EasyJet/Wizz: battle for air supremacy

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“The pandemic has transformed the airline industry in unexpected ways,” said Nils Pratley in The Guardian. The Hungarian budget carrier Wizz Air (now valued at £5bn) is bigger in stock-market terms than easyJet, whose £3.25bn value now stands at roughly half its former level. Hence, perhaps, “Wizz’s cheeky takeover bid”, which, while swiftly batted away by easyJet, “will have come as a blow to the corporate ego”. All the more so since the airline’s dire finances have now forced it to go cap-in-hand to shareholders hoping to raise another £1.2bn via a rights issue.

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EasyJet has already raised £5.5bn of debt and equity since the pandemic started, and is currently burning through “£40m of cash a week”, said Lex in the FT. Prospects may look somewhat less “murky” if, as indicated, the Government moves to scrap heftily priced PCR tests (a serious travel deterrent) for the double-jabbed. But investors still “wary” of easyJet’s “post-pandemic growth story” could well view this rights issue as “a choice between being diluted out of the water or throwing good money after bad”.

The difficult truth, said Matthew Lynn in The Daily Telegraph, is that “the glory days of low-cost flying are over”. Even assuming it becomes less of a hassle as the pandemic eases, aviation will be hard hit as we move to a net-zero economy. “Demand will never get back to where it was and neither will profits” – and that means industry consolidation. “The bright orange airline” still has a lot going for it, including a strong brand and a decent product, but sooner or later it will have to start finding partners. “If not, there will be higher offers – and it can’t tell them all to Wizz off.”