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easyJet to cut 30% of staff as it predicts slow recovery from coronavirus crisis

Air traffic won’t recover fully from coronavirus disruption until 2023, the airline predicted

easyJet plc - EasyJet to cut 30% of staff as it predicts slow recovery from coronavirus

easyJet PLC (LON:EZJ) is to cut around 30% of its staff and slash its fleet size as it predicted flights won’t recover fully from the coronavirus (COVID-19) disruption until 2023.

The Luton-based airline, which has around 15,000 staff, said an employee consultation process about the job losses would start shortly.

Johan Lundgren, chief executive said in a statement: "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". 

easyJet said it now expects the size of its fleet to be 302 aircraft at the end of 2021, or 51 fewer than planned prior to COVID-19. This will include 3-4% of uncrewed standby aircraft.

The reduction in fleet size will be achieved through deferral of new aircraft deliveries and the re-delivery of leased aircraft, the firm added.

easyjet grounded its fleet at the end of March but said recently it intends to resume a limited service in the UK and France from June 15.

Further routes will be announced as customer demand increases, it said, and as government restrictions across Europe are relaxed.

Bookings for winter are well ahead of the equivalent point last year, the airline pointed out, and for the fourth quarter of the current financial year to September, it expects to fly 30% of the number flown a year ago.

The airline also said it intends to raise cash from the sale and leaseback of planes, which will raise £500mln-£650mln and added that assistance from the government’s COVID-19 scheme and loan drawdowns will give it an additional £2bn of liquidity.

Lundgren concluded: "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 June 15, we expect demand to build slowly, only returning to 2019 levels in about three years' time."

Some silver linings for shareholders 

EasyJet shares rose by almost 4% on the news to 734.6p.

William Ryder, an equity analyst at Hargreaves Lansdown, said: "One possible silver lining for shareholders is that the crisis provides airlines with a chance to reset their costs structures." 

"Airlines can renegotiate with airports and other suppliers, as well as reducing headcount and agreeing reductions in staff pay.

"That would make the surviving airlines leaner and more efficient than they were previously, even if social distancing measures prevent them from exploiting this in the near term." 

Whether the cost reductions feed through to ticket prices is another question, he added.

UBS, meanwhile, noted that  Ryanair intends to fly 40% of capacity in July and 60% in August, while easyJet intends to fly 30% of capacity over the summer quarter.

Even so, the broker retained a 'buy' rating and 1,320p twelve-month price target.

Stelios still not happy

Founder and 34% shareholder Stelios haji-Ioannou was predictably critical of the staff cuts, saying employees were being sacrificed for the sake of its £4.5bn contract with plane maker Airbus.

Ioannou has been waging a bitter campaign to get the Airbus deal scrapped, but was defeated last week at a special meeting he called to remove four directors including chief executive Johan Lundgren and chairman John Barton.

CFO Andrew Findlay also survived the vote but subsequently resigned on Tuesday.

 

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LSE:EZJ
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