View Full Version : easyJet Stock Market Press Statement

26th Sep 2001, 12:54
easyJet plc statement relating to US events
The thoughts of everybody at easyJet are with those affected by the tragic events in the United States a fortnight ago.
These are very early days and all airlines are still learning about the changed European environment. easyJet is cautious about the trading environment, but it believes that its business model is robust and able to operate within whatever security regime is in place in Europe. Furthermore, in the current environment, easyJet believes that low-cost airlines will be more resilient than many flag carriers, particularly if the low-cost carriers fly point-to-point within Europe.
easyJet makes the following observations.
Airline operations in Europe
easyJet believes that aviation within Europe is undergoing a two-phase change process.
First, there is short-term disruption as airports, airlines and passengers learn to live with the increased security measures. With the current security procedures, easyJet flew yesterday’s schedule (Sunday) with 83% of its flights arriving within 15 minutes of the scheduled time.
Second, there will be a new long-term security regime within Europe. As easyJet can not predict what this will be, it is unable to forecast what impact it will have on European airlines. However, easyJet believes that although there may be changes to the way in which passengers are processed through terminals, the re-engineering of check-in, security and embarkation processes should not affect aircraft utilisation. However, passenger check-in times may increase.
Immediate impact on easyJet's operations
For the period prior to the attacks, easyJet had been pleased with its performance: revenue has been firm, with year-on-year increases in both yield and load-factor; costs have been on track; and growth has occurred as planned.
Immediately following the attacks, easyJet rigorously applied the UK Government's increased security levels to all easyJet flights, both in the UK and elsewhere in Europe. Although not mandatory in countries outside the UK, easyJet implemented a "no comply, no fly" policy where, for example, 100% baggage screening could not be guaranteed. Due to a lack of preparedness at some airports, some flight cancellations occurred in early days.
The airline is now operating its full flying programme.
On the morning after the attacks, bookings fell by 26%, but quickly recovered and have grown steadily over recent days. Seat sales have recovered to normal levels and easyJet expects to report an average seat factor of over 80% for September.
The profit impact of the attacks notwithstanding, easyJet expects to report a full-year profit, for the year ended 30 September 2001, that is in line with market expectations.
Furthermore, as all aircraft deliveries during the financial year occurred as planned and have been financed by operating leases, cash holdings have increased.
easyJet expects there will be a softness in yield over the next few months. As with disruptions in earlier times, easyJet will use promotions to stimulate sales.
European propensity to travel
easyJet has softened yields and has held a seat sale over the last weekend. The market has responded well to both initiatives. In the seven days to 23rd September, easyJet sold 188,089 seats. This compares to an average of 146,467 seats per week over the 26 weeks to 10th September. This has confirmed easyJet’s belief that the leisure traveller in Europe will respond when the right price is offered.
Also, easyJet believes it is in a strong position to capitalise on the downsizing of other carriers’ networks. Its business model has been built on high frequency between major cities, creating credible alternatives for the business traveller. In addition, if the global economy slows, easyJet expects that business travellers will seek low cost alternatives and will migrate from the full-fare carriers.
Medium-term to long-term environment
Although easyJet is not in a position to anticipate future developments, there are some issues that easyJet can comment on.
 easyJet's belief is that the revised security regime within Europe will have minimal impact on its high-utilisation network. The changes primarily affect passenger processing within terminals.
 easyJet flies point-to-point within Europe. easyJet's belief is that this sector of the industry will be more robust than other parts of the aviation business.
 If a recession occurs, easyJet believes that travellers will migrate from high-cost to low-cost alternatives.
 As easyJet flies with frequent services on a number of business routes, the expected rationalisation of capacity by other carriers will leave easyJet well placed.
 easyJet's risk profile is different from many carriers: easyJet does not fly North Atlantic routes.
 There will be additional costs relating to security and insurance, but these will apply to ALL airlines. As a consequence, easyJet's view is that these are likely to be passed to the consumer. It should be noted, even at the new rates being proposed, insurance costs will still only be less than 3% of easyJet’s operating cost.
It should be noted that there has been lobbying by UK airlines for the UK Government to assist them.
In easyJet’s view this is inappropriate. Governments should not support inefficient airlines. Government aid should be confined to the necessary provision of war insurance and investment in assets (primarily in airports) that may be required to enhance security. easyJet believes that, if the industry is to be assisted by Government, a level playing field approach would be to abolish Airport Departure Tax.
 easyJet flies to many major airports. This is an advantage, as they typically have the resources and equipment to undertake the new security measures. Also, they have a larger number of passengers across which costs can be spread.
 Operating to major airports provides easyJet with an opportunity to gain market share as weaker carriers contract services.
 Although easyJet has previously had a "no hedging" policy, due to the exceptional circumstances now affecting the industry, easyJet has now capped its Jet A1 fuel price at a strike price of approximately 95 US cents per gallon for 90% of its requirements over the next six months. The cost is minimal and it limits down-side exposure.
 easyJet has three new aircraft deliveries from Boeing during the remainder of this calendar year and a further nine during calendar year 2002. Current planning is for these deliveries to proceed. Operating lease financing is in place for the next four aircraft deliveries.
 easyJet currently plans to take delivery of all 26 of its B737-700s on firm order between now and May 2004. Discussions will begin in the New Year on delivery dates for an additional 30 aircraft on which easyJet has price protection.
 easyJet has a strong balance sheet. At 31 March 2001, easyJet had £229m of cash. This cash holding equates to over seven months of operating costs. The cash position has strengthened since March, as the second half of the year has been profitable and all new aircraft deliveries have been financed via operating leases.
easyJet as a low-cost intra-European carrier
easyJet is genetically engineered to be low-cost and flexible. It believes that its business model is robust and will able to operate within the tightened security regime in Europe.
Although global demand will be affected, easyJet believes that low-cost airlines will be more resilient, particularly if they fly point-to-point within Europe. In comparison with most flag carriers, the low-cost point-to-point European airlines should prosper.
The industry will experience some short-term pain, but easyJet expects that the contraction of the industry is likely to provide a range of unique slot and airport opportunities. Also, growth opportunities will be aided by the availability of cheaper aircraft and a larger pool of pilots.
While some other airlines are announcing job losses and fleet capacity reductions, easyJet looks forward to hiring additional staff to deliver planned growth.

The Guvnor
26th Sep 2001, 13:06
According to this, the future is indeed Orange - or Irish. :D :D :D

I'd agree fully with everything that they have said in their press release - their business model (along with FR's) is likely to succeed in the present circumstances whilst those around them crumble and fall.

An in depth economic comparison between FR, GO and EZY would be nice as well - but I don't think we'll be able to see that!

Wee Weasley Welshman
26th Sep 2001, 13:26
Guv - The www.economist.co.uk (http://www.economist.co.uk) or perhaps it was www.ft.com (http://www.ft.com) has a comparison of the three with all kinds of wiggly graphs and talk of seat yield per pax revenue fixed base return.

It was written back in Spring and thus a bit out of date. Go do some digging.


26th Sep 2001, 13:54
"easyJet is genetically engineered to be low-cost and flexible"
From the above Press release

Are they getting a little carried away???

Gemini the Cricket
26th Sep 2001, 14:34
I find interesting that an airline which is agressive agaisnt all its opponents to get a place under this sun, which purchases pages of national newspapers to prove the rest of the world that they are more clever than the rest of the world, and which was nearly praising the recent tragic events because of potential growth forecasts... I find intereresting that this same company is now crying on pprune to adress the stock markets not to leave its value down (see -5 last time I looked at it). I would like to pinpoint the fact that easyjet is not a big company. They are just growing to a critical size of 25 A/C in september. A lot of new aircafts have been recently delivered and therefore must be used efficiently. Easyjet is going to discover the same problem as its competitors, having to open more bases, increasing the risks on costs... It is easy to make money and be cocky with a small outfit. It is harder, when you grow and have to fill up a lot more aircrafts... I just wanted to pinpoint some more elements concerning easyjet...

[ 26 September 2001: Message edited by: Gemini the Cricket ]

26th Sep 2001, 14:59
I think the true point of this press release has been missed!

I believe EasyJet have produced one of the best damn PR excercises I have seen for a long time. Great stuff. It's easy to be cynical but anyone seen their balance sheet lately? :cool:

£229m in the bank! Not at all bad that. Good luck to them. Wonder what Barbara thinks?

[ 26 September 2001: Message edited by: InFinRetirement ]

26th Sep 2001, 16:03
Gemini the Cricket - I'm not sure why you feel that easyJet need to open more bases - they already seem to have a fair number of "hubs" already, even if they are not strictly bases. Surely this gives them the opportunity to do what they describe as "joining the dots" - e.g. Liverpool - Athens, Belfast - Palma etc.

In addition, the rumours that I am hearing say that TBI are now very close to agreeing a long term deal with easyJet at Luton which will lead to rapid expansion from there.

26th Sep 2001, 16:55
IFR is right - you can't take away their success...and the low-cost market dictates aggressive moves to survive.

I agree fully with everything they've said. But I bet EZY staff didn't get a Keyring through their letterbox this morning from Stelios like we did!....Wahhhay, let the good times roll !!

[ 26 September 2001: Message edited by: JB007 ]

27th Sep 2001, 15:57
Yeh, I got a nice little keyring as well, together with a letter telling me that £1052.00 will be added to my paypacket this month. Although the money is taxable, it is still a nice tidy sum, especially for our hard worked cabin crew.

It the dosh ( and a continuing job that counts), not rhetoric!

28th Sep 2001, 04:50
Found this excerpt from Forbes fascinating reading: - I know easyEverything isn't easyJet but it's the same colour isn't it?

Haji-Ioannou's staff, whom he encourages to call him Stelios, is now seeing the other side of their boss' in-your-face attitude.

EasyEverything has run out of money. Last year, the company raised cash from Munich, Germany-based venture capital firm Apax Partners and U.S. computer maker Hewlett-Packard through convertible bonds. Neither has chosen to turn the bonds into shares, preferring to take out the cash. Having failed to find others' money to replace it, Haji-Ioannou is putting up £15 million ($22 million) of his own.

Under the latest proposed refinancing, which on Sept. 28 goes to EasyEverything shareholders for approval (Haji-Ioannou owns 75% of the shares, so it is likely to be a rubberstamp affair), he will increase his holding in the company to 95% through the issue of 1.5 billion new shares to himself priced at one penny each.

His staff also get one-penny shares as part of the package. What has upset many of them is that the shares were previously valued at £1. Whatever visions EasyEverything staff had dancing in their heads of the easy life from a dot-com windfall have disappeared at a stroke.

When EasyEverything was founded in 1999, it did what many Internet start-ups did, add stock sweeteners to the remuneration package. Staff were offered two £1 shares for every £1 they invested in the company, which was being lined up for an initial public offering on the London market in the middle of this year, now delayed until next year. The maximum investment was capped at £10,000. The company also offered a loyalty bonus equal to one year's salary in shares for 15 senior staff if they stayed for 12 months.

Staff members now hold about 5% of the shares, with the average initial investment worth an average of £5,000, according to Haji-Ioannou. After the refinancing, the value of that average shareholding will fall to £50 :eek:. The value of senior staff bonus, previously in the £80,000 to £150,000 range, will be just £800 to £1,500.

On Sept. 25, two senior staff, including Chief Executive Maurice Kelly, quit. Haji-Ioannou is taking over the reins himself.

"That's capitalism," he told a London newspaper. "[The staff] still have the shares. They are just a lot less valuable. This is an Internet company. We used to think they were valuable. Now they are not."

EasyEverything's staff must be hoping that Haji-Ioannou doesn't try to give another practical course in his business philosophies. He himself doesn't skim royalties or expenses or even salaries from his companies. His strategy for getting richer is more like that of Bill Gates: Go public and look for some long-term appreciation.

At least it works for the boss. EasyJet now has a market capitalization of $958 million while Stelmar Shipping, his $66 million (annual sales) family oil-tanker business, which went public in New York earlier this year, has a market value of $162 million. Easy Street isn't so near for EasyEverything staff.