EasyJet grounds fleet: plans to build buffer against virus blow

London

EASYJET Plc grounded its entire fleet for at least two months after completing customer-repatriation flights, and said it's in talks to build a cash cushion to see it through the gap in business caused by the coronavirus.

The budget airline said it could not put a firm date on restarting commercial flights and 4,000 of its 9,000 UK staff will be furloughed initially for two months from April 1.

The restart scheduled flights will depend on government restrictions as well as demand, the UK discount carrier said in a statement on Monday. The shares fell as much as 7.5 per cent.

Airlines across the globe have been shocked into survival mode by the coronavirus, which has caused an abrupt halt in travel as countries cut off access to fight the disease. EasyJet too has been parking planes and idling staff to conserve cash, while operating a handful of repatriation flights.

Irish rival Ryanair Holdings Plc said last week it planned to ground over 90 per cent of its fleet in coming weeks.

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EasyJet said it completed repatriation flights on Sunday. Cabin crew will get 80 per cent of their pay under a government programme, and the company, based in Luton outside of London, is looking for ways to increase its access to cash. The carrier said it has a strong balance sheet and no maturities until 2022.

"We are in ongoing discussions with liquidity providers who recognise our strength of balance sheet and business model," EasyJet said.

EasyJet shares fell 6.5per cent as of 8.36am in London. The stock has sunk 61 per cent this year, dropping the carrier's market value to £2.2 billion (S$3.9 billion).

Airlines worldwide could take a US$252 billion hit to revenue this year from the pandemic, the International Air Transport Association said last week, warning of a pending liquidity crunch. The industry group urged governments to take "massive action" to keep the industry functioning.

EasyJet, whose debt is rated at BBB by S&P, has about £1.6 billion of cash and US$500 million of undrawn and committed credit facility, which expires in 2021, S&P Global said in a report on March 20. The carrier has about £250 million-£300 million in lease payments due every year, S&P said.

While the UK has ruled out a broad bailout for the aviation industry, it has created a £330 billion programme for state-guaranteed loans, which is open to companies with investment-grade credit ratings. EasyJet could also potentially raise cash with a sale-and-leaseback transaction to finance its fleet of Airbus SE A320 family jets, which S&P estimates is worth over £4 billion.

EasyJet separately is under pressure from its founder, Stelios Haji-Ioannou, who has urged the carrier for years to halt its expansion. He has threatened to remove the board if it doesn't cancel an order for more than 100 Airbus planes, Sky News reported.

The carrier is working with its suppliers to defer and reduce payments, where possible, including on aircraft expenditure, it said in a separate statement in response to the interview. BLOOMBERG.