EasyJet Grounds Fleet, Plans to Build Buffer Against Virus Blow

EasyJet Plc grounded its entire fleet after completing customer-repatriation flights, and said it’s in talks to build a cash cushion to see it through the gap in business caused by the coronavirus.

The restart scheduled flights will depend on government restrictions as well as demand, the U.K. discount carrier said in a statement Monday. The shares fell as much as 7.5%.

Airlines across the globe have been shocked into survival mode by the coronavirus, which has caused an abrupt halt in travel as countries cut off access to fight the disease. EasyJet too has been parking planes and idling staff to conserve cash, while operating a handful of repatriation flights. Irish rival Ryanair Holdings Plc said last week it planned to ground over 90% of its fleet in coming weeks.

EasyJet said it completed repatriation flights on Sunday. Cabin crew will get 80% of their pay under a government program, and the company, based in Luton outside of London, is looking for ways to increase its access to cash. The carrier said it has a strong balance sheet and no maturities until 2022.

“We are in ongoing discussions with liquidity providers who recognize our strength of balance sheet and business model,” EasyJet said.

EasyJet shares fell 6.5% as of 8:36 a.m. in London. The stock has sunk 61% this year, dropping the carrier’s market value to 2.2 billion pounds.

Airlines worldwide could take a $252 billion hit to revenue this year from the pandemic, the International Air Transport Association said last week, warning of a pending liquidity crunch. The industry group urged governments to take “massive action” to keep the industry functioning.

EasyJet, whose debt is rated at BBB by S&P, has about 1.6 billion pounds ($2 billion) of cash and $500 million of undrawn and committed credit facility, which expires in 2021, S&P Global said in a report March 20. The carrier has about 250-300 million pounds in lease payments due every year, S&P said.

While the U.K. has ruled out a broad bailout for the aviation industry, it has created a 330 billion-pound program for state-guaranteed loans, which is open to companies with investment-grade credit ratings. EasyJet could also potentially raise cash with a sale-and-leaseback transaction to finance its fleet of Airbus SE A320 family jets, which S&P estimates is worth over 4 billion pounds.

EasyJet separately is under pressure from its founder, Stelios Haji-Ioannou, who has urged the carrier for years to halt its expansion. He has threatened to remove the board if it doesnt cancel an order for more than 100 Airbus planes, Sky News reported.

The carrier is working with its suppliers to defer and reduce payments, where possible, including on aircraft expenditure, it said in a separate statement in response to the interview.