Yahoo Finance EasyJet to 'ramp up' summer holiday flights as it warns of £700m loss
EasyJet (EZJ.L) said it is set to "ramp up" its summer holiday flight schedule as it confirmed that investors should expect a major loss from the airline for the first half of its financial year.
The European budget airline said it expects to make a loss of between £690m and £730m for the six months to 31 March, as the travel industry continues to take a major hit amid the pandemic and lockdown restrictions.
“EasyJet is encouraged by the strong vaccination rollout in the UK and expects the European rollout to pick up pace in the coming weeks, so is looking forward to taking customers on a long-awaited holiday this summer,” it said in a statement.
It also welcomed confirmation that international travel for Brits is on track to reopen as planned in mid-May and said it is working with the government to ensure that the cost of required COVID-19 testing is driven down so that it doesn't risk make travel too costly for some.
Shares in the company ticked up almost 3% on Wednesday morning.
It's expected loss is up from £193m a year earlier but slightly better than expectations, as it continues to deliver a major restructuring and cost reduction programme.
As at 31 March 2021, easyJet said it has unrestricted access to around £2.9bn of liquidity, having raised over £5.5bn since the beginning of the pandemic, and is well-positioned to capitalise on the recovery of travel once restrictions are eased across the network.
CEO Johan Lundgren noted that “easyJet has maintained a disciplined approach to flying during the first half of our financial year, resulting in a first half loss and cash burn better than expectations. We continue to have access to significant levels of liquidity alongside easyJet's major cost-out programme which continues to deliver ongoing cost and efficiency benefits.”
Passenger numbers for the six months ending 31 March 2021 fell by 89% to 4.1 million, in line with a decrease in capacity to 6.4 million seats, representing just 14% of H1 2019 capacity levels.
This led to total group revenue for the six months ending 31 March 2021 decreasing by around 90% to £235m.
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The structural cost-out programme announced last year, easyJet's largest ever, is on track to achieve its targeted savings and will position easyJet to "lead the recovery in aviation," the company said.
“We will continue to operate a reduced schedule throughout much of Q3 but are ready to ramp up our operations to match the level of demand we see in the market,” it added.
Based on current travel restrictions in the markets in which it operates, easyJet expects to fly up to 20% of 2019 capacity levels in Q3 2021, with an expectation that capacity levels will start to increase from late May onwards.
“EasyJet’s in a better position than expected... Still, the group flew just 9% of its 2019 schedule between January and Mach, and the planes that did fly were only 60% full. No amount of restructuring can offset that kind of pain," said Laura Hoy, equity analyst at Hargreaves Lansdown.
"Ultimately, easyJet needs a summer travel season to stop the bleeding. If travel picks up as expected in May, the group looks to be in a strong position to capitalize on pent-up demand... We’re expecting passengers to fork out more for things like extra legroom and cabin bags, something easyJet is prepared to pounce on with its new fare class, Standard Plus," she added.
However, she said this all depends on how and when travel restrictions are lifted.
"Expensive testing requirements and uncertain quarantine rules could keep large swaths of easyJet’s customers from booking flights at all," said Hoy.
17 May is the earliest date international travel in the UK could reopen, as per UK prime minister Boris Johnson's four-step roadmap out of lockdown.
And while Johnson said he is “hopeful” this would happen, he added: “I do not wish to give hostages to fortune, or to underestimate the difficulties we are seeing in some of the destination countries that people might want to go to. We don’t want to see the virus reimported to this country."
There is a chance travel opens up with a traffic light system, where destinations are divided into green, amber and red. Green countries would mean people could return to the UK with no restrictions. Amber ones would likely mean people having to quarantine at home, and red ones would require a 10-day quarantine in a hotel.
EasyJet will release half year results on 20 May.
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