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Summary
- EasyJet Plc had slumped to a £1.3 billion loss during 2020, the first annual loss in its 25-year history
- The FTSE listed airline has recorded a decline of 50 per cent in the number of passengers
- The battered aviation sector has underpinned high hopes on coronavirus vaccine for a swifter recovery
For the first time in its 25-year history, the FTSE 250 listed low-cost European point-to-point Airline Company, EasyJet Plc (LON: EZJ) had slumped to a £1.3 billion loss during the year ended 30 September 2020.
The pandemic has weighed down heavily on the aviation sector. From travel restrictions to quarantine regimes, all have impacted the businesses operating in this sector. Every business is struggling to make ends meet whether it be jet makers or airline operators.
Earlier this month, the British government along with other countries has imposed further travel restrictions which pushed the low-cost airline to cut back on its planned winter schedule and now it expects to fly no more than 20 per cent of its planned capacity during the first quarter of fiscal year 2021.
However, some respite is in sight for airline as the chief executive, Johan Lundgren indicated a rise of 50 per cent in sales during the passing week, primarily after German biotech firm BioNTech and the US drug maker Pfizer announced their coronavirus vaccine.
The company believes that it is well positioned for the summer next year. The company has recorded surge in holiday bookings for summer 2021 as compared to same period previous year. Moreover, the company expects recovery as it witnessed jump in sales of over 900 per cent primarily due to pent up demand during the first five days after the quarantine regime was lifted for the Canary Islands in late October and therefore added 180,000 seats. The company believes that the long-haul and business trips might take some time to recover, however, the short-haul and leisure routes that make up the airline’s network are widely expected to recover quickly.
Also read: EasyJet Sells Aircraft To Help It Through The Winter
Year-end financials
EasyJet recorded decline of 50 per cent in number of passengers along with a reduction in capacity of 47.5 per cent that led to decline in revenue by 52.9 per cent to £3,009 million during the fiscal year 2020 in the wake of coronavirus pandemic.
The headline cost of the European airline surged by 30.2 per cent per seat during the fiscal year 2020, while the company would be launching its Cost Out and restructuring programme for the first time in its history to reduce cash burn. The company reported a significant loss for the period, with negative ROCE of 19.9 per cent and did not recommended any dividends.
The airline succumbed to a pre-tax loss of £1.27 billion for the year ended September 2020. Though it had managed a profit of £430 million in the fiscal year 2019. The revenue declined substantially this year primarily due to slump in airline passengers, which stood at 48.1 million, down by 50 per cent from previous year.
In order to bolster its finances, EasyJet has managed to raise £3.1 billion in cash since April through leasing and sales of aircrafts. The low-cost airline has resorted to cutting staff numbers by 30 per cent that translated into 4,500 redundancies. EasyJet currently owns only 41 per cent of its entire fleet.
Also read: Easyjet Request Government for Urgent Help, Annual Loss Could Mount Over £800 Million
The company has shown a significant decline in financial performance during the year 2020. It remained focused on cash generative flying during the winters to minimise losses incurred so far. EasyJet adapted quickly to the challenges in the trading environment and took corrective actions to reduce cash burn, bolster liquidity, minimise losses and is about to launch a major restructuring programme. The company has the flexibility to ramp up capacity in case there is sudden improvement in demand and confidence amongst travellers. Most importantly, EasyJet has a strong balance sheet with increased total liquidity and investment-grade credit ratings to navigate through the turbulent and uncertain period ahead.
On 18 November 2020, EasyJet shares price stood at GBX 747.80 at GMT 2:29 PM+1, down by 1.94 per cent from the previous day closing price level. EasyJet’s market capitalisation was hovering around £3,483.17 million. In a year’s time, the shares were down by more than 40 per cent. The stock made a 52-week low and high of GBX 470 and GBX 1,552, respectively.
Until a vaccine arrives, the outlook of the aviation sector remains gloomy. The long-haul and business passengers would continue refraining from travelling. The prolonged travel restrictions and battered passenger demand can widen the losses and pose liquidity risks for the aviation sector. The battered sector has underpinned high hopes on coronavirus vaccine for a swifter recovery. Moreover, the airlines may have to bear some additional costs in the form of protective equipment such as face shields. Another major development in the sector is airport testing, which would allow to reduce the 14-day quarantine period down to less than a week under the “test and release system”.
