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EasyJet warns of £1bn loss due to COVID pandemic

·3-min read
EasyJet aircrafts are pictured at Faro airport in Algarve, south of Portugal, on June 15, 2021. - British airline EasyJet inaugurated a new base in Faro, in southern Portugal, shortly after the opening of another in Malaga, in southern Spain, betting on the resumption of tourism. (Photo by PATRICIA DE MELO MOREIRA / AFP) (Photo by PATRICIA DE MELO MOREIRA/AFP via Getty Images)
EasyJet said it became the second largest airline operating in Europe over the summer, with cash flow also turning positive. Photo: Patricia de Melo Moreira/AFP via Getty Images

EasyJet (EZJ.L) announced on Tuesday that it expects to make a pre-tax loss of between £1.14bn ($1.55bn) and £1.18bn this year, but said that its recovery was under way.

The budget airline, which last month turned down a takeover bid from WizzAir (WIZZ.L), saw a jump in the number of passengers flying since travel restrictions eased, but international travel was still waning at just 32% of pre-COVID levels.

As the business ramped up its flying in recent months, losses halved over the summer when compared to the same period last year.

The firm said it became the second largest airline operating in Europe over the summer, with cash flow also turning positive.

EasyJet shares slumped on Tuesday. Chart: Yahoo Finance
EasyJet shares slumped on Tuesday. Chart: Yahoo Finance

EasyJet said it had seen strong demand for popular winter sun destinations, such as Egypt and Turkey, after the UK government relaxed some of its rules, and that it would boost its capacity to around 70% of pre-COVID levels this quarter. Some 100,000 new seats will be added for winter holidaymakers.

October half-term bookings have also been strong, the group said, particularly to the Canary Islands where capacity increased to 140% of 2019 levels. Bookings for the first half of the year are double those of the same time in 2020.

During its fourth quarter it flew 17.3 million seats, with good performance on intra-European and UK domestic routes.

Read more: Heathrow airport warns UK air travel recovery lagging EU rivals as bookings jump

“It is clear recovery is under way,” easyJet CEO Johan Lundgren said. “Business travel is returning to easyJet with corporates and SMEs attracted by our value, network and approach to sustainability.

“We have seen city breaks beginning to return alongside growing demand for leisure travel from customers looking for flights and holidays to popular winter sun destinations.”

As customers book closer to their planned travel dates due to the “continued level of short-term uncertainty", easyJet added that it was difficult to provide a forecast for the 2022 financial year.

The group will not be recommending a dividend when full-year results are published on 30 November.

Shares fell as much as 2.4% in London on the back of the news.

Read more: Airline stocks rise on reports UK set to relax travel rules

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Clearly commercial aviation is slowly emerging from the deep freeze of the last 18 months. The return of passengers to planes, together with a brutal cost cutting regime, hasn’t been enough to push profits into the black, but is set to deliver a vast improvement on last year and full year results look likely to come in better than the market expected.”

He added: “Put improved demand together with a rights issue reinforced balance sheet, and easyJet will be feeling more optimistic about the new financial year than at any time since the pandemic began. 

"All being well the worst is behind it, and while there may be turbulence ahead, the days when airline investors would have been well advised to keep an emergency parachute close at hand seem to be over.”

Watch: Should I book a holiday in 2021?

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