The easyJet [EZJ.LSE] share price fell more than 2% this morning after the company posted a second successive full-year loss in excess of £1bn.
EasyJet share price falls on vaccine concerns, weaker bookings
The emergence of a new Covid variant caps a disappointing year for airlines, as the optimism around vaccinations and reopening has given way to concerns over new variants and fresh travel restrictions. Today's share price decline means the easyJet share price is now down by almost a quarter year-to-date.
The stock's 2% drop this morning was less a reaction to the losses that easyJet announced in its latest financial update today, as these were expected, but largely because of comments made by Moderna CEO Stephane Bancel that existing vaccines could struggle against the Omicron variant.
EasyJet boss Johan Lundgren also acknowledged some "weakening" in bookings in the near-term, as concerned passengers look to rearrange upcoming trips. EasyJet has extended its fee-free rebooking offer until March. Lundgren also commented that, although it will take time for the full impact of the new variant to emerge, the effect on bookings has so far not been as pronounced as when previous restrictions were imposed. Strong pent-up demand for travel has left bookings for next summer largely unaffcted, he added.
Nevertheless, the latest coronavirus developments come as a blow to an airline industry which had hoped that 2021 would bring about a return to normality after the pandemic kept planes grounded. EasyJet struggled to meet its quarterly guidance in the year to September, as its planes flew at less than 20% capacity through the first three quarters of the year.
As a result, easyJet's share price has tumbled. Since early-year optimism lifted the shares above 900p in May, the stock has descended to its current level below 500p. To shore up its finances, easyJet carried out another rights issue in September, its second in 18 months, as the company sold shares worth £1.2bn, helping reduce debts from £2bn to £900m.
EasyJet annual loss tops £1bn again
Today’s full-year numbers put pre-tax losses at £1.14bn, a second successive annual loss after the previous year's loss of £1.27bn. One positive caveat was that losses in the second half of the company's financial year came in lower than the first-half loss of £701m.
Total revenue for the year to September came in at £1.46bn, down 52% year-on-year, largely because the first half of the year-ago period mostly preceded the impact of Covid. Full-year flight capacity for the year to September was 28.2% of 2019 levels, as easyJet carried 20.4m passengers. The airline also reported that it has cut costs by almost a third to £2.23bn, down from £3.1bn.
Since the pandemic hit, easyJet has raised more than £5.5bn to bolster its finances. It has also sold and leased back 43 of its aircraft to raise extra cash. The company is still burning through cash at an average of £36m a week, but has access to £4.4bn in liquidity, mostly consisting of cash and equivalents.
The airline has increased its fleet by 25 aircraft to meet pent-up demand in the year ahead, with slots added at Gatwick, Porto, Lisbon and Milan’s Linate airports. The airline is also 55% hedged for fuel at just below $500 per metric tonne.
Bookings for next summer so far unaffected by new variant
For the first quarter of the year beginning October 2021, easyJet said it is seeing a softening of demand due to the threat of new variants. However, bookings for next summer are holding up well, according to the company. It expects capacity to return to pre-pandemic levels by Q4. That said, easyJet outlined a similar expectation a year ago, and we know how that turned out.
EasyJet said it still expects to fly at 70% capacity in Q2, though it downgraded expectations for Q1 capacity to 65% from the 70% that was forecast a couple of months ago. This revised estimate is unsurprising, given recent problems caused by the Delta variant and the emergence of the Omicron variant.
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