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

Jet2 plc Company Reports

Chairman's Statement

Although the Leisure Travel industry is facing unprecedented challenges due to the Covid-19 pandemic,  I am pleased to report on the record performance for the financial year ended 31 March 2020 of our UK Leisure Travel business – encompassing Jet2holidays, our acclaimed ATOL (*) licensed package holidays operator and Jet2.com, our award-winning airline – which provides a strong foundation to underpin the business’s success going forward.

Despite the fact that Jet2.com had to suspend its flying programme in mid-March 2020 due to the travel restrictions imposed by governments across Europe as a result of the spread of Covid-19, the Leisure Travel business still achieved overall single sector flown passenger growth of 14% to 14.62m (2019: 12.82m), which contributed to an increase in revenue of 21% to £3,584.7m (2019: £2,964.4m) and a Profit before hedge ineffectiveness, FX revaluation and taxation from continuing operations of £264.2m (2019: £175.6m), an increase of 50%.

Exceptional item – The impact 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. As a consequence, the Group has recorded a net exceptional charge of £108.4m relating to ineffectiveness on a proportion of its hedging instruments in the financial year ended 31 March 2020 results.

After accounting for this net exceptional charge, statutory Profit before taxation from continuing operations declined by 11% to £147.7m (2019: £166.5m).

After the exceptional charge, basic earnings per share from continuing operations reduced by 18% to 74.97p (2019: 91.86p). As announced on 24 April 2020 and in consideration of the ongoing impact of Covid-19, the Board does not recommend the payment of a final dividend (2019: 7.4p per share), meaning a total dividend for the year of 3.0p per share (2019: 10.2p), a decrease of 71%.

Strategy

We take people on holiday!”

Jet2holidays is now the UK’s largest tour operator to many Mediterranean and Canary Islands leisure destinations and Jet2.com is the UK’s 3rd largest airline by number of passengers flown. Our “Customer First” strategy has remained consistent and is what has driven Jet2’s continuing success. The delivery of great service is at the core of Jet2holidays and Jet2.com brand values as we recognise that, whether taking end-to-end Real Package Holidays™ with Jet2holidays, or a holiday flight with Jet2.com, the delivery of an attractive and memorable holiday experience engenders loyalty and repeat bookings.

The combined power of our proposition, product and people is what will fuel our ongoing success, as we constantly seek to improve our customers’ holiday choice, experience and enjoyment, giving us the greatest opportunity to retain and attract new customers – the key to continuing profitable growth! 

Our long-term ambition therefore remains – To be the Leading UK Leisure Travel Business.

2020 Key Performance Highlights

The aircraft fleet expanded to 100 for summer 2019 (summer 2018: 90), with 3 new destinations added: Chania in Crete; Izmir in Turkey; and Bourgas in Bulgaria, supplemented by increased frequency of flying to many popular Mediterranean, Canary Island and European Leisure City destinations.

In October 2019, the business acquired a portfolio of primarily peak summer airport slots at Manchester, Birmingham and London Stansted airports, to further improve our customers’ experience through more attractive flight departure timings. Continuing to develop our network, we also acquired additional slots to the Greek Islands, allowing the introduction of new services to Kalamata, Santorini and Mykonos, plus increased flight frequency to some of our most sought-after Greek destinations.

Our balance sheet and liquidity position strengthened to a year end total cash balance of £1,387.5m, an increase of 9% (2019: £1,274.3m), and an ‘own cash’ position (excluding customer deposits) of £520.4m, an increase of 41% (2019: £368.4m).

 

Post Year End Highlights

On 14 May 2020, the Group was confirmed as an eligible issuer for the Bank of England Covid Corporate Financing Facility ("CCFF") and has put in place a £300.0m commercial paper programme to facilitate issuance under it. The CCFF is designed to support liquidity among larger businesses who are capable of demonstrating that they make a material contribution to the UK economy and are able to display sound financial health, equivalent to an investment grade rating, prior to the economic shock caused by the Covid-19 pandemic. This facility, which matures 12 months following draw down, will be used to provide standby liquidity, should that be required, and is currently unutilised.

On 21 May 2020, the Group completed a Placing of 29.78 million new ordinary shares at a price of 576.5 pence per share, representing 20 per cent. of the then existing ordinary share capital of Dart Group plc, raising gross proceeds of £171.7m. The Placing was significantly over subscribed and the shares were placed at no discount to the prevailing market share price.

The sale of our Distribution & Logistics business, Fowler Welch, for a gross cash consideration of £98.0m was also completed on 31 May 2020.

Customers

We know that taking a holiday is one of the most important family experiences of the year and we relish the trust our customers place in us to give them a fantastic holiday experience. Despite the current challenges of Covid-19, going forward we remain committed to doing our very best to ensure that each of our customers “has a lovely holiday” that can be both eagerly anticipated and fondly remembered, supported by our core principles of being family friendly, offering value for money and giving a truly VIP customer service. 

Colleagues

The health and wellbeing of our colleagues is, of course, of paramount importance, and during this difficult period even more so. We are incredibly proud of how quickly and positively they have responded to the new ways of remote working as a result of the lockdown imposed by the UK Government. I would like to take this opportunity to thank all our colleagues for their hard work, dedication and commitment. It was therefore with great regret that we have recently had to propose a number of redundancies amongst colleagues to match our re-sized flying programmes for this summer and winter 20/21 and for flying in the financial year ending 31 March 2022.

Board Changes

The Board recognises that it is responsible for the long-term success of the Group and is accountable to shareholders for its proper management. The Board’s composition is regularly reviewed to ensure that it maintains the appropriate balance of skill set, background and experience, to enable it to oversee the execution of the Group’s strategy by management.

As a result, and following a rigorous search process, we were delighted to welcome Robin Terrell to the Board on 14 April 2020 as an independent non-executive director. Robin brings extensive experience in leading online and retail businesses and has very relevant financial knowledge given his qualification as a chartered accountant and his position as Chairman of the Audit Committee of William Hill plc.

Culture and Stakeholders  

The Board and senior management team remain focused on generating shareholder value by making decisions that ensure the foundations of the business remain strong in an ever-changing marketplace and continue to drive sustainable long-term profitable growth. We recognise the importance of strong relationships with our many stakeholders in helping to realise our growth plans. Additionally, we continue to place particular emphasis on our corporate culture to help achieve our goals, as epitomised by our brand values, known internally as ‘Take Me There’ to: Be Present; Create Memories; Take Responsibility; and Work As One Team. The active fulfilment of these values has been essential to our accomplishments to date and will remain integral to our future success.

Looking Ahead

We still face challenges as a result of the Covid-19 pandemic and therefore maintaining a healthy cash position remains our top priority. We have taken significant actions to improve our available liquidity in the last three months and will continue to do so, to ensure that we are best placed to respond swiftly as UK Government travel restrictions are relaxed and customer confidence recovers. We remain confident that once normality returns, our Customers will be determined to enjoy the wonderful experience of a well-deserved Jet2 holiday and that Jet2.com and Jet2holidays will continue to have a thriving future, taking millions of UK holidaymakers annually, to the Mediterranean, the Canary Islands and to European Leisure Cities.  

Operational Performance

Our performance for the financial year reflects the growing success of our Leisure Travel products - package holidays with our tour operator, Jet2holidays, and holiday flights with our scheduled airline, Jet2.com – which has led to continuing strong customer demand for both. 

During the year, Jet2.com flew a total of 14.62m (2019: 12.82m) flight-only and package holiday single sector passengers, a growth of 14%. Demand for our Real Package Holidays™ continued to grow, as Jet2holidays took 3.77m (2019: 3.17m) customers on package holidays, an increase of 19%, with our flight-only product enjoyed by 7.06m (2019: 6.49m) single sector passengers, a growth of 9%.

Taking a holiday is one of the most important and rewarding family events of the year and the end-to-end Real Package Holidays™ experience allows us to add greater value at each point in our customers’ journey. We believe that sustained investment in our “Customer First” proposition will ensure we continue to deliver consistently attractive holiday experiences, giving us a wonderful opportunity to delight our customers from start to finish, time and time again.

We have also learnt, that even when times are tough and disposable incomes tight, one of the very last discretionary items to be sacrificed is the family holiday. Therefore, we have an operating model, product portfolio and hotel supply chain that are able to provide a variety of holiday experiences, plus a wide choice of holiday durations, accommodation and board basis, all vital ingredients to cater for our customers’ differing budget requirements.

As a vertically integrated leisure travel provider, we are fully in control of our airline seat supply. Together with our overall customer volumes, this allows us to optimise load factors which are consistently above 90% whilst serving many destinations daily, and others several times a week, offering a great choice of truly variable duration holidays at affordable prices, delivering the flexibility that today’s holidaymakers require.

A differentiated product offering and continued innovation helps to make sure we are truly reflecting diversity in our product range, allowing us to meet our customers’ evolving expectations:

Our core Beach product offering is continually reviewed and refreshed, always ensuring that we satisfy our customers’ desire for choice and quality, whilst carefully expanding our resorts presence. Encompassing a wide range of great value 2 to 5-star accommodation, catering for the young, not so young and families alike, many have adjacent waterparks and other great attractions included in the package, adding enjoyment and interest to the overall holiday experience.

Jet2VillasTM our ATOL protected Jet2.com flight + 22kg baggage + car + villa package launched in June 2017, enjoys all the package perks of Jet2holidays, but with the freedom of a villa holiday. With a choice of over 2,400 properties ranging from individual self-catering villas with private pool, to hotel resort villas that make the best of both worlds, this product has proven more popular as each season passes.

Our Indulgent EscapesTM brand encompasses an exclusive collection of five-star hotels for those who want additional luxury and refinement, each property having been hand-picked for its unique appeal to different tastes and interests. This luxury holiday product, which is richly distinctive, has unsurpassed standards of service, décor and attention to detail, and continues to resonate with customers, both existing and new.

Jet2CityBreaks®, which offers an ATOL protected Jet2.com flight + hotel package to over 35 stunning European Leisure Cities, continues to grow profitably at an encouraging rate.

In November 2019, we launched a brand-new product, Vibe by Jet2holidays®, specifically crafted for the growing millennial market, an audience which is often more about mindset than age or demographic. Whilst the new proposition focuses on younger customers and millennials, it has been tailored to meet the demands of a broad audience, including first-time holidaymakers, ‘bucket listers’, and the over-25s experience-driven market. To meet demand, Vibe by Jet2holidays® has grouped an extensive collection of hotels across almost 50 resorts into four groups or ‘Vibes’:

Iconic Vibe: A collection of standout, cutting-edge, stylish and internationally-renowned hotels, with some of the hottest A-list DJs playing each year;

Party Vibe: Great value hotels in the heart of the best party resorts, perfect for those looking for less of the frills but more of the thrills;

Pure Vibe: Staying in is the new going out with Pure Vibe, as this selection of hotels allows customers to enjoy pool parties, live performances and daytime DJs at their hotel; and

Chilled Vibe: For luxury lovers, these hotels offer sophistication and exclusive extras and are perfect for poolside lounging, ideal for capturing and posting on Instagram.

We have great hopes for this new product and believe that many of its customers today will become the Jet2holidays families of the future!

Our hotel portfolio for summer 2019 extended to over 4,000 (summer 2018: over 3,400 hotels) with 40% of our package holidays sold on an all-inclusive basis. This is a particularly resilient, great value offering for families managing to a tight budget, offering a ‘Defined Price’ for the whole holiday experience, including flights, transfers, meals, drinks for the adults and ice lollies for the kids - especially attractive in these times of economic uncertainty.

End-to-end Real Package Holidays™ are not easily replicated by non-specialists and take considerable organisation and attention to detail. In summer 2019, we employed nearly 700 in-resort customer helpers, backed up by 24-hour UK customer helplines, to give practical assistance in all eventualities. Together with convenient airport-to-hotel transfer services, everything is organised to make our customers' holidays easy and carefree. Additionally, behind the scenes, Jet2holidays employs over 1,200 colleagues developing product, marketing our brand, contracting & administering hotels, managing the finances, IT infrastructure and websites, and providing operational support - each and every one contributing an invaluable part to the process of ensuring that our customers have a fantastic holiday experience.

In July 2019, Jet2holidays was recognised as a Which? Recommended Provider for “taking the bar for package holidays and raising it through the roof”. Completed by thousands of Which? members, the survey is compiled based on several qualitative factors including, accommodation; customer service; description versus reality; the holiday representative; the organisation of the holiday; and value for money. In addition, Jet2.com was also recognised as a Which? Recommended Provider for the fourth consecutive year. We are very proud that our efforts to provide wonderful holiday experiences have been acknowledged in this way!

Of course, direct feedback from our loyal customers remains the most effective means of ensuring we continue to challenge ourselves to improve our overall holiday offering - there is always more we can do as we learn, evolve and grow. Pleasingly, our Net Promoter Scores for the rolling 12 month period to 31 March 2020 were consistently above +70 for both Jet2holidays and Jet2.com and our rebooking rates above 50% for the same period, a clear endorsement of the VIP experience we offer!

In summer 2019, Jet2.com flew 100 aircraft (summer 2018: 90 aircraft) from our nine UK bases. Jet2.com continues to lead the way in On-Time Performance (“OTP”), with monthly data published by OAG (the world’s leading travel intelligence company) showing that we were the most punctual UK airline in 2019, as well as being placed in the Top 20 airlines in the world for OTP. In addition, we were very proud to be recognised in the Top 10 Airlines of the World and as both Best Airline – UK and Best Airline – Europe, at the TripAdvisor Travellers' Choice Awards 2019.

(*) ATOL, which is managed by the UK Civil Aviation Authority (‘CAA’), is a statutory licensing scheme which also provides financial protection to consumers of licensable air travel. As a licensing scheme it ensures that only businesses regarded as financially robust and fit can sell licensable travel, and as a financial protection scheme, it ensures that if an ATOL holder fails, affected consumers are able to complete their holiday and be repatriated or, if they cannot get away, receive a full refund.

Outlook

The beginning of the new financial year has brought significant challenges for the entire Leisure Travel industry. The decisions and actions we have taken since have been guided by our commitment to maintain our responsible balance sheet management and carefully protect our cash balance, to enable the business to exit the Covid-19 period in a stable commercial position and to be able to capitalise on the upturn opportunity when it arrives.

Group performance for the financial year ending 31 March 2021 is largely dependent on the level of flying permitted for the remainder of the summer 2020 period, as well as performance in the second half of the 2021 financial year, periods for which we currently still have limited visibility.

Despite the uncertainty, our current monthly load factors for winter 20/21 are satisfactory and summer 2021 bookings, which are showing a materially increased package holiday mix, are encouraging.

Despite today’s uncertainties our business model remains unchanged - we will continue to dedicate significant resources to provide Real Package Holidays™ and deliver wonderful holiday experiences with priceless memories, ensuring that the customer remains at the centre of everything we do. We believe that we have the right customer-focused strategy to grow both our package holiday and flight-only products. Whilst flight-only remains very important, our higher margin package holiday business has tremendous further potential as our reputation for providing ‘package holidays you can trust’TMstrengthens. This gives us every confidence that with our focused approach, our Customers will continue to be keen to travel with us from our Rainy Island to the sun spots of the Mediterranean, the Canary Islands and to European Leisure Cities and Jet2 will emerge from this crisis an even stronger company. 

Philip Meeson
Executive Chairman

17 July 2020