EasyJet’s axe-wielding smacks of opportunism

Nobody can be surprised that easyJet plans to cut jobs – every airline is doing so. But a ratio of “up to” 30% of the entire workforce sounds extreme. Michael O’Leary at Ryanair, who rarely does things by halves, opted for 15%, and has suggested in recent days that the final figure could be lower.

EasyJet explained that “levels of market demand seen in 2019 are not likely to be reached again until 2023”. That is possible, of course, but the prediction could also turn out to be too gloomy. The peak Easter and summer seasons of 2021 remain a very long way off. If they’re free to travel, would Brits, and Europeans in general, deny themselves a foreign holiday for two years in a row? Long-haul flights will probably be slow to recover, but that’s not EasyJet’s market.

Chief executive Johan Lundgren argued that he had to manage many uncertainties, ranging from the possibility of a second wave of infections to the effect on prices and competition of the bailouts of so many “inefficient” continental rivals. EasyJet’s fleet will be smaller than previously planned and efficiencies are a normal course of business. His priority is to ensure the company survives and emerges at least as strong.

That’s all true, but there’s a whiff here of management exploiting the moment to re-set the cost base. That’s what boards are paid to do, one might say. But, in the shoes of the trade union, you’d press hard for more flexibility. Like easyJet’s share price, which has bounced 50% from its lows in the past fortnight, the outlook is evolving.

Time for Pretty Little Thing to grow up

Call it pretty little timing. On Tuesday, a short-seller called Matthew Earl claimed, among other things, that Boohoo might overpay for the 34% of Pretty Little Thing (PLT) that it does not already own – that is to say, the slice of the celeb-heavy fashion brand mostly owned by Umar Kamani, son of Boohoo founder and chairman Mahmud Kamani. A figure of nearly £1bn was mentioned.

Rubbish, said the company at the time, and on Thursday it proved its point. It agreed a deal at £270m plus a possible £54m add-on – well within the City’s guess of what the PLT minority stake would cost. Cue a 15% rise in Boohoo’s share price to an all-time high of 385p, with Earl presumably retiring to lick his wounds.

Boohoo can congratulate itself on resolving a mini-drama before it became heated. It is astonishing that 66% of PLT could cost £3.3m in 2017 and 34% fetch up to £324m three years later, but that’s a function of the remarkable rise in revenues and profits.

In the process, Boohoo, enjoying only slightly slower growth in its main operation, has eclipsed Asos as the star performer in the online-only clothing game. The company is now worth £4.7bn. If it didn’t reside on the junior Alternative Investment Market (as does Asos), it would currently be big enough to qualify for the FTSE 100 index.

The moment has surely come to make the switch to the main market. After a £197m fundraising a fortnight ago, the Kamani interests plus those of co-founder Carol Kane, are down to 25%, so Boohoo is less of a semi-private operation than it used to be. The full buy-in of PLT simplifies matters further.

Why the reluctance about a higher public profile and main-market listing? Greater financial reporting demands can’t be the only reason. If it’s a worry about having to answer more questions about the social and environmental impact of fast fashion, best to get over the hang-up. Scrutiny will come anyway. Boohoo is now worth more than twice as much as Marks & Spencer – time to join the market grown-ups.

To think Hong Kong could have bought the London Stock Exchange…

As China’s National People’s Congress approved a plan to impose new security powers on Hong Kong, let’s pause to remember that only eight months have passed since the wildest bid of recent times – Hong Kong Exchanges & Clearing’s £32bn attempt to buy the London Stock Exchange Group.

The LSE killed the silliness easily, citing the impossible politics among many factors – half of the board of HKEX, remember, are appointed by a Hong Kong government prodded from Beijing (presumably with a sharper stick in future). It’s amazing anyone ever took the bid seriously.

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U.S. Hits Back at China’s Alleged Attempts to Restrict Airlines

Growing tensions between the U.S. and China have expanded to the airline industry as the Transportation Department accused its counterpart in Beijing of blocking American carriers’ attempts to resume service there.

The DOT late on Friday announced that China had violated a bilateral agreement allowing airline service between the two countries by failing to respond to requests by Delta Air Lines Inc. and United Airlines Holdings Inc.

China “impaired the operating rights of U.S. carriers and denied them the fair and equal opportunity to exercise their operating rights,” the department said in a notice posted to a government website.

The order stopped short of imposing any restrictions or penalty on the four airlines from China serving U.S. markets, but is a warning after repeated objections by the U.S. failed to get action, the government said. It requires the Chinese carriers to notify the department of their schedules and any proposed changes they intend. China’s embassy in Washington didn’t immediately respond to an email requesting comment.

The Covid-19 pandemic has led to an increasing rift between the U.S. and China. President Donald Trump has repeatedly blamed China for the virus’ spread and both nations have taken actions aimed at the other, such as expelling journalists.

Starting in February, the U.S. began restricting arrivals of people from China to prevent the spread of the virus. Flights between the two countries fell from about 325 per week in January to only a few dozen.

‘Making It Impossible’

Earlier this year, China set March 12 as a baseline for resumption of service between the two countries. Because Delta, United and American Airlines Group Inc. had already halted service to the Asian nation by then, it put them at an unfair disadvantage, the DOT said.

“The department is taking this step because Chinese aviation authorities have imposed restrictions on U.S. carriers that are making it impossible for them to resume passenger services between the US and China and operate those services at levels that they have a right to operate under the U.S.-China air transport agreement,” the department said in a statement on Saturday.

United had no comment on the DOT order, spokesman Frank Benenati said in an email. “We look forward to resuming those flights — to the benefit of our customers and communities in the U.S. and China — when the regulatory environment allows us to do so,” he said.

Delta didn’t immediately respond to a request for comment.

The DOT order was earlier reported by Reuters.

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Coronavirus may keep Norwegian flying – but it’s not much to celebrate

As one of Norway’s greatest exports, A-ha, put it, in their classic 1980s hit Take on Me, it’s no better to be safe than sorry. This advice may appear ever more overwhelmingly wrong to those who bet their kroner on the vision of the two Bjorns, Kjos and Kise, the co-founders turned chief executive and chairman of Norwegian Air.

The pair wisely exited the scene last year after an extraordinary ride during which they turned Norwegian from a small local carrier into a global pioneer of low-cost, long-haul air travel, and eventually established bases all around Europe. With half an eye on transatlantic links and another on a booming short-haul operation, Norwegian became a dizzying array of subsidiaries whose complexity could not disguise the fact that it was heading for financial disaster.

Although Norwegian had started to streamline and argues that it was on its way back from the brink prior to coronavirus, the pandemic may yet allow it to unexpectedly survive. However, the terms of that survival may be little consolation to investors, who face the choice of salvaging crumbs or waving goodbye to it all.

Norway’s government has offered a lifeline, a 3bn kroner (£230m) aid package to tide it through months of grounded planes, but dependent on the airline effectively making itself solvent again by wiping out debt. Three groups have to decide just how palatable the scraps on offer are. First, the bondholders, who are being asked to take equity in the airline instead of ever seeing their money repaid, and whose foot-dragging past deadlines on Friday suggested little appetite for playing along.

Second, the aircraft lessors, who have in theory until Sunday night to decide whether to accept an even less alluring proposition. For these firms, who own the tangible, flying, metal-and-carbon-fibre assets instead of mere paper, the swap is not exactly tempting. Do they want to trade $500m of aircraft payments to own a chunk of an airline? Norwegian’s hope is that the leasing companies decide it is better to take a stake – effectively becoming the airline operator themselves – rather than parking dozens of Boeings and trying to find a new customer in the current market.

Should those two groups get on board, it finally falls to Norwegian’s battered shareholders, at an emergency general meeting on Monday, to approve the plans. That will mean voting for their own stake to be diluted again to just 5% of the current value – which, in context, is already only 3% of where it stood just two years ago.

In those brave days, the Bjorns’ ambition was so great that they even launched a Norwegian operation in Argentina, which has to be the most insanely optimistic South American transport venture since Fitzcarraldo attempted to haul a steamship over a rainforested Peruvian mountain. And, having placed enormous orders for Dreamliners and other new planes, Norwegian boasted that it had the youngest and most fuel-efficient fleet in the world.

Of a fleet that was due to grow beyond 160 aircraft this summer, just seven planes remain in operation – pootling around Norway, delivering bits and bobs of essential cargo. Norwegian may yet rise from these ashes – but no investor will ever want to see a Bjorn again.

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Luton airport briefly bursts into life, as Wizz Air flies in from Bulgaria

Just after 7.30 on Friday morning, the arrivals hall at London Luton Airport burst into life following a 10-day shutdown due to the coronavirus pandemic. More than 100 passengers arrived on Wizz Air flight W6 4301 from the Bulgarian capital of Sofia, on the airline’s first scheduled commercial flight since the crisis.

Most of those arriving were seasonal farm workers on their way to fruit and vegetable farms across the UK. Others said they had come to work on building sites, as lorry drivers or in kebab shops.

Ryanair to cut 3,000 jobs as coronavirus grounds flights

There were also members of British-Bulgarian families, who had found themselves trapped in Bulgaria when the coronavirus struck and borders closed.

Among the first through the arrivals hall was Sakak, a 35-year-old man from a village near the capital, Sofia, who asked not to disclose his surname. He and all the other passengers were wearing masks provided by the airline.

“I need to work, I need the money,” Sakak said when asked why he had chosen to fly from Bulgaria, where there have been relatively few cases, to the UK, which is one of the worst-affected countries in the world on a per capita basis. “I come to work on the farm in the UK every year; I make the money for my family.”

Sakak said he was “a bit” concerned about the high rate of Covid-19 infection in the UK, but said “it will probably be the same all round the world in the end”. He added: “I come from a tranquil village in the countryside and there is no corona there.”

British Airways to cut Gatwick operation and lay off 1130 pilots

There have been just 1,541 confirmed Covid-19 cases and 66 deaths in Bulgaria, according to John Hopkins University coronavirus research centre. That compares with 177,454 cases and 27,510 deaths in the UK.

Sakak is on his way to work on a farm in Maidstone, Kent. “I work as a driver taking people to the fields to pick raspberries and strawberries,” he said.

While the airport is open, it is missing the noise, queues and shopping opportunities we have come to expect when traveling. Just two flights are scheduled to arrive at Luton on Friday (both Wizz Air flights from Sofia) bringing in a few hundred passengers, which compares with a pre-pandemic average of 49,000 passengers.

There is nowhere to buy a cocktail, beer or even a coffee as all the shops are shuttered. Most of the car parks are closed, but two hardy bus drivers are on hand to drive the new arrivals to Luton airport train station. Optimistic Addison Lee drivers are offering one-way fares to central London for £96.

A Warwickshire farmer in the arrivals hall said he was waiting to greet seven seasonal workers hired to pick vegetables. The farmer, who declined to give his name, said that if eastern European workers did not come to work in the UK this year “acres of food will rot in the fields”. He said it had already proved much harder than usual to hire workers this season. Only four of the seven workers he was expecting arrived.

Alissa Kotsant, 22, a psychology student from Ramsgate, said she had travelled to Bulgaria to see her family before the virus struck and had found herself stuck there. “There is more virus in the UK than Bulgaria, but my life is here,” she said. “I had to come back.”

Kotsant said she did not feel afraid during the flight despite being closely confined with lots of other people and unable to maintain a 2-metre physical distance, as advised by the government.

“It was fine,” Kotsant said. “There were no sick people on the flight, and we all wore masks. You could smell that they had just cleaned the plane.”

However, neither the airline nor the airports measured passengers temperatures to check for signs of fever, a key symptom of the viral infection.

Kotsant said the flight was almost full, and that Wizz Air had not restricted travel in middle seats to create more space between customers.

EasyJet, Emirates and Delta have suggested they will leave middle seats empty when coronavirus travel restrictions are lifted. Ryanair has said it will not resume flights if it is unable to sell tickets for the middle seat, as it will make it much harder to turn a profit. Iata, the global airline association, expects government measures to enforce social distancing on flights.

Owain Jones, the managing director of Wizz Air UK said: “As we restart selected Luton flights to provide an essential service to passengers who need to travel, our primary concern is the health, safety and well-being of our customers and crew. The protective measures that we are implementing will ensure the most sanitary conditions possible.”

The airline said cabin crew are “required to wear masks and gloves and will distribute sanitising wipes to each passenger”. Wizz Air said passengers are required to wear face masks although these would only be“initially provided by Wizz Air”.

The Hungarian airline, which is listed on the London stock market, is also restarting flights between Luton and Budapest, Lisbon, Tenerife, Tel Aviv and Sofia, Varna and Burgas in Bulgaria. Several of the routes are open to citizens of the destination countries only.

A London Luton Airport spokesman said: “The safety of our passengers and staff is our top priority and we continue to rigorously implement all government guidance. This includes deep cleaning, the installation of sanitiser across the airport and floor markings and signage to remind customers to maintain a safe distance. We are also displaying the latest public health guidance throughout the terminal.

“Air links for both passengers and freight have been recognised as essential services and the government has asked airports to remain open where possible, to ensure they can continue. The decision to operate individual routes is a matter for each airline.”

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