Budget airline EasyJet (EZJ.L) boosted its liquidity through a five-year loan facility of $1.87bn ($1.39bn), a move that may alleviate worries about its finances as the travel industry is ravaged by the coronavirus pandemic.
The company’s stock was up 0.9% Monday morning as markets opened in London.
EasyJet CEO Johan Lundgren said the facility “will significantly extend and improve easyJet's debt maturity profile and increase the level of liquidity available.” easyJet has taken swift and decisive action, having now secured more than £4.5bn in liquidity since the beginning of the pandemic.
The loan facility is underwritten by a syndicate of banks and supported by a partial guarantee from UK Export Finance, the government’s Export Credits Guarantee Department, under their Export Development Guarantee scheme.
The scheme for commercial loans is available to qualifying UK companies, does not carry preferential rates or require state aid approval, and contains some restrictive covenants including around dividend payments, however these are compatible with easyJet's existing dividend policy, the company said in a statement.
“This five-year facility will be secured on aircraft upon drawing and will significantly extend and improve easyJet's debt maturity profile and strengthen easyJet's balance sheet by increasing the level of available liquidity,” the statement added.
EasyJet also said that during calendar Q1 it will repay and cancel part of its shorter term debt, which includes a fully drawn Revolving Credit Facility of $500m and loans of around £400m.
“This will free up a number of aircraft assets to further strengthen easyJet's balance sheet,” it said.
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"With our unmatched short haul network and trusted brand, easyJet is well positioned as customers return to the skies in 2021,” said Lundgren.
Last week the airline said it would review its schedule but promised to maintain “essential connectivity between key cities in the UK alongside a small number of international routes.”
Airlines and travel companies reviewed their schedules following the announcement of tough new restrictions. England, Scotland and Northern Ireland were placed back in lockdown to curb the spread of coronavirus. Wales is already under nationwide stay-at-home restrictions.
“Given the ongoing impact of the pandemic on travel, we continue to call for sector specific support such as has been provided to hospitality, where decisions have directly affected the ability to trade,” a spokesperson for EasyJet had said. “The same principle should be applied to aviation.”
Back in November, EasyJet posted the first annual pre-tax loss in its 25-year history, prompting it to seek more government help as the pandemic hammered air travel.
The airline was also in the process of axing up to 4,500 jobs or almost one third of its staff as it seeks to navigate the crisis, mirroring painful cost-cutting across the world aviation sector.