EasyJet Receives Massive £1.4 Billion UK ‘Bailout’ Loan

In the latest consistently inconsistent move in the UK’s reaction to industry crises, easyJet will receive a £1.4 billion bailout loan, backed by the UK Government, joining on to their previous £600 million loan from the spring of 2020.

The “good” news comes just a week after British Airways became the first to unlock this new found support for the aviation sector from the UK Government.

EasyJet’s £1.4 Billion Bailout Loan

For over 10 months, the UK Government ignored actions from across Europe, Asia and the United States, as governments bailed out the airline and aviation industries, to the tune of billions. US Airlines were handed over $35 billion in bailout funds, KLM and Air France received over €10 billion from the Netherlands and French Governments, and the list goes on.

Now, the UK is getting in on the act, with its second state backed soft-loan, to easyJet.

British Airways received a £2bn government backed bailout loan over the New Year and in doing so became the first “UK” airline to receive a state backed loan from the UK Government since the pandemic brought the industry to its knees. A fresh UK lockdown has only further damaged the sector.

easyJet, the company majority owned by billionaire Stelios Haji-Ioannou receives £1.4 billion in private loans backed in large part by the UK Government Export Development Guarantee platform. The impact of this arrangement is that if easyJet were to default on the £1.4 billion loans, the UK and its taxpayers would be responsible for circa 80% of the amount, to the tune of around £1 billion.

The airline famously already borrowed £600 million earlier in the pandemic, bringing its cheap cash reserve total to £2 billion in loans. If the pandemic has proven anything, its that when cheap cash is floating around, airlines grab it pretty effectively.

Does easyJet need the money? That’s a fair question. The airline is among the most ‘cash rich’ in Europe, and will likely use the ‘cheap’ cash loans to further bolster its strong position as a leading low cost carrier, investing in everything from renewed fleets to technology plays.

For customers, it could spell good news.

In exchange for the UK backing, it’s reported that shareholders agree to forego any dividends until the amount is paid off, so as to avoid public mire. As the second airline in as many weeks to receive significant financial support, a trend appears to be emerging where the UK Government isn’t explicitly ‘bailing out’ the sector, but is now taking an interest in ensuring it survives the pandemic.

How, and to who it divvies out state-backed loans may create yet a further uneven playing field in aviation, but it was hardly level to begin with, anywhere. Virgin Atlantic was previously denied funding because it did not list publicly traded debt in the UK, while WizzAir was able to snap up £300 million. Whether that changes remains to be seen. Expect more bailout news to follow.