EasyJet has launched a £450m rights issue to shore up its cash reserves in the face of the Covid-19 crisis.
The issue, worth up to 15% of its current share capital, will need shareholder approval, potentially drawing more opposition from the company’s founder and main shareholder Sir Stelios Haji-Ioannou.
It also reported bigger first-half losses for the six months to 31 March on Tuesday, but insisted it had been on track for a much improved performance before the effects of coronavirus hit.
The airline made a pre-tax loss of £353m, compared with £272m in the same period in 2018-19, but said £160m of the deficit was down to hedging against fluctuations in fuel prices, which backfired as fleets were grounded in the spring.
EasyJet has already raised £1.7bn in additional funding during the crisis and expects to have a cash balance of more than £3bn after the placing – enough to survive a nine-month grounding, according to its latest estimates of cash burn.
Its use of state assistance, including a £600m loan from a Treasury and Bank of England fund, has raised eyebrows after it paid a £174m dividend to shareholders in March.
The airline said last month it would cut 4,500 jobs, and does not expect demand to recover to pre-pandemic levels until 2023.
“We have been decisive in meeting the challenges of the pandemic by cutting costs, vastly reducing our capex while retaining our industry leading fleet flexibility,” its chief executive Johan Lundgren said.
EasyJet restarted a skeleton service of flights last week, mainly domestic routes from the UK. It is planning to increase activities in the next two months, although quarantine rules, which it has challenged legally with rivals British Airways and Ryanair, have dampened demand.
The airline did not provide financial guidance for the rest of the year, but said capacity is expected to build through the summer, with its fourth quarter at 30% of planned pre-coronavirus capacity. It also pointed to “encouraging” bookings for its easyJet Holidays arm.
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