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EasyJet posted an annual loss for the first time, underlining the extent of the pandemic-related done to the airline industry.

The company reported a loss of £1.27bn in the year ending September 30th, vs a profit of £430m in the year before. Capacity decreased by 47.5% but loads were only down 4.3 percentage points to 87.2% due to tough action to reduce capacity. Revenues declined over 50% to £3bn and the headline loss before tax of £835 million was within the guidance range of £815 to £845 million, vs £427m profit last year.

Whilst it has been a tough few months for EasyJet, hopes of an effective global vaccination programmes bodes for a much stronger 2021. Its cash position looks reasonable total liquidity raised of £3.1 billion, and a net debt position of £1.1 billion vs £326 million in 2019. No dividend will be paid in light of the loss for the year – last year it was 43.9p.

Outlook: Based on current state of lockdowns and travel restrictions in the markets in which it operates, easyJet expects to fly no more than around 20% of planned capacity for Q1 financial year 2021. However, given the extent of uncertainty, management declined to provide any further financial guidance for the 2021 financial year.

The problem for EasyJet is that getting travel demand back to where it was is going to take time and whilst there are vaccines in the offing, investors may need to wait patiently. The guidance for flying only 20% of capacity in Q1 underlines the sluggish pace of demand recovery in key markets affected by the coronavirus. And whilst there are vaccines coming, there are timing issues here.

Moreover, there remains great uncertainty about the opening up of key passenger routes in the meantime given the capricious quarantine and lockdown measures in place across Europe. Shares, which have risen the vaccine bump until now, declined almost 3% in morning trading. Ultimately EasyJet will profit from back-to-normal but it may be agonisingly slow. The worst turbulence is behind, but it’s too early to unbuckle your seatbelts.

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