Carnage In UK Aviation Continues As EasyJet Warns Of Unprecedented $1 Billion Loss


KEY POINTS

  • EasyJet warned that it expects to incur pre-tax losses of up to £845 million ($1.09 billion) for fiscal 2020
  • EasyJet expects to fly at only 25% of its normal capacity well into next year.
  • The company has also cut about 4,500 jobs

British budget airline EasyJet warned that it expects to incur pre-tax losses of up to £845 million ($1.09 billion) for fiscal 2020 – its first ever annual loss.

Analysts had forecast a loss of about £794 million, or $1.03 billion.

The budget carrier also said it expects to fly at only 25% of its normal capacity well into next year.

“At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any financial guidance for the 2021 financial year,” EasyJet stated.

Like virtually all British and European airlines, EasyJet has been hammered by the COVID-19 pandemic and related quarantines, which has sapped demand and forced aircraft to be grounded and carriers to cut costs by laying off workers.

EasyJet said it may need more state support to survive – in April, the carrier received a £600 million ($775 million) loan from the British Treasury. The company has also cut about 4,500 jobs, raised £608 million ($786 million) from selling aircraft and borrowed another £419 million ($541 million) from shareholders.

“Aviation continues to face the most severe threat in its history and the U.K. government urgently needs to step up with a… package of measures to ensure airlines are able to support economic recovery when it comes,” said EasyJet Chief Executive Johan Lundgren.

Theo Leggett, BBC business correspondent, wrote that EasyJet’s problems are widespread in the British aviation sector.

“Hopes of a rapid recovery after the lockdown were dashed when the [U.K.] government introduced quarantine restrictions on arrivals from abroad,” he wrote. “Over the summer peak, the airline [EasyJet] was still able to operate at 38% capacity — but its expectations for the final three months of the year are clearly very limited.”

Leggett noted that despite cutting costs by selling and leasing back parts of its fleet, Easyjet is still burning through cash and its future remains “deeply uncertain.”

“Like pretty much every other carrier right now, it’s navigating through some very stormy skies,” he added.

Indeed, EasyJet’s principal rival in the budget  carrier space, Irish-based Ryanair has said it expects to fly at only about 40% of capacity in October. In late July, Ryanair posted a second-quarter loss of 185 million euros ($217 million), while passenger traffic plunged by 99% over the year-ago quarter. Ryanair further warned that “air travel in Europe is likely to remain depressed for at least the next two or three years”

While Ryanair initially planned to cut 3,000 jobs this year – that figure is expected to be lowered after pilots, cabin crew and other employees agreed to accept pay cuts.

The U.K.’s largest airline, British Airways, has already confirmed that it will cut more than 10,000 jobs.

Moreover, an airline union official recently warned that EasyJet was “hanging by a thread.” BBC News reported that Martin Entwisle, a British pilots’ union official, said that EasyJet was in a “really, really dire situation” after meeting with the airline’s chief financial officer, Andrew Findlay.

Entwisle, himself an EasyJet pilot and union representative, said: “I think the easiest way to put it is that the company is hanging by a thread. The situation is dire. If we don’t have a good summer next summer and make a considerable amount of money, we really are going to be out of a job.”

Last month, EasyJet CEO Lundgren himself admitted that the U.K. aviation industry is running out of time and money, and reiterated his urgent plea for more government financial support.

“This is the last chance to save the U.K. airline industry and ensure it is as vibrant and competitive after COVID as it was before,” he stated. “I hope the government takes it.”

Lundgren pointed out how governments in Europe, including France, Italy and Germany, have bailed out their airlines, while the British government has been more reticent.

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