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Summary
- Easyjet would bring down the capacity to less than 40 percent in Q4 FY20 from the previously planned capacity. The decision was taken due to frequently changing travel guidelines by the government.
- It expects additional help from the government for the aviation sector to support job and business.
- Signature Aviation's revenue from continued operation declined by 31.3 percent year on year in H1 FY2020. The revenue was impacted due to lower flight activity.
- The business activity in the US market was down by 19 percent year on year in August 2020 as compared to a 77 percent decline in April 2020.
Shares of Easyjet PLC (LON:EZJ) & Signature Aviation PLC (LON:SIG) were down by 4.14 percent and 3.01 percent, respectively from the last closing price (as on 9 September 2020, before the market close at 1:00 PM GMT+1). Easyjet had lost market capitalization of close to £4.4 billion from 13 February 2020, when the shares hit their 52-week high.
Easyjet PLC (LON:EZJ) - Raised more than £2.4 billion since the start of covid-19
Easyjet PLC is a UK based airline company that mainly operates on the short-haul routes in the UK and Europe. The Company is a budget airline operator.
Capacity Update as reported on 8 September 2020
On 8 September 2020, Easyjet announced that it would only operate less than 40 percent of its planned fleet capacity in Q4 FY20 given the lower travel demand. The Company wants to have a profitable flying, and thus it has revised the capacity from that stated in the Q3 FY20 update. The decision was taken following the UK government's decision to remove seven Greek islands from the travel exemption list. The Company wants the government to set a constructive guidance for travel and quarantine to encourage the customer's confidence in travelling.
(Source: H1 FY2020 presentation)
Sale and Leaseback of Aircraft
On 14 August 2020, the Company announced that it completed the sale and leaseback of five A321 neo aircraft to Jin Shan 37 Ireland Company Limited for £203 million. The transaction was part of the sale and leaseback programme of 23 aircraft that is now successfully completed. The programme generated funds of £608 million. As on 31 March 2020, the five aircraft sold had a book value of £167 million with age in between five months to nine months. The aircraft are leased for ten years with a lease obligation of around £122.3 million. After the completion of the sales and leaseback programme, Easyjet had raised more than £2.4 billion since the start of covid-19. The Company raised £419 million from equity issuance, £400 million from two-term loans, the drawdown of revolving credit facility added £400 million, £600 million from the UK government's covid corporate financing facility and £608 million via sales and leaseback programme.
Q3 FY2020 results (ended 30 June 2020) as reported on 4 August 2020
(Source: Company website)
Easyjet reported revenue of £7 million in Q3 FY20, which declined from £1,761 million in Q3 FY19. The revenue was impacted due to the operation of lower flights. The Company operated 709 flights in Q3 FY20 against 165,656 flights operated a year ago. It operated only ten aircraft in Q3 FY20, whereas it operated 315 aircraft in Q3 FY19. Passengers flying with Easyjet declined from 26.3 million in Q3 FY19 to 0.1 million in Q3 FY20.
Share Price Performance Analysis
1-Year Chart as on September-9-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Easyjet PLC's shares were trading at GBX 572.68 and were down by close to 4.14 percent against the previous closing price (as on 9 September 2020, before the market close at 1:00 PM GMT+1). EZJ's 52-week High and Low were GBX 1,570.00 and GBX 410.00, respectively. Easyjet had a market capitalization of around £2.73 billion.
Business Outlook
The Company highlighted that the current conditions are challenging and the future performance cannot be assessed. The government travel policies are changing very frequently, and thus it is hard to maintain any operational guidance. The focus would be to lower the cash burn and to bring down costs. Easyjet has asked the UK government to provide additional aid to the aviation sector to support the jobs and connectivity. It wants the government to remove the airline passenger duty for 12 months and to lower the charges for air traffic control.
Signature Aviation PLC (LON:SIG) - Acquired two FOBs in Switzerland
Signature Aviation PLC is a UK based company that provides aviation services to business and general aviation travellers. The Company operates fixed base operations (FBO) in North America, Europe, South America, the Caribbean, Africa and Asia.
H1 FY2020 results (ended 30 June 2020) as reported on 8 September 2020
(Source: Company website)
Signature Aviation reported total revenue of USD 963.1 million in H1 FY20, which declined by 36.9 percent year on year from USD 1,528 million in H1 FY19. The revenue from the continued operations was USD 707.2 million, which declined by 31.3 percent year on year from USD 1,140 million in H1 FY19. ERO segment generated revenue of USD 260.4 million, and it is classified as a discontinued operation, and the disposal process is ongoing. EBITDA from the continued operation was USD 143.4 million in H1 FY20 that was lower than EBITDA of USD 237.3 million reported in H1 FY19. The operating profit declined from USD 158.2 million in H1 FY19 to USD 63.1 million in H1 FY20.
The Company reported profit before tax of USD 17.4 million and earnings per share of 1.9 USD cents in H1 FY20. The free cash outflow was USD 24.9 million, and it generated a return on invested capital of 7.4 percent in H1 FY20 that was 9.9 percent in H1 FY19. As on 30 June 2020, Signature Aviation had net debt of USD 2,218.5 million. The Company had liquidity headroom of USD 520.9 million that includes undrawn revolving credit facility of USD 321.0 million, cash of USD 145.0 million and CARES act cash of USD 54.9 million.
Performance by Geography in H1 FY2020
Based on revenue by destination, the UK reported revenue of USD 38.3 million, and Mainland Europe generated USD 60.2 million. North America reported revenue of USD 799.2 million, and Rest of the World revenue was USD 65.4 million. The business and general aviation (B&GA) activity in the US declined by 29.6 percent year on year in H1 FY20. B&GA activity in Europe fell by 35.0 percent year on year in H1 FY20. In the US charter business segment is recovering.
Strategic Flight Plan of Signature Aviation
(Source: Company website)
Share Price Performance Analysis
1-Year Chart as on September-9-2020, before the market close (Source: EODHD/Others, Thomson Reuters)
Signature A PLC's shares were trading at GBX 258.20 and were down by close to 3.01 percent against the previous closing price (as on 9 September 2020, before the market close at 1:00 PM GMT+1). SIG's 52-week High and Low were GBX 402.04 and GBX 129.40, respectively. Signature Aviation had a market capitalization of around £2.24 billion.
Business Outlook
The business activity in the US market was down by 19 percent year on year in August 2020 as compared to a 77 percent decline in April 2020. The Company expects the business performance to be better in the H2 FY20. It is currently managing the cost base prudently. The Company has acquired fixed base operations (FOB) in Geneva and Sion in Switzerland. It opened the new Atlanta FOB in July 2020. The Company is focused on reducing the carbon footprint, and it stated that by 2025 it would bring down the carbon emission by 29 percent.
