EasyJet plots path to next summer after pandemic ruins 2020

EasyJet Plc gave up hope of a winter comeback for European air travel, shifting the focus to liquidity and the prospects for next year, starting with Easter in early April.

The U.K. discount airline entered 2020 with one of the strongest balance sheets in the industry, and said Thursday that it has about 2.3 billion pounds ($3 billion) in cash to survive an extensive pandemic-driven slump. Still, the carrier said it will continue to evaluate ways to raise cash, and called on the state for further support.

“The U.K. government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes,” EasyJet said.

With summer demand ruined by a resurgence in Covid-19 infections and the coming cold months essentially a write-off, EasyJet and its peers in Europe are looking for ways to hang on should the anticipated rebound be further delayed. The carrier, which accepted 600 million pounds of state-guaranteed loans earlier in the year, is in talks with the government about other financing, Sky News reported earlier.

EasyJet reported an annual loss of as much as 845 million pounds for the year through September, its first ever, and scrapped dividend payments.

“Along with other airlines, the company now has to look to summer 2021 for at least a partial recovery in demand,” Daniel Roeska, an analyst with Sanford C. Bernstein, said in a note. “Absent this, the industry will face an existential threat.”

EasyJet shares rose 0.8% to 527.80 pence as if 12:18 a.m. in London, having lost almost two-thirds of their value this year. The company is managing its cash well, Roeska said.

Like other airlines, EasyJet had been expecting to salvage at least part of the summer before renewed travel restrictions across Europe quashed any hopes of an immediate recovery in demand. The carrier has raised over 2.4 billion pounds in cash since the start of the pandemic, including 419 million pounds from an equity increase and 608 million pounds by selling and leasing back planes.

The airline will trim back its schedule over the slow winter season, offering only 25% of its normal capacity. It said Wednesday that it would temporarily close its Venice and Naples bases, serving the popular Italian destinations with fewer flights from other hubs.

What Bloomberg Intelligence says:

“EasyJet’s cash holding of about 2.3 billion pounds suggests fixed costs can be covered through June, according to our limited-flying scenario, yet additional funding may be needed if the pandemic stretches into the second half of 2021”

—Rob Barnett, BI transportation analyst

EasyJet earlier closed U.K. bases including Stansted to consolidate London-area operations at Gatwick and its Luton headquarters. In the fourth quarter it was running at about 38% of capacity, it said, missing an original target for 40%.

Ryanair Holdings Plc, its larger rival in the discount market, said last month that it would cut October capacity by a further 20%, in addition to a previous 20% cut.