EasyJet Warns of First-Ever Annual Loss -- $1 Billion

U.K.-based low-cost carrier easyJet warned it's on track to report a loss of more than $1 billion for the year, its first-ever full-year loss. In an update to investors, CEO Johan Lundgren said passenger demand for the full year will be half of what the carrier had expected.

Lundgren reiterated a call for the U.K. government to provide more aid to the industry. "Aviation continues to face the most severe threat in its history and the U.K. government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes," he said.

The government has offered loans to airlines, but has not offered a comprehensive stimulus package, such as those in the U.S., Singapore, and Germany, among other countries. British Airways, easyJet, and Ryanair are among the airlines that have taken government-backed loans through the U.K.'s Covid Corporate Financing Facility.

EasyJet, like many European airlines, went into the summer optimistic that a recovery was underway. The carrier flew 24% of its planned capacity in July, but this rose to operating more than half of its planned flights in August. Capacity and demand dropped off in September, and the airline plans to fly only 38% of its planned capacity in the fourth quarter.

But the first quarter of next year will be even leaner. "Based on current travel restrictions we expect to fly [circa] 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," Lundgren said.

Demand to leisure destinations over the summer was strong, but the imposition of more travel restrictions by several European countries in response to resurgent coronavirus infections has hampered demand in the autumn, easyJet said.

The carrier is working with its unions in the U.K, Germany, Portugal, and Switzerland to reduce headcount further. EasyJet plans to reduce its workforce by 30%, and said talks with unions had been "productive." Talks with unions in the U.K. have concluded, and are ongoing with unions in Europe. Several European countries have generous support programs for furloghed employees, the company noted. The carrier also is planning to offer more voluntary separation and reduced-work hour plans to cut labor costs.

Through cost-cutting and by raising funds through the financial markets, easyJet estimates it has enough liquidity to operate "through the winter months." It has the option of raising more funds through aircraft sale-leaseback deals if needed, Lundgren said.

"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 minimize losses and cash burn during the first half of 2021."