What's going on?
As if it wasn’t mortifying enough that EasyJet had to ground its entire coronavirus-anchored fleet on Monday: the UK airline’s biggest shareholder now wants it to back out of an almost $6 billion deal too.
What does this mean?
With a third of the world’s population in lockdown, airlines are in survival mode. But by canceling all its flights, EasyJet at least has one less thing to worry about: the UK government will pay its staff on the company’s behalf. It’s hoping to save money elsewhere too – mostly by trimming costs and delaying payments to suppliers.
Those actions may look decisive, but the airline’s strategy has restarted a long-running dispute with its founder, who still owns 34% of the company. He wants EasyJet to save even more cash by reneging on a $5.6 billion order for new Airbus planes, and he’s said he’s prepared to push for changes to the board if he doesn’t get his way.
Why should I care?
For markets: Cabin pressure.
EasyJet’s stock slid 7% on the news that revenue would fall to zero for at least the next two months. That’ll contribute to the $250 billion in sales the industry as a whole is predicted to lose this year. Still, with no debt to pay off until 2022, analysts reckon EasyJet is less vulnerable than lots of its rivals – rivals like US carriers American Airlines and United, which are expected to run out of cash in a matter of months (tweet this).
Zooming out: Chain reactions.
The plummeting demand hurting airlines is hurting the rest of the supply chain too: shares of Airbus – Europe’s biggest planemaker – sank 11% on Monday, and Boeing – its big US rival – initially plunged 12%. And since grounded jets don’t need any fuel, oil’s suffering as well: the oil price hit a 17-year-low on Monday, as demand from airlines continues to tumble and Saudi Arabia and Russia continue to disagree over curbing supply.