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The novel coronavirus has taken its toll on almost all the industries, but the Aviation industry is one such sector which has suffered the most, and many of the airlines across the globe are on the brink of collapse. While the other sectors started feeling the impact a little later, the aviation sector was the one which immediately got affected by the novel coronavirus, with lots of governments imposing travel restrictions with the fear of its rapid spread. The devastating impact on the industry can be gauged with the fact that the International Air Transport Association has predicted that around 25 million jobs globally are at risk with the temporary ban on airline due to Covid-19 crisis. Different governments have come forward to the rescue of the industry and have announced different measures to protect them from collapse. The travel industry has been facing a major shutdown scenario worldwide since February. Due to that, British Airways had already informed its employees last month that it won’t be able to survive due to the effect of total shut down around the globe. The second-largest global airline, American Airlines had also stated that it was going to suspend nearly entire global flights.
The aviation sector of the United Kingdom had asked for special government measures to support this sector to survive. The airline industry of the United Kingdom had also urged the government to support the industry before it gets wiped out due to novel coronavirus epidemic. The trade body of UK airlines stated that industry needs urgent action and warned the authorities that the airline industry faces its most severe crunch since 9/11. For this, the Virgin Atlantic also wrote a letter last month to the Prime Minister of the United Kingdom, that airline sector needs immediate support of £5 billion to £7.5 billion to survive. Still, the Treasury has been reluctant to support the airlines, and first they need to approach the wealthy shareholders.
However, the airlines have taken the alternative way, with the first being the EasyJet Plc, which announced that it has successfully secured loan of £600 million under the emergency coronavirus fund “Covid Corporate Financing Facility” (CCFF), issued by HM Treasury and the Bank of England. The emergency fund provides businesses with investment grade rating prior to the outbreak, with access to funds at the commercial rates. The company further revealed that it secured £407 million from its Revolving Credit Facility against aircraft assets to secure its liquidity. Now the company has a cash reserve of £2,300 million.
The Chief Executive Officer of the company, Johan Lundgren stated that the company is focusing on long term plan of the Airline, while cutting costs and saving job so that the company will be in best position once the impact of coronavirus is over. He further said that company’s priority is to save near term liquidity that’s why the group has taken a loan from the Covid Corporate Financing Facility and borrowed from Revolving Credit Facility to enhance the liquidity of the company. He also stated that the company had agreed with BALPA to furlough of UK-based pilots and crew. During April and May 2020, around 4,000 out of 9,000 pilots & crew will be furloughed.
The news of securing fund came just after the Haji-Ioannou, who is the top shareholder of the company demanded an emergency general meeting and asked for the dismissal of two directors of the company. He had reiterated his demand for cancelling the company’s £4.5 billion contract with Airbus, cautioning that failure to do so could see let the company run out of money by around August this year. After the news of securing the £600 million fund emerged, the representative of Haji-loannou stated that without the cancellation of the airbus order, the company could not change the ongoing situation. The cash burn will probably force the company to take a step toward insolvency from august to late autumn.
Let’s talk about EasyJet Plc’s overview and share price performance
Overview of EasyJet Plc – EasyJet Plc is the United Kingdom-based aviation company which provides low-cost point to point travel routes operation in Europe. It operates a modern Airbus fleet by using the A320 family of aircraft. The company works for six values, i.e. safety, simplicity, one team, integrity, passion and pioneering.
The company, while updating about the impact of the Covid-19 had earlier reported that it has no debt re-financings due until 2022, and it maintains a robust balance sheet. It had also stated that the company is making every action and efforts to eliminate the cost and unimportant expenses from the business at every stage in order to lessen the blow from the Covid-19. The company has reported that after the FCA's latest guidelines, it would be releasing its half-year results on 30 June 2020, while it will come up with a trading update in the second half of April.
(Source: Company websites)
EZJ – Share Price Performance
On 08th April 2020, Easyjet Plc’s stock traded at a price of GBX 627.20 per share (10:51 AM GMT) on the London Stock Exchange, a decline in the value of about GBX 8.60 or 1.35 per cent, as compared to the closing price of the previous day, which has been reported to be at GBX 635.80 per share. The one year high of the company’s stock price was recorded on 13th February 2020 at GBX 1,570.00, whereas its one-year low stock price was recorded at a price of GBX 410.00 on 19th March 2020. The current share price was up by 52.98 per cent from the one-year high price. The stock’s yearly dividend yield was reported to be at 7.95 per cent, whereas the yearly dividend was reported at GBX 43.90 per share. As on 8th April 2020, the market capitalisation of EZJ was reported at GBP 2.53 billion, while its Beta stood at 1.59, which indicates that the share price movement is more volatile as compared to the movement in the comparative benchmark index.
