EasyJet lands $1.87 billion state-backed loan as it looks to ease COVID cash crunch

EasyJet lands $1.87 billion state-backed loan as it looks to ease COVID cash crunch

Budget airline easyJet

secured a $1.87 billion loan on Monday as it looks to ease investor concerns about its balance sheet, which has been devastated by an unprecedented slump in global demand for travel amid the COVID-19 pandemic.

The five-year loan facility has been underwritten by a syndicate of banks and is backed by a program from U.K. Export Finance, which includes some restrictions around future dividend payments, easyJet

said in a statement on Monday.

Shares in easyJet fell more than 1% in London trading on Monday.

European airlines like easyJet, already struggling from the loss of millions of flights since the start of the pandemic in March, have come under increasing pressure in recent weeks, as a number of countries have banned flights from the U.K. due to fears over a highly-contagious strain of coronavirus.

Last week, Irish low-cost carrier Ryanair

cut its annual traffic forecast by around 5 million passengers and called on the government to accelerate the pace of vaccine rollouts.

The U.K. has already started administering the vaccine developed by U.S. drug company Pfizer

and its German partner BioNTech
as well as the one developed by U.K.-Swedish drug company AstraZeneca

together with the University of Oxford. On Friday, biotech Moderna’s

COVID-19 vaccine became the third to be authorized for emergency use by the U.K. regulator.

The government has set a target of vaccinating 14 million of those people most at risk by Feb. 15. On Sunday, the health secretary Matt Hancock said that 2 million vaccinations had been so far administered in the U.K. — including to a third of people aged over 80.

To tackle the sudden rise of the new strain of coronavirus, regular rapid testing for people without COVID-19 symptoms will be made available across England from this week, the government said on Monday.

Read: Pfizer–BioNTech vaccine appears to protect against U.K. and South African COVID-19 strains in lab, study finds

“This critical national infrastructure for testing will be so important as we ease restrictions, so we can use the confidence provided by accurate testing to find the virus and help us return to normal life.” Hancock said in a statement.

However, companies across those sectors worst hit by the pandemic, including airlines, hospitality and retail, are likely to remain under pressure until the autumn, when the government aims to complete testing of adults in the U.K.

Read: EasyJet pleads for government help as it reports first loss in its 25-year history

On Monday, easyJet

Chief Executive Johan Lundgren said the new $1.87 billion loan, which has been secured against aircraft, would “significantly” extend and improve easyJet’s debt maturity profile and increase the level of liquidity available.

The carrier, which has now secured more than £4.5 billion ($6 billion) in liquidity since the beginning of the pandemic, didn’t rule out taking further action.

“Few industries have been as hard hit during the pandemic as the airline business and its leading players are still scrambling for months to shore up their finances so they can come through the turbulence unscathed,” said AJ Bell investment director Russ Mould.

“This [the loan facility] will supplement the cash the company has raised for itself, via June’s £409 million share placing, the sale and lease-back of aircraft and new debt facilities and provide it with additional breathing room as it awaits the return of passengers to the skies,” he added.

Read: IAG swings to operating loss and cuts 4Q capacity

Easyjet’s announcement follows that of British Airways owner International Airlines Group
which in December secured a £2 billion loan also partly underwritten by U.K. Export Finance. IAG also said that month that it was also looking at other ways to raise more cash. 

From this week, flights into the U.K. will require travelers to show proof of a negative COVID test taken within 72 hours before landing.

Read: Top health official warns ‘worst weeks of the pandemic’ ahead for England, as Johnson is said to be considering stricter lockdown

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