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Wednesday, October 28, 2020

EasyJet set to lose £800m

For the first time in it’s 25 year history Easy Jet is set to take it’s first loss.

Chief executive Johan Lundgren, stated, “At the beginning of this year, no one could have imagined the impact the pandemic has had on the industry. easyJet has adapted and risen to the challenges presented by the pandemic by taking decisive actions to minimise losses, bolster liquidity and reduce cash burn while launching a major restructuring programme, having completed the UK consultation and commenced consultations in a number of key countries.”

Despite these brave words the aviation giant is expected to lose between £815 and £845m for the financial year of 2020.

EasyJet plans to fly just 25% of its regular capacity for the rest of 2020, 15% less than larger rival Ryanair, who have declared this winter a “write-off”.

During peak summer business, the airline was operating at just 38% of it’s regular capacity and has had to take on additional loans, sell and lease back aircraft in it’s fleet and make plans to reduce staff numbers by up to 30%.

The company stated that “Removing cost from the business is a key management priority and will position EasyJet to emerge from the pandemic in an even more competitive position for the long term”.

However, the government introduction of mandatory quarantine after travel dashed post lockdown hopes for a surge in business.

Potential holiday makers have to now weigh up the pleasures of going abroad versus the inconvenience of two weeks stuck inside, and after enduring several months of this in the UK, it is perhaps unsurprising that many are choosing to stay at home.

This is reflected in EasyJet’s figures for the full year with passenger numbers decreasing by 48 million, a drop of 50%.

Added to the inconvenience is the uncertainty of travel with the ever changing rules regarding quarantine and fluctuations in the exemption status of other countries.

According to the ONS, only 9% of UK adults said they were likely or very likely to go on holiday abroad this summer.

Despite hopeful projections for the summer of 2021, expectations for the final three months of this year are very bleak and Easy Jet is looking for another government bailout.

The carrier has already freed £1.6b through government loans, selling aircraft and tapping shareholders but this may not be enough to hold the company over as it enters the difficult winter trading period.

Lundgren warned that “Aviation continues to face the most severe threat in its history and the UK government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes.”

Sources:

https://www.bbc.co.uk/news/business-54454202

https://corporate.easyjet.com/~/media/Files/E/Easyjet/pdf/investors/results-centre/2020/easyjet-fy-2020-pre-close-rns.pdf

https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandwellbeing/bulletins/coronavirusandthesocialimpactsongreatbritain/10july2020

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