ii view: easyJet excited about mid-May travel green light

As vaccination rollouts continue, mid-May could be turning point for the travel industry. 

First-half trading update to 31 March

• Passenger numbers fell 89% to 4.1 million
• Total revenue down 90% to £235 million
• Second quarter cash burn of £470 million
• Access to £2.9 billion of liquidity

Guidance:

• Expects a first-half pre-tax loss of between £690 and £730 million

Chief executive Johan Lundgren said: 

"easyJet has maintained a disciplined approach to flying during the first half of our financial year, resulting in a first half loss and cash burn better than expectations.  We continue to have access to significant levels of liquidity alongside easyJet's major cost-out programme which continues to deliver ongoing cost and efficiency benefits.  All of this positions us well to lead the recovery.

"We welcome the confirmation by the UK Government that international travel is on track to reopen as planned in mid-May. “

ii round-up:

Launched in 1995 and floated on the London Stock Exchange in 2000, easyJet (LSE:EZJ) is a short-haul European airline operating a fleet of Airbus aircraft.

In its last full pre-pandemic financial year to the end of September 2019, it flew 96.1 million passengers and recorded revenues of over £6 billion. 

For a round-up of this latest update, please click here.

ii view:

A wide selection of factors outside of the control of airlines themselves can influence performance. The weather, volcano smoke plumes, volatile fuel costs, terrorism and strike action are among them. But the Covid pandemic is now the worst crisis faced by the industry to date.

Measures taken by the Luton headquartered airline to battle the pandemic include cutting staff numbers by around a third and selling and leasing back assets such as planes and buildings. For the year to the end of September, easyJet reported a headline pre-tax loss of £835 million. The airline has raised over £5.5 billion since the start of the Covid-19 crisis. 

For investors, a heavy focus on costs and better than expected cash burn during this latest period offer reassurance. Liquidity of £2.9 billion and a hoped-for return of business come May also both offer positives. However, the degree of outlook uncertainty is still high. The pandemic is global and vaccine rollouts will need to be successful across Europe and not just in the UK. For now, and given a near doubling in the share price since late October, just prior to announced vaccination development success, a good dose of caution arguably remains sensible. 

Positives: 

• Liquidity is up from Q1 following a bond issue
• Cost savings continue to be made

Negatives:

• Market demand not expected by industry body to recover to 2019 levels until 2023
• Many factors outside of management’s control can impact performance

The average rating of stock market analysts:

Buy