Despite spending the majority of the last six months with most of their fleet grounded, EasyJet’s share price has more than doubled from its 2020 October lows, in the hope perhaps that the travel sector would be able to enjoy a summer rebound as the weather warms up.
At its trading update in April EasyJet (LON:EZJ) said it expected to see winter losses of between £690m and £730m, as total revenue fell 90% to £235m.
Today’s H1 loss of £701m has merely served to reinforce why airlines are so anxious to restart a semblance of a normal summer service in order to limit the damage of another year of losses.
First half revenue came in slightly higher than the April guidance at £240m, with passenger numbers down 89.4% to 4.1m, around 14% of 2019 levels, while the load factor fell to 63.7%, missing expectations of 65.5%.
For all the talk of pent-up demand the outlook for Q3 doesn’t look much better with the airline saying it only expects to fly around 15% of its 2019 capacity, with the hope that this would increase from June onwards as the next stage of lockdown restrictions are expected to be eased.
This would equate to three quarters of capacity below 20% and its unlikely Q4 would be much better as the weather gets colder, which helps explain why EasyJet declined to offer any guidance beyond Q3.
EasyJet has made progress on reducing its costs, which have fallen 59% to £844m, and slowing its cash burn, but even with the improvements here it's now pretty certain that the airline is heading for its second successive annual loss.
At the beginning of the year there was a great deal of optimism, that with the vaccine program well advanced there might be a semblance of a return to normal as the summer approached. This optimism now looks rather misplaced.
Unfortunately, few people reckoned on another variant, as well as the rather slow rollout of the vaccine program in Europe which has served to limit the number of options when it comes to travel destinations, with Portugal so far, the only country on the government's green list.
While the airline still has unrestricted access to £2.9bn of liquidity having raised over £5.5bn since the start of the pandemic, EasyJet, along with the rest of the airline sector is still no nearer to knowing when they can expect to resume any semblance of a normal service, with most of their planes grounded due to travel restrictions.
CEO Johan Lundgren urged the government to open travel to more amber list countries so that more services can be restarted, however it’s not immediately clear whether that would help that much given the testing and quarantining that would have to be done before departure and arrival to any amber list country destination.
In terms of raising extra liquidity, in addition to what has been raised so far, the airline has sold and leased back around 43 aircraft in order to raise extra cash. This leaves another 141 fully owned and unencumbered aircraft, which represents over 40% of its remaining fleet, so it certainly has plenty of room to free up some extra cash if it needs to.
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