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Summary
- The stocks of Ryanair and easyJet have significantly lost on their market value since the February 2020, when the pandemic started spreading in the UK
- The airline companies have done a plenty of organisational restructuring including job cuts, reduction of fleet size, reduced frequency of flights, and bringing down the budgeted capital expenditure for the current fiscal
- Both easyJet and Ryanair have separately announced fare cuts and a number of lucrative offers to lure maximum customers in the downcast business activity
UK-based budget airlines Ryanair DAC (LON: RYA) and easyJet plc (LON: EZJ) have been struggling to continue their operations due to the coronavirus pandemic. The aviation sector is one of the worst hit due to the pandemic as travel in and around Europe had hit a standstill due to the lockdown to check the spread of coronavirus. The stocks of Ryanair and easyJet have lost significantly on their market value since February 2020. While the Ryanair shares dropped by almost one-third, the easyJet shares shed around two-third of their pre-pandemic value.
However, some partial recoveries in the share prices were seen once the government ordered to resume limited operations. Despite resumed services, the share prices of easyJet and Ryanair have been trading far below their particular 52-week highs on the London Stock Exchange.
The stock of Luton-headquartered easyJet fell as much as 68.7 per cent in a brief stretch of less than 40 trading days to £475 on 3 April 2020 from a share price level of £1,517 on 20 February 2020. A similar drop was seen in the stock of Ireland-based Ryanair with share prices plummeting about 46.8 per cent in less than 20 trading days to £8.14 on 18 March 2020 from a market price of £15.3 as on 20 February 2020.
Both the carriers, Ryanair and easyJet, have respectively reported subdued results for the quarter ended 30 June 2020 and have announced a series of measures before and after resuming the operations to stay afloat in the tightened market.
We take a brief glance at two of the major modifications that are being incorporated by these flight operators.
Organisational restructuring
The airline companies have done plenty of organisational restructuring including cutting down the workforce, reduction of fleet size, flight frequency and bringing down the budgeted capital expenditure for the financial year 2021. Collectively, all the aforementioned measures are being formulated to curtail the expenses so that the funds can be utilised in an efficient framework.
The capacity is likely to be built through the summer season with an expected operation in Q4 2020 at 30 per cent of the pre-Covid-19 capacity.
Company sources said the booking numbers for easyJet Holidays are encouraging. However, the airline, while announcing the half-yearly results, denied to provide definitive financial guidance for the rest of the fiscal due to the uncertain times.
Earlier in May, easyJet had indicated towards a possibility of a massive reduction in the staff size, apparently to the tune of 4,500 positions, integrating different approaches such as unpaid leaves and part-time contracts etc. Besides, easyJet has been planning a fundraising under which the airline is looking forward to garner around £450 million via a placement of shares. The company expects to sell close to 59.5 million ordinary shares to achieve a target of £400-450 million.
Similarly, Ryanair has said that a second wave of Covid-19 across Europe is their biggest fear, denying to provide any guidance on FY21 PAT (profit after tax). COmpany sources said the budget air carrier is expecting to carry nearly 60 million passengers in FY21 with a lower loss in Q2. In September, Ryanair announced that it is going to slash the October capacity by another 20 per cent, in addition to the 20 per cent-cut already notified in August.
Fare Cuts & Offers
After restructuring and various cost-reduction techniques, both the companies have separately announced fare cuts and a number of lucrative offers to lure maximum number of customers in the downcast business activity.
Ryanair has decided to extend the fee waiver for its customers booking tickets during the October-November period, a move which is likely to increase the flexibility of travel plans. All the customers can willingly change their respective travel plans after booking with zero modification charges till 21 March 2021. Ryanair had launched a “buy one get one free offer” on the flight tickets on as many as 1,600 routes, for travel duration up to 14 December 2020.
Very recently, easyJet launched a new “protection promise” under which the airline included a promise to cancel any holidays for the destinations booked where there is a known quarantine or the requirement of self-isolation with a resolution on refund process within an average of 12 days.
Matt Callaghan, Customer Director at easyJet holidays, explained that it was initiated as a fundamental change rather than a temporary move and would make the customers happy.
A cumulative effort from the companies and some easing of restrictions is likely to help in a steady recovery in the commerce lost on the back of Covid-19 fallout. A prospective and definitive timeline for a coronavirus vaccine would help in alleviating the financial pain sooner-than-expected. However, a positive outlook on most of the businesses including aviation, tourism, sports & entertainment, and automobiles is still hanging in balance with regard to the persistent conditions around the number of cases in the United Kingdom and the neighbouring nations.
