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EasyJet jumps on £600m government loan and hopes of COVID-19 peak

SCHIPHOL, NETHERLANDS - 2020/04/02: EasyJet aircrafts parked at an empty Schiphol Airport. Closed gates and departure halls at Schiphol airport during times of the coronavirus threats. The airport is shrinking what the airport itself calls Kern-Schiphol. This means that facilities for leaving passengers will continue in a slimmed-down form. (Photo by Niels Wenstedt/SOPA Images/LightRocket via Getty Images)
EasyJet aircrafts parked at an empty Schiphol Airport. (Niels Wenstedt/SOPA Images/LightRocket via Getty Images)

Shares in EasyJet (EZJ.L) leapt as much as 25% on Tuesday 7 April, as fears about the airline’s future eased.

EasyJet, which grounded all its aircrafts last week, has faced questions in recent days about how long it could survive. Founder Sir Stelios Haji-Ioannou said on Monday the airline could run out of money by August.

However, the stock rallied after EasyJet said it had secured additional financing to secure its position. The company raised £600m ($738m) through a government-backed loan scheme and has drawn down $500m from its credit line. The actions mean EasyJet now has around £2.3bn of cash on hand.

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“We remain absolutely focused on ensuring the long-term future of the airline, reducing our costs and preserving jobs, to make sure easyJet is in the best position to resume flying once the pandemic is over,” chief executive Johan Lundgren said in a statement.

EasyJet's stock leapt on Tuesday. Photo: Yahoo Finance UK
EasyJet's stock leapt on Tuesday. Photo: Yahoo Finance UK

EasyJet’s stock was also buoyed by continued optimism that the global COVID-19 pandemic may have reached its peak. Spain, Italy and France all reported sustained dips in death rates overnight. The news helped stocks rise for second day in a row.

Airline stocks were among the biggest risers. The travel sector has been devastated by the coronavirus pandemic, which hit demand for air travel even before the wave of government-ordered lockdowns and travel bans.

Hopes that restrictions may soon be eased helped British Airways-owner IAG (IAG.L) climb 12% and Ryanair (RYA.L) rise 6.5%. In continental Europe, Norwegian Air (NAS.OL) stock climbed 8.6% and Lufthansa (LHA.DE) rose 3.3%.

“A recession still remains a given; but hopes are rising that it could well be manageable and not turn into a depression, and that is boosting airlines and travel shares this morning, a sector that has so far borne the brunt of the huge sell off since 21 February,” said Michael Hewson, chief market analyst at CMC Markets.

Despite Tuesday’s share price rally, EasyJet stock still remains 55% below where it stood in late February.

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