EasyJet grounds fleet as virus pushes airlines to the brink

Easyjet planes are seen parked at Luton airport after Easyjet announced it has grounded its entire fleet, as the spread of the coronavirus disease (COVID-19) continues, Luton, Britain, March 30, 2020. (REUTERS/Matthew Childs)
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Updated 31 March 2020

EasyJet grounds fleet as virus pushes airlines to the brink

  • EasyJet was under additional pressure from its biggest shareholder, Stelios Hajji-Ioannou, who along with his family owns about a third of its shares

LONDON: British budget airline easyJet has grounded its fleet of 344 planes and has no clear idea when it might resume flights, it said on Monday, highlighting the strain on airlines trying to survive the coronavirus pandemic.
EasyJet said it would lay off its 4,000 UK-based cabin crew for two months, meaning they won’t work from April 1 but will get 80 percent of their average pay under a state job retention scheme.
The global health crisis has brought European air travel to a standstill, leaving airlines with no revenue and facing a struggle for survival. Small British airline Loganair, for example, said on Monday that it would seek state support.
Shares in easyJet lost as much as 10 percent in early trading, having halved in value over the last month. The airline now has a market capitalization of about £2.3 billion ($2.9 billion).
“We think the group has enough liquidity to manage a short suspension of European air travel but if the disruption proves prolonged, or the recovery is sluggish, easyJet could be in real trouble,” said Hargreaves Landsdown analyst William Ryder.
EasyJet was under additional pressure from its biggest shareholder, Stelios Hajji-Ioannou, who along with his family owns about a third of its shares.
In a letter to easyJet’s chairman, Hajji-Ioannou said it must cancel or renegotiate a £4.5 billion order for 107 Airbus planes because the extra aircraft would just destroy shareholder value.
EasyJet said it was trying to reduce payments, including those on aircraft, and would respond to the letter privately.
The airline said it was focused on short-term liquidity, including removing costs from the business and working with suppliers to defer and reduce payments where possible.
It said grounding its fleet removed significant costs and that it was continuing to talk to UK pilots union BALPA over a potential deal with pilots.
“We are working tirelessly to ensure that easyJet continues to be well positioned to overcome the challenges of coronavirus,” easyJet CEO Johan Lundgren said in a statement.
Hajji-Ioannou has told the airline to try to raise money from shareholders, and offered to participate himself.
Management could face disruption if it does not address his worries over the Airbus order, which is due to be paid between 2020 and 2023, as he has threatened a rolling general meetings to try to remove board members.
For easyJet cabin crew looking for something to do, Britain’s National Health Service has asked them to volunteer at hospitals being set up to cope with the thousands of coronavirus patients expected in the coming weeks. Crew have first aid training and security clearance, making them ideal candidates.
EasyJet said it was focused on using UK government measures already announced to help its finances during the coronavirus crisis and has no plans to ask for any bespoke support.
Some UK airlines had been hoping for a specific state aid package but the government said last week it would only consider stepping in once carriers had exhausted all other options, such as raising capital from existing investors.
On Monday, small regional British airline Loganair, which flies between remote Scottish islands and the mainland, said it was planning to ask the government for support, having already asked its owners for help.
“I do think that like the vast majority of UK airlines we will be going back to take up that invite for further conversation with the Treasury in the coming days because we have to,” said Loganair CEO Jonathan Hinkles.
Virgin Atlantic has already requested state aid, asking for a package of commercial loans and guarantees worth hundreds of millions of pounds, according to the Financial Times.


OPEC, allied nations extend nearly 10M barrel cut by a month

Updated 20 min 53 sec ago

OPEC, allied nations extend nearly 10M barrel cut by a month

  • The meeting, originally scheduled for next week, was brought forward to Saturday

VIENNA: OPEC and allied nations agreed on Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.
Ministers of the group and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10% of the world's overall supply.
However, danger still lurks for the market. Algerian Oil Minister Mohamed Arkab, the current OPEC president, warned attendees that the global oil inventory would soar to 1.5 billion barrels by the mid-point of this year.
“Despite the progress to date, we cannot afford to rest on our laurels,” Arkab said. “The challenges we face remain daunting.”
That was a message echoed by Saudi Arabia's Oil Minister Abdul Aziz bin Salman, who acknowledged “we all have made sacrifices to make it where we are today.” He said he remained shocked by the day in April when U.S. oil futures plunged below zero.
“There are encouraging signs we are over the worst,” he said.
Russian Energy Minister Alexander Novak similarly called April “the worst month in history” for the global oil market.
The decision came in a unanimous vote, Energy Minister Suhail al-Mazrouei of the United Arab Emirates wrote on Twitter. He called it “a courageous decision and a collective effort deserving praise from all participating producing countries.”
OPEC has 13 member states, including Saudi Arabia. The additional countries part of the plus-accord have been led by Russia, with Mexico under President Andrés Manuel López Obrador playing a considerable role at the last minute in the initial agreement.
Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday at over $42 a barrel. Brent had crashed below $20 a barrel in April.
The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.
Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel. That also hurt US shale production, drawing the ire of President Donald Trump. But Trump welcomed the earlier deal, as US Energy Secretary Dan Brouillette did on Saturday with the extension.
“I applaud OPEC-plus for reaching an important agreement today which comes at a pivotal time as oil demand continues to recover and economies reopen around the world,” Brouillette wrote on Twitter.
Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.
However, some countries produced beyond their quotas set by the deal. One of them was Iraq, which remains decimated after the yearslong war against the Islamic State group.
On Saturday, Iraq Oil Ministry spokesman Assem Jihad said in statement that Baghdad had “renewed its full commitment” to the OPEC+ deal.
“Despite the economic and financial circumstances that Iraq is facing, the country remains committed to the agreement," Jihad said.
Analysts had expected OPEC and the other nations to extend the cuts of 10 million barrels per day by one more month, but not longer, since the level of demand is still fluctuating.
“If the demand is great, countries like Russia will want to produce more oil, so they probably won’t want to get locked into a longer-term deal that may not help them,” said Jacques Rousseau, managing director at Clearview Energy Partners.