easyJet Plc -- Moody's: New restrictions on travel across Europe will slow easyJet's passenger traffic recovery in 2021

Announcement: Moody's: New restrictions on travel across Europe will slow easyJet's passenger traffic recovery in 2021

Global Credit Research - 20 Jan 2021

London, 20 January 2021 -- Moody's Investors Service ("Moody's") says that new restrictions on travel across Europe will slow easyJet's passenger traffic recovery in 2021. Following increasing Covid infection rates across Europe extensive travel restrictions have been put in place. Under the current restrictions travel abroad from the UK is not permitted other than for essential purposes. International arrivals into the UK need to provide evidence of a negative test and must quarantine for 10 days, which can be reduced by a further negative test. European countries including Spain, France and Germany are currently restricting arrivals from the UK, subject to varying exceptions relating to residence, nationality and for essential purposes. Approximately 40% of easyJet Plc's ("easyJet") revenues in the year ended 30 September 2019 related to the UK (based on the location of first departure airport for each booking).

Given the seasonally low period for travel at the start of each calendar year the impact of the restrictions on easyJet is likely to be relatively limited. Moody's base case projections remain that substantial improvements in passenger volumes will occur in the second half of calendar 2021. This is based on Covid infection rates reducing from their high current levels through a combination of lockdown measures and vaccination programmes. This will allow travel restrictions to ease and for a more coordinated testing programme to be implemented reducing quarantine arrangements currently in place.

There are however substantial risks that travel volumes will remain very low over Easter and that weakness may persist into the key summer period, notably if infection rates remain high or if testing regimes are not effectively implemented.

Moody's does not expect passenger air traffic to recover to 2019 levels until at least 2023, and hence the focus in 2021 is primarily on cash burn and liquidity. easyJet has taken substantial steps to enhance liquidity since September 2020, including arranging a $1.87 billion five year term loan partially guaranteed by UK Export Finance, and sale and leaseback transactions raising proceeds of approximately GBP700 million.

Moody's estimates that easyJet's current liquidity is sufficient to absorb current levels of cash burn into early 2022. However, despite these actions, easyJet's rating is weakly positioned in the Baa3 rating category, with its liquidity headroom lower than other investment grade-rated airlines, including Delta Air Lines, Inc. (Baa3 negative) and Wizz Air Holdings plc (Baa3 negative). Therefore, the company's credit profile remains relatively exposed to short term demand volatility and risks of further lockdown measures in the peak summer season in 2021. These risks would be mitigated by further actions to address liquidity which Moody's anticipates the company will undertake and by improved market conditions with greater certainty over the recovery in passenger volumes.

As at September 2020 easyJet had liquidity of approximately GBP2.3 billion. This has since been enhanced by the new term loan and sale and leaseback transactions referred to above. During the current quarter the company will repay and cancel approximately GBP800 million of short term debt in relation to its $500 million revolving credit facility and approximately GBP400 million term loans, both due to mature in February 2022. The company will also repay its GBP600 million Covid Corporate Financing Facility in March and November 2021. Moody's forecasts that approximately 40% of easyJet's aircraft are unencumbered which could be used to raise further finance.

Established in 1995, easyJet Plc is one of the largest low-cost airlines in Europe, with around 96 million passengers, sales of GBP6.4 billion and Moody's-adjusted EBIT of GBP490 million in fiscal 2019. easyJet is listed on the London Stock Exchange, and the family of the founder, Sir Stelios Haji-Ioannou, remains the largest shareholder of the group, with a stake of 28.7% as at 30 September 2020.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Martin Robert Hallmark Senior Vice President Corporate Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Richard Etheridge Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454

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