LONDON – UK low-cost carrier easyJet (U2) has today announced it has extended the terms of its £600m government-backed loan as losses at the airline continue to mount.
The airline has posted a loss of £835m for the year up to September, which comes following the effects of the COVID-19 pandemic and U2 having to operate only 20% of its usual capacity.
Commenting on this news was U2 CEO Johan Lundgren, who spoke to Bloomberg Television earlier today, expressed confidence to investors. “There’s very little flying going on across Europe. We’re in a good position but we will continue to review all the options that are out there. We don’t know how long restrictions are going to be in place.”
Investor Confidence Deteriorating?
Lundgren’s appearance on Bloomberg will not come as a surprise, as the airline begins to find itself in a financially peculiar place, especially for investors.
Since the pandemic has begun, its shares have declined by 45% down to 774.20 pence as of 0805L in London today. The airline has had to find ways of preserving cash where possible, which has included the extension of the £600m government loan it has received by the U.K Government.
U2 will pay £300m in March next year and the rest in November, which represents an extension made available through the Bank of England’s Covid Corporate Financing Facility.
Slots Being Sold
It is understood that at London Stansted (STN) in particular, slots at the airport are being sold, and are ironically being snapped up by its low-cost rival, Ryanair (FR). This now means that FR can take an even more dominating share out of STN, of which it already owns a considerable amount of slots too.
Going into a post-pandemic-based perspective, this could mean easyJet falling behind in such competition and will require the airline to think fast on how it will reacquire such market share again.
Desperate for Revenue?
It remains clear that Lundgren is desperate for his airline to make as much revenue as feasibly possible and offered further confidence on the underlying demand for travel thanks to the recent developments for a vaccine.
He has even approached the U.K Prime Minister Boris Johnson to offer out the airline’s help when it comes to distributing the vaccine across the country, especially with its regional links at the moment.
If U2 could sign a contract with the government for such vaccine distribution across the UK, then this could keep the airline ticking until passenger demand fully returns. Such desperation for revenue has even resulted in the airline recently demanding a further state bailout from the U.K Government in order to remain afloat.
A Volatile Situation
It remains clear that the financials of easyJet still remain quite volatile during this pandemic. Back in September, sources at the airline alleged that U2 was “hanging by a thread”, offering no glimmer of hope into survival of the airline.
The airline has had to close three UK bases over the course of this year, as well as having to go head-on with the government about quarantine rules while asking for an additional bailout.
It appears as if the airline is not yet out of the woods yet, and that more work is clearly needed in order to preserve the survival of the airline.
All eyes will be on the government to determine whether such a bailout will be approved and handed out, especially with its strict attitude of seeking liquidity of shareholders first before the state steps in.
Featured Image: easyJet Airbus A320. Photo Credit: Marco Macca