On January 8th, European low-cost carrier easyJet secured a £1.4 billion ($1.91 billion) loan backed by a UK government agency. The five-year loan will help the budget airline through a, particularly challenging season. With COVID-19 cases surging across much of Europe and increased lock-down measures being imposed, airlines have been unable to capitalize on the typically busy holiday season – particularly with shuttling holidaymakers from Northern Europe to warm and sunny destinations around the Mediterranean.
“This facility will significantly extend and improve EasyJet’s debt maturity profile and increase the level of liquidity available,” -Johan Lundgren, CEO, easyJet via Reuters
About easyJet’s new lifeline
According to news coming from Reuters, this loan is underwritten by a syndicate of banks and backed by a partial guarantee from the British government agency UK Export Finance (UKEF). This will fall under UKEF’s Export Development Guarantee scheme.
With a term of five years, the financial news site This Is Money reports that the airline will not be able to pay dividends for the duration of the loan as per conditions agreed upon.
While the bailout has been backed and partially guaranteed by UKEF, easyJet is securing this funding against its aircraft. Although perhaps slightly different, the use of owned aircraft to secure financing is something we’ve seen with other airlines as well.
Reuters also notes that the airline had taken other measures in the past year to remain afloat. This includes a £600 million loan from the UK government, as well as slashing 4,500 jobs. Additionally, easyJet was able to raise £419 million from investors via a share offering.
Similar deal with IAG’s British Airways
The news from easyJet comes less than a week after IAG-carrier British Airways received commitments for £2.0 billion ($2.73 billion) worth of loans. Similar to easyJet, the credit has been acquired to ‘enhance liquidity’ and provide ‘operational and strategic flexibility’ in 2021.
In fact, except for the value of the loan, the funding for easyJet is quite similar to that of British Airways. Both of these credit facilities have five-year terms that are underwritten by a syndicate of banks and partially guaranteed by UK Export Finance (UKEF).
Light at the end of the tunnel
Hopefully, 2021 will be the turnaround year that easyJet and the entire industry has been looking for – especially with the rollout of several successful vaccines being distributed. These loans should help the carrier ride out the short-term and ensure survival through to better market conditions.
“Easyjet has taken swift and decisive action, having now secured more than £4.5billion in liquidity since the beginning of the pandemic. The loan facility, provided on commercial terms, reflects constructive and collaborative work between Easyjet, multiple banks and UK Export Finance.” -Johan Lundgren, CEO, easyJet via This Is Money
Have you flown with easyJet recently? What do you think of the airline’s efforts to secure financial assistance? Let us know in the comments.
Simple Flying has reached out to easyJet for more information. However, at the time of publication, no response was received.