REG - easyJet PLC - Annual Report and Accounts
10/12/2021 10:05
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RNS Number : 2705V easyJet PLC 10 December 2021
10 December 2021
easyJet plc
(the "Company")
Annual Report and Accounts
Further to the Final Results announcement released on 30 November 2021, the
Company confirms that the Annual Report and Accounts for the year ended 30
September 2021 ('2021 Annual Report') has been made available to shareholders
today and is available on the Company's website at
http://corporate.easyjet.com (http://corporate.easyjet.com) .
In accordance with Listing Rule 9.6.1, the 2021 Annual Report has been
submitted to the National Storage Mechanism and will shortly be available for
inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The appendix to this announcement contains additional information which has
been extracted from the 2021 Annual Report for the purposes of compliance with
the FCA's Disclosure Guidance and Transparency Rules and should be read
together with the Final Results announcement from 30 November 2021, which can
be found at http://corporate.easyjet.com/investors/regulatory-news
(http://corporate.easyjet.com/investors/regulatory-news) . Together these
constitute the information required by DTR 6.3.5 to be communicated to the
media in unedited full text through a Regulatory Information Service. This
information is not a substitute for reading the full 2021 Annual Report.
For further details please contact easyJet plc:
Institutional investors and analysts:
Michael Barker Investor Relations +44 (0) 7985 890 939
Adrian Talbot Investor Relations +44 (0) 7971 592 373
Media:
Anna Knowles Corporate Communications +44 (0) 7985 873 313
Edward Simpkins Finsbury +44 (0) 7947 740 551 / (0) 207 251 3801
Dorothy Burwell Finsbury +44 (0) 7733 294 930 / (0) 207 251 3801
LEI: 2138001S47XKWIB7TH90
Appendix: additional information required by DTR 6.3.5
Page and note references in this appendix refer to page numbers and notes in
the 2021 Annual Report.
Directors' Responsibilities and Statements
The following responsibility statement is extracted from the Statement of
Directors' Responsibilities on page 158 of the 2021 Annual Report and Accounts
and is repeated here solely for the purpose of complying with DTR 6.3.5. The
statement relates to the full 2021 Annual Report and Accounts and not the
extracted information presented in this announcement or the Final Results
announcement.
The Directors are responsible for preparing the Annual Report, the Directors'
Remuneration Report and the accounts in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the group and the
company financial statements in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006.
Additionally, the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules require the Directors to prepare the group financial
statements in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union. Under company law, Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the group and company and of the profit or loss of the group for
that period.
In preparing these accounts, the Directors are required to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and accounting estimates that are reasonable and
prudent;
· for the Group accounts, which have been prepared in accordance
with international accounting standards, state whether applicable
International Financial Reporting Standards (IFRS) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union in conformity
with the requirements of the Companies Act 2006 have been followed, subject to
any material departures disclosed and explained in the accounts;
· the company financial statements, which have been prepared in
accordance with international accounting standards, state whether conformity
with the requirements of the Companies Act 2006 have been followed, subject to
any material departures disclosed and explained in the accounts;
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at 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 Group and the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity of, amongst
other things, the financial and corporate governance information provided on
the easyJet website (https://corporate.easyjet.com). Legislation in the United
Kingdom governing the preparation and dissemination of accounts may differ
from legislation in other jurisdictions.
The Directors consider that the Annual Report and Accounts, taken as a whole,
are fair, balanced and understandable and provide the information necessary
for shareholders to assess the Group's and the Company's position and
performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 98 to
101, confirm that, to the best of their knowledge:
· the Group accounts, which have been prepared in accordance with
international accounting standards and International Financial Reporting
Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union, and Company accounts which have been prepared
in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006, both give a true and fair view of the
assets, liabilities, financial position and profit of the Group and Company;
· the Strategic Report, included in the Annual Report, includes a
fair review of the development and performance of the business and the
position of the Group, together with a description of the principal risks and
uncertainties that it faces.
In accordance with section 418 of the Companies Act 2006, each Director in
office at the date the Directors' Report is approved, confirms that:
· so far as the Director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
· he/she has taken all the steps that he/ she ought to have taken
as a Director in order to make himself/herself aware of any relevant audit
information and to establish that the Company's auditor is aware of that
information.
The Annual Report on pages 1 to 158 was approved by the Board of Directors and
authorised for issue on 30 November 2021 and signed on its behalf by:
JOHAN LUNDGREN Chief
Executive KENTON JARVIS Chief
Financial Officer
Principal Risks and Uncertainties
The risks and uncertainties set out below are extracted from the pages 78 to
95 of the 2021 Annual Report and Accounts and are repeated here solely for the
purpose of complying with DTR 6.3.5.
Our risk profile
The Board has responsibility to ensure that risks are identified and mitigated
where possible. Whilst easyJet can monitor risks and prepare for adverse
scenarios, the ability to affect the core drivers of many risks is not within
the Group's control (for example adverse weather, pandemics, acts of
terrorism, changes in government regulation and macro-economic issues).
The principal risks and uncertainties faced by the Group include the following
types of risks:
· Safety, security, and operations - the delivery of a safe and
secure operation which meets the needs and expectations of our customers,
including the impacts of epidemics and pandemics.
· Technology and cyber - the availability, security, compliance and
performance of website and critical technologies, and the protection of
Company and customer data.
· Environment and sustainability - the impacts of climate change on
our business and operations, carbon credit programmes and regulation/taxation.
· Asset efficiency and effectiveness - making the best use of
capacity/slots and fleet mix in the right airports at the right prices, and
driving value through our supply chain.
· Legislative/regulatory landscape - being aware of, and compliant
with, legislation and regulation affecting our business.
· Macro-economic and geopolitical - events that can affect our
financial performance including supply/demand imbalance, general economic
trends and the impact of fuel cost, foreign exchange rates, and counterparty
performance.
· People - having the right people through talent acquisition,
retention, engagement, and succession planning.
As with all businesses, our principal risks and uncertainties are continually
evolving.
Climate change: Physical and transition risks
Climate change presents significant financial impacts to easyJet from both
physical and transition risks. In the next five years, in light of the
challenge of coordinating global climate action, modest political, economic,
and social changes will drive financial impact. More significant action to
stimulate a low-carbon transition will accelerate the rate of transition and
increase the magnitude of impacts to the business.
easyJet currently has the following risk management controls and capabilities
to limit the impacts of climate change:
· Inclusion of Airbus neo aircraft into the fleet which are 15%
more fuel efficient per seat than the standard variant;
· Offsetting of the carbon emissions, funded by easyJet, from the
fuel used on every plane flown. For package holidays provided by easyJet
holidays, we have extended the offsetting to cover the carbon emissions from
the fuel used for transfers, and from the energy for hotel stays;
· A range of fuel and carbon saving initiatives, for instance
operating flights at high load factors, flying point-to-point and using only
one engine when taxiing on the ground; and
· Disruption management measures include advanced winter planning,
standby crews and aircraft, as well as the continual review of flight plans to
ensure the optimal routings.
To limit the impact of our carbon emissions, easyJet has already taken several
steps:
Compliance with regulatory requirements/standards: Our participation in the
EU, UK and Swiss Emissions Trading System (ETS) drives us to focus on
continuing to be as efficient as we can; i.e. by investing in transitioning
our fleet to more modern, fuel efficient aircraft; using technological
developments and flying techniques to operate them in ways which avoid
unnecessary use of fuel and therefore carbon emissions.
A focus on energy efficiency: easyJet operates from sites across Europe
including a large office and engineering operational presence in Luton in the
UK and Berlin in Germany. Living up to 'Our Promise' to be Safe and
Responsible informs how we operate day-to-day and that includes our
ground-based operations. We have initiatives in place focused on deploying the
latest energy-efficiency technologies and procedures to reduce our
ground-based emissions. For more information, refer to page 49
Stimulating low-carbon product R&D: easyJet supports the development of
innovative aviation technologies, working with industry partners to reinvent
aviation over the long term to achieve net zero carbon emissions. easyJet has
a partnership with Airbus to jointly research the opportunities and challenges
of introducing planes powered by hydrogen-combustion, hydrogen-electric, or a
hybrid of both for short-haul flying in Europe by the mid-late 2030s.
Furthermore, easyJet has been supporting Wright Electric over the last five
years, which is aiming to produce a zero carbon emissions commercial aircraft
which could be used for short-haul flights. easyJet also engages with
policymakers and lawmakers to help ensure the regulatory environment supports
the adoption of zero emissions aircraft in commercial aviation.
Compensating for our emissions: As announced in November 2019, we were the
world's first major airline to offset the carbon emissions from the fuel used
for all flights. We are doing this by offsetting the carbon emissions from the
fuel used for all our flights, our ground-based operations and package
holidays, through schemes certified by the highest verification standards.
Since then, we have gone further, offsetting our organisational carbon
emissions (Scope 1 & 2) and, for package holidays, offsetting the carbon
emissions from the fuel used for transfers, and from the energy for hotel
stays.
Only programmes which meet either the Gold Standard or Verified Carbon
Standard (VCS) certifications are supported, including projects that protect
against deforestation and renewable energy projects. Certifiers ensure
reductions claimed by individual programmes would not have happened without
that project and that reducing carbon emissions in one place does not
inadvertently increase emissions elsewhere.
We know that offsetting is an interim solution and so we also continue to
strive to reduce our carbon emissions and support the development of new
technologies. Therefore, during 2021, easyJet worked in partnership with the
Cambridge Centre for Risk Studies (CCRS) to conduct a detailed assessment to
identify the physical and transitional climate change risks it is facing. Our
climate change risks were quantified using a 5-year Enterprise Value at Risk
(5yrEV@Risk) metric which shows how the risks would impact discounted cash
flows over five years within a given confidence interval, e.g. 95%. The
quantification and supporting research and analysis will further assist in the
allocation of resource and capital to manage these risks.
In the near-term horizon, the potential range of impacts is driven mainly by
transition risk. In the next five years, transition risk is likely to evolve
rapidly with developments in regulation, energy supply/demand, legal process,
etc. There is significant variation in transition risk across emission
pathways, with the most ambitious mitigation strategies resulting in the
greatest risk.
There are several transition risks that are prominent, as easyJet develops its
business and operations in a changing landscape.
They include:
· Changes in Consumer Sentiment
· Legislation and Policy Changes
· Technology Developments
· (incl. SAFs and aircraft innovation)
· Investor Sentiment and the increase of the ESG Agenda
· Consumer and/ or Regulator Liability Claims
The five transition risks above were identified through easyJet's corporate
risk management framework, in addition to the physical disruption arising from
climate change (physical risk). The physical risks were reviewed and
incorporated into current principal risks, specifically Significant
Operational Disruption and Pandemic.
Plans are in place to review each transition risk in conjunction with the
current climate change risks detailed below in the principal risks. The action
is to determine individual strategies and assign risk ownership through the
corporate risk management framework. In similar fashion to the current
physical climate change risks, ownership of these risks and their risk
management controls and capabilities sits across the Group and ultimately with
the Airline Management Board.
An update on easyJet's climate change transition risks will be provided at the
2022 Financial Half Year Trading Update.
SAFETY, SECURITY AND OPERATIONS
easyJet's number one priority is the safety and security of its customers,
colleagues, and contractors. The delivery of a safe and secure operation which
meets the needs and expectations of our customers is critical to our business.
Risk Commentary and areas of focus
Significant Safety or Security Event · easyJet's number one priority is the safety and security of its
customers, people, and contractors.
· The Safety Committee (a committee of the easyJet plc Board)
provides oversight of the management of easyJet's safety processes and · Inactivity and managing the safety risks arising from it have
systems. been a focus during the recovery phase of the pandemic. Emphasis has been
placed on identifying training needs amongst our people and third-party
· The easyJet Safety Board, chaired by the CEO and including the contractors.
Chief Operating Officer (deputy- Chair) and AOC Accountable Managers, is
responsible for directing overall safety and security policy and governance. · Enhancements have been made to operations and base risk
The Safety Board meets every month to review safety performance and any management processes to improve reporting capabilities and feedback.
emerging security issues.
· This risk remains unchanged.
Risk Owner
· Chief Operating Officer
Potential causes
· Flight safety incident
· Health and safety incident
· Major security threat
Potential consequences
· Significant injury/loss of life
· Sustained adverse media coverage
· Reduction in future revenue
· Fines/regulatory sanctions
· Operational disruption
· Significant spike in costs
· Share price movement
Controls and mitigations to prevent or reduce the impact of the risks
· Functional Safety Action Groups from across the airline are
chaired by the appropriate senior manager and are responsible for the
identification, evaluation, and control of safety-related risks.
· The easyJet Safety Board meets quarterly to review safety,
security and compliance performance across all Air Operator Certificates
(AOCs). Chaired by the CEO and attended by the three AOC accountable managers.
· Safety Review Boards are held monthly by each AOC, chaired by the
AOC accountable manager and are often attended by the local regulator.
· A Safety Policy is published that promotes the incident reporting
process and supports this safety culture.
· easyJet operates a Safety Management System that includes leading
software systems to:
· report incidents and identify events;
· identify hazards and threats and take appropriate risk-mitigating
actions;
· collect and analyse safety data (enabling potential areas of risk
to be projected); and
· enable learning from easyJet and industry events/incidents to be
captured and embedded into future risk mitigations.
· Timely, credible, and reliable information upon which to base
operational decisions.
· easyJet has a Crisis Management framework that provides emergency
response and crisis management capabilities, supported by trained personnel
and regular exercises.
· Hull (all risks) and liabilities insurance (including spares) is
held.
· Security cleared specialists continually review geopolitical
developments across the easyJet network in particular those countries deemed
to be higher risk and report back to the Board any areas of concern.
· easyJet maintains an inspection regime of all our airports to
ensure the security elements are being effectively managed.
· easyJet continually reviews and develops its safety management
processes.
Risk Commentary and areas of focus
Significant Operational Disruption · Pandemic related reduced traffic demand resulted in the European
air traffic control system seeing significant reduction in Air Traffic
· Non-cancellation disruption events reduced significantly in 2021 Management delays.
due to reduced air traffic control and airport congestion.
· Climate change related weather disruption is increasing but
Risk Owner managed in part through a partnership with the Met Office, which supports with
weather prediction.
· Chief Operating Officer
· Significant work has been undertaken to improve easyJet's
preparedness, including a move to exception management and improved
decision-making tools.
· Phase 1 of a Self-Service Disruption Management tool was launched
in summer 2021 that provides greater control to customers in the event of
disruption.
· Increased use of the Crisis Policy due to the pandemic has
resulted in improvements and greater understanding. The result is easyJet is
better prepared to deal with significant disruption events should they occur,
which will limit the financial and customer impact.
· easyJet continues to face disruption challenges but the pre- and
post-event preparedness has positioned the operation well and reduced this
risk.
Potential causes
· Adverse weather
· Physical impacts of climate change
· Industrial action
· Technology failure
· Destructive cyber-attack (i.e. ransomware)
· Supplier failure
· Infrastructure failure
· Airspace/airport restrictions/closure
· Increasing passenger disruption due to Covid-19
Potential consequences
· Customer dissatisfaction
· Compensation and welfare payable to customers
· Inefficient use of crew/aircraft
· Adverse media coverage
· Share price movement
Controls and mitigations to prevent or reduce the impact of the risks
· Maintaining operational resilience through:
· appropriate resilience into the flying schedule;
· aircraft and crew standby;
· reporting on the day of operations, including customer
communication;
· airport performance and strategic supply chain;
· air traffic control system lobbying and flight planning
enhancements; and
· the use of data across the operation to predict and manage events
and aid decision support.
· Liquidity buffer to better manage the impact of downturns in
business or temporary curtailment of activities.
· Business interruption insurance which provides some cover for
very significant shock events such as extreme weather, air traffic management
issues and loss of access to key airports. The policy would allow us to claim
in the event of a very substantial number of cancellations. This is included
within our definition of liquidity.
· Significant focus on risk mitigation of and preparedness for a
destructive cyber-attack, including running a cyber crisis exercise for senior
Crisis Team and AMB.
Risk Commentary and areas of focus
Pandemic · Prior to the Covid-19 pandemic, at least four infectious diseases
occurred in recent years: SARS, Avian Flu, H1N1, and Ebola. The most
· The risk associated with a pandemic is among the most significant significant differences between these epidemics and Covid-19 are they were
in terms of severity. Covid-19 represents a paradigm shift in both severity short-lived, local, epidemiologically less severe, and with a much lower
and likelihood. transmission index.
· Countries' legislation affects airlines' business with decisions · Previous epidemics did not result in severe restrictions
to reopen borders without restrictions. (lockdowns or route closures) and so Covid-19 has created a new benchmark in
responding to epidemics and pandemics.
· Vaccine availability, efficacy and people's perception of risk
are all factors that must be considered. · easyJet responded quickly and decisively on customer, people and
third-party contract health and financial perspective.
· The presence of virus variants is an example of high predictive
volatility. · easyJet follows guidance from WHO and the International Civil
Aviation Organisation (ICAO), which provides standards and recommended
Risk Owner practices for civil aviation authorities and national governments, as well as
the European Aviation Safety Agency, the European Centre for Disease
· Chief Financial Officer Prevention and Control and country specific health authorities such as Public
Health England.
· We developed a Pandemic Playbook, that ensured a collaborative
response and management of operational, financial, business continuity and
recovery factors.
· Financial resilience was maintained through the raising of circa
£7 billion of liquidity from a diverse range of sources, including a 5x
oversubscribed Euro Bond at competitive pricing and a sale and lease back
programme.
· Through the Covid-19 pandemic, we became adept at responding to
rapidly changing market conditions and now have industry-leading agility to
add new capacity and pivoting our schedule to capitalise on shifts in demand
in future epidemic and pandemic events.
The likelihood of another epidemic and pandemic event occurring has increased
but, through the actions we have taken to manage the impacts of Covid-19 and
increase preparedness, easyJet is better prepared for future events.
Potential causes
· Global travel and physical connectivity
· Urbanisation
· Climate change
· Increased human/animal contact
· Health worker shortages
Potential consequences
· Suppressed customer demand
· Sustained adverse media coverage
· Reduction in future revenue
· Increased regulatory requirements and scrutiny
· Operational disruption
· Significant spike in costs
· Share price movement
Controls and mitigations to prevent or reduce the impact of the risks
· A Biosecurity Standards Group is in place and includes safety and
security experts including our company doctor and representatives from across
the airline. The Group is responsible for developing and maintaining our
single set of easyJet biosecurity standards, which set out the
· requirements to ensure a safe and healthy environment for our
people, customers, and contractors. Standards are translated into our Standard
Operating Procedures (SOPs) and Communications.
· The Pandemic Playbook, which acts in partnership with our
Incident & Crisis Management Playbook and Communicable Disease Action
Group, led by the Head of Safety and with representation from key functions,
is responsible for detection, assessment, and treatment of pandemic and
epidemic events. Treatment includes appropriate escalation.
· A Communicable Disease Policy, that promotes the incident
reporting process, supports this safety culture.
· Governance structure including a Steering Committee (SteerCo)
involving the Chief Financial Officer, Chief Operating Officer, Chief
Commercial Officer and Director of Strategy, to manage pandemic and epidemic
events. The SteerCo is responsible for strategic oversight and communication
with the Board. It maintains focus on long-term recovery.
· Maintaining balance sheet strength.
· Dynamic planning and capacity management process to manage supply
and demand fluctuations.
TECHNOLOGY AND CYBER
The nature of these risks, easyJet's reliance on technology (particularly
online devices) and the ever-increasing sophistication of serious organised
crime groups, terrorists, nation states and even lone parties means that,
despite all the mitigation detailed, easyJet will inevitably retain an element
of vulnerability regarding the availability, confidentiality and integrity of
its information and data.
Risk Commentary and areas of focus
Cyber Attack · easyJet is continually defending its operation against disruption
from sophisticated attackers. The risk from a human operated ransomware attack
· The aviation sector is facing into an increasingly sophisticated and/ or double exploitation ransomware has increased exponentially.
and persistent cyber threat and easyJet is continually defending its operation
against disruption from attackers. The risk from a human operated ransomware · Given easyJet's position we remain an attractive target. This
attack and/ or data breach has increased exponentially. Ransomware is a type results in us needing to continually mature and enhance our controls,
of malware that holds computers or files to ransom. To regain access, the intelligence gathering and protection methods and testing our defences
victim is required to pay a large fee. Double exploitation (where ransomware regularly using industry experts. To help our people keep pace with the
is coupled with a data breach) is a growing threat. Prevention of ransomware rapidly changing threats we face we regularly educate and raise awareness of
is a strategic priority for easyJet. cyber threats across our community.
· A data breach involves the unauthorised access to customer or · The external risk environment continues to increase, however
employee data. Protecting that data and its privacy remains a priority for easyJet continues to invest in, and test, our cyber defences:
easyJet.
· attacks were well defended - known aviation attacking group
Risk Owner attempts were blocked;
· General Counsel and Company Secretary · we continue to educate and raise awareness of cyber threats
across our community.
· We operate a risk-based improvement process leveraging the NIST
framework as our aligned industry standard.
· We continuously invest in Digital Safety through our Digital
Safety Programme, whereby we evolve with the threat landscape.
Potential causes
· Cyber attack
· Data breach
· Third-party incident
· User error
· Misconfigured systems
Potential consequences
· Sustained adverse media coverage
· Fines/regulatory sanctions
· Third-party liability/class actions
· Reduction in future revenue
· Operational disruption
· Significant spike in costs
· Share price movement
· Loss of colleague/customer trust
Controls and mitigations to prevent or reduce the impact of the risks
· A data and cyber risk governance structure exists to regularly
review the data and cyber risk landscape and determine required action to take
place to manage risk effectively.
· Dedicated Digital Safety team who provide assurance over third
parties, proactively monitor threats, and respond to incidents.
· Employee education and awareness programme including a network of
champions, online training, and awareness campaigns.
· External threat intelligence monitoring.
· Security logging and monitoring.
· Vulnerability scanning and penetration testing.
· Digital Safety programme to ensure compliance and ensure data
control and protection.
· Credit card data is protected through PCI DSS compliance as a
Level 1 Merchant. This is revalidated annually by an external body, to which
we (and they) attest.
· Digital Safety is discussed monthly at our AMB and quarterly at
our plc Board. Additionally, as part of our governance processes, the Digital
Safety Board meets quarterly to discuss matters related to our Cyber security.
Risk Commentary and areas of focus
Failure of Critical Technology · Critical technologies include, but are not limited to,
operational, commercial, and financial systems. A critical technology failure
· easyJet relies on several critical technologies that are key to includes any technical failure which is sufficient to interrupt critical
the delivery of essential business processes. business operations (which may include one or more systems).
Risk Owner · System unavailability or a failure can also lead to loss or
corruption of data.
· Chief Information and Data Officer
· easyJet seized the opportunity during the period of reduced
flying resulting from the Covid-19 pandemic to improve the IT environment e.g.
airport network refresh and a data centre upgrade.
· The external environment does present an increase in risk;
however, this has been managed through improvements to the IT environment.
Potential causes
· Destructive cyber-attack (i.e. ransomware)
· Hardware failure
· Aged infrastructure
· Data centre outage
· Third-party outage
· Technological dependency failure
· IT change
Potential consequences
· Sustained adverse media coverage
· Reduction in future revenue
· Fines/regulatory sanctions
· Operational disruption
· Significant spike in costs
· Share price movement
Controls and mitigations to prevent or reduce the impact of the risks
· Monitoring and alerting of availability of critical technologies
and their inter-dependencies.
· Security logging and monitoring.
· Vulnerability scanning and penetration testing.
· Non-damage business interruption insurance in place to limit
financial impact of operational disruption.
· IT Change Management Process embedded to assess risk of all
changes to technology including changes made by third-party providers.
· Critical technologies are cloud hosted, hosted across two data
centres or at third-party provider locations with necessary failover protocols
and security perimeters in place.
· IT Major Incident Management team is in place to respond rapidly
to any unforeseen critical technology incidents including those of a security
nature.
· IT Supplier Relationship Management process to ensure that
third-party services and associated risks are regularly reviewed and assessed.
· easyJet is progressing the delivery of a hosting and network
programme that will further improve the resiliency of core infrastructure and
cloud connectivity capabilities.
· IT and Digital Safety Policies and Standards that set out the
technical and organisational measures for keeping our data and systems safe,
as well as management of our IT assets.
· As an Operator of Essential Services under the Network and
Information Systems regulation in the UK, we have to comply with the
requirements laid out in the Cyber Assessment Framework for Aviation which
focuses on critical systems availability.
ENVIRONMENT AND SUSTAINABILITY
The environment and sustainability risks include the impacts of climate change
on our business and operations, carbon credit programmes, regulation/taxation,
and changing consumer and colleague expectations. easyJet's promise is to be a
safe and responsible airline. This is what guides our approach to
sustainability, whether that be related to climate change, health and safety,
diversity, or employee engagement. An update on easyJet's climate change
transition risks will be provided at the 2022 Financial Half Year Trading
Update.
Risk Commentary and areas of focus
Carbon Trading Scheme · Changes to carbon trading schemes, including the existence and/or
cost of the scheme, have the potential to create financial consequences by
· Adverse changes to carbon trading schemes, including the changes to existing cap and trade schemes (e.g. EU ETS) i.e. the reduction
existence and/or cost of the scheme of free allocations, would translate into an increase in the cost of
compliance for our business.
Risk Owner
· easyJet continues to develop its climate change agenda and has
· Chief Financial Officer taken industry leading positions with both its carbon offsetting programme and
use of the New Engine Option (neo), which produces 15% fuel saving compared to
the Current Engine Option (ceo). easyJet has identified carbon pricing
mechanisms as a transition risk.
· However, based on the external environment easyJet sees the
potential for carbon credit pricing to increase depending on how quickly
governments wish to meet emissions targets, which will result in additional
cost.
Potential causes
· Political change
· Uncertainty driven by Brexit
· International alignment
· External pressure groups
Potential consequences
· Closure of existing scheme
· Loss of free allocations, leading to significant cost impact
· Introduction of new schemes
· Inability to hedge in line with fuel policy
Controls and mitigations to prevent or reduce the impact of the risks
· easyJet influences future and existing policy and regulations
which affect the airline industry through several different channels,
including working with relevant industry bodies to assist in this.
· easyJet looks to optimise fuel usage to reduce emissions and
therefore reduce the potential impact of those schemes, for example ensuring
optimal routings as well as using climb, descent and landing techniques to
improve efficiency.
· easyJet has an appropriate hedging strategy.
Risk Commentary and areas of focus
Increased Taxation · Fuel is one of the biggest direct costs for easyJet. The business
maintains a focus on operational efficiency to save fuel and CO2. Increased
· Future policy measures and regulation to tackle the impact of taxation has been included as part of our Climate Change transition risk
aviation on climate change could impact easyJet's business if they impose portfolio.
limitations and cost on how easyJet operates and the services it can provide.
· Expansion of other aviation-based taxes e.g. for departing
Risk Owner passengers, could translate into greater compliance costs.
· Chief Financial Officer · The financial impact of this risk is increasing due to external
pressures applied by various countries across our network.
Potential causes
· Political change
· External pressure groups
· Customer demand
Potential consequences
· Significant increase in cost of existing aviation taxes/levies
· Future expansion of taxes/levies
· Policies to constrain growth/capacity
· Increasing noise curfews
· Pressure on margins
Controls and mitigations to prevent or reduce the impact of the risks
· By engaging with key stakeholders, easyJet seeks to reach a
common understanding on the drive to impose policy measures and regulation to
address the impact of aviation on climate change. This includes advocating for
fair and proportionate measures which incentivise airlines to be efficient and
which cover all sources of aviation emissions.
· easyJet continues to explain its environmental performance, and
the further action it is taking, to its customers and other stakeholders. For
example, this has included highlighting the introduction of the A320neo and
A321neo aircraft and their reduced emissions compared to previous generation
aircraft, and work with partners regarding new technologies to radically
reduce the carbon footprint of flying.
· easyJet can operate flexible routings in the event of constraints
being brought in.
· The new generation Airbus A320neo and A321neo aircraft are 50%
quieter during take-off and landing than the equivalent previous generation
aircraft.
ASSET EFFICIENCY AND EFFECTIVENESS
We maintain our competitive cost advantage by making the best use of
capacity/slots and fleet mix in the right airports at the right prices and
driving value through our supply chain.
Risk Commentary and areas of focus
Airport Infrastructure · Due to lower volumes of traffic across the European air traffic
network, congestion did not play a significant part in the day to day
· Flying to primary airports is an important element of our operation. However due to changing travel restrictions, traffic flows moved at
customer proposition. The airports to which we fly may already be or may relative short notice, which in some cases caused more localised traffic
become congested. issues at major destination airports.
Risk Owner · With flying volumes expected to increase throughout 2022, easyJet
is anticipating congestion to return to pre-pandemic levels and will rely on
· Chief Commercial Officer the existing controls and mitigations to manage the risk.
Potential causes
· Increased competitor capacity
· Environmental restrictions/pressure restricting airport
expansions
· Delays in airport infrastructure expansion
· Increase in airport charges
· Changes in regulation
· Ineffective slot management
· Ineffective management of the airport operational environment
Potential consequences
· Weakened customer proposition
· Loss of market share
· Inefficient use of crew/aircraft
· Significant increase in costs
Controls and mitigations to prevent or reduce the impact of the risks
· Where easyJet is affected by industrial action or other service
interruption by a key supplier, resources are deployed to manage this as
effectively as possible.
· Sophisticated processes and systems to ensure slot transactions
are made in an efficient and effective manner.
· Effective cross-functional governance to ensure optimal business
decisions are made.
· easyJet closely monitors airport capacity through a dedicated
airport development team. The team works with airports to ensure the
development of appropriate capacity for easyJet in a cost efficient and timely
manner.
· Managing aircraft gauge to improve our ability to grow.
Risk Commentary and areas of focus
Continuity of Services · During 2021, significant enhancements were made to our Crisis
Framework and our approach to dealing with service continuity risks.
· easyJet is dependent on a mixture of critical technology and
processes, employees, buildings/ facilities and third-party suppliers. A loss · The Crisis Policy was developed to operate in a hybrid working
of one or more of the above components could lead to significant disruption to environment, so Crisis Team members can manage crises remotely. In addition,
operations and could have an adverse reputational, financial or legal impact. the Crisis Centre was upgraded to support our hybrid working environment.
Risk Owner · Our Safety Risk team reviewed all critical suppliers ahead of the
restart to flying to ensure they were prepared, and the inactivity risk was
· Chief Operating Officer well managed by identifying and addressing training requirements.
· Our Procurement Process was enhanced to include specific
questions on suppliers' business continuity plans and to identify and assign
appropriate ownership.
· With the enhancements made, increased use of the Crisis Policy
and Procedure and a more flexible approach available, easyJet is better
positioned to respond to continuity risks during 2022 and beyond.
Potential causes
· Failure of critical technology
· Destructive cyber-attack (i.e. ransomware)
· Significant external incident (weather, activism, terrorism)
· Failure of third party
· Industrial action
Potential consequences
· System unavailability for customers and/or staff
· Inability to access key buildings/facilities
· Sustained adverse media coverage
· Unavailability of critical staff
· Reliance on inadequate supplier recovery plans
· Brand/reputation impact
· Operational disruption
Controls and mitigations to prevent or reduce the impact of the risks
· The four key areas of business resilience (IT and processes,
people, premises, and suppliers) all form part of easyJet's functional
business and airport Business Continuity Plans.
· Critical IT systems are identified with ongoing efforts to match
the business needs with recovery capabilities. The risk of system
unavailability is now mitigated further, thanks to the adoption
· of the cloud and the select use of externally hosted systems, in
addition to easyJet's two data centres.
· Incident Management Teams are in place 24/7 to manage low level
IT incidents. If there is a major incident or an escalation of an incident
that has a wider impact on other parts of the business and stakeholders, then
it can be escalated into the Crisis Management framework via the Network Duty
Manager.
· Time-critical staff have been identified via Business Impact
Assessments and Business Continuity Plans, with regularly tested recovery
desks allocated at alternate locations, should the usual place of work be
unavailable. An increased provision of laptops and tablets also enables
greater mobility and remote ways of working.
· Procurement processes include risk assessments aligned with
business objectives. These require relevant third parties to have their own
Business Continuity/ Disaster Recovery plans and we are implementing a process
to review a sample of these each year.
· Maintain close working relationships with key stakeholders
including, but not limited to, airport authorities and slot coordinators,
lobbying where appropriate.
Risk Commentary and areas of focus
Non-Delivery of Strategic Initiatives · Market volatility arising from Covid-19 and its impacts, the
external environment and organisational priority changes are having a negative
· The business continues to undertake several initiatives to effect on delivery of strategy initiatives. However, internally we have
support its strategy. improved the control environment through greater ownership, improved business
planning, reporting and involvement of subject matter experts.
Risk Owner
· This risk remains stable.
· Chief Data and Information Officer
Potential causes
· Inappropriate resource dedicated to change delivery and oversight
· Changes in organisation's priorities (may be driven by internal
or external factors)
· Scope change/time available
· Approach and methodology for complex programmes
Potential consequences
· Business benefits not realised
· Financial underperformance
· Inefficient use of resource
Controls and mitigations to prevent or reduce the impact of the risks
· Complex, large-scale programmes have been initiated and
prioritised through the Enterprise Project Management Office.
· The Enterprise Project Management Office oversees delivery of
projects and programmes ensuring dependencies are managed across the
portfolio.
· A project management framework, which sets out approval
processes, governance requirements, and key ongoing processes and controls, is
followed by all projects and programmes, and reviews are undertaken to ensure
continuous improvement in this approach.
· Each strategic initiative has an executive sponsor and a
Leadership 50 lead assigned and its own steering group, which provides
oversight and challenge to the project, monitors progress against programme
objectives (including budget, benefit realisation and appropriate resource)
and ensures that decisions are made at the appropriate level.
· Key strategic initiatives are managed by dedicated programme
management resource with the right skills and behaviours, complemented by
subject matter specialist resource where appropriate.
· The executive sponsor provides routine updates to the Airline
Management Board and can use this as an escalation channel for any issue
resolution.
· The Board also receives updates on key strategic initiatives
including any risks or issues to achieving the key milestones that enable the
achievement of the five-year plan.
· The Internal Audit function provides independent programme
assurance over our most significant initiatives, drawing upon independent
subject matter expertise where appropriate.
Risk Commentary and areas of focus
Single Aircraft Type Operation · easyJet continues to operate a single type aircraft fleet.
· easyJet is dependent on Airbus as its sole supplier for aircraft. · The operation is set up to manage the risks associated with a
The Board considers that the efficiencies achieved by operating a single fleet single aircraft operation, with maintenance and fleet management reviewed each
type outweigh the risks associated with easyJet's single fleet strategy. year to minimise the potential impact.
Risk Owner · Both the internal and external environment around this risk
remain stable.
· Chief Financial Officer
Potential causes
· Delays in the delivery of new aircraft
· Technical/mechanical issues
· Fluctuating second-hand market
Potential consequences
· Schedule reductions/cancellations
· Grounding of all/part of the fleet
· Loss of customer confidence
· Financial impact when aircraft leave the fleet
Controls and mitigations to prevent or reduce the impact of the risks
· There are 9,032 A320 family (A319, A320, A321) aircraft
operating, with a proven track record for safety and reliability.
· Introduction of the A320neo in part mitigates this single fleet
supplier risk as the aircraft is equipped with a different engine type.
· easyJet continues to work closely with Airbus to ensure full
visibility of the delivery schedule for new aircraft. If there are material
delays, appropriate mitigation is put in place; for example, short-term wet
lease arrangements are used to minimise any operational impact.
· easyJet operates a rigorous established aircraft maintenance
programme. Maintenance schedules are approved by the relevant regulatory body.
· easyJet regularly reviews the second-hand market and has several
different options when looking at fleet exit strategies. Sale and leasebacks
facilitate the exit of aircraft from the fleet by transferring residual value
risk and provides flexibility in managing the fleet size.
LEGISLATIVE/REGULATORY LANDSCAPE
The airline industry is heavily regulated and there is a continual need to
keep well informed and adapt (as required) to any legislative or regulatory
changes across the jurisdictions in which easyJet operates.
Risk Commentary and areas of focus
Brand Licence and Major Shareholder · Given the size of the shareholding, our major shareholder can
influence easyJet's business in relation to actions that require shareholder
· easyJet has two major shareholders (easyGroup Holdings Limited approval.
and Polys Holdings Limited) which, as a concert party, control approximately
15.27% of its ordinary shares. · Through regular communications, the risk associated with our
major shareholders remains low and stable.
· easyJet does not own its company name or branding, which is
licensed from easyGroup Ltd. The licence includes certain minimum service
levels that easyJet must meet to retain the right to use the name and brand.
Risk Owner
· General Counsel and Company Secretary
Potential causes
· Shareholder activism
· Actions of easyGroup or other easyGroup licensees
Potential consequences
· Eventual loss of the brand licence
Controls and mitigations to prevent or reduce the impact of the risks
· Active shareholder engagement programme.
· Regular engagement with easyGroup Holdings Limited alongside
other major shareholders.
· Representatives from the Board and senior management take
collective responsibility for addressing issues arising from any activist
approach adopted by the major shareholder. The objective is to address issues
when they arise and anticipate and plan for potential future activism.
· Quarterly meeting of senior representatives from easyJet and our
major shareholders, attended by the Chief Financial Officer and the Group
General Counsel & Company Secretary, to actively manage brand-related
issues as they arise.
· easyJet makes contributions to the joint brand protection fund.
Risk Commentary and areas of focus
Changing Legal and Regulatory Landscape · The legal and regulatory landscape continues to develop in the
areas in which easyJet operates.
· Failure to comply with legislation and regulation, such as local
consumer laws, new case law or policy changes in relation to customer · The speed of change has increased for both legislation and
compensation, environmental or airport regulation, in the jurisdictions in regulation.
which easyJet operates, or data protection/information protection regulations
could have an adverse reputational and financial impact. · The easyJet General Counsel Office (GCO), that manages legal and
regulatory risks, has developed over the last year to be more prepared for
Risk Owner changes
· General Counsel and Company Secretary · Notwithstanding the level of change increasing, this risk remains
stable.
Potential causes
· New or changes to existing legislation/regulation
· Employee/agent ignorance
· Rogue employee/agent behaviour
Potential consequences
· Sustained adverse media coverage
· Fines/regulatory sanctions
· Reduction in future revenue
· Operational disruption
· Loss of operating licence
· Significant spike in costs
· Share price movement
· Loss of colleague/customer trust
Controls and mitigations to prevent or reduce the impact of the risks
· Compliance framework including, but not limited to, policies,
procedures, and mandatory training programmes.
· easyJet has an in-house team of legal and regulatory experts to
advise on legal issues and developments,
· and to assist the business in interpreting any formal regulatory
requirements. Where appropriate, this expertise is supplemented with
specialist external support relevant to a specific discipline
· or jurisdiction.
· Panel of external legal advisers, both in the UK and in key
easyJet markets, is briefed to keep easyJet informed of any changes or new
legislation and to assist easyJet in developing appropriate responses to such
legislation.
· easyJet influences future and existing policy and regulations
which affect the airline industry through several different channels,
including working with relevant industry bodies to assist in this.
· easyJet adapts to new legislation and regulation, where possible
adapting existing compliance frameworks (for example mandatory training
programmes and clear policies and associated guidance).
MACRO-ECONOMIC AND GEOPOLITICAL
The airline industry can be sensitive to macro-economic and geopolitical
conditions. These risk events can affect our financial performance including
supply/demand imbalance, general economic trends, as well as impact of fuel
cost, foreign exchange rates, and counterparty performance.
Risk Commentary and areas of focus
Supply/Demand Imbalance · Covid-19 has impacted the aviation sector by suppressing demand
and creating opportunities for both existing and local start up operators.
· easyJet's success in the highly competitive European short-haul
aviation market is built on our key competitive advantages: our network, cost · Consolidation creates a more challenging environment with fewer
base, brand, digital innovation, and efficient and robust capital structure. but stronger airlines.
Risk Owner · As the aviation sector emerges from the pandemic, customers may
favour value and low fares over brand loyalty.
· Chief Commercial Officer
· easyJet has emerged as a stronger airline with the ability to
respond to rapidly changing market conditions, having developed
industry-leading agility to add new capacity and pivoting our schedule to
capitalise on shifts in demand.
· Despite increased competition, our enhanced scheduling
capabilities and developing product and ancillary offering results in this
risk improving.
Potential causes
· Increased capacity
· Industry consolidation
· Increased competition from other airlines and transport providers
· Government interventions
· Fall in consumer demand (including but not limited to
macro-economic conditions and environmental concerns)
· Internal growth plans
Potential consequences
· Loss of market positions (relative market share)
· Pressure on margins
· Adverse financial position
· Share price movement
Controls and mitigations to prevent or reduce the impact of the risks
· Enhancements to our commercial organisation to provide even
further focus on existing and new initiatives to optimise the revenue
position.
· Weekly trading meeting to review performance - attended by senior
managers, including members of the AMB.
· Relentless focus on maintaining easyJet's competitive advantages
through network positioning and brand.
· The Network Development Forum, a cross-functional panel of senior
managers, including members of the AMB, approves the allocation of assets
around the network in the context of expected market conditions.
· Competitor and consolidation activity is monitored in detail by
the Network team, enabling strategic decision making on key market positions.
· Fleet framework arrangements, together with the Group's leasing
policy, provide easyJet with significant flexibility in respect of scaling the
fleet according to business requirements.
· Dynamic planning and capacity management process to manage supply
and demand fluctuations.
Risk Commentary and areas of focus
Volatility in Financial Markets · Through Covid-19 easyJet's operational exposures reduced. Hedging
positions were managed through this time so that at any time hedges became
· easyJet is exposed to a variety of financial markets, volatility more than 100% of exposures, the excess was closed out. Any new hedging
in which could give rise to adverse pressure on the cash flows of the Group. activity was reduced due to uncertainty in exposures. This approach was
approved by the Finance Committee.
Risk Owner
· Due to the additional foreign currency debt brought onto balance
· Chief Financial Officer sheet, easyJet has become more exposed to FX revaluation through the P&L.
Hedging this full risk would have been costly and would have added more
volatility to the liquidity position. It was therefore approved by the Finance
Committee that easyJet would accept some P&L volatility, in exchange for a
better managed liquidity position.
· Hedging positions are maintaining a stable position of jet fuel
price. However balance sheet revaluations are increasing foreign exchange
risk.
Potential causes
· Market price risk: volatility in jet fuel prices, foreign
exchange rates, carbon prices, inflation rates or interest rates
· Counter-party risk: default of counter parties used for
depositing surplus cash and hedging
· Liquidity risk: inability to raise funds when required
Potential consequences
· Insufficient cash to meet financial obligations as they fall due
and/or the inability to fund the business when needed leading to insolvency
· Significant increase in costs
Controls and mitigations to prevent or reduce the impact of the risks
· The Finance Committee (a committee of the plc Board) oversees the
Group's treasury and funding policies and activities.
· Treasury policy sets out plc Board approved strategies for market
price risk management, counter-party credit risk management and liquidity risk
management. Monthly reporting on all treasury activity including reporting on
compliance with treasury policy.
· Maintaining a liquidity buffer supported by cash and a business
interruption insurance policy.
· Ability to access diverse sources of funding to support liquidity
requirements.
· Rolling hedging programmes on jet fuel and foreign exchange
market price exposure.
PEOPLE
Having the right people is a key part of Our Plan. In today's environment, we
need to create an inclusive and energising environment that attracts the right
people and inspires everyone to learn and grow
Risk Commentary and areas of focus
Industrial Action · Highly constructive relationships with our trade union partners,
works councils, and our people have allowed the business to adapt throughout
· easyJet, and the aviation industry in general, has a significant 2021 and position the business to emerge with strength from the pandemic.
number of employees who are members of trade unions.
· Productivity has increased by reducing the number of crew per
· Each of the European countries in which easyJet operates has aircraft.
localised employment terms and conditions. As such its pilots, crew and
engineers are members of 21 trade unions across seven countries. There are · Sustainable improvements have been made using part-time and
also an additional seven consultative bodies including five Works Councils and seasonable contracts, which were agreed with our union partners.
a European Works Council.
· Agreements with our union partners have been made throughout the
Risk Owner last year, with routine seasonal recruitment taking place to ensure the
operation is ready to meet demand. This risk remains stable.
· Group People Director
Potential causes
· Adverse employee experience
· Changes to terms and conditions
· Political unrest
Potential consequences
· Sustained adverse media coverage
· Operational disruption
· Significant spike in costs
· Reduction in future revenue
· Share price movement
· Loss of colleague/customer trust
Controls and mitigations to prevent or reduce the impact of the risks
· easyJet seeks to maintain positive working relationships with all
trade unions and other representative bodies and has a framework in place for
consulting and engaging with trade unions and consultative bodies.
· In the event of industrial action or expected disruption, easyJet
has processes to mitigate the impact to our operations. The Operations
department also has specific procedures to deal with such events.
· Adoption of innovative part-time working patterns.
Risk Commentary and areas of focus
Talent Acquisition and Retention · Retention of critical talent continues to be a risk and is
proactively managed, particularly given the continued uncertainty and
· In today's shifting environment, we need to place even more focus on challenge of our industry and our inability to offer compelling short-term
recruiting the right people and building the right talent. financial reward.
Risk Owner
· Group People Director
Potential causes
· Uncompetitive remuneration packages
· Lack of career progression
· Outdated ways of working
Potential consequences
· Sustained inability to deliver key strategic initiatives
Controls and mitigations to prevent or reduce the impact of the risks
· Creation of retention programme for the 2022 financial year
co-sponsored by HR Director, M&A and People Development and Reward
Director.
· Projects making up the programme include:
o Leadership and Management Capability Development
o Talent Development Programme
o Inclusion & Diversity
o Employee Value Proposition
o Wellbeing Framework
o Recognition Principles and Platform
o Reward Approach
· Hybrid working across our office-based communities that support
new ways of working with the right policies, processes, and technology to
improve the employee experience.
· Quarterly engagement survey across all communities to gain
insight on employee sentiment.
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