TIDMEZJ
RNS Number : 1396O
easyJet PLC
28 May 2020
28 May 2020
easyJet plc
('easyJet')
easyJet updates the market on capacity, fleet and cost structure
plans
This announcement contains inside information.
Fleet and capacity
As announced last week, easyJet will resume flying on 15 June,
servicing a small number of routes where we believe there is
sufficient customer demand to support profitable flying. The
initial schedule will comprise mainly domestic flying in the UK and
France.
Further routes will be announced as customer demand increases
and government restrictions across Europe are relaxed. So far, the
booking trends on the resumed flights have been encouraging, and
the demand indications for summer 2020 are improving, albeit from a
low base. Bookings for winter are well ahead of the equivalent
point last year, which includes customers who are rebooking
coronavirus-disrupted flights for later dates.
Regarding fiscal Q4 2020 capacity, current plans are that
easyJet expects to fly around 30% of the planned capacity flown in
Q4 2019. This will continue to be evaluated reflecting changing
regulations and customer demand. Our commercial planning and data
science teams continue to work through different demand scenarios
as we move through summer and into winter 2020/21.
Looking further forward, easyJet expects its year end 2021 fleet
size to be at the bottom end of our fleet range at around 302
aircraft, which is 51 aircraft lower than the anticipated fleet
size for year end 2021 which was reported to the market prior to
Covid-19. This fleet number will include c.3-4% of un-crewed
standby aircraft during peak. The reduction in fleet size will be
achieved through the measures previously announced, including the
deferral of new aircraft deliveries and the re-delivery of leased
aircraft.
In line with IATA projections, easyJet believes that the levels
of market demand seen in 2019 are not likely to be reached again
until 2023. Our fleet deal with Airbus gives easyJet the
flexibility to react to the different circumstances and varying
demand environments which we may be faced with in the coming
period. However, as a low cost airline with a strong network, we
believe we are well placed to benefit from customers seeking great
value during that recovery period.
Rightsizing the airline and cost structure
To effect the restructure of our business, easyJet will shortly
launch an employee consultation process on proposals to reduce
staff numbers by up to 30%, reflecting the reduced fleet, the
optimisation of our network and bases, improved productivity as
well as the promotion of more efficient ways of working. We will
launch the consultation process in the coming days.
easyJet is also continuing to take decisive action in other cost
lines to remove cost and non-critical expenditure from the business
at every level. Some of the areas of focus are:
-- Airports & ground handling - our teams are in active
consultation with airports and ground handlers regarding revised
contracts to reduce costs
-- Maintenance - swift action was taken to defer time-dependent
maintenance spend due to reduced flying and our teams are
continuing discussions with suppliers
-- Selling and marketing - our commercial teams are
renegotiating spend with agencies and prioritising on the most
effective activities to optimise traffic and sales as we look to
restart flying
Whilst we have also undertaken cost cutting measures within
easyJet holidays, it maintains a high proportion of variable costs,
which will flex with revenue, and has no inventory risk.
We also continue to focus on minimising non-essential capex
spending. As previously outlined, our gross capex expectations are
for c.GBP900m in 2020 (of which c.GBP350m remaining in H2),
c.GBP600m in 2021 and c.GBP1,000m in 2022 (subject to auditor
review). The majority of the anticipated capital expenditure in
aggregate across H2 2020, FY2021 and FY2022 relates to aircraft
lease payments treated as capital cashflows under IFRS16 as well as
maintenance expenditure on existing aircraft and other IT related
capital expenditure. Maintenance expenditure will be subject to
restart phasing, the level of FY21 and FY22 flying and the quantity
of operating lease redeliveries to lessors. A significant level of
IT expenditure in FY21 and FY22 is discretionary and also subject
to further review.
Funding
As announced recently easyJet has signed two term loans
totalling c.GBP400m, with both loans maturing in 2022 and secured
against aircraft assets. We also successfully issued GBP600m of
Commercial Paper through the Covid Corporate Financing Facility
(CCFF) as well as fully drawing down on a $500m Revolving Credit
Facility, secured against aircraft assets.
Furthermore we continue to engage with an active lessor market
interested in acquiring aircraft from easyJet's fleet on a sale and
leaseback basis. Announcements on the progress of these engagements
will be made in due course, with anticipated proceeds now expected
to be in the range of GBP500-GBP650m.
Upon closure of all these funding initiatives, we expect to have
generated total additional liquidity of c.GBP2.0bn with our cash
burn during grounding being broadly in line with our estimates
published in April.
Biosecurity measures
Alongside the resumption of services, easyJet also announced a
range of new measures to help ensure the health and wellbeing of
both customers and crew onboard. These include:
-- Customers, cabin and ground crew will be required to wear masks
-- Enhanced cleaning and disinfection of easyJet aircraft
-- Availability of disinfectant wipes and hand sanitiser onboard
-- Initially, no onboard food service
The measures have been implemented in consultation with aviation
authorities ICAO and EASA, and in line with government and medical
advice.
Outlook
At this stage, given the level of continued uncertainty, it is
not possible to provide financial guidance for the remainder of the
FY20 financial year. However, as shown in this release, we continue
to take every step necessary to reduce cost, conserve cash burn,
enhance liquidity, protect the business and ensure it is best
positioned on our return to flying.
easyJet will release half year results (for the six months to 31
March 2020) on 30 June 2020.
Johan Lundgren, easyJet CEO said:
"We realise that these are very difficult times and we are
having to consider very difficult decisions which will impact our
people, but we want to protect as many jobs as we can for the
long-term.
"We remain focused on doing what is right for the company and
its long-term health and success, following the swift action we
have taken over the last three months to meet the challenges of the
virus. Although we will restart flying on 15 June, we expect demand
to build slowly, only returning to 2019 levels in about three
years' time.
"Against this backdrop, we are planning to reduce the size of
our fleet and to optimise the network and our bases. As a result,
we anticipate reducing staff numbers by up to 30% across the
business and we will continue to remove cost and non-critical
expenditure at every level. We will be launching an employee
consultation over the coming days.
"We want to ensure that we emerge from the pandemic an even more
competitive business than before, so that easyJet can thrive in the
future."
For further details please contact easyJet plc:
Institutional investors and analysts:
Michael Barker Investor Relations +44 (0)7985 890 939
Holly Grainger Investor Relations +44 (0)7583 101 913
Media:
Anna Knowles Corporate Communications +44 (0)7985 873 313
Edward Simpkins Finsbury +44 (0)7947 740 551 / (0)207 251 3801
Dorothy Burwell Finsbury +44 (0)7733 294 930
LEI: 2138001S47XKWIB7TH90
A copy of this Trading Statement is available at
http://corporate.easyjet.com/investors
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