Shares in EasyJet (EZJ) fell 6% to 559p after confirming it has finally grounded its entire fleet of aircraft in response to widespread travel bans amid the coronavirus pandemic, as problems for the company pile up.
The FTSE 100 airline said in a statement it finished the last of its repatriation flights yesterday, but will continue to work with government bodies for additional rescue flights as requested.
It also warned that at this stage, ‘there can be no certainty of the date for restarting commercial flights’, and based on continuously evaluating regulation and demand, it will update the market when it has a view.
'GROUNDING REMOVES SIGNIFICANT COST'
EasyJet said the decision to ground its aircraft ‘removes significant cost’, as it looks to remove costs and ‘non-critical expenditure from the business at every level’.
The airline has also agreed with the union Unite to furlough cabin crew from 1 April for two months, who will be paid 80% of their average pay through the government’s job retention scheme.
The company insisted it has a strong balance sheet, highlighting the fact it has no debt re-financings due until 2022. It added that it is in talks with liquidity providers, who EasyJet claims ‘recognise the strength of our balance sheet and business model’.
Statements from airlines regarding the strength of their balance sheets also need to be put into context.
Jonathan Hinkles, chief executive of regional airline Loganair, told the BBC that any airline saying it could survive without government support ‘would probably be lying’.
AIRBUS ORDER LOOMS LARGE
EasyJet’s balance sheet is set to take a hit from having to pay out £174m in dividends to shareholders, something which chief executive Johan Lundgren said it was ‘legally obliged to do’, having taken legal advice to ascertain whether it could avoid having to shell out.
It also has to find a way to deal with £4.5bn order from aircraft manufacturer Airbus, and is under pressure from major shareholder Stelios Haji-Ioannou to cancel the order.
In response, the company said it is seeking to ‘defer and reduce’ payments to Airbus.
'PROBLEMS FAR FROM OVER'
Despite grounding its aircraft, AJ Bell investment director Russ Mould believes EasyJet’s problems are ‘far from over’.
He said, ‘Like many other airlines, EasyJet is trying to get passengers to rebook flights for another time rather than issue refunds so as to avoid having to shell out significant sums of cash.
‘However consumer groups are putting pressure on the sector to give passengers back their cash, so EasyJet’s problems are far from over.
‘Grounding its fleet will save it money but at the end of the day the airline would rather be flying people from A to B than sitting idle.’