Shares in budget airline EasyJet (EZJ) rose 3.6% to 625p after it managed to secure an extra £1.9bn in cash funding to boost its liquidity position.

The FTSE 100 airline said it now has enough cash to keep it going for the next nine months, having borrowed £400m against its jet fleet, issued £600m of commercial paper through the Covid Corporate Financing Facility (CCFF) and maxed out its £400m overdraft, while it could also raise up to £550m from selling and leasing back some of its aircraft.

It comes as the company said in a trading update that it expects to report a headline £185m to £205m pre-tax loss for the six months to 31 March, significantly improved on the £275m pre-tax loss reported in the same period a year ago. Airlines typically make losses during the quieter winter trading period.

However, on a reported basis the loss before tax is expected to be between £360m to £380m, as this will include the impact of £175m to £185m in relation to the ineffectiveness of its fuel hedging, as well as an impact from foreign exchange.

'AT LEAST SOME ENCOURAGEMENT'

AJ Bell investment director Russ Mould said the measures taken by the airline give ‘at least some grounds for encouragement’, with the company also deferring the delivery of 24 new planes from Airbus under pressure from founder Sir Stelios Haji-Ioannou. In total, EasyJet could raise up to £3bn in extra cash.

Mould said, ‘These and other potential future moves like looking for further state support or deferring maintenance spending could have implications for the company’s ability to regain altitude when the current turbulence is behind it.

‘And it is a stark illustration of the industry’s perilous position that even £3bn would only cover it for a nine-month grounding of its fleet.

‘What is unpredictable at this stage is what a recovery in the aviation industry might look like, and how business and leisure travellers might adjust their behaviour once the current pandemic is contained.’

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Issue Date: 16 Apr 2020