EasyJet Plc, a UK-based low-cost airline, has reportedly secured a loan of approximately £600 million from the UK treasury as well as the emergency coronavirus fund of the Bank of England in an effort to stay afloat and weather the slump caused by the coronavirus crisis.
The move comes as Sir Stelios Haji-Ioannou, the biggest shareholder and founder of EasyJet, claimed that the airline would be out of cash by the end of the year. The company also announced that it would also borrow another £407 million from creditors in an effort to ensure the company’s liquidity as its fleets stay grounded throughout April and May, at least, owing to the pandemic.
The announcement follows a call from Haji-Ioannou, who along with his family holds approximately over a third of the company shares, for an emergency general meeting and demand for the firing of two of the company’s directors.
Haji-Ioannou questioned the airline’s management, focusing primarily on its order for over 107 new aircrafts from Airbus. Haji-Ioannou further stated that his main objective would be to terminate the company’s £4.5 billion contract with Airbus.
In an official statement that was released before the conformation of the £600 million government loan, Haji-Ioannou stated that staying solvent till August could prove to be extremely optimistic, even when financial analysis predicts that passengers would quickly embrace air travel during the summer holidaymaking period.
Haji-Ioannou further added that when international travel picks up eventually, the company would most likely feel like a new startup that is looking for a few routes that are profitable for a few of its aircrafts.
The latest loan reportedly does not do much to address the underlying situation, where if the Airbus order is not canceled and with the existing cash burn, the boundary for insolvency only goes back to somewhere between August to late in autumn or early winter.
The company is currently in talks with Airbus to go over the £4.5 billion deal and lower its currently ongoing cash spend.