Will Easyjet cancel its Airbus order?

[jafar]

https://www.forbes.com/sites/marisagarcia/2020/03/30/as-easyjet-grounds-fleet-founder-threatens-board-demanding-airbus-order-cancellation/

Is this a new beginning?

[Less Hair]

Who would take it instead? FR.

[DaveReidUK]

https://www.forbes.com/sites/marisagarcia/2020/03/30/as-easyjet-grounds-fleet-founder-threatens-board-demanding-airbus-order-cancellation/

Is this a new beginning?

No, a new beginning would be Stelios resisting the temptation to chuck his weight around.

[Groundloop]

If Stelios was so worried about the future of EJ he could have refused his £60m dividend payout!

[GKOC41]

EJ should go back to the board for funds. Then Stelios could give back the 60m

[Douglas Bahada]

I would suggest a 4. something billion pound/euro airplane order would be the last thing to be considering if you need to increase short to medium term liquidity.

[mattyj]

EJ will probably give it’s crews an option on an airbus each in lieu of a redundancy payment

[Phantom4]

Might not have

[Phantom4]

Might not have to cancel if they cut their fleet by 30%

[Officerzero]

Might not have to cancel if they cut their fleet by 30%
I would have thought in less than 2 months preparations for the 3rd month will be in place for an accelerated return to get business rolling again. The Governments costs must be frightening to them as each day passes, they know this can't continue a measured return for various business of course but transport is a huge driver in this bounce back.
There are some bizarre thinking cuts going on surely, this is only temporary and will require plenty of staff and take up from residual recovery speeds.
The slots will be eaten up by those that want them and those that will be out of the blocks first will capitalize.
Keeping passengers on side is key also.
BA and others will be in waiting to take the slots from others that may fall by the wayside.
Return preparations should be going on now.
Boris didn't want the second runway so if there is less take up, he and others will be happy.
Survival of the fittest in more ways than one.

[CaptainProp]

No, a new beginning would be Stelios resisting the temptation to chuck his weight around.

This...... ☝🏻

[a1anx]

Acquiring new aircraft right now would be a act of blind faith.
It will be at least a year until the extent and nature of the sector's recovery is known.

[Chris2303]

https://www.forbes.com/sites/marisagarcia/2020/03/30/as-easyjet-grounds-fleet-founder-threatens-board-demanding-airbus-order-cancellation/

Is this a new beginning?

Why would it need new airplanes?

[sheepless]

Nothing will start regular flying until a vaccine is widely distributed. Minimum of 2 years. If we are lucky.
In this 2 year period Airbus and Boeing currently plan to deliver 2000 + aircraft.
This is not a 9/11 type event. No one will want a new aircraft for several years. No one will be able to afford a new aircraft.
:-)

[covec]

What exercises my concern is the thought of travelling through an airport and availing myself of the surrounding transport infrastructure only weeks, or months after a major pandemic.

Our next holiday abroad will be next year - I want proof that this is sorted before I sit next to another pax pr queue through Security.

[Northern Monkey]

Nothing will start regular flying until a vaccine is widely distributed. Minimum of 2 years. If we are lucky.
In this 2 year period Airbus and Boeing currently plan to deliver 2000 + aircraft.
This is not a 9/11 type event. No one will want a new aircraft for several years. No one will be able to afford a new aircraft.
:-)

That is about the most downbeat analysis of our situation yet. And that's saying something.

The reality is, as we starting to see in Italy and Spain, the population cannot be quarantined or isolated for 2 years. Life will have to get back to normal before that or we will see a complete breakdown of society.

I'm betting on a staged release of the restrictions over the next 6-9 months.

[Less Hair]

How is China's airline industry doing these days? Are they slowly returning to business as normal as lockdowns seem to be ending?

[JamesGBC]

Have a look at flight radar and it looks a lot better than Europe. Depends on load factors but freight demand is high.

[RickNRoll]

Will every airline cancel most of their orders?

[Lyneham Lad]

Interesting 'take' on the situation in the Business section of The Times today.

A strange eruption on Mount Stelios (https://www.thetimes.co.uk/article/cc3e0660-72a8-11ea-a7b2-0673a3ece2ba?shareToken=d845b6deb993fd2da20527bcf4a1c0ae)

[WHBM]

Disappointing to see the stereotypical jealousy against Stelios, Branson, Willie Walsh etc in the various threads. I know things are suddenly tough, but ...

No Stelios, no Easyjet in the first place, no jobs there. No Branson, no Virgin in the first place, no jobs there. Etc. I know Easyjet seem to be profitable overall, and Virgin honestly never have been, but that's a separate discussion. These guys do need to devise ways to save the company, otherwise it's all lost for them as well. They have managed to ride the roller-coaster so far.

I suspect that a number of carriers will come out of this. The real long-term issue is going to be at Boeing and Airbus.

[Less Hair]

That will affect the suppliers base again then like it did with the MAX?

[qwertyuiop]

I suspect that a number of carriers will come out of this. The real long-term issue is going to be at Boeing and Airbus.

That’s an interesting one. We know Trump will keep Boeing alive. Who will stump up the Billions for Airbus?

[SamYeager]

That’s an interesting one. We know Trump will keep Boeing alive. Who will stump up the Billions for Airbus?
Germany and France as they employ the majority of their staff in those two countries AFAIK.

[Chris2303]

https://aviationweek.com/air-transport/aircraft-propulsion/pandemic-cuts-new-aircraft-needs-25-through-2025-analysts-say"A 40% drop in global revenue passenger miles followed by a rapid snap-back and leveling out of 5% year-over-year growth starting in 2023 would cut near-term new-aircraft demand about 25% from pre-coronavirus pandemic estimates, Vertical Research Partners analysts conclude.

Vertical plugged a 40% traffic decline into its model for 2020, with rebounds of 19% next year and 10% in 2022, the company said in a Mar. 30 research note. Among the outputs: airlines would need 6,300 new aircraft over the next five years, down from its previous forecast of 8,300.

On a percentage basis, the reduction would hit narrowbodies and widebodies equally, reducing demand for each category by about 25%. Vertical’s revised analysis shows airlines would need 1,540 fewer narrowbodies and 380 fewer widebodies. "

There's more in the article

[marchino61]

The only reason that more MAX orders have not been cancelled is that Airbus has a 5-year order book for the Neo.

I suggest that once MAX customers realise the Neo's order book has shrunk, they will desert Boeing in droves and place orders for the Neo.

In the narrowbody market at least, Boeing is going to suffer a lot more than Airbus.

[there she blows]

https://aviationweek.com/air-transport/aircraft-propulsion/pandemic-cuts-new-aircraft-needs-25-through-2025-analysts-say"A 40% drop in global revenue passenger miles followed by a rapid snap-back and leveling out of 5% year-over-year growth starting in 2023 would cut near-term new-aircraft demand about 25% from pre-coronavirus pandemic estimates, Vertical Research Partners analysts conclude.

Vertical plugged a 40% traffic decline into its model for 2020, with rebounds of 19% next year and 10% in 2022, the company said in a Mar. 30 research note. Among the outputs: airlines would need 6,300 new aircraft over the next five years, down from its previous forecast of 8,300.

On a percentage basis, the reduction would hit narrowbodies and widebodies equally, reducing demand for each category by about 25%. Vertical’s revised analysis shows airlines would need 1,540 fewer narrowbodies and 380 fewer widebodies. "

There's more in the article
yep about 1900 less bodies, right now the world has about 34000 less bodies.
get a grip

[kiwi grey]

The only reason that more MAX orders have not been cancelled is that Airbus has a 5-year order book for the Neo.
I suggest that once MAX customers realise the Neo's order book has shrunk, they will desert Boeing in droves and place orders for the Neo.
In the narrowbody market at least, Boeing is going to suffer a lot more than Airbus.

Particularly as a Boeing customer with aircraft undelivered for more than a year can cancel without penalty.

[sheepless]

Northern Monkey - Apologies for being downbeat...I would hope that the modelling plays out.

"A 40% drop in global revenue passenger miles followed by a rapid snap-back and leveling out of 5% year-over-year growth starting in 2023". But..

Looking at the CFMU portal - Europe has gone from around 24000 movements a day to around 4000. The remaining 4000 includes freighters so the actual decrease in pax is massive.

At the other end of the world NZ has gone to handfuls of passengers a day during lock down. If/When countries get control they will likely impose restrictions for some time.

Singapore, as a hub, is a good one to watch. They have avoided lock down, for the moment. The airline and airport are effectively not operating. Daily cases have always been low.

The bounce back will be the key, but when. There are probably no models for this scenario. Will people want to travel. Will they have the money to travel.

The simple model says this kills 2% of the people. Maybe half of those people did not fly anyway. Clearly it is not that simple.

[Northern Monkey]

Northern Monkey - Apologies for being downbeat...I would hope that the modelling plays out.

"A 40% drop in global revenue passenger miles followed by a rapid snap-back and leveling out of 5% year-over-year growth starting in 2023". But..

Looking at the CFMU portal - Europe has gone from around 24000 movements a day to around 4000. The remaining 4000 includes freighters so the actual decrease in pax is massive.

At the other end of the world NZ has gone to handfuls of passengers a day during lock down. If/When countries get control they will likely impose restrictions for some time.

Singapore, as a hub, is a good one to watch. They have avoided lock down, for the moment. The airline and airport are effectively not operating. Daily cases have always been low.

The bounce back will be the key, but when. There are probably no models for this scenario. Will people want to travel. Will they have the money to travel.

The simple model says this kills 2% of the people. Maybe half of those people did not fly anyway. Clearly it is not that simple.

The numbers we have at the moment are useless. The data is garbage.

Since we don't know the extent of community transmission, we cannot know the true death rate or the true serious complication rate. In the UK, we are only testing people admitted to hospital with respiratory symptoms. So the death rate as a proportion of those cases is going to be much higher than the true death rate. The same is true for nearly every other country out there. There will be large numbers of asymptomatic or mild cases in the community which do not form part of the official statistics. When all that is taken into account, I would bet at least a months salary on the eventual death rate being under 1%. Possibly under 0.5%.

As to your other point, will people want to travel, will people have the money to travel? As soon as we have a vaccine or an effective anti-viral and the restrictions can be lifted on every day life, people will want to travel again. I've used zoom video conferencing this week and despite it being a laugh to have a few beers with your mates, it doesn't come close to meeting someone face to face. So business travel will come back. As for leisure travel, are we really saying that generation selfie won't want to go to the Eiffel Tower, or NYC, or for their gap year adventures in Thailand? I think not.

There is definitely a bigger question about whether they will have the money to travel, at least initially. I do think for a while there will be less flying as people prioritise putting their day to day finances back in order. It will probably take a couple of years to get back to any kind of normal. Now is not the time to start training to be a pilot, despite whatever CAE/L3/FTE may tell you.

Back to the title of the thread, should easyjet cancel its airbus order? I would argue that it shouldn't cancel entirely but should defer as much as possible and reduce the size of the order if possible. There will be opportunities for well placed airlines to do well in a few years from now as capacity comes out of the market and smaller companies either fail or are taken over. It would be foolish to throw the baby out with the bathwater.

[CaptainProp]

The numbers we have at the moment are useless. The data is garbage.

Since we don't know the extent of community transmission, we cannot know the true death rate or the true serious complication rate. In the UK, we are only testing people admitted to hospital with respiratory symptoms. So the death rate as a proportion of those cases is going to be much higher than the true death rate. The same is true for nearly every other country out there. There will be large numbers of asymptomatic or mild cases in the community which do not form part of the official statistics. When all that is taken into account, I would bet at least a months salary on the eventual death rate being under 1%. Possibly under 0.5%.

As to your other point, will people want to travel, will people have the money to travel? As soon as we have a vaccine or an effective anti-viral and the restrictions can be lifted on every day life, people will want to travel again. I've used zoom video conferencing this week and despite it being a laugh to have a few beers with your mates, it doesn't come close to meeting someone face to face. So business travel will come back. As for leisure travel, are we really saying that generation selfie won't want to go to the Eiffel Tower, or NYC, or for their gap year adventures in Thailand? I think not.

There is definitely a bigger question about whether they will have the money to travel, at least initially. I do think for a while there will be less flying as people prioritise putting their day to day finances back in order. It will probably take a couple of years to get back to any kind of normal. Now is not the time to start training to be a pilot, despite whatever CAE/L3/FTE may tell you.

Back to the title of the thread, should easyjet cancel its airbus order? I would argue that it shouldn't cancel entirely but should defer as much as possible and reduce the size of the order if possible. There will be opportunities for well placed airlines to do well in a few years from now as capacity comes out of the market and smaller companies either fail or are taken over. It would be foolish to throw the baby out with the bathwater.

UK data might not be indicative of how widespread virus will become, or give correct indication of death rates, but this data is already available from parts of Asia where they've mass tested since months now.

Once restrictions are lifted I agree that people will want to travel again, but I do think they'll be even more price sensitive than before. This will benefit companies like easyJet, Ryanair, Wizz Air etc.

Taking aircraft deliveries doesn't necessarily mean expanding. Selling off older frames and saving up to 15% in fuel costs, fuel representing 30% of easyJet's total costs, and maintenance costs makes sense when you are looking at running a long term healthy and sustainable business.

CP

[goeasy]

Exactly.... new aircraft doesn’t always mean bigger fleet. Rollover of old airframes is very important in a healthy airline

[procede]

Exactly.... new aircraft doesn’t always mean bigger fleet. Rollover of old airframes is very important in a healthy airline
That depends. Most large western airlines, with enough maintenance facilities, tend to use their aircraft until end of life.
If increased maintenance and down time is an issue, then a young fleet makes some sense, but only if the old airframes have enough residual value. That last thing is very much in doubt now. Even if you lease aircraft, you can probably negotiate a really good deal in the near future if you keep them compared to buying new ones.
Increased fuel burn, especially with fuel prices now, does not matter much on shorter routes and for freighters with limited flight hours per day.

[a1anx]

Post Covid airlines are going to have a problem divesting themselves of excess fleet capacity. I can't see anyone being in a hurry to buy aircraft.

[Loose rivets]

I've used zoom video conferencing this week

The Guardian would express alarm. Software too easy to hack and a real threat - he said, after a family get-together last week.

[Chris2303]

I can't see Airbus being too concerned about airlines cancelling when there is so much uncertainty over the Max return to service (if it does).

There was a lot of discussion on the Max threads about airlines not being able to ditch their Max orders because Airbus had full order books until 2025. Unfortunately Airbus have had to shut down production at a number of facilities due to the current pandemic, so they aren't going to meet a few delivery dates.

Anybody noticed how quiet the Max threads have become?

[Denti]

Post Covid airlines are going to have a problem divesting themselves of excess fleet capacity. I can't see anyone being in a hurry to buy aircraft.
I would say that depends. There will still be a demand for travel, probably even more so after being cooped up in your own home for a few months. However, as money will be scarce, those that can offer lower fares due to their lower cost structure and independence from "premium" passengers will probably be in a better place to fulfill that demand. The hardest hit sector will be the premium travel, as it was in 2009 as companies will cut back on fully paid business or even first class long range travel, and if they have to, send their personnel on economy or premium economy instead.

However, how easyjet will and can react depends largely on the decisions taken by its stakeholders now, if Stelios gets his way the company will become quite irrelevant compared to competitors like wizzair and ryanair and enter a decline, which in fact it has been in already for the last years as it has been very slow to take up opportunities when they present themselves. Which of course means that both share price and dividend will dry up over time, leaving the only conclusion that Stelios is broke right now, and doesn't really care about the future.

[LTNman]

I would think it will be hard to go to government pleading poverty if they refuse to trim their spending plans on a new fleet.

[SamYeager]

I would think it will be hard to go to government pleading poverty if they refuse to trim their spending plans on a new fleet.
The title is whether EJ will cancel their order. Deferring deliveries or trimming their order is another matter altogether and I wouldn't be surprised if EJ is in discussions with Airbus on that very subject. However Stelios seems to just want outright cancellation.

[Akrapovic]

I would think it will be hard to go to government pleading poverty if they refuse to trim their spending plans on a new fleet.

https://www.reuters.com/article/us-health-coronavirus-easyjet-credit/easyjet-requests-draw-down-of-500-million-credit-facility-explores-more-funding-idUSKBN21O1KS

[fergusd]

The Guardian would express alarm. Software too easy to hack and a real threat - he said, after a family get-together last week.

There are many secure alternatives . . .

I used to travel a lot, I will now not be travelling for the forseeable future. The mandatory use of doing business without travel (or going out of business) is likely to stick once people see it's absolutely viable, is cheaper, and results in a better quality of life.

That, for me, and probably the environment, is a good thing.

Likely home working will stick to some extent too, why am I being asked to commute (at all) when I managed without so doing for all those weeks . . .

Things are going to change, probably for the better for many people, once all the pain starts to subside.