Airlines were primed to “stay alert” for an extended period of pressure on the industry after Boris Johnson’s lockdown message over the weekend.
The Prime Minister confirmed yesterday that most travellers into the UK will be required to self-isolate for 14 days of quarantine after arrival.
Willie Walsh, chief executive of British Airways owner International Consolidated Airlines Group (LON:IAG), today told parliament’s transport committee that these changes were “definitely going to make it worse” for the industry.
IAG, which runs the Aer Lingus that came in for criticism over its crowded first flight from Belfast to London, has been planning to resume BA flights in July.
“We’ve probably exhausted every avenue that I can think of at this stage to shore up our liquidity. The cash has been reducing significantly and that will be the case as we go through May, June and July,” he said, though he said IAG did not need any extra bailout from the government.
Walsh added: “The industry has changed and anybody who believes that we’re going back to the way things were in 2019 misunderstands the scale of the challenge that is being faced.”
As well as continuing to burn sizeable amounts of cash through the summer, analysts at Citigroup said airlines will also face increased demand for immediate cash refunds to consumers.
“The output from both of these points is that further sizeable capital raises will most likely ensue,” the analysts said, predicting that easyJet PLC (LON:EZJ) and IAG “the most likely candidates” of the listed airlines.
EasyJet already warned that it is likely to need £700mln to £1bn of capital, versus a market capitalisation that is now around £2bn.
“Having not tapped the equity markets early in this crisis, we feel that the terms may now not be as favourable,” the analysts said.
Making matter worse for the orange-branded budget airline, the board faces a big shareholder vote instigated by 34% shareholder Stelios Haji-Ioannou at the end of the month.
Credit Suisse analysts slashed their target price by more than a fifth to 746p as they now forecast passenger numbers will fall 92% in the second half of the year, driving a full-year loss of £746mln.
The Swiss bank’s analysts, who have retained their ‘outperform’ rating as “structural opportunities” are eyed, now predict 50% lower capacity this coming winter, the first half of easyJet’s 2021 financial year, and that summer 2021 capacity and traffic levels will be 25% lower compared to 2019.
This results in a new forecast for a £138mln profits before tax for 2021, on revenues down 42% compared to 2019, having previously forecast PBT £449m on revenues only 1% below 2019.
Yet Credit Suisse continues to see easyJet as “well positioned to navigate the crisis, and achieve structural gains as competitors suffer more”.
Shares in easyJet were one of the biggest fallers on the FTSE 100 on Monday afternoon, down 8% to 488.7p, while IAG was down almost 4% at 183.65p.
Published at Mon, 11 May 2020 14:40:00 +0000-Airlines tumble as analysts cut forecasts after Boris Johnson’s speech