easyJet follows BA and takes a £1.4 billion loan guaranteed by the UK Government

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• Colin MacKinnon says:

  11 Jan11 January 13:18

  Dividends? From an airline?
  Take Easyjet, annual profits for the past five years:
  2015/16: £437m (net interest £3m)
  2016/17: £305m (net interest £19m)
  2017/18: £358m (net interest £18m)
  2018/19: £349m (net interest £36m)
  2019/20: Loss of £1,079m (net interest £374m)

  Latest figures are to year end 30 Sept. Easyjet used to pay out half their income as a dividend. But last loss has wiped out the previous three years’ profits. Paying back the new loan will wipe out four or five more years of profits if they can trade like pre-Covid times.

  So now there’s an extra £1.4bn of UK govt debt, their aircraft are grounded or flying empty, and they’ve sold and leased back their aircraft – so fewer assets and higher bills.

  Where’s the money coming from for dividends? I can’t see them surviving.

  Maybe Stelios should sell his stake and start up a new airline – there are plenty of airframes, pilots and slots available!

  • ChrisC says:

    11 Jan11 January 13:31

    There is no extra UK Government debt. Just as there is no extra debt because of the BA loan

    This is a guarentee for the banks not a direct loan from taxpayers.

    The government is only on the hook if BA and Easyjet default on the bank loans.

    • Colin MacKinnon says:

      11 Jan11 January 14:14

      Ah, you see I am not an economist. Just a simple chap.

      So when I guaranteed my daughter’s mortgage, I thought of it as my debt. Even though the mortgage was in her name and with me as a guarantor.

      Apologies if I caused confusion.

      My point is, it is not just dividends being paid that people should worry about – it is the very survival of businesses with virtually no assets and absolutely no profits! And no “moat”.

      (But again, that is very old-fashioned of me. Why I have never invested in – and why I have missed out on!! – all these tech companies that don’t make money!)

      • TGLoyalty says:

        11 Jan11 January 15:32

        EasyJet actually had quite a few assets before this year, they owned rather than leased a number of their planes.

        Perhaps they’ll switch back ownership with this new Lon, I have no idea.

        But I’m very confident easyJet will survive.

        • kitten says:

          11 Jan11 January 17:02

          I have constantly had confidence BA, Easyjet and Ryanair will survive this and all will return to making obscene profits. Unless we get another worldshattering event on a much bigger scale.

          However in the bath last night I was thinking some airlines would do much better to take the money, fold and reincorporatee as new entities thus dumping any rerouted seat obligations. There will still be finance players willing to fund same management team new entity.

          Not doing myself any good as regards my own cancelled flights but definitely a practical solution.

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