Fully underwritten rights issue

RNS Number : 2475L

easyJet PLC

09 September 2021

 

THIS ANNOUNCEMENT (AND THE INFORMATION CONTAINED HEREIN) IS NOT FOR RELEASE, PUBLICATION, DISTRIBUTION OR FORWARDING IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO, THE UNITED STATES, AUSTRALIA, CANADA (SUBJECT TO CERTAIN LIMITED EXCEPTIONS), JAPAN, NEW ZEALAND, SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

This announcement is not a prospectus but an advertisement. Investors should not subscribe for the securities referred to in this announcement except on the basis of the information contained in the prospectus expected to be published in due course

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

For immediate release

9 September 2021

easyJet plc

Strengthening the balance sheet and capitalising on long-term strategic and growth opportunities

Fully underwritten rights issue to raise £1.2 billion and new committed $400 million secured revolving credit facility

easyJet plc ("easyJet", the "Group" or the "Company"), today announces a fully underwritten rights issue to raise gross proceeds of approximately £1.2 billion (the "Rights Issue"). In conjunction with the Rights Issue, the Company has also agreed commitments for a new four-year senior secured revolving credit facility of $400 million.

Summary

· As part of a review of its capital structure, the Board has concluded that raising additional equity will protect and strengthen easyJet's long-term positioning in the European aviation sector. As a result, the Company is launching a Rights Issue, the net proceeds of which are expected to:

‒ Facilitate and accelerate the Group's recovery from the impact of the COVID-19 pandemic by providing resilience from downside risks (should the COVID-19 pandemic continue to dampen or delay the recovery of passenger volumes over the next 12 months); and

‒ Materially improve easyJet's ability to deliver long-term value to shareholders through providing the Group with the flexibility to take advantage of long-term strategic and investment opportunities expected to arise as the European aviation market emerges from the COVID-19 pandemic

· Having acted decisively over the last 18 months, easyJet is well-placed to emerge from the pandemic with renewed strength the potential to capitalise on growth opportunities that will create value for shareholders

· The Company expects considerable long-term strategic and investment opportunities to arise as the European aviation market recovers, in particular as legacy carriers restructure their short-haul operations, providing the chance to:

1)  further develop the Group's current position of strength, in particular through its existing structural advantages in easyJet's primary airport network in the high value Western European markets;

2)  gain greater benefit from the step changes being made in its ancillary product portfolio and easyJet Holidays; and

3)  continue to invest in sustainability

· The Group's ability to capitalise on these opportunities is supported by its strong brand and customer proposition as customers look to brands that they can trust and that can offer them the best value

· These key strengths and opportunities, alongside the Group's continued focus on its people and on operational and digital safety, are expected to provide the Group with the tools to grow to pre-pandemic capacity by 2023, as well as achieve strong returns and resilience as the recovery builds, with the medium-term goal of achieving mid-teen EBITDAR margins and low to mid teen ROCE

· Alongside the Rights Issue, the Group has also secured new bank financing commitments, which will further strengthen the Company's liquidity position as the airline recovers from the COVID-19 pandemic. This consists of a new secured $400 million revolving credit facility ("RCF"), which will have a tenor of four years with an additional two-year extension option at lender consent, conditional on the completion of the Rights Issue

Use of proceeds

The Group expects the net proceeds of the Rights Issue to deliver value for Shareholders through:

· Enhancing balance sheet strength and resilience: The Rights Issue will help restore the Group's balance sheet position to pre-COVID-19 pandemic levels, to enhance the Group's liquidity, and to strengthen its investment grade balance sheet. An enhanced balance sheet will provide greater financial flexibility and resilience to withstand potential prolonged market challenges related to the COVID-19 pandemic, including a potential downside scenario with continued travel restrictions in 2022 and/or a slower recovery in travel patterns.

· P roviding the flexibility to capture strategic growth opportunities: As the European travel market emerges from the COVID-19 pandemic, a range of long-term strategic and investment opportunities are expected to arise. The Rights Issue will provide the Group with the financial flexibility to take advantage of these growth opportunities and deliver long-term value:

1)  Building on structural advantages: The Group currently holds a leading strategic position in attractive, high value Western European markets based on scale in primary airports with high income catchment areas. Furthermore, the Group is positioned in many markets as the leading low-cost brand based on its unique combination of convenience and customer service. As the European aviation market recovers post-COVID-19, opportunities will arise at airports within these markets, many of which are slot constrained, as legacy airlines restructure short-haul operations and regulators impose remedies in response to state aid. The Rights Issue will enable the Group to capture these investment opportunities, to build on its current position of strength, and to deliver value-accretive growth.

2)  Gaining greater benefit from ancillary revenue and easyJet Holidays: Over the last 24 months, the Group has implemented an important series of initiatives that has allowed easyJet to add incremental revenues, and the Group recognises that the continued evolution of its product portfolio, supported by the Rights Issue, represents a significant opportunity to increase revenue per seat and margins in the coming years. This includes continuing to build on the success of the launch of easyJet Holidays, which the Group considers a key driver of incremental profitability and revenue growth.

3)  Investing in sustainability with new generation aircraft: Throughout the pandemic, sustainability, and in particular, carbon emissions have become increasingly important to customers. The Group currently holds a market leading position in Europe, having been the first major airline in the world to offset the carbon emissions from the fuel used for all of its flights using high quality accredited offsets and continuing to be the only major European airline to do so. It also has one of Europe's largest fleets of next generation narrow-body aircraft which are 15% more fuel efficient and 50% quieter during take-off and landing than the equivalent previous generation aircraft. To maintain its leadership position in this area, and supported by the Rights Issue, the Group will continue to invest in its fleet, including in new fuel-efficient aircraft, to improve its carbon and cost efficiency through the replacement of existing aircraft that provide less fuel and operational efficiency.

Entering into the new RCF concurrent with the Rights Issue, together with maintaining a prudent and proactive capital management policy, will be supportive towards the strategy of maintaining a liquidity buffer and also enhance balance sheet resilience against potential prolonged market challenges related to the COVID-19 pandemic.

Johan Lundgren, Chief Executive of easyJet said

"The capital raise announced today not only strengthens our balance sheet enabling us to accelerate our post-COVID-19 recovery plan but will also position us for growth so that we can take advantage of the strategic investment opportunities expected to arise as the European aviation industry emerges from the pandemic.

"Since the onset of the pandemic, we have undertaken decisive and robust action to restructure our operations, addressed our cost base and secured our financial position, keeping our investment-grade credit rating. We have worked hard to maintain our customer friendly brand and network and been rewarded with immediate growth in demand when travel restrictions have been lifted.

"This capital increase will allow us to build on our fundamental operational strengths and network strategy for our customers as well as accelerate long-term value creation for our shareholders."

Summary background to the proposed Rights Issue

easyJet entered the pandemic with a strong balance sheet, which enabled the Group to take swift action, raising over £5.5 billion of additional liquidity from a diversified range of funding sources and minimising cash burn through disciplined capacity allocation and a strong focus on cash generative flying to help mitigate the impact of the COVID-19 pandemic on the business.

In response to the unprecedented impact COVID-19 has had on the airline industry, easyJet has taken decisive action to transform the airline:

· Costs: easyJet has undertaken its largest ever cost-out programme which will deliver substantial cost reductions going forward and address legacy cost inefficiencies by providing greater crew flexibility, with the objective of ensuring that the Group emerges from the COVID-19 pandemic with a significant cost advantage compared to legacy carriers. easyJet is on track to achieve approximately £500 million in savings in the financial year ending 30 September 2021, of which the Directors expect almost half will be sustainable on an ongoing basis, with cost actions for the financial year ending 30 September 2022 already underway

· Network / Schedule flexibility: easyJet's leading network of primary airports across Europe's biggest cities has been a key advantage throughout the pandemic. The strong flexibility built into our schedule has enabled easyJet to pivot capacity towards popular routes showing rising customer demand and to focus on positive contribution flying, with the expectation that this will lead to a material improvement in underlying revenue per seat performance as traffic returns to pre-pandemic levels

· Ancillary revenue: easyJet has delivered a step change in its ancillary product portfolio, with our updated cabin bag policy implemented in February and the second phase of that project launching later this year, as well as our bundled 'Standard Plus Fare' performing well. The Group expects that the continued evolution of its product portfolio represents a significant opportunity to increase revenue per seat and margins in the coming years

· easyJet Holidays: Represents a material opportunity to continue to enhance the Group's presence in a market with attractive structural growth potential that is complementary to the core business, and is expected to be a key driver of incremental profitability and revenue growth, with a clear roadmap to contributing annual profit before tax in excess of £100 million

However, the current trading environment remains uncertain and the Group has continued to review its long-term capital and liquidity needs. As part of this review, the Board has concluded that raising additional equity will protect easyJet's long-term positioning in the European aviation sector and support growth as new opportunities arise from the COVID-19 pandemic. As a result, the Company is therefore launching a Rights Issue.

Update on trading

In August 2021, UK domestic capacity was at 105% of 2019 levels with a load factor of 82%, whist intra-EU capacity was at 81% of 2019 levels with a load factors of 85%, demonstrating the strength of the Group's UK domestic and intra-EU flying schedule.

The Directors expect the Group's capacity in Q4 2021 to be approximately 57% of Q4 2019 levels, which is a significant increase compared to Q3 2021, when easyJet flew 17% of Q3 2019 capacity. During Q4 2021, the Company expects to increase capacity allocation and improve expected load factors on both UK domestic and intra-EU flying, with UK domestic capacity already at pre-pandemic levels.

Looking into Q1 2022, the Company currently expects to fly up to 60% of Q1 2019 capacity with a continued focus on profitable flying.

Directors' intentions

Each Director who is a Shareholder has irrevocably undertaken to either take up and subscribe in full for their entire right to subscribe for New Shares in the Rights Issue or sell a sufficient number of Nil Paid Rights to meet the cost of taking up the balance of their entitlement to New Shares.

Possible offer

The Board recently received an unsolicited preliminary takeover approach. This was carefully evaluated and then unanimously rejected. The potential bidder has since confirmed that it is no longer considering an offer for the Company.

The indicative proposal took the form of a low premium and highly conditional all-share transaction which, in the Board's view, fundamentally undervalued the Company. In deciding to reject it, the Board took into account all relevant factors including the highly conditional nature of the proposal and the certainty and strategic opportunity that the Rights Issue presented to the Company.

This is not a statement to which Rule 2.8 of the Takeover Code applies.

Prospectus

The prospectus containing full details of the Rights Issue is expected to be approved by the Financial Conduct Authority (the "FCA") in the UK (the "Prospectus") and made available on the Company's website (https://corporate.easyjet.com/investors/rights-issue) later today.

The Company also intends to launch the Rights Issue in France, Germany, Italy and Spain. In this respect, a prospectus will be submitted to the Autorité des Marchés Financiers (the "AMF") in France for approval and, subject to such approval, will subsequently be passported in Germany, Italy and Spain in accordance with the Regulation (EU) 2017/1129.

Indicative summary timetable

Record Date for entitlements under the Rights Issue	6:00 p.m. on Wednesday 8 September 2021
Date of dispatch of Provisional Allotment Letters or CSN Forms of Instruction (to Qualifying Non-CREST Shareholders only)	Friday 10 September 2021
Admission and dealings in the New Shares, nil paid, commence on the LSE and Existing Shares marked ex-Rights	8:00 a.m. on Monday 13 September 2021
Latest time and date for acceptance, payment in full and registration of renounced Provisional Allotment Letters	By 11:00 a.m. on Monday 27 September 2021
Expected date of announcement of results of the Rights Issue through a Regulatory Information Service announcement	By 8:00 a.m. on Tuesday 28 September 2021
Dealings in the New Shares, fully paid, to commence on the LSE	By 8:00 a.m. on Tuesday 28 September 2021

The Rights Issue is fully underwritten with BNP Paribas, Credit Suisse and Goldman Sachs acting as Joint Global Coordinators and Santander and Société Générale acting as Joint Bookrunners. BNP Paribas and Greenhill are acting as joint sponsors to the Company. Greenhill is acting as financial adviser to the Company.

The Rights Issue is being conducted within the parameters of the authorities conferred upon the Company by Shareholders at its annual general meeting on 23 December 2020 and, as such, does not require the approval of Shareholders in a general meeting or otherwise.

Analyst presentation

An analyst presentation will take place at 08:15am BST today. To join, please dial [phone] and quote 'easyJet' when prompted by the operator. The slides accompanying the presentation will be available on easyJet's website, http://corporate.easyjet.com/rights-issue.

CONTACTS

easyJet

Investor and analyst enquiries

Michael Barker, Director of Investor Relations

[phone]; E-mail: [e-mail]

Adrian Talbot, Senior Investor Relations Manager

[phone]; E-mail: [e-mail]

BNP Paribas (Joint Sponsor, Joint Global Coordinator and Joint Corporate Broker)

Andrew Forrester

Chris Byrne

Paul Frankfurt

Josh Younger

[phone]

Greenhill (Joint Sponsor and Financial Adviser)

David Wyles

Michael Masterson

Dean Rodrigues

[phone]

Credit Suisse (Joint Global Coordinator and Joint Corporate Broker)

John Hannaford

Christian Brucher

Nick Koemtzopoulos

James Green

Gillian Sheldon (Senior Advisor)

[phone]

Goldman Sachs (Joint Global Coordinator)

Eduard van Wyk

Charlie Lytle

Cara Pazdon

Louise Courtney

[phone]

Santander (Joint Bookrunner)

Simon Payne

Javier Mata

Michael Ward

[phone]

Société Générale (Joint Bookrunner)

Emilie Jadat O'Shea

[phone]

Gregory Mouzawak

[phone]

Media enquiries

Anna Knowles    Corporate Communications                             [phone]

Edward Simpkins    Finsbury   [phone]

Dorothy Burwell  Finsbury   [phone]

IMPORTANT NOTICES

This announcement has been issued by and is the sole responsibility of the Company. This announcement is not a prospectus but an advertisement and investors should not acquire any nil paid rights, fully paid rights or new ordinary shares referred to in this announcement except on the basis of the information contained in the prospectus expected to be approved by the Financial Conduct Authority in the UK and published by the Company in connection with the Rights Issue in due course. The information contained in this announcement is for background purposes only and does not purport to be full or complete. Copies of the Prospectus, when published, will be available on the Company's website, provided that the Prospectus will not, subject to certain exceptions, be available to certain shareholders in certain restricted or excluded territories. The Prospectus will give further details of the Rights Issue.

The Company also intends to launch the Rights Issue in France, Germany, Italy and Spain. In this respect, a prospectus will be submitted to the AMF for approval and, subject to such approval, will subsequently be passported in Germany, Italy and Spain in accordance with the EU Prospectus Regulation.

Any decision to participate in the Rights Issue must be made solely on the basis of the Prospectus to be published by the Company in due course. The information contained in this announcement is for background purposes only and no reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its completeness, accuracy or fairness. Recipients of this announcement should conduct their own investigation, evaluation and analysis of the business, data and property described in this announcement. This announcement does not constitute a recommendation concerning any investor's decision or options with respect to the Rights Issue. The information in this announcement is subject to change.

This announcement is for information purposes only and shall not constitute or form part of any offer to issue or sell, or the solicitation of any offer to purchase, subscribe for or otherwise acquire, any securities of the Company in the United States (including its territories and possessions, any state of the United States and the District of Columbia) (the "United States" or "US") or any other jurisdiction where such offer or sale would be unlawful. The securities referred to herein (the "Securities") have not been and will not be registered under the US Securities Act of 1933, as amended (the "US Securities Act") or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, taken up, exercised, resold, pledged, renounced, transferred or delivered, directly or indirectly, into or within the United States, except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any relevant state or other jurisdiction of the United States. There will be no public offering of the Securities in the United States.

Neither this announcement or any other document connected with the Rights Issue has been or will be approved or disapproved by the United States Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the Securities or the accuracy or adequacy of this announcement or any other document connected with the Rights Issue. Any representation to the contrary is a criminal offence in the United States.

The distribution of this announcement and any proposed offering and/or issue of securities referred to herein in certain jurisdictions may be restricted by law. No action has been taken by the Company, BNP Paribas ("BNP Paribas"), Credit Suisse International ("Credit Suisse"), Goldman Sachs International ("Goldman Sachs International"), Banco Santander, S.A. ("Santander"), Société Générale ("Société Générale"), BNP Paribas London Branch ("BNP Paribas London Branch"), Greenhill & Co. International LLP ("Greenhill" and, together with BNP Paribas, Credit Suisse, Goldman Sachs International, Santander, Société Générale and BNP Paribas London Branch, the "Banks") that would permit an offer of securities or possession or distribution of this announcement or publicity material relating to securities in any jurisdiction where action for that purpose is required, other than in the United Kingdom. Persons into whose possession this announcement comes are required by the Company and the Banks to inform themselves about and to observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction.

BNP Paribas is authorised and regulated by the European Central Bank ("ECB") and the Autorité de Contrôle Prudentiel et de Resolution ("ACPR"). Credit Suisse is authorised in the United Kingdom by the Prudential Regulation Authority ("PRA") and regulated in the United Kingdom by the FCA and the PRA. Goldman Sachs International is authorised in the United Kingdom by the PRA and regulated in the United Kingdom by the FCA and the PRA. Santander is authorised and regulated by the Bank of Spain and subject to supervision by the Bank of Spain and by the ECB and to limited regulation by the FCA and the PRA. Société Générale is a French credit institution (bank) authorised and supervised by the ECB and the ACPR and regulated by the AMF. Details of the temporary permissions regime as prescribed under The EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018 (the "Temporary Permissions Regime"), which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the FCA's website, and further details about the extent of Société Générale's authorisation, supervision and regulation by the above-mentioned authorities are available from Société Générale on request. BNP Paribas London Branch is authorised by the PRA with deemed permissions under the Temporary Permissions Regime. BNP Paribas London Branch is subject to regulation by the FCA and limited regulation by the PRA. Greenhill is authorised and regulated in the United Kingdom by the FCA. Each of the Banks is acting exclusively for the Company and no one else in connection with the Rights Issue and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Rights Issue and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients or for providing advice in relation to the Rights Issue or any matters, transactions or arrangements referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on any of the Underwriters (as defined below) and Greenhill by the Financial Services and Markets Act 2000, as amended ("FSMA") or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where the exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither the Banks nor any of their respective subsidiaries, branches or affiliates, accept any duty, liability or responsibility whatsoever (whether direct or indirect) to any person for any acts or omissions of the Company as to the contents of this announcement or make any representation or warranty, express or implied, as to the contents of this announcement including its accuracy, completeness or verification or for any statement made or purported to be made by it, or on its behalf, in connection with the Company, the Securities or the Rights Issue and nothing in this announcement shall be relied upon as a promise or representation in this respect, whether or not as to the past or future. The Banks and their respective subsidiaries, branches and affiliates accordingly disclaim, to the fullest extent permitted by law, all and any duty, liability and responsibility whatsoever arising in tort, contract or otherwise which it might otherwise have in respect of this announcement or any such statement.

BNP Paribas, Credit Suisse, Goldman Sachs International, Santander and Société Générale (the "Underwriters"), in accordance with applicable legal and regulatory provisions, may engage in transactions in relation to the Securities and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. In connection with the Rights Issue, the Underwriters and any of their respective affiliates, acting as investors for their own accounts may acquire new ordinary shares in the Company ("New Shares") as a principal position and in that capacity may retain, acquire, subscribe for, purchase, sell, offer to sell or otherwise deal for their own accounts in such New Shares and other securities of the Company or related investments in connection with the Rights Issue or otherwise. Accordingly, references in this document to the New Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue, offer, subscription, acquisition, placing or dealing by each of the Underwriters and any of their respective affiliates acting as investors for their own accounts. In addition, certain of the Underwriters or their respective affiliates may enter into financing arrangements (including swaps or contracts for difference) with investors in connection with which such Underwriters (or their respective affiliates) may from time to time acquire, hold or dispose of New Shares. The Underwriters may also coordinate a sell-down in the event that any underwriting crystallises as a result of the Rights Issue. Except as required by applicable law or regulation, the Underwriters and their respective affiliates do not propose to make any public disclosure in relation to such transactions.

In the event that the Underwriters acquire New Shares which are not taken up by Qualifying Shareholders (as defined in the Prospectus), the Underwriters may co-ordinate disposals of such shares in accordance with applicable law and regulation. Except as required by applicable law or regulation, the Underwriters and their respective affiliates do not propose to make any public disclosure in relation to such transactions.

Neither the contents of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

This announcement does not constitute a recommendation concerning any investor's options with respect to the Rights Issue. The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each investor or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

None of the Banks nor any of their respective affiliates accepts any responsibility or liability whatsoever for or makes any representation or warranty, express or implied, as to this announcement, including the truth, accuracy, fairness, sufficiency or completeness of the information or the opinions or beliefs contained in this announcement (or any part hereof). None of the information in this announcement has been independently verified or approved by the Banks or any of their respective affiliates. Save in the case of fraud, no liability is accepted by the Banks or any of their respective affiliates for any errors, omissions or inaccuracies in such information or opinions or for any loss, cost or damage suffered or incurred howsoever arising, directly or indirectly, from any use of this announcement or its contents or otherwise in connection with this announcement.

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, if given or made, such announcements must not be relied on as having been authorised by the Company, the Banks or any of their respective affiliates. Subject to the Listing Rules, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules and MAR (each as defined in the Prospectus) and the European Prospectus Regulation, the issue of this announcement and any subsequent announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information contained in it is correct as at any subsequent date.

This announcement contains "forward-looking statements" which includes all statements other than statements of historical fact, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "will", "may", "anticipates", "would", "could" or similar expressions or negatives thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this announcement. None of the Company, the Banks or their respective affiliates undertakes or is under any duty to update this announcement or to correct any inaccuracies in any such information which may become apparent or to provide you with any additional information, other than any requirements that the Company may have under applicable law or the European Prospectus Regulation, the Listing Rules, the Prospectus Regulation Rules, the Disclosure Guidance and Transparency Rules or MAR. To the fullest extent permissible by law, such persons disclaim all and any responsibility or liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this announcement. The information in this announcement is subject to change without notice.

The Securities will not be admitted to trading on any stock exchange other than the London Stock Exchange.

Information to Distributors

Solely for the purposes of the product governance requirements of Chapter 3 of the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK MiFIR Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK MiFIR Product Governance Requirements) may otherwise have with respect thereto, the New Shares have been subject to a product approval process, which has determined that such securities are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, as respectively defined in paragraphs 3.5 and 3.6 of the FCA Handbook Conduct of Business Sourcebook; and (ii) eligible for distribution through all permitted distribution channels (the "Target Market Assessment").

Notwithstanding the Target Market Assessment, distributors (such term to have the same meaning as in the UK MiFIR Product Governance Requirements) should note that: the price of the New Shares may decline and investors could lose all or part of their investment and the New Shares offer no guaranteed income and no capital protection; and an investment in the New Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the sale of the New Shares. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Underwriters will only procure investors (in connection with the Rights Issue) who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of Chapters 9A or 10A respectively of the FCA Handbook Conduct of Business Sourcebook; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the New Shares.

Each distributor is responsible for undertaking its own Target Market Assessment in respect of the New Shares and determining appropriate distribution channels.

 

easyJet plc

31 FOR 47 FULLY UNDERWRITTEN RIGHTS ISSUE TO RAISE GROSS PROCEEDS OF APPROXIMATELY £1.2 BILLION

1.  Introduction to the Rights Issue

easyJet announces today that it proposes to raise gross proceeds of approximately £1.2 billion by way of a Rights Issue.

Pursuant to the Rights Issue, easyJet is proposing to offer 31 New Shares to Qualifying Shareholders for every 47 Existing Shares.

The Rights Issue price of 410 pence per New Share represents a discount of 35.8% to the theoretical ex-rights price of 638 pence per Existing Share by reference to the closing price on 8 September 2021 (the last Business Day prior to the date of this announcement).

The Rights Issue is fully underwritten by BNP Paribas, Credit Suisse, Goldman Sachs, Santander and Société Générale.

2.  Background to, and reasons for, the Rights Issue

2.1  The period prior to the COVID-19 pandemic

2.1.1 The Group's long-term strategic positioning

The Group entered early 2020 as one of Europe's leading airlines, delivering a robust operational and financial performance, with a strong balance sheet and an increasing share of the European short-haul market. The strength of the Group's market positioning has been underpinned by its low-cost positioning and long-term network and fleet strategy, through a disciplined, multi-year focus on:

· delivering cost efficiency and operational flexibility by operating a single fleet type (of Airbus A320 family aircraft) in a single class configuration with optimised utilisation rates;

· maintaining a low-cost position through direct distribution, a productive labour force, outsourced handling and maintenance and attractive airport deals;

· establishing, strengthening and growing the Group's strong network of leading number one and number two positions in primary airports as the competitive landscape evolves;

· customer loyalty, increasing number of bookings being made by returning customers;

· within its operating markets, serving customers' preferred airports and thereby delivering a yield premium; and

· growing ancillary revenue through the introduction of new products including the launch of easyJet Holidays, paid cabin bags and new 'Standard Plus Fare'.

The delivery of this strategy has provided a strong foundation for the business, with an attractive point-to-point network, a differentiated customer service model, a leading, trusted brand and a strong relative cost position on the Group's markets. The objective of this strategy has been to deliver shareholder value through maximising operating profit per seat, maximising ROCE and generating sustainable positive cash flows. Over the period from FY2016 to FY2019, the Group delivered cash returns to shareholders in excess of £1.0 billion and maintained an average headline ROCE in excess of 13%.

The core strengths of the Group's primary airport positions, differentiated operating model and its focus on customer experience whilst maintaining a disciplined cost structure are expected to continue to differentiate it from other airline operators in a post-COVID-19 market (see paragraph 2.3 (Post-COVID-19 positioning for recovery and a return to growth) below).

2.1.2 Delivery of trading and operational initiatives prior to the COVID-19 pandemic

In January 2020, prior to the onset of the COVID-19 pandemic, the Group upgraded its revenue guidance for the first half of the financial year to 30 September 2020, reflecting robust customer demand, low levels of competitor capacity, and the delivery of self-help initiatives. Alongside the long-term strategic positioning of the Group as discussed above, the business momentum and strong operational performance built on a range of key management initiatives including:

· Revenue initiatives - The further refinement of the Group's commercial and trading model to better focus on yield enhancement.

· Growth - The acquisition of additional slots from Thomas Cook, which bolstered the Group's number one market position at London Gatwick;

· Fleet - The continuation of an ongoing programme of fleet up-gauging through reconfiguration and retirement of the older, less efficient Airbus A319 model; and

· Resilience - The establishment of an operational resilience programme driving a material 30% year-on-year reduction in disruption events and a £37 million reduction in direct disruption costs in the year ended 30 September 2019 compared with the year ended 30 September 2018;

· Sustainability - The launch of a market leading sustainability strategy making the Group the world's first major airline to offset the carbon emissions from fuel across its network; and

· Holidays - The launch of easyJet Holidays in November 2019 as a key driver of incremental profitability and revenue growth, which is complementary to the core business.

The Group also started the financial year ended 30 September 2020 in a strong funding position, with net debt at 30 September 2019 of £326 million, and liquidity per 100 seats at £3.6 million which represented comfortable headroom compared to the target of £2.6 million per 100 seats. Further, out of the Group's total fleet of 331 aircraft at 30 September 2019, 232 of the Group's 237 owned aircraft, representing 70% of the total fleet, were unencumbered.

During the period prior to the COVID-19 pandemic, the Group had demonstrated a strong track record of growth between the years ended 30 September 2016 and 30 September 2019, with total revenue increasing by 36% from £4,669 million to £6,385 million, seat capacity increasing from 79.9 million seats to 105 million seats, and Headline EBITDAR margin of between 14% and 16%.

2.2 The impact of the COVID-19 pandemic and the Group's response

2.2.1 Impact of COVID-19 pandemic on global aviation travel

The measures undertaken by governments since the beginning of the COVID-19 pandemic, including travel restrictions, quarantines, lockdowns and restrictions on non-essential services, have led to an unprecedented decrease in the ability to fly as well as a decrease in appetite for domestic and international air travel.

Whilst passenger traffic initially started to recover within Europe by the end of June 2020, primarily as a result of the relaxation of travel restrictions and increased demand for leisure destinations such as the Mediterranean, traffic dropped again during the last three months of 2020 as a result of the rise in new strains of COVID-19 and the subsequent reintroduction of travel restrictions across Europe.

As a result of the ongoing vaccination programme in Europe and the corresponding relaxation of travel restrictions, passenger demand began to improve across intra-European routes for the 2021 summer season. However, irrespective of the partial recovery in domestic and international air travel, passenger numbers remain depressed as compared against the same period in 2019.

2.2.2 Impact of the COVID-19 pandemic on the Group

Given the nature of its business, the Group is highly dependent upon people being able to travel freely, and the COVID-19 pandemic and associated government travel restrictions and advice have had a very significant negative impact on the Group's business. For the year ended 30 September 2020 and the six months ended 31 March 2021, the Group experienced a material reduction in revenue and incurred significant losses. These losses would have been significantly greater had the Group not taken swift action to reduce costs, preserve cash balances and increase liquidity.

2.2.3 The Group's response to the COVID-19 pandemic

The impact of the COVID-19 pandemic was rapid and acute, and has had an unprecedented operational and financial impact on the Group alongside the wider airline industry.

During the initial grounding of aircraft throughout the spring and summer of 2020 and subsequent periods of severe travel restrictions imposed by countries across the Group's network, the Group responded by launching the largest restructuring and cost-out programme in the Group's history, whilst also remaining disciplined around capacity and focused on cash generative flying in order to minimise cash burn and losses and maximise liquidity.

The Group's robust and immediate actions reduced the fixed cost and capex cash burn of the business to around £39 million per week on average during the first quarter of 2021 and around £38 million per week on average during the second quarter of 2021, outperforming the Group's previous estimate of £40 million per week.

(1) Largest ever restructuring and cost-out programme

Over the course of the COVID-19 pandemic, the Group has acted quickly and decisively to reduce operating expenses throughout the business, including reducing legacy costs and addressing other productivity issues. This restructuring and cost-out programme is on track to achieve approximately £500 million in savings in the financial year ending 30 September 2021, of which the Directors expect almost half will be sustainable on an ongoing basis.

These steps are intended to ensure that the Group continues to have a significant cost advantage compared to legacy carriers with whom the Group has the greatest route overlap, and enable the Group to align cost to demand through the COVID-19 recovery and beyond.

(A) Crew efficiency

Significant actions have been taken to improve crew efficiency whilst also addressing legacy structural and productivity issues.

These actions include reduction in the number of full time equivalent crew members per aircraft across the Group's network; agreeing part-time and seasonal contracts which provides cost efficiencies on an annual basis by minimising redundancy costs, improving productivity on a sustainable basis and providing flexibility to grow without hiring additional crew; pay reductions in certain jurisdictions; a two-year pay freeze agreements in the Group's other jurisdictions; and new seasonal part time bases and contracts in Faro and Malaga.

The Directors expect these actions to realise significant improvements in crew productivity.

(B) Airports and ground handling

The breadth of the Group's network results in the Group having a number of leading positions in key markets and primary airports across Europe. As a result, airports and ground handling costs represent a significant part of the Group's cost base and were a particular focus of the restructuring and cost-out programme. The Group is engaged in negotiations with airports across its network to secure the best long-term deals. Additional savings have been achieved following a line-by-line review of ground handling costs and subsequent renegotiation of ground handling contracts.

Additional actions undertaken by easyJet management include agreeing to short term airport deals covering 80% of traffic; achieving permanent savings in ground operations and contact centres; doubling airport revenue per flight as a result of the introduction of charges for on-board cabin bags, with further development expected to be delivered by the end of 2021; disruption savings using the Upgraded Customer Disruption App; a full property review and exits from buildings and car parks.

(C) Engineering and maintenance

Significant cost savings have been made in engineering whilst maintaining 95% of the Group's fleet in a flight-ready condition. Management actions include reducing the number of spare aircraft; insourcing line maintenance in Berlin, Glasgow, Edinburgh and Bristol; delivering cost savings; extending and improving the terms of certain contracts including our heavy maintenance deals with Lufthansa Technik and SRT Malta; extending our low-cost engine shop deal with GE Aviation; and agreeing with Airbus a more efficient scheduling of checks.

(D) Summary

The Group remains focused on exploring further opportunities to deliver cost reductions and efficiencies whilst seeking to retain almost half of the £500 million restructuring and cost-out programme on an ongoing basis. The Directors believe that the steps which the Group has taken will position the business to emerge from the COVID-19 pandemic in an even more competitive cost position for the long term. As flying returns to more normal levels, the Group will continue to focus on efficiency, minimising the impact of disruption and maintaining a continued focus on optimising the Group's cost base.

(2) Defer near-term capex by £1.0 billion whilst retaining fleet flexibility

The Group's Airbus A320 family fleet is a major component of its business model and gives it a competitive advantage. Since the beginning of the COVID-19 pandemic, the Group's total fleet number has reduced in size and been restructured to allow the flexibility to expand or contract depending on expectations of future demand. As at 31 March 2021, the fleet comprised 330 aircraft (a decrease of 3.5% from 342 as at 30 September 2020) which was driven principally by the deferral of deliveries from Airbus and redelivery to lessors of operating leased aircraft that had reached their lease term maturity, with the fleet expected to be further reduced to 307 by 30 September 2021 (a decrease of 10% since 30 September 2020). As at 30 June 2021, 57% of the Group's fleet comprised owned aircraft (as compared to 70% as at 30 September 2019).

In light of the COVID-19 pandemic, the Group reached agreement with Airbus for the deferral of 29 aircraft deliveries due to be delivered before the end of the financial year ending 30 September 2022, providing cash flow relief during a challenging period. These aircraft will now be delivered in the financial years ending 30 September 2027 and 2028 and there will also be movement of delivery dates during this and in subsequent financial years to more closely match forecast seasonal demand. As a result, the Group will take no aircraft deliveries in the current financial year, and will take delivery of eight aircraft in the financial year ending 30 September 2022 and seven aircraft in the financial year ending 30 September 2023.

The revised fleet agreement with Airbus materially reduced the Group's capital expenditure requirements, giving the Group the flexibility in the future to retire and upgrade aging aircraft with more fuel efficient models. The Group has also deferred or cancelled a number of other projects and minimised other non-essential capex. Combined, these measures have enabled the Group to defer near-term projected capex spend by approximately £1 billion from the outset of the COVID-19 pandemic through to the financial year ending 30 September 2023.

(3) Restructured the network to provide flexibility and align capacity to long term strength

In parallel with the restructuring of the fleet, the Group has also adjusted its network to focus on those locations that performed strongly prior to the pandemic.

In the United Kingdom, the Group made the decision to close its bases in Stansted and Southend with the objective of strengthening London Gatwick and improving London Luton airport. The base in Newcastle was also closed, although both Newcastle and Southend continue to be served through utilising lower cost aircraft based in other countries, including new bases in Portugal (Faro) and Spain (Malaga).

In Europe, the Berlin base was substantially restructured, with the reduction of over 690 full-time equivalent (FTE) employees through voluntary and compulsory redundancies, internal transfers to seasonal bases or part-time contracts, whilst in France compulsory redundancies were avoided through putting in place long-term partial unemployment and furlough agreements, pilot pay reductions and a change to roster patterns. The Group's leading network of primary airports across Europe's biggest cities has been a key advantage throughout the pandemic, with the flexibility built into the Group's schedule enabling it to pivot capacity towards popular routes showing rising customer demand and focus on positive contribution flying.

As a result of these changes, the Group expects to see a material improvement in underlying revenue per seat performance as traffic returns to pre-pandemic levels.

(4) The Group's capital structure response to the COVID-19 pandemic

To strengthen its balance sheet, the Group raised over £5,500 million of additional liquidity from a diversified range of funding sources since the start of the COVID-19 pandemic. As a result of these actions, as at 30 June 2021, the Group had unrestricted access to approximately £2.9 billion of liquidity, comprising cash and cash equivalents, money market funds, money market deposits plus the undrawn portion of the UKEF facility. The Group strengthened its debt maturity profile through the UKEF facility and the bonds issued under the EMTN Programme and, apart from the £300 million of CCFF funding which is due to be repaid on 18 November 2021, the Group has no other debt maturities outstanding until the financial year ending 30 September 2023.

The consolidated capital structure actions implemented by the Group since the onset of the COVID-19 pandemic has allowed it to maintain its investment grade balance sheet whilst improving its debt repayment profile and enhancing its liquidity buffer.

The Group's funding position remains stable, with net debt at 30 June 2021 of approximately £2.0 billion and with liquidity per 100 seats of approximately £5.0 million, representing material headroom compared to the Group's target of £2.6 million per 100 seats. The Group's net debt at 30 June 2021 is approximately £1.6 billion higher than net debt as at 31 March 2020, as a result of management actions to enhance liquidity in response to the COVID-19 pandemic.

2.3 Post-COVID-19 positioning for recovery and a return to growth

With the ongoing vaccination programme in Europe and the corresponding relaxation of travel restrictions, the Group believes it can lead the travel recovery within Europe by building on its key strengths and structural advantages in the European aviation market:

(1) Network strategy

The Group is well-positioned to capture greater network market share and demand as the pandemic abates. The Group has a strong network of number one and number two positions in primary airports serving attractive catchment areas (including London Gatwick, Geneva and Milan Linate among others), which enables the Group to be efficient with network choices. The Directors expect low-cost, short-haul leisure demand to lead the recovery in air travel, with demand for holidays and business customers gravitating towards value.

Furthermore, in its key markets, the Group expects legacy carriers and tour operators to take longer to recover from the impact of COVID-19, due to, among other considerations, their exposure to long-haul operating models and a higher relative sensitivity to a recovery in business travel. This is expected to increase competitive pressure on legacy carriers and tour operators, particularly at primary airports. As a result, the Group expects to be very well positioned to deliver growth by competing against legacy carriers and tour operators at primary airports, whilst maintaining its long-standing discipline of allocating more capacity to higher yielding airports.

The Group's network strategy continues to be focused on three key themes:

· Lead in core markets - The Group prioritises building number one and two positions in primary airports where it delivers a yield premium, with a view of offering the most compelling networks of destinations to customers and driving greater returns and frequencies from these markets. In addition, many of these airports are slot constrained allowing scale positions to be preserved. The Group will seek to maintain its focus on country leadership in the UK, France and Switzerland, with a city focus in Amsterdam, Milan and Berlin, with the COVID-19 pandemic expected to catalyse opportunities for the Group to secure additional landing slots in these core markets whilst also capitalising on short-haul retrenchment by some of the legacy carriers in other markets to grow market share.

· Accelerate investment in destination leaders - The Group will build on its existing leading position in Western Europe's top leisure destinations to provide network breadth and flexibility. This is expected to also unlock cost benefits, enabling the Group to manage seasonality and support the growth of easyJet Holidays, and provide schedule flexibility to enable it to more easily shift capacity in response to demand.

· Build network in focus cities - The Group is building a network of key cities to broaden the Group's presence across Europe. By establishing a presence in large origin markets without basing aircraft or crew locally, the Group is able to serve markets flexibly, with a low-cost base, and lower overall risk.

(2) Customer excellence

The Group's differentiated strategic positioning is in part derived from its commitment to customer excellence. This is due to the Group's fantastic staff, the ease, value and reliability that customers experience when booking to fly and travelling with the Group, and the Group's value proposition in short-haul flights. This approach, supported by its use of numerous digital tools including user-friendly websites and award-winning mobile apps, underscores the ongoing power and customer-centricity of the easyJet brand.

The Group's focus on customer excellence has continued to drive the strength of the brand and delivered strong customer satisfaction scores through the first half of the year and positive movement in Brand Trust scores across all markets. The Group remains the first choice low-cost carrier in the United Kingdom, France, Switzerland and Berlin, one of the best value airlines overall in the United Kingdom and France and the best value low-cost carrier in Italy, Switzerland and Berlin. For the six months ended 31 March 2021, the Group's customer satisfaction was 80% (an increase of 3% from 77% for the six months ended 31 March 2020). As at 30 June 2021, 78% of seats were booked by returning customers, demonstrating the Group's loyal customer base.

Hundreds of easyJet crew members have also volunteered to help at vaccination centres in their local communities across Europe, with many of them having trained to deliver vaccines.

The Group expects its strong brand and customer proposition to be ever more important as the industry recovers from COVID-19, and customers look to brands that they can trust and that can offer them the best value.

(3) Product portfolio evolution

The Group's strategy is to achieve growth and margin expansion across the entirety of its network whilst delivering incremental levels of ancillary revenue. The Group recognises that the continued evolution of its product portfolio represents a significant opportunity to increase revenue per seat and margins in the coming years. The Group has evolved its product portfolio to capitalise on significant ancillary revenue opportunities, including the introduction of the 'Standard Plus Fare' in January 2021 and charging for cabin baggage in February 2021. These measures will also drive on-time performance.

The Directors believe that the continued evolution of the Group's product portfolio, including the launch of the 'Leisure' fare (including a standard seat and 15kg hold bag) in September 2021, delivery of phase II of the cabin baggage product in October 2021 and the opportunity to build on spend per customer for in-flight retail, will drive an increase in ancillary revenue going forward.

(4) easyJet Holidays

The Group is continuing to build on the success of the launch of easyJet Holidays, which offers flexible holiday packages at competitive prices. easyJet Holidays offerings are underpinned by an industry leading 'Protection Promise' which has meant that the Group has been able to retain over 60% of customers whose holidays were affected by the COVID-19 pandemic in the first half of 2021. easyJet Holidays also offsets the carbon emissions directly associated with its holidays - the fuel from flights and transfers, plus the energy from hotel stays.

The Group, through easyJet Holidays, enjoys strong partnerships with leading hotels without the need for financial commitments or inventory risk. During the first half of 2021, the Group signed over 40 additional flagship beach hotels which were previously under exclusive contracts with competitors, further optimising easyJet Holidays' portfolio, whilst also establishing connectivity with some of the world's largest hotel chains including Hilton, Accor, Radisson and Intercontinental Hotel Group to improve the range of our cities offering.

Reflecting the strength of the easyJet Holidays business model and the significant opportunities to grow market share, the Group sees a clear road-map to contributing annual profit before tax in excess of £100 million.

(5) Disciplined cost base

The Group operates with a disciplined approach to maintaining operational efficiency and optimised costs in order to preserve its relative cost advantage in the core markets and primary airport destinations that it serves:

· a focus on cost, with every £0.05 per passenger saving being worth £5 million, the H1 2020 cost programme delivering savings ahead of internal expectations, part time contracts providing unparalleled flexibility and productivity levels transformed, with savings delivered in every costs line and beating guidance for cash out from fixed cost plus capex;

· strong aircraft utilisation driven by a simple point-to-point network structure with short aircraft turns;

· a relatively young fleet with a highly consistent Airbus A320 family aircraft;

· simple product structure with a high density, single class aircraft configuration and low-cost, high margin ancillary products;

· focused on direct distribution, with nearly 90% of sales from an easyJet-branded channel; and

· fully outsourced ground handling model, with competitive sourcing processes driving cost efficiency.

Whilst the Directors expect various industry-wide cost inflationary pressures to emerge in the wake of the COVID-19 pandemic (including in relation to navigation charges, ownership costs and airport fees), the Directors expect these pressures to be partially mitigated due to the steps undertaken over recent months by the Group, together with a disciplined approach to driving efficiency, minimising the impact of disruption and a thorough negotiation of all supplier agreements. Further cost actions for the financial year ending 30 September 2022 are already underway.

(6) Sustainability

Throughout the COVID-19 pandemic, the Group has continued to reaffirm its commitment to sustainability and minimising its environmental impact, which is of significant and growing importance to customers. According to the European Investment Bank, 72% of consumers say that the sustainable behaviour of a company is now a more important factor in a purchase decision since the global outbreak of the COVID-19 pandemic. Moreover, customer awareness of the Group's carbon offsetting policy increased to 57% in July 2021 from 47% in March 2021. In the year ended 30 September 2020, the Group's emissions per passenger kilometre were more than 47% lower than legacy carriers.

In November 2019, the Group established a new sustainability strategy which focused on driving down its environmental impact. The strategy has three pillars: (i) tackling carbon emissions, (ii) stimulating carbon innovation, and (iii) going beyond carbon.

· Tackling carbon emissions: The Group continue to operate a fleet of modern, fuel efficient aircraft and is continuously striving for more ways to be fuel efficient and emit less carbon. In 2019, the Group became the first major airline worldwide to offset all the organisation's direct carbon emissions (scope 1 and 2), through programs that plant trees or avoid the release of additional carbon dioxide. Since then, the Group has retired over 3 million carbon credits from high-quality projects to provide carbon neutral flights to our customers at no additional cost to them.

· Stimulating carbon innovation: The Group is supporting the development of new technologies to reinvent aviation over the long-term so that European aviation can become net-zero carbon. Offsetting can only be an interim solution, whilst zero emissions technology is developed. The Group is collaborating with several industry leaders to support technological step change: Wright Electric in their development of 'Wright 1', an all-electric single aisle 186-seater aircraft and a strategic partnership with Airbus in their ambition to develop a zero-emission commercial aircraft by 2035.

· Going beyond carbon: The Group is constantly looking for more ways to take action outside of carbon reductions including having taken steps to reduce the amount of plastic used on our services. The Group is creating a culture where employees can champion sustainability and in the future the Group will focus its charitable efforts on environmental sustainability.

These key strengths, alongside the Group's continued focus on its people and on operational and digital safety, are expected to provide the Group with the tools to grow to pre-pandemic capacity by 2023, as well as achieve strong returns and resilience as the recovery builds, with the medium-term goal of achieving mid-teen EBITDAR margins and low to mid teen ROCE.

2.4  Ongoing review of financial and associated policies

As a result of the unprecedented impact the COVID-19 pandemic has had on the Group and the aviation industry as a whole, the Board has concluded that raising additional financing, via a fully underwritten Rights Issue of approximately £1,235 million, coupled with a new US$400 million undrawn revolving credit facility, will accelerate the Group's recovery from the pandemic and protect its long-term positioning. As part of this review of the Group's capital structure, and as has been previously communicated, the Group is also concurrently in the process of reviewing its financial policy framework. Due to the current uncertainty as to the timing of a sustainable resumption of international travel, further changes and updates cannot be ruled out and the Group intends to keep its capital structure framework and associated policies under review. Based on the detailed analysis undertaken to date, and current expectations for the travel industry and the business, an update of the Group's current position is summarised below.

2.4.1 Liquidity

The Group has always sought to maintain sufficient liquidity to protect the funds of the customers which it serves, as demonstrated by the existing policy of maintaining a minimum level of liquidity that is the higher of (i) unearned revenue; or (ii) £2.6 million per 100 static aircraft seats.

Having reviewed this policy and, in particular, having taken into account the impact COVID-19 has had on the industry, it is anticipated that going forward the Group will maintain a minimum liquidity level that is at least equal to unearned revenue plus an appropriate additional margin which will be set by the Board and reviewed on an ongoing basis against prevailing market conditions. The Board expects to set this margin for the financial year ending 30 September 2022 at £500 million.

2.4.2 Dividends

As a result of the impact of the COVID-19 pandemic on the Group, and the losses incurred, the Board last year withdrew dividend guidance and did not recommend the payment of a dividend for the financial year ended 30 September 2020. Given the continued impact of the pandemic on the operational and financial performance of the Group, headline losses before tax of £1,019 million have been incurred in the nine months to 30 June 2021.

The Board recognises the importance of dividends to shareholders and will seek to resume payments when the operating environment and the financial performance of the Group permits. The pace and resilience of the Group's post pandemic recovery will be key determinants of the timing and quantum of future shareholder distributions. The Board expects to update the market as to when it anticipates resuming paying dividends and on its future dividend policy, assuming the market environment and circumstances permit, when it announces its full year results for the financial year ending 30 September 2022.

2.4.3 Hedging

To mitigate fluctuations in fuel and exchange rates, the Group will continue to take a prudent approach to managing risk through hedging instruments.

As a result of operational changes across the industry that have been catalysed by the COVID-19 pandemic, the Group anticipates maintaining more flexibility in hedging tenor and volumes in order to adapt to changing capacity brought about by fluctuating demand.

2.4.4 Credit rating

Throughout the pandemic the Group has maintained its investment grade credit rating. This credit rating has provided confidence to customers, suppliers, lenders and investors, allowing the Group to raise finance on competitive terms from a variety of different sources. The Group's ambition remains to maintain a strong balance sheet and to retain its investment grade credit rating.

2.4.5 Fleet

In the past the Group has looked to maximise the number and value of owned aircraft on balance sheet. Having a significant number of unencumbered aircraft contributed to the Group's strong investment grade balance sheet as it entered the pandemic. The level of unencumbered aircraft has enabled Group to source ample liquidity through various sources throughout the pandemic. The Group intends to maintain a significant portion of owned aircraft within its fleet and will continue to communicate capital expenditure plans to the market. As has historically been the case, the Group will continue to proactively manage the residual value risk of its owned aircraft.

2.4.6 Depreciation

Following the impact of COVID-19 on aircraft valuations, the Group is undertaking a review of its aircraft depreciation policy.

The Group is reducing the useful economic life of its aircraft from the current 23 years to 18 years, to better represent the planned life of the aircraft with easyJet. In light of this change, the residual value estimates are being revised to reflect the market expectations of residual value of easyJet's various aircraft types.

It is expected that this change, which will be implemented from 1 July 2021 on a prospective basis, will increase the depreciation charge by c.£10m in the financial year ending 30 September 2021 and will be a non-cash item.

2.5 Rationale for the Rights Issue and use of proceeds

As part of a review of its capital structure, the Group has concluded that raising additional equity will protect and strengthen easyJet's long-term positioning in the European aviation sector. The net proceeds from the Rights Issue, which will increase the Group's cash balance, will facilitate and accelerate the Group's recovery from the impact of the COVID-19 pandemic, strengthening the Group's balance sheet by reducing net debt, providing further liquidity, and enhancing resilience against potential prolonged market challenges related to the COVID-19 pandemic. As the sector recovers, this flexibility will also support growth, enabling the Group to take advantage of long-term strategic and investment opportunities expected to arise as the European aviation and travel industries restructure as a result of the COVID-19 pandemic. This, combined with the underlying strength of the Group's strategic position, will materially improve the Group's ability to deliver long-term value to Shareholders.

· Enhancing balance sheet strength and resilience - The Rights Issue will help restore the Group's balance sheet position to pre-COVID-19 pandemic levels, to enhance the Group's liquidity, and to strengthen its investment grade balance sheet. An enhanced balance sheet will provide greater financial flexibility and resilience to withstand potential prolonged market challenges related to the COVID-19 pandemic, including a potential downside scenario with continued travel restrictions in 2022 and/or a slower recovery in travel patterns.

· Providing the flexibility to capture strategic growth opportunities - As the European travel market emerges from the COVID-19 pandemic, a range of long-term strategic and investment opportunities are expected to arise. The Rights Issue will provide the Group with the financial flexibility to take advantage of these growth opportunities and deliver long-term value:

1)  Building on structural advantages: The Group currently holds a leading strategic position in attractive, high value Western European markets based on scale in primary airports with high income catchment areas. Furthermore, the Group is positioned in many markets as the leading low-cost brand based on its unique combination of convenience and customer service. As the European aviation market recovers post-COVID-19, opportunities will arise at airports within these markets, many of which are slot constrained, as legacy airlines restructure short-haul operations and regulators impose remedies in response to state aid. The Rights Issue will enable the Group to capture these investment opportunities, to build on its current position of strength, and to deliver value-accretive growth.

2)  Gaining greater benefit from ancillary revenue and easyJet Holidays: Over the last 24 months, the Group has implemented an important series of initiatives that has allowed easyJet to add incremental revenues, and the Group recognises that the continued evolution of its product portfolio, supported by the Rights Issue, represents a significant opportunity to increase revenue per seat and margins in the coming years. This includes continuing to build on the success of the launch of easyJet Holidays, which the Group considers a key driver of incremental profitability and revenue growth.

3)  Investing in sustainability with new generation aircraft: Throughout the pandemic, sustainability, and in particular, carbon emissions have become increasingly important to customers. The Group currently holds a market leading position in Europe, having been the first major airline in the world to offset the carbon emissions from the fuel used for all of its flights using high quality accredited offsets and continuing to be the only major European airline to do so. It also has one of Europe's largest fleets of next generation narrow-body aircraft which are 15% more fuel efficient and 50% quieter during take-off and landing than the equivalent previous generation aircraft. To maintain its leadership position in this area, and supported by the Rights Issue, the Group will continue to invest in its fleet to improve its carbon and cost efficiency through the replacement of existing aircraft that provide less fuel and operational efficiency.

Alongside the Rights Issue, the Group has also secured new bank financing commitments, which will further strengthen the Company's liquidity position as the airline recovers from the COVID-19 pandemic. This consists of a new secured US$400 million revolving credit facility, which will have a tenor of four years with up to two extensions, each for a period of one year, conditional on the completion of the Rights Issue.

The actions implemented by the Group since the onset of the COVID-19 pandemic has allowed it to maintain its investment grade balance sheet, whilst improving its debt repayment profile and enhancing its liquidity buffer, with the Group having unrestricted access to approximately £2.9 billion of liquidity as at 30 June 2021, providing confidence to customers, suppliers, lenders and investors through the pandemic. The Group's ambition remains to maintain a strong balance sheet and to retain its investment grade credit rating.

Entering into the new RCF concurrent with the Rights Issue, together with maintaining a prudent and proactive capital management policy, will be supportive towards the strategy of maintaining a liquidity buffer and also enhance balance sheet resilience against potential prolonged market challenges related to the COVID-19 pandemic.

3.  Disenfranchisement

On 4 January 2021, the Company announced that it had commenced steps to suspend voting rights in respect of certain shares ("Affected Shares") held by Relevant Persons (see Note 1) in accordance with the Company's articles of association (the "Articles") so that a majority of the voting rights in the Company are held by EU Persons (see Note 2). The Company announced that the voting rights suspension was being applied on a "last in, first out" ("LIFO") basis such that the shares most recently acquired by Relevant Persons will have voting rights suspended first.

New shares taken up by Relevant Persons in the Rights Issue may be deemed to be Affected Shares and may accordingly be subject to disenfranchisement in accordance with the Articles. The Company intends to apply the LIFO principle to new shares taken up in the Rights Issue, as a result of which Relevant Persons who take up new shares early in the Rights Issue acceptance period will be less likely to be subject to disenfranchisement than, and prioritised for re-enfranchisement ahead of, Relevant Persons who take up new shares in the Rights Issue later in the acceptance period.

In addition, the Company has in the past discussed and may in the future, including as a result of any change to relevant regulatory requirements, discuss with the FCA the Company's application of the LIFO principle to determine which shares are treated as Affected Shares for the purposes of disenfranchisement. The Company may in the future be required to adopt an alternative basis for determining which shares are treated as Affected Shares for the purposes of disenfranchisement, such as designating an equal proportion of all shares held by Relevant Persons to be Affected Shares. This could result in certain Relevant Persons who are Shareholders being subject to disenfranchisement in circumstances where under the LIFO principle they would not be subject to disenfranchisement.

Note 1: "Relevant Persons" has the meaning given to it in the Articles. In general terms, "Relevant Persons" refers to non-EU nationals.

Note 2: "EU Persons" refers to the nationals of one of the member states of the EU, Switzerland, Norway, Iceland or Liechtenstein.

4.  Risk factors and further information

Shareholders should consider fully and carefully the risk factors associated with easyJet, as set out in the section of the Prospectus titled "Risk Factors".

Shareholders should read the whole of the Prospectus and not rely solely on the information set out in this announcement.

5.  Key terms of the Rights Issue

The Company is proposing to raise proceeds of approximately £1,196 million (net of fees, costs and expenses) by way of the Rights Issue.

The Rights Issue will be made on the basis of:

31 New Shares for every 47 Existing Shares

held by and registered in the names of Qualifying Shareholders at 6:00 p.m. (London time) on the Record Date.

The Company is proposing to offer 301,260,394 New Shares (representing approximately 66.0% of the Company's existing issued share capital and 39.7% of the Enlarged Issued Share Capital) in connection with the Rights Issue to Qualifying Shareholders other than, subject to certain exemptions, to those Qualifying Shareholders with a registered address, or resident, in one of the Excluded Territories.

The Rights Issue is to be made at the Issue Price of 410 pence per New Share to Qualifying Shareholders payable in full on acceptance by no later than 11:00 a.m. (London time) on 27 September 2021.

The Issue Price of 410 pence per New Share represents:

· a 48.0% discount to the closing price of an Existing Share; and

· a 35.8% discount to the theoretical ex-Rights price of an Existing Share,

in each case based on the closing middle-market price of 789 pence on the LSE on the Latest Practicable Date.

To the knowledge of the Company, there is no extra cost for non-UK Shareholders to subscribe for the New Shares or transfer Nil Paid Rights.

The Rights Issue has been underwritten by the Underwriters pursuant to the terms and conditions of the Underwriting Agreement.

The Rights Issue is conditional, inter alia, upon:

(i)  the Underwriting Agreement having become unconditional in all respects save for the conditions relating to Admission; and

(ii)  Admission occurring on or before 8:00 a.m. (London time) on 14 September 2021 (or such later time and date as the Joint Global Coordinators and the Company may agree).

Entitlements to New Shares will be rounded down to the nearest whole number and fractional entitlements will not be allotted to Qualifying Shareholders but will be aggregated and sold in the market on behalf of the relevant Qualifying Shareholders. Amounts of less than £5.00 at the date of payment will not be paid to such Qualifying Shareholders and will instead be retained for the benefit of the Company.

The New Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the New Shares.

If a Qualifying Shareholder does not take up any of his or her Rights to subscribe for New Shares, such Qualifying Shareholder's economic and voting interests, as a percentage of the Enlarged Issued Share Capital, will be diluted by 39.7% as a result of the Rights Issue.

It is expected that Admission will become effective and that: (1) dealings in the New Shares (nil paid) will commence on the LSE by 8:00 a.m. (London time) on 13 September 2021; and (2) dealings in the New Shares (fully paid) will commence on the LSE by 8:00 a.m. (London time) on 28 September 2021.

It is expected that the Nil Paid Rights will trade under ISIN GB00BMY5XK54 and the Fully Paid Rights will trade under ISIN GB00BMZ0FW54.

Shareholders will not be charged expenses by the Company in respect of the Rights Issue.

6.  Expected timetable of principal events

Board meeting to approve the Rights Issue and the Prospectus	Wednesday 8 September 2021
Record Date for entitlements under the Rights Issue................	6:00 p.m. on Wednesday 8 September 2021
Approval of the Prospectus by the FCA ...................................	Thursday 9 September 2021
Announcement of the Rights Issue..........................................	Thursday 9 September 2021
Publication of the Prospectus..................................................	Thursday 9 September 2021
Date of dispatch of Provisional Allotment Letters or CSN Forms of Instruction (to Qualifying Non-CREST Shareholders only)......	Friday 10 September 2021
Admission and dealings in the New Shares, nil paid, commence on the LSE and Existing Shares marked ex-Rights.....................	8:00 a.m. on Monday 13 September 2021
Nil Paid Rights credited to stock accounts in CREST (Qualifying CREST Shareholders only)........................................................	As soon as practicable after 8:00 a.m. on Monday 13 September 2021
Nil Paid Rights and Fully Paid Rights enabled in CREST...............	As soon as practicable after 8:00 a.m. on Monday 13 September 2021
Latest time and date for receipt of instructions from Qualifying Non-CREST Shareholders in respect of Cashless Take-up or disposal of Nil Paid Rights under Special Dealing Service............	5:00 p.m. on Friday 17 September 2021
Recommended latest time and date for requesting withdrawal of Nil Paid Rights or Fully Paid Rights from CREST (i.e. if your Nil Paid Rights or Fully Paid Rights are in CREST and you wish to convert them into certificated form)........................................	4:30 p.m. on Tuesday 21 September 2021
Expected date for the sale of the relevant Nil Paid Rights in relation to Cashless Take-up or sale instructions under the Special Dealing Service.............................................................	By Tuesday 21 September 2021
Latest time and date for depositing renounced Provisional Allotment Letters, nil paid or fully paid, into CREST or for dematerialising Nil Paid Rights into a CREST stock account (i.e. if your Nil Paid Rights or Fully Paid Rights are represented by Provisional Allotment Letters and you want to convert them to uncertificated form)................................................................	3:00 p.m. on Wednesday 22 September 2021
Expected settlement of dealings in relation to Cashless Take-up or sale instructions of Nil Paid Rights under Special Dealing Service....................................................................................	By Wednesday 22 September 2021
Latest time and date for splitting Provisional Allotment Letters, nil or fully paid.........................................................................	3:00 p.m. on Thursday 23 September 2021
Expected date of despatch of cheques in relation to proceeds of Cashless Take-up or disposal of Nil Paid Rights under Special Dealing Service........................................................................	By Thursday 23 September 2021
Latest time and date for acceptance, payment in full and registration of renounced Provisional Allotment Letters.........	By 11:00 a.m. on Monday 27 September 2021
Expected date of announcement of results of the Rights Issue through a Regulatory Information Service announcement........	By 8:00 a.m. on Tuesday 28 September 2021
Dealings in the New Shares, fully paid, to commence on the LSE...............................................................................................	By 8:00 a.m. on Tuesday 28 September 2021
New Shares credited to CREST stock accounts (uncertificated holders only)...........................................................................	As soon as reasonably practicable after 8:00 a.m. on Tuesday 28 September 2021
Nominee Service accounts credited with New Shares..............	Tuesday 5 October 2021
Expected despatch of definitive share certificates for New Shares in respect of the Rights Issue in certificated form (to Qualifying Certificated Shareholders only) and premium payments (if applicable) in respect of Nil Paid Rights not taken up...........................................................................................	By Tuesday 12 October 2021
Expected despatch of Nominee Service statements for New Shares in respect of the Rights Issue........................................	By the end of October 2021

 

Definitions:

"Admission".............................................	the admission of the New Shares (nil paid) to the premium listing segment of the Official List and to trading on the LSE's Main Market for listed securities becoming effective
"AMF"........................................................	The Autorité des Marchés Financiers
"Articles of Association" or "Articles".	the articles of association of the Company
"Banks"......................................................	BNP Paribas, Credit Suisse, Goldman Sachs, Santander, Société Générale and Greenhill
"Board".....................................................	the board of Directors of the Company
"Business Day".........................................	a day (other than a Saturday or Sunday) on which banks are open for general business in London
"Cashless Take-up"..................................	selling some Rights and using the proceeds to take up remaining Rights
"CCFF".......................................................	the joint Bank of England and HM Treasury's lending facility, under which the Bank of England, acting through an entity named Covid Corporate Financing Facility Limited, may acquire commercial paper which is issued by a participating eligible company
"Company" or "easyJet"........................	easyJet plc, a company registered in England and Wales with registered number 03959649
"CREST".....................................................	the relevant system (as defined in the Uncertificated Securities Regulations 2001 (SI 2001/3755)) in respect of which Euroclear UK & Ireland is the operator
"CSN Form of Instruction"....................	the CSN form of instruction to be issued to Qualifying Non-CREST Shareholders who hold Existing Shares within the Nominee Service
"Directors"...............................................	the directors of easyJet
"Enlarged Issued Share Capital"...........	the Company's ordinary issued share capital following completion of the Rights Issue
"Excluded Territories"............................	Australia, Canada (subject to certain limited exceptions), Japan, New Zealand, South Africa, the United States (subject to certain limited exceptions) and any other jurisdiction where the extension or availability of the Rights Issue (and any other transaction contemplated thereby) would breach any applicable law or regulation
"Existing Shares".....................................	in relation to a particular date, the Shares existing as at that date
"FCA".........................................................	the Financial Conduct Authority
"Fully Paid Rights"...................................	rights to subscribe for the New Shares, fully paid
"Group".....................................................	easyJet, its subsidiary undertakings from time to time (as defined in the Companies Act 2006)
"ISIN"........................................................	International Security Identification Number
"Issue Price".............................................	410 pence, the price at which New Shares will be issued to Qualifying Shareholders subscribing for New Shares to the Rights Issue
"Joint Bookrunners"...............................	Santander and Société Générale
"Joint Global Coordinators"..................	BNP Paribas, Credit Suisse and Goldman Sachs
"Latest Practicable Date"......................	8 September 2021, being the latest practicable date prior to the publication of the Prospectus
"LSE"..........................................................	London Stock Exchange plc
"Main Market".........................................	the LSE's Main Market for listed securities
"New Revolving Credit Facility"...........	US$400 million revolving credit facility entered into by EACL as borrower on 9 September 2021
"New Shares"..........................................	the new Shares to be issued by the Company pursuant to the Rights Issue
"Nil Paid Rights"......................................	New Shares, nil paid, to be provisionally allotted by the Company pursuant to the Rights Issue
"Nominee Service".................................	the easyJet Corporate Sponsored Nominee Service provided by Equiniti Financial Services Limited
"Official List"............................................	the Official List of the FCA
"Prospectus"............................................	document relating to easyJet plc dated 9 September 2021 which the Company proposes to publish in relation to the Rights Issue
"Provisional Allotment Letter"............	the provisional allotment letter to be issued to Qualifying Non-CREST Shareholders
"Qualifying CREST Shareholders".........	Shareholders whose Shares are on the Register on the Record Date and which are held in uncertificated form and held through CREST
"Qualifying Non-CREST Shareholders"	Qualifying Shareholders whose Shares are on the Register on the Record Date and which are held in certificated form or through the Nominee Service
"Qualifying Shareholders".....................	Qualifying CREST Shareholders and Qualifying Non-CREST Shareholders
"Record Date"..........................................	6:00 p.m. (London time) on 8 September 2021
"Register".................................................	the register of members of the Company
"Rights".....................................................	the Nil Paid Rights or the Fully Paid Rights (or both) as the context may require
"Rights Issue"...........................................	the offer by way of rights to Qualifying Shareholders to subscribe for New Shares on the terms and conditions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Provisional Allotment Letter or CSN Form of Instruction (as applicable)
"RIS"..........................................................	Regulatory Information Service
"ROCE"…	return on capital employed
"Shareholder"..........................................	a holder of Shares
"Shares"....................................................	the ordinary shares of £0.272857 each in the capital of easyJet
"Special Dealing Service".......................	the dealing service being made available by Equiniti to Qualifying Non-CREST Shareholders who are individuals with a registered address in the United Kingdom who wish to sell all of their Nil Paid Rights or to effect a Cashless Take-up
"Takeover Code".....................................	The City Code on Takeovers and Mergers
"Underwriters".......................................	BNP Paribas, Credit Suisse, Goldman Sachs, Santander and Société Générale
"Underwriting Agreement".................	the underwriting and sponsors' agreement dated 9 September 2021 between and among the Company and the Banks

 

END

 

 

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