Airlines in flight for cash as fight for survival becomes the reality

European airlines have moved further into survival mode, with EasyJet grounding its entire fleet and temporarily laying off 4,000 cabin crew; and Aer Lingus owner IAG altering its lending terms to give it wriggle room to weather the storm caused by the Covid-19 outbreak.
Airlines in flight for cash as fight for survival becomes the reality

European airlines have moved further into survival mode, with EasyJet grounding its entire fleet and temporarily laying off 4,000 cabin crew; and Aer Lingus owner IAG altering its lending terms to give it wriggle room to weather the storm caused by the Covid-19 outbreak.

IAG — which also owns British Airways and Spanish carriers Iberia and Vueling — has extended its revolving credit facility by a year to June 2021. Just under $1.4bn (€1.27bn) is available under the facility, and IAG’s total cash and undrawn lending facilities currently total €9.3bn.

The global health crisis has brought European air travel to a standstill, leaving airlines facing a struggle for survival.

EasyJet has grounded all of its 344 planes, with no indication of when they might fly again. It is laying off cabin crew for two months, but their pay will largely be covered by the UK’s job retention scheme.

“We think the group [EasyJet] has enough liquidity to manage a short suspension of European air travel but if the disruption proves prolonged, or the recovery is sluggish, EasyJet could be in real trouble,” said Hargreaves Lansdown analyst William Ryder.

EasyJet said it was trying to reduce payments, including those on aircraft. The airline said it was focused on short-term liquidity, including removing costs from the business and working with suppliers to defer and reduce payments.

It said grounding its fleet removed significant costs and that it was continuing to talk to UK pilots union BALPA over a potential deal with pilots.

EasyJet’s biggest shareholder Stelios Haji-Ioannou has called on the airline to cancel or renegotiate a £4.5bn order for 107 Airbus planes and wants the airline to tap shareholders for more money.

Elsewhere, small British airline Loganair has said it will seek state support.

Ryanair, meanwhile, has 90% of its fleet grounded and has extended the time during which the vast majority of its planes will be out of action by a week until April 9.

“We are working with EU Governments to try to keep some minimum flight links open for emergency reasons, even though the passenger loads on these flights will be very low,” Ryanair said.

In a recent note, Davy said Ryanair and IAG were well-placed to survive in a European airline industry which could see its number of carriers halved after the world recovers from the coronavirus.

Meanwhile, shares in Woodie’s DIY owner Grafton Group fell by over 3% on the back of the retail chain having to temporarily close its doors and Grafton significantly scaling down its distribution operations in the Republic. The group has not laid off any staff.

Davy, meanwhile, has forecast as 50% sales drop this year for Primark, which trades here as Penneys, should its stores remain closed for six months.

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