EasyJet still owes flights to up to five million passengers who could redeem their vouchers in a summer rush once a Covid-19 vaccination programme is rolled out, deepening the airline's financial woes.
The FTSE 250 operator plunged into the red for the first time in the year to September, with a £1.3bn annual pre-tax loss.
A successful vaccination programme would boost airlines in 2021. However, easyjet may need to provide millions of flights that will not deliver extra revenues.
The Luton-based carrier said it had paid £863m in refunds between March and September to customers whose trips had been cancelled because of the pandemic.
Some £250m of credit vouchers had been issued. With easyJet’s average ticket price at £50, this means around five million passengers will fly effectively for 'free' on vouchers - these vouchers will be valid for up to two years.
However, chief executive Johan Lundgren insisted easyJet would need to fly fewer voucher-carrying passengers than its peers because of the number of refunds it had processed.
Mr Lundgren also remained cautious despite a surge in bookings following the announcement of a potential vaccine last week.
“We don’t know the extent of this crisis; we don’t know how long it will go on,” he said.
The airline’s auditors raised “an emphasis of matter in relation to the going concern material uncertainty”.
Mr Lundgren said easyJet had raised £3.1bn of emergency funds to navigate the crisis and had £2.3bn in the bank shortly after the September year end.
“We will make sure that we will have cash available at any given point in time.
“EasyJet has not only withstood the impact of the pandemic, but now has an unparalleled foundation upon which to emerge strongly from the crisis,” he said.
Dan Thomas, senior analyst at Third Bridge said that even if a vaccine is widely available over the winter, pressure will remain on the industry into the crucial summer season next year.
"When travel corridors do begin to reopen, profitability is likely to remain depressed as multiple carriers look to redeploy across a smaller number of potential routes and discount fares are offered,” he said.
Mr Lundgren said easyJet remains in talks with the UK Government “on a daily basis” over assistance from the state. Key asks include a temporary suspension of air passenger duty and continued pressure for ministers to roll out a sophisticated - and affordable - testing regime to mitigate travel restrictions.
Rishi Sunak, the Chancellor, has warned airlines that they will only receive bespoke support from taxpayers once all other private sector options have been exhausted .
The easyJet boss questioned this logic.
He said: “If you are the Government, and you are telling me that you are going to come to me in the last resort. In this business, then I would come to you in the shape of Flybe, in the shape of Thomas Cook. The Government will then say: ‘That looks too risky for me, you are too much in debt and you are not going to get yourself out of this one.’”
Despite the aviation sector facing a gloomy outlook, other analysts say that there is light at the end of the tunnel.
Andrew Lobbenberg from HSBC said that November might be “as bad as it gets” as the relaxation of restrictions in December could be followed by vaccination programmes and the implementation of testing regimes.
“Politically, there remains a lack of international coherence on policies to reopen travel. Nonetheless, there is far greater momentum than before to use testing as a tool to reopen global travel. The aviation industry's lobbying for pre-flight testing is also gaining some traction,” he wrote.
Separately, British Airways’ owner IAG is said to have slashed what it will pay for Spanish budget carrier Air Europa. IAG previously announced a price of almost €1bn (£900m). According to El Confidencial, this has been chipped to between €300m and €400m.