17 May 2019

easyJet plc

Results for the six months ending 31 March 2019

easyJet delivers half year results in line with expectations; investing in long term profit and returns; full year outlook unchanged

Summary

·      During the first six months of Financial Year 2019 easyJet has:

o  delivered first half results in line with expectations

o  brought additional focus on its cost, customer and operational initiatives to underpin the outlook for the remainder of the year

o  continued to invest in the strategy set out in the Our Plan framework and is making good progress on its strategic initiatives

·      Passenger numbers for the six months to 31 March 2019 increased by 4.9 million (13.3%) to 41.6 million

·      Capacity¹ increased by 14.5% principally due to annualising of new operations in Berlin. easyJet grew its existing network capacity by c.7%. Load factor decreased by 1.0 percentage points to 90.1% mainly as a result of building loads in Berlin in the first quarter

·      Total revenue increased by 7.3% to £2,343 million (H1 2018: £2,183 million) due to capacity growth and a foreign exchange benefit negatively offset by, the impact of the move of Easter, the new IFRS 15 accounting standard and the annualisation of prior year benefits such as Monarch's bankruptcy and Ryanair cancelling a large proportion of its winter 2017/8 schedule in the UK. Total revenue per seat decreased by 6.3% to £50.71 (H1 2018: £54.10), with a decrease of 7.4% at constant currency²

·      Headline cost per seat increased by 3.9% to £56.66 (H1 2018: £54.53) as a result of fuel price increases, the impact of foreign exchange, underlying cost inflation, investing in resilience as well as the impact of drones at Gatwick in December, mitigated by easyJet's cost programme and fleet up-gauging. Headline cost per seat excluding fuel at constant currency increased by 1.3%

·      Headline loss before tax was £275 million (H1 2018: loss of £18 million) reflecting the above revenue and cost drivers, easyJet's normal seasonality as well as increased volume of capacity

·      Total loss before tax of £272 million for the six months ended 31 March 2019 (H1 2018: loss of £68 million) reflecting a small benefit of £3 million from non-headline items

·      easyJet's business model and strategy are underpinned by sector leading balance sheet strength, with a net debt position at 31 March 2019 of £201 million (under new IFRS 16 accounting standards)

Outlook

·     easyJet's headline profit before tax expectations for Financial Year 2019 remain unchanged and in line with market expectations

·     easyJet continues to implement its strategy to secure leading positions at primary airports to drive profitable growth, returns and cash flow

·    Forward bookings for the third quarter are three percentage points behind last year at 72% and flat year on year at 34% for the fourth quarter. easyJet's capacity growth in the second half is forecast at c.7%

·    Revenue per seat at constant currency in the second half is now expected to be slightly down. This is not helped by the ongoing negative impact of Brexit-related market uncertainty as well as a wider macroeconomic slowdown in Europe. This is offsetting a continued focus of yield improving initiatives, the move of Easter into the second half, the second-half phasing benefit of IFRS 15, improvements in Berlin and more disciplined market capacity growth

·    However, full year headline cost per seat excluding fuel at constant currency (assuming normal levels of disruption in H2) is now also expected to be down. This includes an expected benefit in the second half from easyJet's investment in operational resilience to manage the impact of disruption

·    It is estimated that at current exchange rates⁽³⁾ and with jet fuel remaining within a $600 metric tonne to $700 metric tonne trading range, easyJet's unit fuel⁽⁴⁾ bill for the 12 months to 30 September 2019 is likely to increase by between £25 million and £60 million compared to the 12 months to 30 September 2018. easyJet's total fuel cost for the year to 30 September 2019 is currently estimated to be approximately £1.4 billion 

·    In addition, exchange rate movements are likely to have around a £10 million positive impact on headline profit before tax compared to the 12 months to 30 September 2018

·    easyJet is now targeting to consolidate its stronger positions delivered over the past few years and as a result its capacity growth in Financial Year 2020 will likely be at the lower end of its historic growth rates

Commenting on the results, Johan Lundgren, easyJet Chief Executive said:

"easyJet has performed in line with expectations in the first half.  

 "I am pleased that despite tougher trading conditions, we flew more than 41 million customers, up 13% on last year, performed well operationally with 54% fewer cancellations in the period and customer satisfaction with our crew is at an all-time high. We have also continued to make good progress on our strategic initiatives in holidays, loyalty, business and with data.

 "Cost control remains a major priority for easyJet.  Our focus is on efficiency and on innovation through data and we are on track to deliver more than £100m in cost savings during 2019.

 "We are well-equipped to succeed in this more difficult market through a number of short term customer and trading initiatives for the summer; measures to improve our operational resilience; and by focusing on what is most important to customers - value for money, punctuality and great customer service.  All this is underpinned by a market leading balance sheet.

 "We have invested in the operation by doubling our standby aircraft and changed our schedules so that even though the external operating environment over the summer is not set to improve, we plan to alleviate the impact on our customers.  We have rolled out Auto Bag Drop to 17 airports, which combined fly over 34 million of our customers and we are now the number one airline in Berlin and at our newly opened base in Nantes in France.  In total we are now the number one airline at 27 airports across the network, up from 18 two years ago.

 "Our focus on our customers continues to grow their loyalty.  Our loyal customers are choosing us time and again and now account for 76% of total bookings, an increase of seven million since last year."

For further details please contact easyJet plc: 

There will be an analyst presentation at 09:30 am GMT on 17 May 2019 at Nomura, One Angel Lane, London, EC4R 3AB

Alternatively a webcast of the presentation will be available both live and for replay (please register on the following link):
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Overview

During the first half of Financial Year 2019 easyJet has made progress in its strategic priorities in order to deliver future increases in profit per seat, return on capital employed and cash flow.

Capacity growth of 14.5% in the first half represents investment in stronger positions across the network, particularly the strategic opportunities in Berlin and Manchester. Passenger numbers have grown by 13.3% to 41.6 million and total revenue in the first half has grown to £2,343 million. Underlying revenue, including ancillary revenue, has been positive.

easyJet continues to invest in its customers and the implementation of the Operational Resilience programme in the first half has gone well and is delivering early benefits in the summer season.

Cost control remains a major focus for easyJet. Headline cost per seat excluding fuel at constant currency has increased by 1.3%, which includes an estimated £10 million direct cost from drones at Gatwick and reflects continued inflationary pressures. Both fuel and foreign exchange have been significant cost headwinds in the first half.

As a result of the investment in capacity, structural and revenue timing impacts and cost investment for the future, the headline first half loss was £275 million, which was in line with management expectations.     

Revenue

Total revenue increased by 7.3% to £2,343 million (H1 2018: £2,183 million). Revenue per seat decreased by 6.3% to £50.71, and by 7.4% at constant currency to £50.12. This was driven by:

·     Positive underlying demand for easyJet's attractive network of destinations and frequencies supported by easyJet's strong brand

·     Continued growth in ancillary revenue per seat through better bag and allocated seating sales combined with product and pricing initiatives

·     A foreign currency revenue benefit from a stronger Euro against Sterling

Offset by:

·     The dilutive impact of a full period of operations at Berlin Tegel in its first full year of operations. easyJet grew capacity in Tegel by 50% in the six month period, which will naturally have put pressure on market prices

·     The impact of the move to IFRS 15 accounting standard changing the timing of recognition of revenue (£57m total revenue impact in H1)

·     Cancelled flights and lost revenue resulting from the drone issue at London Gatwick (c.£5m revenue impact)

·     A decrease of 1.0 percentage points in load factor to 90.1% as anticipated, due to Berlin dilution and the one-off increase in prior year late demand

·     Seasonality - the movement of Easter to the second half of the financial year (H1 impact of c.£45m)

·     The impact of lower market capacity benefits in the prior year, including the one-off impact from the bankruptcies at Monarch and Air Berlin and the winter withdrawal of Ryanair from the UK domestic market

easyJet has started a number of initiatives to drive yield and ancillary revenue, supported in particular by increasing availability and deployment of data and by new product development. Investment in these has been prioritised and is now expected to support trading in the fourth quarter as well as for the future. These initiatives include:

·     Increasing the use of data in our pricing algorithms for both tickets and ancillary products

·     Developing the allocated seat band product further from the three bands in use at the beginning of the year to five by the end of April

·     Developing product bundles quicker, in particular targeting business customers with a flexible, fast and value-focused combination that includes a seat at the front of the cabin, second cabin bag, Speedy Boarding and Fast Track security

Cost

easyJet's underlying cost performance has been solid despite external inflationary pressures. Headline cost per seat including fuel increased by 3.9% to £56.66 (H1 2018: £54.53). Headline cost per seat including fuel at constant currency increased by 2.5% to £55.88.

Headline cost per seat excluding fuel increased by 1.3% at constant currency to £43.65 (H1 2018: £43.11). This cost increase was driven by:

·     Inflationary cost pressures including higher regulated airport charges, changes to airport mix and prices rises in maintenance costs

·     Annualisation of previously agreed crew pay deals

·     Ownership costs reflecting new aircraft year on year and the impact of IFRS 16 accounting

·     A c.£10million cost impact of the drones at Gatwick relating to customer welfare costs. The incident affected around 82,000 customers and led to over 400 flights being cancelled

·     Investment in operational resilience ahead of the busy summer period

easyJet's cost programme has partly offset these challenges and continued to deliver substantial savings in particular:

·     Lower overall levels of disruption, cancellations and delays over three hours despite the drone issue at Gatwick

·     Fleet up-gauging from A319 ceo to A320 neo and A321 neo albeit this has been marginally lower than planned due to Airbus delivery delays

·     Established strategic relationships with key suppliers, particular airports and ground handling agents, to drive long-term cost efficiencies

·     Lower de-icing costs due to relatively benign weather

·     Lower navigation charges

Fuel cost per seat increased by 14.0% to £13.02 (H1 2018: £11.42) and by 7.1% at constant currency, driven by a higher hedged fuel price compared to the prior year, along with increases in the market price, partially offset by a continued investment into more fuel efficient aircraft. 

Non-headline costs

easyJet had a £3 million benefit in non-headline items during the first half of Financial Year 2019. These items are separately disclosed as non-headline profit before tax items. The most significant items were as follows:

·     £2 million non-cash profit as a result of the sale and leaseback of ten A319 aircraft in the period (H1 2018: charge of £19 million), a small change to previous guidance as the terms of the transaction were finalised

·     £3 million gain from the retranslation of balance sheet assets and liabilities (H1 2018: nil)

·     £4 million charge for ongoing organisational and legal costs associated with easyJet's Brexit-mitigation programme (H1 2018: charge of £4 million)

There were no non-headline charges relating to Tegel, which is now fully integrated into the underlying business (H1 2018: charge of £24 million).

Non-headline items are material non-recurring items or are items which do not reflect the trading performance of the business. Further detail can be found in the notes to the accounts.

Strategic progress

Delivering Our Plan

easyJet has a well-established business model that provides a strong foundation to drive profitable growth and long term shareholder returns. easyJet is delivering its strategy through its new strategic framework which is called 'Our Plan'. The five priorities are:

1.    Network - number one or number two in primary airports

2.    Winning our customers' loyalty

3.    Value by efficiency

4.    The right people

5.    Innovating with data

1.    Network - number one or number two in primary airports

easyJet's strategy is focused on key airports, serving valuable catchment areas that represent Europe's top markets by GDP, driving both leisure and business travel.

easyJet has now reached a number one position in 27 airports, an increase of two airports since H1 2018 and easyJet is now number one or number two at 25 of its 29 bases. 54% of easyJet capacity is flown from an airport where easyJet has a number one position and easyJet's seat capacity at airports where it has number one or number two positions has increased by almost seven million seats since 2018 to 78 million seats.

During the first half of Financial Year 2019, easyJet targeted two strategic investment opportunities, at Berlin Tegel and Manchester airports, as well as continuing to build its share in existing markets adding frequencies and destinations. In addition, around 2% of capacity growth in the first half was through up-gauging to bigger aircraft, by which easyJet can continue to deliver growth in slot constrained airports and drive higher returns.

easyJet is continuing to consolidate its position in Berlin and is now the number one airline in that market. With increased overall scale, operations at the business-friendly Tegel, a growing domestic network and additional international destinations, easyJet is establishing a strong presence in Berlin. The Germania airline bankruptcy has led to a benefit in terms of capacity and easyJet has secured additional aircraft parking at Tegel, which has allowed a reduction in costly outstation overnight stops and the opportunity to drive revenue with a better schedule and offer for the local Berlin customer.

easyJet continues to target growth in regional France, leveraging its long-established brand and network presence. In April easyJet opened a new base in Nantes, which brings its number one positions in France to six, including Nice, Lyon, Bordeaux, Nantes, Lille and Grenoble as well as a number two position in Paris Charles de Gaulle and Toulouse.

easyJet also consolidated its position as the UK's leading airline in the domestic market, with growth at Manchester, Edinburgh, Glasgow, Belfast, Liverpool, Southend and Bristol, as well as continuing to strengthen its number one positions in Italy at Milan Malpensa, Venice and Naples.

2.    Winning our customers' loyalty

easyJet continues to implement its customer focused strategy in order to drive revenue, leading to increasing loyalty, brand recognition and offering its customer a range of attractive products. This is achieved through an attractive flying network, market-leading digital tools and a high level of customer service. 

easyJet is the first choice airline for value⁽⁵⁾ across its European markets, reflecting its investment in customers and people. In the UK easyJet has seen further growth in consideration and more consumers than ever are saying we are their first choice brand. In Europe our customers in France, Switzerland and Italy now consider easyJet their most trusted and best value Low Cost Carrier. In Germany easyJet's brand consideration has increased substantially with a 12 percentage point increase in serious consideration from the same period five years ago.

Initiatives such as the expansion of Automated Bag Drop to 17 airports, which represents over 34 million customers per year, has improved customer satisfaction due to an overall more efficient process for customers, with reduced queue times and customer hosts on hand to support with any queries. The launch of the AirPortr home bag collection service and the partnership with Three / Hands Free at some airports has allowed customers more flexibility in their travel plans and these services will expand further in the second half of the year. As a result of the successful "Summer of Boarding" initiatives last year, further activities are being planned to support this key part of the customer journey to ensure customers enjoy an easy, efficient and friendly experience when they fly with easyJet.

Satisfaction with crew onboard has increased year on year which is a strong reflection of easyJet's core purpose of having "the warmest welcome in the sky". In January 2019 the new electronic point of sale (ePOS) system was launched on board which has allowed the crew to provide an even better service on board, and allowing contactless payments for the first time, leading to a faster and more efficient service. This is also expected to drive revenue improvement in the future. Real time stock management functionality is allowing easyJet to build more detailed usage trends to help understand customer demands for future product selection and supports our new and improved regional food offering. The expansion of the pre-order offering to include boutique and children's meal deals is also allowing customers to pre-plan for their journeys. easyJet has also recently announced that it will stop selling peanuts on its aircraft to protect those with allergies.

easyJet's continued focus on its customers is being delivered through the proactive management of disruption, ensuring that customers receive accurate, relevant and timely communications through the appropriate channels such as the app which maintains its five star customer rating from over 31 million downloads.  Customers are being provided greater choice and flexibility when they need to contact easyJet, which is being served through enhanced self-service capabilities (such as instant chat) and greater support around their entitlements in disruption. easyJet is now delivering a significantly better disruption claim process: the longest call centre wait time this Easter has been 4.5 minutes (compared to three and half hours during Easter 2018); the average processing time of a claim is one day and payment within five days; and easyJet is investing in systems to manage 20,000 claims per week at peak times. Over the course of the next year, easyJet will also be developing ways for customers to track the status of their claims to further improve this process.

Customer enhancements in the digital area so far this year include Look and Book, the new feature on the app that allows customers to book flights using screen grabs of Instagram posts. The introduction of the new digital bag scanner on the app also allows customers to check their cabin bag size before they arrive at the airport, allowing for a more seamless experience on the day of travel. Future development is now focused on enhancing the website design and planning for the delivery of voice activated bookings.

Strategic initiatives

easyJet has continued to invest in its three strategic initiatives in the first half of the year, which will drive revenue and profit per seat (through increasing demand and yields as well as higher ancillary revenue growth), with relatively low capital requirements driving increasing returns.

Holidays

easyJet has made excellent progress in setting up its Holidays business and expects to launch the offering by the end of the year, selling holidays for the summer 2020 season.  The focus over the past six months has been to establish a structure and platform for the business as well as continue to define the offering.

The opportunity remains significant, with an estimated European Package Holiday market of around €60 billion⁽⁶⁾ which is growing at 6% per annum. easyJet's network of high frequencies to 157 airports in Europe is expected to fly over 100 million seats this financial year and at present easyJet only sells accommodation to around 500,000 of its existing customers.

In March easyJet Holidays announced the appointments to its leadership team, which is made up of a combination of people already working for easyJet who bring with them extensive business and brand knowledge along with newly appointed experienced travel industry professionals. The Holidays Board will bring the experience, ambition and diversity that will be needed to build and grow easyJet Holidays into a major holidays business.

easyJet has also now appointed two best in class technology partners in Valtech, who will design and build the front end web platform, as well as Atcore as the back end provider who have led the provision of leading edge travel technology over a number of decades. They are uniquely placed to develop a platform that can provide a bespoke easyJet Holidays product and customer proposition but can scale across all easyJet's markets as it grows.

With the team, structure and technology now in place, easyJet Holidays is continuing to develop its direct relationships with key hotel partners throughout Europe and negotiations are well advanced. easyJet's aim is to work with the most loved hotels in city, beach and ski destinations and to complement these hand-picked hotels with a full range of accommodation options through our partners.

easyJet plans to launch its Holidays business at the end of 2019, selling holidays for summer 2020.

Business

easyJet's positions in primary airports and high number of frequencies allows it to compete effectively for higher yielding business customers, who tend to book late and add valuable ancillary revenue.

easyJet made further strong gains with business passengers in the first half, flying 8.3 million business passengers, an increase of 1.1 million more than in H1 2018 (+ 15.7%) growing faster than capacity. Business passenger penetration reached 20% for the half, up +0.6ppt on the prior year. This has been driven by the expansion at Tegel, supported by traction from our business sales team who have grown contracted customers by 6%. easyJet has over 50% penetration of business passengers on its German domestic routes. In Germany easyJet has now made it easier for customers to reclaim VAT with a semi-automated process and is progressing towards a fully automated offer.

easyJet has also made progress in its strategic focus on Business, building on the existing infrastructure, adding back end capability to make it easier to fly business with easyJet and continuing to develop its business proposition to compete with higher price legacy airlines. In the next few months easyJet will be delivering a number of initiatives that will drive increased volumes and an increased revenue premium from business customers:

·     Rolling out Flight Club Business to over 100 corporate customers, which is currently being trialled with a pilot group of customers

·     Introducing a Duty of Care solution through our partnership with Traxo

·     Adding Fast Track within our Flexi Fare offer at another 20 airports to ensure 90% of our business passengers can enjoy quicker transition through airports 

·     Trialling a business fare bundle that includes a seat at the front of the cabin, second cabin bag, Speedy Boarding and Fast Track security

Loyalty

easyJet is taking a phased approach to its loyalty initiative, first looking to build on the success of its current loyalty products, Flight Club and easyJet Plus, whilst continuing the development of a modern, low cost rewards programme to introduce in the future.

easyJet carried more than 90 million passengers last year and has more than 25 million unique customers engaged in its CRM programme. easyJet plans to give these customers greater recognition and reward. easyJet is also planning to expand its easyJet Plus subscription product, introducing new variants to appeal to distinct customer segments.  

3.    Value by efficiency

easyJet is committed to maintaining its structural cost advantage in the markets in which it operates, primarily against the legacy airlines. easyJet is low cost, driving efficiency and investing only where it matters most to our customers and our people.

Through its Cost and Efficiency Programme, easyJet continues to drive both short-term efficiencies and longer term structural cost savings across all areas of the business, leveraging its increasing scale. These savings enable the airline to offset the effects of underlying inflation and build flexibility to help mitigate revenue pressure. Data is also playing an increasingly large part in identifying and delivering cost savings.

The Cost and Efficiency Programme has been able to deliver sustainable reduction this period: £45 million of savings have been achieved in the first half (H1 2018: £66m), principally in:

·     airport deals: easyJet continues to benefit from economies of scale and delivering passenger growth to its network of airports

·     ground handling costs: efficiency savings including at Gatwick with DHL and prior year saving from lower weather-related costs (e.g. de-icing)

·     fleet procurement: 11 new A320 and A321 aircraft delivered that are more fuel efficient and have higher seat density

·     disruption cost savings: 3,242 disruption events compared to 4,814 in H1 2018, despite the impact of Gatwick drones, with better customer service and lower welfare costs

easyJet expects to save around £100 million in Financial Year 2019.

Disruption

Further to our structural cost programme initiatives where we leverage our scale, easyJet sees opportunities to address head-on the worsening aviation operating environment and the associated rising cost of disruption in order to drive better On-Time Performance and customer satisfaction, as well as reduce costs.

During the first half of the year easyJet has made significant progress in its Operational Resilience programme, using data and resource from across the company to plan for a summer when the airspace environment is expected by Eurocontrol to experience an increase in delay minutes. Some of the main areas of focus have been:

·     Schedules: for the summer 2019 schedule easyJet has improved automation and increased the number of parameters used in the planning process, including factoring in longer turn times for bigger aircraft such as the A320s and A321s, buffers for curfew-constrained airports and airspace that has been identified as being more congested. As easyJet operates more slots at constrained airports than any other airline in the world this is a key development that will continue to be enhanced in the future

·     Crew rosters: data has been used extensively to ensure that sufficient crew are available to fly the aircraft at the right time in the right place whilst protecting days off and minimum rest periods. Standby crew are now rostered to times of day when they are most needed and fewer sectors are planned for crews on each day

·     Tactical planning team: easyJet has set up a dedicated resource to plan operations with a seven day time horizon, updating systems and processes to reflect weather patterns, known strikes and ATC constriction, routings and aircraft availability

·     On the day: intense focus on the first wave and using simulator software to identify early sectors that are likely to be affected, partnering with airspace providers to utilise low-use airspace

·     Spare aircraft: easyJet has almost doubled availability of standby capacity for the summer that will be available in the event of delays or technical issues

·     Continued development of the Skywise predictive maintenance programme with Airbus to ensure that aircraft technical availability remains high and costs reduced

Since the start of the year this investment has already seen improved performance, despite a 43% increase in delay minutes due to ATC. Over the busiest-ever Easter period easyJet had no cancellations and only eight three hour delays out of 7,300 flights, which replicates our expected flying in some of the peak summer days. On-Time Performance did not fall below 82% and peaked at 91% on Easter Sunday. 

easyJet is already using this early data and findings for its future planning and expects to continue to drive improving performance and efficiency in Financial Year 2020 and beyond.

On-Time Performance

In the six months to 31 March 2019, On-Time Performance (OTP) was down one percentage point year on year to 81%. This reflects the challenges of operating at scale in increasingly congested airspace. OTP in the first quarter was significantly affected by the impact of the drones at Gatwick airport. However there was a 54% reduction in cancellations in H1 2019 compared to H1 2018. 

4.    The right people

easyJet's customer-facing employees are the very best in the industry and contribute significantly to the warmest welcome in the sky that passengers enjoy, leading to increased loyalty and repeat business.

Last year easyJet introduced Peakon as its tool to monitor employee engagement and to provide continuous insight into employee experience, empowering managers to make changes to the things that matter most. easyJet's eNet Promotor Score (eNPS) has remained high albeit broadly flat with an eNPS score of 25 in the most recent survey completed in March 2019 (eNPS was 27 in June 2018). easyJet's engagement score has also remained stable at 7.9 (vs 8.0 in June 2018). This is pleasing after a challenging end to summer operations and significant business change in the period. Feedback on Our Plan has been positive as the new Airline Management Board set out their vision for the future of easyJet.

Employee retention has remained strong, with turnover decreasing by 0.9 percentage points during the period to 6.1%. Crew retention is very good, with pilot turnover slightly ahead of last year at 6.6% (H1 2018: 3.3%). easyJet has continued to benefit from a strong employer brand, hiring almost 3,000 crew in the six month period.

5.    Innovating with data

easyJet has the ambition to become the most data-driven airline in the world and has now invested in 39 data scientists and analysts who will give greater focus and weight to easyJet's use of data to improve the customer experience, drive revenue, reduce cost and improve operational reliability.

During the first half the data team have started nine new data products that will secure revenue and costs benefits in this year. The majority are focused on Operational Resilience and include an OTP simulator, ATC slot predictor, medium term standby capacity tracker and a night-time aircraft movement management tool. easyJet's revenue initiatives are also heavily dependent on data and software developed by the data team. For example, additional and cleaner data is being added to the revenue pricing system, the demand forecasting model is being enhanced and further improvements are being made to flight profiles. On the cost side easyJet has again reviewed the inflight product management and is securing over 50% waste savings as well as offering the ability to secure higher revenue opportunities.

Looking forward easyJet will now bring its data team together with its IT function to drive greater scale and product development speed. This includes projects to accelerate the completion of the data hub and its functionality which will build the capability to accelerate product creation and delivery.

Traffic statistics

easyJet's monthly passenger statistics are set out in the table below. easyJet experienced 1,210 cancellations in H1 2019 compared to 2,650 cancellations in H1 2018, with the biggest number of cancellations due to weather and ATC issues. Prior year numbers reflected the impact of the 'Beast from the East' weather in March.

Brexit

easyJet ensured that it was prepared for Brexit on 29 March. It now has 135 aircraft registered in Austria and is flying that fleet independently, with a separate identifier and call-sign, alongside the Swiss and UK airlines, with all related crew licenses now also transferred as necessary. Legislation securing flying rights is now in place between the EU and the UK which includes a six month grace period on ownership in the event of a hard Brexit.

Should they be necessary easyJet has in place a number of options to maintain its ownership by qualifying nationals, including the use of the provisions contained in its Articles of Association which would permit it to suspend rights to attend and vote at meetings of shareholders and/or forcing the sale of shares owned by non-qualifying nationals as well as other potential actions. easyJet's ownership by qualifying EEA (excluding UK) nationals is 49.6% at 30 April 2019.

Fleet

easyJet's fleet is a major component of its business model and a competitive advantage. easyJet's total fleet as at 31 March 2019 comprised 320 aircraft (30 September 2018: 315 aircraft) with the increase driven by the addition of new A320 neo and A321 neo deliveries. easyJet retrofitted 32 of its 180 seat A320 ceo fleet over the winter to reach 186 seat gauge. The average gauge of the fleet is now 174 seats per aircraft, an increase from 172 at 31 March 2018. The average age of the fleet increased slightly to 7.3 years (30 September 2018: 7.0 years).  In the first half easyJet's asset utilisation across the network increased slightly to an average 10.0 block hours per day (H1 2018: 9.7 hours) as fewer flights were cancelled in the period compared to prior year.

Fleet as at 31 March 2019:

A strong balance sheet

easyJet's business model and strategy are underpinned by sector leading balance sheet strength. easyJet is committed to its investment grade rating, with a BBB+ rating from Standard & Poor's and a Baa1 rating from Moody's.

Of easyJet's 320 aircraft on the balance sheet at 31 March 2019, the 221 owned aircraft are unencumbered, representing 69% of the total fleet. The comparable position at 31 March 2018 was 201 unencumbered aircraft, which was 67% of the total fleet.

easyJet's funding position is strong with net debt at 31 March 2019 of £201 million, which comprised cash and money market deposits of £1,280 million (31 March 2018: £1,624 million) and borrowings of £1,481 million (31 March 2018: £959 million). The net debt position includes the impact of lower profitability and therefore cash flow in the first half compared to H1 2018.

Borrowings as at 31 March 2019 include £623 million of lease liabilities, with the majority added as a result of the adoption of IFRS 16.

After allowing for the impact of operating leases, as previously adjusted (seven times operating lease costs incurred in the 12 months ending 31 March 2018), adjusted net debt at 31 March 2018 was £238 million.

Liquidity per 100 seats was £3.7 million (H1 2018: £4.1m).

Outlook

easyJet's headline profit before tax expectations for Financial Year 2019 remain unchanged and in line with market expectations.

easyJet is confident in its strategy and will continue its disciplined investment in reinforcing and expanding number one positions in its airports and on its routes, with significant opportunities in its core markets. Capacity is planned to grow by around 7% in the second half of  Financial Year 2019, of which two percentage points completes the full year capacity growth plans in Berlin. Forward bookings for the third quarter are slightly behind last year at 72% and flat year on year at 34% for the fourth quarter.

Revenue per seat at constant currency in the second half is now expected to be slightly down. This is not helped by the ongoing negative impact of Brexit-related market uncertainty as well as a wider macroeconomic slowdown in Europe. This is offsetting a continued focus of yield improving initiatives, the move of Easter into the second half, the second-half phasing benefit of IFRS 15, improvements in Berlin and more disciplined market capacity growth.

However full year headline cost per seat excluding fuel at constant currency (assuming normal levels of disruption in H2) is now also expected to be down. This includes an expected benefit in the second half from easyJet's investment in operational resilience to manage the impact of disruption.

It is estimated that at current exchange rates⁽³⁾ and with jet fuel remaining within a $600 metric tonne to $700 metric tonne trading range, easyJet's unit fuel⁽⁴⁾ bill for the 12 months to 30 September 2019 is likely to increase by between £25 million and £60 million compared to the 12 months to 30 September 2018. easyJet's total fuel cost for the year to 30 September 2019 is currently estimated to be approximately £1.4 billion.

In addition, exchange rate movements are likely to have around a £10 million positive impact on headline profit before tax compared to the 12 months to 30 September 2018.

 easyJet is now targeting to consolidate its stronger positions delivered over the past few years and as a result its capacity growth in Financial Year 2020 will likely be at the lower end of its historic growth rates.

Hedging positions

Details of hedging arrangements as at 31 March 2019 are set out below:

(1) Represents the number of earned seats flown. Earned seats include seats that are flown whether or not the passenger turns up as easyJet is a no-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 include seats provided for promotional purposes and to staff for business travel

(2) Constant currency is calculated by comparing 2019 financial period performance translated at the 2018 financial period effective exchange rate to the 2018 financial period reported performance, excluding foreign exchange gains and losses on balance sheet revaluations

(3) US $ to £ sterling 1.29, euro to £ sterling 1.15. Currency, capital expenditure and fuel increases are shown net of hedging impact

(4) Unit fuel calculated as the difference between latest estimate of FY'19 fuel costs less FY'18 fuel cost per seat multiplied by FY'19 seat capacity

(5) Source: Millward Brown brand tracker

(6) ONS Travel Trends 2017

(7) On-time performance measured by internal easyJet system

 OUR FINANCIAL RESULTS

Headline loss before tax increased from £18 million for the six months ended 31 March 2018 to £275 million for the six months ended 31 March 2019. At constant currency, headline loss before tax for the six months ended 31 March 2019 would have been £266 million, giving an adverse foreign exchange impact of £9 million compared to last year. Total loss before tax increased from £68 million for the six months ended 31 March 2018 to £272 million for the six months ended 31 March 2019.

During the six months ended 31 March 2019, the new accounting standards IFRS 9, 15 and 16 have been adopted, applying the standard prospectively for IFRS 9 and using the cumulative catch-up ('modified') transition method for IFRS 15 and 16. This means that the prior year comparatives have not been restated. The impact on H1 2019 has been split out in the income statement to allow comparability with H1 2018.

FINANCIAL OVERVIEW