EasyJet will fly just a quarter of its planned capacity in the three months to December as it warned of annual losses of up to £845 million.
The UK budget carrier, which has raised £2.4 billion since the start of the Covid-19 pandemic, said it remained focused on “cash generative flying” over the winter to minimise losses and cash burn.
Pre-tax losses of between £815 million and £845 million are expected for the airline’s financial year which ended on September 30 as annual passenger numbers halved to 48 million with capacity slashed by 48% to 55 million seats.
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Chief executive Johan Lundgren said: “Aviation continues to face the most severe threat in its history and the UK government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes.
“EasyJet came into this crisis in a very strong position thanks to its strong balance sheet and consistent profitability.
“This year will be the first time in its history that easyJet has ever made a full year loss.”
In a trading update today, the airline said: “Based on current travel restrictions in the markets in which we operate, easyJet expects to fly circa 25% of planned capacity for Q1 2021.
“We will cover the majority of our pre-existing network with reduced frequency, taking advantage of the European slot waiver mechanism put in place for this winter to best match our capacity against the lower demand that currently exists.
“We remain focused on cash generative flying over the winter season in order to minimise losses during the first half.
“We retain the flexibility to ramp capacity back up quickly when we see demand return.
“At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any financial guidance for the 2021 financial year.”
EasyJet carried more than nine million passengers in the peak summer three months – but that number was down 67% from 28 million flown in the same period last year.
Just 38% of planned capacity was flown in the period.
“Flying peaked in August and then tapered significantly during September when customer demand was materially affected by changes in government travel guidance and quarantine rules,” the airline said.
“Customers are booking at a very late stage and visibility remains limited.”
The airline added: “EasyJet has operated a disciplined flying programme over the summer alongside launching a major restructuring programme.
“EasyJet has raised over £2.4 billion in cash since the beginning of the Covid-19 pandemic and is well positioned to weather the ongoing challenging environment and capitalise on a recovery, once government travel restrictions are eased.
“With a cash position at 30 September 2020 of c.£2.3 billion, combined with the actions which we are taking on thinning our routes in Q1 and removing cost, it will enable us to conserve cash over the winter months.
“As previously indicated, easyJet will continue to review its liquidity position on a regular basis and will continue to assess further funding opportunities, including sale and lease backs, should the need arise.”
UK talks with management and administration staff, cabin crew and pilots over staff cuts of 30% have now concluded, the airline disclosed.
“Removing cost from the business is a key management priority and will position easyJet to emerge from the pandemic in an even more competitive position for the long term,” the airline added.
“As part of this restructuring programme easyJet launched an employee consultation process on proposals to reduce staff numbers by up to 30%, including optimising our network and bases, improving productivity and promoting more efficient ways of working.
“Discussions with the relevant unions and works councils were constructive and have resulted in greatly increased seasonal and flexible working patterns whilst avoiding the need for compulsory redundancies,” the airline said.
“This will make a material difference to our annual cost base and cash burn, particularly over the winter months.
“The targeted UK cost savings have been achieved, plus our future UK winter crew cost base has the ability to be flexed down materially in line with demand.
“Consultation processes are underway in Germany, Portugal and Switzerland.
A restructuring charge of around £120 million has been taken relating to restructuring.
“The continuing availability of furlough schemes in continental European markets, in addition to the more variable contracts which were proposed by our unions in the UK, will enable us to conserve cash over the winter months whilst thinning our schedules far more than ever before to allow us to match capacity with customer demand,” the airline added.
Lundgren said: “At the beginning of this year, no one could have imagined the impact the pandemic has had on the industry.
“EasyJet has adapted and risen to the challenges presented by the pandemic by taking decisive actions to minimise losses, bolster liquidity and reduce cash burn while launching a major restructuring programme, having completed the UK consultation and commenced consultations in a number of key countries.
“Throughout we have taken a very prudent and conservative approach to capacity and this disciplined approach has seen us deliver a better than expected cash burn outcome in Q4 and will see us continue to focus on profitable flying over the winter season in order to minimise losses and cash burn during the first half of 2021.
“Based on current travel restrictions we expect to fly c.25% of planned capacity for Q1 2021 but we retain the flexibility to ramp up capacity quickly when we see demand return and early booking levels for summer ’21 are in line with previous years.
“I would like to thank everyone at easyJet who has worked tirelessly to manage through this period. I believe that, as a result, and due to our decisive response to the pandemic, we are well positioned for the recovery.”
