DAVY VIEW

easyJet’s 15% equity raise (gross proceeds of £419m) along with sale and leaseback transactions will see liquidity proceeds exceeding £3bn and should give its capital structure some breathing space. Whether this is the appropriate leverage will depend on cash burn (£3bn on a full grounding over nine months), restructuring (stretch target of flat cost per seat ex-fuel in FY2021 versus FY2019) and recovery (30% capacity in peak summer Q4). While no guidance is given, with operations likely to resume on a slow and gradual basis, we assume reported losses before tax of £770m and £35m in FY2020 and FY2021 respectively before profit returns in FY2022 (£390m). We retain our ‘Neutral’ rating with a price target of £7.