EasyJet raises £419 million via a share sale as H1 loss widens due to COVID-19

EasyJet (LON: EZJ) announced to have raised £419 million via a share sale on Thursday to boost its liquidity amidst the Coronavirus pandemic that brought the global airline industry to a near halt in recent months. The British airline had a target of raising £400 million to £450 million via the placement. EasyJet recently revised its deal with Airbus to defer deliveries of 24 aircraft.

Shares of the company opened about 3.5% down on Thursday. At 700 pence per share, EasyJet is currently more than 50% down year to date in the stock market after recovering from a low of 475 pence per share in early April. Learn more about value investing strategy.  

EasyJet’s pre-tax loss broadens to £353 million in H1

EasyJet’s offer included 59.5 million shares priced at 703 pence per piece that marks a 5% discount on the price at which the stock closed the regular session on Wednesday. The placement represented 15% of the air carrier’s share capital.

According to EasyJet, demand for air travel is unlikely to recover to pre-virus levels before 2023. COVID-19 pushed the budget airline into grounding its fleet on 30^th March. Despite resilience in underlying trading, EasyJet’s pre-tax loss in the six months that ended on 31^st March came in at £353 million versus £272 million in the same period last year. EasyJet has already announced plans of cutting 4,500 jobs.

CEO Johan Lundgren had previously announced a target of £2 billion in additional funding for the airline, out of which, he boasted on Wednesday, £1.7 billion has already been secured. Before the stock issue, EasyJet had £467 million of net debt.

EasyJet wishes to resume 30% of its pre-virus capacity in Q4

EasyJet also revealed on Thursday that the majority of its customers opted for a voucher or rebooked the cancelled flights instead of demanding a refund. Combined with a state-backed loan, the share placement on Thursday, and other measures, the low-cost air carrier now boasts a cash balance of just under £3 billion, that is significantly above the expectations.

EasyJet resumed minimal service earlier in June and plans on increasing flights in the upcoming months. The British carrier is also participating in a legal challenge to the quarantine rules that were recently introduced in the United Kingdom.

For the fourth quarter, the Luton-based company has a target of resuming at least 30% of its pre-virus capacity. EasyJet said bookings were slowly getting encouraging but refrained from giving financial guidance on Wednesday.

At the time of writing, the £2.76 billion company has a price to earnings ratio of 7.91.