City analysts says rising cases of COVID in mainland Europe means easyJet, the second-biggest airline at Liverpool Airport, may have to slash its fares to stay competitive this winter. Tony McDonough reports
European airline easyJet may have to slash fares this winter if it wants to persuade people to keep flying amid rising cases of COVID and possible lockdowns.
Stock market analysts Kepler Cheuvreux said with the pandemic showing signs of a resurgence in some parts of continental Europe, people may become more reluctant to book flights over the winter period.
It expects easyJet, which operates 25 routes out of Liverpool John Lennon Airport and is second only to Ryanair on Merseyside, to operate at around 50% capacity between now and the spring as it continues its recovery from the the pandemic.
But the analysts warn that the carrier would need a more aggressive fares policy if it wanted to avoid a stalling of that recovery. Kepler Cheuvreux said: “We consider deteriorating traffic trends coupled with slot requirements at European capacity-constrained airports to be increasingly likely during the current winter flight schedule.
“With increasing number of infections, lockdowns being reintroduced in some countries, we see the risk easyJet will have to incentivise demand and stimulate load factors with significant fare discounts.”
In October easyJet said it expected pre-tax losses to exceed £1bn for the second year in a row for the 12 months to September 30, 2021. Prior to the pandemic, the company had never recorded a full-year loss. This all changed in the year to September 30, 2020, when the pre-tax loss hit £1.2bn.
In the early weeks of the pandemic in 2020 the European aviation sector ground to a halt. As a result easyJet saw its full-year passenger numbers plummet 50% to 48.1m. Over the past year or so the airline has taken steps to shore up its battered balance sheet.
Earlier this year it took out a five-year £1.4bn loan underwritten by a syndicate of banks and supported by a partial guarantee from UK Export Finance under the Government’s Export Development Guarantee scheme. It also raised £1.2bn via a rights issue as well as more than £300m through the sale and leaseback of a number of aircraft.
In the final three months of this year easyJet is adding 100,000 seats. As the Government has lifted travel restrictions it has seen a surge in bookings to destinations such as Egypt, Turkey and the Canary Islands. However, with COVID cases rising again in Europe more turbulence could be on the way.