What just happened?
EasyJet has warned that it could faces losses of more than £800m this financial year, making it the first annual loss in its 25-year history[i].
What does this mean?
EasyJet has signalled to the government that it may require additional financial support[ii]. This comes after the company slashed its winter flight schedule due to plummeting passenger demand[iii]. EasyJet has already received a £360m loan from the government, cut 4500 jobs equating to almost a third of its staff and raised £608m from selling aircraft[iv]. Despite this action, [v] UK airlines have also called for tax breaks and other measures to be introduced to help them survive the crisis. Including a Covid-19 airport testing regime to be introduced to shorten the 14-day quarantine rule.[vi]
EasyJet has predicted that it will operate at 25% of normal capacity for the rest of 2020 and into 2021[vii], despite being able to fly at a 38% capacity during the summer peak.[viii] This reduction is due to the government introducing quarantine restrictions on arrivals from abroad which has led to demand drastically decreasing. [ix]
EasyJet isn’t the only airline facing difficultly due to the pandemic, the whole aviation industry is struggling. The International Air Transport Association (IATA) released the financial outlook for the global air transport industry, stating that airlines were expected to lose $84.3bn in 2020 with a net profit of -20.1%[x].
The United Kingdom, and in particular its aviation industry, has been heavily affected by the COVID-19 crisis. Watch this quick video which explains the road to recovery.
The biggest driver in the industry’s losses is the lack of passenger demand. Demand vanished as international borders closed, and countries locked down to prevent the spread of the virus. The lowest point being in April when global travel was approximately 95% below 2019 levels[xi].
How does this affect the legal sector?
Aviation litigation faces the same obstacles posed by the litigation process in general. The way litigation is performed has dramatically altered over the crisis, changing to being predominately online.
With courts and law firms alike having mostly closed their premises across the UK. This has led to a rapid uptake of technology to allow individuals to work from home and to be able to continue court functions so that justice can still prevail[xii]. During the pandemic there has been a vast reduction in both commercial and private flights, highlighting the importance of being responsive to change and the need to adapt the way we work.
Under EU Regulation EC261 customers are entitled to compensation by airlines for cancelled or substantially delayed flights unless caused by extraordinary circumstances[xiii]. The European Commission clarified that Covid-19 does engage this provision and that airlines are obliged to offer customers the choice between, a reimbursement, rerouting at the earliest opportunity or rerouting at a later date at the passenger’s convenience[xiv].
Many airlines have chosen to offer travel vouchers as an alternative option to a refund, this may be more attractive to customers while also preserving cash for airlines[xv]. This has led some airlines to run into trouble, including Delta Air Lines who are being sued over their Covid-19 refund policy with the claim stating they are not offering full refunds, only rebookings or a travel voucher[xvi].
Written by Isabella Hunter
Assessing Firms:
#Clyde&Co. #ReedSmith #DLAPiper #NotonRoseFulbright #Bird&Bird #Hogenlovells #Trowers&Hamilins #Winston&Strawn #Dentons #Kennedys #HerbertSmithFreehills
References:
[i] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[ii] Nils Pratley, There’s no harm in asking but easyJet shouldn’t bet on a bailout (2020) <https://www.theguardian.com/business/nils-pratley-on-finance/2020/oct/08/no-harm-easyjet-asking-bet-bailout-airline-time>
[iii] Philip Georgiadis and Daniel Thomas, EasyJet latest to call on government for support, Financial Times (2020) <https://www.ft.com/content/e7691f9c-edb6-40e5-889b-7d8136de0c2d>
[iv] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[v] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[vi] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[vii] Ryan McAleer, EasyJet cuts back its operation at Belfast International Airport, The Irish News (2020) <https://www.irishnews.com/business/2020/10/09/news/easyjet-cuts-back-operation-at-belfast-international-airport-2092121/>
[viii] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[ix] Theo Leggett, EasyJet to make first annual loss in its history, BBC News (2020) <https://www.bbc.co.uk/news/business-54454202>
[x] Industry losses to top $84 billion (2020) <https://www.iata.org/en/pressroom/pr/2020-06-09-01/>
[xi] Industry losses to top $84 billion (2020) <https://www.iata.org/en/pressroom/pr/2020-06-09-01/>
[xii] Stewarts, What the impact of Covid-19 means for aviation claims (2020) <https://www.stewartslaw.com/news/what-the-impact-of-covid-19-means-for-aviation-claims/>
[xiii] Civil Aviation authority, Guidance on consumer law for airlines, < https://www.caa.co.uk/Commercial-industry/Airlines/Guidance-on-consumer-law-for-airlines/ >
[xiv] Stewarts, What the impacts of Covid-19 means for aviation claims (2020) < https://www.stewartslaw.com/news/what-the-impact-of-covid-19-means-for-aviation-claims/ >
[xv] Norton Rose Fulbright, COVID-19 and the practical implications for the global aviation industry (2020) <https://www.nortonrosefulbright.com/en/knowledge/publications/895cf5ba/covid-19-and-the-practical-implications-for-the-global-aviation-industry >
[xvi] Stewarts, What the impacts of Covid-19 means for aviation claims (2020) < https://www.stewartslaw.com/news/what-the-impact-of-covid-19-means-for-aviation-claims/ >
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.