Q&A: Jeff Carr on EasyJet's interims

Jeff Carr, EasyJet

These seem to be quite a complex set of results what with the GB
airways acquisition and also the effects of currency translation. So could you
just talk me through what for you are the key numbers from these
results?

You’re right. It is a more complicated set of results than we’ve had in the
past and there are three factors which we really have to understand.

Firstly, there is the dramatic increase in fuel prices. Fuel has gone up
around about 50% in terms of its cost per tonne basis over the last three
months.

Then you’ve also got the fact that the euro has strengthened significantly
versus the pound. That has an impact on our revenue per seat and our cost per
seat- it drives them both up.

Overall, we’re slightly long on the euro, so it’s a slight favourable benefit
to us.

But it makes our costs look significantly higher than they would have been at
constant currency. It also makes our revenues look stronger than they would have
been.

The third factor is the GB acquisition. Now we have two months of GB Airways
included in our numbers.
In total it made an operating loss of £7m and you have to factor that out as
well.

But of course as you say it’s all about the oil price. What exactly is your
hedging position and also your expectation for the full year impact?

Well we have 40% of the rest of the financial year hedged at around $750 per
tonne.
Now the 60% that we don’t have hedged, as we’ve seen, has gone up dramatically
over the last few weeks.

We’ve been at about $800 a tonne in the market and up to around about $1,200
per tonne for jet and that’s a significant increase and that will have an impact
on margins if it stays at that level.

But there is so much uncertainty out there. How do you see easyJet
coping if there is a worsening in the economic environment? In 12 years you
haven’t seen a full-blown recession have you?

We do obviously think through the impact of a potential downturn. The key for
easyJet is that we have a lot of flexibility.

We have flexibility to manage our costs, we have flexibility to manage our
growth and we have flexibility on the revenue side. I think that this
distinguishes the easyJet model from, for example, the legacy carriers.

I think the key to that is retaining that flexibility and acting quickly
depending on the circumstances.

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