Last year, easyJet made its first-ever annual loss, and it doesn’t look like this year will be any better, with the difficult trading environment set to continue for quite a while yet.
The Covid-19 pandemic has had a massive impact on the travel sector, and while the vaccination rollout has raised optimism, a return to normal is unlikely in the short-term. What will this week’s half-year results mean for the easyJet share price?
EasyJet share price recovering steadily after pandemic sell-off
After the pandemic hit, the easyJet share price took a massive dip in March 2020, plummeting from just under 1,500p to below 475p by 3 April. Since then, the shares have experienced a turbulent time, but have seen a steady upward trend and made gains, which now sees the easyJet share price at just over 1,000p.
Some optimism has returned this week, as the UK’s travel ban was lifted on 17 May and commercial flights to various destinations were made possible again. EasyJet will run 186 flights to ‘green list’ destinations (that don’t require quarantine after visiting) this month, including Faro and Gibraltar, as booking surged following the UK government’s release of its initial ‘traffic light’ system.
EasyJet’s range of short-haul could stand them in better stead for a quick recovery than major long-haul operators, as flights to closer destinations seem set to improve in a shorter timeframe than trips to farther-flung places.
However, as restrictions are only expected to be eased slowly, any expectations of a quick rebound look increasingly unlikely, despite the recent rise in the easyJet share price reflecting optimism that the next two quarters could well see a significant improvement.
Huge fall in revenue expected
At its most recent trading update, easyJet said it expected to see winter losses of between £690m and £730m, as total revenue fell 90% to £235m. Only 20% of pre-pandemic capacity is expected to be flown in the upcoming quarter.
While easyJet still has unrestricted access to £2.9bn of liquidity having raised over £5.5bn since the start of the pandemic, the airline is still no nearer to knowing when they can expect to resume any semblance of a normal service.
What is the outlook for the easyJet share price?
In November 2020, easyJet chief executive Johan Lundgren said: “easyJet has not only withstood the impact of the pandemic, but now has an unparalleled foundation upon which to emerge strongly from the crisis.”
That was before the second major lockdown began, which had a further impact on easyJet’s plans. This week’s half-year update should tell us whether easyJet management are any more confident about the outlook than they were a month ago. Cash burn has been slowed down, falling to £470m in Q2, while the airline still has the option to sell more of its aircraft and lease them back. So far, EasyJet has sold and leased back around 43 aircraft in order to raise extra cash. This leaves another 141 fully owned and unencumbered aircraft, which represents over 40% of its remaining fleet, so it certainly has plenty of room to boost its liquidity.
EasyJet will release its half-year results on Thursday at 7am. How will the easyJet share price react?
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