Pandemic pushes EasyJet to first loss in 25-year history

Budget airline posts £1.3 billion loss in one year

Air travel has plummeted during the pandemic. Reuters

EasyJet plunged to a £1.27 billion ($1.68 billion) loss in the 12 months to the end of September, showing the extent of the impact of the pandemic on the British low-cost airline, which had never before made an annual loss in its 25-year history.

With travel at anaemic levels during the second wave of the virus in Europe, easyJet said quarterly cash burn, a key metric watched by investors keen to see costs reduced, improved to £651 million from £774 million in the previous period.

EasyJet also said on Tuesday that after talks with the Bank of England and the UK government's finance ministry, it will extend its borrowing under a Covid Corporate Finance Facility, staggering repayments and relieving pressure on its balance sheet.

The airline has repeatedly said it is keeping its liquidity position under review as the outlook for travel has worsened.

The reported annual loss before tax of £1.27 billion compared to the £430 million profit it made in the previous year. On a headline basis, it made a loss of £835 million, in line with an October forecast.

It is currently flying around 20 per cent of planned capacity and said short-term uncertainty was such that it could not provide any financial guidance.

To survive the pandemic so far, the airline has raised over £1 billion from sale and leaseback deals for its aircraft, taken a £600 million loan from the government, cut 4,500 jobs, and tapped shareholders for £419 million, and has said it could need to do more.

Speaking on BBC's Radio 4 Today programme, EasyJet chief executive Johan Lundgren said news that two vaccines were proven at being effective was positive, but that it was too early to tell when the airline industry would recover.

"We know that [the vaccine] is going to be a very critical part of the recovery going forward," he said.

"But it’s not only about the vaccine, we need to have testing in place, we need to have a refined quarantine system."

Adam Vettese, analyst at multi-asset investment platform eToro, said the aviation industry has has its "toughest year" due to the Covid disruption.

“The situation has been so dire that there will almost certainly be airlines out there at the moment that wonder if they will survive without a swift return to normality. However, easyJet is not one of those. Despite posting its first ever loss, it is incredibly bullish about its prospects," he said.

“While its debt has piled up during coronavirus, easyJet has slashed costs, has plenty of access to liquidity and is cherry-picking the flights it knows will make it money while capacity is reduced. For those reasons it is among the strongest of European carriers and therefore will weather this storm better than most."