Brexit plans and share ownership, principal risks, airline

easyJet plc – annual report – 30 September 2019

Industry: transport

CHIEF EXECUTIVE’S REVIEW (extract)
BREXIT
easyJet is well prepared for the UK’s departure from the European Union and has been operating in a ‘No-Deal Brexit’ environment since March 2019.

Since March easyJet has been structured as a pan-European airline group with three airlines based in Austria, Switzerland and the UK. This ensures that easyJet will continue to be able to operate flights both across the EU and domestically within EU countries after the UK has left the EU, regardless of the Brexit outcome.

easyJet has made good progress in meeting the European ownership requirements and our equity capital is currently around the 50% threshold of qualifying nationals (EU member states plus Switzerland, Norway, Iceland, Liechtenstein, but excluding the UK). In the event that the UK were to leave the EU without a deal and if the European ownership of easyJet were to fall below 50% then easyJet could invoke the provisions within its Articles of Association which allow for suspension of rights to attend and vote at shareholder meetings and/or sale of shares by non-qualifying nationals to
qualifying nationals. Similar powers exist in the articles of association of other airlines, as well as in the articles of companies in other sectors which have national share ownership requirements. Whilst easyJet has no current intention of exercising these powers, the position will be kept under review pending the outcome of Brexit negotiations between the UK and the EU, along with other options. easyJet continues to closely monitor demand on all of our routes, in the event that political events may affect our customers’ propensity to travel.

Having started our Brexit preparations early and with contingency plans in place, we are confident that easyJet will keep flying and that our operations will not be materially affected, whatever the outcome of the current political situation.

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

Over the last three years easyJet has put in place a series of measures to protect our flying rights regardless of the eventual Brexit outcome, these include:
• Implementing a new operating model, with easyJet operating as a pan-European airline group with three operating airlines: in Austria, Switzerland and the UK. This will ensure we can continue to maintain our network after Brexit.
• Focusing our investor relations programme on ensuring that we remain majority EU27 owned and controlled and putting in place a contingency plan to ensure that we remain compliant with the requirement that EU airlines are majority owned and controlled by EU nationals.
• Ensuring that our operation is robust to the UK leaving EASA, the European Aviation Safety Agency, including by transferring our EU27 based pilots to Austrian pilot licences and ensuring we have sufficient pilots and cabin crew of EU27 nationality.
• Continuing to engage with European governments, aviation regulators and the European Commission on Brexit issues.

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

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

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