EasyJet has announced a half-year loss of £701m, serving to reinforce why the airline is so anxious to restart a semblance of a normal summer service in order to limit the damage to both revenue and the easyJet share price.
First-half revenue came in slightly higher than the April guidance at £240m, with passenger numbers down 89.4% to 4.1m, around 14% of 2019 levels, while the load factor fell to 63.7%, missing expectations of 65.5%.
Despite spending the majority of the last six months with most of their fleet grounded, easyJet’s share price has more than doubled from its 2020 October lows, in the hope perhaps that the travel sector would be able to enjoy a summer rebound as the weather warms up.
EasyJet share price to face Q3 difficulties?
At its trading update in April, easyJet had said it expected to see winter losses of between £690m and £730m, as total revenue fell 90% to £235m.
For all the talk of pent-up demand, the outlook for Q3 doesn’t look much better, with the airline saying it only expects to fly around 15% of its 2019 capacity, with the hope that this would increase from June onwards as the next stage of lockdown restrictions are expected to be eased.
This would equate to three quarters of capacity below 20% and it's unlikely Q4 would be much better as the weather gets colder, which helps explain why easyJet declined to offer any guidance beyond Q3.
Second successive annual loss looks likely
EasyJet has made progress on reducing its costs, which have fallen 59% to £844m, and slowing its cash burn, but even with the improvements here it's now pretty certain that the airline is heading for its second successive annual loss, having posted its first ever loss last year.
At the beginning of the year there was a great deal of optimism, that with the vaccine programme well advanced, there might be a semblance of a return to normal as the summer approached. This optimism now looks rather misplaced.
Unfortunately, few people reckoned on another variant, as well as the rather slow rollout of the vaccine programme in Europe. This has served to limit the number of options when it comes to travel destinations, with Portugal so far the only country on the government's green list.
Uncertainty set to take a further toll
While the airline still has unrestricted access to £2.9bn of liquidity, having raised over £5.5bn since the start of the pandemic, easyJet, along with the rest of the airline sector is still no nearer to knowing when it can expect to resume any semblance of a normal service, with most of their planes grounded due to travel restrictions.
CEO Johan Lundgren urged the government to open travel to more amber-list countries, so that more services can be restarted, however it's not immediately clear whether that would help that much given the testing and quarantining that would have to be done before departure and arrival to any amber list country destination.
In terms of raising extra liquidity, in addition to what has been raised so far, the airline 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 free up some extra cash if it needs to.