Budget carrier to defer delivery of new aircraft
Budget carrier easyJet is to defer deliveries of new aircraft over the next two years.
It said this is to ensure the business is ready to react to reduced demand as the European airspace begins to re-open after international travel restrictions due to the coronavirus pandemic, and to maximise its liquidity in the event of an extended grounding period.
The carrier, which operates scores of routes from Liverpool John Lennon Airport and Manchester Airport, said it has reached agreement with aircraft manufacturer Airbus for the net deferral of 24 aircraft deliveries from financial years 2020, 2021, and 2022.
This means that 10 aircraft deliveries will be deferred in 2020, 12 in 2021, and two in 2022.
In 2021 the airline will take no aircraft deliveries and said it retains the option to defer a further five deliveries in financial year 2022.
Exact dates of future deliveries of the deferred aircraft are to be agreed in response to the demand environment.
Within the next 16 months easyJet also has 24 operating leases due for renewal, providing the airline with further flexibility, which could include deferment and cancellation.
As a result of these actions, easyJet said the fleet has the flexibility to be substantially lower than the company’s previous plan, while also retaining the flexibility to respond to future demand environments.
It will also deliver significant reductions in capex spend over the next three years.
The carrier said it will provide more information regarding its future fleet plan at its trading update on Thursday, April 16.
Chief executive Johan Lundgren said: “Our industry is facing unprecedented challenges which require unprecedented action.
“As we have consistently said, we remain completely focused on improving short term liquidity and reducing expenditure across the business.
“Today I am pleased to announce that we have agreed with Airbus to amend our delivery schedule by deferring the purchase of 24 aircraft, providing a significant boost to our cash flow and a vast reduction to our near-term capex programme.
“In addition, we have 24 leases up for renewal over the next 16 months, which gives us another level of flexibility to respond to future demand.”
Earlier this week the carrier’s biggest shareholder, and founder, Sir Stelios Haji-Ioannou, warned the airline could run out of cash reserves by August due to the lockdown on international travel.
Later the same day, easyJet declared that it would have access to cash reserves of around £2.3bn after it revealed it had used the Covid Corporate Financing Facility (CCFF) and its revolving credit facility.
But Sir Stelios urged easyJet directors to scrap a multibillion pound deal with Airbus to avoid taking tax-payer funded loans.
He wanted the group to cancel the £4.5bn order for 107 planes, which he said could stand idle due to the ongoing coronavirus pandemic.