Produced by: ABN AMRO

Bank NV

Tuesday 14 November 2006 Change of forecast

easyJet* Hold
Absolute performance

n/a
Trading well Short term

Overweight
easyJet reported FY06 profits in line with consensus and guidance. Sector relative to market

Trading looks decent and the model is performing well at new lower United Kingdom
growth levels. However, we see no justification for raising Transport
estimates now and retain Hold, target 530p.
Price

£5.66
Key forecasts
Target price
FY05A FY06A FY07F FY08F FY09F £5.30
Revenue (£m) 1341 1620 1881 2159 2490 Market capitalisation
EBITDA (£m) 82.8 146.0 199.3% 281.5% 342.0
£2.32bn (€3.44bn)
Reported PTP (£m) 82.6 129.2 163.7 237.7 283.7
Avg (12mth) daily turnover
Normalised PTP (£m) 82.6 129.2 163.7 237.7 283.7
Normalised EPS (p) 14.4 22.7 28.4 41.2& 49.2 £16.91m (€24.67m)
Dividend per share (p) 0.00 0.00 0.00 0.00 0.00 Reuters Bloomberg
Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 EZJ.L EZJ LN
Normalised PE (x) 39.2 25.0 20.0 13.7 11.5
EV/EBITDA (x) 23.1 13.5 10.2 6.91 5.79 Asset allocation
EV/invested capital (x) 1.34 1.23 1.14 1.02 1.68 Equities Overweight
ROIC - WACC (%) -4.16 -2.05 -0.76 1.40 2.48 Cash Neutral
Source: Company data, ABN AMRO forecasts year to Sep, fully diluted Bonds Underweight
Accounting Standard: IFRS

Price performance (1M) (3M) (12M)

Price (£) 5.0 4.1 3.1
56% growth in PBT, despite challenges
Absolute % 12.2 37.0 81.8
Pretax profit rose 56% to £129m, close to our £132m forecast and in line with Rel market % 10.3 24.3 53.5
consensus. Detailed guidance means this result was no surprise, but it is nonetheless Rel sector % 7.3 22.4 56.7
creditable given lower than expected traffic growth at 12%, wet leasing costs of
Nov 03 Nov 04 Nov 05
£10m, a £4m impact from August’s security incidents, fuel costs up 33% per seat and 6

heavy advertising which rose 4% per seat. Total cost per seat rose 5.7%, falling 5
1.5% excluding fuel or 2.3% excluding fuel and wet lease expenses. Against this, unit
4
fare revenue rose 5.9% per seat and ancillaries 34% per seat.
3
No profit guidance for FY07; our forecasts are broadly unchanged 2
There is no specific PBT guidance, but the company guided to 15% capacity growth
1
for FY07, flat yields in 1H and lower in 2H, fuel hedged 28% at $659/MT and 31%
EZJ.L Europe Transport
effectively at $687/MT. Given this guidance, our existing estimates do not look
Stock borrowing: n/a
inappropriate and we make only line-item changes. We stress, however, that
Volatility (30-day): 20.33%
switching our assumption of flat yields to an increase of 2% would raise our FY07F Volatility (6-month trend): ↓
PBT from £164m to £198m (EPS from 28p to 34p). 52-week range: 5.74-3.02
FTSE Eurotop 300 Index: 1466.64
The model works Europe Transport: 197.94
The business seems to be performing solidly. The company appears confident about Source: ABN AMRO, Bloomberg
delivering operational integrity next year and has a new COO on board. Profit growth
next year should come from the 15% top-line growth, combined with a modest
margin improvement, itself deriving from flattening fuel costs, continuing ancillaries
growth and one-off security and operational disruption costs falling away.
Analysts
Hold maintained – the stock has had a great run
Andrew Lobbenberg
After a 28% rise in the past three months, we maintain a Hold recommendation with +44 20 7678 1488
a target price of 530p. EZJ does not appear cheap relative to peers, trading on a PER andrew.lobbenberg@uk.abnamro.com

of 20x Sept 07F and Sept 14x 08F, compared with Ryanair on 21x Mar07F and 17x Christian Cowley
+44 20 7678 1813
Mar08F, or Air Berlin on 18x Dec06F and 10x Dec 07F. While trading is good, we see
potential negative catalysts in coming months from environmental legislation or
Marketing analyst
increased taxation of flying.
Noirin Burke
+44 20 7678 0366
Important disclosures and analyst certifications regarding
companies can be found in the Disclosures Appendix. www.abnamroresearch.com
Priced at close of business 14 November 2006. Use of %& indicates that the line item has changed by at least 5%.
*Hoare Govett Ltd, a member of the ABN AMRO Group, is broker to this company
250 Bishopsgate, London, EC2M 4AA, United Kingdom
C O M P A N Y D Y N A M I C S

Trading well - the model works

This time last year, the new management team said they would not change
the basic business model, but they would drive it harder. They have, and,
thanks also to a benign trading environment, it has yielded good results.

Full-year results in line with expectations

easyJet reported pre tax profit up 56% to £129m, close to our £132m forecast and in
line with consensus. The operating profit results were notably better than we had
forecast, but higher interest expenses meant that pre-tax profit was slightly lower
than we had modelled. This difference reflects a higher share of on balance sheet
aircraft than we had modelled.

For the full year, unit passenger revenues rose 5.9%, which was a 1.5% decline in 1H
and an 11.2% increase in 2H, weighted to 3Q when yields rose 16%. Ancillary
revenues grew by 34% per seat in the full year, with a broadly similar rate of
increase across the year.

Unit costs as reported by easyJet rose 5.5%, but this reflected a 33% increase in fuel
cost per seat. Unit costs ex fuel fell 1.5%. Excluding fuel and the impact of wet
leasing, unit costs fell 2.3%.

The chart below illustrates the bridge from 2005 to 2006. Roughly speaking, volume
growth combined with stronger passenger fares offset fuel, allowing for ancillary
revenue growth and cost reductions to drive profits.

Detailed guidance from the company throughout the year meant that this result was
no surprise, but is creditable given:

■ the 12% traffic growth, lower than our forecast of 15%, leaving fixed costs to be
spread across fewer seats;

■ wet leasing costs of £10m, to maintain the schedule in the face of crew shortages
in the summer;

■ a £4m impact from August’s security incidents;

■ fuel costs up 33% per seat; and

■ heavy advertising costs which rose 4% per seat.

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Chart 1 : Profit bridge

£8m
250 £19m
21p
£33m 49p
(£1m)
86p Overhead (£10m)
200 £83m (2p)
Ops cost (25p) FY 2006
213p Ownership
Wet Leasing £129m
Ancil rev
150 FY 2005 332p
£83m (£96m)
100 238p £10m (248p)
Pax rev Fuel
Volume
50

0
FY 2005 Volume Pax rev Ancil rev Ops cost Overhead Ownership Wet Fuel FY 2006
Leasing

Source: ABN AMRO

FY07 estimates broadly unchanged

For FY07 the company did not give specific PBT guidance. However, it guided to 15%
capacity growth for the year, flat yields in 1H and lower yields in 2H, with fuel hedged
across the full year 28% at $659/MT and a further 31% with caps and collars whose
lower price is $687/MT. This reflects some early hedging and the rising forward
curve, but appears expensive relative to today’s market rate below $580/MT.

Our forecasts are based on flat yields, slightly better than company guidance and 7%
unit ancillary growth, which is conservative given current run rates above 30%.

Combining these revenue estimates with a forecast 1% fall in unit cost ex fuel and
the latest fuel guidance suggests only very small changes to our existing estimates.
In terms of line-item changes, our forecasts for operating profits are raised 9% for
FY07 and 3% for FY08, but are lowered 1% at the PBT level for FY07 and 3.8% for
FY08. These moves reflect more on balance sheet aircraft and hence lower leasing
costs, offset by higher interest costs relating to debt for the on balance sheet aircraft

We have slightly lowered our tax rate for FY07, in line with company guidance.

We should stress, however, that the company remains highly geared. Switching our
flat yield estimate for a yield improvement of, say, 2% would change PBT to from
£164m (EPS 28p) to £198m (EPS 34p).

The model works

The business seems to be performing solidly. easyJet appears confident about
delivering operational integrity next year and has a new COO on board. The company
has sourced 66% of pilots for summer 2007, and 50% of First Officers, and is
confident that it can operate the summer schedule without requiring wet leased
aircraft.

Profit growth next year should come from the 15% top-line growth, combined with a
modest margin improvement, which itself derives from flattening fuel costs,
ancillaries continuing to grow and one-off security and operational disruption falling
away.

In terms of network development, the company guided that future growth would
come from a broadly even split of frequency additions, joining the dots between
EAS YJE T* 14 N OV E MB ER 20 06
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CO M P AN Y D Y N AM I CS

existing cities and opening new stations. For FY07, the sole new base is Madrid,
which will no doubt be a competitive market, as Ryanair, Vueling and Spanair also
add capacity. The second largest weight of growth comes form Milan, which we
believe is trading well. Gatwick growth is being supported by strong advertising in the
UK, designed to attract business travellers to easyJet.

Looking to the future we imagine there could be opportunities for easyJet from British
Airways’ retrenchment in the UK regions, as well as in Continental Europe, at the
many airports that remain relatively unpenetrated by low-cost carriers. Major airports
that are relatively free from low-cost carriers include Lisbon, Brussels National and
Athens. We also continue to see strong opportunities for low-cost carriers in replacing
charter airlines on short-haul services to the Western Mediterranean.

Chart 2 : Network growth

100%
4%
90% 19%
80% 27%
41%
70% 64%
60% 48%
50%
40% 43%
69%
30%
20% 27%
33%
10% 16%
9%
0%
2003 2004 2005 2006

Frequency increase Join the dots New airports

Source: easyJet

Table 1 : FY07 aircraft allocation

Base 9/06 9/07 Base 9/06 9/07

Gatwick 18 +2 Madrid +4
Luton 17 Belfast 5
Stansted 13 Paris Orly 5
Bristol 9 +1 Basel 4
Berlin 8 Dortmund 4
Liverpool 8 Glasgow 4
Geneva 6 +2 Edinburgh 3
Newcastle 6 E Midlands 3
Malpensa 3 +3 Tactical 6 +3

Total 122 137

Source: easyJet

Valuation: target price maintained at 530p

Other than on price to book ratios, we do not find easyJet’s valuation relative to other
European low cost carriers particularly attractive. We retain our target price at 530p,
a 7% discount to our 570p three stage DCF fair value, reflecting in particular the
risks of environmental legislation.

In terms of near-term catalysts, positive sentiment on the stock might come from a
successful post results road show and monthly data indicating stronger unit revenues
than guided.

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Green threats
The greatest threat we see comes from environmental legislation or taxation. easyJet
is a strong proponent of emissions trading and is contributing proactively to the
debate about aviation’s contribution to global warming. However, this would not
leave it immune from the impact of any emissions trading, whose impact on easyJet
would depend on the detail of implementation. However, at the most general level
emissions trading is a tax on growth and thus threatens low-cost carriers more than
network airlines.

Given that the implementation of any European trading scheme will be politically
complex and thus subject to potential delay, there is a material risk that politicians,
not least in the UK, might be tempted to introduce interim increases of taxation on
aviation, before emissions trading comes into effect. We would not be surprised to
see a material increase in UK Air Passenger Duty, for example, in coming months.
Such a move would not destroy the easyJet or Ryanair business models, but would
add to pressure on underlying yields.

Table 2 : easyJet full year results

Var forecast vs
Year end 30 Sept (£m) 2005A 2006A Change 2006F actual
Revenue 1,341.4 1,619.7 20.7% 1,620.3 0.0%
Fare Revenue 1,254.2 1,488.4 18.7% 1,489.1 0.0%
Ancillary Revenue 87.2 131.3 50.6% 131.2 0.0%

Costs -1,275.2 -1,501.9 17.8% -1,507.9 -0.4%

Ground handling -130.5 -144.1 10.4% -148.4 -2.9%
Airport -230.1 -258.4 12.3% -251.4 2.8%
Fuel -260.2 -387.8 49.0% -375.4 3.3%
Navigation -108.6 -121.2 11.6% -119.4 1.5%
Crew -136.2 -160.0 17.5% -163.8 -2.3%
Maintenance -119.2 -109.5 -8.1% -116.0 -5.6%
Advertising -32.8 -38.2 16.5% -37.7 1.4%
Merchant fees and incentive pay -15.6 -17.9 14.7% -17.2 3.9%
Aircraft insurance -19.3 -15.8 -18.1% -19.4 -18.4%
Others -82.4 -88.3 7.2% -75.5 17.0%
Depreciation -15.8 -27.4 73.4% -21.2 29.0%
Amortisation -0.8 -0.8 0.0% -0.8 0.0%
Operating leases - dry -123.7 -122.9 -0.6% -129.7 -5.3%
Operating leases - wet 0.0 -9.6 -32.0 -70.0%

Operating profit 66.2 117.8 77.9% 112.4 4.8%

Margin 4.9% 7.3% 6.9% 4.8%

Associates 0.1 0.1 0.1

Net interest 16.3 11.3 19.0
Exceptionals 0.0 0.0
Profit before tax 82.6 129.2 56.4% 131.5 -1.7%

Taxes -23.6 -35.1 -36.8

Tax rate 28.6% -27.2% 28.0%
Net profit (FRS 3) 59.0 94.1 59.5% 94.7 -0.6%

FD EPS (norm) (p) 14.4 0.2 -98.4% 23.5 -99.0%

Source: ABN AMRO, easyJet

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Table 3 : easyJet full year results analysis

Var forecast vs
Year end 30 Sept (£m) 2005A 2006A Change 2006F actual
Passengers (000) 29,558 32,952 11.5% 32,952 0.0%
Seats (000) 34,700 38,875 12.0% 38,859 0.0%

Fare per passenger 42.43 45.1689 6.4% 45.19 0.0%

Ancillary per passenger 2.95 3.9846 35.1% 3.98 0.0%

Fare per seat 36.14 38.29 5.9% 38.32 -0.1%

Ancillary per seat 2.51 3.38 34.4% 3.38 0.0%
Total revenue per seat 38.66 41.66 7.8% 41.70

Cost per seat 36.75 38.63 5.1% 38.81 -0.4%

of which
Ground handling 3.76 3.71 -44.1% 3.82 -2.9%
Airport 6.63 6.65 0.2% 6.47 2.7%
Fuel 7.50 9.98 33.0% 9.66 3.3%
Navigation 3.13 3.12 -0.4% 3.07 1.5%
Crew 3.93 4.12 4.9% 4.21 -2.3%
Maintenance 3.44 2.82 -18.0% 2.99 -5.7%
Advertising 0.95 0.98 4.0% 0.97 1.4%
Merchant fees and incentive pay 0.45 0.46 2.4% 0.44 3.9%
Aircraft insurance 0.56 0.41 -26.9% 0.50 -18.4%
Others 2.37 2.27 -4.3% 1.94 16.9%
Depreciation 0.46 0.70 54.8% 0.55 28.9%
Amortisation 0.02 0.02 -10.7% 0.02 0.0%
Operating leases - dry 3.56 3.16 -11.3% 3.34 -5.3%
Operating leases - wet - 0.25 0.82 -70.0%
Source: ABN AMRO, easyJet

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Table 4 : Estimate revisions

Year end 30 Sept (£m) Actual Was Was Was IFRS IFRS IFRS Variance Change Change
2005A 2006F 2007F 2008F 2006A 2007F 2008F 2006A 2007F 2008F
Revenue 1,341.4 1,620.3 1,816.0 2,067.3 1,619.7 1,881.2 2,159.2 0.0% 3.6% 4.4%
% change 23.0% 20.8% 12.1% 13.8% 20.7% 16.1% 14.8%
Passengers (000) 29,558 32,952 36,724 41,553 32,952 38,042 43,401 0.0% 3.6% 4.4%
Fare Revenue 1,254.2 1,489.1 1,659.6 1,877.8 1,488.4 1,719.1 1,961.3 0.0% 3.6% 4.4%
Ancillary Revenue 87.2 131.2 156.5 189.5 131.3 162.1 197.9 0.0% 3.6% 4.4%

Costs -1,275.2 -1,507.9 -1,671.4 -1,843.6 -1,501.9 -1,722.5 -1,928.5 -0.4% 3.1% 4.6%
% change 22.6% 18.3% 10.8% 10.3% 17.8% 14.7% 12.0%
Ground handling -130.5 -148.4 -163.7 -179.7 -144.1 -163.0 -180.4 -2.9% -0.4% 0.4%
Airport -230.1 -251.4 -283.0 -323.4 -258.4 -301.3 -347.2 2.8% 6.5% 7.4%
Fuel -260.2 -375.4 -422.3 -453.8 -387.8 -452.9 -495.7 3.3% 7.2% 9.2%
Navigation -108.6 -119.4 -137.0 -153.5 -121.2 -141.8 -160.1 1.5% 3.5% 4.3%
Crew -136.2 -163.8 -197.4 -227.8 -160.0 -192.9 -224.5 -2.3% -2.3% -1.5%
Maintenance -119.2 -116.0 -127.8 -140.2 -109.5 -122.9 -136.0 -5.6% -3.8% -3.0%
Advertising -32.8 -37.7 -43.2 -49.4 -38.2 -43.7 -49.8 1.4% 1.0% 0.8%
Merchant fees and incentive pay -15.6 -17.2 -17.5 -17.8 -17.9 -18.9 -19.5 3.9% 8.1% 9.6%
Aircraft insurance -19.3 -19.4 -21.6 -24.4 -15.8 -18.1 -20.6 -18.4% -16.3% -15.6%
Others -82.4 -75.5 -87.5 -99.0 -88.3 -101.2 -115.4 17.0% 15.6% 16.6%
Depreciation -15.8 -21.2 -25.9 -31.1 -27.4 -39.8 -50.0 29.0% 53.7% 60.5%
Amortisation -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 0.0% 0.0% 0.0%
Goodwill amortisation 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Operating leases - dry -123.7 -129.7 -133.8 -142.6 -122.9 -124.4 -128.5 -5.3% -7.0% -9.9%
Operating leases - wet 0.0 -32.0 -10.0 0.0 -9.6 -1.0 0.0 -70.0% -90.0%

Operating profit 66.2 112.4 144.6 223.7 117.8 158.8 230.7 4.8% 9.8% 3.1%
% change 31.1% 69.8% 28.6% 54.7% 77.9% 34.8% 45.3%
Margin 4.9% 6.9% 8.0% 10.8% 7.3% 8.4% 10.7%

Associates 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Net interest 16.3 19.0 20.7 23.3 11.3 4.8 6.9
Exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Profit before tax (FRS 3) 82.6 131.5 165.4 247.1 129.2 163.7 237.7 -1.7% -1.0% -3.8%
Profit before tax (norm) 82.6 131.5 165.4 247.1 129.2 163.7 237.7 -1.7% -1.0% -3.8%

Taxes -23.6 -36.8 -46.3 -69.2 -35.1 -45.8 -66.6

Tax rate 28.6% 28.0% 28.0% 28.0% 27.2% 26.5% 27.0%
Net profit (FRS 3) 59.0 94.7 119.1 177.9 94.1 117.8 171.2 -0.6% -1.0% -3.8%
Net profit (norm) 59.0 94.7 119.1 177.9 94.1 117.8 171.2 -0.6% -1.0% -3.8%
% change 1.4% 60.5% 25.8% 49.4% 59.5% 25.2% 45.3%

Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Retained earnings 59.0 94.7 119.1 177.9 94.1 117.8 171.2 -0.6% -1.0% -3.8%

FD EPS (norm) (p) 14.4 23.5 29.5 44.1 22.7 28.4 41.2 -3.5% -3.9% -6.6%
% change 0.5% 58.8% 25.8% 49.4% 57.0% 25.9% 45.3%
Source: ABN AMRO, easyJet

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Table 5 : European airline valuation sheet

Air Average
Aer France/ British Deutsche SAS network
Company easyJet Ryanair Air Berlin Lingus KLM Airways Lufthansa Finnair Iberia Group carrier
Not
Recommendation Hold Hold Buy Hold Hold Hold Sell Buy Buy
covered

Year end Sept Mar Dec Dec Mar Mar Dec Dec Dec Dec
Last year end 2006 2006 2005 2005 2006 2006 2005 2005 2005 2005
Currency £ € € € € £ € € € SKr
Ticker EZJ.L RYA.I AB1X.DE EIR.I AF1.PA BAY.L LHAG.DE FIA1S.HE IBE SAS AB
Rel performance (1 mth) 10.3% 8.4% 20.5% 24.2% 1.9% 7.2% -7.1% 10.8% 3.4% 6.7%
Rel performance (3 mths) 23.2% 18.1% 44.3% 50.8% 13.5% 19.7% 0.3% 22.5% 19.7% 21.1%
Rel performance (6 mths) 47.5% 31.2% 66.0% 25.9% 20.7% -0.1% 12.8% 3.2% 21.4%
Rel performance (12 mths) 55.5% 9.7% 86.2% 22.1% 37.4% -3.5% -1.7% -1.6% 23.1%

Share price 566p €9.42 €15.90 €2.71 €31.98 463p €18.78 €12.25 €2.55 SKR106
Target price 530p €8.50 €20.00 €26.00 450p €17.00 €11.00 €2.80 SKR120
Upside (downside) -6% -10% 26% -19% -3% -9% -10% 10% 14% -2.9%
12 month high 566p €9.50 €16.00 €2.98 €31.98 465p €18.78 €14.96 €2.55 SKR112
12 month low 307p €6.50 €9.20 €2.20 €14.32 305p €11.36 €10.25 €1.86 SKR72

Shares outstanding (m) 409 772 60 529 269 1,136 458 89 948 165
Market cap (local) 2,315 7,272 954 1,434 8,603 5,257 8,601 1,090 2,417 17,408
Market cap (€m) 3,334 7,272 954 1,434 8,603 7,570 8,601 1,090 2,417 1,911

EV/EBITDRA (x)
Last 10.0 15.9 13.1 9.6 5.8 6.6 6.1 6.4 5.6 9.4 6.7
Year 1 8.8 14.1 7.6 8.2 5.1 5.9 6.4 7.1 6.3 7.3 6.3
Year 2 7.0 11.9 6.2 7.7 5.2 4.9 5.6 6.2 5.6 7.1 5.8
Year 3 6.0 11.2 5.2 6.6 4.5 4.1 5.2 5.7 5.1 5.8 5.1
EV/Invested Capital (x)
Last 1.90 3.97 1.62 2.00 1.09 1.37 1.05 1.37 1.16 1.14 1.20
Year 1 1.73 3.46 1.37 1.51 1.05 1.31 1.26 1.33 1.18 1.09 1.20
Year 2 1.58 2.99 1.21 1.51 1.03 1.24 1.16 1.28 1.10 1.01 1.14
Year 3 1.44 2.59 1.15 1.34 1.00 1.17 1.10 1.22 1.10 0.98 1.09
MV/Adj BV
Last 2.07 2.46 2.68 1.44 1.06 3.56 1.34 1.71 1.47 1.53 1.78
Year 1 2.11 2.25 2.68 1.44 0.88 2.73 1.26 1.62 1.25 1.51 1.54
Price/earnings (x)
Last 25.0 24.1 N/A 18.9 17.9 17.7 13.8 17.3 22.5 N/A 17.8
Year 1 20.0 20.7 18.1 22.1 13.2 12.1 18.5 30.9 22.3 26.2 20.5
Year 2 13.7 16.5 9.9 17.1 17.6 9.0 15.5 18.0 13.7 13.3 14.5
Year 3 11.5 15.5 7.1 14.3 12.1 7.7 14.7 13.6 10.0 7.3 10.9
Source: ABN AMRO, Datastream, prices as at COB 13/11/2006

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Table 6 : Low cost carrier valuation ratios

Air Aer Sky Norwe- South- Virgin

easyJet* Ryanair Berlin Lingus Europe FlyMe gian Airtran Jetblue west Westjet Blue Gol ADR Air Asia

Not Not Not Not Not Not Not Not Not Not
Recommendation Hold Hold Buy Hold
covered covered covered covered covered covered covered covered covered covered

Year end Sept Mar Dec Dec Dec Dec Dec Dec Dec Dec Dec Mar Jun Dec

Last year end 2006 2006 2005 2005 2005 2005 2005 2005 2005 2005 2005 2005 2005 2005

Currency £ € € € € SEK NKr US$ US$ US$ C$ A$ USD MYR

Ticker EZJ.L RYA.I AB1X.DE EIR.I SKY.AT FLYB.SE NAS OL AAI JBLU LUV WJAFF.PK VBA.AX GOL 5099

Price 566 9.42 15.9 2.71 2.81 0.95 90 10.77 13.92 15.45 13.7 1.88 28.89 1.49

Target price 530 8.50 20.00 1.74

Upside (downside) -6% -10% 26% -7%

Market cap (local) 2,315 7,272 950 1,434 110 379 1,770 981 2446 12234 1683 1972 2416 3,499

Market cap (€) 3,334 7,272 950 1,434 110 42 216 765 1,909 9,548 1,155 1,174 1,885 751

PEG 68% 131% N/A N/A N/A N/A N/A 32% N/A 80% N/A 302% N/A 71%

P/E Yr 1 19.95 20.67 18.11 N/A -1.94 14.97 102.27 30.77 - 232.00 20.88 17.34 23.50 16.32 21.29
N/A
P/E Yr 2 13.74 16.49 9.92 35.13 16.08 11.45 11.97 33.95 16.26 14.57 18.25 12.40 16.56
N/A
P/E Yr 3 11.51 15.52 7.07 18.73 12.36 6.01 10.26 23.59 20.33 16.12 15.16 N/A 13.55

3yr EPS grth CAGR 29% 16% N/A N/A N/A N/A N/A 96% 11% 26% N/A 8% N/A 30%
Source: ABN AMRO, Datastream for non covered companies, prices as at COB 13/11/06

Figure 1 : Three stage DCF

Economic Profit Valuation £m % Discounted Cash Flow Valuation £m %
Adjusted Opening Invested Capital 1988.7 69 Value of Phase 1: Explicit (2007 to 2011) 381.6 14
NPV of Economic Profit During Explicit Period 306.7 11 Value of Phase 2: Value Driver (2012 to 2016) 557.8 20
NPV of Econ Profit of Remaining Business (1, 2) 456.1 16 Value of Phase 3: Fade (2017 to 2026) 750.1 28
NPV of Econ Profit of Net Inv (Grth Business) (1, 3) 118.5 4 Terminal Value 1032.6 38
Enterprise Value 2870.0 100 Enterprise Value 2722.2 100
Plus: Other Assets 0.0 0 FCF Grth Rate at end of Phs 1 implied by DCF Valuation 3.0
Less: Minorities 0.0 0 FCF Grth Rate at end of Phs 1 implied by Current Price 2.9
Less: Net Debt (as at 14 Nov 2006) 557.5 19
Equity Value 2312.5 81 Returns, WACC and NPV of Free Cash Flow
No. Shares (millions) 405.7
18% 200
Per Share Equity Value 5.70
16% 150
Current Share Price 5.66
14% 100
12%
Sensitivity Table No of Years in Fade Period 50
10%
#REF! 5 10 15 20 25 0
6.0% 6.53 7.18 7.81 8.41 8.99 8%
(50)
7.0% 5.93 6.41 6.86 7.28 7.68 6%
WACC

4% (100)
8.1% 5.37 5.70 6.00 6.28 6.54
9.0% 4.92 5.15 5.36 5.54 5.71 2% (150)
10.0% 4.49 4.64 4.76 4.87 4.97 0% (200)
2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Performance Summary Phase 2 Avg

2007 2008 2009 (2012 - 2016) Phase 1 NPV of FCF (RHS) Phase 2 NPV of FCF (RHS)
Phase 3 NPV of FCF (RHS) Total Business ROIC
Invested Capital Growth (%) 10.7 6.5 13.2 5.0
Growth Business ROIC Remaining Business ROIC
Operating Margin (%) 12.4 14.3 14.4 13.5 WACC
Capital Turnover (x) 1.1 1.1 1.2 1.3
Source: ABN AMRO
1. In periods following the Explicit Period i.e. Phase 2 and Phase 3
2. Remaining Business is defined as Capital as at the end of Phase 1 and capex = depreciation thereafter
3. Net Investment is defined as capex over and above depreciation after Phase 1

EAS YJE T* 14 NOV EMBER 20 06

9
 DISCLOSURES APPENDIX

Recommendation structure

Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside
of 5% or more. The trading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more
from the suggested entry price range, and a Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading
recommendation time horizon is 0-60 days.
Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price. A
Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For listed property trusts (LPT) or real estate investment trusts (REIT) the
recommendation is based upon the target price plus the dividend yield, ie total return. A Buy implies a total return of 10% or more, a Hold 5-10% and a Sell less
than 5%. For Scandinavian mid- and small-caps a Buy/Sell implies upside/downside of 15% or more, an Add/Reduce 5-15% and a Hold less than 5%. For other
European mid- and small-caps a Buy/Sell implies upside/downside of 10% or more, an Add/Reduce 5-10% and a Hold less than 5%.
Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance
parameters should be interpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months.
Sector relative to market: The sector view relative to the market is the responsibility of the strategy team. Overweight/Underweight implies upside/downside of
10% or more and Neutral implies less than 10% upside/downside.
Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary
catalysts were in place to effect this change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a
view on the market or sector. If it is felt that the catalysts are not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ
from 'fair' value.
Asset allocation: The asset allocation is the responsibility of the economics team. The recommended weight (Over, Neutral and Under) for equities, cash and bonds
is based on a number of metrics and does not relate to a particular size change in one variable.
Stock borrowing rating: The stock borrowing rating is the subjective view and responsibility of the ABN AMRO equity finance team: Easy implies ready availability.
Moderate implies some availability. Hard implies availability is tight. Impossible implies no availability.

Distribution of recommendations

The tables below show the distribution of ABN AMRO's recommendations (both long term and trading). The first column displays the distribution of
recommendations globally and the second column shows the distribution for the region. Numbers in brackets show the percentage for each category where ABN
AMRO has an investment banking relationship.

Long Term recommendations (as at 14 Nov 2006) Trading recommendations (as at 14 Nov 2006)
Global total (IB%) Europe total (IB%) Global total (IB%) Europe total (IB%)
Buy 584 (22) 244 (50) Trading Buy 10 (40) 6 (67)
Add 51 (25) 49 (27)
Hold 493 (18) 214 (36)
Reduce 16 (6) 15 (7)
Sell 118 (8) 33 (24) Trading Sell 1 (0) 0 (0)
Total (IB%) 1262 (19) 555 (40) Total (IB%) 11 (36) 6 (67)

Valuation and risks to target price

easyJet (RIC: EZJ.L, Rec: Hold, CP: £5.66, TP: £5.30): Our target price is DCF-based. The upside risks to our target price could arise should monthly revenue
data indicate a stronger-than-guided performance, should the oil price fall or should competitors fail. The downside risks to our target price would arise from weak
revenues, from softening UK consumer confidence or from rapid progress towards environmental legislation or taxation.

easyJet

Stock performance, recommendations and coverage (as at 13 Nov 2006) Trading recommendation
history (as at 14 Nov 2006)
Date Rec Analyst
08 May 2006 n/a CA
02 May 2006 Trading Buy CA

Andrew Lobbenberg started covering this stock on 29 Oct 02

Moved to new recommendation structure between 1 November 2005 and 31 January 2006

Regulatory disclosures

Subject companies: EZJ.L

ABN AMRO expects to receive, or intends to seek, compensation during the next three months for investment banking services from this company, its subsidiaries
or affiliates: EZJ.L
Hoare Govett Ltd, a member of the ABN AMRO Group, is broker to this company: EZJ.L
ABN AMRO has received compensation for investment banking services from this company, its subsidiaries or affiliates during the previous 12 months: EZJ.L

EAS YJE T* 14 N OV EMB ER 20 06

10
 DISCLOSURES APPENDIX

Global disclaimer
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_________________________________________________________________________________________________________________________________
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_________________________________________________________________________________________________________________________________
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Should you require additional information please contact the relevant ABN AMRO research team or the author(s) of this report.

EAS YJE T* 14 N OV EMB ER 20 06

11
EASYJET*: KEY FINANCIAL DATA

Income statement
£m FY05A FY06A FY07F FY08F FY09F
Revenue 1341 1620 1881 2159 2490
Cost of sales n/a n/a n/a n/a n/a
Operating costs -1259 -1474 -1682 -1878 -2148
EBITDA 82.8 146.0 199.3 281.5 342.0
DDA & Impairment (ex gw) -16.6 -28.2 -40.6 -50.8 -63.3
EBITA (1) 66.2 117.8 158.8 230.7 278.6
Goodwill (amort/impaired) 0.00 0.00 0.00 0.00 0.00
EBIT 66.2 117.8 158.8 230.7 278.6
Net interest (2) 16.3 11.3 4.81 6.92 5.01
Associates (pre-tax) (3) 0.10 0.10 0.10 0.10 0.10
Other pre-tax items (4) 0.00 0.00 0.00 0.00 0.00
Reported PTP 82.6 129.2 163.7 237.7 283.7
Taxation -23.6 -35.1 -45.8 -66.6 -79.4
Minority interests n/a n/a n/a n/a n/a
Other post-tax items 0.00 0.00 0.00 0.00 0.00
Reported net profit 59.0 94.1 117.8 171.2 204.3
Tot normalised items 0.00 0.00 0.00 0.00 0.00
Normalised EBITDA 82.8 146.0 199.3 281.5 342.0
Normalised PTP 82.6 129.2 163.7 237.7 283.7
Normalised net profit 59.0 94.1 117.8 171.2 204.3
Source: Company data, ABN AMRO forecasts year to Sep

Balance sheet
£m FY05A FY06A FY07F FY08F FY09F
Cash & market secs (1) 695.5 900.4 1091 1295 1670
Other current assets 217.8 213.3 247.7 284.3 327.9
Tangible fixed assets 398.6 695.7 909.7 1047 1341
Intang assets (incl gw) 311.0 310.7 310.7 310.7 310.7
Oth non-curr assets 6.90 3.50 3.60 3.70 3.80
Total assets 1630 2124 2563 2941 3653
Short term debt (2) 16.3 32.8 48.9 56.5 83.1
Trade & oth current liab 398.2 476.2 553.1 634.8 732.1
Long term debt (3) 276.1 521.7 750.0 867.4 1252
Oth non-current liab 75.8 110.0 110.0 110.0 110.0
Total liabilities 766.4 1141 1462 1669 2177
Total equity (incl min) 863.4 982.9 1101 1272 1476
Total liab & sh equity 1630 2124 2563 2941 3653
Net debt (2+3-1) -403.1 -345.9 -292.0 -371.4 -334.9
Source: Company data, ABN AMRO forecasts year ended Sep

Cash flow statement

£m FY05A FY06A FY07F FY08F FY09F
EBITDA 82.8 146.0 199.3 281.5 342.0
Change in working capital 82.6 76.4 42.5 45.1 53.7
Net interest (pd) / rec 23.3 8.10 4.81 6.92 5.01
Taxes paid 2.90 -4.50 -45.8 -66.6 -79.4
Other oper cash items 0.00 0.00 0.80 0.80 0.80
Cash flow from ops (1) 191.6 226.0 201.6 267.8 322.1
Capex (2) -108.9 -314.6 -246.3 -173.7 -335.6
Disposals/(acquisitions) 0.00 0.00 0.00 0.00 0.00
Other investing cash flow n/a n/a n/a n/a n/a
Cash flow from invest (3) -108.9 -314.6 -246.3 -173.7 -335.6
Incr / (decr) in equity 0.00 17.3 0.00 0.00 0.00
Incr / (decr) in debt n/a n/a n/a n/a n/a
Ordinary dividend paid 0.00 0.00 0.00 0.00 0.00
Preferred dividends (4) n/a n/a n/a n/a n/a
Other financing cash flow n/a n/a n/a n/a n/a
Cash flow from fin (5) 0.00 17.3 0.00 0.00 0.00
Forex & disc ops (6) 0.00 -1.70 0.00 0.00 0.00
Inc/(decr) cash (1+3+5+6) 82.7 -73.0 -44.7 94.1 -13.5
Equity FCF (1+2+4) 82.7 -88.6 -44.7 94.1 -13.5
Lines in bold can be derived from the immediately preceding lines. year to Sep
Source: Company data, ABN AMRO forecasts

EAS YJE T* 14 N OV EMB ER 20 06

12
EASYJET*: PERFORMANCE AND VALUATION

Standard ratios easyJet Ryanair Air Berlin

Performance FY05A FY06A FY07F FY08F FY09F FY07F FY08F FY09F FY06F FY07F FY08F
Sales growth (%) 23.0 20.7 16.1 14.8 15.3 28.4 24.8 12.8 32.2 33.5 10.2
EBITDA growth (%) -10.9 76.3 36.5 41.2 21.5 14.7 23.2 0.27 180.2 50.4 29.8
EBITA growth (%) -2.07 77.9 34.8 45.3 20.8 10.8 25.2 1.59 n/a 80.6 38.2
Normalised EPS growth (%) -1.82 57.0 25.2 45.3 19.4 17.2 25.4 -7.99 n/a 82.7 40.3
EBITDA margin (%) 6.17 9.01 10.6 13.0 13.7 25.4 25.1 22.3 9.96 11.2 13.2
EBITA margin (%) 4.94 7.27 8.44 10.7 11.2 18.9 18.9 17.0 5.24 7.09 8.89
Net profit margin (%) 4.40 5.81 6.26 7.93 8.20 16.2 16.3 13.3 3.27 4.47 5.69
Return on avg assets (%) 3.20 4.58 4.88 6.04 6.09 7.19 7.47 6.67 5.08 6.06 6.75
Return on avg equity (%) 7.13 10.2 11.3 14.4 14.9 16.3 17.2 14.3 16.5 19.6 22.3
ROIC (%) 3.91 6.02 7.31 9.46 10.5 18.0 19.1 17.6 11.4 15.1 17.4
ROIC - WACC (%) -4.16 -2.05 -0.76 1.40 2.48 10.7 11.8 10.3 4.84 8.47 10.8
year to Sep year to Mar year to Dec

Valuation
EV/sales (x) 1.43 1.22 1.08 0.90 0.80 3.12 2.46 2.12 0.74 0.58 0.50
EV/EBITDA (x) 23.1 13.5 10.2 6.91 5.79 12.3 9.81 9.48 7.44 5.19 3.79
EV/EBITDA @ tgt price (x) 21.3 12.5 9.41 6.38 5.36 11.0 8.79 8.46 8.97 6.21 4.57
EV/EBITA (x) 28.9 16.7 12.7 8.43 7.11 16.6 13.0 12.4 14.1 8.21 5.63
EV/invested capital (x) 1.34 1.23 1.14 1.02 1.68 2.81 2.25 2.18 1.53 1.34 1.18
Price/book value (x) 2.68 2.39 2.14 1.85 1.59 3.09 2.60 2.49 2.16 1.77 1.42
Equity FCF yield (%) 3.57 -3.77 -1.90 4.00 -0.58 7.06 8.68 8.76 12.8 18.1 22.9
Normalised PE (x) 39.2 25.0 20.0 13.7 11.5 20.7 16.5 17.9 18.1 9.92 7.07
Norm PE @ tgt price (x) 36.7 23.4 18.7 12.9 10.8 18.7 14.9 16.2 22.8 12.5 8.89
Dividend yield (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 280.9 0.00 0.00 0.00
year to Sep year to Mar year to Dec

Per share data FY05A FY06A FY07F FY08F FY09F Solvency FY05A FY06A FY07F FY08F FY09F
Tot adj dil sh, ave (m) 408.9 415.4 415.4 415.4 415.4 Net debt to equity (%) -46.7 -35.2 -26.5 -29.2 -22.7
Reported EPS (p) 14.4 22.7 28.4 41.2 49.2 Net debt to tot ass (%) -24.7 -16.3 -11.4 -12.6 -9.17
Normalised EPS (p) 14.4 22.7 28.4 41.2 49.2 Net debt to EBITDA -4.87 -2.37 -1.47 -1.32 -0.98
Dividend per share (p) 0.00 0.00 0.00 0.00 0.00 Current ratio (x) 2.20 2.19 2.22 2.28 2.45
Equity FCF per share (p) 20.2 -21.3 -10.8 22.7 -3.26 Operating CF int cov (x) -7.10 -27.5 -50.5 -47.3 -79.1
Book value per sh (p) 211.2 236.6 265.0 306.2 355.4 Dividend cover (x) 0.00 0.00 0.00 0.00 0.00
year to Sep year to Sep
Priced as follows: EZJ.L - £5.66; RYA.I - €9.42; AB1.F - €15.90
Source: Company data, ABN AMRO forecasts

EASYJET*: VALUATION METHODOLOGY

Economic Profit Valuation £m % Discounted Cash Flow Valuation £m %
Adjusted Opening Invested Capital 1988.7 69 Value of Phase 1: Explicit (2007 to 2011) 381.6 14
NPV of Economic Profit During Explicit Period 306.7 11 Value of Phase 2: Value Driver (2012 to 2016) 557.8 20
NPV of Econ Profit of Remaining Business (1, 2) 456.1 16 Value of Phase 3: Fade (2017 to 2026) 750.1 28
NPV of Econ Profit of Net Inv (Grth Business) (1, 3) 118.5 4 Terminal Value 1032.6 38
Enterprise Value 2870.0 100 Enterprise Value 2722.2 100
Plus: Other Assets 0.0 0 FCF Grth Rate at end of Phs 1 implied by DCF Valuation 3.0
Less: Minorities 0.0 0 FCF Grth Rate at end of Phs 1 implied by Current Price 2.9
Less: Net Debt (as at 14 Nov 2006) 557.5 19
Equity Value 2312.5 81 Returns, WACC and NPV of Free Cash Flow
No. Shares (millions) 405.7
18% 200
Per Share Equity Value 5.70
16% 150
Current Share Price 5.66
14% 100
12%
Sensitivity Table No of Years in Fade Period 50
10%
#REF! 5 10 15 20 25 0
6.0% 6.53 7.18 7.81 8.41 8.99 8%
(50)
7.0% 5.93 6.41 6.86 7.28 7.68 6%
WACC

4% (100)
8.1% 5.37 5.70 6.00 6.28 6.54
9.0% 4.92 5.15 5.36 5.54 5.71 2% (150)
10.0% 4.49 4.64 4.76 4.87 4.97 0% (200)
2003

2005

2007

2009

2011

2013

2015

2017

2019

2021

2023

Performance Summary Phase 2 Avg

2007 2008 2009 (2012 - 2016) Phase 1 NPV of FCF (RHS) Phase 2 NPV of FCF (RHS)
Phase 3 NPV of FCF (RHS) Total Business ROIC
Invested Capital Growth (%) 10.7 6.5 13.2 5.0
Growth Business ROIC Remaining Business ROIC
Operating Margin (%) 12.4 14.3 14.4 13.5 WACC
Capital Turnover (x) 1.1 1.1 1.2 1.3
Source: ABN AMRO
1. In periods following the Explicit Period i.e. Phase 2 and Phase 3
2. Remaining Business is defined as Capital as at the end of Phase 1 and capex = depreciation thereafter
3. Net Investment is defined as capex over and above depreciation after Phase 1

EAS YJE T* 14 N OV EMB ER 20 06

13
Strategic & competitive overview

easyJet*
Company description Hold Price relative to sector

easyJet is Europe's second-largest low-cost airline. Since its first flight in November 1995, the 140

airline has grown from a Luton base offering two routes from Luton to Glasgow and Edinburgh, to
120
an airline offering 212 routes serving 74 airports. The company has bases in Luton, Liverpool,
Stansted, Gatwick, Bristol, Nottingham, Newcastle, Glasgow, Edinburgh, Paris, Geneva, 100

Amsterdam, Berlin, Dortmund, Basel, Milan and, effective from 2007, Madrid. 80

60

40

20
Nov Mar Jun Oct Jan May Aug Dec Mar Jul Nov
03 04 04 04 05 05 05 05 06 06 06

Strategic analysis Average SWOT company score: 4 2006 Revenues

Strengths 4
8%
easyJet is one of only two Pan-European low-cost carriers. It has a strong brand associated with
value-for-money, quality air transport. easyJet has a leading position across three London airports.
It has ordered 120 A319 aircraft at very competitive rates. 92%

Weaknesses 3 Passenger Ancillary

easyJet's unit costs are and should remain considerably higher than Ryanair's. easyJet's
management team and board are in transition following the appointment of a new management Source: easyJet

team and new board members. Market data

Opportunities 5 Headquarters
Margin improvement from stronger ancillary revenue generation and from unit cost reduction. Cost easyLand, London Luton Airport,
Bedfordshire LU2 9LS
opportunities exist in airport and handling, crew, administration and aircraft ownership. Evaluating
Website
operations in lower-cost countries. Strengthening the management team. www.easyjet.com
Threats 2 Shares in issue
Retaining the easyJet culture, while adopting more stringent attitude towards cost-cutting. 409.1m

Introduction of environmental taxation or levies. Freefloat

60%
Scoring range is 1-5 (high score is good) Majority shareholders
easyGroup (17%), Clelia Holdings (12%),
Polys Holdings (12%)

Transport

Sector view Overweight Sector rel to Europe

We believe the Transport sector offers leverage to a robust global economy, and should continue to 125

do well if the macro news flow remains strong. We like that parts of the sector are investing in 120
future growth and are in many cases doing so by re-leveraging their balance sheets. This sets the
115
sector apart from the overall market and should support performance in 2006.
110
The sector view is set in consultation with the relevant company analyst but is the ultimate responsibility of the Strategy Team.
105

100

95

90
Nov Mar Jun Oct Jan May Sep Dec Apr Jul Nov
03 04 04 04 05 05 05 05 06 06 06

Industry competitive position Average competitive score: 3+ Broker recommendations

Supplier power 3+
Pilots are unionised and well organised; other work groups enjoy less power. Low-cost carriers have 10
locked in long-term deals from aircraft manufacturers. Airports and handlers will gain power. 8
6
Barriers to entry 2-
4
Very low in the low-cost airline industry: aircraft are cheap, crew available and even air operator
2
certificates can be acquired. As the cycle improves, these markets should tighten.
0
Customer power 4+ Buy Hold Sell
Passengers purchase on price. The concept of customer loyalty is dead. Low-cost carriers enjoy
pricing power only on rare monopoly routes at peak periods.
Source: Thomson
Substitute products 3+
Traditional airlines, ground transportation and telecommunications compete for all passengers.
Leisure activities, such as DIY, dining out and amusement parks, compete for discretionary
spending.
Rivalry 4+
High, against traditional airlines and within low-cost sector. Aggressive comparative marketing
typical. We expect consolidation to flow from the UK to the continent.
Scoring range 1-5 (high score is good) Plus = getting better Minus = getting worse
EAS YJE T* 14 N OV EMB ER 20 06
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