Brexit plans and share ownership, principal risks, airline

easyJet plc – annual report – 30 September 2020

Industry: transport

CHIEF EXECUTIVE’S REVIEW (extract)

BREXIT

easyJet is well prepared for the end of the Brexit transition period on 31 December 2020 (the ‘Transition Period’) and has been operating in a ‘no deal’ Brexit environment since March 2019.

Since March 2019, 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 end of the Transition Period, irrespective of whether there is any future agreement between the EU and UK on aviation matters.

To allow continued flying within Europe after the end of the Transition Period, easyJet is required to ensure ongoing compliance with European ownership and control requirements. Our level of ownership by EU nationals1 is currently 45.2%. If easyJet’s level of EU ownership remains below the required level of 50% plus one share at the end of the Transition Period, easyJet’s board stands ready to activate existing provisions of easyJet’s Articles of Association to ensure that easyJet will be able to continue to comply following the end of the Transition Period. This would be achieved by exercising easyJet’s existing powers to suspend voting rights of certain UK and non-EU nationals. For the period of any such suspension, the relevant shareholders would not be permitted to attend, speak or vote at shareholder meetings in respect of the shares subject to the suspension.

Any suspension of voting rights would be applied on a last-in first-out basis, meaning it would affect shares most recently acquired by UK and non-EU nationals first. A suspension of voting rights would apply only while EU ownership is below 50% plus one share. Further information regarding the possible suspension of voting rights can be found on easyJet’s website at: http://corporate.easyjet.com/

easyJet expects to keep the position under review following the end of the Transition Period. If EU ownership remained below the required level over time, easyJet retains the right to activate the provisions of its existing Articles of Association, which permit the Company to compel non-EU national shareholders to sell their easyJet shares to EU nationals.

RISK (extract)

BREXIT

easyJet preparations for the Brexit trade deal continue and the plan has not changed. The focus remains ensuring that our network is unaffected by Brexit and that our operations are uninterrupted by any eventual Brexit trade deal outcome, including a no deal exit. The cross functional Brexit programme continues to oversee Brexit planning, led by the Group General Counsel & Company Secretary. The Board has also had oversight of the preparations and is regularly briefed.

easyJet has in place a series of measures to protect our flying rights regardless of the Brexit trade deal outcome, these included:

  • 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
  • Ensuring that we meet the requirements that EU airlines are majority EU27 owned and controlled, through our investor relations programme and, if needed, activating our contingency plan that could involve suspending a small number of shareholders’ voting rights
  • Ensuring that our operation is robust to the UK leaving EASA, the European Aviation Safety Agency, including 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 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.

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.