anyconcerns raised are investigated carefully and thoroughly toassess what action, if any, should be taken. Any matters ofsignificance are reported to the Audit Committee, along with acomprehensive full year report. The Board supports the objectivesof the Bribery Act 2010 and procedures have been established toensure that compliance is achieved. These set out what isexpected from our colleagues and stakeholders to ensure thatthey protect themselves as well as the Group’s reputation andassets. Training has been provided to the Board, seniormanagement and all employees and is refreshed on a regularbasis. Any breach of the Bribery Act will be regarded as seriousmisconduct, potentially justifying immediate dismissal.CORPORATE GOVERNANCE REPORT CONTINUEDAUDIT COMMITTEE REPORT CONTINUEDSIGNIFICANT JUDGEMENTSCARRYING VALUE OF INTANGIBLE ASSETSThe Committee considered whether the carrying value ofgoodwill and landing rights held by easyJet, including thoseacquired as part of the Air Berlin transaction, should beimpaired. The judgement in relation to impairment largelyrelates to the assumptions underlying the calculation of thevalue in use of the business being tested for impairment;primarily whether the forecasted cash flows are achievable andthe overall macroeconomic assumptions which underlie thevaluation process. The Committee addressed these mattersusing reports received from management outlining the basisfor assumptions used. The forecasted cash flows used in thecalculation were presented to the Board.KEY JUDGEMENTAL ACCRUALS ANDPROVISIONSThe Committee reviewed the level and calculations of keyaccruals and provisions which are judgemental in nature,specifically customer claims in respect of flight delays andcancellations.AIRCRAFT MAINTENANCE PROVISIONSThe Committee reviewed the maintenance provision at theyear end. A number of judgements are used in the calculationof the provision, primarily pricing, utilisation of aircraft andtiming of maintenance checks. The Committee addressedthese matters using reports received from management whichunderpin the basis of assumptions used. The Committee alsodiscussed with the external auditors their review of theassumptions underlying the estimates used.ADOPTION OF NEW ACCOUNTING STANDARDSThe Committee considered the accounting policy under newaccounting standards IFRS 15 Revenue from contracts withcustomers, IFRS 16 Leases and IFRS 9 Financial Instruments,including the judgements, assumptions and estimates made bymanagement and the financial impact these had both uponadoption on 1 October 2018 and in the first year of adoption.The Committee also considered the disclosure requirementsof the new standards.PENSION ACCOUNTINGThe Committee considered the financial and demographicassumptions used in the calculation of the Swiss net definedbenefit obligation. Advice was sought from expert independentactuaries by the management team as part of the process. TheCommittee also considered the disclosure for the restatementof prior periods to reflect the pension scheme obligations.TREASURY OPERATIONS INCLUDING DERIVATIVEFINANCIAL INSTRUMENTSThe Committee considered the approach taken to determinethe fair value of derivative financial instruments under IFRS 13Fair Value Measurement. The Committee also considered theapproach taken to the revised accounting and disclosurerequirements following the introduction of IFRS 9 FinancialInstruments.92 easyJet plc Annual Report and Accounts 2019EXTERNAL AUDITORPricewaterhouseCoopers LLP (‘PwC’), as the external auditor, isengaged to conduct a statutory audit and express an opinion onthe financial statements. Its audit includes the review and reviewof the systems of internal financial control and data which areused to produce the information contained in the financialstatements. PwC was reappointed as auditor of the Group atthe 2019 Annual General Meeting following a tender processundertaken in 2015.The current external audit engagement partner is Andrew Kemp,Senior Statutory Auditor, who has held this role since 2016. Theexternal audit plan and the £0.4 million fee proposal for thefinancial year under review (2018: £0.4 million) was prepared byPwC in consultation with management and presented to theCommittee for consideration and approval.EXTERNAL AUDITOR EFFECTIVENESSSenior management monitors the external auditor’s performance,behaviour and effectiveness during the exercise of their duties,which informs the Audit Committee’s decision on whether torecommend reappointment on an annual basis.The Audit Committee also assesses the effectiveness,independence and objectivity of the external auditor by,amongst other things:• considering all key external auditor plans and reports; inparticular those summarising audit work performed onsignificant risks and critical judgements identified, anddetailed audit testing thereon;• having regular engagement with the external auditor duringCommittee meetings and ad hoc meetings (when required),including meetings without any member of managementbeing present;• the Committee Chair having discussions with the SeniorStatutory Auditor ahead of each Committee meeting; and• following the end of the financial year, each Committeemember completing an auditor effectiveness reviewquestionnaire.The Committee this year asked PwC to reiterate the steps takento ensure the quality of its listed audits. PwC confirmed that theaudit partner and audit team are not the subject of any PwC,Institute, FRC or other regulatory investigation.The Committee was satisfied that the external audit had providedappropriate focus to those areas identified as the key risk areas tobe considered by the Audit Committee. It had also continued toaddress the areas of significant accounting estimates. On thisbasis, and considering the views of senior management, theCommittee concurred that the external audit had been effective.EXTERNAL AUDITOR INDEPENDENCE AND NONAUDIT FEESTo preserve objectivity and independence, the external auditordoes not provide consulting services unless this is in compliancewith the Group’s non-audit services policy which reflects the EUaudit reform regulations and the FRC’s Revised Ethical Standard2016. This policy is available in the governance section of easyJet’scorporate website at corporate.easyjet.com.In the 2019 financial year, PwC undertook only audit relatednon-audit services for the Company as set out in note 3 to thefinancial statements.EXTERNAL AUDIT TENDERINGPwC were first appointed to audit the Annual Report andAccounts for the year ended 30 September 2006, and havetherefore served a 14-year term. Under EU audit reform legislation,companies are required to have a mandatory tender of auditorsafter 10 years, or 20 years if there is a compulsory re-tender at 10years. During the 2015 financial year, the Committee led a tenderprocess for external audit services, following which the AuditCommittee agreed to recommend that the Board reappoint PwCas, on balance, they performed best against the Committee’spre-agreed selection and assessment criteria. Having undertakensuch a process, the Company confirms that it has complied withthe provisions of the Statutory Audit Services for Large CompaniesMarket Investigation (Mandatory Use of Competitive TenderProcesses and Audit Committee Responsibilities) Order 2014.LOOKING FORWARDThe Committee will continue to consider the financial reporting ofthe Group and review the Group’s accounting policies and annualstatements. In particular, any major accounting issues of asubjective nature will be discussed by the Committee.The Committee will also continue to review internal andexternal audit activity and the effectiveness of the riskmanagement process.PwC cannot bereappointed in 2026and a competitivetender will take place(if not alreadyeffected prior to thisdate)Competitive tenderto take place unlessrequired earlierFull competitivetender, PwCreappointedPwC appointed2006 2015 2020 2024/2025 2026Mandatoryappointment ofnew external auditlead partner afterfive years to signoff on the 2021financial yearEXTERNAL AUDIT TENDERING TIMELINEwww.easyJet.com 93GOVERNANCE CORPORATE GOVERNANCE REPORTThe Committee’s keyrole is to review andmonitor the Group’streasury policies,treasury operationsand fundingactivities along withassociated risksfinance COMMITTEE REPORTI am pleased to present the Finance Committee (the ‘Committee’)report covering the work of the Committee during the 2019financial year.The Committee’s key role is to review and monitor the Group’streasury policies, treasury operations and funding activities alongwith associated risks. It is responsible for regulating the treasuryactivities of the Company and controlling the associated risks,determining and approving material inter-company distributionsand changes to share warehousing policies and loan facilityarrangements. The Committee is also responsible for providingapprovals in relation to hedging, International Swaps andDerivatives Association (ISDA) arrangements, letters of credit,guarantees in line with the delegated authority and thetreasury policy.This report sets out how it has discharged its duties andresponsibilities during the year, including reviewingcompliance with treasury policies and approving the issuanceof a €500 million bond under the EMTN programme.CORPORATE GOVERNANCE REPORT CONTINUEDFINANCE COMMITTEE REPORTMEMBERSHIP, MEETINGS AND ATTENDANCE• Andy Martin (Chair)• Andreas Bierwirth• Charles GurassaThe Committee consists of independent Non-Executive Directorsand is chaired by Andy Martin with members of the executivemanagement invited to attend meetings. There were no changesto the membership of the Committee during the year. TheCompany Secretary acts as Secretary to the Committee.Member biographies setting out their skills and experience canbe found on pages 68 to 71.The Committee met five times during the year. Meetingattendance can be found in the table on page 80. TheCommittee’s terms of reference can be found on theCompany’s website at corporate.easyjet.com.Andy MartinChair of the Finance Committee94 easyJet plc Annual Report and Accounts 2019KEY ACTIVITIES DURING THE YEARThe Committee continued to monitor treasury activities to ensurethe Company continued to be appropriately funded and theoverall treasury objective and the specific objectives of eachtreasury activity were consistent with both the financial andcorporate business objective.The Committee monitors activities by receiving regular reportsfrom the Treasury function setting out details of cash anddeposits, hedging positions for fuel, foreign exchange and carbon,debt maturity, interest rate analysis and monitoring credit ratings,amongst other matters.The Committee also considered aircraft financing, monitoring thenumber of aircraft in the fleet that are owned or leased andapproving sale and leasebacks where appropriate to manageresidual value risk and maintain flexibility.The Committee continued to provide effective oversight of theGroup’s treasury and funding policies, ensuring that treasuryactivities undertaken do not subject the Group to undesired levelsof risk, and that these activities are appropriately aligned with theGroup’s strategy and financial performance. During the year theCommittee reviewed compliance with the Group’s policies andapproved changes in relation to counterparty credit risk andIFRS 16 risk management.The Committee also approved the creation of a new risk policy toreduce income statement volatility introduced from therecognition of an IFRS 16 lease liability.The Committee approved the annual update to the Euro MediumTerm Note (EMTN) programme, and approved a €500 millionbond issuance under the programme during the year whichcompleted in June 2019. On completion of the bond issuance,the £250 million revolving credit facility was cancelled.Areas of focusJET FUELHEDGINGReviewed and approved theCompany’s jet fuel hedgingpolicy and forecastsCARBONHEDGINGReviewed and discussed carbonhedging and the impact of theEU Emissions Trading System onthe Company to address theissues potentially faced as aresult of BrexitEMTNPROGRAMMEReviewed and approved theannual update to the EMTNprogramme and approved a€500 million bond issuanceunder the programmeFINANCIALREGULATIONUPDATEReceived an update on thefinancial regulatory developmentsof relevance to the Companywww.easyJet.com 95GOVERNANCE CORPORATE GOVERNANCE REPORTAnnual statement by the Chair of theRemuneration CommitteeOn behalf of the Board, we are pleased to present the Directors’remuneration report for the year ended 30 September 2019(the ‘Report’). The Report sets out details of the remunerationpolicy for Executive and Non-Executive Directors, describes howthe remuneration policy is implemented and discloses theamounts paid relating to the year ended 30 September 2019, andexplains how it will be implemented for the 2020 financial year.PERFORMANCE AND REWARD OUTCOMES INTHE 2019 FINANCIAL YEAROverall the Company performed well given the challengingcircumstances. The difficult early trading conditions and ongoingmarket uncertainty meant that our profit performance endedbehind our initial expectations at the outset of the year. Passengernumbers and total revenue both increased, while we achieved anoverall reduction in cost per seat (excluding fuel) and made goodprogress on our operational resilience and strategic initiatives.Incentive plan performance against our targets for both the bonusplan and LTIP are summarised in the ‘Remuneration at a glance’section on page 98 to 99 and described below.BONUSAnnual bonus payments are based 70% on financial performanceand 30% on strategic goals including a minority element based onpersonal objectives.Operational performance over the year remained resilient withcost per seat, On-Time Performance and Customer Satisfactionmeasures all performing between the threshold and target levelsset by the Committee. However, despite a strong recovery in thesecond half of the year, profit before tax for the full year fell belowthe threshold level set. The Committee also assessed theExecutive Directors’ performance against their individual objectivesand was pleased with their strong personal performance andleadership during the year. Based on all the above, a bonus of 16%and 17% of the maximum was payable to the CEO and CFOrespectively for 2019. The Committee was satisfied that thisoutcome was appropriate with no further discretionaryadjustments considered necessary. One-third of the bonusesearned is subject to compulsory deferral into shares for threeyears (see page 109 to 110 for full details).LTIPAwards were made to the Chief Financial Officer and othermembers of senior management under the LTIP in December 2016with vesting based on three-year performance to 30 September2019. The ROCE target (70% of the award) was met in full, whileTSR performance (30% of the award) was below the thresholdlevel. The Committee considered this outcome and determinedthat it was a fair reflection of the long-term performance of theCompany as a whole in the context of the challenging businessenvironment and the targets set by the Committee at the time ofthe award. 70% of the award will therefore vest in December 2019(see page 111 for full details).Charles GurassaChair of the Remuneration Committee (untilOctober 2019)MOYA GREENE DBEChair of the Remuneration Committee (fromOctober 2019)96 easyJet plc Annual Report and Accounts 2019IMPLEMENTATION OF THE REMUNERATIONPOLICY IN THE 2020 FINANCIAL YEARWe will take the following approach to implementation of theremuneration policy for the year ending 30 September 2020.SALARYExecutives’ base salaries are reviewed annually, and any changesare normally made in line with the average increase for the widerworkforce. The Committee has therefore awarded a 2.8% increaseto the CEO, which is slightly below the 3% increase typicallyawarded to our wider workforce in the UK.As noted on page 108 Andrew Findlay will increase hisaccountabilities by taking on the corporate strategy function inaddition to fleet planning. This will allow easyJet to navigate theincreasingly complex trading climate and long-term strategicchoices ahead to maximise long-term shareholder value andachieve our sustainability ambitions. As per the remunerationpolicy, the Committee considered this a material increase inresponsibilities which merited an increase beyond the levelgranted to the wider workforce. The Committee agreed, therefore,a change in Andrew Findlay’s salary from £510,000 to £550,000effective 1 January 2020 (an increase of 7.8%). The Committee issatisfied that this is appropriate and in keeping with easyJet’sremuneration principles, noting Andrew’s continued exceptionalperformance.BONUSThe Committee has reviewed the bonus measures and targets,taking account of our strategic goals and our KPIs set out on page110. The majority of the bonus will continue to be based onfinancial measures (comprising 70% of the maximum) and 30% onstrategic goals for the CEO and CFO. In particular, the Committeehas decided to incorporate our commitment to the progression ofour environmental sustainability agenda within the bonus structureof the entire Airline Management Board alongside other strategicKPIs around our customers, employees and launch of our Holidaysbusiness. More details on the specific weightings for each metricare set out on page 108. One-third of any bonus earned willcontinue to be subject to compulsory deferral into shares forthree years.LTIPIn line with the approach adopted in 2018, LTIP awards will begranted to Executive Directors in December 2019 with acombination of EPS, ROCE and TSR performance measures. TheCommittee has determined that these measures remain alignedCharles gurassaChair of the Remuneration Committee (until October 2019)18 November 2019MOYA GREENE DBEChair of the Remuneration Committee (from October 2019)18 November 2019with the strategic plan described on page 19 and the targets sethave taken into consideration the challenging trading environmentand market consensus. The targets will be disclosed at the pointof grant and again in the 2020 Annual Report.REVIEW OF THE REMUNERATION POLICY DURING2020The Directors’ Remuneration Policy was last approved byshareholders at our 2018 AGM, and as such a new policy will needto be approved in 2021. The Committee will therefore be carryingout a full review of the policy during 2020, taking account of ourevolving strategic and stakeholder needs as well as marketpractice and best practice governance developments since ourlast review. The Committee is especially mindful of the need forour remuneration policies to reflect the unique nature of ourbusiness and the sector-specific challenges we face. As part ofthis process, the Committee will engage fully with easyJet’s majorshareholders and other stakeholders, to ensure that we are able tolisten to their views.As we announced earlier this year, Charles Gurassa stepped downas Chair of the Remuneration Committee at the end of the year,and as of October 2019, has been succeeded by Moya Greene.Moya will lead the Committee through the upcoming review of theDirectors’ Remuneration Policy. We thank shareholders for theirengagement and support throughout Charles’s tenure. We hopethat you will find this report informative and, as always, theCommittee welcomes any comments you may have.WHAT IS IN THIS REPORT?This Report sets out easyJet’s remuneration policy for Executive and Non-Executive Directors, describes the implementation ofthat policy and discloses the amounts earned relating to the year ended 30 September 2019. The Report complies with theprovisions of the Companies Act 2006 and supporting regulations. The Report has been prepared in line with therecommendations of the UK Corporate Governance Code and the requirements of the UK Listing Authority Listing Rules.The Directors’ remuneration policy (set out on pages 100 to 106) was approved by shareholders in a binding vote at the AGM inFebruary 2018 and became effective on that date. The Annual Statement by the Chairman of the Remuneration Committee(set out on pages 96 to 97) and the Annual Report on Remuneration (set out on pages 107 to 115) will together be subject toan advisory vote at the forthcoming AGM.www.easyJet.com 97GOVERNANCE REMUNERATION REPORTRemuneration at a glance74.6%£42.9473.9%£45544% 4.4%72.9% 74.9% 76.9%0% 0%£479 £532 £61217% 1.7%CEOCFO15.8%17.3%85%100%8.5%10%£43.03 £42.59 £42.160% 50% 100%12% 1.2%73.8% 76.3% 78.8%

Weighting
Threshold
MetricsHeadline profit before tax

10%60%10%10%10%
On-time performanceat budgeted constantcurrency (£m)Headline cost per seat atbudgeted constant currencyDepartment / individualCustomer satisfaction

100%
Total

On-Target Maximum Achieved(% of max)% of Maximumbonus achievedAnnual bonus – performance for the 2019 financial yearCEO & CFO ANNUAL BONUS – FY2019 PERFORMANCE(CEO) 85%(CFO) 100%(CEO) 15.8%(CFO) 17.3%2019£200 £400 £600 £800 £1,000 £1,200 £1,400 £1,600201820192018FIXED BONUS LTIPAndrew Findlay (Chief Financial Officer)£780£154 £705SINGLE TOTAL FIGURE OF REMUNERATION (£’000)£226£544£526 £650£1,006£1,500£1,403£1,176Johan Lundgren (Chief Executive)£631 £869REWARD PRINCIPLESThe Remuneration Committee’s primary objective is to design a remuneration framework which promotes the long-term success ofthe Group. For some time we have been guided by the following reward principles:Principle Application in remuneration frameworkSimple & cost-effective To establish a simple and cost-effective reward package in line with our low-cost and efficient businessmodel. For example, our Executive Directors do not receive the level of benefits that can be found in themajority of listed companies and instead are aligned with those in the wider employee population.Aligned with businessstrategyTo support the achievement of our business strategy of growth and returns, performance is assessedagainst a range of financial, operational, and longer-term targets. This ensures that value is delivered toshareholders and that Executive Directors are rewarded for the successful and sustained delivery of thekey strategic objectives of the Group.Pay for performance Total remuneration closely reflects performance and is therefore more heavily weighted towards variablepay than fixed pay. This ensures that there is a clear link between the value created for shareholders andthe amount paid to our Executive Directors.DIRECTORS’ REMUNERATION REPORT CONTINUED98 easyJet plc Annual Report and Accounts 2019EXECUTIVE DIRECTOR REMUNERATION POLICY – AT A GLANCEElement Policy Implementation of Policy for the 2020 financial yearBase salary Increase normally up to the average workforcelevel (though may be increased at higher ratesin certain circumstances, for example wheresalary is set below market on recruitment andis being transitioned to a competitive level in aseries of planned stages).Johan Lundgren’s salary will increase by 2.8% effective 1January 2020, to £740,000. This just below the increaseawarded to the wider UK workforce.Andrew Findlay’s salary will increase by 7.8%, reflecting hisadditional responsibility for Strategy as well as performanceand experience in the role. His base salary effective 1 January2020 will therefore be £550,000.Benefits andpensionModest pension and benefit provision, at similarlevels as the wider UK workforce.Pension of 6.15% of salary (being the cash alternative to a 7%employer contribution less UK employers’ national insurancecontributions); plus modest benefits.Annual bonus Maximum opportunity is 200% of salary (ChiefExecutive) and 175% of salary (Chief FinancialOfficer). One-third of bonus is deferred intoshares for three years. Majority based onfinancial measures. Withholding and recoveryprovisions apply.Maximum will remain at 200% of salary for the ChiefExecutive and at 175% of salary for the Chief Financial Officer.Similar to last year, performance metrics and weightingsremain split between 70% financial and 30% strategic goals.See pages 109 to 110 for more information on the breakdownof each measure. Full details of performance against eachmetric will be provided in the 2020 Annual Report.Long-termincentive planNormal maximum awards of 250% of salary(Chief Executive) and 200% of salary (ChiefFinancial Officer). Up to 300% of salary inexceptional circumstances.Three-year performance period plus two-yearpost-vesting holding period.Based on financial and relative TSR targets.Withholding and recovery provisions apply.Award to the Chief Executive of 250% of salary and award tothe Chief Financial Officer of 200% of salary.The performance targets for the 2020 awards will be disclosedin full at the date of grant and in the Annual Report.Share ownershipguidelines200% of salary (Chief Executive) and 175% ofsalary (Chief Financial Officer).Requirement to retain 50% of post-tax LTIPvesting and 100% of post-tax deferred bonusshares until guideline is met (and maintained).200% of salary for the Chief Executive and 175% of salary forthe Chief Financial Officer: in line with policy.Annual bonus performance weightingTotal financial metrics 70%Total strategic metrics 30%2550751003 year average ROCE(70% weighting)Target Actual Target Actual3 year TSR(30% weighting)Overall13%9%Median13.5%11.2%UpperquartileBelowThresholdLTIP – Performance for the three years to 30 September 201970% vesting overall100% of ROCEawards vested0% of TSRawards vestedwww.easyJet.com 99GOVERNANCE REMUNERATION REPORTDirectors’ remuneration policyThis part of the Directors’ remuneration report sets out easyJet’sDirectors’ remuneration policy. This policy was approved byshareholders in a binding vote at the AGM on 8 February 2018,and became effective on that date. The Committee’s currentintention is that the current policy will operate for the three-yearperiod to the AGM in 2021.A copy of the Directors’ remuneration policy can be foundonline, within the Annual Report and Accounts, athttp://corporate.easyjet.com/.ROLE OF OUR REMUNERATION COMMITTEEThe Remuneration Committee has responsibility for determiningremuneration for the Executive Directors and the Chairman of theBoard. The Committee also reviews the remuneration of theGroup’s most senior executives in consultation with the ChiefExecutive. The Committee takes into account the need to recruitand retain executives and ensure that they are properly motivatedto perform in the long-term interests of the Company and itsshareholders, while paying no more than is necessary.CONSIDERATIONS WHEN DETERMINING THEREMUNERATION POLICYThe primary objective of the Group’s remuneration policy is topromote the long-term success of the business through theoperation of competitive pay arrangements which are structuredso as to be in the best interests of shareholders. When setting thepolicy for Executive Directors’ remuneration, the Committee takesinto account total remuneration levels operating in companies of asimilar size and complexity, the responsibilities of each individualrole, individual performance and an individual’s experience. Ouroverall policy, having given due regard to the factors noted, is toweight remuneration towards variable pay. This is typicallyachieved through setting base pay at a competitive level,offering very modest pension and benefits, and giving thepotential to earn above-market variable pay subject to theachievement of demanding performance targets linked to theGroup’s strategic objectives.In setting remuneration for the Executive Directors, theCommittee takes note of the overall approach to reward foremployees in the Group. Salary increases will ordinarily be(in percentage of salary terms) no higher than those of the widerworkforce. The Committee does not formally consult directlywith employees on executive pay but does receive periodicupdates from the Group People Director.The Committee also considers developments in institutionalinvestors’ best practice expectations and the views expressedby shareholders during any dialogue.CONSIDERING THE VIEWS OF SHAREHOLDERSWHEN DETERMINING THE REMUNERATIONPOLICYeasyJet remains committed to shareholder dialogue and takes anactive interest in voting outcomes. We consult extensively with ourmajor shareholders when setting our remuneration policy or whenconsidering any significant changes to our remunerationarrangements. The Committee also considers shareholderfeedback received in relation to the Directors’ remuneration reporteach year following the AGM. This, plus any additional feedbackreceived from time to time, is then considered as part of theCommittee’s annual review of remuneration policy and itsimplementation.DIRECTORS’ REMUNERATION REPORT CONTINUED100 easyJet plc Annual Report and Accounts 2019SUMMARY OF THE REMUNERATION STRUCTUREThe table below sets out the main components of easyJet’s remuneration policy:Element, purposeand link to strategyOperation (including maximumlevels where applicable)Framework used to assessperformance and provisionsfor the recovery of sums paidSalaryTo provide the corereward for the role.Sufficient level to recruitand retain individuals of thenecessary calibre toexecute the Company’sbusiness strategy.Base salaries are normally reviewed annually, with changes typicallyeffective from 1 January.Salaries are typically set after considering salary levels in companies of asimilar size and complexity, the responsibilities of each individual role,progression within the role, individual performance and an individual’sexperience. Our overall policy, having given due regard to the factors noted,is normally to target salaries at a broadly market competitive level.Salaries may be adjusted and any increase will ordinarily be no higher thanthose of the wider workforce (in percentage of salary terms).Increases beyond those granted to the wider workforce (in percentage ofsalary terms) may be awarded in certain circumstances such as where thereis a change in responsibility or experience, progression in the role, or asignificant increase in the scale of the role or the size, value or complexityof the Group.The Committee considersindividual salaries at theappropriate Committeemeeting each year afterhaving due regard to thefactors noted in operatingthe salary policy.No recovery provisionsapply to salary.BenefitsIn line with the Company’spolicy to keep remunerationsimple and consistent.Executive Directors receive benefits provisions at similar levels as the widerUK workforce. Benefits will typically include, for example, modest death inservice cover. The cost to the Company of providing these benefits mayvary from year to year depending on the level of the associated premium.Executive Directors typically receive no other conventional executivecompany benefits, but will be eligible for any other benefits which areintroduced for the wider workforce on broadly similar terms.Other benefits such as relocation allowances (and other incidentalassociated expenses) may be offered if considered appropriate andreasonable by the Committee.Executive Directors can pay for voluntary benefits, where Companypurchasing power may provide an advantage to employees.Executive Directors are also eligible to participate in any all-employee shareplans operated by the Company, in line with HMRC guidelines currentlyprevailing (where relevant), on the same basis as for other eligibleemployees.Should it be appropriate to recruit a Director from overseas, flexibility isretained to provide benefits that take account of those typically provided intheir country of residence (e.g. it may be appropriate to provide benefitsthat are tailored to the unique circumstances of such an appointment asopposed to providing the benefits detailed above).Necessary expenses incurred undertaking Company business arereimbursed so that Executive Directors are not worse off on a net of taxbasis as a result of fulfilling Company duties.Not applicable.No recovery provisionsapply to benefits.PensionTo provide employees withlong-term savings viapension provisions in linewith the Company’sstrategy to keepremuneration simple andconsistent.Defined contribution plan with the same monthly employer contributionsas those offered to eligible employees in the wider UK workforce (i.e. up to7% of base salary); or a cash alternative to the equivalent value lessemployer’s National Insurance contribution costs.easyJet operates a pension salary sacrifice arrangement wherebyindividuals can exchange part of their salary for Company-paid pensioncontributions. Where individuals exchange salary this reduces employerNational Insurance contributions. easyJet credits half of this reduction(currently 6.9% of the salary exchanged) to the individual’s pension plan.Not applicable.No recovery provisionsapply to employer pensioncontributions.www.easyJet.com 101GOVERNANCE REMUNERATION REPORTSUMMARY OF THE REMUNERATION STRUCTURE CONTINUEDElement, purposeand link to strategy Operation (including maximum levels where applicable)Framework used to assess performanceand provisions for the recovery of sums paidShare ownershipTo ensure alignmentbetween the interests ofExecutive Directors andshareholders.The Chief Executive and the Chief Financial Officerare expected to build and maintain a holdingequivalent to 200% and 175% of salary respectivelyover a period of five years from appointment.Executive Directors are expected to retain 50% ofthe post-tax shares vesting under the LTIP and 100%of the post-tax deferred bonus shares until theguideline is met and keep it maintained thereafter.Not applicable.Annual bonusTo incentivise andrecognise execution of thebusiness strategy on anannual basis. Rewards theachievement of annualfinancial and operationalgoals.Compulsory deferralprovides alignment withshareholders.Maximum opportunity of 200% of salary for ChiefExecutive and 175% of salary for other ExecutiveDirectors.One-third of the pre-tax bonus earned is subject tocompulsory deferral into shares (or equivalent),typically for a period of three years, and is normallysubject to continued employment.The remainder of the bonus is paid in cash.Dividend equivalent payments may be made on thedeferred bonus at the time of vesting, and mayassume the reinvestment of dividends.All bonus payments are at the discretion of theCommittee, as shown following this table.Bonuses are based on stretching financial,operational, and personal or departmentalperformance measures, as set and assessed bythe Committee in its discretion, with performancenormally measured over a one-year period.Financial measures (e.g. headline profit beforetax) will represent the majority of the bonus, withother measures representing the balance. Agraduated scale of targets is set for eachmeasure, with 10% of each element being payablefor achieving the relevant threshold hurdle.Safety underpins all of the operational activities ofthe Group and the bonus plan includes a provisionthat enables the Remuneration Committee toscale back the bonus earned (including to zero) inthe event that there is a safety event which itconsiders warrants the use of such discretion.The annual bonus plan includes provisions whichenable the Committee (in respect of both thecash and the deferred elements of bonuses) torecover or withhold value in the event of certaindefined circumstances.LTIP Performance ShareAwardTo incentivise and recogniseexecution of the businessstrategy over the longerterm. Rewards strongfinancial performance andsustained increase inshareholder value.Each year LTIP awards may be granted subject tothe achievement of performance targets. Awardsnormally vest over a three-year period.The maximum opportunity contained within the planrules for Performance Share Awards is 250% ofsalary (with awards up to 300% of salary eligible tobe made in exceptional circumstances, such asrecruitment).The normal maximum face value of annual awardswill be 250% of salary for the Chief Executive and200% of salary for other Executive Directors.Dividend equivalent awards may be made on LTIPawards that vest, and may assume the reinvestmentof dividends.A holding period applies to share awards granted inthe financial year ended 30 September 2015 andbeyond. The holding period will require the ExecutiveDirectors to retain the after-tax value of shares for 24months from the vesting date.LTIP awards currently vest based on performanceagainst a challenging range of financial targetsand relative TSR performance set and assessedby the Committee in its discretion. Financialtargets currently determine vesting in relation toat least 50% of awards. The selection ofmeasures and weightings may be varied forfuture award cycles as appropriate to reflect thestrategic priorities of the business at that time.Performance is normally measured over athree-year period.A maximum of 25% of each element vests forachieving the threshold performance target with100% of the awards being earned for maximumperformance.The LTIP includes provisions which enable theCommittee to recover or withhold value in theevent of certain defined circumstances.DIRECTORS’ REMUNERATION REPORT CONTINUED102 easyJet plc Annual Report and Accounts 2019DISCRETION RETAINED BY THE COMMITTEE INOPERATING THE INCENTIVE PLANSThe Committee will operate the annual bonus plan and LTIPaccording to their respective rules (or relevant documents) and inaccordance with the Listing Rules where relevant. The Committeeretains discretion, consistent with market practice, in a number ofregards to the operation and administration of these plans. Theseinclude, but are not limited to, the following in relation to the LTIPand annual bonus deferred in shares:• the participants;• the timing of grant of an award;• the size of an award;• the determination of vesting;• the payment vehicle of the award/payment;• discretion required when dealing with a change of controlor restructuring of the Group;• determination of the treatment of leavers based on the rules ofthe plan and the appropriate treatment chosen;• adjustments required in certain circumstances (e.g. rights issues,corporate restructuring events and special dividends); and• the annual review of performance measures and weighting, andtargets for the LTIP from year to year.In relation to the annual bonus plan, the Committee retainsdiscretion over:• the participants;• the timing of grant of a payment;• the determination of the bonus payment;• dealing with a change of control;• determination of the treatment of leavers based on the rules ofthe plan and the appropriate treatment chosen; and• the annual review of performance measures and weighting, andtargets for the annual bonus plan from year to year.In relation to both the Group’s LTIP and the annual bonus plan,the Committee retains the ability to adjust the targets and/or setdifferent measures if events occur which cause it to determinethat the conditions are no longer appropriate (e.g. materialacquisition and/or divestment of a Group business), and theamendment is required so that the conditions achieve their originalpurpose and are not materially less difficult to satisfy.Any use of the above discretions would be explained in the AnnualReport on Remuneration and may be the subject of consultationwith the Company’s major shareholders.The use of discretion in relation to the Group’s Save As You Earnand Share Incentive Plans will be as permitted under HMRC rulesand the Listing Rules.Details of share awards granted to existing Executive Directors areset out on page 111. These remain eligible to vest based on theiroriginal award terms.PERFORMANCE METRICS AND TARGET SETTINGThe choice of the performance metrics applicable to the annualbonus plan reflect the Committee’s belief that any incentivecompensation should be appropriately challenging and tied to thedelivery of a blend of key financial, operational and personaltargets. These targets are intended to ensure that ExecutiveDirectors are incentivised to deliver across a scorecard ofobjectives for which they are accountable. Financial measures(e.g. headline profit before tax) will be used for the majority of thebonus and will be selected in order to provide a clear indication ofhow successful the Group has been in managing operationseffectively overall (e.g. in maximising profit per seat whilstmaintaining a high load factor). The remainder of the bonus will bebased on key operational (e.g. customer satisfaction) and personalor departmental measures set annually.Since safety is of central importance to the business, the award ofany bonus is subject to an underpin that enables theRemuneration Committee to reduce the bonus earned (includingto zero) in the event that there is a safety event that it considerswarrants the use of such discretion.LTIP awards are earned for delivering performance against anappropriate balance of key long-term financial (e.g. headline ROCEand headline EPS) and relative TSR targets. These seek to assessthe underlying financial performance of the business whilemaintaining clear alignment between shareholders and ExecutiveDirectors. Targets are set based on a sliding scale that takesaccount of relevant commercial factors.Only modest awards are available for delivering thresholdperformance levels, with maximum awards requiring substantialoutperformance of challenging plans.The Committee has retained some flexibility on the specificmeasures which can be used for the annual bonus plan and theLTIP to ensure that they will be fully aligned with the strategicimperatives prevailing at the time they are set.No performance targets are set for Save As You Earn awardssince these are purposefully designed to encourage employeesacross the Group to purchase shares in the Company. A measureof Group performance is used in determining awards under theShare Incentive Plan.HISTORICAL AWARDSAll historical awards that were granted under any current orprevious share schemes operated by the Company, and whichremain outstanding, remain eligible to vest on the basis of theiroriginal award terms.DIFFERENCES IN PAY POLICY FOR EXECUTIVEDIRECTORS COMPARED TO OTHER EASYJETEMPLOYEESThe remuneration policy for the Executive Directors is moreheavily weighted towards variable and share-based pay than forother employees, to make a greater part of their pay conditionalon the successful delivery of business strategy.This aims to create a clear link between the value created forshareholders and the remuneration received by the ExecutiveDirectors. However, in line with the Group’s policy to keepremuneration simple and performance-based, the benefit andpension arrangements for the current Executive Directors are onthe same terms as those offered to eligible employees in thewider workforce. All employees have the opportunity toparticipate in a number of broad-based share plans.www.easyJet.com 103GOVERNANCE REMUNERATION REPORTILLUSTRATION OF HOW MUCH THE EXECUTIVEDIRECTORS COULD EARN UNDER THEREMUNERATION POLICYA significant proportion of remuneration is linked to performance,particularly at maximum performance levels. The charts belowshow how much the Chief Executive and Chief Financial Officercould earn through easyJet’s remuneration policy under differentperformance scenarios in the 2020 financial year. The followingassumptions have been made:• Minimum (performance below threshold) – fixed pay only,with no vesting under any of easyJet’s incentive plans• In line with expectations – fixed pay plus a bonus at themid-point of the range (giving 50% of the maximumopportunity) and vesting of 50% of the maximumunder the LTIP• Maximum (performance meets or exceeds maximum)– fixed pay plus maximum bonus and maximumvesting under the LTIP1. Were easyJet’s share price to increase by 50%, Johan Lundgren’s total remuneration would increase to £5,042,000 under an ‘exceeds target’ scenario– driven by the increased value of the LTIP awards2. Were easyJet’s share price to increase by 50%, Andrew Findlay’s total remuneration would increase to £3,198,000 under an ‘exceeds target’ scenario– driven by the increased value of the LTIP awardsThe scenarios do not include any dividend assumptions. It should be noted that since the analysis above shows what could be earned bythe Executive Directors based on the remuneration policy described above (ignoring the potential impact of share price growth), thesenumbers will differ to values included in the table on page 109 detailing actual earnings by Executive Directors.Fixed pay comprises:• Salaries – salary effective as at 1 January 2020;• Benefits – amount received in the 2019 financial year;• Pension – employer contributions or cash-equivalent paymentsreceived in the 2019 financial year; and• Matching Shares under the all-employee share incentive plan.19%32%100%36% 45%30% 38%£4,117,000£2,452,000£787,000CHIEF EXECUTIVE (JOHAN LUNDGREN)1FIXED PAY ANNUAL BONUS LTIP (PERFORMANCE)Exceeds targetIn line with expectationsBelow thresholdExceeds targetIn line with expectations£2,648,000£1,617,000£586,00022%36%100%36% 42%30% 34%Below thresholdCHIEF FINANCIAL OFFICER (ANDREW FINDLAY)2FIXED PAY ANNUAL BONUS LTIP (PERFORMANCE)DIRECTORS’ REMUNERATION REPORT CONTINUED104 easyJet plc Annual Report and Accounts 2019EXECUTIVE DIRECTORS’ TERMS OFEMPLOYMENTThe Group’s policy is for Executive Directors to have servicecontracts which may be terminated with no more than 12 months’notice from either party.The Executive Directors’ service contracts are available forinspection by shareholders at the Company’s registered office.APPROACH TO LEAVERSIf notice is served by either party, the Executive Director cancontinue to receive basic salary, benefits and pension for theduration of their notice period, during which time the businessmay require the individual to continue to fulfil their current dutiesor may assign a period of garden leave.A payment in lieu of notice may be made and, in this event, theCommittee’s normal policy is to make the payment in up to 12monthly instalments which may be reduced if alternativeemployment is taken up during this period.Bonus payments may be made on a pro-rata basis, but only forthe period of time served from the start of the financial year tothe date of termination and not for any period in lieu of notice.Any bonus paid would be subject to the normal bonus targets,tested at the end of the financial year.In relation to a termination of employment, the Committeemay make any statutory entitlements or payments to settle orcompromise claims in connection with a termination of anyexisting or future Executive Director as necessary. The Committeealso retains the discretion to reimburse reasonable legal expensesincurred in relation to a termination of employment and to meetany outplacement costs if deemed necessary.The rules of the Company’s share plans set out what happens toawards if a participant ceases to be an employee or Director ofeasyJet before the end of the vesting period. Generally, anyoutstanding share awards will lapse on such cessation, except incertain circumstances.If an Executive Director ceases to be an employee or Director ofeasyJet as a result of death, injury, retirement, the sale of thebusiness or company that employs the individual, or any otherreason at the discretion of the Committee, then they will betreated as a ‘good leaver’ under the relevant plan’s rules. Underthe deferred bonus, the shares for a good leaver will normallyvest in full on the normal vesting date (or on cessation ofemployment in the case of death) and if the award is in the formof an option, there is a 12 month window in which the award canbe exercised. Awards structured as options which have vestedprior to cessation can be exercised within 12 months of cessationof office or employment.Under the LTIP, a good leaver’s unvested awards will vest (eitheron the normal vesting date or the relevant date of cessation, asdetermined by the Committee) subject to achievement of anyrelevant performance conditions, with a pro-rata reduction toreflect the proportion of the vesting period served. TheCommittee has the discretion to dis-apply time pro-rating ifit considers it appropriate to do so. A good leaver mayexercise their vested awards structured as options for a periodof 12 months following the individual’s cessation of office oremployment, whereas unvested awards may be exercisedwithin 12 months of vesting.In determining whether an Executive Director should be treated asa good leaver, and the extent to which their award may vest, theCommittee will take into account the circumstances of anindividual’s departure.In the event of a takeover or winding-up of easyJet plc (which isnot part of an internal reorganisation of the easyJet Group, incircumstances where equivalent replacement awards are notgranted) all awards will vest subject to, in the case of LTIP awards,the achievement of any relevant performance conditions with apro-rata reduction to reflect the proportion of the vesting periodserved. The Committee has discretion to disapply time pro-ratingif it considers it appropriate to do so. In the event of a takeover,the Committee may determine, with the agreement of theacquiring company, that awards will be exchanged for equivalentawards in another company.POLICY ON EXTERNAL APPOINTMENTSExecutive Directors are permitted to accept appropriate outsideNon-Executive Director appointments so long as the overallcommitment is compatible with their duties as Executive Directorsand is not thought to interfere with the business of the Group.Any fees received in respect of these appointments are retaineddirectly by the relevant Executive Director.APPROACH TO DETERMINING REMUNERATIONON RECRUITMENTBase salary levels will be set in accordance with easyJet’sremuneration policy, taking into account the experience andcalibre of the individual. Where it is considered appropriate to offera lower salary initially, a series of increases to achieve the desiredsalary positioning may be given over the following few years toreflect progression in the role, subject to individual performance.Benefits will normally be provided in line with those offered toother employees. The Committee may provide an allowance and/or reimbursement of any reasonable expenses in relation to therelocation of an Executive Director. easyJet may also offer a cashamount on recruitment, payment of which may be staggered, toreflect the value of benefits a new recruit may have received froma former employer.Should it be appropriate to recruit a Director from overseas,flexibility is retained to provide benefits that take account of thosetypically provided in their country of residence (e.g. it may beappropriate to provide benefits that are tailored to the uniquecircumstances of such an appointment).The maximum level of variable pay that may be offered on anongoing basis and the structure of remuneration will be inaccordance with the approved policy detailed above, i.e. at anaggregate maximum of up to 450% of salary (200% annual bonusand 250% Performance Shares under the LTIP), taking intoaccount annual and long-term variable pay. This limit does notinclude the value of any buy-out arrangements. Any incentiveoffered above this limit would be contingent on the Companyreceiving shareholder approval for an amendment to its approvedpolicy. Different performance measures may be set initially for theannual bonus, taking into account the responsibilities of theindividual, and the point in the financial year that they joined.LTIP awards can be made shortly following an appointment(assuming the Company is not in a closed period).The above policy applies to both an internal promotion to theBoard or an external hire.In the case of an external hire, if it is necessary to buy outincentive pay or benefit arrangements (which would be forfeitedon leaving the previous employer), this would be provided fortaking into account the form (cash or shares), timing andexpected value (i.e. likelihood of meeting any existingperformance criteria) of the remuneration being forfeited.Replacement share awards, if used, will be granted usingeasyJet’s share plans to the extent possible, although awardsmay also be granted outside these schemes if necessary andas permitted under the Listing Rules.In the case of an internal promotion, any outstanding variable payawarded in relation to the previous role will be paid according toits terms of grant (adjusted as relevant to take into account theBoard appointment).www.easyJet.com 105GOVERNANCE REMUNERATION REPORTOn the appointment of a new Chairman or Non-ExecutiveDirector, fees will be set taking into account the experience andcalibre of the individual. Where specific cash or sharearrangements are delivered to Non-Executive Directors, these willnot include share options or other performance-related elements.The Board evaluation and succession planning processes in placeare designed to ensure there is the correct balance of skills,experience and knowledge on the Board. The activities of theNominations Committee overseeing these matters are disclosed inthe Nominations Committee report on pages 87 to 88.NON-EXECUTIVE DIRECTOR FEESThe Non-Executive Directors receive an annual fee (normally paidin monthly instalments). The fee for the Non-Executive Chairmanis set by the Remuneration Committee and the fees for the otherNon-Executive Directors are approved by the Board, on therecommendation of the Chairman and Chief Executive.TERMS OF APPOINTMENT OF THENON-EXECUTIVE DIRECTORSThe terms of appointment of the Chairman and the otherNon-Executive Directors are recorded in letters of appointment.The required notice from the Company is three months. TheNon-Executive Directors are not entitled to any compensation onloss of office.The Non-Executive Directors’ letters of appointment are availablefor inspection by shareholders at the Company’s registered office.Element Purpose and link to strategy Operation (including maximum levels where applicable)Fees To attract and retain a highcalibre Chairman, DeputyChairman and Non-ExecutiveDirectors by offeringmarket-competitive fee levelsThe Chairman is paid an all-inclusive fee for all Board responsibilities.The other Non-Executive Directors receive a basic Board fee, with supplementary feespayable for additional Board Committee responsibilities.The Chairman and Non-Executive Directors do not participate in any of the Group’sincentive arrangements.Fee levels are reviewed on a regular basis, and may be increased, taking into accountfactors such as the time commitment of the role and market levels in companies ofcomparable size and complexity.Flexibility is retained to exceed current fee levels if it is necessary to do so in order toappoint a new Chairman or Non-Executive Director of an appropriate calibre.In exceptional circumstances, if there is a temporary yet material increase in the timecommitments for Non-Executive Directors, the Board may pay extra fees to recognisethe additional workload.Necessary expenses incurred undertaking Group business will be reimbursed so thatthe Chairman and Non-Executive Directors are not worse off, on a net of tax basis, asa result of fulfilling Company duties.No other benefits or remuneration are provided to the Chairman or Non-ExecutiveDirectors.DIRECTORS’ REMUNERATION REPORT CONTINUED106 easyJet plc Annual Report and Accounts 2019Annual report on remunerationROLE OF THE REMUNERATION COMMITTEEThe key role of the Committee is to make recommendations tothe Board on executive remuneration packages and to ensurethat remuneration policy and practices of the Company rewardfairly and responsibly, with a clear link to corporate and individualperformance. The Committee’s terms of reference can be foundon the Company’s website at corporate.easyjet.com.MEMBERSHIP, MEETINGS AND ATTENDANCE• Moya Greene (Chair from 21 October 2019)• Adèle Anderson (until 7 February 2019)• Charles Gurassa• Andy Martin• Julie SouthernThe Committee consists of independent Non-Executive Directorsand was chaired by Charles Gurassa during the year. CharlesGurassa stepped down as Chair of the Committee with effectfrom 21 October 2019 but remains a member of the Committee.Moya Greene took up the role of Chair with effect from the samedate. There were no other changes to the membership of theCommittee during the year. The Company Secretary acts asSecretary of the Committee. Other key invitees include the ChiefExecutive Officer, the Group People Director, Head of Reward andexternal advisers as relevant.Member biographies setting out their skills and experience can befound on pages 68 to 71. The Committee met four times duringthe year. Meeting attendance can be found in the table on page 80.KEY RESPONSIBILITIES• To set the remuneration policy for all Executive Directors andthe Company’s Chairman• To set the remuneration packages for the AMB and monitor theprinciples and structure of remuneration for other seniormanagement• To oversee remuneration and workforce policies and practices,and take these into account when setting the policy for Directorand AMB remuneration• To approve the design of, and determine targets for, allemployee share schemes operated by the Company• To oversee any major changes in employee benefit structuresthroughout the Company or Group• To review and monitor the Group’s compliance with relevantgender pay reporting requirementsKEY ACTIVITIES DURING THE YEAR• Assessed the level of performance in respect of the bonus forthe 2019 financial year, and LTIP awards set in December 2016and vesting in December 2019, to determine appropriate payouts• Determined the bonus and LTIP targets for the 2020 financialyear after considering and debating alternative targets, investorexpectations and internal business plans• Reviewed and approved the remuneration packages for newAMB members• Reviewed the total packages and service contracts of the AMBand senior management• Considered the results and implications of gender pay gapreporting, and reviewed and commented on recommendationsto further enhance the Company’s performance• Reviewed and approved the payment of the all-employeePerformance Share Award in respect of the 2019 financial yearThe Board and the Committee are committed to ensuring thateasyJet’s remuneration framework is designed to support thestrategy, providing balance between motivating and challengingsenior management whilst also driving the long-term success ofthe Group for its shareholders.The Committee carefully considered and approved packages fornew members appointed to the AMB during the year.Remuneration arrangements have been designed to promote thelong-term success of the Company.APPLICATION OF THE REMUNERATION POLICYFOR THE 2020 FINANCIAL YEARThere will be no material changes to the remuneration policy or itsimplementation for the 2020 financial year. easyJet’sremuneration policy has received consistently high levels ofinvestor support in recent years. Over the coming year and inadvance of the next policy vote in 2021, the Committee willconsider the continued appropriateness of the current policy. TheCommittee considers that it remains aligned with the best practiceexpectations of institutional investors.www.easyJet.com 107GOVERNANCE REMUNERATION REPORTBASE SALARYAs noted on page 97 Andrew Findlay will increase hisresponsibilities by taking on the corporate strategy function inaddition to fleet planning. The Committee, therefore, agreed anincrease in Andrew’s current salary from £510,000 to £550,000.The current and proposed salaries of the Executive Directors are:1 January2020 salary1 January2019 salaryChange vs1 January 2019JohanLundgren £740,000 £720,120 2.8%AndrewFindlay£550,000 £510,000 7.8%For comparison, the typical rate of salary increase to be awardedto our wider UK workforce will be 3%.ANNUAL BONUS IN RESPECT OF PERFORMANCEIN THE 2020 FINANCIAL YEARThe maximum bonus opportunity remains at 200% of salary forthe Chief Executive and at 175% for the Chief Financial Officer.The measures have been selected to reflect a range of financialand operational goals that support the key strategic objectivesof the Group.The performance measures and weightings will be as follows:As a percentage ofmaximum bonus opportunityMeasure CEO CFOHeadline profit before tax atbudgeted constant currency 60% 60%Headline cost per seat ex fuel atbudgeted constant currency 10% 10%Total financial measures 70% 70%Customer 10% 10%Employees 5% 4%Environment 5% 4%Other strategic goals 10% 12%Total strategic measures 30% 30%The proposed target levels for the 2020 financial year have beenset to be challenging relative to the business plan and the currenteconomic environment.The Committee is comfortable that the bonus targets for bothExecutive Directors are appropriately demanding in light of theirrespective bonus opportunities.The targets themselves, as they relate to the 2020 financial year,are commercially sensitive. However, retrospective disclosure ofthe targets and performance against them will be provided in nextyear’s remuneration report unless they remain commerciallysensitive at that time. The safety of our customers and peopleunderpins all of the operational activities of the Group and thebonus plan includes a provision that enables the RemunerationCommittee to scale back (including to zero) the bonus awarded inthe event that a safety event has occurred, which it considerswarrants the use of such discretion. One-third of the pre-taxbonus earned will be deferred into shares for a period of threeyears and will be subject to continued employment.Bonus payments may now be withheld or recovered if, within aperiod of three years from the date of payment, there is: a caseof serious personal misconduct; a misstatement of accounts; anerror in calculation of results; an instance of corporate failure; ormaterial damage to the Company’s reputation as a result of asafety event.LTIP AWARDS IN RELATION TO THE 2020FINANCIAL YEARWe intend to make awards to the Chief Executive of 250% ofsalary and to the Chief Financial Officer of 200% of salary inrespect of the 2020 financial year.Awards made for the 2020 financial year will be subject to acombination of headline ROCE, headline EPS and TSRperformance measures, reflecting a balance between growthand returns, and aligning with the Group’s strategic prioritiesover the medium term described on page 19.Finalised targets will be disclosed at the date of grant and in thenext Annual Report.A post-vesting holding period requiring the Executive Directors toretain the post-tax value of any shares for two years from thevesting date will continue to apply to the 2020 and future awards.LTIP payments may be withheld or recovered if, within a period ofthree years from the date of vesting, there is: a case of seriouspersonal misconduct; a misstatement of accounts; an error incalculation of results; an instance of corporate failure; or materialdamage to the Company’s reputation as a result of a safety event.NON-EXECUTIVE DIRECTOR FEESThe fees for the Chairman and Non-Executive Directors from 1January 2020 will be:Chairman £314,568Basic fee for other Non-Executive Directors £62,914Fees for Deputy Chairman andSenior Independent Director role1 £25,000Chair of the Audit, Safety andRemuneration Committees1 £15,000Chair of the Finance Committee1 £10,000Chair of the Employee Engagement Committee1 £10,0001. Supplementary feesFees payable to the Non-Executive Directors are reviewedannually. Accordingly, a basic fee increase of 2.8% will applyfrom 1 January 2020, which is slightly below the typical increasefor the wider UK workforce.DIRECTORS’ REMUNERATION REPORT CONTINUED108 easyJet plc Annual Report and Accounts 2019DIRECTORS’ REMUNERATION FOR THE YEAR ENDED 30 SEPTEMBER 2019The table below sets out the amounts earned by the Directors (£’000) (audited)2019 2018£’000Fees andSalary Benefits(6) Bonus(7) LTIP(8) Pension(9) TotalFees andSalary Benefits(6) Bonus(7) LTIP Pension(9) TotalExecutiveJohan Lundgren 717 19 226 – 44 1,006 594 – 869 – 37 1,500Carolyn McCall DBE(1) – – – – – – 118 – – – 7 125Andrew Findlay 508 5 154 705 31 1,403 491 5 650 – 30 1,176Non-ExecutiveJohn Barton 305 – – – – 305 300 – – – – 300Charles Gurassa 101 – – – – 101 100 – – – – 100Adèle Anderson(2) 25 – – – – 25 75 – – – – 75Dr Andreas Bierwirth 76 – – – – 76 75 – – – – 75Keith Hamill OBE(2) – – – – – – 15 – – – – 15Andy Martin 71 – – – – 71 70 – – – – 70Julie Southern(3) 72 – – – – 72 10 – – – – 10Moya Greene DBE 68 – – – – 68 60 – – – – 60Dr AnastassiaLauterbach(4) 46 – – – – 46 – – – – – –Nicholas Leeder(5) 46 – – – – 46 – – – – – –Total 2,035 24 380 705 75 3,219 1,908 5 1,519 – 74 3,5061. Left the Board on 30 November 2017 but continued to be actively employed by easyJet until 31 December 2017, in order to assist with the transition tothe new Chief Executive. Carolyn McCall received salary of £58,833 and pension contributions of £3,618 between 1 December and 31 December 20172. Adèle Anderson left the Board on 7 February 2019 and Keith Hamill left the board on 31 December 20173. Appointed to the Board on 1 August 20184. Appointed to the Board on 1 January 20195. Appointed to the Board on 1 January 20196. Benefits relate to the cost to the Company of personal accident and life assurance cover and the value of shares during the year under the Company’sShare Incentive Plan, as well as reimbursements made to the Chief Executive for business-related travel expenses in respect of domestic car travel to thevalue of £16,0007. One-third of the bonus will be compulsorily deferred into shares for three years and subject to forfeiture8. Andrew Findlay was granted LTIP awards in December 2016, vesting in December 2019 subject to Group performance measured to 30 September 2019.This award was subject to a ROCE performance measure (70% of the award), which was met in full, and a TSR performance condition, which was notmet. Accordingly, 70% of the award will vest in December 2019. For the purpose of this table, this award has been valued using the three-month averageshare price to 30 September 2019 of £10.01, and will be restated in next year’s report once the share price on the date of vesting is known. This comparesto a share price of £10.43 at grant9. Johan Lundgren, Carolyn McCall and Andrew Findlay all received a cash alternative to pension contributions equivalent to 7% less UK employer’s NICs,resulting in a gross cash allowance of 6.15% of basic salaryANNUAL BONUS OUTTURN FOR PERFORMANCE IN THE 2019 FINANCIAL YEAR (AUDITED)A sliding scale of financial and operational bonus targets was set at the start of the 2019 financial year. 10% of each element is payablefor achieving the threshold target, increasing to 50% for on-target performance and 100% for achieving maximum performance.Achievements between these points are calculated on a straight-line basis.Measure CEO & CFO Threshold On-Target Maximum Actual PayoutHeadline profit before tax(1) 60% £479m £532m £612m £455m 0%Customer satisfaction targets(2) 10% 73.8% 76.3% 78.8% 73.9% 12%On-time performance(3) 10% 72.9% 74.9% 76.9% 74.6% 44%Headline cost per seat (ex. fuel)(1) 10% £43.02 £42.59 £42.16 £42.94 17%Personal and departmental objectives(4) 10% n/a n/a n/a Note 4 Note 41. At budgeted constant currency2. Customer satisfaction measures the percentage of our passengers that are ‘Quite satisfied’, ‘Very satisfied’ or ‘Completely satisfied’ at last contact3. On-time performance measures the percentage of arrivals within 15 minutes of scheduled time, subject to flying 99.5% of programme (excludingcancellations made 14 days in advance which do not attract EU compensation and those which affect the whole airline sector e.g. terrorist disruption, ormajor airport incidents)4. Personal performance targets described over the pagewww.easyJet.com 109GOVERNANCE REMUNERATION REPORTThe personal performance element of the bonus was subject to the achievement of a set of individual performance targets agreed bythe Committee, as follows:JOHAN LUNDGRENObjective Weighting Commitments AchievementsStrategic Initiatives 30% Progress on launch of new Holidays, Loyalty, Data andBusiness initiativesAll four strategic initiatives are ontrack to launch within the agreedtimeframes and milestones agreedby the CommitteeCreative and energisingenvironment30% Embedding a creative and energising environment thatattracts the right people and inspires everyone to learnand growEmployee engagement surveyparticipation rates and overallscores were all maintained abovethe agreed levelsCost control 25% Progress on Operational Resilience Programme andDisruption CostsOverall disruption costs werematerially reduced versus FY18 as adirect outcome of the OperationalResilience programmeTegel acquisition 15% Progress on successful integration of the new Tegeloperation into the wider networkProgress against Tegel integrationtargets were behind planOverall The Committee agreed that 85% of the maximum wasachieved.ANDREW FINDLAYObjective Weighting Commitments AchievementsCost & Balance SheetManagement25% Cost and Balance Sheet initiatives delivered or on trackas per plan without impacting speed of plan deliveryMultiple initiatives were alldelivered as planned withoutimpacting the speed of delivery ofthe long-term strategic planIT and Data Leadership 25% Successfully lead IT and Data teams on an interim basisensuring smooth transition to the new Chief Data andInformation OfficerIT and Data team restructure andstrategic initiatives were completedas planned along with smoothtransition to the new Chief Dataand Information Officer over FY19Strategic Initiatives 25% Progress on launch of new Holidays, Loyalty, Data andBusiness initiativesAll four strategic initiatives are ontrack to launch within the agreedtime frames and milestones definedby the CommitteeCreative and energisingenvironment25% Creating an inclusive and energising environment thatattracts the right people and inspires everyone to learnand growEmployee engagement surveyparticipation rates and overallscores were all maintained abovethe agreed levelsOverall The Committee agreed that 100% of the maximum wasachievedAccordingly, bonuses of 15.8% and 17.3% of the maximum were payable, resulting in bonus pay outs of £226,442 and £153,773 for JohanLundgren and Andrew Findlay, respectively. One-third of the bonus is compulsorily deferred into shares for three years and subject tocontinued employment. The Committee is satisfied with the overall payments in light of the level of performance achieved.DIRECTORS’ REMUNERATION REPORT CONTINUED110 easyJet plc Annual Report and Accounts 2019LTIP (AUDITED)The awards vesting in respect of the performance year to 30 September 2019 were subject to a combination of performance conditionsbased on three-year average headline ROCE (based on a 7x operating lease expense adjustment) and relative TSR compared to FTSE51-150 companies measured over the prior three financial years. The percentage which could be earned was determined using thefollowing vesting schedule:Below threshold(0% vesting)Threshold(25% vesting)On Target(50% vesting)Maximum (100%vesting) ActualVesting (% ofelement)ROCE awards (70% of total) < 9.0% 9.0% 11.2% 13.0% or above 13.5% 100%TSR awards (30% of total) < Median Median n/a Upper quartile < Median 0%Three-year average headline ROCE performance exceeded the maximum target, while our TSR performance was below median. Aspreviously disclosed, the Committee took the decision in 2017 to exclude the impact of the Air Berlin transaction from the 2015 and 2016LTIP cycles. As a result, 70% of the award became eligible to vest. The Committee considered this outcome and determined that it was afair reflection of the performance of the Company as a whole in the context of the challenging business environment. 70% of AndrewFindlay’s award (62,080 shares) will therefore vest in December 2019, together with a dividend equivalent award of 8,275 shares.PAYMENTS FOR LOSS OF OFFICE AND PAYMENTS TO PAST DIRECTORS (AUDITED)No payments for loss of office or any other payments have been made to any former Directors during the year.EXECUTIVE DIRECTORS’ SHARE AWARDS OUTSTANDING AT THE FINANCIAL YEAR END (AUDITED)Details of share options and share awards outstanding at the financial year end are shown in the following tables:JOHAN LUNDGRENSchemeNo. of shares/options at 30September2018(1)Shares/optionsgrantedin yearShares/optionslapsedin yearShares/optionsexercisedin yearNo. of shares/options at 30September2019(1) Date of grantExerciseprice(£)Marketprice onexercisedate(£)Datefrom whichexercisable Expiry DateA 134,350 – – – 134,350 19 Dec 20174 – – 19 Dec 2020 19 Dec 2027A – 167,003 – – 167,003 19 Dec 20186 – – 19 Dec 2021 19 Dec 2028B – 26,871 – – 26,871 19 Dec 2018 – – 19 Dec 2021 19 Dec 2028C – 283 – – 283 5 Apr 2019 – – 5 Apr 2022 n/aE – 1,571 – – 1,571 14 Jun 2019 – – 1 Aug 2022 1 Feb 2023ANDREW FINDLAYSchemeNo. of shares/options at 30September2018(1)Shares/optionsgrantedin yearShares/optionslapsedin yearShares/optionsexercisedin yearNo. of shares/options at 30September2019(1) Date of grantExerciseprice(£)Marketprice onexercisedate(£)Datefrom whichexercisable Expiry DateA 49,620 – (49,620) – – 17 Dec 20152 – – 17 Dec 2018 17 Dec 2025A 88,686 – – – 88,686 19 Dec 20163 – – 19 Dec 2019 19 Dec 2026A 72,621 – – – 72,621 19 Dec 20174 – – 19 Dec 2020 17 Dec 2027A 14,585 – – – 14,585 4 Jun 20185 – – 4 Jun 2021 4 Jun 2028A – 94,619 – – 94,619 19 Dec 20186 – – 19 Dec 2021 19 Dec 2028B 4,985 – – – 4,985 19 Dec 2016 – – 19 Dec 2019 19 Dec 2026B 12,789 – – – 12,789 19 Dec 2017 – – 19 Dec 2020 19 Dec 2027B – 20,086 – – 20,086 19 Dec 2018 – – 19 Dec 2021 19 Dec 2028C 182 – – – 182 5 Apr 2018 – – 5 Apr 2021 n/aC – 283 – – 283 5 Apr 2019 – – 5 Apr 2022 n/aD 324 138 – – 462 – – Note 7 – n/aE 1,051 – (1,051) – – 10 Jun 2016 11.98 – 1 Aug 2019 1 Feb 2020E 557 – – – 557 15 Jun 2017 9.69 – 1 Aug 2020 1 Feb 2021The closing share price of the Company’s ordinary shares at 30 September 2019 was £11.50 and the closing price range during the yearended 30 September 2019 was £8.55 to £13.48.KEY:A Long Term Incentive Plan – Performance SharesB Deferred Share Bonus PlanC Share Incentive Plan – Performance (Free) SharesD Share Incentive Plan – Matching SharesE Save As You Earn Awards (SAYE)www.easyJet.com 111GOVERNANCE REMUNERATION REPORTNote 1: Number of share awards grantedThe number of shares is calculated according to the scheme rules of individual plans based on the middle-market closing share price ofthe day prior to grant. As is usual market practice, the option price for SAYE awards is determined by the Committee in advance of theaward by reference to the share price following announcement of the half year results.Note 2: LTIP awards granted in December 201570% of vesting was based on three-year average ROCE performance (based on a 7x operating lease expense adjustment) for the threefinancial years ending 30 September 2018, and 30% of vesting was based on relative TSR performance compared to companies rankedFTSE 31-130. ROCE for the 2018 financial year has been calculated excluding the impact of the Air Berlin acquisition. The following targetsapplied for these awards:Vesting inDecember 2018Vesting inDecember 2018Threshold(25% vesting) TargetMaximum(100% vesting) ActualVesting (% ofelement)ROCE awards(70% of total award) < 15.0% 15.0% 18.0% 20.0% 13.8% 0%TSR awards(30% of total award) < Median Median n/a Upper quartile < Median 0%Three-year average ROCE (including lease adjustments) was 13.8%, and the Company did not meet the threshold TSR performancetarget. These awards therefore lapsed in full in December 2018.Note 3: LTIP awards made in December 2016Details of this award are set out on page 111.The face value of the award granted to Andrew Findlay was £924,995 (200% of salary). Three-year average ROCE (based on a 7xoperating lease expense adjustment) was 13.5%, and the Company did not meet the threshold TSR performance target, such that 70% ofthe award will vest in December 2019. On vesting, 8,275 dividend equivalent shares will be granted, reflecting the value of dividends whichwould have been earned had Andrew Findlay held shares over the vesting period.Note 4: LTIP awards made in December 201740% of vesting is based on three-year average headline ROCE (including lease adjustment) performance for the three financial yearsending 30 September 2020, 40% is based on aggregate headline EPS over the three financial years ending 30 September 2020, and20% is based on relative TSR performance compared to companies ranked FTSE 51-150. In addition, the TSR awards will not vest unlessthere has been positive TSR over the performance period. The following targets apply for these awards:Vesting inDecember 2020Below threshold(0% vesting)Threshold(25% vesting)Target(50% vesting)Maximum(100% vesting)ROCE awards (40% of total award) < 9.0% 9.0% 11.2%310p 13.0%335p EPS awards (40% of total award) < 278p 278p TSR awards (20% of total award) < Median Median n/a Upper quartileThe face value of the awards granted was £1,850,000 (250% of salary) to Johan Lundgren and £1,000,000 (200% of salary) to Andrew Findlay.Note 5: LTIP awards made in June 2018As disclosed in the 2018 Annual Report, in June 2018 Andrew Findlay received an additional award of £249,914 (50% of salary).DIRECTORS’ REMUNERATION REPORT CONTINUED112 easyJet plc Annual Report and Accounts 2019Note 6: LTIP awards made in December 201840% of vesting is based on three-year average headline ROCE (using the new IFRS 16 lease accounting standard) performance for thethree financial years ending 30 September 2021, 40% is based on aggregate headline EPS over the three financial years ending 30September 2021, and 20% is based on relative TSR performance compared to companies ranked FTSE 51-150. In addition, the TSRawards will not vest unless there has been positive TSR over the performance period. The following targets apply for these awards:Vesting in December 2021Below threshold(0% vesting)Threshold(25% vesting)Target(50% vesting)Maximum(100% vesting)ROCE awards (40% of total award) < 12.5% < 12.5% 14.5%414p 16.5%446p EPS awards (40% of total award) < 383p < 383p TSR awards (20% of total award) < Median < Median n/a Upper quartileNote that ROCE targets, which were previously disclosed in the prior year’s report, have been increased by 1.5pp to reflect the adoption of IFRS 15 and IFRS 16. EPSand TSR targets remain unchanged. The face value of the awards granted was £1,800,300 (250% of salary) to Johan Lundgren and £1,020,000 (200% of salary)to Andrew Findlay. The value of the awards was determined based on the closing share price on the day prior to the date of grant of £10.78.Note 7: Buy As You EarnParticipants buy Partnership Shares monthly under the Share Incentive Plan. The Company provides one Matching Share for each PartnershipShare purchased, up to the first £1,500 per year. These Matching Shares are first available for vesting three years after purchase.SHAREHOLDING GUIDELINES IN THE 2019 FINANCIAL YEAR (AUDITED)The shareholding guidelines will continue to operate on the same basis as last year, i.e. the Chief Executive and Chief Financial Officer areexpected to build up a shareholding of 200% and 175% of salary, respectively, over the first five years from appointment to the Board.Until the guideline is met, Executive Directors are required to retain 50% of net vested shares from the LTIP and 100% of net vesteddeferred bonus shares. Similarly, the Non-Executive Directors, including the Chairman of the Board, are required to build up ashareholding of 100% of annual fees over a period of five years from appointment.DIRECTORS’ CURRENT SHAREHOLDINGS AND INTERESTS IN SHARES (AUDITED)The following table provides details on current Directors’ interests in shares at 30 September 2019.Interests in share schemes(7)Unconditionallyowned shares(2)Shareholdingguidelines achieved(3)Deferredbonus(4) SAYE LTIP(5) SIP(6) TotalJohn Barton 45,000 100% – – – – –Charles Gurassa 18,198 100% – – – – –Johan Lundgren 40,000 46% 26,871 1,571 301,353 283 330,078Andrew Findlay 30,468 66% 37,860 557 270,511 1,011 309,939Dr Andreas Bierwirth 5,251 100% – – – – –Dr AnastassiaLauterbach(1) – 0% – – – – –Nicholas Leeder(1) – 0% – – – – –Andy Martin 7,000 100% – – – – –Moya Greene DBE 7,407 100% – – – – –Julie Southern 776 13% – – – – –1. Appointed to the Board on 1 January 20192. Includes SIP Partnership Shares, vested SIP Performance (Free) Shares, vested SIP Matching Shares and any shares owned by connected persons3. Based on unconditionally owned shares and post-tax value of share interests under the deferred bonus plan as per the Committee’s policy onshareholding guidelines. Once the guideline has been met, the number of shares counting towards the guideline is fixed, regardless of any change in shareprice, with the Director only needing to invest in additional shares to the value of any increase in salary or fees awarded during the year in order tomaintain satisfaction of the guideline4. Includes 26,871 and 20,086 awards granted in the year to Johan Lundgren and Andrew Findlay, respectively5. LTIP shares are granted in the form of nil-cost options subject to performance. Includes 167,003 and 94,619 LTIP awards granted in the year to JohanLundgren and to Andrew Findlay, respectively6. Consists of unvested SIP Performance (Free) Shares and unvested SIP Matching Shares7. Of these schemes, the LTIP is subject to performance conditions and continued service. All other schemes are subject to continued service onlyAs at 18 November 2019, the unconditionally owned shares of Andrew Findlay had increased by 25 shares since 30 September 2019 to30,493 shares.Changes in share ownership levels throughout the year may be found on our corporate website corporate.easyjet.com/.www.easyJet.com 113GOVERNANCE REMUNERATION REPORTExecutive Directors are deemed to be interested in the unvested shares held by the easyJet Share Incentive Plan and the easyJet plcEmployee Benefit Trust. At 30 September 2019, ordinary shares held in the Trusts were as follows:Number ofordinary shares easyJet Share Incentive Plan Trust 2,230,577 easyJet plc Employee Benefit Trust 85,537 Total 2,316,114 POSITION AGAINST DILUTION LIMITSeasyJet complies with the Investment Association’s Principles of Remuneration with regard to dilution limits. These principles require thatcommitments under all of the Company’s share incentive schemes must not exceed 10% of the issued share capital in any rolling 10-yearperiod. Share awards under all current share incentive schemes (LTIP, Save As You Earn and Share Incentive Plan) will be satisfied withshare purchases on the market and the Company’s current position against its dilution limit is within the maximum 10% limit.EMPLOYEE SHARE PLAN PARTICIPATIONA key component of easyJet’s reward philosophy is to provide share ownership opportunities throughout the Group by making annualawards of performance-related shares to all eligible employees. In addition, easyJet operates a voluntary discounted share purchasearrangement for all employees via a Save As You Earn scheme and a Buy As You Earn arrangement with matching shares in the UKunder the tax-approved Share Incentive Plan.DETAILS OF DIRECTORS’ SERVICE CONTRACTS AND LETTERS OF APPOINTMENTDetails of the service contracts and letters of appointment in place as at 30 September 2019 for Directors are as follows:Date ofappointmentDate of currentservice contractUnexpired term at30 September 2019John Barton 1 May 2013 3 May 2016 Letters of appointment for theNon-Executive Directors donot contain fixed term periods;however, they are appointedin the expectation that theywill serve for a maximum ofnine years, subject tosatisfactory performance andre-election at AGMs.Charles Gurassa 27 June 2011 19 June 2017Johan Lundgren 1 December 2017 10 November 2017Andrew Findlay 2 October 2015 10 April 2015Dr Andreas Bierwirth 22 July 2014 19 July 2017Moya Greene DBE 19 July 2017 18 July 2017Dr Anastassia Lauterbach 1 January 2019 14 December 2018Nicholas Leeder 1 January 2019 14 December 2018Andy Martin 1 September 2011 19 July 2017Julie Southern 1 August 2018 7 June 2018REVIEW OF PAST PERFORMANCEThe chart below sets out the TSR performance of the Company relative to the FTSE 250, FTSE 100 and a group of European airlines(1)since 2009. The FTSE 100 and FTSE 250 were chosen as easyJet has been a member of both indices during the period.This graph shows the value, by 30 September 2019, of £100 invested in easyJet on 30 September 2009, compared with the value of£100 invested in the FTSE 100 and FTSE 250 Indices or a comparator group of airlines on the same date.The other points plotted are the values at intervening financial year ends. Overseas companies have been tracked in their local currency,i.e. ignoring exchange rate movements since 30 September 2009.1. British Airways, Lufthansa, Ryanair, Air France-KLM and Iberia have all been included in the comparative European airlines group. British Airways and Iberiahave been tracked forward from 2011 onwards as IAGDIRECTORS’ REMUNERATION REPORT CONTINUED010020030040050060070030 Sep 2009 30 Sep 2010 30 Sep 2011 30 Sep 2012 30 Sep 2013 30 Sep 2014 30 Sep 2015 30 Sep 2016 30 Sep 2017 30 Sep 2018 30 Sep 2019easyJet FTSE 100 Index FTSE 250 Index Comparator Airlines114 easyJet plc Annual Report and Accounts 2019SINGLE TOTAL FIGURE OF REMUNERATIONThe table below shows the total remuneration figure for the Chief Executive over the same 10-year period. The total remuneration figureincludes the annual bonus and LTIP awards which vested based on performance in those years.The annual bonus and LTIP vesting percentages show the payout for each year as a percentage of the maximum.2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Single total figure ofremuneration (£’000) 2,741 1,552 3,694 7,777 9,209(4) 6,241(3) 1,453(2) 757 1,625(1) 1,006Annual Bonus (%) 0% 63% 96% 87% 76% 66% 13% 0% 73% 16%LTIP vesting (%) n/a n/a 92% 100% 100% 100% 32% 0% n/a n/a1. Includes remuneration for the current Chief Executive, Johan Lundgren, of £1,500,000, and £125,000 paid to his predecessor, Carolyn McCall DBE (who was noteligible for a bonus payment in 2018)2. Includes 48,509 LTIP shares (inclusive of dividend equivalents) at the vesting date share price of £10.43, a decrease of 30% on the share price at grant of £14.993. Includes 266,899 LTIP shares vesting for the period, share price is £17.15 (the actual share price at vesting) an increase of 133% on the share price at grant of £7.374. Includes 445,575 LTIP shares vesting for the period, share price was £16.71 (the actual share price at vesting) an increase of 325% on the share price at grant of £3.93CHANGE IN CHIEF EXECUTIVE PAY FOR THE YEAR IN COMPARISON TO THAT FOR EASYJETEMPLOYEESThe table below shows the year-on-year percentage change in salary, benefits and annual bonus earned between the year ended 30September 2019 and the year ended 30 September 2018 for the Chief Executive, compared to the average earnings of all other easyJetUK employees.Salary Benefits(3) Annual bonus(4)Chief Executive(1) 0.6% n/a (74)%Average pay based on all easyJet’s UK employees(2) 3.0% 0% (81)%1. Chief Executive figures present actual FY2019 earnings compared against annualised figures for FY2018 (his start date was 1 December 2017).2. UK employees are presented as the comparator as their salaries and benefits represent the most appropriate comparison. Note that UK employeescomprise over 50% of total employees.3. Chief Executive benefits include an award under the all-employee Performance share plan in April 2019 and reimbursements for business-related travelexpenses in respect of domestic car travel. Prior year benefits solely comprised health benefits not of material cost to the Company. UK employeebenefits remained unchanged versus the prior year.4. The reduction in bonus outcome, both for the Chief Executive and for UK employees, principally resulted from easyJet’s missing its profit target in 2019. In2018, easyJet exceeded its profit stretch target such that both UK pilots and cabin crew received the maximum bonus outcome.RELATIVE IMPORTANCE OF SPEND ON PAYThe table below shows the total pay for all of easyJet’s employees compared to other key financial indicators.Year ended30 September2019Year ended30 September2018 Change %Employee costs (£m) 944 847 11%Ordinary dividend (£m) 174 233 (25)%Average monthly number of employees 14,751 13,104 13%Revenue (£m) 6,385 5,898 8%Headline profit before tax (£m) 427 578 (26)%1. Additional information on the number of employees, total revenue and profit has been provided for context. The majority of easyJet’s employees (around90%) perform flight and ground operations, with the rest performing administrative and managerial roles.EXTERNAL APPOINTMENTSAndrew Findlay received fees of £67,500 in the year to 30 September 2019 for his role as Non-Executive Director of Rightmove plc.STATEMENT OF SHAREHOLDERS’ VOTING AT AGMThe table below provides details of shareholder voting in respect of the Directors’ Remuneration Policy (approved in February 2018), andthe Annual Report on Remuneration (in February 2019).Policy(February 2018 AGM)Annual Report on Remuneration(February 2019 AGM)Votes cast in favour 299,660,093 99.06% 173,273,056 98.09%Votes cast against 2,831,491 0.94% 3,366,581 1.91%Total votes cast in favour or against 302,491,584 100% 176,639,637 100%Votes withheld 40,212 413,182ADVISERS TO THE REMUNERATION COMMITTEEThe Remuneration Committee is advised by the Executive Compensation practice of Aon plc. Aon was appointed by the Committee in2004 following a tender process. Aon advises the Committee on developments in executive pay and on the operation of easyJet’sincentive plans. Other than to the Committee, advice is also provided to easyJet in relation to, for example, legal implementation and thefees of the Non-Executive Directors. Aon also provides pension and flexible benefits administration services to the Company. Total fees(excluding VAT) paid to Aon in respect of services to the Committee during the 2019 financial year were £63,000, charged on a timeand materials basis. Aon is a signatory to the Remuneration Consultants Group Code of Conduct and any advice received is governed bythat code. The Committee has reviewed the operating processes in place at Aon and is satisfied that the advice it receives isindependent and objective.www.easyJet.com 115GOVERNANCE REMUNERATION REPORTDIRECTORS’ REPORTDirectors’ reportThe Directors present their Annual Report and Accounts togetherwith the audited consolidated financial statements for the yearended 30 September 2019. This Directors’ report and the strategicreport, which includes the trends and factors likely to affect thefuture development, performance and position of the businessand a description of the principal risks and uncertainties of theGroup (which can found on pages 2 to 65 and is incorporatedby reference), collectively comprise the management report asrequired under the Disclosure and Transparency Rules (‘DTRs’).RESULTS & DIVIDENDThe total profit for the financial year after taxation amounts to£349 million (last year £358 million).The Company’s dividend policy is to pay shareholders 50% ofheadline profit after tax, reflecting the Board’s confidence inthe long-term prospects of the business. The Directors arerecommending an ordinary dividend of 43.9 pence per share,amounting to £174 million.The ordinary dividend is subject to shareholder approval atthe Company’s Annual General Meeting (AGM) to be held on6 February 2020 and will be payable on 20 March 2020 tothe shareholders on the register at the close of business on28 February 2020.BOARDBOARD OF DIRECTORS AND THEIR INTERESTSDetails of the Directors who held office at the end of the yearand their biographical details are set out on pages 68 to 71.Changes to the Board in the year are set out on page 71.The Directors’ interest in the ordinary shares and options of theCompany are disclosed within the Directors’ RemunerationReport on pages 111 and 113.APPOINTMENT AND RETIREMENT OF DIRECTORSThe Directors may from time to time appoint one or moreDirectors. Any such Director shall hold office only until the nextAGM and shall then be eligible for appointment by the Company’sshareholders. It is the current intention that at the Company’s2020 AGM all continuing Executive and Non-Executive Directorswill retire and offer themselves for reappointment in compliancewith the 2018 Code.DIRECTORS’ CONFLICTS OF INTERESTDirectors have a statutory duty to avoid situations in which theyhave, or may have, interests that conflict with those of easyJet,unless that conflict is first authorised by the Board. The Companyhas in place procedures for managing conflicts of interest. TheCompany’s Articles of Association also contain provisions to allowthe Directors to authorise potential conflicts of interest so that aDirector is not in breach of his or her duty under company law.Should a Director become aware that he or she has an interest,directly or indirectly, in an existing or proposed transaction witheasyJet, he or she should notify the Board in line with theCompany’s Articles of Association. Directors have a continuingduty to update any changes to their conflicts of interest.DIRECTORS’ INDEMNITIESDirectors’ and officers’ insurance cover has been established for allDirectors to provide appropriate cover for their reasonable actionson behalf of the Company. A deed was executed in 2007indemnifying each of the Directors of the Company and/or itssubsidiaries as a supplement to the Directors’ and officers’insurance cover. The indemnities, which constitute a qualifyingthird-party indemnity provision as defined by section 234 of theCompanies Act 2006, were in force during the 2019 financial yearand remain in force for all current and past Directors of theCompany.SHARESSHARE CAPITAL AND RIGHTS ATTACHINGTO SHARESThe Company’s issued ordinary share capital as at 30 September2019 comprised a single class of ordinary share. Further details ofthe Company’s share capital during the year are disclosed in note20 of the consolidated financial statement on page 159.All of the issued ordinary shares are fully paid and rank equally inall respects. The rights and obligations attaching to the Company’sordinary shares are set out in its Articles of Association. Holders ofordinary shares are entitled, subject to any applicable law and theCompany’s Articles of Association, to:• have shareholder documents made available to them, includingnotice of any general meeting;• attend, speak and exercise voting rights at general meetings,either in person or by proxy; and• participate in any distribution of income or capital.DIRECTORS’ POWERS IN RELATION TO ISSUINGOR BUYING BACK SHARESSubject to applicable law and the Company’s Articles ofAssociation the Directors may exercise all powers of theCompany, including the power to authorise the issue and/ormarket purchase of the Company’s shares (subject to anappropriate authority being given to the Directors byshareholders in a general meeting and any conditionsattaching to such authority).At the 2019 AGM, the Directors were given the following authority:• to allot shares up to a nominal amount of £10,838,107,representing 10% of the Company’s then issued share capital;• authority to allot shares, without first offering them to existingshareholders in proportion to their holdings, up to a maximumnominal value of £5,419,053, representing 5% of the Company’sthen issued share capital; and• purchase in the market a maximum of 39,720,813 shares,representing up to 10% of the Company’s share capital.No shares were allotted or bought back under these authoritiesduring the year ended 30 September 2019 and up to the dateof this report. These standard authorities will expire on 31 March2020 or at the conclusion of the 2020 AGM, whichever is earlier.The Directors will seek to renew the authorities at the AGMin 2020.116 easyJet plc Annual Report and Accounts 2019VOTING RIGHTS AND RESTRICTIONS ON TRANSFEROF SHARESNone of the ordinary shares carry any special rights with regard tocontrol of the Company. There are no restrictions on transfers ofshares other than:• certain restrictions which may from time to time be imposed bylaws or regulations such as those relating to insider dealing;• pursuant to the Company’s Share Dealing Code, whereby theDirectors and designated employees require approval to deal inthe Company’s shares;• where a person with an interest in the Company’s shares hasbeen served with a disclosure notice and has failed to providethe Company with information concerning interests in thoseshares;• where a proposed transferee of the Company’s shares hasfailed to provide to the Directors a declaration of nationality(together with such evidence as the Directors may require)as required by the Company’s Articles of Association; and• the powers given to the Directors by the Company’s Articles ofAssociation to limit the ownership of the Company’s shares bynon-UK nationals or, following a decision of the Directors, bynon-EU nationals, and powers to enforce this limitation,including the right to force a sale of any affected shares.There are no restrictions on exercising voting rights save insituations where the Company is legally entitled to impose such arestriction (for example under the Articles of Association where anAffected Shares Notice has been served, amounts remain unpaidin the shares after request, or the holder is otherwise in default ofan obligation to the Company). The Company is not aware of anyarrangements between shareholders that may result in restrictionson the transfer of securities or voting rights.VARIATION OF RIGHTSSubject to the Companies Act 2006, rights attached to any classof shares may be varied with the consent in writing of the holdersof three-quarters in nominal value of the issued shares of the classor with the sanction of a special resolution passed at a separategeneral meeting of the shareholders.EMPLOYEE SHARE SCHEMES – RIGHTS OFCONTROLThe trustees of the easyJet UK Share Incentive Plan, which is usedto acquire and hold shares in the Company for participants in theUK Share Incentive Plan, do not seek to exercise voting rights onshares held other than on direction of the underlying beneficiaries.The trustees take no action in respect of ordinary shares for whichthey have received no direction to vote, or in respect of ordinaryshares which are unallocated.The trustee of the easyJet plc Employee Benefit Trust (the ‘Trust’),which is used to acquire and hold shares in the Company for thebenefit of employees, including in connection with the easyJetLong Term Incentive Plan, the International Share Incentive Planand Save As You Earn plans, has the power to vote or not vote,at its absolute discretion, in respect of any shares in the Companyheld unallocated in the Trust. However, in accordance with goodpractice, the trustee adopts a policy of not voting in respect ofsuch shares.Both the trustees of the easyJet UK Share Incentive Plan and theeasyJet plc Employee Benefit Trust have a dividend waiver inplace in respect of shares which are the beneficial property ofeach of the trusts.ADDITIONAL INFORMATIONSUBSTANTIAL INTERESTSIn accordance with DTR 5, as at 30 September 2019 the Companyhad been notified of the following disclosable interests in its issuedordinary shares:Number ofshares asnotified to theCompany% of issuedshare capitalas at 30September2019The Haji-Ioannou family concertparty shareholding, consisting ofeasyGroup Holdings Limited (holdingvehicle for Sir Stelios Haji-Ioannouand Clelia Haji-Ioannou) and PolysHaji-Ioannou (through his holdingvehicle Polys Holdings Limited)133,977,772 33.73%Invesco Limited 39,717,251 9.99%Blackrock, Inc. 20,475,122 5.15%Between 30 September 2019 and 18 November 2019, theCompany was notified that Blackrock’s holding had changed tobelow 5% of voting rights. There were no other interests in sharesnotified between 30 September 2019 and 18 November 2019.ANNUAL GENERAL MEETINGThe venue and timing of the Company’s 2020 AGM will bedetailed in the notice convening the AGM at the relevant time.ARTICLES OF ASSOCIATIONThe Company’s Articles of Association may only be amended bya special resolution at a general meeting of the shareholders. TheCompany’s articles were last amended at the 2018 AGM to ensurethe Company was able to remain EU-owned and controlled at alltimes after the UK has left the EU as required under the EU law.BRANCHESThe Group, through various subsidiaries, has established branchesin France, Germany, Italy, Netherlands, Portugal and Spain, inwhich the business operates.FINANCIAL INSTRUMENTSDetails of the Group’s use of financial instruments, together withinformation on our financial risk management objectives andpolicies, hedging policies and our exposure to financial risks canbe found in notes 24 and 27 to the consolidated financialstatements.GOING CONCERN AND VIABILITY STATEMENTThe Company’s going concern and viability statements aredetailed on pages 34 and 35 of the Strategic Report.www.easyJet.com 117GOVERNANCE DIRECTORS’ REPORTINDEPENDENT AUDITOR AND DISCLOSURE OFINFORMATION TO THE AUDITORThe Directors have taken all reasonable steps to ensure anyaudit-related information has been brought to the attention ofthe Group’s auditor. The Directors are not aware of any relevantinformation which has not been disclosed to the auditor.A resolution to reappoint PricewaterhouseCoopers LLP as auditorof the Group will be put to shareholders at the forthcoming AGM.POLITICAL DONATIONS AND EXPENDITUREeasyJet works constructively with all levels of government acrossits network, regardless of political affiliation. easyJet believes in therights of individuals to engage in the democratic process; howeverit is easyJet’s policy not to make political donations. There were nopolitical donations made or political expenditure incurred duringthe 2019 financial year.RELATIONSHIP AGREEMENT WITH CONTROLLINGSHAREHOLDERSAny person who exercises or controls on their own, or togetherwith any person with whom they are acting in concert, 30% ormore of the votes able to be cast on all or substantially all mattersat general meetings of a company are known as ‘controllingshareholders’. The Listing Rules require companies with controllingshareholders to enter into a written and legally binding agreementwhich is intended to ensure that the controlling shareholdercomplies with certain independence provisions. The agreementmust contain undertakings that:• transactions and arrangements with the controlling shareholder(and/or any of its associates) will be conducted at arm’s lengthand on normal commercial terms;• neither the controlling shareholder nor any of its associates willtake any action that would have the effect of preventing thelisted company from complying with its obligations under theListing Rules; and• neither the controlling shareholder nor any of its associates willpropose or procure the proposal of a shareholder resolutionwhich is intended or appears to be intended to circumventthe proper application of the Listing Rules.The Board confirms that, in accordance with the Listing Rules, on14 November 2014, the Company entered into such an agreementwith Sir Stelios Haji-Ioannou (easyJet’s founder) and easyGroupHoldings Limited, an entity in which Sir Stelios holds a beneficialinterest and which holds shares in the Company on behalf of SirStelios (the ‘Relationship Agreement’). Under the terms of theRelationship Agreement, Sir Stelios and easyGroup HoldingsLimited have agreed to procure the compliance of Polys and CleliaHaji-Ioannou with the independence obligations contained in theRelationship Agreement. Sir Stelios, easyGroup, Polys and CleliaHaji-Ioannou together comprise controlling shareholders of theCompany who have a combined total holding of approximately33% of the Company’s voting rights.The Board confirms that, since the entry into the RelationshipAgreement on 14 November 2014 until 18 November 2019, beingthe latest practicable date prior to the publication of this AnnualReport and Accounts:• the Company has complied with the independence provisionsincluded in the Relationship Agreement;• so far as the Company is aware, the independence provisionsincluded in the Relationship Agreement have been compliedwith by Sir Stelios, easyGroup, and Clelia and Polys Haji-Ioannouand their associates; and• so far as the Company is aware, the procurement obligationincluded in the Relationship Agreement has been complied withby Sir Stelios and easyGroup Holdings Limited.SIGNIFICANT AGREEMENTS – CHANGE OFCONTROLThe Company also licences the easyJet brand from easyGroupLimited. Further details are set out in note 28 to the financialstatements.The following significant agreements which were in force at 18November 2019 take effect, alter or terminate on a change ofcontrol of the Company.EMTN Programme and Eurobond issueOn 7 January 2016, the Group established a Euro Medium TermNote Programme (the ‘EMTN Programme’) which provides theGroup with a standardised documentation platform to allow forsenior unsecured debt issuance in the Eurobond markets. Themaximum potential issuance under the EMTN Programme is£3 billion. The EMTN Programme was subsequently updated on4 June 2019 with the issue of further Eurobonds.Under the EMTN Programme, the following notes (the ‘Notes’)have been issued by the Company:• February 2016: Eurobonds consisting of €500 millionguaranteed Notes paying 1.75% interest and maturing inFebruary 2023;• October 2016: Eurobonds consisting of €500 million guaranteedNotes paying 1.125% interest and maturing in October 2023; and• June 2019: Eurobonds consisting of €500 million guaranteedNotes paying 0.875% interest and maturing in June 2025.Pursuant to the final terms attaching to the Notes, the Companywill be required to make an offer to redeem or purchase its Notesat its principal amount plus interest up to the date of redemptionor repurchase if there is a change of control of the Companywhich results in a downgrade of the credit rating of the notes toa non-investment grade rating or withdrawal of the rating by bothMoody’s and Standard & Poor’s.Revolving credit facilityThe Group was party to a revolving credit facility (RCF) whichcontained change of control provisions. A new RCF was reviewedand approved by the Finance Committee in July 2018. The newRCF amounted to £250 million, supported equally by five banks,and was for a period of two years ending in July 2020. Followingthe issuance of Medium Term Notes, the RCF of £250 millionwas discontinued.DIRECTORS’ REPORT CONTINUED118 easyJet plc Annual Report and Accounts 2019DISCLOSURES REQUIRED UNDER LISTINGRULE 9.8.4The information to be included in the 2019 Annual Reportand Accounts under LR 9.8.4, where applicable, can belocated as set out below.Information PageAmount of interest capitalised and tax relief n/aPublication of unaudited financial information n/aDetails of long-term incentive schemes 96-115Waiver of emoluments by a director n/aWaiver of future emoluments by a director n/aNon pre-emptive issue for cash n/aNon pre-emptive issue for cash to majorunlisted subsidiary undertaking n/aParent participation in a placing by alisted subsidiary n/aContracts of significance 118Provision of services by controllingshareholder n/aShareholder waiver of dividends 117Shareholder waiver of future dividends 117Agreements with controlling shareholder 118Other information that is relevant to this report, and which isincorporated by reference, can be located as follows:Information PageMembership of Board during 2019financial year 68-71Directors’ service contracts 114Financial instruments and financial riskmanagement Note 27Carbon and greenhouse gas emissions 60-61Corporate governance report 66Future developments of the businessof the Group 16-25Employee equality, diversity and inclusion 57-59Employee engagement 56-57Other agreementsThe Company does not have other agreements with any Directoror employee that would provide compensation for loss of officeor employment resulting from a change of control on takeover,except that provisions of the Company’s share schemes and plansmay cause options and awards granted to employees under suchschemes and plans to vest on a takeover.The Annual Report and Accounts have been drawn up andpresented in accordance with UK company law and the liabilitiesof the Directors in connection with the report shall be subject tothe limitations and restrictions provided by such law.easyJet plc is incorporated as a public limited company and isregistered in England under number 3959649. easyJet plc’sregistered office is Hangar 89, London Luton Airport, Luton,Bedfordshire, LU2 9PF.The Strategic Report (comprising pages 2 to 65) and Directors’report (comprising pages 116 to 119) were approved by the Boardand signed on its behalf by the Company Secretary.By order of the BoardMaaike de BieCompany SecretaryLondon, 18 November 2019www.easyJet.com 119GOVERNANCE DIRECTORS’ REPORTThe Directors are responsible for preparing the Annual Report, theDirectors’ remuneration report and the accounts in accordancewith applicable law and regulations.Company law requires the Directors to prepare accounts for eachfinancial year. Under that law the Directors have prepared theGroup and Company accounts in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the EuropeanUnion (EU). Under company law the Directors must not approvethe accounts unless they are satisfied that they give a true andfair view of the state of affairs of the Group and the Company andof the profit or loss of the Group and the Company for that period.In preparing these accounts, the Directors are required to:• select suitable accounting policies and then apply themconsistently;• make judgements and accounting estimates that are reasonableand prudent;• state whether applicable IFRS as adopted by the EU have beenfollowed, subject to any material departures disclosed andexplained in the accounts; and• prepare the accounts on the going concern basis unless it isinappropriate to presume that the Company will continue inbusiness.The Directors are responsible for keeping adequate accountingrecords that are sufficient to show and explain the Group’s andthe Company’s transactions and disclose with reasonable accuracyat any time the financial position of the Group and the Company.This enables them to ensure that the accounts and the Directors’remuneration report comply with the Companies Act 2006 and,as regards the Group accounts, Article 4 of the IAS Regulation.They are also responsible for safeguarding the assets of the Groupand the Company and hence for taking reasonable steps for theprevention and detection of fraud and other irregularities.The Directors are responsible for the maintenance and integrity of,amongst other things, the financial and corporate governanceinformation provided on the easyJet website (corporate.easyjet.com).Legislation in the United Kingdom governing the preparation anddissemination of accounts may differ from legislation in otherjurisdictions.The Directors consider that the Annual Report and Accounts,taken as a whole, are fair, balanced and understandable andprovide the information necessary for shareholders to assess theGroup’s and the Company’s position and performance, businessmodel and strategy.Each of the Directors, whose names and functions are listed onpages 68 and 71, confirm that, to the best of their knowledge:• the Group and Company accounts, which have been preparedin accordance with IFRS as adopted by the EU, give a true andfair view of the assets, liabilities, financial position and profit ofthe Group and Company; and• the strategic report, included in the Annual Report, includes afair review of the development and performance of thebusiness and the position of the Group, together with adescription of the principal risks and uncertainties that it faces.In accordance with section 418 of the Companies Act 2006, eachDirector in office at the date the Directors’ report is approved,confirms that:• so far as the Director is aware, there is no relevant auditinformation of which the Company’s auditor is unaware; and• he/she has taken all the steps that he/she ought to have takenas a Director in order to make himself/herself aware of anyrelevant audit information and to establish that the Company’sauditor is aware of that information.The Annual Report on pages 1 to 120 was approved by the Boardof Directors and authorised for issue on 18 November 2019 andsigned on its behalf by:JOHAN LUNDGRENChief ExecutiveANDREW FINDLAYChief Financial OfficerDirectors’ responsibilitiesand statementsSTATEMENT OF DIRECTORS’ RESPONSIBILITIES120 easyJet plc Annual Report and Accounts 2019INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EASYJET PLCREPORT ON THE AUDIT OF THE FINANCIALSTATEMENTSOPINIONIn our opinion, easyJet plc’s Group financial statements andCompany financial statements (the “financial statements”):• give a true and fair view of the state of the Group’s and of theCompany’s affairs as at 30 September 2019 and of the Group’sprofit and the Group’s and the Company’s cash flows for theyear then ended;• have been properly prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) as adopted by theEuropean Union and, as regards the Company’s financialstatements, as applied in accordance with the provisions of theCompanies Act 2006; and• have been prepared in accordance with the requirements of theCompanies Act 2006 and, as regards the Group financialstatements, Article 4 of the IAS Regulation.We have audited the financial statements, included within theAnnual Report and Accounts (the “Annual Report”), whichcomprise: the Consolidated and Company statements of financialposition as at 30 September 2019; the Consolidated incomestatement and Consolidated statement of comprehensive income,the Consolidated and Company statements of changes in equity,and the Consolidated and Company statements of cash flows forthe year then ended; and the notes to the financial statements,which include a description of the significant accounting policies.Our opinion is consistent with our reporting to the Audit Committee.BASIS FOR OPINIONWe conducted our audit in accordance with International Standardson Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilitiesunder ISAs (UK) are further described in the Auditors’ responsibilitiesfor the audit of the financial statements section of our report. Webelieve that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.IndependenceWe remained independent of the Group in accordance withthe ethical requirements that are relevant to our audit of thefinancial statements in the UK, which includes the FRC’s EthicalStandard, as applicable to listed public interest entities, and wehave fulfilled our other ethical responsibilities in accordancewith these requirements.To the best of our knowledge and belief, we declare thatnon-audit services prohibited by the FRC’s Ethical Standard werenot provided to the Group or the Company.Other than those disclosed in the Corporate Governance reporton page 93, we have provided no non-audit services to the Groupor the Company in the period from 1 October 2018 to30 September 2019.MATERIALITY• Overall Group materiality: £21.5m based on 5% of profit before tax (2018: £28.8m based on 5% ofheadline profit before tax),• Overall Company materiality: £21.3m (2018: £26.2m), based on 1% of total assets.AUDIT SCOPE• We performed audit procedures over six reporting components in the Group, including all individuallysignificant components.• Separate audit procedures were carried out over the Company and in relation to consolidationadjustments.• This provided coverage of 100% external revenue and profit before tax.KEY AUDIT MATTERS• Aircraft maintenance provision (Group).• Fair value of derivative instruments (Group and Company).• EU 261 provision (Group).• Goodwill and landing rights impairment assessment (Group).• Accounting for the liabilities associated with the Swiss pension scheme (Group).• Accounting for the adoption of new accounting standards (IFRS 9, 15 and 16) (Group and Company).OverviewMaterialityAudit scopeArea offocusTHE SCOPE OF OUR AUDITAs part of designing our audit, we determined materiality andassessed the risks of material misstatement in the financialstatements.CAPABILITY OF THE AUDIT IN DETECTINGIRREGULARITIES, INCLUDING FRAUDBased on our understanding of the Group and industry, weidentified that the principal risks of non-compliance with laws andregulations related to easyJet’s Air Travel Organiser’s Licencebeing revoked, breaches of the current EU Emissions TradingSystem requirements or other environmental regulations, UK andoverseas tax legislation not being adhered to and non-compliancewith employment regulations in the UK and other jurisdictions inwhich the Group operates, and we considered the extent to whichnon-compliance might have a material effect on the financialstatements. We also considered those laws and regulations thathave a direct impact on the preparation of the financialstatements such as the Companies Act 2006 and the ListingRules. We evaluated management’s incentives and opportunitiesfor fraudulent manipulation of the financial statements (includingthe risk of override of controls), and determined that the principalrisks were related to posting inappropriate journal entries, either inthe underlying books and records or as part of the consolidationprocess, and management bias in accounting estimates. TheGroup engagement team shared this risk assessment with thecomponent auditor so that they could include appropriate auditprocedures in response to such risks in their work. Auditprocedures performed by the Group engagement team and/orcomponent auditors included:• Discussions with management, internal audit and the Group’slegal team, including consideration of known or suspectedinstances of non-compliance with laws and regulation and fraud;• Reading key correspondence from the FRC;• Challenging assumptions and judgements made bymanagement in it’s significant accounting estimates thatinvolved making assumptions and considering future eventsOUR AUDIT APPROACHwww.easyJet.com 121FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EASYJET PLC CONTINUEDthat are inherently uncertain. We focused on the valuation ofthe maintenance provision, impairment of goodwill and landingrights, the valuation of pension scheme liabilities and thevaluation of the EU 261 provisions (see related key audit mattersbelow);• Consideration of recent correspondence with the Group’s legaladvisors to ensure that it aligned with the conclusions drawn onobligations recognised in respect of uncertain legal matters;• Identifying and testing journal entries, in particular any journalentries posted with unusual account combinations and creditingthe income statement; and• Testing all material consolidation adjustments to ensure thesewere appropriate in nature and magnitude.There are inherent limitations in the audit procedures describedabove and the further removed non-compliance with laws andregulations is from the events and transactions reflected in thefinancial statements, the less likely we would become aware of it.Also, the risk of not detecting a material misstatement due tofraud is higher than the risk of not detecting one resulting fromerror, as fraud may involve deliberate concealment by, for example,forgery or intentional misrepresentations, or through collusion.KEY AUDIT MATTERSKey audit matters are those matters that, in the auditors’professional judgement, were of most significance in the audit ofthe financial statements of the current period and include themost significant assessed risks of material misstatement (whetheror not due to fraud) identified by the auditors, including thosewhich had the greatest effect on: the overall audit strategy; theallocation of resources in the audit; and directing the efforts of theengagement team. These matters, and any comments we makeon the results of our procedures thereon, were addressed in thecontext of our audit of the financial statements as a whole, and informing our opinion thereon, and we do not provide a separateopinion on these matters. This is not a complete list of all risksidentified by our audit.Key audit matter How our audit addressed the key audit matterAIRCRAFT MAINTENANCE PROVISION (GROUP)The Group operates aircraft which are owned or held underfinance or operating lease arrangements and incurs liabilities formaintenance costs in respect of aircraft leased under operatingleases during the term of the lease. These arise from legal andcontractual obligations relating to the condition of the aircraftwhen it is returned to the lessor. Maintenance provisions of £526million (2018: £392m) for aircraft maintenance costs in respect ofaircraft leased under operating leases were recorded in thefinancial statements at 30 September 2019. At each balancesheet date, the calculation of the maintenance provision includesa number of variable factors and assumptions including: likelyutilisation of the aircraft; the expected cost of the heavymaintenance check at the time it is expected to occur; thecondition of the aircraft; and the lifespan of life-limited parts. Wefocused on this area because of an inherent level of managementjudgement required in calculating the amount of provision neededas a result of the complex and subjective elements around thesevariable factors and assumptions.Refer to the Accounting policies, judgements and estimates note(note 1c.ii) and note 18, on page 156, for management’s disclosuresof the relevant judgements and estimates involved in assessing thisprovision valuation. Refer to Audit Committee report on page 89.We evaluated the maintenance provision model and testedthe calculations therein. This included assessing the processby which the variable factors within the provision areestimated, evaluating the reasonableness of the assumptions,testing the input data and re-performing calculations. Inparticular, we challenged the key assumptions using theGroup’s internal data, such as business plans and maintenancecontract terms and pricing. We also performed sensitivityanalysis around the key drivers of the model. We found nomaterial exceptions from these assessments andcomparisons.Having ascertained the magnitude of movements in those keyassumptions, that either individually or collectively would berequired for the provision to be misstated, we considered thelikelihood of such movements arising and any impact on theoverall level of aircraft maintenance provisions recorded in thefinancial statements. Our assessment as to likelihood andmagnitude did not identify any material exceptions.FAIR VALUE OF DERIVATIVE INSTRUMENTS (GROUP AND COMPANY)The Group and Company hold significant net funds, comprisingcash and money market deposits and borrowings through bankloans and lease obligations. Given the nature of the business, theGroup and Company also make use of derivative financialinstruments. Forward contracts are used to hedge transactioncurrency risk (comprising fuel, leasing and maintenance US dollarpayments), jet fuel price risk, and Euro and Swiss Franc revenuereceipts. At 30 September 2019, cash and money market depositsamounted to £1,580 million (2018: £1,384 million), borrowings were£1,324 million (2018: £977 million), derivative financial assetsamounted to £273 million (2018: £395 million) and derivativefinancial liabilities were £210 million (2018: £31 million). We focuson these balances because of their materiality to the financialposition of the Group and Company, the volume of transactionspassing through the respective accounts and the number ofcounterparties involved.Refer to the Accounting policies, judgements and estimates note(note 1c.ii) and note 24, on pages 163 – 166, for management’sdisclosures of the relevant judgements and estimates involved inassessing the valuation of derivatives instruments. Refer to AuditCommittee report on page 89.We evaluated and assessed the processes, procedures andcontrols in respect of treasury and other managementfunctions which directly impact the relevant account balancesand transactions.We tested management’s year end account reconciliationprocess. The results of this work allowed us to focus onsubstantiating the year end positions recorded in the financialstatements. We did not identify any material exceptions. Weindependently obtained third-party confirmations fromcounterparties of the year end positions. .We assessed the appropriateness of hedge accounting for thederivative financial instruments and tested, using independentdata feeds, the fair values being ascribed to those instrumentsat the year end. These procedures did not identify any materialexceptions. We also assessed the appropriateness of thedisclosures in the financial statements in respect of bothnon-derivative and derivative financial instruments. Based onour work, we considered the disclosures to be appropriate.122 easyJet plc Annual Report and Accounts 2019Key audit matter How our audit addressed the key audit matterEU 261 PROVISION (GROUP)The Group records a provision for EU 261 compensationpayable in respect of flight delays and cancellations. At 30September 2019 this provision was £30 million (2018: £39 million).We focused on this area because there is an inherent level ofcomplexity in management’s estimate of this provision owingto its uncertain nature.Refer to the Accounting policies, judgements and estimatesnote (note 1c.ii) and note 18, on page 156, for management’sdisclosures of the relevant judgements and estimates involved inassessing this provision valuation. Refer to Audit Committeereport on page 89.We have understood the processes, procedures and controlsin place in respect of the EU 261 provision balance andassessed key account reconciliation processes. We testedand challenged the reasonableness of the key assumptionsunderlying the EU 261 provisions which included:• passenger claim history;• levels of passenger claims;• flight disruptions;• levels of no-show passengers; and• time periods over which the assessment is made.We tested the input data of the EU 261 provisions,reperformed the underlying calculations and performedsensitivity analysis over the key drivers of the valuation of theprovision. We found no material exceptions from theseprocedures.Having ascertained the magnitude of movements in those keyassumptions, that either individually or collectively would berequired for the provision to be materially misstated, weconsidered the likelihood of such movements arising and anyimpact on the overall level of judgemental provisions recordedin the financial statements. Our assessment as to thelikelihood and magnitude did not identify any materialexceptions.GOODWILL AND LANDING RIGHTS IMPAIRMENT ASSESSMENT (GROUP)Goodwill arises from acquisitions in previous years and has anindefinite expected useful life. Landing rights (which are intangibleassets) are considered by management to have an indefiniteuseful life as they will remain available for use for the foreseeablefuture. Goodwill and landing rights are tested for impairment atleast annually at the cash-generating unit (“CGU”) level. The Grouphas one CGU, being its route network, to which all goodwill andlanding rights relate. At 30 September 2019, the aggregate valueof goodwill and landing rights amounted to £497 million (2018:£494 million). We focused on this assessment as the impairmenttest involves a number of subjective judgements and estimates bymanagement, many of which are forward-looking. Theseestimates include key assumptions surrounding the strategic fiveyear plan, fuel prices, exchange rates, long-term economic growthrates and discount rates.Refer to the Accounting policies, judgements and estimates note(note 1c.ii) and note 9, on pages 151 – 152, for management’sdisclosures of the relevant judgements and estimates involved inassessing goodwill and landing rights for impairment. Refer toAudit Committee report on page 89.We obtained management’s annual impairment assessmentand ensured the calculations were mathematically accurateand the methodology used was in line with the requirementsof IAS 36 ‘Impairment of Assets’. Where our interpretation ofIAS 36 differed from that of management, we have adjustedfor this in our independent analysis to reflect the impact ofany such differences on management’s base case model.We evaluated and challenged the future cash flow forecastsof the CGU, and the process by which they were drawn up,and tested the underlying value in use calculations. In doingthis, we compared the forecast to the latest Board-approvedplans, and compared prior year budget to actual data in orderto assess the quality of the forecasting process.We also challenged the key assumptions for fuel prices,exchange rates and long-term growth rates in the forecastsby comparing them to economic and industry forecasts and,for the discount rate, by assessing the cost of capital for theGroup and comparable organisations. We found no materialexceptions from our work.We performed our own independent sensitivity analysisaround the key assumptions by replacing key assumptionswith alternative scenarios to ascertain the extent of change inthose assumptions that either individually or collectively wouldbe required for the goodwill and landing rights to be impaired.We found no material exceptions from this analysis.www.easyJet.com 123FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EASYJET PLC CONTINUEDKey audit matter How our audit addressed the key audit matterACCOUNTING FOR THE LIABILITIES ASSOCIATED WITH THE SWISS PENSION SCHEME (GROUP)A pension liability of £47 million has been recognised on thebalance sheet as at 30 September 2019 due to the obligationswhich arise due to minimum required rates of return under Swisslaw. The comparative period has also been restated in order topresent the liability on consistent basis. An obligation of £29million is therefore now recognised as at 30 September 2018. As aresult of the quantum of this liability and the level of judgementinvolved in calculating the opening and closing liability, there is anincreased risk of material misstatement. Whilst managementutilises the service of third party actuarial advisors to determinethe key assumptions, there is a risk that the discount rate, rate ofinflation and mortality assumptions used in the calculation areinappropriate.Refer to the Accounting policies, judgements and estimates note(note 1c.ii) and note 19, on pages 156 -158, for management’sdisclosures of the relevant judgements and estimates involved inassessing the valuation of the pension obligation. Refer to AuditCommittee report on page 89.We obtained the IAS 19 actuarial valuations as at 30 September2019, 30 September 2018 and 1 October 2017 prepared bymanagement’s experts and agreed the projected unitmethodology used in all three valuations to be appropriate.In respect of each valuation we used our actuarial expertsfrom PwC Switzerland to assess the appropriateness of thesignificant assumptions used in determining the pensionliabilities including the discount rate, RPI and CPI inflationassumptions and mortality assumptions. Specifically, weensured these fell within an acceptable range on benchmarkingthese against our accepted actuarial assumptions and noted nooutliers. We also ensured that the valuation methodology usedat each relevant date was consistent.For each period impacted by the prior period adjustment, wehave tested the correction to retained earnings to ensure that ithas been calculated appropriately.We assessed the appropriateness and adequacy of thedisclosures in respect of the pension liability in note 19 of thefinancial statements and agree these to be satisfactory andaligned to the requirements of IAS 19.Based on the procedures we have performed we haveconcluded that the accounting for the Swiss pension schemeis appropriateACCOUNTING FOR THE ADOPTION OF NEW ACCOUNTING STANDARDS (IFRS 9, 15 AND 16)(GROUP AND COMPANY)easyJet has implemented IFRS 9 and 15 in accordance with therequired adoption date, and has chosen to early adopt IFRS 16. Theimpact on the financial statements of the adoption of all three newstandards is significant.Refer to the Accounting policies, judgements and estimates note(note 1b) for management’s disclosures of the relevant judgmentsand estimates involved in determining the impact of the adoptionof these three standards as well as for details of the relevantchanges to the accounting policies applied for the year ended 30September 2019 and going forward. This note can be found onpages 137 – 144. Refer to Audit Committee report on page 89.We obtained management’s narrative impact assessment inrespect of each new accounting standard and their proposedaccounting policies. We assessed the appropriateness ofthese initial assessments to ensure the proposed treatmentswere in line with the requirements of standards. This includeda consideration of any exemptions or practical expedients tobe exercised. Appropriate amendments to the methodologyand accounting policies to be applied were made bymanagement where required.Following the completion of the initial assessment weobtained management’s calculations for determining thequantum impact of the adoption of these standards. Wetested the mathematical accuracy of the schedules obtainedand tested the accuracy of a sample of the input data usedto ensure this was appropriate.We obtained the fair value assessment for equity investmentsto be recognised under IFRS 9 which were prepared bymanagement’s experts. We utilised our internal valuationsteam to assess the reasonableness of this valuation.We also tested the appropriateness of the significantassumptions used in determining the impact. For IFRS 15 thisincluded the assessment of what proportion of thecompensation costs incurred should be offset againstrevenue. For IFRS 16 these included the discount rates andassessment of lease extension options to be used incalculating the value of the lease liabilities.We assessed the appropriateness and adequacy of thedisclosures in respect of the adoption in note 1b of thefinancial statements and concluded that these were aligned tothe requirements of IFRS 9, 15 and 16 respectively.Based on the audit procedures performed we concluded thatthe impact of adoption of new accounting standards hasbeen appropriate and the relevant judgements and estimateshave been disclosed in the financial statements.124 easyJet plc Annual Report and Accounts 2019HOW WE TAILORED THE AUDIT SCOPEWe tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statementsas a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry inwhich they operate.The Group operates through the Company and its twelve subsidiary undertakings of which six were actively trading through the year.The remaining subsidiaries are either holding companies, dormant or have been newly established during the year and not yet started toactively trade. The accounting for these components is largely centralised in the UK.We determined the most effective approach to scoping was to perform full scope procedures over five components registered in the UKand Austria, together with performing procedures over all material financial statement line items for easyJet Switzerland SA. Under ourdirection and supervision some financial statement line items identified in our scope were audited by a component team from PwC Switzerland.We determined the appropriate level of our involvement in the underlying work to ensure we could conclude that sufficient appropriateaudit evidence had been obtained for the Group financial statements as a whole. We issued written instructions to the componentauditor and had regular communications with them throughout the audit cycle. Additional audit procedures were performed in relation toconsolidation adjustments. The testing approach ensured that appropriate audit evidence had been obtained over all financial statementline items in order to support our opinion on the Consolidated financial statements as a whole. Based on the detailed audit workperformed across the Group, we have gained coverage of 100% of both external consolidated revenue and profit before tax.MATERIALITYThe scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our auditprocedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individuallyand in aggregate on the financial statements as a whole.Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:Group Financial Statements Company Financial StatementsOverall materiality £21.5m (2018: £28.8m). £21.3m (2018: £26.2m).How we determined it 5% of profit before tax. 1% of total assets.Rationale for benchmark applied We have applied this benchmark, a generallyaccepted auditing practice, in the absence ofindicators that an alternative benchmark wouldbe appropriate given that profitability is theprimary measure used by the shareholders inassessing the underlying performance of theGroup. In the previous year a benchmark set at5% of headline profit before tax was used todetermine overall materiality. This was due tothe significance of the non-headline itemswhich arose during the previous financial year.We have applied this benchmark of totalassets, a generally accepted auditingpractice, in the absence of indicators thatan alternative benchmark would beappropriate given that the Company doesnot generate revenues of its own.For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The rangeof materiality allocated across components was between £1,650,000 and £21,330,000. Certain components were audited to a localstatutory audit materiality that was also less than our overall Group materiality.We agreed with the Audit Committee that we would report misstatements identified during our audit above £1,075,000 (Group audit)(2018: £1,400,000) and £1,065,000 (Company audit) (2018: £1,300,000) as well as misstatements below those amounts that, in ourview, warranted reporting for qualitative reasons.GOING CONCERNIn accordance with ISAs (UK) we report as follows:Reporting obligation OutcomeWe are required to report if we have anything material to add ordraw attention to in respect of the directors’ statement in thefinancial statements about whether the directors considered itappropriate to adopt the going concern basis of accounting inpreparing the financial statements and the directors’identification of any material uncertainties to the Group’s andthe Company’s ability to continue as a going concern over aperiod of at least twelve months from the date of approval ofthe financial statements.We have nothing material to add or to draw attention to.However, because not all future events or conditions can bepredicted, this statement is not a guarantee as to the Group’sand Company’s ability to continue as a going concern. Forexample, the terms on which the United Kingdom may withdrawfrom the European Union are not clear, and it is difficult toevaluate all of the potential implications on the Group’s trade,customers, suppliers and the wider economy.We are required to report if the directors’ statement relating togoing concern in accordance with Listing Rule 9.8.6R(3) ismaterially inconsistent with our knowledge obtained in the audit.We have nothing to report.www.easyJet.com 125FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORTINDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF EASYJET PLC CONTINUEDREPORTING ON OTHER INFORMATIONThe other information comprises all of the information in theAnnual Report other than the financial statements and ourauditors’ report thereon. The directors are responsible for theother information. Our opinion on the financial statements doesnot cover the other information and, accordingly, we do notexpress an audit opinion or, except to the extent otherwiseexplicitly stated in this report, any form of assurance thereon.In connection with our audit of the financial statements, ourresponsibility is to read the other information and, in doing so,consider whether the other information is materially inconsistentwith the financial statements or our knowledge obtained in theaudit, or otherwise appears to be materially misstated. If weidentify an apparent material inconsistency or materialmisstatement, we are required to perform procedures to concludewhether there is a material misstatement of the financialstatements or a material misstatement of the other information.If, based on the work we have performed, we conclude that thereis a material misstatement of this other information, we arerequired to report that fact. We have nothing to report based onthese responsibilities.With respect to the Strategic Report, Directors’ report andCorporate Governance Statement, we also considered whetherthe disclosures required by the UK Companies Act 2006 havebeen included.Based on the responsibilities described above and our workundertaken in the course of the audit, the Companies Act 2006(CA06), ISAs (UK) and the Listing Rules of the Financial ConductAuthority (FCA) require us also to report certain opinions andmatters as described below (required by ISAs (UK) unlessotherwise stated).Strategic Report and Directors’ reportIn our opinion, based on the work undertaken in the course of theaudit, the information given in the Strategic Report and Directors’report for the year ended 30 September 2019 is consistent withthe financial statements and has been prepared in accordancewith applicable legal requirements. (CA06)In light of the knowledge and understanding of the Group andCompany and their environment obtained in the course of theaudit, we did not identify any material misstatements in theStrategic Report and Directors’ report. (CA06)Corporate Governance StatementIn our opinion, based on the work undertaken in the course of theaudit, the information given in the Corporate GovernanceStatement (on page 37 – 47 and 66 – 120) about internal controlsand risk management systems in relation to financial reportingprocesses and about share capital structures in compliance withrules 7.2.5 and 7.2.6 of the Disclosure Guidance and TransparencyRules sourcebook of the FCA (“DTR”) is consistent with thefinancial statements and has been prepared in accordance withapplicable legal requirements. (CA06)In light of the knowledge and understanding of the Group andCompany and their environment obtained in the course of theaudit, we did not identify any material misstatements in thisinformation. (CA06)In our opinion, based on the work undertaken in the course ofthe audit, the information given in the Corporate GovernanceStatement (on page 37 – 47 and 66 – 120) with respect to theCompany’s Corporate Governance Code and practices and aboutits administrative, management and supervisory bodies and theircommittees complies with rules 7.2.2, 7.2.3 and 7.2.7 of theDTR (CA06)We have nothing to report arising from our responsibility to reportif a Corporate Governance Statement has not been prepared bythe Company. (CA06)The directors’ assessment of the prospects of the Group and ofthe principal risks that would threaten the solvency or liquidityof the GroupWe have nothing material to add or draw attention to regarding:• The directors’ confirmation on page 37 of the Annual Reportthat they have carried out a robust assessment of the principalrisks facing the Group, including those that would threaten itsbusiness model, future performance, solvency or liquidity.• The disclosures in the Annual Report that describe those risksand explain how they are being managed or mitigated.• The directors’ explanation on page 35 of the Annual Report asto how they have assessed the prospects of the Group, overwhat period they have done so and why they consider thatperiod to be appropriate, and their statement as to whetherthey have a reasonable expectation that the Group will be ableto continue in operation and meet its liabilities as they fall dueover the period of their assessment, including any relateddisclosures drawing attention to any necessary qualifications orassumptions.We have nothing to report having performed a review of thedirectors’ statement that they have carried out a robustassessment of the principal risks facing the Group and statementin relation to the longer-term viability of the Group. Our review wassubstantially less in scope than an audit and only consisted ofmaking inquiries and considering the directors’ process supportingtheir statements; checking that the statements are in alignmentwith the relevant provisions of the UK Corporate GovernanceCode (the “Code”); and considering whether the statements areconsistent with the knowledge and understanding of the Groupand Company and their environment obtained in the course ofthe audit. (Listing Rules)Other Code ProvisionsWe have nothing to report in respect of our responsibility toreport when:• The statement given by the directors, on page 120, thatthey consider the Annual Report taken as a whole to be fair,balanced and understandable, and provides the informationnecessary for the members to assess the Group’s andCompany’s position and performance, business model andstrategy is materially inconsistent with our knowledge ofthe Group and Company obtained in the course ofperforming our audit.• The section of the Annual Report on page 89 – 93 describingthe work of the Audit Committee does not appropriatelyaddress matters communicated by us to the Audit Committee.• The directors’ statement relating to the Company’s compliancewith the Code does not properly disclose a departure from arelevant provision of the Code specified, under the Listing Rules,for review by the auditors.Directors’ RemunerationIn our opinion, the part of the Directors’ Remuneration Report tobe audited has been properly prepared in accordance with theCompanies Act 2006. (CA06)126 easyJet plc Annual Report and Accounts 2019RESPONSIBILITIES FOR THE FINANCIALSTATEMENTS AND THE AUDITRESPONSIBILITIES OF THE DIRECTORS FOR THEFINANCIAL STATEMENTSAs explained more fully in the Statement of Directors’responsibilities set out on page 120, the directors are responsiblefor the preparation of the financial statements in accordance withthe applicable framework and for being satisfied that they give atrue and fair view. The directors are also responsible for suchinternal control as they determine is necessary to enable thepreparation of financial statements that are free from materialmisstatement, whether due to fraud or error.In preparing the financial statements, the directors areresponsible for assessing the Group’s and the Company’s abilityto continue as a going concern, disclosing, as applicable, mattersrelated to going concern and using the going concern basis ofaccounting unless the directors either intend to liquidate theGroup or the Company or to cease operations, or have norealistic alternative but to do so.AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OFTHE FINANCIAL STATEMENTSOur objectives are to obtain reasonable assurance about whetherthe financial statements as a whole are free from materialmisstatement, whether due to fraud or error, and to issue anauditors’ report that includes our opinion. Reasonable assurance isa high level of assurance, but is not a guarantee that an auditconducted in accordance with ISAs (UK) will always detect amaterial misstatement when it exists. Misstatements can arisefrom fraud or error and are considered material if, individually or inthe aggregate, they could reasonably be expected to influencethe economic decisions of users taken on the basis of thesefinancial statements.A further description of our responsibilities for the audit of thefinancial statements is located on the FRC’s website at:www.frc.org.uk/auditorsresponsibilities. This description formspart of our auditors’ report.USE OF THIS REPORTThis report, including the opinions, has been prepared for andonly for the Company’s members as a body in accordance withChapter 3 of Part 16 of the Companies Act 2006 and for no otherpurpose. We do not, in giving these opinions, accept or assumeresponsibility for any other purpose or to any other person towhom this report is shown or into whose hands it may comesave where expressly agreed by our prior consent in writing.OTHER REQUIRED REPORTINGCompanies Act 2006 exception reportingUnder the Companies Act 2006 we are required to report to youif, in our opinion:• we have not received all the information and explanationswe require for our audit; or• adequate accounting records have not been kept by theCompany, or returns adequate for our audit have not beenreceived from branches not visited by us; or• certain disclosures of directors’ remuneration specified by laware not made; or• the Company financial statements and the part of the Directors’Remuneration Report to be audited are not in agreement withthe accounting records and returns.We have no exceptions to report arising from this responsibility.AppointmentFollowing the recommendation of the Audit Committee, we wereappointed by the members on 22 February 2006 to audit thefinancial statements for the year ended 30 September 2006 andsubsequent financial periods. The period of total uninterruptedengagement is 14 years, covering the years ended 30 September2006 to 30 September 2019.Andrew Kemp(Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon18 November 2019www.easyJet.com 127FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORTCONSOLIDATED INCOME STATEMENT128 easyJet plc Annual Report and Accounts 201930 September 2019 30 September 2018NotesHeadline£ millionNon-headline£ millionTotal£ millionHeadline£ millionNon-headline£ millionTotal£ millionPassenger revenue 5,009 – 5,009 1,376 – 1,376 4,688 – 4,688Ancillary revenue 1,210 – 1,210 Total revenue 26FuelAirports and ground handlingCrewNavigationMaintenanceSelling and marketingOther costsOther income 6,385 – 6,385 5,898 – 5,898(409) – (409) (400) – (400)(302) – (302) (313) (22) (335)(157) – (157) (143) – (143)(456) – (456) (507) (93) (600)29 – 29 13 – 13 EBITDARAircraft dry leasingDepreciationAmortisation of intangible assets 970 – 970 961 (122) 839(5) – (5) (152) (10) (162)(484) – (484) (199) – (199)(15) – (15) (15) – (15) 109 Operating profit 466 – 466 595 (132) 463 (1,416) – (1,416) (1,184) – (1,184)(1,845) – (1,845) (1,649) – (1,649)(859) – (859) (754) (7) (761)Interest receivable and otherfinancing income 21 3 24 12 – 12 Interest payable and otherfinancing charges (60) – (60) (29) (1) (30) Net finance (charges)/income 2 (39) 3 (36) (17) (1) (18) Profit before taxTax (charge)/credit 36 427 3 430 578 (133) 445(78) (3) (81) (112) 25 (87) Profit for the year 349 – 349 466 (108) 358 Earnings per share, penceBasic 7 88.6 90.9Diluted 7 87.8 90.2128 easyJet plc Annual Report and Accounts 2019CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEwww.easyJet.com 129Year ended30 September2019£ millionYear ended30 September2018(restated)£ millionProfit for the year 349 358Other comprehensive income/(expense)Items that may be reclassified to the income statement:Cash flow hedgesFair value (losses)/gains in the year (214) 531Gains transferred to income statement (165) (191)Gains/(losses) transferred to property, plant and equipment 14 (19)Related tax credit/(charge) 69 (60)Cost of hedging 4 –Items that will not be reclassified to the income statement:Remeasurement of post-employment benefit obligations (17) (2)Related deferred tax credit 3 –Fair value movement on equity investment (6) –(312) 259Total comprehensive income for the year 37 617For capital expenditure cash flow hedges, the accumulated gains and losses recognised in other comprehensive income willbe transferred to the initial carrying amount of the asset acquired, within property, plant and equipment.Gains on cash flow hedges reclassified from other comprehensive income to the income statement lines are as follows:2019£ million2018£ millionRevenue (10) 32Fuel (150) (206)Maintenance (5) (2)Aircraft dry leasing – (3)Other costs – (12)(165) (191)www.easyJet.com 129FINANCIAL STATEMENTS CONSOLIDATED ACCOUNTSCONSOLIDATED STATEMENT OF FINANCIAL POSITION130 easyJet plc Annual Report and Accounts 2019Notes30 September2019£ million30 September2018(restated)£ millionNon-current assetsGoodwill 9 365 365Other intangible assets 9 196 181Property, plant and equipment 10 5,163 4,140Derivative financial instruments 24 126 175Equity investment 24 48 –Restricted cash 13 4 11Other non-current assets 11 142 122 6,044 4,994 Current assetsTrade and other receivables 12 372 406Derivative financial instruments 24 147 220Current tax assets 6 24 –Money market deposits 13 291 348 Cash and cash equivalents 13 1,285 1,025 2,119 1,999 Current liabilitiesTrade and other payables 14 (1,050) (1,023)Unearned revenue (1,069) (877)Borrowings 15 – (9)Lease liabilities 16 (219) –Derivative financial instruments 24 (138) (24)Current tax payable – (9)Provisions for liabilities and charges 18 (192) (118) (2,668) (2,060) Net current liabilities (549) (61)Non-current liabilitiesBorrowings 15 (1,324) (968)Lease liabilities 16 (359) –Derivative financial instruments 24 (72) (7)Non-current deferred income 17 (6) (18)Post-employment benefit obligation 19 (47) (29)Provisions for liabilities and charges 18 (397) (335)Deferred tax 6 (305) (343)(2,510) (1,700)Net assets 2,985 3,233Shareholders’ equityShare capital 20 108 108Share premium 659 659Hedging reserve (4) 299Cost of hedging reserve 8 –Translation reserve (1) 1Retained earnings 2,215 2,166 2,985 3,233 The accounts on pages 128 to 173 were approved by the Board of Directors and authorised for issue on 18 November 2019 and signed onbehalf of the Board.JOHAN LUNDGREN ANDREW FINDLAYDirector Director130 easyJet plc Annual Report and Accounts 2019CONSOLIDATED STATEMENT OF CHANGES IN EQUITYwww.easyJet.com 131Sharecapital£ millionSharepremium£ millionHedgingreserve£ millionCost ofhedgingreserve£ millionTranslationreserve£ millionRetainedearnings(restated)£ millionTotal(restated)£ million At 30 September 2018Recognition on adoption of IFRS 9Recognition on adoption of IFRS 15Recognition on adoption of IFRS 16At 1 October 2018Profit for the periodOther comprehensive incomeTotal comprehensive incomeDividends paid (note 8)Share incentive schemesValue of employee servicesPurchase of own sharesCurrency translation differences 108–––108–––– 659–––659–––– 299(5)–(2)292–(296)(296)– –4––4–44– 1–––1–––– 2,16655(70)(34)2,117349(20)329(233) 3,23354(70)(36)3,181349(312)37(233) ––– ––– ––– ––– ––(2) 18(16)– 18(16)(2) At 30 September 2019 108 659 (4) 8 (1) 2,215 2,985Sharecapital£ millionSharepremium£ millionHedgingreserve£ millionCost ofhedgingreserve£ millionTranslationreserve£ millionRetainedearnings(restated)£ millionTotal(restated)£ millionAt 30 September 2017 108 659 38 – 1 1,996 2,802Swiss pension scheme recognition – – – – – (24) (24)At 1 October 2017 108 659 38 – – 1,972 2,778Total comprehensive income – – 261 – – 356 617Dividends paid (note 8) – – – – – (162) (162)Share incentive schemesValue of employee services – – – – – 17 17Purchase of own shares – – – – – (17) (17)At 30 September 2018 108 659 299 – 1 2,166 3,233The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relatingto highly probable transactions that are forecast to occur after the year end. Within the hedging reserve, £1 million relates to a deferredtax liability and £39 million gain to trades where hedge accounting has been discontinued. As the hedged item is still expectedto occur this amount has been deferred until the underlying cash flow impacts the income statement.Further details of the adjustment made to the opening retained earnings as at 1 October 2018 due to the adjustment arising on theadoption of IFRS 9, 15 and 16 can be found in note 1. Details of the prior period restatement in relation to defined benefit pensionscan also be found in note 1.www.easyJet.com 131FINANCIAL STATEMENTS CONSOLIDATED ACCOUNTSCONSOLIDATED STATEMENT OF CASHFLOWS132 easyJet plc Annual Report and Accounts 2019NotesYear ended30 September2019£ millionYear ended30 September2018£ millionCash flows from operating activitiesCash generated from operations 22 1,098 1,215Ordinary dividends paid 8 (233) (162)Interest and other financing charges paid (58) (29)Interest and other financing income received 12 11Tax paid (58) (74)Net cash generated from operating activities 761 961Cash flows from investing activitiesPurchase of property, plant and equipment 10 (954) (931)Purchase of intangible assets 9 (30) (81)Net decrease in money market deposits 23 52 269Net proceeds from sale and leaseback of aircraft 121 106Net cash used by investing activities (811) (637)Cash flows from financing activitiesPurchase of own shares for employee share schemes (16) (17)Proceeds from Eurobond issue 23 443 –Repayment of capital element of finance leases arising under IAS 17 – (6)Repayment of capital element of leases arising under IFRS 16 23 (174) –Net decrease/(increase) in restricted cash 7 (4)Net cash generated from financing activities 260 (27)Effect of exchange rate changes 50 17Net increase in cash and cash equivalents 260 314Cash and cash equivalents at beginning of year 1,025 711Cash and cash equivalents at end of year 13 1,285 1,025132 easyJet plc Annual Report and Accounts 2019notes to the accountswww.easyJet.com 1331. ACCOUNTING POLICIES, JUDGEMENTS AND ESTIMATESSTATEMENT OF COMPLIANCEeasyJet plc (the ‘Company’) and its subsidiaries (‘easyJet’ or the ‘Group’ as applicable) is a low-cost airline carrier operating principallyin Europe. The Company is a public limited company whose shares are listed on the London Stock Exchange under the ticker symbolEZJ and is incorporated and domiciled in the United Kingdom. The address of its registered office is Hangar 89, London Luton Airport,Luton, Bedfordshire, LU2 9PF.The accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union,taking into account IFRS Interpretations Committee interpretations and those parts of the Companies Act 2006 applicable to companiesreporting under IFRS.BASIS OF PREPARATIONThe accounts are prepared based on the historical cost convention except for certain financial assets and liabilities including derivativefinancial instruments that are measured at fair value.This is the first set of the Group’s financial statements where IFRS 9 ‘Financial instruments’, IFRS 15 ‘Revenue from contractswith customers’ and IFRS 16 ‘Leases’ have been applied. Changes to significant accounting policies are described in note 1b.easyJet’s business activities, together with factors likely to affect its future development and performance, are described in thestrategic report on pages 2 to 65. Principal risks and uncertainties are described on pages 37 to 47. Note 27 to the accounts sets outthe Group’s objectives, policies and procedures for managing its capital and gives details of the risks related to financial instrumentsheld by the Group.The accounts have been prepared on a going concern basis. Details on going concern are provided on page 34.The use of critical accounting estimates and management judgement is required in applying the accounting policies. Areas involvinga higher degree of judgement or complexity, or where assumptions and estimates are significant to the financial statements, arehighlighted on pages 145 to 146.Income statement presentationFrom 1 October 2018, easyJet has presented other income as a separate line on the face of the consolidated income statement. Otherincome includes items such as insurance receipts, compensation and dividends received. It is believed this presentation enhances thedisclosure and understanding of these balances, which have increased in magnitude from previous years. The prior year comparativeshave been reclassified from other costs and other financing income lines to be consistent with the change in presentation but have notbeen restated.Prior period adjustmentThe Swiss retirement benefit scheme operates as a defined contribution scheme under Swiss law. In the current year, easyJet hasassessed options to extend the pension scheme insurance it holds. It has been identified as part of this work that, despite the schemebeing fully insured, it meets requirements to be accounted for as a defined benefit plan under IAS 19 ‘Employee benefits’, primarily dueto the legal obligation to accrue interest on the pension accounts and the payment of lifetime pension benefits. An actuarial valuationhas been performed to calculate the valuation of the scheme assets and liabilities under IAS 19. Plan assets are measured at fair valueand plan liabilities reflect the future benefits of past and current service, discounted to present values. The service cost and interest onthe net defined benefit liability are recognised in the income statement and actuarial movements are recognised in other comprehensiveincome. The impact on the 30 September 2018 statement of financial position was recognition of a net defined benefit obligation of£31 million, and a £5 million deferred tax asset. Retained earnings have reduced by £26 million accordingly. There was also a £2 millionreclassification of a pension prepayment from Trade and other receivables into the net defined benefit obligation. There was no materialimpact on the income statement, other comprehensive income or EPS for the year ended 30 September 2018.The scheme was recognised with effect from 1 October 2017. The impact on the 1 October 2017 balance sheet is as follows:As reported Adjustment RestatedNon current assets 4,237 – 4,237Trade and other receivables 275 (2) 273Current assets 1,734 (2) 1,732Current liabilities (1,670) – (1,670)Deferred tax liability (249) 5 (244)Post-employment benefit obligation – (27) (27)Non-current liabilities (1,499) (22) (1,521)Net assets 2,802 (24) 2,778Retained earnings 1,996 (24) 1,972Equity 2,802 (24) 2,778www.easyJet.com 133FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED134 easyJet plc Annual Report and Accounts 20191A. SIGNIFICANT ACCOUNTING POLICIESThe significant accounting policies applied are summarised below. Unless otherwise stated they have been applied consistently toboth years presented. The explanations of these policies focus on areas where judgement is applied or which are particularly significantin the financial statements.BASIS OF CONSOLIDATIONThe consolidated accounts incorporate the accounts of easyJet plc and its subsidiaries for the years ended 30 September 2018 and2019. A full list of subsidiaries can be found in the Notes to the Company accounts on page 176.A subsidiary is an entity controlled by easyJet plc. Control is achieved when easyJet is exposed, or has rights, to variable returns fromits involvement with the investee and has the ability to affect those returns through its power, directly or indirectly, over the investee.Intragroup balances, transactions and any unrealised gains and losses arising from intragroup transactions are eliminated in preparingthe consolidated accounts.FOREIGN CURRENCIESThe primary economic environment in which a subsidiary operates determines its functional currency. The consolidated accountsof easyJet are presented in Sterling, rounded to the nearest £million, which is the Company’s functional currency and the Group’spresentation currency. Certain subsidiaries have operations that are primarily influenced by a currency other than Sterling. Exchangedifferences arising on the translation of these foreign operations are taken to shareholders’ equity until all or part of the interest is sold,when the relevant portion of the accumulated exchange gains or losses is recognised in the income statement. Profits and losses offoreign operations are translated into Sterling at average rates of exchange during the year, since this approximates the rates on thedates of the transactions.Transactions arising in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assetsand liabilities denominated in foreign currencies are translated into Sterling using the rate of exchange ruling at the end of a reportingperiod and (except where the asset or liability is designated as a cash flow hedge) the gains or losses on translation are included in theincome statement. Non-monetary assets and liabilities denominated in foreign currencies are translated into Sterling at foreign exchangerates ruling at the dates the transactions were effected.BUSINESS COMBINATIONSBusiness combinations in prior years were accounted for by applying the purchase method. The cost of the acquisition was measuredat the aggregate of the fair values, at the date of exchange, of assets given and liabilities incurred or assumed plus any costs directlyattributable to the business combination. The acquiree’s identifiable assets and liabilities were recognised at their fair values at theacquisition date.Goodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the businesscombination over easyJet’s interest in the net fair value of the identifiable assets acquired and the liabilities assumed.GOODWILL AND OTHER INTANGIBLE ASSETSGoodwill arising on acquisition was recognised as an asset and initially measured at cost, being the excess of the cost of the businesscombination over easyJet’s interest in the net fair value of the identifiable assets acquired and the liabilities assumed. Goodwill is nowstated at cost less any accumulated impairment losses. It has an indefinite expected useful life and is tested for impairment at leastannually or where there is any indication of impairment.Landing rights are stated at cost less any accumulated impairment losses. They are considered to have an indefinite useful life as theywill remain available for use for the foreseeable future provided minimum utilisation requirements are observed, and are tested forimpairment at least annually or where there is any indication of impairment.Other intangible assets are stated at cost less accumulated amortisation, which is calculated to write off their cost, less estimatedresidual value, on a straight-line basis over their expected useful lives. Expected useful lives and residual values are reviewed annually.Expected useful lifeComputer software 3–7 yearsPROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated to write off the cost, lessestimated residual value, of assets, on a straight line basis over their expected useful lives. Expected useful lives and residual valuesare reviewed annually.Expected useful life Aircraft1Aircraft sparesAircraft – prepaid maintenanceLeasehold improvementsFreehold LandFixtures, fittings and equipmentComputer hardware 23 years14 years7-10 years5-10 years or the length of lease if shorterNot depreciated3 years or length of lease of property where equipment is used if shorter3-5 years 1. Aircraft held as right of use assets are depreciated over the lease term, see leases sectionResidual values, where applicable, are reviewed annually against prevailing market rates at the end of the reporting period for equivalentlyaged assets and depreciation rates are adjusted accordingly on a prospective basis. The carrying value is reviewed for impairment ifevents or changes in circumstances indicate that the carrying value may not be recoverable. For aircraft, easyJet is dependent on Airbusas its sole supplier. This gives rise to a valuation risk which crystallises when aircraft exit the fleet, where easyJet is reliant on the futuredemand for second-hand aircraft.NOTES TO THE ACCOUNTS CONTINUED134 easyJet plc Annual Report and Accounts 2019www.easyJet.com 135An element of the cost of a new aircraft is attributed on acquisition to prepaid maintenance and is depreciated over a period rangingfrom seven to ten years from the date of manufacture. Subsequent costs incurred which lend enhancement to future periods, suchas long-term scheduled maintenance and major overhaul of aircraft and engines, are capitalised and depreciated over the length ofthe period benefiting from these enhancements. All other maintenance costs for owned aircraft are charged to the income statementas incurred.Pre-delivery and option payments made in respect of aircraft are recorded in property, plant and equipment at cost. These amountsare not depreciated. Interest attributed to pre-delivery and option payments made in respect of aircraft and other qualifying assetsunder construction are capitalised and added to the cost of the asset concerned.Gains and losses on disposals (other than aircraft sale and leaseback transactions) are determined by comparing the net proceedswith the carrying amount and are recognised in the income statement.Freehold land is recorded at cost and not depreciated as it is considered to have an indefinite useful life. It is tested for impairmentat least annually or where there is any indication of impairment.OTHER NON-CURRENT ASSETSPayments for aircraft and engine maintenance, as stipulated in the respective lease agreements, have historically been made to somelessors as security for the performance of future heavy maintenance works. The payments are recorded within current and non-currentassets (as applicable) as receivables from the lessors until the respective maintenance event occurs and the reimbursement with thelessor is finalised. Any payment that is not expected to be reimbursed by the lessor is recognised immediately within operating expensesin the statement of comprehensive income.IMPAIRMENT OF NON-CURRENT ASSETSAn impairment loss is recognised to the extent that the carrying value exceeds the higher of the asset’s or cash generating unit’s fairvalue less cost to sell and its value in use. Impairment losses recognised on goodwill are not reversed. Impairment losses recognisedon assets other than goodwill are only reversed where changes in the estimates used result in an increase in recoverable amount.FINANCIAL GUARANTEESIf a claim on a financial guarantee given to a third party becomes probable, the obligation is recognised at fair value. For subsequentmeasurement, the carrying amount is the higher of initial measurement and best estimate of the expenditure required to settle theobligation at the reporting date.TAXTax expense in the income statement consists of current and deferred tax. Tax is recognised in the income statement except whenit relates to items credited or charged directly to other comprehensive income or shareholders’ equity, in which case it is recognisedin other comprehensive income or shareholders’ equity. The charge for current tax is based on the results for the year as adjustedfor income that is exempt and expenses that are not deductible using tax rates that are applicable to the taxable income.Deferred tax is provided in full on temporary differences relating to the carrying amount of assets and liabilities, where it is probable thatthe recovery or settlement will result in an obligation to pay more, or a right to pay less, tax in the future, with the following exceptions:• where the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of otherassets and liabilities in a transaction that affects neither taxable income nor accounting profit; and• deferred tax arising on investments in subsidiaries is not recognised where easyJet is able to control the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future.Deferred tax is calculated at the tax rates that are expected to apply in the periods in which recovery of assets and settlement ofliabilities are expected to take place, based on tax rates or laws enacted or substantively enacted at the date of the statement offinancial position.Deferred tax assets represent amounts recoverable in future periods in respect of deductible temporary differences, losses and taxcredits carried forwards. Deferred tax assets are recognised to the extent that it is probable that there will be suitable taxable profitsfrom which they can be deducted.Deferred tax liabilities represent the amount of income taxes payable in future periods in respect of taxable temporary differences.Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current taxliabilities and it is the intention to settle these on a net basis.PROVISIONS FOR CUSTOMER CLAIMSProvisions are recognised when a present legal or constructive obligation arises as a result of a past event, it is probable that the Groupwill be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Amounts provided forrepresent the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking intoaccount all related risks and uncertainties.Provision is made for passenger compensation claims when the Group has an obligation to recompense customers under FlightCompensation Regulation 261/2004. Provisions are measured based on known eligible events, passengers impacted and historicalclaim rates.www.easyJet.com 135FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED136 easyJet plc Annual Report and Accounts 20191A. SIGNIFICANT ACCOUNTING POLICIES CONTINUEDEMPLOYEE BENEFITSeasyJet contributes to defined contribution pension schemes for the benefit of employees (see below for the Swiss scheme treatment).The assets of the schemes are held separately from those of easyJet in independently administered funds. easyJet’s contributions arecharged to the income statement in the year in which they are incurred. easyJet has no further payment obligations once thecontributions have been paid for defined contribution schemes.The expected cost of compensated annual leave and other employee benefits is recognised at the time that the related employees’services are provided.Switzerland pension schemeeasyJet contributes to an independently administered post-employment fund for employees in Switzerland. The final benefit iscontribution-based with certain minimum guarantees required by Swiss law. Due to these minimum guarantees, the Swiss pensionplan meets IAS 19 Employee Benefits’ requirements to be treated as a defined benefit plan for the purposes of these consolidatedfinancial statements.The easyJet portion of the current service costs and the net interest cost are charged to the consolidated income statement in theyear in which they relate. Actuarial gains and losses are recognised in the consolidated statement of comprehensive income and theconsolidated statement of financial position reflects the net surplus or deficit at the balance sheet date.The actuarial assumptions used to calculate the defined benefit obligation are based on the requirements set out in IAS 19. They are setby management, based on advice from independent actuaries. The defined benefit obligation is calculated using the projected unit creditmethod. Cost of managing the plan assets are deducted as incurred in determining the return on plan assets and the present value ofprojected future general administration expenses that are a direct consequence of past service are included as part of the retirementbenefit obligation.SHARE CAPITAL AND DIVIDEND DISTRIBUTIONOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shownin equity as a deduction, net of tax, from the proceeds.Where any Group company or employee benefit trust purchases the Company’s equity shares, the consideration paid and any directlyattributable incremental costs are deducted from retained earnings until the shares are cancelled or re-issued. Proceeds from re-issueare shown as a credit to retained earnings.easyJet settles share awards under the Long Term Incentive Plan, the Save As You Earn scheme, Restricted Share Plan and ShareIncentive Plans by purchasing its own shares on the market through employee benefit trusts. The cost of such purchases is deductedfrom retained earnings in the period that the transaction occurs.Dividend distributions to the Company’s shareholders are recognised as a liability in the period in which the dividends are approvedby the Company’s shareholders.SHARE-BASED PAYMENTSeasyJet has a number of equity-settled share incentive schemes. The fair value of share options granted under the Save As You Earnscheme is measured at the date of grant using the Binomial Lattice option pricing model. The fair value of grants under the Long TermIncentive Plan is measured at the date of grant using the Black-Scholes model for awards based on ROCE performance targets, andthe Stochastic model (also known as the Monte Carlo model) for awards based on TSR performance targets. The fair value of all otherawards is the share price at the date of grant.The fair value of the estimated number of options and awards that are expected to vest is expensed to the income statement on astraight-line basis over the period that employees’ services are rendered, with a corresponding increase in shareholders’ equity. Wherenon-market performance criteria (such as ROCE) attached to the share options and awards are not met, any cumulative expensepreviously recognised is reversed. For awards with market-related performance criteria (such as TSR), an expense is recognisedirrespective of whether the market condition is satisfied.The social security obligations payable in connection with grant of the share options are an integral part of the grant itself and thecharge is treated as a cash-settled transaction.SEGMENTAL DISCLOSURESeasyJet has one operating segment, being its route network, based on management information provided to the Airline ManagementBoard, which is easyJet’s chief operating decision maker. Resource allocation decisions are made for the benefit of the route networkas a whole, rather than for individual routes within the network. Performance of the network is assessed based on the consolidatedincome statement before tax for the year.Revenue is allocated to geographic segments on the following bases:• revenue earned from passengers is allocated according to the location of the first departure airport on each booking; and• commission revenue earned from partners is allocated according to the domicile of each partner.NOTES TO THE ACCOUNTS CONTINUED136 easyJet plc Annual Report and Accounts 2019www.easyJet.com 1371B. CHANGES IN SIGNIFICANT ACCOUNTING POLICIESThe Group has initially adopted IFRS 15 ‘Revenue from Contracts with Customers’, IFRS 16 ‘Leases’ and IFRS 9 ‘Financial Instruments’from 1 October 2018.IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERSeasyJet has adopted IFRS 15 on 1 October 2018 applying the cumulative catch-up (‘modified’) transition method. The comparativeinformation has not been restated, and the retrospective cumulative impact of IFRS 15 has been recognised within the opening balanceof retained earnings as at 1 October 2018.The standard provides a single model for measuring and recognising revenue arising from contracts with customers. It supersedes allexisting revenue requirements in IFRS. Under IFRS 15, revenue is recognised when customers obtain control of goods or services andso are able to direct the use, and obtain the benefits, of those goods or services.easyJet identified two principal areas which were impacted on adoption of IFRS 15:• Revenue recognition from certain revenue streams, principally administration and change fees, will be recognised on the date of flightrather than the date of booking. This change results in a higher proportion of annual revenues being recognised in the second halfof the financial year.• Some of the compensation payments made to customers (in respect of flight delays), previously recorded wholly within expenses, arenow offset against revenues recognised, with the excess compensation continuing to be recorded within expenses. This presentationalchange will have no impact on the overall profit for the year.easyJet continues to report one operating segment, being its route network. The IFRS 15 criteria for revenue disaggregation hasbeen reviewed and it has been determined that no additional disaggregation is appropriate.Unearned revenue is a contract liability as defined by IFRS 15. In the current year £87 million has been recognised in revenue whichwas recorded in unearned revenue at the beginning of the year.ACCOUNTING POLICY FOR REVENUEeasyJet categorises total revenue earned on the face of the income statement between passenger and ancillary revenue. Passengerrevenue arises from the sale of flight seats and administration fees and is measured as the price paid by the customer. Passengerrevenue is recognised when the performance obligation has been completed. This is when the flight takes place. Amounts paid by‘no-show’ customers are recognised as passenger revenue when the booked service is provided, as such customers are not generallyentitled to change flights or seek refunds once a flight has departed.Ancillary revenue includes revenue from the provision of checked baggage, allocated seating and change fees, as well as revenue arisingfrom commissions earned from services sold on behalf of partners and inflight sales. It is measured as the price paid by the customerfor the service booked. Ancillary revenue is recognised when the performance obligation is complete, which is generally when the relatedflight takes place, with the following exceptions:• cancellation fees which are recognised when the cancellation is processed; and• in the case of commission earned from travel insurance, revenue is recognised at the time of booking as easyJet acts solelyas appointed representative of the insurance company.Unearned revenue from flights not yet flown is held in the statement of financial position until it is realised in the income statementwhen the performance obligation is complete.Some of the compensation payments made to customers (in respect of flight delays) are offset against revenues recognised upto the amount of the flight, with the excess compensation being recorded within expenses.IFRS 16 LEASESIFRS 16 has been early adopted, bringing the timing of adoption in line with IFRS 9 and 15. The standard provides a single lesseeaccounting model, specifying how leases are recognised, measured, presented and disclosed.easyJet has applied the cumulative catch-up (‘modified’) transition method. The comparative information has not been restated,and the retrospective cumulative impact of IFRS 16 has been recognised within the opening balance of retained earnings as at1 October 2018. The financial statement impact of IFRS 16 is shown within this note. Refer also to note 10 property plant andequipment and note 16 leases.On initial adoption, easyJet has elected to use the following practical expedients proposed by the standard:• the application of a single discount rate to a portfolio of leases with reasonably similar characteristics, for example aircraft withsimilar lease term;• the use of hindsight when determining the lease term if the contract contains options to extend or terminate the lease;• the exclusion of initial direct costs from the measurement of the right of use asset; and• lease payments for contracts with a duration of 12 months or less and contracts for which the underlying asset is of a lowvalue continue to be expensed to the income statement on a straight-line basis over the lease term.Judgements made in applying IFRS 16 include assessing the lease term, identifying the discount rate to be used and assessingmaintenance obligations. Further details are given below.www.easyJet.com 137FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED138 easyJet plc Annual Report and Accounts 20191B. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUEDCAPITALISATION OF LEASE CONTRACTSUnder IFRS 16, easyJet has capitalised the right of use of all aircraft and properties previously held under operating leases. At the dateof adoption 84 aircraft and six properties were capitalised. The lease term corresponds to the duration of the contracts signed exceptin cases where the Group is reasonably certain that it will exercise contractual extension or termination options.easyJet has recognised a right of use asset representing its right to use the underlying asset and a corresponding lease liabilityrepresenting its obligation to make lease payments. Operating lease expenses have been replaced by a depreciation expense on rightof use assets recognised and an interest expense as the interest rate implicit in easyJet’s lease liabilities unwinds. When the interestrate implicit in the lease is not readily determined, easyJet’s incremental borrowing rate has been used.Finance leases previously capitalised under IAS 17 ‘Leases’ have been reclassified to the right of use asset category under IFRS 16.ACCOUNTING FOR THE MAINTENANCE OF LEASED AIRCRAFTeasyJet has contractual obligations to maintain aircraft held under leases. Previously, provisions were created over the term of the leasebased on the estimated future costs of major airframe checks, engine shop visits and end of lease liabilities. These costs were discountedto present value with the corresponding income statement charge recognised within maintenance costs and the unwinding of thediscount recognised within interest costs.As at 1 October 2018 and going forward under IFRS 16, contractual maintenance obligations which are not dependent on the use ofthe aircraft are recognised in full on commencement of the lease. They have been capitalised as part of the right of use asset at theinception of the lease and will be depreciated over the lease term. Contractual maintenance obligations which are dependent on theuse of the aircraft will continue to be provided for over the term of the lease based on the estimated future costs, discounted topresent value. However they will be capitalised to the right of use asset rather than recognised within maintenance costs in the incomestatement. This asset will be depreciated immediately as the obligation has arisen as a result of flying hours/cycles already undertaken.Where an aircraft is sold and leased back, other than when first delivered to easyJet, a maintenance catch-up liability resulting frompast flying activity arises at the point the lease agreement is signed and a corresponding maintenance provision catch-up charge waspreviously recognised immediately in the income statement. Under IFRS 16 this maintenance provision catch-up has been capitalisedas part of the right of use asset at the inception of the lease and depreciated over the lease term.These changes will result in a decrease in maintenance costs and an increase in depreciation expense.ACCOUNTING POLICY FOR LEASESFinance leases and operating leases for the comparative period ended 30 September 2018, were recognised and measured inaccordance with IAS 17 Leases. The accounting policies set out below are those applied to the current period, in accordance with IFRS 16.When a contractual arrangement contains a lease easyJet recognises a lease liability and a corresponding right of use asset at thecommencement of the lease.At the commencement date the lease liability is measured at the present value of the future lease payments, discounted using theGroup’s incremental borrowing rate where the interest rate in the lease is not readily determined. Subsequently, the lease liability isadjusted by increasing the carrying amount to reflect interest on the lease liability, reducing the carrying amount to reflect the leasepayments made and remeasuring the carrying amount to reflect any reassessment or lease modifications.The lease term is determined from the commencement date of the lease and covers the non-cancellable term. If easyJet has anextension option, which it considers it reasonably certain to exercise, then the lease term will be considered to extend beyond thatnon-cancellable period. If easyJet has a termination option, which it considers it reasonably certain to exercise, then the lease termwill be considered to be until the date of the termination option.At the commencement date the right of use asset is measured at an amount equal to the lease liability plus any lease payments madebefore the commencement date and any initial direct costs, less any lease incentive payments. An estimate of costs to be incurred inrestoring an asset, in accordance with the terms of the lease, is also included in the right of use asset at initial recognition. Subsequently,the right of use asset is measured in accordance with the accounting policy for property, plant and equipment. Adjustment is also madeto the right of use to reflect any remeasurement of the corresponding lease liability.Short-term leases and low value leases are not recognised as lease liabilities and right of use assets, but are recognised as an expensestraight line over the lease term.easyJet enters into sale and leaseback transactions whereby it sells either new or mid-life aircraft to a third-party and immediately leasesthem back. Where sale proceeds received are judged to reflect the aircraft’s fair value, any gain or loss arising on disposal is recognised inthe income statement, to the extent that it relates to the rights that have been transferred. Gains and losses that relate to the rights thathave been retained are included in the carrying amount of the right of use asset recognised at commencement of the lease. Where saleproceeds received are not at the aircraft’s fair value, any below market terms are recognised as a prepayment of lease payments, andabove market terms are recognised as additional financing provided by the lessor.NOTES TO THE ACCOUNTS CONTINUED138 easyJet plc Annual Report and Accounts 2019www.easyJet.com 139IFRS 9 FINANCIAL INSTRUMENTSeasyJet has adopted IFRS 9 on 1 October 2018 applying the standard prospectively. The standard removes the multiple classificationand measurement models for financial assets required by IAS 39 ‘Financial Instruments: Recognition and Measurement’ and insteadintroduces a model that has three classification categories: amortised cost; fair value through profit or loss and fair value through othercomprehensive income. Classification of a debt asset instrument is driven by its cash flow characteristics and thebusiness model in which the asset is held. Equity investments can now be measured at fair value through either the income statementor through other comprehensive income.Accounting for financial liabilities and for derecognising financial instruments under IFRS 9 is materially consistent with that requiredby IAS 39. IFRS 9 adds new requirements to address the impairment of financial assets and hedge accounting, which have had animmaterial impact. Existing hedging activities have not materially changed on adoption of the standard. Some changes have beenrecognised in the classification and measurement of financial instruments, though these changes do not materially impact the financialstatements due to the stable nature of the Group’s investments. Similarly, easyJet does not have a material impact from the changesto hedge accounting or impairment due to upfront payments from customers and the high credit quality of counterparties with whicheasyJet transacts. A summary of the changes to the classification and measurement of financial instruments under IFRS 9 is includedin note 24.ACCOUNTING POLICY FOR FINANCIAL INSTRUMENTSFinancial instruments for the comparative period ended 30 September 2018, were recognised and measured in accordance with IAS 39.The accounting policies set out below are those applied to the current period, in accordance with IFRS 9.Financial instruments are recognised when easyJet becomes a party to the contractual provisions of the relevant instrument andderecognised when it ceases to be a party to such provisions. Financial assets are also impaired (written-off) when the Group hasno reasonable expectation of recovering the financial asset.With the exception of trade receivables that do not contain a significant financing component, financial instruments are initially measuredat fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, directly attributabletransactions costs. Trade receivables that do not contain a significant financing component are initially measured at the transaction price.Where market values are not available, the fair value of financial instruments is calculated by discounting expected cash flowsat prevailing interest rates and by applying period end exchange rates.The equity investment in The Airline Group Limited is measured at fair value. Movements in fair value are assessed at each reportingperiod and recorded in other comprehensive income. The fair value is measured with reference to income and market valuationtechniques in line with IFRS 13 ‘Fair Value Measurement’ requirements. See note 24 for further details.Financial assets measured at amortised costFinancial assets are classified and measured according to easyJet’s business model for managing a specified group of financialassets, and the nature of the contractual cash flows arising from that group of financial assets.Subsequent to initial recognition, this classification of financial asset is measured at amortised cost using the effective interestrate method.Financial assets are measured at amortised cost when both of the following criteria are met:• The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractualcash flows; and• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principaland interest on the principal amounts outstanding.Financial assets measured at amortised cost include refundable lease deposits and other refundable lease contributions, restrictedcash, trade and other receivables, money market deposits and cash and cash equivalents (excluding money market funds).Restricted cash comprises cash deposits which have restrictions governing their use and is classified as a current or non-currentasset based on the estimated remaining length of the restriction.Cash and cash equivalents comprise cash held in bank accounts with no access restrictions, bank term deposits and tri-party reposall being repayable on demand or maturing within three months of inception.Money market deposits comprise of term deposits and tri-party repos maturing greater than three months from inception.www.easyJet.com 139FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED140 easyJet plc Annual Report and Accounts 20191B. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUEDFinancial assets measured at fair value through profit or lossSubsequent to initial recognition, this classification of financial asset is measured at fair value through profit or loss.Financial assets are measured at fair value through profit or loss when they do not meet the criteria to be measured at amortisedcost or at fair value through other comprehensive income.Financial assets measured at fair value through profit or loss comprise of money market funds.Financial assets measured at fair value through other comprehensive incomeOn initial recognition, equity investments, excluding interests in associates, are irrevocably designated as measured at fair value throughother comprehensive income. Subsequently they are measured at fair value with changes recognised in other comprehensive incomewith no recycling of these gains and losses to the income statement.Impairment of financial assets measured at amortised costAt each reporting date easyJet recognises a loss allowance for expected credit losses on financial assets measured at amortised cost.In establishing the appropriate amount of loss allowance to be recognised, easyJet applies either the general approach or the simplifiedapproach, depending on the nature of the underlying group of financial assets.General approach – impairment assessmentThe general approach is applied to the impairment assessment of refundable lease deposits and other refundable lease contributions,restricted cash, money market deposits and cash and cash equivalents.Under the general approach easyJet recognises a loss allowance for a financial asset at an amount equal to the 12-month expectedcredit losses, unless the credit risk on the financial asset has increased significantly since initial recognition, in which case a loss allowanceis recognised at an amount equal to the lifetime expected credit losses.Simplified approach – impairment assessmentThe simplified approach is applied to the impairment assessment of trade and other receivables.Under the simplified approach easyJet always recognises a loss allowance for a financial asset at an amount equal to the lifetimeexpected credit losses.Non-derivative financial liabilitiesNon-derivative financial liabilities are initially recorded at fair value less directly attributable transaction costs, and subsequently at amortisedcost, and include trade and other payables and borrowings. Interest expense on borrowings is recognised using the effective interest method.Borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 monthsafter the reporting period date.Financial liabilities measured at amortised costSubsequent to initial recognition, this classification of financial liability is measured at amortised cost using the effective interest rate method.Financial liabilities measured at amortised cost include trade and other payables, lease liabilities and borrowings.Derivative financial instruments and hedging activitiesDerivative financial instruments are measured at fair value through profit or loss with the exception of derivative financial instrumentsthat are designated as a hedging instrument in a cash flow for hedge relationship.easyJet uses foreign currency forward exchange contracts to hedge foreign currency risks on transactions denominated in US dollars,Euros, Swiss francs and South African rand. These transactions primarily affect revenue, fuel, fixed costs, and the carrying value of ownedaircraft. easyJet also uses cross-currency interest rate swaps to hedge currency and interest rate risk on certain borrowings, and jet fuelforward contracts to hedge fuel price risks. Hedge accounting is applied to those derivative financial instruments that are designated ascash flow hedges or fair value hedges.Fair value hedgesChanges in the fair values of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, togetherwith any changes in the fair values of the hedged assets or liabilities that are attributable to the hedged risk. Any differences between thehedge item and hedge instrument fair valuation is recoded as hedge ineffectiveness as a non-headline item within the income statement.Fair value changes in the derivative instrument attributable to currency basis are not designated as part of the hedged instrument.Such fair value changes are recognised through other comprehensive income, and are recycled to the income statement on a rationalbasis, according to the nature of the underlying hedged item.Cash flow hedgesGains and losses arising from changes in the fair value of foreign exchange forward, jet fuel forward swaps and cross currency interestrate swap contracts designated as a cash flow hedge are recognised in other comprehensive income and deferred in the hedgingreserve to the extent that the hedges are determined to be effective. Fair value changes in the derivative instrument attributableto currency basis are not designated as part of the hedged instrument. Such fair value changes are recognised through othercomprehensive income, and are recycled to the income statement on a rational basis, according to the nature of the underlyinghedged item. All other changes in fair value are recognised immediately in the income statement.When the hedged forecast transaction relates to an item of property, plant and equipment, the relevant accumulated gains and losses aretransferred from the hedging reserve and included in the initial carrying amount of that purchased asset. Otherwise they are recognised inthe income statement in the same period in which the hedged transaction affects the income statement and against the same line item.In the event that a hedged forecast transaction is no longer expected to occur, any related gains and losses are immediately transferredfrom the hedging reserve and recognised in the income statement.Hedge accounting is discontinued when a hedging instrument is derecognised (e.g. through expiry or disposal), or no longer qualifiesfor hedge accounting. Where the hedged item continues to be expected to occur, the related gains and losses remain deferred in thehedging reserve until the transaction takes place.NOTES TO THE ACCOUNTS CONTINUED140 easyJet plc Annual Report and Accounts 2019www.easyJet.com 141Hedge RelationshipThe Group determines that the criteria for each hedge accounting relationship are met due to:• All relationships demonstrate a strong economic correlation;• The effects of credit do not dominate the change in value of the associated hedged risk; and• All Group hedge relationships have a hedge ratio of one to one, aligning to the Group’s risk management strategy.IMPACT ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 1 OCTOBER 2018The following table summarises the impacts of adopting IFRS 9, 15 and 16 on the Group’s consolidated statement of financial positionas at 1 October 2018.As at 1 October 2018£ millionsAs reported30 September2018(restated) IFRS 9 impact IFRS 15 impact IFRS 16 impactAdjustedopeningbalance sheetNon-current assetsGoodwill 365 – – – 365Other intangible assets 181 – – – 181Property, plant and equipment 4,140 – – 497 4,637Derivative financial instruments 175 – – – 175Equity investments – 54 – – 54Restricted cash 11 – – – 11Other non-current assets 122 – – – 1224,994 54 – 497 5,545Current assetsTrade and other receivables 406 – – (8) 398Derivative financial instruments 220 – – – 220Money market deposits 348 – – – 348Cash and cash equivalents 1,025 – – – 1,0251,999 – – (8) 1,991Current liabilitiesTrade and other payables (1,023) – – 9 (1,014)Unearned revenue (877) – (87) – (964)Borrowings (9) – – 9 –Lease liabilities – – – (152) (152)Derivative financial instruments (24) – – – (24)Current tax payable (9) – – – (9)Provisions for liabilities and charges (118) – – (2) (120)(2,060) – (87) (136) (2,283)Net current liabilities (61) – (87) (144) (292)Non-current liabilitiesBorrowings (968) – – 89 (879)Lease liabilities – – – (477) (477)Derivative financial instruments (7) – – – (7)Non-current deferred income (18) – – 12 (6)Post-employment benefit obligations (29) – – – (29)Provisions for liabilities and charges (335) – – (18) (353)Deferred tax (343) – 17 5 (321)(1,700) – 17 (389) (2,072)Net assets 3,233 54 (70) (36) 3,181Shareholders’ equityShare capital 108 – – – 108Share premium 659 – – – 659Hedging reserve 299 (5) – (2) 292Cost of hedging reserve – 4 – – 4Translation reserve 1 – – – 1Retained earnings 2,166 55 (70) (34) 2,1173,233 54 (70) (36) 3,181www.easyJet.com 141FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED142 easyJet plc Annual Report and Accounts 20191B. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUEDThe following tables summarise the impacts of adopting IFRS 9, 15 and 16 on the Group’s consolidated income statement for the yearended 30 September 2019, its consolidated statement of financial position as at 30 September 2019, and its consolidated statementof cash flows for the year ended 30 September 2019. There has been an immaterial impact of IFRS 9 adoption on the income statementand cash flow statement.IMPACT ON THE CONSOLIDATED INCOME STATEMENTYear ended 30 September 2019£ millions As reported IFRS 15 impact IFRS 16 impactAmountswithoutadoption ofIFRS 15 & 16 Passenger revenue 5,009 21 – 5,030 Ancillary revenue 1,376 2 – 1,378 Total revenue 6,385 23 – 6,408 FuelAirports and ground handlingCrewNavigationMaintenanceSelling and marketingOther costsOther income (1,416)(1,845)(859)(409)(302)(157)(456)29 ––––––(18)– –(3)––(85)–(3)– (1,416)(1,848)(859)(409)(387)(157)(477)29 EBITDAR 970 5 (91) 884 Aircraft dry leasingDepreciationAmortisation of intangible assets (5)(484)(15) ––– (182)244– (187)(240)(15) Operating profit 466 5 (29) 442 Interest receivable and other financing incomeInterest payable and other financing charges 24(60) –– 1422 38(38) Net finance charges (36) – 36 –Profit before tax 430 5 7 442Taxation (81) – – (81)Profit for the period 349 5 7 361 Earnings per share, penceBasic 88.6 91.6 Interest receivable and other financing income includes a £16 million hedging benefit as a result of management actionNOTES TO THE ACCOUNTS CONTINUED142 easyJet plc Annual Report and Accounts 2019www.easyJet.com 143IMPACT ON THE CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 September 2019£ millionsAsreportedIFRS 9impactIFRS 15impactIFRS 16impactAmountswithoutadoption ofIFRS 9, 15 & 16Non-current assetsGoodwill 365 – – – 365Other intangible assets 196 – – – 196Property, plant and equipment 5,163 – – (431) 4,732Derivative financial instruments 126 – – – 126Equity investments 48 (48) – – –Restricted cash 4 – – – 4Other non-current assets 142 – – – 142 6,044 (48) – (431) 5,565 Current assetsTrade and other receivablesDerivative financial instrumentsCurrent tax assetsMoney market depositsCash and cash equivalents 372147242911,285 ––––– ––––– 8(14)––– 380133242911,285 2,119 – – (6) 2,113 Current liabilitiesTrade and other payablesUnearned revenueBorrowingsLease liabilitiesDerivative financial instrumentsCurrent tax payableProvisions for liabilities and charges (1,050)(1,069)–(219)(138)–(192) ––––––– –92–––(17)– (15)–(43)219––2 (1,065)(977)(43)–(138)(17)(190) (2,668) – 75 163 (2,430)Net current liabilities (549) – 75 157 (317) Non-current liabilitiesBorrowingsLease liabilitiesDerivative financial instrumentsNon-current deferred incomePost-employment benefit obligationsProvisions for liabilities and chargesDeferred tax (1,324)(359)(72)(6)(47)(397)(305) ––––––– ––––––– (53)359–––15(5) (1,377)–(72)(6)(47)(382)(310) (2,510) – – 316 (2,194)Net assets 2,985 (48) 75 42 3,054Shareholders’ equity Share capitalShare premiumHedging reserveCost of hedging reserveTranslation reserveRetained earnings 108659(4)8(1)2,215 ––9(8)–(49) –––––75 ––2––40 1086597–(1)2,281 2,985 (48) 75 42 3,054www.easyJet.com 143FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED144 easyJet plc Annual Report and Accounts 20191B. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES CONTINUEDIMPACT ON THE CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 30 September 2019£ millions As reported IFRS 15 impact IFRS 16 impactAmountswithoutadoption ofIFRS 15 & 16 Cash flows from operating activitiesOperating profit for the period 466 5 (29) 442 Adjustments for non cash items:Depreciation 484 – (244) 240Commercial IT platform (2) – – (2)Gain on sale and leaseback (2) – – (2)Amortisation of intangible assets 15 – – 15Share-based payments charge 19 – – 19Changes in working capital and other itemsof an operating natureDecrease in trade and other receivables 37 – – 37Decrease in trade and other payables 43 – – 43Increase in unearned revenue 105 (5) – 100Increase/(decrease) in provisions (3) – 85 82Increase in other non-current assets (20) – – (20)Decrease in derivative financial instruments (32) – – (32)Decrease in non-current deferred income (12) – – (12)Cash generated from operating activities 1,098 – (188) 910 Ordinary dividends paidInterest and other financing charges paidInterest and other financing income receivedNet tax paid (233)(58)12(58) –––– –21–– (233)(37)12(58) Net cash generated from operating activities 761 – (167) 594Cash flows from investing activitiesPurchase of property, plant and equipment (954) – – (954)Purchase of intangible assets (30) – – (30)Net decrease in money market deposits 52 – – 52Net proceeds from sale and leaseback of aircraft 121 – – 121Net cash used by investing activities (811) – – (811)Purchase of own shares for employee share schemes (16) – – (16)Proceeds from Eurobond issue 443 – – 443Repayment of capital element of finance leases arising under IAS 17 – – (7) (7)Repayment of capital element of leases arising under IFRS 16 (174) – 174 –Net decrease in restricted cash 7 – – 7Net cash used by financing activities 260 – 167 427Effect of exchange rate changes 50 – – 50Net increase in cash and cash equivalents 260 – – 260Cash and cash equivalents at beginning of period 1,025 – – 1,025Cash and cash equivalents at end of period 1,285 – – 1,285NOTES TO THE ACCOUNTS CONTINUED144 easyJet plc Annual Report and Accounts 2019www.easyJet.com 1451C.CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATESThe preparation of accounts in conformity with generally accepted accounting principles requires the use of estimates and assumptionsthat affect the reported amounts of assets and liabilities at the date of the accounts and the reported amounts of income and expensesduring the reporting period. Although these amounts are based on management’s best estimates, events or actions may mean thatactual results ultimately differ from those estimates, and these differences may be material. The estimates and the underlyingassumptions are reviewed regularly.1C.(I) CRITICAL ACCOUNTING JUDGEMENTSThe following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that theDirectors have made in the process of applying the Group’s accounting policies and that have the most significant effect on theamounts recognised and presented in the financial statements.CLASSIFICATION OF INCOME OR EXPENSES BETWEEN HEADLINE AND NON-HEADLINE ITEMS (NOTE 5)The Group seeks to present a measure of underlying performance which is not impacted by material non-recurring items or itemswhich are not considered to be reflective of the trading performance of the business. This measure of profit is described as ‘headline’and is used by the Directors to measure and monitor performance. The excluded items are referred to as ‘non-headline’ items.Non-headline items may include impairments, amounts relating to acquisitions and disposals, expenditure on major restructuringprogrammes, litigation and insurance settlements, balance sheet exchange gains or losses, the income or expense resulting from theinitial recognition of sale and leaseback transactions, fair value adjustments on financial instruments and other particularly significantor unusual non-recurring items. Items relating to the normal trading performance of the business will always be included within theheadline performance.Judgement is required in determining the classification of items between headline and non-headline.CONSOLIDATION OF EASYJET SWITZERLANDJudgement has been applied in consolidating easyJet Switzerland S.A. as a subsidiary on the basis that the Company exercises adominant influence over the undertaking. A non-controlling interest has not been reflected in the consolidated accounts on the basisthat holders of the remaining 51% of the shares have no entitlement to any dividends from that holding and the Company has an optionto acquire those shares for a pre-determined minimal consideration.EU CARBON EMISSIONS TAX SCHEMEThe EU emissions trading system (ETS) mandates that greenhouse gas producing businesses, such as airlines, offset their carbonfootprint by obtaining, and subsequently surrendering carbon allowances (‘allowances’) by submitting them to the relevant regulator.Airlines can obtain allowances by receiving free allowances from the EU as allocated by the UK government and purchasing allowancesfrom the market.In December 2018 the EU issued a regulation which stated that aviation operators may not use allowances issued by Member Stateswho have triggered article 50 and notified of their intention to leave the EU. This was implemented to protect the integrity of the carbonallowances market and avoid an inundation of UK free allowances into the market if the EU law did not apply to the UK at the ETSsubmission date, but free allowances had been allocated. The free allowances allocated to our Austrian and Swiss operations werenot impacted and have been received.As at 30 September 2019 easyJet have recognised a UK ETS liability of £60 million and a UK free allowance asset of £25 million asthe EU confirmed the suspension would be lifted automatically in the event of a withdrawal agreement coming into force.Brexit has now been further delayed. The submission date for ETS allowances relating to 2019 calendar year is 31 December 2019, withsettlement on 30 April 2020. Three scenarios are possible as at the due date of submission; firstly the UK could have left the EU with awithdrawal agreement in place. In this case the transition period becomes applicable, meaning the UK will remain subject to the EU ETSscheme for calendar 2019 and 2020 years, and therefore the free allowances automatically become available. Secondly, the UK couldhave left without a deal, in which case EU law no longer applies and no ETS liability or free allowances apply, as confirmed by the UKGovernment. In this scenario, de-recognition of the liability and asset relating to ETS may occur. Thirdly, Brexit could be further delayed.In this case easyJet expect to be required to submit allowances to cover the total 2019 ETS liability and receive the related freeallowances. Due to the ongoing uncertainty, easyJet have retained the liability and related asset as at 30 September 2019 whichis consistent with historic treatment and reflects the conditions as at 30 September 2019.1C.(II) CRITICAL ACCOUNTING ESTIMATESThe following critical accounting estimates involve a higher degree of judgement or complexity, or are areas where assumptions aresignificant to the financial statements. The critical accounting estimates concerned are not major sources of estimation uncertaintythat have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next year.AIRCRAFT MAINTENANCE PROVISIONS – £526 MILLION (NOTE 18)easyJet incurs liabilities for maintenance costs in respect of aircraft leased during the term of the lease. These arise from legal andconstructive contractual obligations relating to the condition of the aircraft when it is returned to the lessor. To discharge theseobligations, easyJet will also normally need to carry out one heavy maintenance check on each of the engines and the airframeduring the lease term.On recognition of a right of use asset under IFRS 16 a provision is made in the income statement for maintenance not dependenton use of the aircraft, plus maintenance relating to previous use, based on hours or cycles flown, to provide for the cost of theseobligations. Contractual obligations which are dependent on the ongoing use of the aircraft will be provided over the term of the leasebased on the estimated future costs, discounted to present value. This will be capitalised to the right of use asset rather than recognisedin maintenance in the income statement. This asset will be depreciated immediately as the obligation has arisen as a result of flying hoursalready undertaken. The most critical estimates required are considered to be the utilisation of the aircraft, the expected costs of theheavy maintenance checks at the time which they are expected to occur, the condition of the aircraft, the lifespan of life-limited partsand the rate used to discount the provision.www.easyJet.com 145FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED146 easyJet plc Annual Report and Accounts 20191C.(II) CRITICAL ACCOUNTING ESTIMATES CONTINUEDThe bases of all estimates are reviewed annually, and also when information becomes available that is capable of causing a materialchange to an estimate, such as renegotiation of end of lease return conditions, increased or decreased utilisation, or changes in thecost of heavy maintenance services. No reasonable combination of changes to these estimates would result in a material movementto the carrying value of the provision.PROVISIONS FOR CUSTOMER CLAIMS – £50 MILLION (NOTE 18)easyJet incurs liabilities for amounts payable to customers who make claims in respect of flight delays and cancellations, and refundsof air passenger duty or similar charges. Estimates include passenger claim rates, the value of claims made and the period of time overwhich claims will be made. The bases of all estimates are reviewed at least annually and also when information becomes available thatis capable of causing a material change to the estimate. No reasonable combination of changes to these estimates would result in amaterial movement to the carrying value of the provision.GOODWILL AND LANDING RIGHTS – £497 MILLION (NOTE 9)Goodwill and landing rights are tested for impairment at least annually. easyJet has one cash-generating unit, being its route network.In making this assessment, easyJet has considered the manner in which the business is managed including the centralised nature ofits operations and the ability to open or close routes and redeploy aircraft and crew across the whole route network.The value in use of the cash-generating unit is determined by discounting future cash flows to their present value. When applyingthis method, easyJet relies on a number of key estimates including its ability to meet its strategic plans, future fuel prices and exchangerates, long-term economic growth rates for the principal countries in which it operates, and its pre-tax weighted average cost of capital.Both fuel price and exchange rates are volatile in nature, and the assumptions used are sensitive to significant changes in these rates.DEFINED BENEFIT PENSION ASSUMPTIONS – £47 MILLION (NOTE 19)The Swiss pension scheme meets the requirements under IAS 19 to be recognised as a defined benefit pension scheme and thenet pension obligation is recognised on the balance sheet. The measurement of scheme assets and obligations are calculated byan independent actuary in line with IAS 19. The financial and demographic assumptions used in the calculation are determined bymanagement following consultation with the independent actuary with consideration of external market movements and inputs.The calculation is most sensitive to movements in the discount rate applied to the future obligation and a sensitivity analysis isincluded in note 19.DERIVATIVE FINANCIAL INSTRUMENTS – £273 MILLION ASSET, £210 MILLION LIABILITY (NOTE 24)easyJet is exposed to financial risks including fluctuations in exchange rates, jet fuel prices and interest rates. Financial risk managementaims to limit these market risks with selected derivative hedging instruments being used for this purpose. The Group hold a numberof derivatives and financial instruments including foreign currency forward exchange contracts, jet fuel forward contracts and crosscurrency interest rate swap contracts. easyJet’s policy is not to speculatively trade derivatives but to use the instruments to hedgeanticipated exposure. Given the inherently complex nature of this area the Finance Committee (a committee of the Board) overseesthe Group’s treasury activities.1D. NEW AND REVISED STANDARDS AND INTERPRETATIONS NOT APPLIEDThere are no standards that are issued but not yet effective that would be expected to have a material impact on the entity inthe current or future reporting periods and on foreseeable future transactions.2. NET FINANCE CHARGES2019£ million2018£ millionInterest receivable and other financing incomeInterest income (22) (12)Net defined benefit interest cost – –Net exchange gains on monetary assets and liabilities1 (2) – (24)23–2611 (12) Interest payable and other financing chargesInterest payable on bank and other borrowingsInterest payable on finance lease obligations under IAS 17Interest payable on lease liabilities under IFRS 16Other interest payable 184–8 60 30Net finance charges 36 181. Included within net exchange gains on monetary assets and liabilities is an £24 million gain relating to the fair value gain on derivatives designated asfair value through profit or loss. See Note 24 for details.NOTES TO THE ACCOUNTS CONTINUED146 easyJet plc Annual Report and Accounts 2019www.easyJet.com 1473. PROFIT BEFORE TAXThe following have been included in arriving at profit before tax:2019£ million2018£ millionDepreciation of property, plant and equipmentOwned assets 236 195Assets held under finance leases arising under IAS 17 – 4Right of use assets under IFRS 16 248 –(Gain)/loss on disposal of intangibles, property, plant and equipment – 4(Gain)/loss on sale and leaseback (2) 11Operating lease rentals arising under IAS 17Aircraft – 154Other assets – 7Lease rentals on short-term and low value leases arising under IFRS 16Dry leased aircraft and other low value rentals 11 –Wet leased aircraft rentals1 22 561. These are short-term leases where the treatment remains the same under IAS 17 and IFRS 16In the comparative period ended 30 September 2018 aircraft operating lease rentals of £154 million included only the operating drylease rental charges recognised in the period, as well as the impact of hedging the USD exposure on these lease rentals.Wet leased aircraft rentals of £22 million (2018: £56 million) were recognised within other costs. Wet leases are fundamentally differentto regular, long-term lease commitments as they are short-term in nature (with terms of less than one year) and they relate to theprovision of aircraft, crew, maintenance and insurance (‘ACMI’).AUDITORS’ REMUNERATIONDuring the year easyJet incurred fees payable for the audit of the Group and individual accounts from easyJet’s auditors and theirassociates (including foreign partners) totalling £0.4 million (2018: £0.4 million). In addition, easyJet incurred fees in respect of auditrelated non-audit services totalling £123,500 (2018: audit related fees of £122,600) from its auditors. This includes the fee in respectof the half year review performed.4. EMPLOYEESThe average monthly number of people employed by easyJet was: 2019Number2018Number Flight and ground operationsSales, marketing and administration 13,839 12,391912 713 14,751 13,104 Employee costs for easyJet were:2019£ million2018£ millionWages and salaries 743 669Social security costs 95 86Pension costs 87 75Share-based payments 19 17944 847Key management compensation was:2019£ million2018£ millionShort-term employee benefits 6 9Share-based payments 3 2Termination payments – 29 13The Directors of easyJet plc and the other members of the Airline Management Board are easyJet’s key management as theyhave collective authority and responsibility for planning, directing and controlling the business.Share-based payment charges arising during the prior year in respect of grants to key management personnel were offset by creditsrecognised on certain forfeitures arising from bad leavers and from downward revisions to some LTIP forecast vesting percentages.Emoluments paid or payable to the Directors of easyJet plc was:2019£ million2018£ millionRemuneration 3 43 4Details of Directors’ remuneration are disclosed in the Directors’ remuneration report on pages 96 to 115.www.easyJet.com 147FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED148 easyJet plc Annual Report and Accounts 20195. NON-HEADLINE ITEMSAn analysis of the amounts presented as non-headline is given below:Year ended30 September2019£ millionYear ended30 September2018£ millionCommercial IT platform (credit)/charge (2) 65Tegel Integration – 40Sale and leaseback (gain)/charge (2) 19Brexit-related costs 4 7Organisational review – 1Recognised in operating profit – 132Fair value adjustment (1) 1Balance sheet foreign exchange gain (2) –Total non-headline charge/(credit) before tax (3) 133Tax on non-headline items 3 (25)Total non-headline charge/(credit) after tax – 108COMMERCIAL IT PLATFORM CREDITAt the end of 2018, a one-off charge of £65 million was recognised in relation to our IT commercial platform. This charge includeda £60 million write down of costs previously capitalised, along with an additional £5 million accrual for close down costs.During 2019, only £3 million of the close down accrual was utilised, mainly due to staff being redeployed and anticipated compromiseagreements not being required. Therefore the remaining £2 million has been released back to the income statement.TEGEL INTEGRATIONThere were no further one-off integration costs in relation to the operations in Tegel classified as non-headline in 2019. In 2018, themain drivers of the £40 million integration expenses were from engineering costs, dry leasing and transaction costs.SALE AND LEASEBACK (GAIN)/CHARGEDuring the year, easyJet completed the sale and leaseback of 10 A319 aircraft (2018: 10). The net income statement impact of the10 sale and leasebacks was a £2 million gain (2018: £19 million loss).In 2018 (before the adoption of IFRS 16), the charge was split between a loss on disposal of £11 million and a maintenance provisioncatch-up of £8 million. Under IFRS 16, the maintenance provision catch-up is now capitalised within the right of use asset rather thanbeing recognised as part of the gain or loss on disposal. As the 2019 aircraft were sold at mid-life, there was no maintenance provisioncatch-up required.BREXIT-RELATED COSTSFollowing the UK’s referendum vote to leave the EU easyJet has established a multi AOC structure, helping to secure flying rights forthe portion of our network that remains wholly within and between EU states, excluding the UK.In 2019 easyJet incurred further expenses of £4 million (2018: £7 million), with the primary drivers being re-registering aircraft and pilotlicences, as well as legal costs.ORGANISATIONAL REVIEWThere were no further organisational review costs classified as non-headline during 2019 as the project ceased in 2018.FAIR VALUE ADJUSTMENTThis relates to hedge accounting ineffectiveness for items held in fair value and cash flow hedge relationships.This arises as the value of hedged items are adjusted for changes in fair value attributable to the hedged risks, which are not perfectlyoffset by the fair value change on the hedging instruments due to factors such as in counterparty credit risk, cash flow timing oramount changes.Hedge ineffectiveness causes temporary volatility to the income statement; over the life of the contract it nets out to zero and hasno cash flow impact. Therefore, it is presented as a ‘non-headline’ item.BALANCE SHEET FOREIGN EXCHANGE (GAIN)/LOSSThis relates to foreign exchange gains or losses arising from the re-translation of monetary assets and liabilities held in the statementof financial position.The (gain)/loss from balance sheet revaluations fluctuates each month, being driven by exchange rate movements which are unrelatedto the trend in the underlying performance of our ongoing business, so are excluded from headline costs.NOTES TO THE ACCOUNTS CONTINUED148 easyJet plc Annual Report and Accounts 2019www.easyJet.com 1496. TAX CHARGETax on profit on ordinary activities:2019£ million2018£ millionCurrent taxUnited Kingdom corporation tax 16 57Foreign tax 9 7Adjustments in respect of prior years – (16)Total current tax charge 25 48Deferred taxTemporary differences relating to property, plant and equipment 49 39Other temporary differences 7 (20)Adjustments in respect of prior years – 20Total deferred tax charge 56 39Total tax charge 81 87Effective tax rate 18.9% 19.7%RECONCILIATION OF THE TOTAL TAX CHARGEThe tax for the year is lower than (2018: higher than) the standard rate of corporation tax in the UK as set out below:2019£ million2018£ millionProfit before tax 430 445 Tax charge at 19.0% (2018: 19.5%)Income not chargeable for tax purposesExpenses not deductible for tax purposes 82(1)1 85(1)1 Share-based paymentsAdjustments in respect of prior years – current taxAdjustments in respect of prior years – deferred taxDifference in applicable rates for current and deferred taxAttributable to rates other than standard UK rateEarly adoption of accounting standards not impacting taxation 3––(6)11 2(16)20(5)1– 81 87Current tax recoverable at 30 September 2019 amounted to £24 million (2018: current tax payable £9 million). This related to £29 millionof tax recoverable in the UK (2018: tax payable £12 million) and £5 million (2018: £3 million) of tax payable in other European jurisdictions.During the year ended 30 September 2019, net cash tax paid amounted to £58 million (2018: £74 million).TAX ON ITEMS RECOGNISED DIRECTLY IN OTHER COMPREHENSIVE INCOME OR SHAREHOLDERS’ EQUITY2019£ million2018£ millionCharge to other comprehensive incomeDeferred tax on change in fair value of cash flow hedges 69 (60)Deferred tax on post-employment benefit 3 –www.easyJet.com 149FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED150 easyJet plc Annual Report and Accounts 20196. TAX CHARGE CONTINUEDDEFERRED TAXThe net deferred tax liability in the statement of financial position is as follows:Acceleratedcapitalallowances£ millionShort-termtimingdifferences£ millionFair valuegains/(losses)£ millionShare-basedpayments£ millionPostemploymentbenefitobligation£ millionTotal£ million As at 30 September 2018Adjustments arising on adoption of IFRS 15 and 16At 1 October 2018Charged to income statementCharged to other comprehensive income 259–25949– 14(22)(8)7– 83–83–(69) (8)–(8)–– (5)–(5)–(3) 343(22)32156(72) At 30 September 2019 308 (1) 14 (8) (8) 305Acceleratedcapitalallowances£ millionShort-termtimingdifferences£ millionFair valuegains/(losses)£ millionShare-basedpayments£ millionPostemploymentbenefitobligation£ millionTotal£ millionAt 1 October 2017 199 33 23 (6) (5) 244Charged to income statement 60 (19) – (2) – 39Credited to other comprehensive income – – 60 – – 60At 30 September 2018 259 14 83 (8) (5) 343It is estimated that deferred tax assets of approximately £6 million (2018: deferred tax assets of £6 million) will reverse during the nextfinancial year.It is estimated that deferred tax liabilities of approximately £3 million (2018: deferred tax liabilities of £5 million) will reverse during thenext financial year.7. EARNINGS PER SHAREBasic earnings per share has been calculated by dividing the total profit for the year by the weighted average number of shares in issueduring the year after adjusting for shares held in employee benefit trusts.To calculate diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion ofall dilutive potential shares. Share options granted to employees where the exercise price is less than the average market price of theCompany’s ordinary shares during the year are considered to be dilutive potential shares. Where share options are exercisable basedon performance criteria and those performance criteria have been met during the year, these options are included in the calculationof dilutive potential shares.Headline basic and diluted earnings per share are also presented, based on headline profit for the year.Earnings per share is based on:2019£ million2018£ millionHeadline profit for the year 349 466Total profit for the year 349 3582019million2018millionWeighted average number of ordinary shares used to calculate basic earnings per share 393 394Weighted average number of dilutive potential shares 4 3Weighted average number of ordinary shares used to calculate diluted earnings per share 397 397Earnings per share2019pence2018penceBasic 88.6 90.9Diluted 87.8 90.2Headline earnings per share2019pence2018penceBasic 88.7 118.3Diluted 87.8 117.4NOTES TO THE ACCOUNTS CONTINUED150 easyJet plc Annual Report and Accounts 2019www.easyJet.com 1518. DIVIDENDSAn ordinary dividend in respect of the year ended 30 September 2019 of 43.9 pence per share, or £174 million, based on headlineprofit after tax, is to be proposed at the forthcoming Annual General Meeting. These accounts do not reflect this proposed dividend.An ordinary dividend of 58.6 pence per share, or £233 million, in respect of the year ended 30 September 2018 was paid in the yearending 30 September 2019. An ordinary dividend of 40.9 pence per share, or £162 million, in respect of the year ended 30 September2017 was paid in the year ended 30 September 2018.9. GOODWILL AND OTHER INTANGIBLE ASSETSOther intangible assets Goodwill£ millionLandingRights£ million Computersoftware£ million Total£ million 8627(13) 21530(13) At 30 September 2019 365 132 1003415(13) 2323415(13) At 30 September 2019 – –Net book value 36 36 At 30 September 2019 365 132 64 196 At 1 October 2018 365 129 52 181 CostAt 1 October 2018 365 129 Additions – 3 Disposals – – AmortisationAt 1 October 2018 – – Charge for the year – – Disposals – – Other intangible assetsGoodwill£ millionLandingrights£ millionComputersoftware£ millionTotal£ millionCostAt 1 October 2017 365 94 11546(75) 20981(75) At 30 September 2018 365 129 863015(11) 2153015(11) At 30 September 2018 – –Net book value 34 34 At 30 September 2018 365 129 52 181 At 1 October 2017 365 94 85 179 Additions – 35 Disposals – – AmortisationAt 1 October 2017 – – Charge for the year – – Disposals – – easyJet has one cash generating unit, being its route network. The recoverable amount of goodwill and other assets with indefiniteexpected useful lives has been determined based on value in use calculations of the route network.Pre-tax cash flow projections have been derived from the strategic plan presented to the Board for the period up to 2024, usingthe following key assumptions: Pre-tax discount rate (derived from weighted average cost of capital)Fuel price (US dollars per metric tonne)Long-term economic growth rateExchange rates:US dollarEuroSwiss franc 7.2%6502.0% 1.301.131.30 www.easyJet.com 151FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED152 easyJet plc Annual Report and Accounts 20199. GOODWILL AND OTHER INTANGIBLE ASSETS CONTINUEDBoth fuel price and exchange rates are volatile in nature, and the assumptions used represent management’s view of reasonableaverage rates. Operating margins are sensitive to significant changes in these rates.Cash flow projections beyond the forecast period have been extrapolated using an estimated average of long-term economicgrowth rates for the principal countries in which easyJet operates. The impairment model is sensitive to a sustained significantadverse movement in foreign currency exchange rates.No reasonably possible combination of changes to the key assumptions above, including spot rates as at 30 September 2019 forfuel and foreign exchange, would result in the carrying value of the cash-generating unit exceeding its recoverable amount.10. PROPERTY, PLANT AND EQUIPMENT Owned assets Assets held asfinance leasesunder IAS 17 Right of use assets held underleasing arrangements underIFRS 16 Total Aircraft andspares£ million Land andbuildings£millionOther£ million Aircraft andspares£ million Aircraft andspares£ millionOther£ million Total£ million – 67– –– 6734 15– –– (6) 103(103)–––– – –– – 5,1341,0546,1881,081(101)(6) 34 76– 18– –– 18– 5– –– (5) –30(30)–––– 1,298 34– –575 12575 12243 4– –– – 7,1629945271,551484(31)(5) At 30 September 2019 1,147Net book value – 18 – 818 16 1,999 At 30 September 2019 4,573 34 58 – 480 18 5,163 At 1 October 2018 4,018 – 49 – 550 20 4,637 At 30 September 2018 4,018 – 49 73 – – 4,140 CostAt 30 September 2018 4,964 Recognised on adoption of IFRS 16 – 1,125 32 At 1 October 2018 4,964 1,125 32 Additions 905 125 2 Aircraft sold and leased back (149) 48 – Disposals – At 30 September 2019 5,720 DepreciationAt 30 September 2018 946 Recognised on adoption of IFRS 16 – At 1 October 2018 946 Charge for the year 232 Aircraft sold and leased back (31) Disposals – Aircraft andspares£ millionOther£ millionTotal£ millionCostAt 1 October 2017 4,345 60 4,405Additions 919 12 931Aircraft sold and leased back under operating leases (184) – (184)Disposals (13) (5) (18)At 30 September 2018 5,067 67 5,134DepreciationAt 1 October 2017 861 19 880Charge for the year 195 4 199Aircraft sold and leased back under operating leases (67) – (67)Disposals (13) (5) (18)At 30 September 2018 976 18 994Net book valueAt 30 September 2018 4,091 49 4,140 3,484 41 3,525 At 1 October 2017 NOTES TO THE ACCOUNTS CONTINUED152 easyJet plc Annual Report and Accounts 2019www.easyJet.com 153Information presented for the comparative period ended 30 September 2018, is presented in accordance with IAS 17. Informationpresented for the current period ended 30 September 2019, is presented in accordance with IFRS 16.The net book value of aircraft includes £286 million (2018: 283 million) relating to advance and option payments for future deliveries.This amount is not depreciated.Aircraft with a net book value of £71 million (2018: £73 million) which were classified as finance leases in 2018 are now included withinthe right of use asset created on adoption of IFRS 16 as at 1 October 2018. Right of use assets with a net book value of £497 millionwere recognised as at that date which were previously treated as operating leases.easyJet is contractually committed to the acquisition of 110 (2018: 115) Airbus A320 family aircraft, with a total list price* of US$13.0 billion(2018: US$13.2 billion) before escalations and discounts for delivery in financial years 2020 (22 aircraft), in 2021 (26 aircraft), in 2022(27 aircraft) and in 2023 (35 aircraft).The ‘Other’ categories comprise of leasehold improvements, computer hardware, leasehold property and fixtures, fittings and equipment.During the 2019 financial year we purchased land in Luton, UK with the intention to build a new head office.* Airbus no longer publishes list prices. The estimated list price is based on the last available list price published in January 2018and escalated by Airbus’ standard escalation from January 2018 to January 2019 of 3.7%.11. OTHER NON-CURRENT ASSETS2019£ million2018£ millionLessor maintenance contributions 107 88Deferred consideration and deposits held by aircraft lessors 25 25Recoverable supplemental rent (pledged as collateral) 9 7Other 1 2142 122Lessor maintenance contribution assets arise to compensate easyJet for the delivery of a mid-life aircraft, where a lessor has agreedto make a contribution to easyJet’s maintenance costs to reflect the cycles already flown by the aircraft at the point it is delivered toeasyJet. Depending on the contract terms, payment will be made either at the maintenance event date or at the lease return date.12. TRADE AND OTHER RECEIVABLES2019£ million2018£ millionTrade receivables 80 112Less provision for loss allowance (1) (1)79 111Prepayments and accrued income 247 215Recoverable supplemental rent (pledged as collateral) 1 24Other receivables 45 56372 406With respect to trade receivables that are neither impaired nor past due, there are no indications at the reporting date that the paymentobligations will not be met. Amounts due from trade receivables are short-term in nature and largely comprise credit card receivablesdue from highly rated financial institutions and, accordingly, the possibility of significant default is considered to be unlikely.www.easyJet.com 153FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED154 easyJet plc Annual Report and Accounts 201913. CASH AND MONEY MARKET DEPOSITS2019£ million2018£ millionCash and cash equivalents (original maturity less than three months) 1,285 1,025Money market deposits (original maturity more than three months) 291 348Non-current restricted cash 4 111,580 1,384Interest rates on money market deposits and restricted cash are repriced within 365 days based on prevailing market rates of interest.Carrying value is not significantly different from fair value.Restricted cash comprises:2019£ million2018£ millionAircraft operating lease deposits – 7Amount held in escrow accounts for legal cases 4 44 1114. TRADE AND OTHER PAYABLES2019£ million2018£ millionTrade payables 339 329Accruals 598 574Leased aircraft – surplus on sale and leaseback – 7Taxes and social security 27 26Other payables 86 871,050 1,02315. BORROWINGS AND LEASE LIABILITIESCurrent£ millionNon-current£ millionTotal£ millionAt 30 September 2019Eurobond – 1,324 1,324Lease liabilities arising under IFRS 16 219 359 578219 1,683 1,902Current£ millionNon-current£ millionTotal£ millionAt 30 September 2018Eurobond – 879 879Finance lease liabilities arising under IAS 17 9 89 989 968 977Information presented for the comparative period ended 30 September 2018, is presented in accordance with IAS 17 Leases. Informationpresented for the current period ended 30 September 2019, is presented in accordance with IFRS 16 Leases.Finance lease obligations relate to aircraft and bear interest partly at fixed rates and partly at variable rates linked to USD LIBOR.The maturity profile of borrowings is set out in note 27.On 7 January 2016, the UK Listing Authority approved a prospectus relating to the establishment of a £3,000 million Euro MediumTerm Note Programme of easyJet plc. The prospectus under this programme has subsequently been updated with the latest versionbeing issues on 5 February 2019. Under this programme, on 9 February 2016 easyJet plc issued notes amounting to €500 million fora seven-year term with a fixed annual coupon rate of 1.750%. On 18 October 2016 easyJet plc issued additional notes amounting to€500 million for a seven-year term with a fixed annual coupon rate of 1.125%. On 11 June 2019 easyJet plc issued additional notesamounting to €500 million for a six-year term with a fixed annual coupon rate of 0.875%.The €500 million Eurobond issued on 9 February 2016 was designated as the hedged item in an effective fair value hedgingrelationship. The Group used cross-currency interest rate swaps to convert the fixed rate Eurobond to a Sterling floating rate exposure.The cross-currency interest rate swaps have the same maturity and common terms as the Eurobond that they are hedging. The carryingvalue of the fixed rate Eurobond net of cross-currency interest rate swaps at 30 September 2019 was £378 million. See note 27 foradditional details.The €500 million Eurobond issued on 18 October 2016 was designated as the hedged item in an effective cash flow value hedgingrelationship. The Group used cross-currency interest rate swaps to convert the fixed rate Eurobond to a Sterling fixed rate exposure.The cross-currency interest rate swaps have the same maturity and common terms as the Eurobond that they are hedging. Thecarrying value of the fixed rate Eurobond net of cross-currency interest rate swaps at 30 September 2019 was £446 million. Seenote 27 for additional details.The €500 million Eurobond issued on 11 June 2019 was designated as the hedged item in an effective cash flow value hedgingrelationship. The Group used cross-currency interest rate swaps to convert the fixed rate Eurobond to a Sterling fixed rate exposure.The cross-currency interest rate swaps have the same maturity and common terms as the Eurobond that they are hedging. The carryingvalue of the fixed rate Eurobond net of cross-currency interest rate swaps at 30 September 2019 was £448 million. See note 27 foradditional details.NOTES TO THE ACCOUNTS CONTINUED154 easyJet plc Annual Report and Accounts 2019www.easyJet.com 155On 10 February 2015 easyJet signed a $500 million revolving credit facility with a minimum five-year term. The facility is due to maturein February 2022.On 1 August 2018 easyJet signed a £250 million revolving credit facility with a two-year term. This facility was cancelled in June 2019following the bond issue in the same month.16. LEASESInformation presented in this note is in respect of the current period ended 30 September 2019 and is presented in accordance withIFRS 16. Information in respect of the comparative period ended 30 September 2018 is presented in accordance with IAS 17.easyJet holds aircraft under leasing arrangements that are recognised as right of use assets and lease liabilities, with remaining leaseterms ranging up to eight years. easyJet is contractually obliged to carry out maintenance on these aircraft, and the cost of this isprovided based on the number of flying hours and cycles operated. Further details are given in note 1.Information in respect of right of use assets, including the carrying amount, additions and depreciation, are set out in note 10 tothese financial statements. Information in respect of the carrying value and interest arising on lease liabilities is set out in note 24and note 2 respectively. A maturity analysis of lease liabilities is set out below.easyJet also enters into short-term leases and low value leases which are not recognised as right of use assets and lease liabilities.The expense recognised in the period in relation to these leases is disclosed in note 3.The weighted average incremental borrowing rate applied to the lease liabilities in the statement of financial position at the initialadoption on 1 October 2018 was 4.38%.Amounts recognised in the statement of cash flows30 September 2019£ millionRepayment of capital element of leases (174)Reconciliation to prior year operating lease commitmentAs at 1 October 2018£ million Operating lease commitments as disclosed at 30 September 2018 601 Reconciling items:Effect of discounting (at incremental borrowing rate as at 1 October 2018)Adjustment for options reasonably certain to be exercised (84)14 Finance lease liabilities recognised as at 30 September 2018 under IAS 17 98 Lease liabilities as at 1 October 2018 629Lease liabilities30 September 2019£ million Maturity analysis – contractual undiscounted cash flowsLess than one yearOne to five yearsMore than five years (230)(343)(64) (637)Lease liabilities included in the statement of financial position30 September 2019£ million CurrentNon-current (219)(359) Total (578)Amounts recognised in income statement30 September 2019£ millionInterest on lease liabilities adopted under IFRS 16 26Expenses relating to short-term and low value leases (excluding wet leases) 11Expenses relating to short-term wet leases 225917. NON-CURRENT DEFERRED INCOMEThe balance for the comparative period ending 30 September 2018 principally comprised the non-current surplus of sale proceedsover fair value of aircraft that have been sold and leased back under operating leases. Following the adoption of IFRS 16, the surplusshould be recognised as additional financing provided by the lessor and has therefore been reclassified to lease liabilities within theopening balances.www.easyJet.com 155FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED156 easyJet plc Annual Report and Accounts 201918. PROVISIONS FOR LIABILITIES AND CHARGESMaintenanceprovision£ millionProvisions forcustomerclaims£ millionOtherprovisions£ millionTotal provision£ million At 30 September 2018Recognised on adoption of IFRS 16At 1 October 2018Exchange adjustmentsCharged to income statementUnwinding of discountUtilised 39220412239019(18) 61–61–141–(152) ––––13–– 453204732324419(170) At 30 September 2019 526 50 13 589Provisions for customer claims comprise amounts payable to customers who make claims in respect of flight delays and cancellations,and refunds of air passenger duty or similar charges. Other provisions include amounts in respect of potential liabilities for employeerelated matters.2019£ million2018£ millionCurrent 192 118Non-current 397 335589 453Maintenance provisions are expected to be utilised within ten years. Provisions for customer claims and other provisions are expectedto be utilised within one year.19. PENSIONSDue to the minimum guarantees in place under Swiss law, the Swiss pension plan meets IAS 19 requirements to be treated as a definedbenefit plan under IAS 19 despite the scheme having many attributes akin to a defined contribution scheme. The Swiss Federal Councilrequires that a guaranteed minimum interest rate must be achieved (currently 1%), plus a guaranteed minimum conversion rate to beapplied to accumulated pension on retirement (currently 6.8%). These guarantees mean that the scheme is accounted for as a definedbenefit scheme under IAS 19. The scheme remains open to new employees.The easyJet portion of the current service costs and the net interest cost are charged to the consolidated income statement in the yearin which they relate. Net interest is determined by multiplying the net defined benefit liability by the discount rate at the start of theannual reporting period, adjusted for any contributions and benefit payments in the period. Actuarial gains and losses are recognisedin the consolidated statement of comprehensive income and the consolidated balance reflects the net surplus or deficit at the balancesheet date.The defined benefit obligation is calculated using the projected unit credit method. This reflects service rendered by employees to thedates of valuation and incorporates actuarial assumptions including discount rates used in determining the present value of benefits,projected rates of remuneration growth and mortality rates. The present value of the defined benefit obligation is determined bydiscounting the estimated future cash outflows using yields of high-quality corporate bonds. Management base the discount rateon the bond yield on the Swiss bond market over 15 to 20 years, reflecting the currency in which the benefits will be paid, andmaturity terms approximating to the terms of the related pension obligation.The key financial assumptions used to calculate the Swiss scheme liabilities under IAS 19 as at 30 September were:2019 2018Discount rate 0.05% 1.10%Salary increase 1.00% 1.00%Demographic assumptions BVG 2015 GT BVG 2015 GTNOTES TO THE ACCOUNTS CONTINUED156 easyJet plc Annual Report and Accounts 2019www.easyJet.com 157DEMOGRAPHIC ASSUMPTIONSThe demographic assumptions including mortality assumptions used for the liability calculation are based on the most recent BVG 2015tables. These tables are based on the experience during the period 2010 to 2014 on 15 of the largest autonomous Swiss pension plansand are considered to be the best estimate available to management.SENSITIVITIESThe scheme asset values are sensitive to market conditions. The scheme liabilities are sensitive to actuarial assumptions used todetermine the scheme obligations. Changes in these assumptions could have a material impact on the consolidated statement offinancial position. The main assumptions are the discount rate, the rate of salary increase and the life expectancy rate. The followingtable provides an estimate of the potential impact on the pension scheme of changing these assumptions:Increase/(decrease) in definedbenefit obligation2019 2018Discount rate +0.5%-0.5% (7.6%)8.8% (7.0%)8.0%Salary increase +0.5%-0.5% 1.2%(1.1%) 0.7%(0.6%)Life expectancy +1 year-1 year 0.6%(0.7%) 0.4%(0.4%)easyJet has an affiliation contract with Swiss Life Collective BVG Foundation. The assets of all affiliated companies are pooled whichdiversifies the associated risk and the scheme assets represent the share in this Collection Foundation. The Collective controls theasset management, is exposed to the risk and guarantees the savings capitals under the contract in place. The Board of Trusteeswith the elected employees’ and employers’ representatives decide the investment strategy. The current agreement is “fully insured”by Swiss Life, which means that all underfunding, investment and longevity risks are transferred from easyJet to Swiss Life over theterm of the policy i.e. over the term of the policy when members retire, all payments are the liability of the pension scheme.The amounts recognised in the consolidated income statement are as follows:2019£ million2018£ millionCurrent service costs – defined benefit 7 7Interest cost on net defined benefit obligation 1 1Interest income on defined benefit asset (1) (1)Administration cost – –Net defined benefit cost recognised in income statement 7 7Amounts recognised in other comprehensive income:2019£ million2018£ millionActuarial loss/(gain) 18 2(Return) on plan assets (1) –Recognised in the statement of other comprehensive income 17 2Movement in net deficit in the year:£ million £ millionNet deficit of the plan at 1 October 29 27Net defined benefit cost recognised in income statement 7 7Net defined benefit cost/(gain)recognised in OCI 17 2Company contributions (7) (7)Foreign exchange 1 –Statement of financial position net deficit at 30 September 47 29The net deficit recognised in the statement of financial position includes a prepayment for cash paid over to Swiss Life in advance andnot yet utilised in the pension scheme.Expected employer cash contribution from the company in 2020 financial year is expected to be CHF 8 million.www.easyJet.com 157FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED158 easyJet plc Annual Report and Accounts 201919. PENSIONS CONTINUEDChanges in the present value of the defined benefit obligation are as follows:2019£ million2018£ millionPresent value of obligation at 1 October 118 106Current service cost 7 7Administration costs – –Member contributions 4 3Interest costs on defined benefit obligation 1 1Contributions paid by plan participants 2 6Benefit payments from scheme assets (6) (7)Actuarial (gain)/loss arising from financial adjustments 16 2Actuarial (gain)/loss arising from experience adjustments 2 –Foreign exchange 3 –Present value of obligation at 30 September 147 118Changes in the fair value of the scheme assets are as follows:2019£ million2018£ millionFair value of the scheme asset as at 1 October 89 79Interest income on the defined benefit plan assets 1 1Contributions paid by company 7 7Contributions paid by employees 4 3Contributions paid by plan participants 2 6Benefits paid from plan assets (6) (7)Return on plan assets 1 –Foreign exchange 2 –Fair value of the scheme asset as at 30 September 100 892019 2018Number of active participants 1,067 950Average age of active insured members in years 38 38Average time remaining before active employees reach final age in years 10 10Average active life expectancy in years 55 55Average years of service in years 8 8The weighted average duration of the defined benefit obligation of the Swiss pension scheme is 16 years (2018: 15 years).MATURITY PROFILE OF DEFINED BENEFIT OBLIGATIONExpected benefit payments during financial year ending 30 September 2019 plus:£m1 year 72 years 63 years 84 years 85 years 76 up to 10 years 38NOTES TO THE ACCOUNTS CONTINUED158 easyJet plc Annual Report and Accounts 2019www.easyJet.com 15920. SHARE CAPITALNumber Nominal value2019million2018million2019£ million2018£ millionAuthorisedAt 30 September 2019 and 30 September 2018Ordinary shares of 27 2/7 pence each 458 458 125 125Allotted, called up and fully paidAt 30 September 2019 and 30 September 2018 397 397 108 108There was no new share capital issued in the year.easyJet’s employee benefit trusts hold the following shares. The cost of these has been deducted from retained earnings:2019 2018Number of shares (million) 2 2Cost (£ million) 30 26Market value at year end (£ million) 27 2321. SHARE INCENTIVE SCHEMESeasyJet operates the following share incentive schemes, all of which are equity settled. The change in the number of awards outstandingand weighted average exercise prices during the year, and the number exercisable at each year end were as follows:Grant date 1 October 2018 GrantedForfeitedmillionExercisedmillion30 September2019millionLong Term Incentive Plan17 December 2013 0.1 – – – 0.119 December 2014 0.1 – – – 0.118 December 2015 0.3 – (0.3) – –19 December 2016 0.6 – (0.2) – 0.419 December 2017 0.8 – (0.2) – 0.619 December 2018 – 1.4 (0.1) – 1.3Restricted Share Plan19 December 2016 0.1 – – – 0.1Save As You Earn scheme1 July 2015 0.2 – (0.1) – 0.11 July 2016 0.6 – (0.1) – 0.51 July 2017 2.2 – (0.7) – 1.51 July 2018 0.9 – (0.5) – 0.41 July 2019 – 4.5 (0.1) – 4.4Share Incentive Plans 3.8 1.9 (0.2) (0.4) 5.19.7 7.8 (2.5) (0.4) 14.6Weighted average exercise prices are as follows:1 October 2018 Granted Forfeited Exercised30 September2019Save As You Earn scheme 11.20 8.02 11.38 – 9.09The exercise price of all awards save those disclosed in the above table is £nil.The number of awards exercisable at each year end and their weighted average exercise price is as follows:Price£Numbermillion2019 2018 2019 2018Long Term Incentive Plan – – 0.2 0.2Restricted Share Plan – – 0.1 –Save As You Earn scheme 11.98 13.23 0.6 0.20.9 0.4The weighted average remaining contractual life for each class of share award at 30 September 2019 is as follows:Years Long Term Incentive Plan 8.3 Restricted Share PlanSave As You Earn scheme 7.22.6 www.easyJet.com 159FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED160 easyJet plc Annual Report and Accounts 201921. SHARE INCENTIVE SCHEMES CONTINUEDLONG TERM INCENTIVE PLANThe plan is open, by invitation, to Executive Directors and Senior Management, and provides for annual awards of Performance Sharesworth up to 250% of salary each year. The vesting of these shares is dependent on return on capital employed (ROCE), earnings pershare (EPS) and total shareholder return (TSR) targets compared to FTSE-ranked companies at the start of the performance period.All awards have a three-year vesting period. 2019 awards are assessed on performance conditions measured over the three financialyears ended 30 September 2021.RESTRICTED SHARE PLANGranted in December 2016, the plan is open by invitation, to certain senior managers. The vesting of these shares is dependent onremaining in employment for a period of two years.SAVE AS YOU EARN SCHEMEThe scheme is open to all employees on the UK payroll. Participants may elect to save up to £500 per month under a three year savingscontract. An option is granted by the Company to buy shares at a discount of 20% from market price at the time of the grant. At theend of the savings period, the option becomes exercisable for a period of six months. Employees who are not paid through the UKpayroll may participate in the scheme under similar terms and conditions, albeit without the same tax benefits.SHARE INCENTIVE PLANThe plan is open to all employees on the UK payroll. Participants may invest up to £1,800 of their pre-tax salary each year to purchasepartnership shares in easyJet. For each partnership share acquired, easyJet purchases a matching share up to a maximum value of£1,500 per annum. Employees must remain with easyJet for three years from the date of purchase of each partnership share in orderto qualify for the matching share, and for five years for the shares to be transferred to them tax free. The employee is entitled todividends on shares purchased, and to vote at shareholder meetings.Subject to Company performance, easyJet also issues free shares to UK employees under an approved share incentive plan of upto £3,000 per annum in value. There is a similar unapproved free shares scheme for international employees.NOTES TO THE ACCOUNTS CONTINUED160 easyJet plc Annual Report and Accounts 2019www.easyJet.com 161The fair value of grants under the Save As You Earn scheme are calculated by applying the Binomial Lattice option pricing model.The fair value of grants under the TSR based Long Term Incentive Plan is estimated under the Stochastic model (also known as theMonte Carlo model). The fair value of grants under all other schemes is the share price on the date of grant. The following assumptionsare used:Grant dateShareprice£Exercise|price£Expectedvolatility%OptionlifeyearsRisk-freeinterest rate%Fairvalue£ Long Term Incentive Plan18 December 2012 – ROCE 7.37 – – – – 6.92 18 December 2012 – TSR 7.37 – 33% 3.0 0.44% 5.1617 December 2013 – ROCE 14.99 – – – – 14.9917 December 2013 – TSR 14.99 – 31% 3.0 0.76% 9.8319 December 2014 – ROCE 16.52 – – – – 16.5219 December 2014 – TSR 16.52 – 29% 3.0 0.78% 11.6518 December 2015 – ROCE 17.13 – – – – 17.1318 December 2015 – TSR 17.13 – 29% 3.0 0.81% 9.6919 December 2016 – ROCE 10.43 – – – – 10.4319 December 2016 – TSR 10.43 – 35% 3.0 1.40% 5.2119 December 2017 – ROCE 13.77 – – – – 13.7719 December 2017 – EPS 13.77 – – – – 13.7719 December 2017 – TSR 13.77 – 34% 3.0 1.15% 6.8919 December 2018 – ROCE 10.78 – – – – 10.7819 December 2018 – EPS 10.78 – – – – 10.7819 December 2018 – TSR 10.78 – 47% 3.0 1.27% 5.39Restricted Share Plan19 December 2016 10.43 – – – – 10.43Save As You Earn scheme1 July 2014 16.62 13.30 33% 3.5 1.64% 5.031 July 2015 16.54 13.23 31% 3.5 0.95% 4.421 July 2016 14.98 11.98 35% 3.5 0.20% 4.281 July 2017 12.11 9.69 31% 3.5 0.42% 2.841 July 2018 17.43 13.94 30% 3.5 0.88% 4.411 July 2019 10.03 8.02 33% 3.5 0.67% 2.70Share price for LTIPs is the closing share price from the last working day prior to the date of grant.Exercise price for the Save As You Earn scheme is set at a 20% discount from the share price at grant date.Expected volatility is based on historical volatility over a period comparable to the expected life of each type of option.Levels of early exercises and forfeitures are estimated using historical averages.The weighted average fair value of matching shares granted under the Share Incentive Plan during the year was £10.97 (2018: £15.44).For grants under the Save As You Earn scheme, the dividend yield assumption is calculated based on the actual yield at thedate of grant. For the options granted in 2019, the dividend yield assumption was 4.5% (2018: 3.2%; 2017: 4.2%; 2016: 3.5%;2015: 2.75%; 2014: 2%).The total share-based payment expense recognised for the year was £19 million (2018: £17 million).www.easyJet.com 161FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED162 easyJet plc Annual Report and Accounts 201922. RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS2019£ million2018£ millionOperating profit 466 463Adjustments for non-cash items:Depreciation 484 199Loss on disposal on intangibles – 4Commercial IT platform (credit)/charge (2) 60(Gain)/loss on sale and leaseback (2) 11Amortisation of intangible assets 15 15Share-based payments 19 17Changes in working capital and other items of an operating nature:Decrease/(increase) in trade and other receivables 37 (130)Increase in trade and other payables 43 303Increase in unearned revenue 105 150(Decrease)/increase in provisions (3) 121Increase in other non-current assets (20) (48)(Decrease)/increase in derivative financial instruments (32) 57Decrease in non-current deferred income (12) (7)Cash generated from operations 1,098 1,21523. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET CASH1 October 2018£ millionIFRS 16implementation£ millionFair value andforeignexchange£ millionLoan issuecostscapitalised andlease changes1£ millionNetcash flow£ million30 September2019£ million Cash and cash equivalentsMoney market deposits 1,025348 –– 50(5) –– 210(52) 1,285291 1,373 – 45 – 158 1,576 EurobondFinance lease obligations under IAS 17Lease liabilities arising under IFRS 16 (879)(98)– –98(629) (8)–(43) 6–(80) (443)–174 (1,324)–(578) (977) (531) (51) (74) (269) (1,902)Net cash/(debt) 396 (531) (6) (74) (111) (326)1. Lease changes includes new sale and leasebacks and lease extensions during the yearNOTES TO THE ACCOUNTS CONTINUED162 easyJet plc Annual Report and Accounts 2019www.easyJet.com 16324. FINANCIAL INSTRUMENTSCLASSIFICATION AND MEASUREMENTUnder IAS 39 ‘Financial Instruments: Recognition and Measurement’ easyJet previously classified and measured its financial instrumentsas follows:• Derivative financial instruments: classified and measured at fair value through profit or loss;• All other financial assets: classified as loans and receivables and measured at amortised cost; and• All other financial liabilities: classified as other liabilities and measured at amortised cost.Under IFRS 9 easyJet’s basis for classifying and measuring derivative financial instruments and other financial liabilities has remainedunchanged.In accordance with IFRS 9 easyJet has performed an assessment on its non-derivative financial assets to ascertain the appropriateaccounting treatment. Under this assessment all such financial assets, with the exception of money market funds and other equityinstruments, have been assessed as being held under the ‘hold to collect’ business model, and the related cash flows have beenassessed as representing ‘solely payments of principal and interest’ (‘SPPI’). On this basis, this group of financial assets have continuedto be classified and measured at amortised cost on adoption of IFRS 9. Whilst there has been no change in the measurementclassification of these instruments, a measurement difference has arisen on adoption of IFRS 9, primarily due to the enhancedimpairment requirements of IFRS 9 versus IAS 39.Under IFRS 9 money market funds have been classified and measured at fair value through profit or loss. easyJet’s assessment of theinstruments concluded that whilst these are also ‘hold to collect’ financial assets, they fail the SPPI test due to the fact the underlyingshort-term debt investments within the funds can be sold at the funds discretion. On adoption of IFRS 9, money market funds havetherefore been reclassified out of the amortised cost classification and into the fair value through profit or loss classification. However,due to the short-term, highly liquid nature of these instruments, their previous carrying values, under IAS 39, is considered to be materiallythe same as their fair value. As such, no measurement difference has arisen on adoption of IFRS 9.Other equity investments are non-derivative financial assets of unlisted investments, excluding interests in associates. On initialrecognition, these equity investments have been designated as measured at fair value through other comprehensive income.These equity investments did not previously require recognition under IAS 39.A summary of the changes to the classification and measurement bases of non-derivative financial assets under IFRS 9 is set out below:IAS 39 carryingamount at 30September 2018£ millionRe-classifications£ millionRemeasurements£ millionIFRS 9 carryingamount at1 October 2018£ millionEffect onretainedearnings at1 October 2018£ million Amortised cost:Other non-current assetsTrade and other receivablesRestricted cashMoney market depositsCash and cash equivalents 122406113481,025 ––––(665) ––––– 12240611348360 ––––– Fair value:Cash and cash equivalents – 665 – 665 –Equity investments – – 54 54 54The effect of adoption of IFRS 9 on the statement of financial position in the current period to 30 September 2019 is set out in note 1.www.easyJet.com 163FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED164 easyJet plc Annual Report and Accounts 201924. FINANCIAL INSTRUMENTS CONTINUEDCARRYING VALUE AND FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIESThe fair values of financial assets and liabilities, together with the carrying value at each reporting date, are as follows: Amortised costAt 30 September 2019Financialassets£ millionFinancialliabilities£ million Held at fair value Fair valuehedges£ millionCash flowhedges£ millionOther financialinstruments£ millionOther1£ millionCarryingvalue£ millionFairvalue£ million Other non-current assetsTrade and other receivablesTrade and other payables – (919)Derivative financial instruments – –Restricted cash 4 –Money market deposits 291 –Cash and cash equivalents 872 –Eurobonds3 – (1,324)Lease liabilities – (578)Equity investments2 – – – – – 1 142 142– – – 163 372 372– – – (131) (1,050) (1,050)73 (30) 20 – 63 63– – – – 4 4– – – – 291 291– – 413 – 1,285 1,285– – – – (1,324) (1368)– – – – (578) (580)– – 48 – 48 48 141 – 209 – Amortised cost Held at fair valueAt 30 September 2018Financialassets£ millionFinancialliabilities£ millionFair valuehedges£ millionCash flowhedges£ millionOther financialinstruments£ millionOther1£ millionCarryingvalue£ millionFairvalue£ millionOther non-current assets 120 – – – – 2 122 122Trade and other receivables 240 – – – – 166 406 406Trade and other payables – (894) – – – (129) (1,023) (1,023)Derivative financial instruments – – 64 300 – – 364 364Restricted cash 11 – – – – – 11 11Money market deposits 348 – – – – – 348 348Cash and cash equivalents 1,025 – – – – – 1,025 1,025Eurobonds3 – (879) – – – – (879) (908)Finance lease obligations – (98) – – – – (98) (100)Information presented for the comparative period ended 30 September 2018, is presented in accordance with IAS 39 and IFRS 7 Financial Instruments.Disclosures, as applicable to IAS 39. Information presented for the current period ended 30 September 2019, is presented in accordance with IFRS 9and IFRS 7, as modified by IFRS 9.1. Amounts disclosed in the ‘Other’ column are items that do not meet the definition of a financial instrument. They are disclosed to facilitate reconciliationof the carrying values of financial instruments to line items presented in the statement of financial position.2. The equity investment of £48 million represents a 13.2% shareholding in a non‐listed entity, The Airline Group Limited. Valuation movements aredesignated as being fair valued through other comprehensive income due to the nature of the investment being held for strategic purposes.A dividend of £3 million (2018: £3 million) was received during the year.3. For further information see Capital, Financing and Interest risk management section in note 27.NOTES TO THE ACCOUNTS CONTINUED164 easyJet plc Annual Report and Accounts 2019www.easyJet.com 165FAIR VALUE CALCULATION METHODOLOGYWhere available the fair values of derivatives and financial instruments have been determined by reference to observable market priceswhere the instruments are traded. Where market prices are not available, the fair value has been estimated by discounting expectedfuture cash flows at prevailing interest rates and by applying year end exchange rates (excluding the Airline Group Limited equityinvestment).The fair values of the three Eurobonds are classified as level 1 of the IFRS 13 Fair Value Measurement hierarchy (valuationstaken as the closing market trade price for each respective Eurobond as at 30 September 2019). Apart from the equity investment,the remaining financial instruments for which fair value is disclosed in the table above, and derivative financial instruments, are classifiedas level 2.The equity investment is classified as level 3 due to the use of forecast cash flows which are discounted to present value. Though thereare other level 2 inputs to the valuation, the discounted cash flow is a significant input which is not based on observable market data.The fair value is assessed at each reporting date based on the discounted cash flows and two other valuations calculated using a marketapproach and level 2 inputs. If the level 3 forecast cash flows were 10% higher or lower the fair value would not increase/decrease bya significant amount.The equity investment was recognised on adoption of IFRS 9 at 1 October 2018 at £54 million based on an external valuation. Using thesame methodology management performed the calculation as at 30 September 2019 resulting in a fair value reduction of £6 millionwhich was recognised in other comprehensive income.The fair value measurement hierarchy levels have been defined as follows;• Level 1, fair value of financial instruments based on quoted prices (unadjusted) in active markets for identical assets or liabilities.• Level 2, fair value of financial instruments in an active market (for example, over the counter derivatives) which are determined usingvaluation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates.• Level 3, fair value of financial instruments that are not based on observable market data (i.e. unobservable inputs).FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTSAt 30 September 2019QuantitymillionNon-currentassets£ millionCurrentassets£ millionCurrentliabilities£ millionNon-currentliabilities£ millionTotal£ million Designated as cash flow hedgesUS dollarEuroSwiss francSouth African RandJet fuelCross-currency interest rate swaps 2,7402,3384921343888 4341––– 10815–27– –(11)(9)–(118)– (2)(3)(5)–(55)(7) 1495(13)2(166)(7) Designated as fair value hedgesCross-currency interest rate swaps 379 73 – – – 73 Designated as fair value through profit or lossUS dollar 345 5 15 – – 20126 147 (138) (72) 63At 30 September 2018QuantitymillionNon-currentassets£ millionCurrentassets£ millionCurrentliabilities£ millionNon-currentliabilities£ millionTotal£ millionDesignated as cash flow hedgesUS dollar 2,627 25 22 (11) (1) 35 EuroSwiss francSouth African Rand 2,020429237 1–2 951 (12)(1)– (2)(4)– (4)–3 Jet fuelCross-currency interest rate swaps 3445 83– 183– –– –– 266– Designated as fair value hedgesCross-currency interest rate swaps 379 64 – – – 64175 220 (24) (7) 364www.easyJet.com 165FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED166 easyJet plc Annual Report and Accounts 201924. FINANCIAL INSTRUMENTS CONTINUEDFor foreign currency forward exchange contracts and exchange swap contracts, quantity represents the gross nominal value of currencycontracts held, disclosed in the contract currency. The cross-currency interest rate swap contracts are presented at the sterling notional.For jet fuel forward contracts quantity represents contracted metric tonnes.The majority of hedged foreign exchange and jet fuel transactions are expected to occur on various dates within the next 24 months.Accumulated gains and losses resulting from these transactions are deferred in the hedging reserve. They will be recognised in theincome statement in the periods that the hedged transactions impact the income statement. Where the gain or loss is included in theinitial amount recognised following the purchase of an aircraft, recognition in the income statement is over a period of up to 23 yearsin the form of depreciation of the purchased asset.Amounts related to USD foreign exchange derivatives held at fair value through profit or loss (e.g. not held in a hedge accountingrelationship) form part of the Group’s balance sheet retranslation risk management strategy. Fair valuation movements on thesederivatives are recognised in the income statement and offset foreign exchange movements on the corresponding notional amountof balance sheet liabilities held in USD. These trades are all expected to occur on various dates within the next 24 months.The Group maintains cross-currency interest rate swap contracts on fixed rate debt issuance as part of the approach to currency andinterest rate risk management. The cross-currency interest rate swap contracts are designated and qualify as either fair value or cashflow hedges to minimise volatility in the income statement.The following derivative financial instruments are subject to offsetting, enforceable master netting agreements:At 30 September 2019Grossamount£ millionAmountnot set off£ millionNetamount£ million Derivative financial instrumentsAssetsLiabilities 273(210) (143)143 130(67) 63 – 63At 30 September 2018Grossamount£ millionAmountnot set off£ millionNetamount£ millionDerivative financial instrumentsAssets 395 (31) 364Liabilities (31) 31 –364 – 364All financial assets and liabilities are presented gross on the face of the statement of financial position as the conditions for netting off, asspecified in IAS32 ‘Financial Instruments: Presentation’ are not met.25. GUARANTEES AND CONTINGENT LIABILITIESThe Group has given a formal undertaking to Hotelopia Holidays S.L.U, the Civil Aviation Authority (CAA) and the Trustees of the AirTravel Trust that it will guarantee easyJet bookings made on its behalf by Hotelopia. In the event the CAA publishes a notice of failurein respect of Hotelopia, the Group will honour all easyJet related bookings or enter into alternative arrangements for the bookings tobe fulfilled or compensated.easyJet is involved in a number of disputes and litigation which arose in the normal course of business. The likely outcome of thesedisputes and litigation cannot be predicted, and in complex cases reliable estimates of any potential obligation may not be possible.Having reviewed the information currently available, management considers that the ultimate resolution of these disputes and litigationis unlikely to have a material adverse effect on easyJet’s results, cash flows or financial position.As at 30 September 2019 easyJet had no agreements with third parties for which fees were contingent upon the completion ofacquisition activities (2018: nil).At 30 September 2019 easyJet had outstanding letters of credit and performance bonds totalling £34 million (2018: £33 million),of which £7 million (2018: £12 million) expire within one year. The fair value of these instruments at each year end was negligible.No amount is recognised on the statement of financial position in respect of any of these financial instruments as it is not probablethat there will be an outflow of resources.NOTES TO THE ACCOUNTS CONTINUED166 easyJet plc Annual Report and Accounts 2019www.easyJet.com 16726. GEOGRAPHICAL REVENUE ANALYSIS2019£ million2018£ millionUnited Kingdom 2,546 2,577Southern Europe 2,169 1,837Northern Europe 1,558 1,395Other 112 896,385 5,898Southern Europe comprises countries lying wholly or mainly south of the border between Italy and Switzerland, plus France.easyJet’s non-current assets principally comprise its fleet of 232 owned (2018: 220) and 99 leased aircraft (2018: 95), giving a total fleetof 331 at 30 September 2019 (2018: 315). 28 aircraft (2018: 26) are registered in Switzerland, 136 (2018: 113) are registered in Austria andthe remaining 167 (2018: 176) are registered in the United Kingdom.27. FINANCIAL RISK AND CAPITAL MANAGEMENTeasyJet is exposed to financial risks including fluctuations in exchange rates, jet fuel prices and interest rates. Financial risk managementaims to limit these market risks with selected derivative hedging instruments being used for this purpose. easyJet’s policy is not tospeculatively trade derivatives but use the instruments to hedge anticipated exposure and gain cash flow certainty. As such, easyJetis not exposed to market risk by using derivatives as any gains and losses arising are offset by the outcome of the underlying exposurebeing hedged. In addition to market risks, easyJet is exposed to credit and liquidity risk.The Board is responsible for setting financial risk and capital management policies and objectives which are implemented by the treasuryfunction on a day to day basis. The policy outlines the approach to risk management and also states the instruments and time periodswhich the treasury function is authorised to use in managing financial risks. The policy is regularly reviewed to ensure best practice.No significant changes were made during the current year with the exception of an update to take account of the financial risk arisingfrom FX translations of lease liabilities (predominantly in USD) following the adoption of IFRS 16.CAPITAL EMPLOYEDCapital employed comprises shareholders’ equity, borrowings (including amounts related to IFRS 16 lease liability), cash and moneymarket deposits (excluding restricted cash).Consequently, the capital employed at the end of the current and prior year and the return earned during those years were as follows: 2019 2018 (restated) Headline£ millionNon-headline£ millionTotal£ million Headline£ millionNon-headline£ millionTotal£ million 3,233 – 3,233977 – 977– – –(1,373) – (1,373) Capital employed 3,311 – 3,311 3,971 – 3,971 594 (132) 46251 3 54 Adjusted operating profit 466 – 466 645 (129) 516 Tax rate 19% 19% Adjusted operating profit after tax 377 – 377 522 (104) 418 Return on capital employed 11.4% 11.4% 14.6% 11.7% Shareholders’ equity 2,985 – 2,985 Borrowings 1,324 – 1,324 Lease liabilities 578 – 578 Cash and money market deposits (excludingrestricted cash) (1,576) – (1,576) Reported capital employed 3,311 – 3,311 2,837 – 2,837Operating lease adjustment – – – 1,134 – 1,134Reported operating profit 466 – 466 Implied interest in operating lease costs – – – Return on capital employed is calculated by dividing the adjusted operating profit after tax by the average of the opening and closingcapital employed.2018 is calculated using an operating lease adjustment applied under IAS 17 before the adoption of IFRS 16.www.easyJet.com 167FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED168 easyJet plc Annual Report and Accounts 201927. FINANCIAL RISK AND CAPITAL MANAGEMENT CONTINEDLIQUIDITY RISK MANAGEMENTThe objective of easyJet’s liquidity risk management is to ensure sufficient cash is available to meet future liabilities as they fall dueand ensure access to cost effective funding in various markets.easyJet continues to hold significant cash and liquid funds to mitigate the impact of potential business disruption events as well ashaving access to a revolving credit facility of $500 million. The $500 million revolving credit facility was agreed on 10 February 2015and was undrawn at 30 September 2019.On 1 December 2017 easyJet also entered into a bespoke Business Interruption Insurance product that pays out up to £150 million inthe event of specific liquidity stress scenarios (with standard insurance exclusions).easyJet has a target minimum liquidity requirement to cover peak unearned revenue with a minimum of £2.6 million per 100 seatsin the fleet. In assessing this liquidity metric, both revolving credit facilities and Business Interruption Insurance need to be taken intoconsideration. Total cash (excluding restricted cash) and money market deposits at 30 September 2019 was £1,576 million (2018:£1,373 million). Surplus funds are invested in high quality short-term liquid instruments, mainly money market funds, bank depositsand tri-party repos.The maturity profile of financial liabilities based on undiscounted cash flows and contractual maturities is as follows: At 30 September 2019Within 1 year£ million 1-2 years£ million 2-5 years£ million Over 5 years£ million Borrowings 17Trade and other payables 919Lease liabilities 230FX and jet derivative contracts – receipts (3,344)FX and jet derivative contracts – payments 3,292Cross-currency swap contracts – receipts (17)Cross-currency swap contracts – payments 32 17–195(1,577)1,523(17)32 929–148(82)80(929)898 447–64––(447)453 At 30 September 2018Within 1 year£ million1-2 years£ million2-5 years£ millionOver 5 years£ millionBorrowings 26 32 558 450Trade and other payables 894 – – –FX and jet derivative contracts – receipts (3,184) (1,282) (68) –FX and jet derivative contracts – payments 3,161 1,228 65 –Cross-currency swap contracts – receipts (13) (13) (484) (450)Cross-currency swap contracts – payments 22 22 439 450The maturity profile has been calculated based on spot rates for the US dollar, Euro, Swiss franc, South African rand and jet fuel at closeof business on 30 September each year.NOTES TO THE ACCOUNTS CONTINUED168 easyJet plc Annual Report and Accounts 2019www.easyJet.com 169CREDIT RISK MANAGEMENTeasyJet is exposed to credit risk arising from cash and money market deposits, derivative financial instruments and trade and otherreceivables. Credit risk management aims to reduce the risk of default by setting limits on credit exposure to counterparties basedon their respective credit ratings. Credit ratings also determine the maximum period of investment when placing funds on deposit.The maximum exposure to credit risk at the reporting date is equal to the carrying value of its financial assets, excluding tri-partyrepo, which are securitised by high quality, investment grade financial assets.Counterparties for cash investments and derivatives contracts are required to have a long-term credit rating of A- or better atcontract inception from either Moody’s, Standard & Poor’s or Fitch rating agencies (except where there is a specific regulatory,contractual requirement or a bank guarantee from an A- rated entity). Exposures to these counterparties are regularly reviewedand, if the long-term credit rating falls below A- management will make a decision on remedial action to be taken.The credit rating of counterparties that easyJet holds financial assets with are as follows:At 30 September 2019A- and above£ millionBelow A-£ millionOther£ millionTotal£ million Financial AssetsTrade receivablesOther non-current assetsDerivative financial instrumentsRestricted cashMoney market depositsCash and cash equivalents ––13042911,282 –––––3 372142–––– 37214213042911,285 Total 1,707 3 514 2,224At 30 September 2018A- and above£ millionBelow A-£ millionOther£ millionTotal£ millionFinancial AssetsTrade receivables – – 406 406Other non-current assets – – 122 122Derivative financial instruments 364 – – 364Restricted cash 11 – – 11Money market deposits 348 – – 348Cash and cash equivalents 1,022 3 – 1,025Total 1,745 3 528 2,276At the end of each reporting date easyJet recognises a loss allowance for expected credit losses on financial assets measured atamortised cost. In establishing the appropriate amount of loss allowance to be recognised, easyJet applies either the general approachor the simplified approach, depending on the nature of the underlying group of financial assets.The general approach is applied to the impairment assessment of refundable lease deposits and other refundable lease contributions,restricted cash, money market deposits and cash and cash equivalents.Under the general approach easyJet recognises a loss allowance for a financial asset at an amount equal to the 12-month expectedcredit losses, unless the credit risk on the financial asset has increased significantly since initial recognition, in which case a loss allowanceis recognised at an amount equal to the lifetime expected credit losses.At 30 September 2019 this was considered immaterial. This is due to easyJet’s strict policy of investing only with counterpartieswho hold a high, investment grade credit standing (except in specific circumstances) as detailed in the tables above.The simplified approach is applied to the impairment assessment of trade and other receivables.Under the simplified approach easyJet always recognises a loss allowance for a financial asset at an amount equal to the lifetimeexpected credit losses using the historic loss methodology to calculating an impairment provision.At 30 September 2019 this was considered immaterial. The exposure to individual customer’s credit risk is reduced as no individualcustomer accounts for a substantial proportion of the total revenue and most payments are collected in advance of the servicebeing provided.FOREIGN CURRENCY RISK MANAGEMENTThe majority of easyJet’s exposure to currency arises from fluctuations in the US dollar, Euro and Swiss franc exchange rates whichcan significantly impact easyJet’s financial results and cash flows. The aim of the foreign currency risk management is to reduce theimpact of these exchange rate fluctuations.Significant currency exposures in the income statement are managed through the use of currency forward contracts entered intoa cash flow hedge relationships, in line with the board approved policy. The policy states that easyJet hedges between 65% – 85% ofthe next 12 months forecast surplus operating cash flows on a rolling basis, and 45% – 65% of the following 12 months forecast surplusoperating cash flows on a rolling basis.Significant currency exposures relating to the acquisition cost or sale proceeds of aircraft are also managed through the use of currencyforward contracts and FX swap contracts where up to 90% of the next 18 months forecast requirement is hedged. In addition, easyJethas substantial borrowings and other monetary liabilities denominated in US dollars and Euros, which are largely offset by holding USdollar and Euro cash and money market deposits.www.easyJet.com 169FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED170 easyJet plc Annual Report and Accounts 201927. FINANCIAL RISK AND CAPITAL MANAGEMENT CONTINUEDSignificant currency exposures relating to foreign currency denominated debt issuances are managed through the use of cross-currencyinterest rate swap contracts, where deemed appropriate. These hedges are designated as either fair value hedges or cash flow hedges.During the year easyJet entered into FX forward contracts for the purposes of managing the foreign exchange risk created as a resultof the adoption of the IFRS 16: As part of the new standard the Group has recognised £578 million in lease liabilities, the majority of whichare denominated in USD. Lease liability amounts are classified as monetary financial instruments, with retranslation amounts resultingfrom movements in foreign exchange rates in the period (into the functional currency of GBP) going through the income statement.FX forward contracts classified as fair value through profit or loss (e.g. not designated in a hedge relationship) are used as part of theGroup’s risk management strategy to reduce this foreign exchange risk in the income statement.Management may take action to hedge other currency exposures as deemed appropriate.The volume of transactions in a hedge relationship that occurred during the financial year to manage the foreign currency risk wereas follows:• USD – £1,614 million• EURO – £1,434 million• CHF – £269 million• ZAR – £103 millionThe gains and losses that arose from these hedge transactions during the year were as follows:• USD – £57 million gain• EURO – £9 million loss• CHF – £4 million gain• ZAR – £2 million gainCAPITAL, FINANCING AND INTEREST RATE RISK MANAGEMENTThe objective of capital management is to ensure that easyJet is able to continue as a going concern whilst delivering shareholderexpectations of a strong capital base as well as returning benefits for other stakeholders.On 30 September 2019, easyJet held long-term corporate credit ratings from both Standard & Poor’s (BBB+) and Moody’s (Baa1).easyJet plc established a £3,000 million Euro Medium Term Note programme on 7 January 2016, with any debt issuances under thisscheme being guaranteed by easyJet Airline Company Limited. Subsequently easyJet plc has issued three bonds under this programme.In February 2016, easyJet plc issued a €500 million bond guaranteed by easyJet Airline Company Limited. The Eurobond pays an annualfixed coupon of 1.750%. At the same time the Group entered into three cross-currency interest rate swaps to convert the entire €500million fixed rate Eurobond to a Sterling floating rate exposure. All three swaps pay floating interest (three-month LIBOR plus a margin)quarterly, receive fixed interest annually, and have maturities matching the Eurobond. The Group designated all three cross-currencyinterest rate swaps as a fair value hedge of the interest rate and currency risks on the €500 million Eurobond. The swaps are measuredat fair value through profit or loss with any gains or losses being taken immediately to the income statement (except where relatedto timing differences related to cross-currency basis amortisation). The carrying value of the Eurobond is adjusted for changes in fairvalue attributable to the risks being hedged. This net carrying value differs to the swap’s fair value depending on movements in theGroup’s credit risk and cross-currency basis. The carrying value of the fixed rate Eurobond net of the cross-currency interest rateswap at 30 September 2019 was £378 million. This value does not include capitalised set-up costs incurred in the issuing of the bond.The lifetime fair value adjustment to the bond hedging instrument on the statement of financial position was £(72) million. During theyear fair value adjustments totalled £(10) million which were offset by materially equal and opposite movements on the hedginginstruments. Movements related to the hedging of foreign exchange in the year were £2 million with the remaining fair value movementsrelating to the hedging of interest risk.In October 2016 easyJet plc issued a €500 million bond under the £3,000 million Euro Medium Term Note Programme guaranteed byeasyJet Airline Company Limited. The Eurobond pays an annual fixed coupon of 1.125%. Shortly after the issuance of the €500 millionbond the Group entered into three cross-currency interest rate swaps to convert the entire €500 million fixed rate Eurobond to aSterling fixed rate exposure. The cross-currency interest rate swaps were executed on 8 November 2016 with settlement and notionalexchange occurring on 14 November 2016. All three swaps pay fixed interest semi-annually, receive fixed interest annually, and havematurities matching the Eurobond. The Group designated all three cross-currency interest rate swaps as a cash flow hedge of thecurrency risk on the €500 million Eurobond. The cross-currency interest rate swaps are measured at fair value with the effectiveportion taken through the statement of comprehensive income. The element of the fair value generated by the change in the spotrate is recycled to the income statement from the statement of comprehensive income to offset the revaluation of the Eurobond.The carrying value of the fixed rate Eurobond net of the cross-currency interest rate swap at 30 September 2019 was £446 million.This value does not include capitalised set-up costs incurred in the issuing of the bond.In June 2019 easyJet plc issued a €500 million bond guaranteed by easyJet Airline Company Limited. The Eurobond pays an annual fixedcoupon of 0.875%. At the same time the Group entered into three cross-currency interest rate swaps to convert the entire €500 millionfixed rate Eurobond to a Sterling fixed rate exposure. All three swaps pay fixed interest semi-annually, receive fixed interest annually,and have maturities matching the Eurobond. The Group designated all three cross-currency interest rate swaps as a cash flow hedgeof the currency risk on the €500 million Eurobond. The cross-currency interest rate swaps are measured at fair value with the effectiveportion taken through the statement of comprehensive income. The element of the fair value generated by the change in the spotrate is recycled to the income statement from the statement of comprehensive income to offset the revaluation of the Eurobond.The carrying value of the fixed rate Eurobond net of the cross-currency interest rate swap at 30 September 2019 was £448 million.This value does not include capitalised set-up costs incurred in the issuing of the bond.NOTES TO THE ACCOUNTS CONTINUED170 easyJet plc Annual Report and Accounts 2019www.easyJet.com 171The weighted average interest GBP interest rate hedged for the three bonds was 2.55% with a weighted average GBP/EUR foreignexchange hedge rate of 1.19.Interest rate cash flow risk arises on floating rate borrowings and cash investments.Interest rate risk management policy aims to provide certainty in a proportion of financing while retaining the opportunity to benefit frominterest rate reductions. Borrowings are issued at either fixed or floating interest rates repricing every three to six months. A significantproportion of the US dollar liabilities are matched with US dollar cash assets by value. Aircraft leases are a mix of fixed and floating rates.Of the 99 aircraft leases in place at 30 September 2019 (2018: 95), 83% were based on fixed interest rates and 17% were based onfloating interest rates (2018: 82% fixed, 18% floating).COMMODITY PRICE RISK MANAGEMENTThe Group is exposed to commodity risk in the form of jet fuel and Carbon EU Emissions Trading System (ETS) price risk.The objective of the fuel price risk management policy is to provide protection against sudden and significant increases in jet fuel prices,thus mitigating volatility in the income statement in the short-term. In order to manage the risk exposure, forward contracts are usedin line with the Board approved policy to hedge between 65% and 85% of estimated exposures up to 12 months in advance, and tohedge between 45% and 65% of estimated exposures from 13 up to 24 months in advance. Jet fuel derivatives are entered into acash flow hedge relationship against the future forecasted jet fuel usage. Specific decisions may require consideration of a longerterm approach. Treasury strategies and actions will be driven by the need to meet treasury, financial and corporate objectives.The Group has a regulatory requirement to surrender ETS carbon allowances on an annual basis to the relevant environmental agencies,relative to the amount of carbon emissions in the period. easyJet is required to purchase ETS allowances on the open market to fulfilthis requirement and is exposed to price movements that can introduce volatility to the income statement. To mitigate this exposure,forward contracts are used in line with board approved policy to hedge up to 95% of anticipated exposure up to 24 months out.These contracts are not classified as a financial instruments as they fall within the own use provision under IFRS 9.The volume of hedge transactions that occurred during the financial year to manage the jet commodity price risk was 3 millionmetric tonnes. This resulted in a £97 million gain in the income statement.MARKET RISK SENSITIVITY ANALYSISFinancial assets and liabilities affected by market risk include borrowings, lease liabilities, deposits, trade and other receivables, tradeand other payables and derivative financial instruments. The following analysis illustrates the sensitivity of changes in relevant foreignexchange rates, interest rates and fuel prices. It should be noted that the analysis reflects the impact on profit or loss after tax forthe year and other comprehensive income on financial instruments in a cash flow hedge relationship held at the reporting date. Thesensitivities are calculated based on all other variables remaining constant. The analysis is considered representative of easyJet’sexposure over the next 12-month period.The sensitivity analysis is based on easyJet’s financial assets and liabilities and financial instruments held as at 30 September 2019.The currency exchange rate analysis assumes a +/-10% change in both US dollar and Euro exchange rates.The interest rate analysis assumes a 1% increase in interest rates over the next 12 months.The fuel price analysis assumes a 10% increase in fuel price over the next 12 month.Currency ratesUS dollar+10%1US dollar-10%2Euro+10%1Euro-10%2Interest rates1% increaseFuel price 10%increaseAt 30 September 2019 £ million £ million £ million £ million £ million £ millionIncome statement impact: gain/(loss) 87 (71) 5 (4) 11 –Impact on other comprehensive income:increase/(decrease) 180 (147) 4 (3) – 136Currency ratesUS dollar+10%1US dollar-10%2Euro+10%1Euro-10%2Interest rates1% increaseFuel price 10%increaseAt 30 September 2018 £ million £ million £ million £ million £ million £ millionIncome statement impact: gain/(loss) 33 (27) 7 (6) 8 –Impact on other comprehensive income:increase/(decrease) 191 (156) 20 (16) – 1341. GBP weakened.2. GBP strengthened.The market risk sensitivity analysis has been calculated on spot rates for the US dollar, Euro and jet fuel at close of business on 30 September each year.www.easyJet.com 171FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSNOTES TO THE ACCOUNTS CONTINUED172 easyJet plc Annual Report and Accounts 201927. FINANCIAL RISK AND CAPITAL MANAGEMENT CONTINUEDAPPLICATION OF HEDGE ACCOUNTINGOn adoption of IFRS 9 easyJet has elected to separate changes in the value of cross-currency interest rate swaps arising as a result offoreign currency basis spread, when designating the swap as a hedging instrument. Changes in value relating to foreign currency basisspread no longer form part of the designated hedging instrument, and are instead recognised through other comprehensive income,held in a separate cost of hedging reserve, and are subsequently amortised on a rational basis. This has resulted in a reclassificationof £4 million between the hedging reserve and the cost of hedging reserve on 1 October 2018.IMPACT ON THE FINANCIAL STATEMENTS DURING THE PERIOD ENDED 30 SEPTEMBER 2019The effect of adoption of IFRS 9 on the statement of financial position in the current period to 30 September 2019 is set out in note 1.Details of major hedging arrangement at the reporting date are set out below broken down by the notional maturity of hedgeinstruments and average rates in local currency.Hedge instrument (notional in millions) Within one yearGreater thanone yearJet fuel hedged notional 2 1Average hedge rate 655 640USD foreign exchange hedged notional 1,529 1,211Average hedge rate 1.36 1.30EUR foreign exchange hedged notional 1,865 473Average hedge rate 1.12 1.10CHF foreign exchange hedged notional 296 196Average hedge rate 1.27 1.23ZAR foreign exchange hedged notional 108 26Average hedge rate 28.25 29.54HEDGE EFFECTIVENESSHedge effectiveness testing on all relationships is performed at each reporting date. Whilst the critical terms matching of the Group’shedge relationships means that any ineffectiveness should be minimal it can be driven by factors such as material changes in credit risk,changes in the timings or amounts of the hedged items. During the year fair value movements of £214 million held in a cash flow hedgerelationship was materially the same as movements in hedge instrument hypotheticals.Hedge ineffectiveness of £1 million was recognised through the income statement in the period relating to cross-currency interest rateswaps and timing differences on foreign exchange forward hedges. This was recognised within interest payable and other financecharges, as a non-headline item.NOTES TO THE ACCOUNTS CONTINUED172 easyJet plc Annual Report and Accounts 2019www.easyJet.com 17328. RELATED PARTY TRANSACTIONSThe Company licenses the easyJet brand from easyGroup Limited (‘easyGroup’), a wholly owned subsidiary of easyGroup HoldingsLimited, an entity in which easyJet’s founder, Sir Stelios Haji-Ioannou, holds a beneficial controlling interest. The Haji-Ioannou familyconcert party shareholding (being easyGroup Holdings Limited and Polys Holding Limited) holds, in total, approximately 33% of theissued share capital of easyJet plc as at 30 September 2019.Under the Amended Brand Licence signed in October 2010 and approved by the shareholders of easyJet plc in December 2010,an annual royalty of 0.25% of total revenue is payable by easyJet to easyGroup for a minimum term of 10 years. The full term ofagreement is 50 years.easyJet and easyGroup established a fund to meet the annual costs of protecting the ‘easy’ (and related marks) and the ‘easyJet’ brands.easyJet contributes up to £1 million per annum to this fund and easyGroup contributes £100,000 per annum. Beyond the first £1.1 millionof costs, easyJet can commit up to an aggregate £5.5 million annually to meet brand protection costs, with easyGroup continuing tomeet its share of costs on a 10:1 ratio. easyJet must meet 100% of any brand protection costs it wishes to incur above this limit.A side letter to the Brand Licence was entered with easyGroup, dated 29 September 2016, under which, in return for easyGroupconsenting to easyJet acquiring a portion of the equity share capital in Founders Factory Limited, easyJet made a payment of £1.The amounts included in the income statement, within Other costs, for these items were as follows:2019£ million2018£ millionAnnual royalty 16 15Brand protection (legal fees paid through easyGroup to third parties) 1 117 16At 30 September 2019, £0.9 million (2018: £3 million) of the above aggregate amount was included in trade and other payables.29. EVENTS AFTER THE REPORTING PERIODeasyJet acquired Thomas Cook’s slots at Gatwick Airport (12 summer slot pairs and eight winter slot pairs) and Bristol Airport(six summer slot pairs and one winter slot pair) for £36 million. Contractual terms have concluded and the slots have beenawarded to easyJet.www.easyJet.com 173FINANCIAL STATEMENTS NOTES TO THE ACCOUNTSCOMPANY STATEMENT OF FINANCIAL POSITION174 easyJet plc Annual Report and Accounts 2019Notes30 September2019£ million30 September2018(restated)£ million1 October 2017(restated)£ millionNon-current assetsInvestments in subsidiary undertakings c 945 d 73 1 927 910Derivative financial instruments with subsidiary undertakings 63 62Deferred tax asset – –1,019 990 972Current assetsAmounts due from subsidiary undertakings 1,854 1,626 1,582Current tax asset – – 21,854 1,626 1,584 Current liabilitiesAmounts due to subsidiary undertakingsCurrent tax payable (3)(2) (1) (2)(5) –(5) (6) (2)Net current assets 1,849 1,620 1,582Non-current liabilitiesBorrowings e (1,324) (879) (870)Derivative financial instruments with subsidiary undertakings d (8) – (8)(1,332) (879) (878)Net assets 1,536 1,731 1,676Shareholders’ equityShare capital 108 108 108Share premium 659 659 659Hedging reserve (15) (1) (3)Cost of hedging reserve 8 – –Retained earnings 776 965 9121,536 1,731 1,676In accordance with Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own incomestatement and statement of comprehensive income. The Company’s profit for the year was £25 million (2018: £198 million). Includedin this amount are dividends received of £15 million (2018: £177 million), which are recognised when the right to receive payment isestablished. The Company recognised no other income or expenses in either the current or prior year, other than the profit for each year.The accounts on pages 174 to 178 were approved by the Board of Directors and authorised for issue on 18 November 2019 and signedon behalf of the Board.JOHAN LUNDGREN ANDREW FINDLAYDirector Director174 easyJet plc Annual Report and Accounts 2019COMPANY STATEMENT OF CHANGES IN EQUITYwww.easyJet.com 175Sharecapital£ millionSharepremium£ millionHedgingreserve£ millionCost of hedgingreserve£ millionRetainedearnings£ millionTotal£ million At 30 September 2018Recognition on adoption of IFRS 9At 1 October 2018Total comprehensive incomeDividends paidShare incentive schemesMovement in reserves for employee share schemes 108–108–– 659–659–– (1)(5)(6)(9)– –444– 965196625(233) 1,731–1,73120(233) – – – – 18 18 At 30 September 2019 108 659 (15) 8 776 1,536Sharecapital£ millionSharepremium£ millionHedgingreserve£ millionCost of hedgingreserve£ millionRetainedearnings£ millionTotal£ millionAt 1 October 2017 108 659 (3) – 912 1,679Total comprehensive income – – 2 – 198 200Dividends paid – – – – (162) (162)Share incentive schemesMovement in reserves for employee share schemes – – – – 17 17At 30 September 2018 108 659 (1) – 965 1,731An ordinary dividend in respect of the year ended 30 September 2019 of 43.9 pence per share or £174 million, based on headlineprofit after tax, is to be proposed at the forthcoming Annual General Meeting. These accounts do not reflect this proposed dividend.An ordinary dividend of 58.6 pence per share, or £233 million in respect of the year ended 30 September 2018 was paid in the yearended 30 September 2019. An ordinary dividend of 40.9 pence per share, or £162 million, in respect of the year ended 30 September2017 was paid in the year ended 30 September 2018.The disclosures required in respect of share capital are shown in note 20 to the consolidated accounts.COMPANY STATEMENT OF CASH FLOWSNotesYear ended30 September2019£ millionYear ended30 September2018£ millionCash flows from operating activitiesCash used by operations (excluding dividends) f 223 36 (26)Interest received 40Interest paid (34) (29)Dividends received 15 177Dividends paid (233) (162)Tax paid (7) –Net cash used by operating activities – –Cash flows from financing activitiesProceeds from drawdown of bank loans and other borrowings 443 –Movement in loans with subsidiary undertakings (443) –Net movement in cash and cash equivalents – –Cash and cash equivalents at beginning and end of year – –www.easyJet.com 175FINANCIAL STATEMENTS COMPANY ACCOUNTSNotes to the company accounts176 easyJet plc Annual Report and Accounts 2019A) SIGNIFICANT ACCOUNTING POLICIESThe significant accounting policies applied in the preparation of these Company accounts are the same as those set out in note1 to the consolidated accounts with the addition of the following:INVESTMENTSInvestments in subsidiaries are stated at cost, less any provision for impairment. Where subsidiary undertakings incur charges forshare-based payments in respect of share options and awards granted by the Company, a capital contribution in the same amountis recognised as an investment in subsidiary undertakings with a corresponding credit to shareholders’ equity.PRIOR YEAR ADJUSTMENTA prior period adjustment has been made to the Derivative Financial Instruments with Subsidiary classification to align with the treatmentof these line items within the Group accounts within the statement of financial position. Previously these amounts were classifiedas current assets on a net basis due to the amounts being related to inter-company cross currency interest rate swaps with a solesubsidiary (easyJet Airline Company Limited). These cross currency interest rate swaps are used to manage foreign currency andinterest rate risks on Eurobond debt items and are held within hedge accounting relationships. The Eurobond items are non-currentin nature and the external interest rate swaps align and should be presented as non-current.The impact of this restatement on the statement of financial position as at 30 September 2018 has resulted in £63 million beingreclassified from current assets to non-current assets. There was no impact on net assets or retained earnings.B) INCOME STATEMENT AND STATEMENT OF TOTAL COMPREHENSIVE INCOMEIn accordance with Section 408 of the Companies Act 2006, the Company is exempt from the requirement to present its own incomestatement and statement of comprehensive income. The Company’s profit for the year was £25 million (2018: £198 million). Includedin this amount are dividends received of £15 million (2018: £177 million), which are recognised when the right to receive payment isestablished. The Company recognised no other income or expenses in either the current or prior year, other than the profit for each year.The Company has eight employees at 30 September 2019 (2018: seven). These employees are the Non-Executive Directors of easyJetplc; their remuneration is paid by easyJet Airline Company Limited. The Executive Directors of easyJet plc are employed and paid byeasyJet Airline Company Limited. Details of Directors’ remuneration are disclosed in note 4 to the consolidated accounts and in theDirectors’ remuneration report on pages 96 to 115.C) INVESTMENTS IN SUBSIDIARY UNDERTAKINGSInvestments in subsidiary undertakings were as follows:2019£ million2018£ millionAt 1 October 927 910Capital contributions to subsidiaries 18 17At 30 September 945 927A full list of Group companies are detailed below.Country of incorporation Principal activityPercentage ofordinaryshares heldeasyJet Airline Company Limited2 England and Wales Airline operator 100easyJet Switzerland S.A.3 Switzerland Airline operator 49Dawn Licensing Holdings Limited4 Malta Holding company 100Dawn Licensing Limited4 Malta Graphic design 100easyJet Sterling Limited1, 5 Cayman Islands Aircraft trading and leasing 100easyJet Leasing Limited1, 5 Cayman Islands Aircraft trading and leasing 100easyJet UK Limited2 England and Wales Air transport 100easyJet Holidays Holdings Limited2 England and Wales Holding company 100easyJet Holidays Limited2 England and Wales Tour operator 100easyJet Holidays Transport Limited2 England and Wales Air transport 100easyJet Europe Airline GmbH6 Austria Airline operator 100SALEM Beteiligungsverwaltungachtundachtzigste GmbH6 Austria Holding company 1001. Although these companies are Cayman Islands incorporated they have always been, and continue to be, UK tax resident.2. Hangar 89, London Luton Airport, Luton, Bedfordshire, LU2 9PF.3. Route de l’Aeroport, Meyrin, CH-1215 Geneve 15, Switzerland.4. Sterling Buildings, The Penthouse, Enrico Mizzi Street, Ta’ Xbiex, XBX 1453, Malta.5. Governor’s Square, West Bay Road, Lime Tree Bay Road, UNIT # 2-105 , PO Box 1982, Grand Cayman KY1-1104, Cayman Islands.6. Wagramer Straße 19, 11.Stock IZD Tower, 1220 Wien, Austria.176 easyJet plc Annual Report and Accounts 2019www.easyJet.com 177The Company has a 49% interest in easyJet Switzerland S.A. with an option to acquire the remaining 51%. The option is automaticallyextended for a further year on a rolling basis, unless the option is terminated by written agreement prior to the automatic renewal date.easyJet Switzerland S.A. is a subsidiary on the basis that the Company exercises a dominant influence over the undertaking. A noncontrolling interest has not been reflected in the consolidated accounts on the basis that holders of the remaining 51% of the shareshave no entitlement to any dividends from that holding and the Company has an option to acquire those shares for a predeterminedminimal consideration.D) FINANCIAL INSTRUMENTSIn February 2016, easyJet plc issued a €500 million bond under the £3,000 million Euro Medium Term Note Programme guaranteedby easyJet Airline Company Limited. The Eurobond pays an annual fixed coupon of 1.750%. At the same time the Group entered intothree cross-currency interest rate swaps to convert the entire €500 million fixed rate Eurobond to a floating rate Sterling exposure.In October 2016 easyJet plc issued €500 million bond under the £3,000 million Euro Medium Term Note Programme guaranteedby easyJet Airline Company Limited. The Eurobond pays an annual fixed coupon of 1.125%. At the same time the Group entered intothree cross-currency interest rate swaps to convert the entire €500 million fixed rate Eurobond to a Sterling fixed rate exposure.In June 2019 easyJet plc issued €500 million a bond under the £3,000 million Euro Medium Term Note Programme guaranteed byeasyJet Airline Company Limited. The Eurobond pays an annual fixed coupon of 0.875%. At the same time the Group entered intothree cross-currency interest rate swaps to convert the entire €500 million fixed rate Eurobond to a fixed rate Sterling exposure.For further details please refer to note 27 of the consolidated accounts.E) BORROWINGSNon-current£ millionTotal£ million At 30 September 2019Eurobond 1,324 1,324 Non-current£ millionTotal£ millionAt 30 September 2018Eurobond 879 879On 1 August 2018 easyJet signed a £250 million revolving credit facility with a two-year term. The facility was cancelled in June 2019following the bond issue.For further details please see the disclosures shown in note 15 to the consolidated accounts.F) RECONCILIATION OF PROFIT FOR THE YEAR TO CASH GENERATED FROM OPERATIONS2019£ million2018£ millionProfit for the year 25 198Adjustments for:Finance and other similar income (9) (12)Unrealised foreign exchange differences (3) (11)Tax charge 2 5Dividends received (15) (177)Operating cash flows before movement in working capital – 3Changes in working capital and other items of an operating nature:Decrease/(increase) in amounts due from subsidiary undertakings 220 (29)Increase/(decrease) in amounts due to subsidiary undertakings 1 (1)Increase in derivative financial instruments 2 1223 (26)www.easyJet.com 177FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTSNOTES TO THE COMPANY ACCOUNTS CONTINUED178 easyJet plc Annual Report and Accounts 2019G) GUARANTEES AND CONTINGENT LIABILITIESThe Company has given a formal undertaking to the Civil Aviation Authority to guarantee the payment and discharge of all liabilitiesof easyJet UK Limited, a subsidiary of the Company. The guarantee is required for that company to maintain its operating licenceunder Regulation 3 of the Licensing of Air Carriers Regulations 1992.The Company has issued a guarantee in favour of easyJet Airline Company Limited, a subsidiary undertaking, in relation to theprocessing of credit card transactions, and also in respect of hedging transactions carried out according to treasury policy.The Company has guaranteed the contractual obligations of easyJet Airline Company Limited and easyJet Leasing Limited,both subsidiary undertakings, in respect of its contractual obligations to Airbus SAS in respect of the supply of Airbus 320 family aircraft.The company has guaranteed the contractual obligations of easyJet Holidays Limited, a subsidiary undertaking, with regards to paymentobligations to Atcore Technology Limited.The Company has guaranteed the repayment of borrowings that financed the acquisition of aircraft by subsidiary undertakings. TheCompany has also guaranteed the payment obligations for the lease of aircraft by subsidiary undertakings.The Company has guaranteed certain letters of credit issued on behalf of subsidiary undertakings.The company has guaranteed the contractual obligations of easyJet Airline Company Limited, a subsidiary undertaking, in respect of a$500 million revolving credit facility. The revolving credit facility was agreed during the year ended 30 September 2015, for a minimumof five years, and was undrawn at 30 September 2019 and 30 September 2018. The facility is currently due to mature in February 2022.No amount is recognised on the Company statement of financial position in respect to any of these guarantees as it is not probablethat there will be an outflow of resources.H) RELATED PARTY TRANSACTIONSTransactions with subsidiary undertakings, which principally relate to the provision of funding within the Group, are carried out onan arm’s length basis. Outstanding balances are placed on intercompany accounts with no specified credit period, are unsecured,and bear market rates of interest. Amounts due from subsidiaries are repayable on demand.During the financial year the Company received a dividend from easyJet Switzerland of £15 million (2018: £15 million).For full details of transactions and arrangements with easyJet’s largest shareholder, see note 28 of the consolidated accounts.NOTES TO THE COMPANY ACCOUNTS CONTINUED178 easyJet plc Annual Report and Accounts 2019Five-year summarywww.easyJet.com 1792019£ million20181(restated)£ million20172(as reported)£ million20162(restated)£ million20153(as reported)£ millionIncome statementRevenue 6,385 5,898 5,047 4,669 4,686Total EBITDAR 970 839 709 770 940Headline EBITDAR 970 961 733 764Total operating profit 466 463 404 510 688Headline operating profit 466 595 428 504Total profit before tax 430 445 385 507 686Headline profit before tax 427 578 408 494Total profit after tax 349 358 305 437 548Headline profit after tax 349 466 325 427Basic total earnings per share – pence 88.6 90.9 77.4 110.9 139.1Basic headline earnings per share – pence 88.7 118.3 82.5 108.4Diluted total earnings per share – pence 87.8 90.2 76.8 110.1 138Diluted headline earnings per share – pence 87.8 117.4 81.9 107.6Ordinary dividend per share – pence 43.9 58.6 40.9 53.8 55.2Statement of financial positionNon-current assets 6,044 4,994 4,237 4,042 3,549Current assets 2,119 1,999 1,734 1,442 1,279Current liabilities (2,668) (2,060) (1,670) (1,569) (1,768)Non-current liabilities (2,510) (1,700) (1,499) (1,221) (811)Net assets 2,985 3,233 2,802 2,694 2,249Net cashOperating activities 761 961 663 387 609Investing activities (863) (906) (515) (586) (532)Financing activities (excluding movements inborrowings and money market deposits) (9) (21) (10) (16) (70)Loan issue costs 6 (1) 6 1 –Fair value and foreign exchange gains/(losses) (86) 6 – (8) 6Net increase/(decrease) in net cash (191) 39 144 (222) 13Key performance indicatorsHeadline return on capital employed 11.4% 14.6% 11.9% 15.0% 22.2%Net cash/(debt) (£million) (326) 396 357 213 435Total profit before tax per seat (£) 4.10 4.68 4.45 6.35 9.15Headline profit before tax per seat (£) 4.07 6.07 4.71 6.18Revenue per seat (£) 60.81 61.94 58.23 58.46 62.48Total cost per seat (£) 56.71 57.26 53.78 52.11 53.33Headline cost per seat (£) 56.74 55.87 53.52 52.28Total cost per seat excluding fuel (£) 43.23 44.82 41.53 38.16 37.55Headline cost per seat excluding fuel (£) 43.26 43.43 41.27 38.33Seats flown (million) 105.0 95.2 86.7 79.9 75.01. See note 1 to the financial statements for details of the change in accounting policy.2. See note 1 to the 2017 financial statements for details of the change in accounting policy.3. The performance metrics for 2015 above have not been restated to reflect the change in accounting policies detailed in note 1 to the 2017 financialstatements.www.easyJet.com 179FINANCIAL STATEMENTS FIVE-YEAR SUMMARYGLOSSARY180 easyJet plc Annual Report and Accounts 2019Adjusted capital employed Capital employed plus seven times operating lease costs incurred in the year.Adjusted net cash/debt Net cash/debt less seven times operating lease costs incurred in the year.Aircraft dry/wet leasing Payments to lessors under dry leasing arrangements relate solely to the provision of an aircraft.Payments to lessors under wet leasing arrangements relate to the provision of aircraft, crew,maintenance and insurance.Aircraft owned/leased at end of year Number of aircraft owned or on lease arrangements of over one month’s duration at the endof the period.Ancillary Revenue Includes revenue from the provision of checked baggage, allocated seating, change fees andcommissions.AOC Air Operator Certificate.Available seat kilometres (ASK) Seats flown multiplied by the number of kilometres flown.Average adjusted capital employed The average of opening and closing capital employed.Block hours Hours of service for aircraft, measured from the time that the aircraft leaves the terminalat the departure airport to the time that it arrives at the terminal at the destination airport.Capital employed Shareholders’ equity less net cash/debt.Cost per ASK Revenue less profit before tax, divided by available seat kilometres.Cost per seat Revenue less profit before tax, divided by seats flown.Cost per seat, excluding fuel Revenue, less profit before tax, plus fuel costs, divided by seats flown.Customer Satisfaction (CSAT) Customer satisfaction index, based on results of a customer satisfaction survey which measureshow satisfied the customer was with their most recent flight.EBITDAR Earnings before interest, taxes, depreciation, amortisation, aircraft dry leasing costs, and profitor loss on disposal of aircraft held for sale.Gearing Adjusted net cash/debt divided by the sum of shareholders’ equity and adjusted net cash/debt.Headline A measure of underlying performance which is not impacted by material non-recurring itemsor items which are not considered to be reflective of the trading performance of the business.Load factor Number of passengers as a percentage of number of seats flown. The load factor is notweighted for the effect of varying sector lengths.Net cash/debt Total cash less borrowings. (Cash includes money market deposits but excludesrestricted cash).Non-headline Material non-recurring items or items which are not considered to be reflective of the tradingperformance of the business.Normalised operating profit after tax Reported operating profit adjusted for one-third of operating lease costs incurred in the year,less tax at the prevailing UK corporation tax rate at the end of the financial year.On-time performance (OTP) Percentage of flights which arrive within 15 minutes of scheduled arrival time.Operated aircraft utilisation Average number of block hours per day per aircraft operated.Other costs Administrative and operational costs not reported elsewhere, including some employee costs,compensation paid to passengers, exchange gains and losses and the profit or loss on thedisposal of property plant and equipment.Other income Includes insurance receipts, compensation and dividends received.Passengers Number of earned seats flown. Earned seats comprises seats sold to passengers (including noshows), seats provided for promotional purposes and seats provided to staff for business travel.Profit before tax per seat Profit before tax divided by seats flown.Revenue The sum of seat revenue and non-seat revenue.Revenue passenger kilometres (RPK) Number of passengers multiplied by the number of kilometres those passengers were flown.Revenue per ASK Revenue divided by available seat kilometres.Revenue per seat Revenue divided by seats flown.Return on capital employed (ROCE) Operating profit, less tax at the prevailing UK corporation tax rate at the end of the financialyear, divided by average capital employed.ROCE (including lease adjustments) Normalised operating profit after tax divided by average adjusted capital employed. Applicableto 2018 under IAS17.Seats flown Seats available for passengers.Sector A one-way revenue flight180 easyJet plc Annual Report and Accounts 2019SHAREHOLDER INFORMATIONMANAGING YOUR SHARES AND SHAREHOLDERCOMMUNICATIONThe Company’s share register is maintained by our Registrar,Equiniti. Shareholders with queries relating to their shareholdingshould contact Equiniti directly using one of the methods listedbelow:Equiniti LimitedAspect HouseSpencer RoadLancingWest SussexBN99 6DATelephone: 0371 384 2091Telephone number outside UK : +44 121 415 7567Online: help.shareview.co.ukWebsite: www.shareview.co.ukLines are open Monday to Friday 8.30am to 5.30pm; excludingbank holidays.Shareholders can manage their holdings online or elect to receiveshareholder documentation in electronic form by registering atwww.shareview.co.uk. Some of the benefits of having a Shareviewportfolio are:• Track share price and recent performance• View and manage all of your shareholdings in one place• Buy and sell shares instantly online with the share dealingservice• Find comprehensive shareholder information and forms• Update your records following a change of address• Have dividends paid into your bank account• Vote in advance of Company general meetingsShould shareholders who have elected for electroniccommunication require a paper copy of any of the Company’sshareholder documentation, or wish to change their instructions,they should contact Equiniti.ANNUAL GENERAL MEETINGThis year’s Annual General Meeting (AGM) will be held on6 February 2020 at the offices of easyJet plc, Hangar 89, LondonLuton Airport, Luton, Bedfordshire, LU2 9PF. The Notice conveningthe AGM will be available for download from the Company’scorporate website at corporate.easyjet.com/investors/shareholderservices/agmKEY DATES27 February 2020 Ex-dividend date28 February 2020 Record date6 February 2020 Annual General Meeting20 March 2020 Final dividend payment dateAUDITORPricewaterhouseCoopers LLPEmbankment PlaceLondonWC2N 6KHCOMPANY’S REGISTERED OFFICEHangar 89London Luton AirportLutonBedfordshireLU2 9PFTelephone: 01582 525252Registered in England & Wales under number 03959649CORPORATE WEBSITEYou can access the corporate website at corporate.easyjet.com.The corporate website provides useful information includingannual reports, results announcements and share price data, aswell as background information about the Company. Shareholdersare encouraged to sign up to receive email notification of resultsand press announcements as they are released by registering atcorporate.easyjet.com/investorsSHARE PRICE INFORMATIONDetails of our share price data and other share price tools areavailable at corporate.easyjet.com/investors.DIVIDENDSDividends can be paid quickly and securely directly into your bankaccount instead of being dispatched to you by cheque. You mayalso choose to have your dividends reinvested in further shares ofthe Company through our Dividend Reinvestment Plan (DRIP)(terms and conditions apply). To arrange either of these options,simply call Equiniti on the number provided. Alternatively, you canmanage your dividend payment choices by registering withShareview at www.shareview.co.uk.SHARE GIFTShareholders who only have a small number of shares whosevaluation makes it uneconomic to sell them may wish to considerdonating them to charity through ShareGift, the independentcharity share donation scheme (registered charity no.1052686).Further information may be obtained from ShareGift on0207 930 3737 or at sharegift.org.SHAREHOLDER FRAUDFraud is on the increase and many shareholders are targetedevery year. If you have any reason to believe that you may havebeen the target of a fraud or attempted fraud in relation to yourshareholding, please contact Equiniti immediately.shareholder informationwww.easyJet.com 181FINANCIAL STATEMENTS SHAREHOLDER INFORMATIONNOTES182 easyJet plc Annual Report and Accounts 2019www.easyJet.com 183FINANCIAL STATEMENTS SHAREHOLDER INFORMATIONNOTES184 easyJet plc Annual Report and Accounts 2019Printed by Park Communications on FSC®certified paper.This document is printed on Galerie Satin,a paper containing 15% recycled fibre and85% virgin fibre sourced from wellmanaged, responsible, FSC® certifiedforests. The pulp used in this product isbleached using an elemental chlorine free(ECF) process.Designed and produced by Black Sun plcThank youWe’d like to thank everyone whohas helped to produce this report:Sruti Bajoria, Michael Barker, Ella Bennett, Meena Bhatia-Ahir, Mita Bhattacharjee, Lis Blair,Matthew Callaghan, Louise Cardani, Robert Carey, Maaike de Bie, Rob Denham, ClaireDickinson, Alex Field, Andrew Findlay, James Fisher, Jeremy Fletcher, Matt Garner, HollyGrainger, Mike Hirst, Flic Howard-Allen, Sadie Holness, Emma Knowler, Matt Landsman,Alex Larkin, Johan Lundgren, Ben Matthews, Tom Minion, Matthew Newman, MarkRamsden, Sarahjane Robertson, Zarina Sabir, Ryan Simmons, Ben Souter, Julie Southern,Adrian Talbot, Mario Yiannopoulos and all of our employees across the network.Hangar 89London Luton AirportLutonBedfordshireLU2 9PFwww.easyJet.com

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