EasyJet 2016: relationship with suppliers 

What we do: Low-cost European point-to-point airline 

We use our cost advantage and number one and number two network positions in strong markets to deliver low fares and operational efficiency on point-to point routes, with our people making the difference by offering friendly service for our customers.

Stakeholders 

EasyJet interacts with a number of stakeholders in its operations, such as customers, suppliers, (including infrastructure owners and operators e.g. airports, air traffic control), regulators and national governments.

Third-party service providers

There is a defined procurement process, led by a centralised procurement team, which ensures a competitive and robust selection of suppliers. As part of the process, alternative service providers are identified and assessed against balanced evaluation criteria within the major markets in which easyJet operates. Any specific supplier risks are identified and assessed during the procurement process and controls and risk mitigation measures are included in the contracts entered into with the supplier.

Contracts are managed according to easyJet’s supplier relationship management framework, with key principles covering defined ownership and accountability, a governance framework and effective communication. Supplier performance is monitored through regular business reviews, including achievement of service level agreements and key performance indicators. Robust transition plans are agreed in the event of switching suppliers to enable an acceptable level of service to be maintained.

Suppliers

EasyJet’s suppliers have an important role in making travel easy and affordable for the airline’s customers. The business seeks to have an open, constructive and effective relationship with all suppliers, to contribute to its success.

EasyJet has an established supplier relationship management framework, which provides a toolkit and guidance for easyjet managers who lead relationships with easyJet’s key partners. The framework is developed around easyJet’s core values and the objective is to build strong, lasting relationships with partners and drive value from the partnership. The principles are based on managing suppliers in the same way that easyJet manages its people, and ensuring that suppliers’ rights and responsibilities are clearly set out. When tendering for new suppliers easyJet seeks information from suppliers on factors including quality assurance, health and safety, environmental practices, sub-contracting arrangements and legal, regulatory and tax compliance.

Discussion points

1 The financial statements show a single line for ‘trade and other payables’. The extracts from the narrative parts of the annual report give insight into the nature of the relationships with suppliers. What information is gained from the narrative that cannot be seen in accounting numbers alone?

2 There is a liability for ‘unearned revenue’. This relates to fares paid in advance by customers who will fly on a future date. Why is this a liability?

Transcribed Image Text:

Current liabilities (from statement of financial position) Trade and other payables Unearned revenue Borrowings Derivative financial instruments Current tax payable Provisions for liabilities and charges 30 September 2016 million (564) (568) (92) (275) (21) (53) (1,573) 30 September 2015 million (495) (619) (182) (368) (43) (61) (1,768)