Shares in budget airline EasyJet (EZJ) gained 3.5% to 733p as it confirmed it would resume flights from 15 June.

In an update to the City, the firm also said it expects to cut its workforce by up to 30% as it seeks to reduce the size of its fleet, with the company warning that demand would likely only return to pre-pandemic levels in about three years.

‘Although we will restart flying on 15 June, we expect demand to build slowly, only returning to 2019 levels in about three years’ time,’ the low-cost carrier said.

The company also said that capacity for the fourth quarter of this year would be well below that of last year.

For the fourth quarter of 2020, EasyJet said it expected to fly around 30% of the planned capacity flown in fourth of 2019, and added that it would continue to cut costs by cutting both the size of its fleet and its workforce.

HIT TO ANCILLARY REVENUE

AJ Bell investment director Russ Mould said air travel in this ‘new normal’ in the world of coronavirus will not only hit the company’s fare income but its all-important ancillary revenue too.

Mould said, ‘Air travel in this ‘new normal’ will look a bit different – these largely domestic flights will see everyone wearing masks and no on-board meals being served. Presumably the company will not be selling products in-flight either.

‘If these measures have to be maintained for the long-term it would likely put a material dent in ancillary revenue which totalled more than £1.3bn in the last full financial year.’

‘FUTURE RECOVERY AFFECTED BY DECISIONS NOW’

Mould added that EasyJet’s cost cutting plans are ‘understandable’ given the scale of the challenges facing aviation.

But he said ‘If, as EasyJet is guiding, there is a recovery in demand by 2023 the firm’s ability to benefit from this recovery will be affected by the decisions it is taking now.

‘It can, for example, be easier to cut staff than it will be rehire and retrain them as and when EasyJet needs to increase its capacity again.’

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Issue Date: 28 May 2020