Shares in budget airline EasyJet (EZJ) fell 2.4% to 758.6p as it swung to a huge annual loss for the first time in its 25-year history due to the impact of the coronavirus pandemic.
For the year ended 30 September, EasyJet reported a pre-tax loss of £1.27 billion, compared with a profit of £430 million year-on-year, as revenue decreased by 52.9% to £3.01 billion.
Total airline revenue per seat decreased by 10.6% to £54.35 and passenger numbers for the year decreased by 50.0% to 48.1 million.
STRONG LOAD FACTOR BUT HIGHER COSTS
On a more positive note EasyJet was in theory able to fly more profitably on the planes it did run with its passenger load factor (i.e. how full the planes are) over the year dropping only 4.3% to 87.2%.
For reference the International Air Transport Association (IATA) estimates, based on a sample of 122 airlines, that airlines need a load factor of 77% on average to break even.
However, it was also hit by a £311 million charge on the ineffectiveness of its fuel hedging as the grounding of planes earlier this year defeated the purpose of its fixed-price contracts for jet fuel.
The airline also struggled to keep on a lid on expenses with its cost per available seat kilometre excluding fuel rising 28.1% to 5.01p, compared to revenue per available seat kilometre of 4.82p, a 12.4% drop on last year.
The company did not recommend the payment of a final dividend, citing the loss for the year.
EasyJet’s cash position at 30 September stood at £2.3 billion, while due to the measures taken during the pandemic net debt stood at £1.1 billion, a big increase to its 2019 net debt level of £326 million.
‘900% INCREASE IN SALES’
Looking ahead, EasyJet maintained expectations to fly no more than about 20% of planned capacity for the first quarter of 2021, but insisted that underlying demand remains strong.
‘We know our customers want to fly with us and underlying demand is strong, as evidenced by the 900% increase in sales in the days following the lifting of quarantine for the Canary Islands in October,’ EasyJet said.
AJ Bell investment director Russ Mould said being stuck inside during the autumn and winter periods could indeed fuel pent-up demand for wanting to go on holiday, and that once lockdown restrictions start to ease again a more optimistic consumer may well feel the time is right to book a break away.
But he added, ‘EasyJet needs that event to happen sooner rather than later so cash inflows can start to radically improve. Even when demand picks up, EasyJet faces the prospect of intense price competition in the industry as airlines rush to attract business to aid their recovery.
‘Investors have been bidding the shares up in recent weeks on hopes that an imminent vaccine will revive society and therefore the airline sector. Unfortunately for EasyJet its financial situation will still remain fragile even once business picks up as any recovery will take a long time to return the sector to pre-Covid health.’
