After suffering a full-year loss of £1.2bn easyJet has now secured a £1.4bn Government-backed loan to shore up its balance sheet. Tony McDonough reports
Low-cost airline easyJet, with has lost more than £1bn during the COVID-19 pandemic, has secured a £1.4bn Government-backed loan to shore up its balance sheet.
Aviation has taken a battering from the pandemic with planes across the world grounded for weeks at a time. In November, easyJet reported a pre-tax loss for the 12 months to September 30, 2020, of £1.2bn. It was the first full-year loss in its history.
In normal times the carrier operates more than 30 routes out of Liverpool John Lennon Airport but since March last year it has slashed the number of flights across its network. Passenger numbers for the full year plummeted 50% to 48.1m.
And, with the COVID crisis set to continue well into 2021, easyJet has taken steps to shore up its balance sheet. It has taken 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.
The Export Development Guarantee scheme for commercial loans is available to qualifying UK companies. It does not carry preferential rates or require state aid approval, and contains some restrictive covenants, one of which will mean easyJet will not be able to pay a dividend to shareholders for five years.
The facility will be secured on aircraft and will significantly extend and improve easyJet’s debt maturity profile and strengthen easyJet’s balance sheet by increasing the level of available liquidity.
On Monday easyJet also said that it would repay and cancel part of its short-term debt during the first three months of 2021. This includes its £369m overdraft facility and another £400m loan.
Johan Lundgren, easyJet chief executive, said: “This facility will significantly extend and improve easyJet’s debt maturity profile and increase the level of liquidity available. easyJet has taken swift and decisive action, having now secured more than £4.5bn in liquidity since the beginning of the pandemic.
“The loan facility, provided on commercial terms, reflects constructive and collaborative work between easyJet, multiple banks and UK Export Finance. With our unmatched short haul network and trusted brand, easyJet is well positioned as customers return to the skies in 2021.”
Easyjet main low-cost rival, Ryanair, is also struggling with passenger numbers and last week further slashed its full-year passenger forecasts. However, with the COVID vaccine now being rolled out, Ryanair chief executive Michael O’Leary believes the carrier is in a stronger position than its rivals to take full advantage of the recovery.