Annual Financial Report

RNS Number : 6785V

easyJet PLC

04 December 2019

 

4 December 2019

easyJet plc

(the "Company")

Annual Report and Accounts

Further to the Final Results announcement released on 19 November 2019, the Company confirms that the Annual Report and Accounts for the year ended 30 September 2019 ("2019 Annual Report") has been published today and is available on the Company's website at http://2019annualreport.easyjet.com. It has also been submitted to the National Storage Mechanism and will shortly be available at www.morningstar.co.uk/uk/NSM.

The appendix to this announcement contains additional information which has been extracted from the 2019 Annual Report for the purposes of compliance with the FCA's Disclosure & Transparency Rules and should be read together with the Final Results announcement, which can be found at 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 2019 Annual Report. 

For further details please contact easyJet plc: 

Institutional investors and analysts:
Michael Barker	Investor Relations	[phone]
Holly Grainger	Investor Relations	[phone]
Media:
Anna Knowles	Corporate Communications	[phone]
Dorothy Burwell	Finsbury	[phone]
		[phone]

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 2019 Annual Report.

Directors' Responsibilities and Statements

The following responsibility statement is extracted from the Statement of Directors' Responsibilities on page 120 of the 2019 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 2019 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 accounts for each financial year. Under that law the Directors have prepared the Group and Company accounts in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period.

In preparing these accounts, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the accounts; and

·      prepare the accounts on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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 (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 68 and 71, confirm that, to the best of their knowledge:

·      the Group and Company accounts, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company; and

·     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 120 was approved by the Board of Directors and authorised for issue on 18 November 2019 and signed on its behalf by:

JOHAN LUNDGREN          Chief Executive                  ANDREW FINDLAY          Chief Financial Officer

Principal Risks and Uncertainties                                              

The risks and uncertainties set out below are extracted from the pages 38 to 47 of the 2019 Annual Report and Accounts and are repeated here solely for the purpose of complying with DTR 6.3.5.

Our risk Profile

The key risks reviewed by the Board fall into seven broad themes listed in alphabetical order:

• 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
• Environment and sustainability - the impacts of climate change on our business and operations, carbon credit programmes, regulation/taxation, and changing consumer and colleague expectations
• 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, Brexit, as well as impact of fuel cost, foreign exchange rates, and counterparty performance
• People - having the right people through talent acquisition, retention, engagement, and succession planning
• Safety, security, and operations - the delivery of a safe and secure operation which meets the needs and expectations of our customers
• Technology and cyber - the availability, security, compliance and performance of website and critical technologies, and the protection of company and customer data

Changes in the year

Our principal risks and uncertainties continue to evolve over time. As we evolve our strategy in a dynamic industry against a backdrop of political and economic uncertainty, new risks emerge and we adapt our response activities as our risk exposure changes. The roll out of the new corporate risk framework has been a catalyst for reviewing the presentation of a number of these risks, including the new themes set out above. The following changes in our risk profile have been approved by the Board.

Since 30 September 2018, risks associated with the following three themes have increased:

·      Asset efficiency and effectiveness

·      Environment and sustainability

·      Technology and cyber

These risks, together with our response plans, are monitored regularly through our governance structure. Further detail on the risks, the potential causes and consequences, together with key controls and mitigations are detailed on the following pages.

This year, we have incorporated our 'third-party service providers' risk into a broader 'continuity of services' risk, due to the outsourced nature of our business model and the similarity in management response.

Having reviewed our environment and sustainability risk profile and including emerging risks, we have identified a number of different risks, each with its own characteristics these relate to:

·      Carbon trading schemes

·      Climate change

·      Changes in the legislative/regulatory environment

Further detail is outlined on page 41.

Brexit

easyJet has continued its preparations for Brexit. The focus has been on ensuring that our network is unaffected by Brexit and that our operations are uninterrupted by any eventual Brexit outcome, including a potential no deal exit. The cross functional Brexit programme continues to oversee Brexit planning, led by the General Counsel. The Board has also had oversight of the preparations and is regularly briefed.

Over the last three years easyJet has put in place a series of measures to protect our flying rights regardless of the eventual Brexit outcome, these include:

·      Implementing a new operating model, with easyJet operating as a pan-European airline group with three operating airlines: in Austria, Switzerland and the UK. This will ensure we can continue to maintain our network after Brexit.

·     Focusing our investor relations programme on ensuring that we remain majority EU27 owned and controlled and putting in place a contingency plan to ensure that we remain compliant with the requirement that EU airlines are majority owned and controlled by EU nationals.

·     Ensuring that our operation is robust to the UK leaving EASA, the European Aviation Safety Agency, including by transferring our EU27 based pilots to Austrian pilot licences and ensuring we have sufficient pilots and cabin crew of EU27 nationality.

·      Continuing to engage with European governments, aviation regulators and the European Commission on Brexit issues.

Of particular focus over the last year has been ensuring that easyJet is robust to a no deal Brexit outcome and that flights are able to continue between the EU and the UK. We successfully worked with the EU and UK governments to ensure that there is a legislative framework in place for flights to continue even in the event of a no deal Brexit. Alongside this the EU and UK have put in place the necessary arrangements to govern safety issues.

To further support the robustness of our operation to a no deal outcome we have invested in operational measures to ensure that there is no reliance on EU/UK trading links in case these are disrupted, including putting in place stores for spare parts within the EU27.

A no deal Brexit carries potential financial risks for instance from changes in airport and tax charging structures and any unexpected outcomes. Alongside this there remains uncertainty about the economic effects of a no deal Brexit.

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.

	Potential causes	Potential consequences	Controls and mitigations
AIRPORT INFRASTRUCTURE Flying to primary airports is an important element of our customer proposition. The airports to which we fly may already be or may become congested. Links to our plan 1, 2, 5 B, D	·  Increased competitor capacity ·  Environmental restrictions/ pressure restricting airport expansions ·  Delays in airport infrastructure expansion ·  Increase in airport charges ·  Changes in regulation ·  Ineffective slot management	·  Weakened customer proposition ·  Loss of market share ·  Inefficient use of crew/aircraft ·  Significant increase in costs	·  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. See the significant operational disruption risk on page 46 for further details. ·  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 places emphasis on the management of airport capacity through a dedicated airport development team who ensure close collaboration on capacity plans. The team helps influence the development of appropriate capacity increases in a cost efficient and timely manner. ·  Managing aircraft gauge to improve our ability to grow.
​CONTINUITY OF SERVICES easyJet is dependent on a mixture of critical IT systems and processes, employees, buildings/facilities and third-party suppliers. A loss of one or more of the above components could lead to significant disruption to operations and could have an adverse reputational, financial or legal impact. Links to our plan 2, 3, 5 A, B, D, E	·  Failure of critical IT system ·  Significant external incident (terrorism, weather, activism) ·  Failure of third party ·  Industrial action	·  System unavailability for customers and/or staff ·  Inability to access key buildings/facilities ·  Unavailability of critical staff ·  Reliance on inadequate supplier recovery plans ·  Operational disruption	·  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, in addition to easyJet's two data-centres. ·  Incident Management and Resilience teams are in place and ready to respond to any IT related incident. ·  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. ·  Enhanced 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.
NON-DELIVERY OF STRATEGIC INITIATIVES The business continues to undertake a number of initiatives to support its strategy. Links to our plan 2, 3, 4 D, E	·  Resource dedicated to change delivery and oversight ·  Changes in organisation's priorities (may be driven by internal or external factors) ·  Scope change/time available	·  Business benefits not realised ·  Financial underperformance ·  Inefficient use of resource	·  Complex, large-scale programmes have been initiated, prioritised and are managed through the Project Management Office. ·  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 from the AMB and its own steering group which provides oversight and challenge to the project, monitors progress against programme objectives and ensures that decisions are made at the appropriate level. ·  Key strategic initiatives are managed by experienced programme managers, complemented by appropriate subject matter specialist resource where appropriate. ·  A Project Management Office is in place to oversee delivery of projects and programmes, including the allocation of support resource, budget tracking and realisation of benefits. ·  The AMB meets twice monthly. The executive sponsor provides routine updates 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 associated with their delivery. ·  The Internal Audit function provides independent programme assurance over our most significant initiatives, drawing upon independent subject matter expertise where appropriate.
SINGLE FLEET SUPPLIER easyJet is dependent on Airbus as its sole supplier for aircraft. The Board considers that the efficiencies achieved by operating a single fleet type outweigh the risks associated with easyJet's single fleet strategy. Links to our plan 3, 5 A, D	·  Delays in the delivery of new aircraft ·            Technical/mechanical issues ·  Fluctuating second hand market	·  Schedule reductions/cancellations ·  Grounding of all/part of the fleet ·  Loss of customer confidence ·  Financial impact when aircraft leave the fleet	·  There are approximately 8,500 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. In the event that 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 a number of different options when looking at fleet exit strategies. Sale and leaseback facilitates the exit of aircraft from the fleet by transferring residual value risk, and also provides flexibility in managing the fleet size.

ENVIRONMENT AND SUSTAINABILITY

The impacts of climate change on our business and operations, carbon credit programmes, regulation/taxation, and changing consumer and colleague expectations. easyJet's promise in Our Plan 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. More information is in the Sustainability section on page 48.

	Potential causes	Potential consequences	Controls and mitigations
CARBON TRADING SCHEMES Adverse changes to carbon trading schemes, including the existence and/or cost of the scheme. Links to our plan 2, 3, A, B, D, E	·  Political change ·  Uncertainty driven by Brexit ·  International alignment ·  External pressure groups	·  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	·  easyJet influences future and existing policy and regulations which affect the airline industry through a number of different channels, including working with relevant industry bodies to assist in this; ·  easyJet look 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; and ·  easyJet has an appropriate hedging strategy (to the extent possible).
CLIMATE CHANGE Weather patterns including, but not limited to, winds, storms, extreme temperatures, are becoming increasingly difficult to predict. Links to our plan 2, 5, 3 A, B, C, D, E	·  Increased CO2 emissions	·  Adverse customer experience ·  Injury to customers ·  Operational disruption (including airspace and runway closures) ·  Aircraft damage	·  easyJet continues to bring Airbus neo aircraft into its fleet which are significantly more fuel efficient than the standard variant; ·  easyJet aircraft use only one engine when taxiing on the ground; ·  easyJet operates flights with a high load factor, and is a short-haul operator, which has a lower carbon impact per passenger kilometre than airlines whose operations include a significant amount of long-haul flight; 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. In addition, to reduce the time it takes to resolve aircraft technical faults, easyJet has a contract for two light aircraft and crew to transport engineers and spare parts around its network, with dedicated engineers on standby to travel.
ECO-TAXES Future policy measures and regulation to tackle the impact of aviation on climate change could impact easyJet's business if they impose limitations and cost on how easyJet operates and the services it can provide. Links to our plan 2, 4 A, B, D, E	·  Political change ·  External pressure groups ·  Customer demand	·  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	·  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; ·  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 in regards to new technologies to radically reduce the carbon footprint of flying; ·  easyJet is able to operate flexible routings in the event of constraints being brought in; and ·  The new generation Airbus A320neo and A321neo aircraft are 50% quieter during takeoff and landing than the equivalent previous generation aircraft.

LEGISLATIVE/REGULATORYLANDSCAPE

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.

	Potential causes	Potential consequences	Controls and mitigations
BRAND LICENSE AND MAJOR SHAREHOLDER ·  easyJet has two major shareholders (easyGroup Holdings Limited and Polys Holdings Limited) which, as a concert party, control approximately 33% of its ordinary shares. ·  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 in order to retain the right to use the name and brand. Links to our plan 3 A	·  Shareholder activism ·  Actions of easyGroup or other easyGroup licensees	·  Eventual loss of the brand licence	·  Active shareholder engagement programme; ·  Regular engagement with easyGroup Holdings Limited alongside other major shareholders; ·  Relationship agreement with easyGroup and Polys Holdings in line with the controlling shareholder regime set out in the Financial Conduct Authority's Listing Rules; ·  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 both sides, attended by the Chief Financial Officer and the Company Secretary and Group General Counsel, to actively manage brand-related issues as they arise; and ·  easyJet makes contributions to the joint brand protection fund.
LEGAL/REGULATORY NON-COMPLIANCE Failure to comply with legislation and regulation, such as local consumer laws, new case law or policy changes in relation to customer compensation, environmental or airport regulation, in the jurisdictions in which easyJet operates, could have an adverse reputational and financial impact. Links to our plan 2, 3, 4 A, B	·  New or changes to existing legislation/regulation ·  Employee/agent ignorance ·  Rogue employee/agent behaviour	·  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	·  Compliance framework including, but not limited to, policies, procedures, and mandatory training programmes; ·  easyJet has an in-house team of Legal 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, are 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 a number of different channels, including working with relevant industry bodies to assist in this; and ·  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, Brexit (discussed on page 18), as well as impact of fuel cost, foreign exchange rates, and counterparty performance.

	Potential causes	Potential consequences	Controls and mitigations
SUPPLY/DEMAND IMBALANCE easyJet's success in the highly competitive European short-haul aviation market is built on our key competitive advantages: our network, cost base, brand, digital innovation and efficient and robust capital structure. Links to our plan 1, 2, 3, 4, 5 B, D	·  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	·  Loss of market positions (relative market share) ·  Pressure on margins ·  Adverse financial position ·  Share price movement​	·  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. ·  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.
VOLATILITY IN FINANCIAL MARKETS easyJet is exposed to a variety of financial markets, volatility in which could give rise to adverse pressure on the cash flows of the group. Links to our plan 1, 3, 5 D	·  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	·  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	·  The Finance Committee (a committee of the plc Board) oversees the Group's treasury and funding policies and activities. See page 94 for further details. ·  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, a revolving credit facility (provided by a group of relationship banks) 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.

	Potential causes	Potential consequences	Controls and mitigations
INDUSTRIAL ACTION easyJet, and the aviation industry in general, has a significant number of employees who are members of trade unions. Each of the European countries in which easyJet operates has localised employment terms and conditions. As such its pilots and crew are members of 22 trade unions across eight countries. There are also an additional 11 consultative bodies including five Works Councils and a European Works Council that operate under EU legislative guidance. Links to our plan 2, 4 A, B, C	·  Adverse employee experience ·  Changes to terms and conditions ·  Political unrest	·  Sustained adverse media coverage ·  Operational disruption ·  Significant spike in costs ·  Reduction in future revenue ·  Share price movement ·  Loss of colleague/customer trust	·  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.
TALENT ACQUISITION AND RETENTION In today's shifting environment, we need to place even more focus on recruiting the right people and building the right talent. Links to our plan 3, 4 C	·  Uncompetitive remuneration packages ·  Lack of career progression ·  Outdated ways of working	·  Sustained inability to deliver key strategic initiatives ·  Increased costs	·  Benchmarking of reward packages. ·  Quarterly employee listing tool with action plans to address issues raised. ·  Talent mapping of senior employees to ensure continued investment and development of top talent. ·  Succession planning of key roles. ·  Diversity and inclusion strategy. ·  Strategic programme to enhance ways of working for head office staff.

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.

	Potential causes	Potential consequences	Controls and mitigations
SIGNIFICANT SAFETY OR SECURITY EVENT ·  easyJet's number one priority is the safety and security of its customers, colleagues, and contractors. ·  The Safety Committee (a committee of the Board) provides oversight of the management of easyJet's safety processes and systems. See pages 85-86 for further details. ·  The easyJet Safety Board, chaired by the Chief Executive and including the Chief Operating Officer and AOC Accountable Managers, is responsible for directing overall safety and security policy and governance. The Safety Board meets every month to review safety performance and any emerging security issues. Links to our plan 2, 4 A	·  Flight safety incident ·  Health and safety incident ·  Major security threat	·  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	·  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 monthly to review safety, security and compliance performance across all Air Operator Certificates (AOC) chaired by the CEO, attended by the three AOC accountable managers and periodically by AOC regulators. ·  Safety Review Boards are held locally and are open for the local regulator to attend. ·  A Safety Policy is published that promotes the incident reporting process and supports this safety culture; ·  easyJet operates a Safety Management System using 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 an emergency response process and performs crisis management 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.
SIGNIFICANT OPERATIONAL DISRUPTION ·  This year there has been a significant reduction in disruption events (three hour delays, cancellations and overnight delays). Events within easyJet's control ('non-extraordinary') have reduced against 2018 by 25%, as a result of the Operational Resilience programme and a range of easyJet interventions, and events outside of easyJet's control (e.g. weather, strikes) have reduced by 34%. ·  On Time Performance has remained stable against 2018, despite a significant reduction in cancellations. ·  The European Air Traffic Control system experienced fewer total delay minutes than in 2018. easyJet flight planning interventions further reduced the proportion of these delay minutes that impacted easyJet. En-route delay minutes reduced, largely driven by fewer ATC strikes than in 2018. Airport delay minutes worsened. The ATC system still performed worse than 2017. Links to our plan 2, 3, 5 B, D, E	·  Adverse weather ·  Industrial action ·  Technology failure ·  Supplier failure ·  Infrastructure failure ·  Airspace/airport restrictions/ closure	·  Customer dissatisfaction ·  Compensation ad welfare payable to customers ·  Inefficient use of crew/aircraft ·  Adverse media coverage ·  Share price movement	·  Key strategic project, Operational Resilience, focusing on: ·  Building appropriate resilience into the flying schedule; ·  Aircraft and crew standby; ·  Operations Control Centre 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. ·  There is also continued focus on the EU261 claims management process which has been further strengthened during the year by increasing the size of the team handling legal claims. ·  New incident and crisis management framework to further enhance the effectiveness of response. ·  Liquidity buffer to better manage the impact of downturns in business or temporary curtailment of activities (see the volatility in financial markets risk outlined on page 43). ·  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.

TECHNOLOGY AND CYBER

The nature of these risks, easyJet's reliability 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.

	Potential causes	Potential consequences	Controls and mitigations
DATA BREACH A data breach involves the unauthorised access to customer or employee data. Protecting that data and its privacy remains a priority for easyJet. Links to our plan 2, 5 A, B, D	·  Cyber attack ·  Third party incident ·  User error ·  Misconfigured systems	·  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	·  A data and cyber risk governance structure exists to regularly review the data and cyber risk landscape and determine required action to take place in order to manage risk effectively. ·  Dedicated Information Security team who proactively monitor threats and respond to incidents. ·  Employee education and awareness programme including a network of champions, online training and awareness campaigns. ·  Security logging and monitoring. ·  Vulnerability scanning and penetration testing. ·  Ongoing General Data Protection Regulation (GDPR) programme to ensure compliance with GDPR regulations in support of the Data Protection Officer (DPO).
FAILURE OF CRITICAL TECHNOLOGY easyJet relies on a number of critical technologies that are key to the delivery of essential business processes. These include, but are not limited to, operational, commercial and financial systems. A critical technology failure includes any technical failure which is sufficient enough to interrupt critical business operations (which may include one or more systems). This includes system unavailability or a failure which results in the loss or corruption of data. Links to our plan 2, 3 A, B, D, E	·  Cyber attack ·  Hardware failure ·  Aged infrastructure ·  Data Centre Outage ·  Third Party Outage ·  Technological Dependency Failure ·  IT change	·  Sustained adverse media coverage ·  Reduction in future revenue ·  Fines/regulatory sanctions ·  Operational disruption ·  Significant spike in costs ·  Share price movement	·  Monitoring and alerting of availability of critical technologies and their inter-dependencies. ·  Security logging and monitoring. ·  Vulnerability scanning and penetration testing. ·  Business Interruption Insurance in place. ·  IT Change Management Process embedded to assess risk of all changes to technology including changes made by third party providers. ·  Critical technologies are either 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 are progressing the delivery of a hosting and network programme that will further improve the resiliency of core infrastructure and cloud connectivity capabilities.

 

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