EasyJet hits back after founder warns airline will 'run out of money by around August'

EasyJet founder Sir Stelios Haji-Ioannou has warned that the budget airline will “run out of money by around August”, as he renewed calls to cancel a multi-billion-pound order with Airbus.

The Luton-headquartered airline grounded all of its planes last week as demand for flights collapsed due to the coronavirus pandemic. Picture: Ian Georgeson

The high-profile entrepreneur also called on the carrier to remove chief finance officer Andrew Findlay.

The warning comes days after Sir Stelios, who holds the biggest stake in EasyJet, requisitioned a meeting of the company’s shareholders to decide whether to remove another director from the board.

On Friday, EasyJet rejected the founder’s request for the meeting aimed at removing director Andreas Bierwirth.

Sir Stelios has now called for Findlay to be sacked, as he said it would be “the best way to stop him writing billion-pound cheques plus to Airbus every year”.

It comes after the Luton-headquartered airline grounded all of its planes last week as demand for flights collapsed due to the coronavirus pandemic.

Chief executive Johan Lundgren has indicated that the airline would consider accepting UK government bailout loans if needed. But Sir Stelios has said it will not need those financial lifelines if it terminates the contract with Airbus.

He also stressed that he will not invest any further cash into the airline while the £4 billion-plus contract with the European aircraft manufacturer is in place.

In a statement, Sir Stelios said: “Terminating the Airbus contract is the only chance current shareholders have to maintain any value in their shares.

“If EasyJet terminates the Airbus contract, then it does not need loans from the UK taxpayer and it has the best chance to survive and thrive in the future with some injection of additional equity provided for by the markets.

“But if easyJet stumbles along whilst taking UK taxpayers’ money as loans only to pass it on to Airbus, it will have to raise fresh equity anyway in the next three to six months - reducing the value of our current shareholdings to close to zero.

“For the avoidance of doubt, I will not inject any fresh equity in easyJet whilst the Airbus liability is in place.”

A spokesman for EasyJet, which runs a string of routes out of Scotland, said: “The board is managing the unprecedented challenges facing the airline and the aviation sector as a whole.

“We remain absolutely focused on short-term liquidity, removing expenditure from the business alongside safeguarding jobs and ensuring the long-term future of the airline.

“We believe that holding a general meeting would be an unhelpful distraction from tackling the many immediate issues our business faces.”

In a further update to investors, the airline stressed that it expected to have access to cash reserves of some £2.3bn.

CEO Lundgren said: “We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure EasyJet is in the best position to resume flying once the pandemic is over. We are pleased that we have now reached agreement with both Unite and Balpa regarding furlough arrangements for UK-based EasyJet pilots and crew.

“Our current priority is to safeguard short term liquidity, so we have borrowed from the CCFF [Covid Corporate Financing Facility] and drawn down on our revolving credit facility in order to increase our liquidity in the event of a prolonged grounding of the fleet.”

Nigel Frith, a senior market analyst at www.asktraders.com, noted: “With the level of uncertainty amongst holidays and the future of airlines across the globe at stake, we can see that airlines are struggling.

“Prior to the pandemic, EasyJet was a brand that offered cheap flights which matched with consumers’ budgets, so it's now not a case of which airline offers the best deals, but a case of which airlines are still going to have money left at the end of this disaster.

“Adding to this, Sir Stelios wanting to cancel a £4.5bn contract with Airbus, it makes things trickier to decide on a deal, and at the moment its current shareholders want to maintain value in their shares.

“EasyJet are one of the very few airlines that offer the cheapest flights to Europe, but if the airline has no money by the end of August, this not only causes stress for the brand as a whole, but also the customers that currently have booked holidays with the airline and the employees that are left clueless as to what's happening with their careers - this is a very critical time for EasyJet and they need to act quickly.”

Meanwhile, Airline Norwegian suffered a 61 per cent drop in demand last month.

The budget carrier said it carried 1.2 million passengers in March, compared with three million during the same month in 2019.

Norwegian chief executive Jacob Schram said: "The speed of the Covid-19 global outbreak throughout March had a profound impact on the entire Norwegian network as cancellations, in line with global travel advice and falling demand, were implemented throughout the month."