EasyJet cuts Q2 capacity on new Covid restrictions as revenues plunge
Airline chief calls for clarity on when travel rules will be relaxed
Budget airline easyJet said it expected to fly no more than 10% of 2019 capacity in the second quarter as tighter coronavirus restrictions triggered an 88% slump in revenue for the three months to December 31.
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The company, hammered by the slump in passenger numbers due to Covid-19, said first quarter group revenue plummeted to £165m, while passenger numbers fell 87% to 2.9 million.
Chief executive Johan Lundgren called on governments to say how and when travel restrictions would be removed to allow passengers to make bookings, saying easyJet was confident there was pent up demand for holidays.
“The key thing is really that they have a plan and as soon as possible let people know and how they’re going to unwind these things,” he said, while also attacking government ministers for advising people against booking summer holidays abroad due to the pandemic.
Lundgren said he had written to ministers to express concerns about the remarks. “It would be much better to tell people they must check their airlines’ cancellation policies. Not tell them not to book at all,” he said.
EasyJet said cost cuts had seen cash burn fall to £40m per week in a fully grounded scenario. Its bolstered the balance sheet earlier in January through a $1.87bn loan backed by a partial guarantee from the UK government.
"At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any further financial guidance for the 2021 financial year. Customers are booking at a later stage and visibility remains limited," the company said on Thursday.
EasyJet faces an even tougher time in its key UK market after the government on Wednesday introduced new measures on the travel industry, including demanding that passengers justify why they are leaving the country.
TIGHTER RULES CAUSING UNCERTAINTY
Airline chiefs have been furious at government’s delays to implement pre-flight screening, which has only just begun after months of lobbying from the industry,
"These restrictions and the continued uncertainty regarding their future removal are the main driver of decreased customer demand," easyJet said.
"Subject to continued progress on vaccinations, together with the future relaxation of government travel restrictions across Europe, we are anticipating a release of pent-up demand for travel."
The company added that research it conducted among 5,000 European consumers between January 8 and 20 this year showed that 65% have or plan to make a travel booking in 2021, with existing easyJet customers even more likely to travel rising to almost three quarters planning a trip this year.
AJ Bell investment director Russ Mould said that despite the costs cutting and new financing, the airline was still enduring "real pain".
"This is a race EasyJet is never going to win, hence the need to flex borrowings, and talk of pent-up demand could be moot if most of us are prevented from jetting off on holiday this summer as governments prioritise getting the pandemic under control."
“Another problem for EasyJet is that some of its rivals, namely Wizz Air and Ryanair, operate with lower costs and therefore have greater flexibility to put capacity back online when demand does eventually return."
“For now, the market seems confident air travel will eventually recover to its pre-Covid levels. EasyJet could be treated quite differently by creditors and shareholders if that assessment changes and a more permanent impact on the sector is expected.”