EasyJet's share price is higher today on the back of a largely positive third-quarter update, as it confirmed that summer bookings are ahead of forecast.
Encouraging outlook boosts easyJet share price
The low-cost airline raised its fourth-quarter schedule to 40% of capacity, ahead of its previous guidance of 30%. It's worth noting that approximately four months ago, there were genuine fears the aviation sector could be out of commission for much of 2020, so the change in sentiment is remarkable. The group's optimism is encouraging, but traders are wondering whether it will be shared by holidaymakers. Easyjet is now predicting its Q4 loss will be smaller than previously expected. In July, the load factor was 84% as demand outstripped forecasts.
In light of the lockdowns and travel bans, the numbers for the third quarter were terrible. Revenue for the three-month period was a pitiful £7 million, and the headline loss before tax was £324.5 million. Total costs in the period tumbled by 79% to £332.1 million as operations were minimal. EasyJet had a cash burn of £774 million in the quarter, but its guidance was £1 billion, so once again the group is performing ahead of expectations.
Rights issue raises cash after first-loss loss
In late June, easyJet’s share price came under pressure after the company announced its first-half results and a rights issue plan in one go. The airline raised over £400 million by issuing new shares that were equivalent to just shy of 15% of the total share capital. The group has previously secured £1.7 billion in funding, and it went on to raise over £200 million from a sale and leaseback agreement from six aircraft.
The first-half results covered the six-month period up until the end of March, so only the tailend of the period was impacted by the travel ban. Total revenue ticked up by 1.6% to £2.38 billion. The demise of Thomas Cook was a factor in the group’s performance. However, the pre-tax loss was £353 million, including a one-off charge of £160 million attributed to Covid-19-related flight restrictions.
Just over a week ago, the UK government announced that anybody arriving in the UK from Spain must self-isolate for two weeks. Westminster took the decision because of a jump in the number of Covid-19 cases registered in Catalonia. The British government advised its citizens against non-essential travel to mainland Spain. The country in question is an extremely popular destination for British holidaymakers, and the update hit the airline.
Pandemic sees easyJet share price nosedive
EasyJet’s share price took a hammering as a result of the pandemic. Just before the health emergency kicked in, the stock was trading in the region of 1,500p, and the lows in March were not too far away from the 400p mark. There was a relief rally that ran until early June on the back of optimism that economies were reopening, and airlines started publishing stories about offering attractive summer sales.
The easyJet share price has been pushing lower for nearly two months, but if it holds above the 500p mark, it could claw back some of the ground lost recently.