easyJet: Airline secures £600M Government bailout after issuing dire warning amid covid-19

The airline is just one of many who have been forced to make cuts amid the ongoing coronavirus pandemic. EasyJet was forced to ground its entire fleet of aircraft last week after repatriating 45,000 Britons from around the world due to the coronavirus.

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They brought the last flight in last week and did 650 rescue flights.

Now, the airline is being bailed out by the Treasury and Bank of England’s emergency coronavirus fund with a huge loan of £600million after its founder warned it will “run out of money by around August”.

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The funds are from the UK’s corporate financing facility to help firms during covid-19.

The airline has also said it will be borrowing more money from commercial creditors.

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easyJet: The airline is just one of many who have been forced to make cuts amid covid-19 (Image: GETTY)easyJet: The funds are from the UK’s corporate financing facility (Image: GETTY)

EasyJet said the move will act as part of their “focus on maximising liquidity” which will see them borrow a further $500million (£406million).

Founder of the company Sir Stelios Haji-Ioannou last week renewed calls to cancel a £4.5billion order with Airbus.

He also asked that the company removes its chief finance officer Andrew Findlay.

Sir Stelios holds the biggest stake in the airline.

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Another request was rejected which saw Sir Stelios asking for a meeting of shareholders to decide whether another director should be fired.

Sir Stelios said that Mr Findlay should be fired because it would be ”the best way to stop him writing billion-pound cheques-plus to Airbus every year”.

The founder has said before that the airline would need loans from the Government if it terminates its contract with Airbus.

He also said he would not be investing more of his own money in easyJet while a contract exists between them and Airbus.

In a statement issued before easyJet announced it had additional funding, Sir Stelios issued a dire warning about the future of the company.

easyJet: The airline’s largest base is London Gatwick (Image: GETTY)

He said: “If this £4.5billion liability to Airbus is preserved – and not cancelled – by the easyJet board then, I regret to report, easyJet will run out of money around August 2020, perhaps even earlier.”

He added: “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.”

EasyJet also announced it has reached an agreement with trade unions on furlough arrangements for its pilots and crew.

The airline’s chief executive Johan 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 and drawn down on our Revolving Credit Facility in order to increase our liquidity in the event of a prolonged grounding of the fleet.

“The CCFF provides businesses with access to funds at the commercial rates which were available before the coronavirus crisis and any UK company that had an investment grade rating before the crisis can apply for this funding.”

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The airline said in a statement about the loan: “easyJet continues to focus on maximising liquidity in the event of an extended grounding period. To that effect easyJet has been successful in its issuance of £600m of Commercial Paper through the Covid Corporate Financing Facility (CCFF).

“easyJet has also issued today a utilisation request to fully draw down on its $500m Revolving Credit Facility, secured against aircraft assets. As a result of this, by April 9, easyJet is expected to have access to cash reserves of c.£2.3bn. 

“Given the possibility of a prolonged grounding easyJet will continue to consider further liquidity and funding options.

“easyJet and BALPA have collaboratively reached an agreement on furlough arrangements for its pilots. The agreement will be effective from 1 April 2020.  Last week easyJet announced it had reached an agreement on furlough arrangements for its cabin crew and training instructors.  That agreement was also effective from 1 April 2020. 

“Following the FCA’s recent update on reporting guidelines, easyJet will release a trading update in the second half of April and a half year results announcement on 30 June 2020.”