Results from easyJet Plc may have been better than expected but as comments about recent softening of bookings and the rise of the omicron Covid-19 variant has brought renewed scrutiny on airlines.
With new knee-jerk border controls brought in on southern African countries, with some European countries having locked down even before the emergence of the new variant, it may be worth examining how the travel sector could cope with an extended squeeze on travellers.
READ: easyJet bookings soften due to COVID-19 spread
At the end of September, the month when it carried out a £1.2bn rights issue, the budget airline had £4.4bn of liquidity.
This was made up of £3.5bn of cash and cash equivalents, plus the undrawn portion of a lending facility and an undrawn US$400m revolving facility.
Its net debt was £910mln, of which debt was £3.4bn and lease liabilities were £1.1bn.
With easyJet’s cash burn averaging £36mln per week on a fixed-costs-plus-capex basis for the past year, it would take 122 weeks to run out of liquidity if this rate was maintained and no cash was incoming.
However, its cash burn was £55mln in the third quarter, which if repeated would reduce its cash runway by 42 weeks.
The FTSE 250 group’s liquidity policy is to have unearned revenue, which increased £232mln to £846mln, plus £500mln.
Compare this with fellow FTSE 250 airline Wizz Air Holdings (AIM:WIZZ) PLC.
Wizz had total cash of €1.67bn at the end of September, including short-term deposits and restricted cash balances, and borrowings of €2.7bn.
But it has much lower cash burn than its rivals, at around €15mln per week for the last full year, giving it a runway of 111 weeks if no new cash was being generated.
Larger rival International Consolidated Airlines Group (LSE:IAG), the owner of British Airways, has more cash but also much higher cash burn.
The Anglo-Iberian carrier reported liquidity of €10.6bn at the end of its third quarter, 30 September, which comprised cash of €7.6bn and committed and undrawn general and aircraft facilities of €3bn.
IAG’s cash operating costs were much higher at €260mln per week in the past quarter.
At this rate, the FTSE 100 group would rattle to the end of its liquidity runway in just over 40 weeks if it was not generating more cash.
IAG’s net debt also towered at €12.4bn at the end of the quarter, up 27% over the period.
Shares in IAG and EZJ are at their lowest in over a year, down 70% and 57% from the start of 2020, while WIZZ was up on its pre-pandemic levels earlier this year but is now pretty much flat.