EasyJet bolsters liquidity by raising $520 million in share sale

EasyJet Plc raised about 419 million pounds ($520 million) in a share sale, padding its coffers for the gearing up of flights as the European aviation sector emerges from the coronavirus lockdown.

The stock offering, equal to almost 15% of the existing share base, was placed at the price of 703 pence a share, representing a 5% discount to the closing price on June 24, the Luton, England-based company said Thursday in a filing.

EasyJet said it will now have more than 3 billion pounds of cash, taking into account as much as 350 million pounds to be raised from sale-and-leaseback transactions on its aircraft. Liquidity has also been boosted by a slightly lower-than-expected cash burn as more customers opt to take vouchers for canceled flights instead of asking for refunds.

Britain’s biggest discount carrier was among the first European airlines to begin building up services as lockdowns eased, resuming internal flights in the U.K. and France. The number of British airports served will increase to 14 from next week, with more international flights added. EasyJet plans to operate 50% of its usual routes in July and 75% in August, though lower frequencies mean third-quarter capacity will be down about 30%.

The shares traded 5.8% lower at 10:21 a.m. in London, taking their value down by half since the start of the year.

“The positive signal of ‘flying again’ combined with the current developments across Europe in reducing the severity of social distancing measures and lockdowns should support bookings,” Daniel Roeska, an analyst at Bernstein wrote in a note. “As long as bookings start increasing, the cash flow for the company may well be positive during the startup.” Profitability may only return in the second half of 2021, he added.

EasyJet’s bid to counter the impact of the virus has been further complicated by feuding with founder and largest shareholder, Stelios Haji-Ioannou, who has used the crisis to press a long-held demand for the airline to cancel a large aircraft order with Airbus SE. Last month, EasyJet fended off an effort by Haji-Ioannou to oust top management.

About one-third of the new placement will be subject to another shareholder vote, EasyJet said. It plans to hold the meeting around July 14.

Haji-Ioannou couldn’t immediately be reached for comment on the share sale. He had previously called on the company to raise 600 million pounds in equity through a rights issue to existing shareholders, although he said that he would only consider participating if the jet order was canceled.

Travel Restart

With Covid-19 infection levels on the decline in most of Europe, governments have been easing travel restrictions. Holiday spots including Greece, Spain and Portugal are seeking to win back passengers. Airlines are likewise trying to salvage the tail end of the summer season when tens of millions of people generally take their vacation.

The U.K. may also relax its controversial quarantine requirements for incoming passengers as early as next week, with the adoption of so-called air bridges.

EasyJet said revenue increased a 1.6% in the first half, while reporting a pretax loss of 353 million pounds, including a 160 million pound charge for fuel hedges. The carrier said it wasn’t possible to provide guidance for the remainder of the financial year, due to the coronavirus pandemic.

BNP Paribas and Credit Suisse are joint global coordinators for the share sale, which will begin immediately, the carrier said.