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Easy jet presentation

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EasyJet

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Easy jet presentation

  1. 1. EasyJet Case GGSB MBA - LONDON
  2. 2. 3 Why easyJet • easyJet shares skyrocketed from GBP 390 in January 2012 to GBP 1,770 in April 2014; 4.54 times or 354% appreciation!
  3. 3. 26 Continued opportunity for easyJet Source: Market share growth rates from OAG. easyJet routes based on internal easyJet definition. Based October download for the six months to 31 Capacity growth H1‘ F’14 (OAG) Taking advantage of competitor restructuring, improving network %of easyJet capacity touching country 1. Network UK 33% France 13% Italy 12% -9% Switzerland 10% Spain 9% Germany 6% 2% -4% 0% -0% -2% -2% 2% 1% -6% -4% 3% 4% 2% 2% 4% -4% 3% Total capacity change - easyJet markets Competitors on easyJet markets easyJet capacity change March 2014. Adjustment made to forward looking easyJet capacity to reflect the latest view of fleet growth.
  4. 4. 27 • easyJet has a strong position across much of Europe on the top 100 markets • From all the EU city pairs, the top 100 routes have a 24% capacity share • Over 75% of our capacity is at airports where we have a leading position Leading position in top market pairs No.1 31m 46% No. 2 21m 30% Other 16m 24% easyJet Ryanair IAG LufthansaGroup AirFrance-KLM Norwegian Alitalia SAS AirBerlin-NIKI VuelingAirlines TurkishAirlines Presence in top 100 market pairs 1 Non primary airports 1 Presence in top 100 market pairs Source: OAG, easyJet Airports where easyJet has number 1or 2 market share 48 18 37 Number of market pairs operated between 2 primary airports 2 24 24 2221 19 17 16 14 3
  5. 5. 8 Strong unit revenue growth Source: Competitor capacity from OAG using an easyJet definition of overlapping markets. This excludes charter capacity. £m F '13 F '12 Change Passengers (m) 60.8 58.4 4.0% Load factor (%) 89.3% 88.7% +0.6ppt Seats (m) 68.0 65.9 3.3% Average sector length (km) 1,091 1,096 (0.5%) Total revenue (£m) 4,258 3,854 10.5% Total revenue per seat (£) 62.58 58.51 7.0% @ constant currency (£) 62.65 58.51 7.1%
  6. 6. 30 34 35 36 37 38 39 40 41 FY10 FY11 FY12 FY13 Source: • Great service: surveys conducted by Millward Brown & GfK for 12months to end September 2013 UK Spain France Germany Italy Switzerland Portugal Netherlands Demand: Understanding evolving customer base UK France Italy Switzerland Germany Older passengers, higher disposable incomes Average age FY'10 FY'13 Increasingly pan-European customer base FY’10 FY’13 Great service: “consider flying easyJet again?” Increased proportion customers re-booking Customer 50% 45% 50% 55% Volumes New Exising UK47% France 12% Italy8% Switzerland 7% Other 26% UK44% France 14% Italy13% Switzerland 10% Other19% 98% • Other data from internal easyJet systems 95% 96% 97% 96%
  7. 7. 31 High volume Conversion focused e-Commerce engine Demand based Pricing Model Structured re-targetting customers and prospects Proposition re-design and segmentation Marketing Areas of focus • Network optimisation • Brand awareness • Digital / Web • Revenue management system • Proposition redesign  Business  Allocated seating  Bag policy  Mobile boarding  On-line check-in How we sell
  8. 8. 33 Allocated seating has been a success Most popular seats Introduced variable pricing on allocated seating from start of November H2 performance Allocated seating Impact on revenue per seat c.62p increase % of RPS growth c.+1 percentage point Satisfaction with boarding experience +4.5 pp Now 73%
  9. 9. 37 Crew Airports & ground handling Other & Fixed Engineering Fuel efficiency Navigation Ownership Sales and marketing EasyJet Lean – lowest cost for our network 1. Areas of focus for FY’14 Innovative thinking to drive long-term, sustainable savings, benchmarked against the best in class • On-going delivery of key initiatives: • Ground ops: ground handling & non-regulated airports • Crew settlements & flexibility • Engineering 2. Longer term programmes • Plans in place for significant longer term deliverables: • Fuel: sharklets, lightweight seats • Navigation • Engineering easyJet Lean
  10. 10. 15 Increasing proportion of A320’s F '13 F '12 Change A319 (operating lease) 54 49 5 A319 (owned / finance lease) 99 111 (12) A319 Total 153 160 (7) A320 (operating lease) 18 6 12 A320 (owned / finance lease) 46 48 (2) A320 Total 64 54 10 Total fleet 217 214 3 Operating lease 33% 26% 7ppt Percentage unencumbered 36% 32% 4ppt Percentage of A320s in fleet 29% 25% 4ppt
  11. 11. 36 Lowest cost base EBIT Cost perASK(excl. fuel) (1) easyJet cost advantage • easyJet Lean • Continued focus on on-time performance and asset utilisation • New fleet order • Fuel efficiency • new generation aircraft expected to reduce today’s total cost per seat by 4-5%(2) Difficulties with comparisons • Airport mix: primary vs. secondary • Accounting treatment e.g. passenger airport charges (3,4) • Sector length 12mend31 Mar’13 1. 12months to end of March 2013; CASK data and definitions sourced from the Airline Analyst 2. Cost saving for new generation aircraft assumes fuel at $1,100 / MT, compares current generation A320 aircraft vs. new generation A320neo aircraft 3. Differences in accounting treatment of per passenger airport costs as per accounting standard 4. easyJet believes its current reporting appropriately reflects its business model in relation to the standard 1.6 Ryanair 0.8 2.0 2.1 3.1 2.8 4.4 4.5 easyJet Vueling Norwegian IAG Air Berlin AF-KLM LHA (Group) Staff, depreciation, maintenance, ownership, marketing, head office Airport, ground handling, navigation en-route charges
  12. 12. 13 Cost per seat excluding fuel - key drivers Favourable/ (Adverse) £ Cost per seat ex fuel £ var at constant currency % var at constant currency Drivers Airports and Ground Handling 15.84 (1.14) (7.9%) • Significant increases in airport charges in Spain and Italy • Increased de-icing related costs Crew 6.68 (0.08) (1.1%) • Increase in salaries, offset by higher proportion of A320s and shorter sector length Navigation 4.33 0.02 0.5% • Price increases more than offset by higher proportion of A320s and shorter sector length Maintenance 3.11 - 0.2% • One-off items from last year not repeated, offset by above inflation price increases and increase in average fleet age Overhead 4.64 (0.08) (2.1%) • Higher disruption-related costs including EU261claims, relating to prolonged winter conditions and strike action • Increase in performance related employee costs Brand licence 0.16 (0.08) (108.2%) • As per the amended brand license agreement, now fixed percentage of revenue Ownership 3.41 (0.05) (1.4%) • Increased proportion of leased aircraft, following new leases and sale and leaseback transactions • Savings on interest cost from paying off high coupon debt Total CPS excluding fuel 38.17 (1.41) (3.9%)
  13. 13. 48 RASK and CASK F '13 F '12 Change Total revenue per seat 62.58 58.51 7.0% at constant currency 62.65 58.51 7.1% RASK at constant currency (pence) 5.74 5.34 7.6% Total cost per seat ex fuel 38.17 36.25 5.3% at constant currency 37.66 36.25 (3.9%) CASK ex fuel at constant currency (pence) 3.45 3.31 (4.4%)
  14. 14. 3 10 years share performance of easy Jet and its peers
  15. 15. 3 easyJet revenue and earnings
  16. 16. 3 easyJet EPS and dividends
  17. 17. 3 Independent analysts forecasts • Share price forecast. The 24 analysts offering 12 month price targets for easyJet plc have a median target of 1,820. It represents a 18.95% increase. • In 2013, easyJet plc reported a dividend of 0.34 GBP, which represents a 40.24% increase over last year. The 19 analysts covering the company expect dividends of 0.37 GBP for the upcoming fiscal year, an increase of 11.04%
  18. 18. 3 SWOT Strengths Weaknesses Opportunities Threats Strong position in the key aviation markets of Europe Lack of geographic diversification Growing international tourism Increasing charges at regulated airports Robust capital structure and liquidity Dispute between the founder and the board of easyJet adversely impact the brand image Network expansion to enhance coverage and drive growth Intense competition and price discounting Competitive and flexible business model Key agreements
  19. 19. 3 Strengths •Strong position in Europe: - Connect top 100 city to city market pairs than any other airlines - 4th largest short-haul carrier in Europe (8% MS) - 31% MS in UK for intra-European market -3rd most searched airlines, with 370M visits in 2013 •Financials (from 2012 to 2013): -Revenue grew by 10.5% -Operating profit grew by 50.2% -Net profit grew by 56.1% - ROCE grew by 6.1%
  20. 20. 3 Weaknesses • Lack of geographic diversification: -Risk is born with the current political and economic uncertainty of the European region which creates challenges of regulation and government. -Air traffic control costs are about double in Europe than they are in the US • Dispute between founder and the board: - Sir Stelios (quit in 2010) raised dispute regarding the strategy and threatened to sell shares if the company buys more planes. Results, included drop in share prices.
  21. 21. 3 Opportunities • Growing international tourism: -2nd largest industry in the worls, recovered since downfall of ‘08-’09 and European arrivals increased by 5% in 2013 • Network expansion to enhance coverage and drive growth: - Launched 10 and 5 new routes in 2013 & 2014, respectively.
  22. 22. 3 Threats • Increasing charges at regulated airports - 70% of total airport costs comes from regulated airports, as there have been above inflationary cost increases in 2013-2014. - Due to new and increased aviation taxes, 2% increase costs per seat are projected.
  23. 23. Thank you! Q & A (Sustainability of easyJet)
  24. 24. 3 Shareholders
  25. 25. 3 Shareholders

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