Airline and package holiday provider Jet2 (JET2) has raised £422 million from shareholders and new investors to help it survive a ‘continually challenging trading environment’ amid travel uncertainty caused by the pandemic.
Shares in Jet2 fell 7.5% to £12 as it issued 35.8 million new shares, representing around 20% of its stock, at £11.80 each, a 9.1% discount to yesterday’s closing price.
Based on the scenario planning done by its management, Jet2 said the proceeds from the raise would provide sufficient liquidity on an ‘extended and likely unpredictable shutdown basis’ to deal with this ‘continually challenging trading environment.’
‘NO FLY’ SCENARIOS
Jet2 has come up with three ‘no fly’ scenarios of increasing durations it can see happening this year: restarting flying on 22 May this year, restarting on 16 July, or in the most pessimistic scenario restarting flying on 1 September.
It said all three scenarios assume a ramp up of flying operations at reduced seat capacity with average passenger load factors that are initially below historic levels.
The scenarios also assume a cautious outlook for Winter 2021/22 and a full, unhindered Summer 2022 flying programme for the group’s financial year ending 31 March 2023.
Executive chairman Philip Meeson said the fundraise would also help the firm ‘take longer-term strategic decisions to support sustainable long term profit growth; and improve the ability for Jet2 to exit the pandemic in a stable commercial position so that it is well positioned to capitalise on the upturn opportunity when it arrives.’
ANALYST VIEW
Jefferies analyst Becky Lane said research shows UK consumers expect staycations in 2021, with data showing package holidays further deteriorating in the important January booking window, but also that it showed there is pent-up demand, highlighted by 2020 data around easing restrictions.
Lane is also optimistic on the prospects for Jet2 and believes it is ‘ideally positioned’ to take market share due to its balance sheet position, positive brand perceptions, and its business model flexibility which involves ‘limited capital commitment versus peers, no retail footprint, no reliance on customer deposits for underlying business operations, prompt supplier payments’.
She added, ‘Every month of restrictions represents further market share opportunity for Jet2 from a weaker TUI (TUI). Any future industry structural changes (deposit ring-fencing, hotelier pressure on payment terms, changing brand loyalty) are further tailwinds.’
