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Summary
- The 25-year-old British budget airline is facing a loss first time in its history, as its passenger traffic halved in the past year due to the impact of the coronavirus pandemic.
- The company has called the government to lend a helping hand in the form of a rescue package.
- The company faces further stress in the coming few months, as the pandemic infection rates increase in the European continent, raising fears of a second lockdown in the UK.
One of the most successful airline companies in the United Kingdom EasyJet is in a very precarious situation right now. The company which had never seen a full-year loss ever, since it was incorporated 25 years ago, is facing a loss of more than £800 million this year, which is posing a very serious threat to its solvency. The year 2020 is proving to be a hard year for the global aviation industry as the safety regulations imposed by health authorities and the general fear of flying among people during pandemic times has kept the revenue flow into all airline companies at record lows.
On the eve of its results release, the management of the company has made a request to the British government for a bespoke help to the airline sector to help them further if the pandemic situation continues to worsen through the last quarter of the year.
The company’s latest results and its financial troubles
On 8 October 2020, the company came out with its trading update for its Q4 period ending 30 September 2020. During this quarter, the company flew 66,533 flights, against 172,739 flights flown by it in the quarter ending 30 September 2019 which is a contraction of 61.5 per cent.
The passengers flown by the company during the quarter stood at 9.36 million compared to 28.02 million passengers flown by it during the previous year’s corresponding quarter, registering a fall of 67 per cent.
The total revenue earned by EasyJet Plc for the quarter stood at £620 million, whereas for the quarter ending 30th September 2019 the company had reported a revenue of £2.28 billion which is a shortfall of 73 per cent.
For the quarter, the company expects to report a group headline loss before tax between £295 million and £325 million, whereas in 2019 in the corresponding quarter it had reported a group headline profit before tax of £528 million.
The management of the company believes that for the full year 2020 the group headline loss before tax of the company will be in the range between £815 million and £845 million.
The company’s net debt as on 30 September 2020 stood at £1.1 billion and it was holding cash and cash equivalents of c. £2.3 billion.
The state of the airline sector in the United Kingdom
The British airline industry, like any other across the world, has been deeply battered by the pandemic. Originating in the Wuhan province in China, the pandemic has spread to almost all parts of the world at an incredible speed. Unlike other major pandemics, the spread of Covid-19 was really fast, and this speed of spread took health authorities by surprise requiring governments in many countries to impose lockdowns to bring this spread in control.
In the United Kingdom also the government imposed a lockdown that lasted for six weeks from March to May. When the lockdown was relaxed, the government enhanced safety protocols in place for airlines as well as passengers. The public was also apprehensive about taking to the skies just yet as the pandemic was still continuing to spread with no medicine and vaccine in reach. The airlines in the country thus are registering a very slow state of recovery, and if there is indeed a resurgence towards the end of the year, this recovery would also be undone.
The stock price performance of EasyJet Plc (LON:EZJ) on the London Stock Exchange (YTM)
(Source- Thomson Reuters)
The shares of Easy Jet Plc have not been doing good at the London Stock Exchange since the beginning of this year, and as of 9 October 2020, the shares of the company were quoted at GBX 523.80 (12.26 PM GMT+1), down by 2.50 per cent from the previous day’s close.
EasyJet PLC (LON:EZJ) is a Luton, the United Kingdom-based low-cost European point-to-point airline company. The company has four geographic segments, which are differentiated according to the origin country.
The state of affairs of other two major airlines in the UK in 2020
Among the other British Airline companies, the shares of IAG Group Plc (LON:IAG) have not been doing well at the London Stock Exchange since the beginning of this year. On the 2nd of January 2020, the shares of the company traded on the exchange at GBX 636.20 per share and were trading at GBX 104 per share on 9 October 2020 (1.05 AM GMT+1), down by 2.7 per cent over previous day’s close.
Wizz Air Holdings Plc (LON:WIZZ) the other major airlines in the United Kingdom has also been performing poorly on the London Stock exchange since the beginning of 2020. The shares of the company have seen huge volatility throughout the year, especially during the period between March and May 2020. On the 2nd of January 2020, the shares of the company traded on the exchange at GBX 3,990.20 per share and were trading at GBX 3,230.00 per share of 9 October 2020 (1.12 AM GMT+1) losing 2.48 per cent over previous day’s close.
