The entrepreneur said if the order is kept “I’m sorry to report it, Easyjet will run out of money around August 2020, maybe even sooner.”
Easyjet immobilized its entire fleet in late March, saying that “at this point there can be no certainty as to when commercial flights will resume.”
Easyjet plots the entire fleet
A statement released by Stelios today (April 6) said:
“My main goal is to terminate the £ 4.5 billion contract between Easyjet and Airbus for 107 unnecessary additional aircraft. This is the only way to preserve value for all shareholders and also for all bondholders.
“Easyjet’s market capitalization (the value of all stocks) hovers around £ 2 billion today. The Haji-Ioannou family owns around 34% of the shares, but the remaining 66% is largely held by many individual shareholders and various pension funds paying pensions tomorrow – and in the years to come. I will now seek the support of these other shareholders to terminate the Airbus contract.
“The net book value of Easyjet’s assets (net of liabilities) was £ 3 billion as of September 30, 2019. Even after taking into account trading losses during the current grounding, there are still many good assets at inside Easyjet and we must not allow current administrators to waste our assets by paying Airbus for these unwanted new planes.
“Easyjet has also borrowed £ 1.3 billion from bondholders (pension fund money again) which will need to be fully repaid over the next 2-5 years. Today, these bonds are trading at a discount of 20-30% from their original value, which means that the market believes that Easyjet can become insolvent at any time while paying Airbus 1.35 billion. pounds for new aircraft in the coming months (the same value as all bonds in circulation today).
Stelios said the forecast of running out of money around August “is based on optimistic forecasts released by easyJet stock broker (Neil Glynn at Credit Suisse on April 2, 2020) showing a drop in cash (negative balance) of £ 164 million by September 2020 ”.
He added that the forecast was based on “extremely optimistic assumptions that the Easyjet fleet would return to the skies in June, generating profitable income of £ 1.5 billion during the summer months” – which Stelios called it “pure fantasy”.
“It should be noted that almost all European countries have now closed their borders to foreigners,” said Stelios. “No one really knows when they will reopen. And even then, no one believes that people will be ready to take so many overseas trips by June 20. “
“Fear has now taken precedence over human behavior when it comes to any form of overseas travel. Each country will want to keep the others away for much longer than the date on which its own local national lockout ends. I think Easyjet, at the end of the national blockages, will look more like a start-up trying to find a few profitable routes for a few aircraft at a time. How many Britons will want to fly to northern Italy or Spain on vacation in June? Not much, I think. “
Stelios said he is calling for the dismissal of two directors from the Easyjet board of directors, including chief financial officer Andrew Findlay.
“If Easyjet terminates the Airbus contract, then it does not need loans from the UK taxpayer and it has the best chance of surviving and thriving in the future with an injection of additional capital planned by the markets (bet passed to existing shareholders), ”said Stelios.
“But if Easyjet stumbles while taking British taxpayer money in the form of loans only to return it to Airbus, it will have to raise new equity anyway in the next 3-6 months – reducing the value of our current holdings to near zero.
“In any event, no rational investor would buy new shares in Easyjet if the money was used by easyJet to pay £ 4.5 billion to Airbus for new planes it just doesn’t need . I certainly will not throw good money after bad. To avoid any ambiguity, I will not inject any new capital into Easyjet while Airbus’ liability is in place. “
Business trip has contacted Easyjet regarding today’s statement and will post any responses here.