EasyJet explores fundraising options to ride out slump

EasyJet Plc is considering options including raising new debt and equity to provide a buffer against the coronavirus pandemic that’s forced the discount airline to ground its fleet, according to people familiar with the matter.

The U.K. carrier is working with long-time advisers Credit Suisse Group AG and Goldman Sachs Group Inc. to explore various fundraising scenarios, the people said, asking not to be identified because the discussions are confidential. EasyJet is studying both commercial and government sources as well as a delay in plane orders to conserve cash if needed for a longer-term downturn, the people said.

EasyJet, which is seen as one of the European airlines better-equipped because of its existing cash and credit lines, is discussing the best options to navigate the pandemic-related slowdown and traditionally slower winter season, the people said. The airline would prefer loans to selling new shares, one of the people said.

Deliberations are at an early stage and no final decisions have been made, the people said. Spokesmen for Credit Suisse and Goldman Sachs declined to comment.

Adding liquidity would fortify EasyJet as it digs in for an undetermined period with little revenue. While it’s considering other ways to boost cash, including equity as an option would align with the U.K. government’s preference for private solutions to the coronavirus crisis. It would also show responsiveness to the carrier’s founder, Stelios Haji-Ioannou, who this week demanded the company terminate a 4.5 billion pound ($5.6 billion) order for Airbus SE jets so it can survive the crisis.

Haji-Ioannou, who controls a 34% stake in the airline, has given EasyJet until midday Wednesday to respond to his ultimatum on the order for more than 100 A320-series planes. The 53-year-old Greek entrepreneur has also called on the company to raise 600 million pounds in equity through a rights issue to existing shareholders.

EasyJet declined to comment on its fundraising plans. The company said Monday it would respond privately to Haji-Ioannou.

While canceling the Airbus order isn’t likely, EasyJet may seek to defer some deliveries that are still a few years away, the people said.

Survival Mode

Like other airlines across the globe, EasyJet has been thrown into survival mode by the coronavirus, which forced an abrupt halt in travel as countries cut off access to fight the disease. The International Air Transport Association this week warned that airlines will burn through as much as $61 billion worldwide in the second quarter as travel hits bottom.

With the usually busy summer season putting the third quarter at risk, airlines are looking ahead to how they can get through the winter lull and make it to summer 2021.

EasyJet on Monday grounded its fleet indefinitely and put staff on leave to lower its outgoing expenses to preserve cash. It also said it was working with suppliers to “defer and reduce payments where possible, including on aircraft expenditure.”

Aircraft orders are usually agreed years in advance and cancellations carry stiff penalties.

Founder’s Ultimatum

Haji-Ioannou, who quit the board in protest over its expansion in 2010, has long opposed buying new aircraft. On Sunday he renewed that campaign in a letter to the board, arguing that the Airbus order threatens EasyJet’s existence and is unnecessary because the industry will shrink because of the global outbreak.

He threatened to call shareholder meetings to remove one director every 7 weeks if he doesn’t get his way. Haji-Ioannou has opposed any government aid, which in some countries has come with strings including restrictions on dividends.

EasyJet’s debt is rated at BBB by S&P, and it has about 1.6 billion pounds of cash and $500 million of an undrawn and committed credit facility, which expires in 2021, S&P Global said in a report March 20. The carrier has annual lease commitments of about 250 million pounds to 300 million pounds, S&P said.

EasyJet could also raise cash through a sale-and-leaseback transaction of its fleet of Airbus SE A320-family jets, which S&P estimates is worth more than 4 billion pounds.