December 1, 2020

EASYJET FALLS TO ITS ANNUAL LOSS IN THE MIDST OF A THE PANDEMIC

As the Coronavirus crisis continues to have profound effects on the traveling industry, EasyJet reported their first annual loss in the 25-year history. The aviation company posted a loss in excess of half of its revenues of £1.27 billion between the year and 30 September.

EasyJet added that it anticipated that the normal capacity will fly only 20% in the next year. The pandemic hit airlines heavily and reduced the number of people on lockdowns and restrictions.

EasyJet however welcomed the possibility to roll out a Covid-19 vaccine and stated that the basic demand for air travel was strong.

Executive Chief Johan Lundgren said that the latest developments in Covid vaccines “certainly are good news, as we know that this is a crucial part to the recovery,” says BBC Radio 4’s Today program.

“But I don’t think that’s just a question of the vaccine, it’s because we also have the need for testing, we also need a sophisticated quarantine system development,” he said.

On the news of last Monday’s vaccine, reservations were up nearly 50 percent so it only shows that good news from here makes people more confident that reservations can be made in the future.”

The airline stated that EasyJet’s revenues shrank due to restrictions on government travel in most markets. This included complete national lockdowns which led the airline 11 weeks to ground its whole fleet. The demand was recovered in summer as locks fell, but widespread quarantine restrictions eroded demand again in September.

The news about possible vaccinations can be good, but EasyJet still has a long, tough winter, with a fifth of its regular schedule. The airline was one of Europe’s original low-budget carriers. The company has always focused on cost control.

Yet it had to aggressively cut its outputs to save money. A tight belt has become tighter, even if union deals have allowed plans to sweep redundancies to be tinted out.

If airlines cannot fly, they can’t make money and a relatively slim business like EasyJet burns cash. There’s a good one, however. The company believes that when travel restrictions are removed, passengers will still fly and demand.

MONEY PROBLEM

The pandemic has placed considerable pressure on the finances of EasyJet and forced EasyJet to accept new debt, pay extra cash to shareholders, and sell several dozen aircraft.

Mr. Lundgren said EasyJet should not need anything more in the near future than the £3bn it has raised. “No, at this moment we believe that we are in a good position,” he told Today.

“But we always said that we will continue to examine all the options available for us to cope with the conditions and, you know a lot of uncertainty still lies about the recovery.”

The UK government’s support was used in April by EasyJet, who borrowed £600M.

On Tuesday, the airline said that it would extend its credit under the Corporate Finance Facility scheme and phase out repayments after negotiations with the Bank of England and the Treasury.

PENT UP DEMANDS

The results of EasyJet ‘demonstrate that a global pandemic occurs on the once-profitable airline.’

“EasyJet will have to navigate through a long winter saddled with a considerable debt with the vaccine light at the end of a very long tunnel.” Management “administered tough medicine,” she said, including the reduction of employees and even the slower use of aircraft to reduce fuel consumption.”

“If EasyJet can, however, keep its head above water it will really fly in the second half of 2021, as the rising demand for consumer fuels a return to foreign vacation,” added Palmer.