“Businesses will go bankrupt long before a year from now unless there is support in there." "If we don't get sufficient levels of support from the government and this continues for that period of time, the aviation industry will not be intact."
Moody's Investor Service on Tuesday signalled a series of downgrades for European airlines as they struggle to combat the spread of Covid-19.
The credit ratings agency has downgraded easyJet PLC to Baa2 from Baa1 and Deutsche Lufthansa AG to Ba1 from Baa3, with Lufthansa on review for another downgrade. Moody's has placed all ratings from both airlines on review for downgrade.
"easyJet has been particularly exposed to the early stages of the coronavirus outbreak in Europe due to its exposure to Italy, which represented around 20% of passenger volumes in 2019. Moody's expects travel restrictions to worsen globally over the coming weeks leading to full or partial groundings across the company's network," the ratings agency said.
Moody's does not expect easyJet to benefit materially in 2020 from the lower oil price because it has hedged around 68% of its expected fuel costs for fiscal 2020, ending 30 September 2020, through swaps at a jet fuel price of USD655 per metric tonne, compared to the current price of around USD420 per metric tonne.
With significant cancellations and capacity cuts easyJet is likely to be fully or over-hedged in the next quarter.
Plenty the PMO will need to do, worst case senario now being priced in and its no where near that. Debt holders will happily restructure, its a strong business just needs high prices which will obviously come at some point. Wont be the same business it was when it was when it was £1.18 but going to be worth a lot more that 15p
If we hit commercial oil I’m wondering what will happen. PMO is the big factor, I can’t help but think that even if oil prices go back up in the near term PMO will look to pay down some of its debt after being so exposed. I suspect both 88e and PMO would look to farm out some of the production cost which will now also be an uncertain process. I think that this will be moved back by a good few years as a result of the oil price crash, no way the project goes unimpacted even on a success case.
Ahha you make a good point, didn’t mean to be rubbing it in the face of any holders, seemed a bit quiet on here so didn’t see the harm, plus I was open about my short position and tbh wanted to warn any PIs about what I thought was coming. Closed out my position now and see that Granular are still adding. Human nature being what it is there could be a rise from here. Will be keeping and eye on it and if it comes close to £4 I’ll be opening another position for the CMA report in April/May which is clearly going to decimate the unprofitable parts of the business. I think they will need to cut down the entire business, sell off what they can on the funeral side and then have a relook at the transformation plan. I’d give it 3 years and you might have a smaller, leaner business to build on.