easyJet expects capacity to drop by 90% in second quarter; cash burn £40mln per week
easyJet PLC (LON:EZJ) has said it expects capacity to drop by 90% in the second quarter as it burns of cash £40mln per week.
The budget airline said the European slot waiver mechanism in place for this winter allows it to match capacity against the lower demand, while the EU and UK authorities are discussing a revised slot waiver for the Summer 2021 season.
The FTSE 250 group said it is focused on cash generative flying to minimise losses and cash burn as well as retaining the flexibility to ramp up capacity quickly when demand picks up.
Moreover, it forecasts legacy carriers will free up capacity around Europe as they are “dramatically scaling back” their short-haul operations, so competition will be lower in a post-coronavirus pandemic world.
Holidays for Winter 2021/22 were launched in December and are experiencing “very positive demand” while bookings for Summer 2021 are currently significantly ahead of last year but many customers are waiting for further clarity on quarantine rules.
In the quarter to December 31, 2020, easyJet said its passenger numbers plummeted by 87% to 2.9mln as capacity dived 82% to 4.4mln seats. As a result, group revenue was 88% lower at £165mln.
As of January 25, 2021, easyJet had access to £2.5bn of liquidity. Group headline costs excluding fuel were reduced by 52% after the firm let go a third of its staff and made seasonal contracts for its UK-based pilots, as well as furloughing employees in several countries.
The airline also secured new ground handling contracts at London Gatwick and at all its Swiss and Spanish airports and took steps to make fuel usage more efficient.
The money issue
Russ Mould, investment director at AJ Bell, noted that the airline “is still enduring real pain” with the inability to pad rocketing costs with passenger revenue, so it has to continuously borrow money.
“And talk of pent-up demand could be moot if most of us are prevented from jetting off on holiday this summer as governments prioritise getting the pandemic under control. Another problem for EasyJet is that some of its rivals, namely Wizz Air and Ryanair, operate with lower costs and therefore have greater flexibility to put capacity back online when demand does eventually return,” he commented.
“For now, the market seems confident air travel will eventually recover to its pre-Covid levels. easyJet could be treated quite differently by creditors and shareholders if that assessment changes and a more permanent impact on the sector is expected.”
Shares shed 2% to 702.63p early on Thursday.
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