EasyJet seeks 'bespoke' help for airlines; US jobless claims still high – as it happened

Graeme Wearden

from on 2020-10-08 15:47 (#58WZT)

Rolling coverage of the latest economic and financial news, as budget airline easyJet warns it lost up to 845m last year

Latest: US initial claims dips to 840,000
Easyjet: Worst crisis in airline history
Only expects to fly 25% of flights in current quarter
Full-year loss of up to 845m - first full-year loss ever
Bank of England: downside risks to economy

4.47pm BST

Nancy Pelosi's rejection of standalone aid for the US airline sector punctuated some of the optimism in the markets.

Her comments, just before the closing bells rang in Europe, knocked stocks back from their earlier gains.

U.S. House Speaker Nancy Pelosi on Thursday said there would be no additional federal aid for U.S. airlines without a more comprehensive COVID-19 relief package, adding that she was hopeful for a larger deal because it has to be done."

Ain't going to be no standalone bill, unless there is a bigger bill," Pelosi told reporters.

4.29pm BST

Just in: House speaker Nancy Pelosi is not accepting Donald Trump's proposal for a small package of stimulus aid for airlines.

She's sticking to the Democrats position, that America needs a comprehensive stimulus bill to aid the recovery:

There'll be no standalone legislation to help airlines without a comprehensive #COVID19 relief bill, says @SpeakerPelosi.

Key news from Pelosi presser this morning :
1)the standalone airline bill will be considered in the light of an overall comprehensive coronavirus stimulus bill;
2)The airline bill, will either part of comprehensive coronavirus stimulus bill or separate bill attached to main bill.

3.46pm BST

Today's burst of US stimulus plan optimism has now pushed the FTSE 100 index back over 6,000 points (up 0.9% today) for the first time in over two weeks.

Other European markets are higher too, with Germany's DAX up 1.1%

Stimulus talks are on one minute, they are off the next. They seem to be back on again, and stocks are responding positively. But investors will be wondering what might be next, and whether this will be enough to support the markets at these elevated levels, given a growing list of concerns for investors. I am not too convinced the rally will hold this time.

As well as Brexit and US election uncertainties, you have a resurgent coronavirus causing more restrictions and posing great risk to the economic recovery. Indeed, several European nations are seeing record rises in daily cases.

3.25pm BST

The World Trade Organization is set to be run by a woman for the first time in its 25-year history after it was announced that the final choice to be its new director-general will be between South Korea's Yoo Myung-hee and Nigeria's Ngozi Okonjo-Iweala.

Britain's former international trade secretary Liam Fox failed to make the final shortlist as the number of candidates was whittled down from five to two..... More here.

2.49pm BST

The US stock market has opened with some small gains, as investors cling to hopes of stimulus measures soon.

The Dow Jones industrial average has jumped by 105 points, or 0.4%, to 28,409 points, which is its highest level since early September.

I shut down two days ago because they weren't working out. Now, they're starting to work out. We're starting to have some very productive talks.

2.23pm BST

America's persistently high jobless claims total shows the need for fresh stimulus measures, says Glassdoor senior economist Daniel Zhao.

The drop in claims stalled at the same time much-needed stimulus talks ground to a halt. The stalled stimulus negotiation is a bad sign for the millions of unemployed Americans with bills to pay and companies attempting to stave off furloughs or layoffs.

The longer Americans await more fiscal support, the more likely the pandemic's negative effects will metastasize through the economy, resulting in a new wave of layoffs."

2.03pm BST

Several economists and investors are concerned that US jobless claims seem to have levelled off at a worryingly high level.

Joseph Brusuelas, chief economist at RSM, says there's no V-shaped recovery in the labor force:

Over the past six weeks first time claims have average 867,000 which clearly points to a stalling out of improvement with claims at elevated levels. Moreover, that average stands above the 661,000 of workers recalled in September. Definitely not a V shaped recovery.

At 840k, Initial Jobless Claims came in above the 820k estimate, and above last week's 837k level. Claims peaked on 3/28 but have leveled off at a high level; now averaging 854k for the past 4 weeks. https://t.co/maIeV4Rfa2 pic.twitter.com/TrD19eud6W

1.3 m initial unemployment claims in week end Oct 3 - still way too high. California still on pause to deal w backlog, fraud and double counting. Special pandemic claims were down but still high. Need to watch this category as long-term unem starting to run out of reg UI.

The long-term unemployed will have to reapply for special pandemic UI provided by the CARES Act - that runs out at year end. There are a lot of problems with this data. Still, never thought over a million initial UI a week, or half that, would be where we are. This is so hard.

1.43pm BST

Newsflash: The number of Americans seeking unemployment benefits remains worryingly high.

The latest jobless figures show that 840,000 new initial claims' for unemployment support were filed last week, on a seasonally adjusted basis. That's more than the 820,000 expected, and shows that there's been little improvement for several weeks.

Last wk, workers filed 804K UI initial claims + 464K PUA claims = another 1.27 million claims NSA#joblessclaims hit their lowest level since Mar, as PUA claims dropped, driven by downward revisions & drops in AZ & PR.

UI+PUA claims together still over 1 million weekly.

1/ pic.twitter.com/LYnqV0auiQ

Initial jobless claims worst than expected at 840k vs. 820k est. & 849k in prior week (rev up); continuing claims down to 10.98M vs. 11.4M est. & 11.98M in prior week...greatest gains in MD (+3.6k), IL (+3.4k) & NJ (+2.5k); greatest decreases in TX (-7.1k), FL (-6.7k) & GA (-5.9k) pic.twitter.com/sxXFRZ0KQ2

1.28pm BST

Opec, the oil cartel, has cut its forecast for long-term demand for crude - but dismissed claims that peak oil may have already arrived.

#OPEC has, for the first time, forecast the peak in global demand. Its latest World Oil Outlook estimates demand will reach 109.3 mil b/d in 2040 (downward revision of 1.3 mil b/d from last year's report), then "plateau over a relatively long period" #OOTT pic.twitter.com/WA7Q0xjqRj

Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand plateaus during the second half.

Future demand will likely remain persistently below past projections due to the lingering effects of the COVID-19-related shutdowns and their impact on the global economy and consumer behaviour."

12.55pm BST

The TUC aren't the only people concerned about the impact of new Covid-19 restrictions in the North of England.

Mayors, MPs and council leaders have vowed to fiercely oppose any new lockdown measures without substantial financial support.

With a leaked report and no talk of a strong support package, this morning many NW operators and employees are extremely anxious and fearful of their future.

This Government has treated the 5th biggest industry in the UK with utter disregard and a throw away thought

A disgrace.

12.05pm BST

Britain's unions are pushing the government to launch a new local furlough' scheme to help businesses survive if tough Covid-19 restrictions are imposed in their area.

Scotland announced a new crackdown on pubs and restaurants yesterday, and the North of England could face similar curbs within days.

We all hoped the economy would be starting to reopen and recover this autumn. But with further restrictions imminent in some areas, we need the chancellor to adopt a fresh approach to protect jobs and livelihoods.

In areas facing high infection rates and further business closures, the government must act to preserve jobs and stop family firms going to the wall through a new local furlough scheme - building on the existing national job retention and job support schemes, with help for the self-employed too. That's the right response to this renewed public health emergency in parts of the UK.

11.15am BST

The Bank of England's financial policy committee fears that corporate insolvencies will rise, as the jump in Covid-19 cases hits the economy.

The minutes of their meeting last week, released this morning, show that the FPC expects some companies will come under heavier pressure in the months ahead.

The recent increases in Covid-19 cases, and associated public health measures, have the potential to weigh further on economic activity.

There had not been widespread reports of companies that were unable to access finance, UK corporate insolvencies remained low, and lending through government backed loan guarantee schemes had levelled off, with 57bn being approved through schemes by mid-September compared to 31bn by May. This suggested that the demand for finance was largely being met by the supply of credit. However, intelligence from the Bank's regional Agents suggested that there were some pockets of unmet borrowing needs which might translate into signs of distress in the coming months.

While the number of UK corporate insolvencies had remained low to date, the FPC judged it would probably increase. Some companies may struggle because they were highly leveraged or unprofitable prior to March and others faced pressure because of structural changes in the economy.

11.00am BST

Here's our news story on easyJet's call for fresh assistance, after suffering its first full-year loss:

EasyJet has called on the British government to provide airlines with a bespoke package of support measures urgently, warning that aviation is facing the most severe threat in its history.

The airline said it expected to report a full-year loss for the first time in its history, forecasting a pre-tax loss of between 815m and 845m for the last 12 months.

10.53am BST

Shares in telecoms business TalkTalk have surged by 16% after it agreed to talks about a 1.1bn takeover bid.

TalkTalk said that its board has agreed to progress the proposal made by Toscafund, the telecoms company's second-largest shareholder, but that the hedge fund would have to get the backing of executive chairman and founder Charles Dunstone. Dunstone is TalkTalk's largest shareholder with an almost 30% stake. Toscafund, which is chaired by Martin Gilbert, has a similar sized stake.

The board has considered the terms of the proposal and has agreed to progress the proposal further with Toscafund along with taking advice from the company's advisers," the company said in a statement.

10.50am BST

Shares in UK engineering firm Rolls-Royce have surged by nearly 10% this morning, as fears over its financial health ease.

The jet engine maker has been climbing steadily since agreeing a 5bn rescue package, including a 2bn cash call from shareholders, last week.

Rolls Royce +8% to 170p, coincidentally the same price as when they floated in 1987. Shares have risen 70% since last Friday's low but were over 10 pounds in 2018!

10.35am BST

Most European stock markets have gained ground this morning, although UK stocks are being held back by a stronger pound.

The Stoxx 600 index of Europe's listed companies has gained 0.5%, to its highest level in nearly three weeks.

Donald Trump called on Republicans and Democrats to work together to push for a $25bn stimulus package for the airline sector. United Continental and Americans Airlines Groups both gained in excess of 4%. It seems that Mr Trump also promoted the idea of $1,200 stimulus payments to individuals.

Nancy Pelsoi, of the Democrats, said that it was a missed opportunity for a major relief package. It seems that the Donald hit the reset button on the discussions so he could try and be in control of the situation. US stock markets had a better reaction to the developments and the S&P 500 closed up over 1.7% - recouping the losses that were posted on Tuesday.

10.05am BST

One in ten UK firms still aren't ready to reopen following the pandemic.

That's according to the latest survey from the Office for National Statistics, which found that:

9.43am BST

Bank of England Governor Andrew Bailey has warned that Britain's economy faces unprecedented uncertainty', due to the Covid-19 pandemic.

There is an unprecedented level of uncertainty at the moment. And the risks, I'm afraid -- certainly as we see them -- are very much on the downside," Bailey said, citing the recent rise of COVID-19 cases in Britain.

Asked about the prospect of a trade deal between Britain and the European Union before a post-Brexit transition ends on Dec. 31, Bailey said it was vital that economies remained open.

9.29am BST

Other UK companies are also warning about the impact of Covid-19 on their businesses.

Robert Walters, the recruitment firm, has posted a 30% plunge in earnings in the last quarter, compared to a year ago.

Key forward-looking recruitment indicators have stabilised or shown early signs of improvement particularly across our Asia Pacific business which was the first region to be impacted by the pandemic at the turn of the year.

Pockets of strong demand do exist across a number of specialist disciplines globally including technology, digital, e-commerce, fintech, cyber-security and healthcare.

9.29am BST

Shares in easyJet have dropped by almost 2% this morning, to 513p - still above the eight-year lows hit earlier this year.

8.59am BST

Here's a snap summary from the Mirror's Graham Hiscott:

Sobering figs from @easyJet as it lays bare ongoing coronavirus impact.
First annual loss in 25-year history - up to 845m
Lost equivalent of 3.5m a day between July and September
Flew 18.6m fewer passengers in peak summer months.
Debts more than tripled to 1.1bn

8.52am BST

City analysts are warning that airlines face tough months ahead... underlining why easyJet is pleading for more government help:

Richard Hunter, Head of Markets at interactive investor:

The likely impending pressure on the consumer could have further implications for the hospitality and leisure sectors.

Meanwhile, the airlines remain in fight rather than flight mode, conserving capital in any way possible, as evidenced by some of the measures announced today by easyJet following the halving of passenger numbers due to the pandemic.

'easyJet has made the descent into its first ever loss, as Covid 19 turbulence has rocked the aviation industry. Due to the collapse in air travel, the airline expects to report a pre-tax loss of between 815 and 845 million for the 12 months to the end of September. Over the last three months, it's only been able to fly 38% of planned capacity. The brief respite of higher bookings in August was dashed after fresh quarantine restrictions were imposed on arrivals across Europe.

The situation is expected to deteriorate over the winter as infections increase, customers remain fearful of flying and tough quarantine rules are kept in place. That is why the company is forecasting that it will only be able to fly a quarter of its planned capacity in the first quarter of 2021. The gravity of the situation, with customer passenger numbers halved to 48 million, has forced it to appeal for urgent government help.

8.37am BST

The ongoing Covid-19 crisis means that easyjet will only fly a quarter as many flights as normal in the next three months... and it's not giving any financial guidance for the next year either.

Here's its latest outlook statement:

Based on current travel restrictions in the markets in which we operate, easyJet expects to fly c.25% of planned capacity for Q1 2021. We will cover the majority of our pre-existing network with reduced frequency, taking advantage of the European slot waiver mechanism put in place for this winter to best match our capacity against the lower demand that currently exists. We remain focused on cash generative flying over the winter season in order to minimise losses during the first half. We retain the flexibility to ramp capacity back up quickly when we see demand return.

At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any financial guidance for the 2021 financial year.

8.18am BST

Jim Armitage of the Evening Standard reckons the government may not heed easyJet's call....

As Trump suggests more help got US airlines, EasyJet asks Rishi Sunak for a UK package. With the Chancellor getting grief from his backbenchers for being too generous, good luck with that. https://t.co/ULdYGxW4CP

Chief executive Johan Lundgren's renewed calls came as Donald Trump suggested further assistance for US airlines, triggering 4% rises in the share prices of United Continental and American Airlines overnight.

EasyJet has raised more than 2.4 billion in cash since the crisis including through debt, share issues and selling and leasing back its planes but the group, like other airlines, is facing unprecedented difficulties ahead as the pandemic rolls through Europe.

8.15am BST

This morning's financial results clearly show how airlines had a grim summer.

Last year, easyJet made a profit of 528m in July-September. This year, it expects to post a loss of between 295m and 325m, having only carried one-third as many customers.

8.00am BST

Easyjet reports that it has cut UK staff levels successfully":

easyJet launched an employee consultation process on proposals to reduce staff numbers by up to 30%, including optimising our network and bases, improving productivity and promoting more efficient ways of working.

The UK consultations with management and administration staff, UK cabin crew and UK pilots have now concluded successfully. Discussions with the relevant unions and works councils were constructive and have resulted in greatly increased seasonal and flexible working patterns whilst avoiding the need for compulsory redundancies. This will make a material difference to our annual cost base and cash burn, particularly over the winter months.

Consultation processes are underway in Germany, Portugal and Switzerland.

7.44am BST

EasyJet says that the UK government's quarantine rules had a significant impact on business last month.

During the last quarter (July to September), it only flew 38% of planned capacity. It nudged over 50% in August, before the prospect of 14-day quarantining for arrivals from popular sunspots like Spain, France, and Portugal deterred customers from booking.

Flying peaked in August and then tapered significantly during September when customer demand was materially affected by changes in government travel guidance and quarantine rules.

Customers are booking at a very late stage and visibility remains limited.

7.24am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

#BREAKING EasyJet expects annual pre-tax loss of up to 845 mn pic.twitter.com/y9lofVtR1p

Based on current travel restrictions we expect to fly c.25% of planned capacity for Q1 2021 but we retain the flexibility to ramp up capacity quickly when we see demand return and early booking levels for summer 21 are in line with previous years.

Aviation continues to face the most severe threat in its history and the UK Government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes.

easyJet came into this crisis in a very strong position thanks to its strong balance sheet and consistent profitability. This year will be the first time in its history that easyJet has ever made a full year loss.

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