easyJet takes a £600m loan from the Government

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easyJet has just announced that it has taken £600m in funding from the Government to keep it in the air (or not in the air, technically).

The money was raised using the Covid Corporate Financing Facility which allows companies to borrow money from taxpayers.  The terms are meant to match those that the company could have got a few weeks ago from the public markets, as opposed to what it would have to pay today.

easyJet has also told its banks that it intends to fully draw down a $500m loan which had been agreed but never actually executed.

The airline believes that, once these two loans are drawn at the end of this week, it will have £2.3 billion of cash on hand.

The airline also announced that it has agreed a furlough deal with its pilots, although details have not been released.  There is already a furlough deal in place for cabin crew and training instructors.

easyJet takes a £600m loan from the Government

Johan Lundgren, easyJet CEO said:

“We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure easyJet is in the best position to resume flying once the pandemic is over.  We are pleased that we have now reached agreement with both Unite and BALPA regarding furlough arrangements for UK-based easyJet pilots and crew.”

“Our current priority is to safeguard short term liquidity, so we have borrowed from the CCFF and drawn down on our Revolving Credit Facility in order to increase our liquidity in the event of a prolonged grounding of the fleet.”

“The CCFF provides businesses with access to funds at the commercial rates which were available before the coronavirus crisis and any UK company that had an investment grade rating before the crisis can apply for this funding.”

This doesn’t help Virgin Atlantic though …..

If you thought that this deal may be a template for a Virgin Atlantic funding package, it isn’t.  

Virgin Atlantic does not have any rated debt – investment grade or non-investment grade – as far as I can tell.  This means that it cannot access the Covid Corporate Financing Facility.

For non financial types, it is roughly equivalent to the Government taking over all credit card issuance, but only accepting new applications from people who already had cards and were repaying them promptly in the days before the Government took over.  If Virgin Atlantic had issued even a small amount of rated tradeable debt – £50m or so – as opposed to standard bank loans, it would qualify to raise money via the same route as easyJet.

The official regulatory news release is here.

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Comments

  1. presumably Stelios will be ok with this, as there’s no (obvious) risk that his Easyjet holding will be diluted by this arrangement ?

    • He won’t be happy if he thinks the cash is heading straight off to Airbus!

      • Richard Relief says:

        good move by EJ mgt but it doesn’t buy them time against the Stelios action – Stelios is too smart/ well-advised

        • What a pain he is to a business as frankly all his actions are driven by personal interests such as the dividend he trousered only a few days before.
          He has always hated fact EJ switched to Airbus aay from his beloved Boeing.
          Guess EJ are really his pcash cow as not much else he has started up seems to make any money.

  2. Aston100 says:

    Wonder if we’ll now see the reappearance of the online refund option on Easyjets website.

  3. melonfarmer says:

    Any governance strings attached? Threatening to fire your non-execs is a red flag.

  4. So they’ve borrowed money to be able to refund their customers?

    Nice trick if you can do it – would make me insolvent!

  5. mark taylor says:

    Just been told by email from easyjet that my flight to Krakow on 1st May from Edinburgh has not been cancelled & if I want to cancel then all I am entitled to are taxes refunded. Just trying to work out how they plan to get me there if they have no planes, no cabin crew and now no pilots….guess they just dont want to give me my money back.

    • They didn’t say they can get you there. They said it hasn’t been cancelled (yet). When it is you can get your refund…

    • TGLoyalty says:

      If you know all that then just wait for it to be cancelled.

    • That’s terrible. Easyjet must just be hoping that some of their customers will just give up , accept the taxes and walk away

      • Lady London says:

        They have forced me into accepting tax-only refunds on quite a few bokings in recent months due to their sneaky unpublished rule changes which they have brought in to affect existing bookings not just new ones.

        Was being asked amounts like 75 or even more as a so-called “fare difference” to change an existing booking when I could buy the same flight off the internet for 15 or 17 euros. Hence forced to give them quite a few bookings back for just the tax which is about £9 or £13 depending.

    • They’re only officially cancelling flights a few days before they are due to take off (which while annoying makes perfect sense), just give it time and the email will come through with your options once they have cancelled it.

      I had 1 cancellation sent to me last week, and today they cancelled the return which is due to depart on the 14th April. Tried calling for a refund and it doesn’t even go through, just gives some info and then hangs up, luckily I am an EasyJet Flight Club member, so called them up, got through immediately and the refund is on it’s way.

    • Ryanair play the same games as want you to voluntarily change your flight to another time.
      Just stick it out until a few days before flight is due and with Ryanair you then get the option to cancel and get your money back.

  6. Lady London says:

    Hope they still manage to renegotiate / denegotiate the Airbus orders.

    Stelios has got a point.

    • Or he’s greedy and short-sighted? If he wanted to run the company why didn’t he keep a majority % instead of selling? Airbus supports thousands of jobs in the UK anyway – more concerned about that than Stelios (who is resident in Monaco) and his shareholding.

      • It is very hard to see any logic in increasing your fleet by so much over the next 3 years, however. If you go back to his original letter to the board, on his maths the last 100 planes they bought are loss-making – ie they have gone onto more marginal routes (because easyJet hoovered up all the easy wins years ago) and those marginal routes do not make money.

        easyJet is not Flybe. They are not flying 78 seaters. The A321neo has a whopping 235 seats. How many unexploited city pairs are there in Europe which could sustain a 235 seat aircraft?

        • Do not think they have many 321’s on order and a large part of the fuel efficient 320’s orders are to replace existing 319’s so increasing capacity but not hugely.
          When AirBerlin went bust EJ took over leases of a number of there aircraft to get the Berlin base moving as did Ryanair.

  7. memesweeper says:

    ‘Virgin Atlantic does not have any rated debt’

    … a secondary problem for Virgin Atlantic is they may not be able to pay off any large loan either. EasyJet generates far more cash in normal operations.

  8. Thomas Atkins says:

    That All Saints model looks as miserable as I feel. Down with Covid-19…

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