2007/082006/072005/062004/052003/042002/03Key Documents

Jet2 plc Company Reports

Business and Financial Review

The Group’s financial performance for the year ended 31 March 2020 is reported in line with International Financial Reporting Standards (“IFRS”), as adopted by the EU.

Group Financial Performance 2019/20

Customer Demand & Revenue

Despite Leisure Travel customer booking trends for the summer 2019 season being later than in previous years, the growing awareness and appreciation of our leisure travel products meant that overall demand for both our higher margin package holiday product from Jet2holidays and our flight-only offering from Jet2.com remained resilient.

Jet2.com flew a total of 14.62m (2019: 12.82m) single sector passengers to and from sun, city and ski destinations, an increase of 14% and only slightly behind the seat capacity increase of 15%. As a result, average load factors were a healthy 92.2% as compared to the prior year of 92.8%. Customers choosing our end-to-end package holiday product increased by 19% to 3.77m (2019: 3.17m), while single sector passengers choosing our important flight-only product increased by 9% to 7.06m (2019: 6.49m). Encouragingly, package holiday customers represented 52% of overall flown passengers (2019: 49%).

Early summer 2019 experienced increased levels of promotional pricing to drive customer demand, succeeded by progressively stronger bookings in later summer and into the second half of the year, in part aided by a reduction in overall market seat capacity on short and medium haul beach routes.

Seizing this opportunity, Jet2.com expanded its route network by carefully replacing part of the market capacity reduction with incremental profitable flying, with customer demand remaining buoyant and associated ticket pricing strengthening. Consequently, average flight-only ticket yield per passenger sector at £85.59 (2019: £81.79) was 5% higher than the prior year.

The mix of customers taking shorter duration package holidays increased by 1ppt versus the prior year, with those choosing all-inclusive holidays increasing by 3ppts, as families opted for our great value ‘Defined Price’ offering. In addition, the mix of higher value 4 & 5-star packages improved by 2ppts. Together with increased airline ticket pricing and inflationary hotel room rate increases, the overall average price of a Jet2holidays package holiday increased to £687 (2019: £669).

Non-ticket retail revenue per passenger sector increased by 3% to £24.91 (2019: £24.07) primarily due to a strong in-flight retail sales performance for both existing and new products. This revenue stream, which is primarily discretionary in nature, continues to be optimised through our customer contact programme as we focus on continually developing our customer services.

As a result, overall Group revenue grew by 21% to £3,584.7m (2019: £2,964.4m), ahead of the growth in passenger numbers.

Net Operating Expenses

The Travel Industry in general faces many cost pressures in relation to fuel, carbon and other operating charges, together with the necessary continued investment in our own products and operations, including that required to attract and retain colleagues. As a result, total operating expenses (excluding the hedge ineffectiveness exceptional expense) increased by 19% to £3,291.7m (2019: £2,759.9m), ahead of both the passenger and activity increase.

The principal areas of cost increase ahead of activity were:

Fuel and Carbon – a result of increased jet fuel and carbon costs per tonne;

Agent commission – strategic investment with our travel agent partners resulted in the mix of trade bookings as a proportion of total bookings growing by 4ppts to over 28%, with an increase in associated commission levels paid; 

Colleague costs – we are keen to create the right environment for all our colleagues to thrive and are committed to delivering a balanced lifestyle. To achieve this, for our aircraft crews we launched our “Lifestyle 2020” programme, which was implemented in 2019 and continued into 2020. The substantial financial investment that this programme requires underlines our commitment to be a career airline of choice for all; and

Depreciation a result of incremental depreciation on right-of-use assets plus ongoing investment and renewal of the aircraft fleet.

Operating Profit

The increasing mix of higher margin package holiday customers is pleasing, as we continued to focus on improving cross-selling conversion from flight-only to package holidays on our website and through our broader marketing messaging. Additionally, the Real Package Holidays™ proposition lends itself to brand loyalty and retention, resulting in a better quality of recurring revenue and profitability in comparison to the more impulsive, price-sensitive, flight-only product.

Though operating profit in the first half of the financial year grew modestly by 3%, strong customer demand and pricing, plus incremental profitable flying and carefully controlled cost investment in readiness for the proposed expansion of the summer 2020 flying programme, meant operating losses (excluding hedge ineffectiveness) for the second half of the year decreased by 53% to £68.5m (2019: £146.9m).

As a result, overall Group operating profit (excluding hedge ineffectiveness) for the year increased by 43% to £293.0m (2019: £204.5m).

Net Financing Expense

Net financing expense of £37.6m (2019: £40.3m) is stated after finance income of £14.5m (2019: £10.7m), the year-on-year increase due to higher average cash balances and favourable interest rates, and interest payable of £44.0m (2019: £41.9m), related to structured aircraft finance and IFRS 16 lease interest expense. In addition, net FX revaluation losses of £8.1m (2019: £9.1m loss) were incurred, arising from the year end revaluation of foreign currency denominated monetary balances.

Discontinued Operations

At the year end date, the business was in active discussions to sell its Distribution & Logistics business, Fowler Welch, and having satisfied the conditions under IFRS5 Non-current Assets Held for Sale and Discontinued Operations, this business which achieved a profit before taxation of £5.5m (2019: £4.1m), is classed as a discontinued operation.

Pre-Exceptional Statutory Profit for the Year

As a result, the Group achieved a statutory pre-exceptional profit before taxation from continuing operations of £256.1m (2019: £166.5m), an increase of 54%.

Exceptional Item

The Group operates under a clear set of treasury policies approved by the Board. The aim of our well-established hedging policy has been to reduce short-term volatility in earnings by hedging up to a maximum of 90 per cent. of projected jet fuel, euro and US dollar requirements for the next twelve months. The impact and timing of Covid-19 means that both the flying and holiday programmes expected to be operated in the first half of the financial year ending 31 March 2021 are significantly lower than that on which the hedging programme for jet fuel and foreign currency was originally based and therefore the Group has recorded a net exceptional charge of £108.4m relating to hedge ineffectiveness.


The Group recorded a tax expense of £36.1m compared to £29.9m in 2019. The Group’s effective tax rate of 24% (2019: 18%) was higher than the 19% headline rate of corporation tax, as legislation substantively enacted on 17 March 2020 means the UK tax rate, which was previously advised as 17%, will remain at 19% from 1 April 2020 onwards. As a result, Deferred tax has been provided at 19% (2019: 17%).

Statutory Net Profit for the year and Earnings Per Share

Having accounted for the exceptional item, the Group achieved a statutory profit after taxation from continuing operations of £111.6m (2019: £136.6m). Basic earnings per share decreased by 18% to 74.97p (2019: 91.86p).

Other Comprehensive Income and Expense

The Group had Other comprehensive expense of £44.9m (2019: £51.4m), the change compared to the prior year driven primarily by movements in the fair value of open hedge instruments, as reflected in the balance of the cash flow hedging reserve in equity. The hedging reserve excludes those open jet fuel and foreign currency hedges that were classified as ineffective at 31 March 2020 and were therefore recognised as an exceptional item in the Consolidated Income Statement.

 Cash Flow Generated From Operating Activities

The Group generated net cash from operating activities of £443.1m (2019: £483.0m), driven by the pre-exceptional trading performance of the Leisure Travel business which resulted in EBITDA improving by 36% to £498.2m. In contrast with 2019, when growing forward bookings increased cash flows by £132.6m, in 2020 this was a cash outflow of £194.7m as bookings declined sharply due to the Covid-19 pandemic, with flying operations suspended from mid-March 2020 and all flights and holidays departing prior to 1 May 2020 cancelled. This outflow was partially offset by an increase in payables of £152.7m for flights and holidays cancelled shortly before the year end which had either not yet been refunded, or credit notes not yet redeemed until post 31 March 2020. As a result, the previously positive contribution to operating cashflow from movements in working capital in 2019 of £136.3m, reversed to an outflow of £21.5m, a year-on-year reduction of £157.8m.

Net Cash Used In Investing Activities

The business invested £26.8m in the acquisition of a portfolio of primarily peak summer airport slots, at Manchester, Birmingham and London Stansted airports, plus certain Greek Island slots to further improve our customers’ experience through more attractive flight departure timings and continue to develop the network. In addition, total capital expenditure of £211.3m (2019: £302.3m) included additional aircraft, continued investment in the long-term maintenance of our existing aircraft fleet, replacement of ground operations equipment at our UK and overseas bases, plus technology and infrastructure projects across the Group.

Net Cash From Financing Activities

In late March 2020, due to the Covid-19 pandemic, the Group prudently drew down £65.0m (2019: £nil) of its revolving credit facility. The Group also made capital repayments of £38.0m (2019: £65.1m) on aircraft loans and repaid £99.7m (2019: £73.7m) of its aircraft, vehicles and property leases.

Overall, this resulted in a net cash inflow from total operations of £125.9m (2019: £265.7m) and an improved year end gross cash position, including money market deposits, of £1,387.5m (2019: £1,274.3m). Net cash, stated after borrowings and lease liabilities increased by 259% to £229.1m (2019: £63.9m).

At the reporting date, the Group had received payments in advance of travel from its Leisure Travel customers amounting to £867.1m (2019: £905.9m), and had increased its ‘own cash’ balance excluding customer deposits by 41% to £520.4m (2019: £368.4m). There were no cash restrictions from merchant acquirers and £39.8m (2019: £nil) was placed with counterparties in the form of margin calls to cover out-of-the-money hedge instruments. In addition, the Group continued to comfortably exceed the UK Civil Aviation Authority’s ‘liquidity threshold test’.

Total shareholders’ equity increased by £56.2m (2019: £75.9m) primarily comprising profit after taxation of £116.0m (2019: £139.9m), dividends paid of £15.5m (2019: £13.1m) and an adverse movement of £48.8m (2019: adverse £50.1m) in the cash flow hedging and cost of hedging reserves, largely a result of out-of-the-money jet fuel forward contracts held at the end of the financial year.

Net Assets Held For Sale

At the year end date, having satisfied the conditions under IFRS5 Non-current Assets Held for Sale and Discontinued Operations, the net assets of the Distribution & Logistics operation were classed as Assets and Liabilities held for sale on the Statement of Financial Position and totalled £66.4m.

Adoption of IFRS 16 – Leases

The Group adopted IFRS 16 from 1 April 2019 applying the full retrospective method of transition and has restated the 2019 financial statements in this Annual Report and Accounts. The full detail and impacts of this change are explained in Notes 4 and 31 to the financial statements respectively.

Events Subsequent to 31 March 2020

At 31 March 2020, the Group had a strong and responsibly managed balance sheet with a total cash balance of £1,387.5m and an ‘own cash’ balance excluding customer deposits of £520.4m. However, as a result of the Covid-19 pandemic and its unprecedented impact, our cash balance and the careful preservation of it, has now become our top priority.

A considered but swift response saw cost mitigation measures put in place including: approximately 80% of our UK colleagues being put on temporary leave of absence (‘furloughed’) in order to make full use of the grants available under the UK Government’s Coronavirus Job Retention Scheme (“JRS”) with similar schemes also in place for many of our overseas colleagues; the cancellation of all twelve summer-only third-party leased aircraft; deferral of non-critical capital expenditure; the freezing of recruitment and discretionary spending and the termination of arrangements with contractors. In addition, we have also had positive discussions with many of our suppliers to reduce our monthly outgoings.

Despite the JRS, our monthly salary bill remains a substantial proportion of our overall costs and therefore, with huge reluctance and after much thought, we asked all colleagues (including Directors) to take a pay cut for the nine-month period from 1 April 2020 until 31 December 2020. Additionally, performance related bonuses earned for the financial year ended 31 March 2020 plus the Discretionary Colleague Profit Share Scheme, will not be paid.

We further strengthened our cash position in May 2020, by completing an over-subscribed share Placing of 20% of the then issued share capital of the Company for gross proceeds of £171.7m and also completing the sale of our Distribution & Logistics business, Fowler Welch, for a gross cash consideration of £98.0m. In addition, we secured eligibility for up to £300.0m of funding from the Bank of England under the UK Government's Covid Corporate Financing Facility (CCFF). This facility, which matures 12 months following draw down, will be used to provide standby liquidity, should that be required, and is currently unutilised.

More recently, we have had to reassess and reduce our flying programmes for the remainder of 2020 and for 2021, the overall effect being the need to sadly propose a number of colleague redundancies across our business.

Despite these difficult decisions, we will continue to take every step necessary to preserve cash and enhance liquidity to ensure both Jet2.com and Jet2holidays are equipped to deal with this most challenging of trading environments and also best positioned for a return to operations in a stable financial position, to the benefit of all stakeholders.


Gary Brown

Group Chief Financial Officer

17 July 2020