Corporate (Mis)Behavior

[Psamathe]

I've been amazed recently by what is going on in EasyJet

EasyJet asks for bailout despite £170m dividend payment
...
EasyJet’s (EZJ) chief executive has come under fire for refusing to suspend a £170m dividend payment while simultaneously requesting government assistance.

And now on top of that we get (from EasyJet again)

EasyJet will run out of money by August if Airbus order goes ahead, founder warns

Ian

[Bonefishblues]

The dividend on the individual share I own has been withdrawn. Oh and I have lost 50% of value pre-C19. Other than that, all good

[carpetcleaner]

There's nothing wrong with a company asking for government handouts if is struggling to survive.

The government would end up paying lots of benefit payments if Easy Jet went bust, and the company would stop paying taxes, so it might be cost effective to help it overcome temporary difficulties.

[Mike Sales]

There's nothing wrong with a company asking for government handouts if is struggling to survive.

The government would end up paying lots of benefit payments if Easy Jet went bust, and the company would stop paying taxes, so it might be cost effective to help it overcome temporary difficulties.

Should the Government be in the business of "picking winners"?
Previous companies in trouble have been allowed to fail.
There is good reason to cut the amount of flying.

[Psamathe]

There's nothing wrong with a company asking for government handouts if is struggling to survive.
.....

But at the same-time as e.g. £170m dividend payout to shareholders. If it is struggling to survive should it be making such shareholder dividend payments or keeping that money to stop it needing Gov. bail-out.

Ian

[PH]

The first story - Capitalism functioning as you'd expect it to. If the investors can get a better return on their capital elsewhere that's where they'll take it. There's no morality to it, most shareholders don't have any interest in the company or it's functions. Before we get too holier than thou about it - anyone who has certain saving or a private pension will be part of the same game unless they've gone to extraordinary lengths to avoid it, unless explicitly instructed a fund manager will be under an obligation to maximise the return to stakeholders. Whether the government should be subsidising them is another matter, there's an argument for not doing so unless necessary, there's also an argument that the levels of subsidy shouldn't be based on need. All the benefits so far have been universal within the criteria, the wages for furlough staff and the self employed payout are not based on either the individual's or business's need. We might not like this, but it'd be unfair to single out any company or individual for being part of the system.
The second story - This just seems to be a disagreement about the likely future of their business over the next few years. Whether volumes are going to justify the new planes or not. I've no idea, but it's a commercial decision for the shareholders and management, they'll profit from getting it right and lose out if not.

[Psamathe]

The first story - Capitalism functioning as you'd expect it to. If the investors can get a better return on their capital elsewhere that's where they'll take it. There's no morality to it, most shareholders don't have any interest in the company or it's functions. Before we get too holier than thou about it - anyone who has saving or a private pension will be part of the same game unless they've gone to extraordinary lengths to avoid it, unless explicitly instructed a fund manager will be under an obligation to maximise the return to stakeholders. Whether the government should be subsidising them is another matter, there's an argument for not doing so unless necessary, there's also an argument that the levels of subsidy should be based on need. All the benefits so far have been universal within the criteria, the wages for furlough staff and the self employed payout are not based on either the individual's or business's need. We might not like this, but it'd be unfair to single out any company or individual for being part of the system.
The second story - This just seems to be a disagreement about the likely future of their business over the next few years. Whether volumes are going to justify the new planes or not. I've no idea, but it's a commercial decision for the shareholders and management, they'll profit from getting it right and lose out if not.

To me (my 1st thoughts) are that the 2nd story is about cancelling an existing order for aircraft. That there was an order for aircraft would suggest the company was OK and could afford the aircraft or could finance the aircraft - either way people considered then in adequate shape to meet the financial demands from buying new aircraft. The new aircraft together with a dividend payout goes further to suggest a company doing OK (it can afford a dividend). But then at the same time as paying out the dividend and with new aircraft on order to request a bailout seems a bit like trying to take Government money and passing it to shareholders. Not the 1st time business has done it but that does not make it acceptable to me.

Ian

[Oldjohnw]

The whole world needs to recalibrate. I wonder how much support the owners of easyJet gave to people who needed benefits prior to the current crisis.

If people in the future fly less - and I hope they do - throwing millions at airlines is not a good move.

We need food and drink and medical care; airlines less so.

[PH]

To me (my 1st thoughts) are that the 2nd story is about cancelling an existing order for aircraft. That there was an order for aircraft would suggest the company was OK and could afford the aircraft or could finance the aircraft - either way people considered then in adequate shape to meet the financial demands from buying new aircraft.
Ian

I see what you're saying. But without looking at their accounts I'd be surprised if the new planes were being purchased outright and the finance arrangements will based on an anticipated level of income which is now in uncertain. I doubt any airline can afford to maintain aircraft that are not being used close to capacity, more so for a budget line where the margins will be narrower.
I'd be surprised if all the current airlines are still around in a years time, certainly not in their current form.

[Bonefishblues]

To me (my 1st thoughts) are that the 2nd story is about cancelling an existing order for aircraft. That there was an order for aircraft would suggest the company was OK and could afford the aircraft or could finance the aircraft - either way people considered then in adequate shape to meet the financial demands from buying new aircraft.
Ian

I see what you're saying. But without looking at their accounts I'd be surprised if the new planes were being purchased outright and the finance arrangements will based on an anticipated level of income which is now in uncertain. I doubt any airline can afford to maintain aircraft that are not being used close to capacity, more so for a budget line where the margins will be narrower.
I'd be surprised if all the current airlines are still around in a years time, certainly not in their current form.

I seriously doubt if the airlines will ever be the same again. I think air travel will become much more expensive, but time will tell.

[fullupandslowingdown]

Why should certain companies be able to dip into the taxpayer's pockets (even those who never travel by air, which there must be a few) to support one company.

Fuel is one of the biggest costs which airlines face. Fuel represented 24% of easyJet’s cost base for the 2019 financial year.

EasyJet boosts cash reserves to £2.3bn Apr 6th 2020, 15:01

shares in Dec 2019 before covid 1325p 2019 dividend 88.6p which equals 6.68% return, not bad compared to BOE rate of 0.75% at that time.


some of the costs in 2019 £millions
Airports and ground handling 1,848 if you're not flying then no costs here except for parking
Crew 859 furlough them and it's a 80% saving here
Maintenance 387 only periodic maintenance required - about 50% saving
Selling and marketing 157 no one but an idiot expects to be flying on holiday today
Fuel 1,416 what they're gonna do, go on joy rides?
Aircraft dry leasing 187 not in use so the banks should again take the hit here
Depreciation 240 as below, but based on wear and tear, which they won't be much now so 80% it
Amortisation 15 a finance trick to reduce tax
Net finance charges 15 again the banks should suspend their charges just like we helped them out in 2008
Landing rights charge 497 if you don't fly, you don't need to land

provision is made in the income statement for maintenance not dependent on use of the aircraft, plus maintenance relating to previous use, based on hours or cycles flown, to provide for the cost of these obligations

HIGH IMPACT EVENT PREPAREDNESS AND RESPONSE
Being prepared for unplanned or unwanted events of any scale through recovery activities is critical. Throughout 2019, there have been further enhancements to the incident and crisis management framework to reflect the increasingly uncertain operating environment. The Board is therefore satisfied that it has carried out a robust assessment of the principal risks facing the organisation, including those that would threaten the business model, future performance, solvency, or liquidity.

Johan Lundgren (Chief Executive) £1,006,000
Andrew Findlay (Chief Financial Officer) £1,403,000

The fees for the Chairman and Non-Executive Directors from 1 January 2020 will be:
Chairman £314,568
Basic fee for other Non-Executive Directors £62,914
Fees for Deputy Chairman and Senior Independent Director £25,000
Chair of the Audit, Safety and Remuneration Committees £15,000
Chair of the Finance Committee £10,000
Chair of the Employee Engagement Committee £10,000

Total amounts earned by the Directors (audited) £3,219,000

RESULTS & DIVIDEND
The total profit for the financial year after taxation amounts to £349 million (last year £358 million).
The Company’s dividend policy is to pay shareholders 50% of headline profit after tax, reflecting the Board’s confidence in the long-term prospects of the business. The Directors are recommending an ordinary dividend of 43.9 pence per share, amounting to £174 million.

Current tax:
United Kingdom corporation tax 16
Foreign tax 9

The Haji-Ioannou family; Sir Stelios Haji-Ioannou, Clelia Haji-Ioannou, Polys Haji-Ioannou owns 33.73% of the company

Finance data directly from the

easyJet plc Annual Report and Accounts 2019

[Oldjohnw]

There is a serious principle involved here about supporting airlines (compared with other companies), except perhaps for the universal offer for all business in relation to staff pay.

Air travel is a huge environment disaster and should be discouraged. Bailing out such an industry is spending taxpayer money on aiding environmental destruction, quite apart from paying money to in effect support the payment of dividends which could apply to other companies.

Worth a Chancellor and MP letter.

[Cugel]

There is a serious principle involved here about supporting airlines (compared with other companies), except perhaps for the universal offer for all business in relation to staff pay.

Air travel is a huge environment disaster and should be discouraged. Bailing out such an industry is spending taxpayer money on aiding environmental destruction, quite apart from paying money to in effect support the payment of dividends which could apply to other companies.

Worth a Chancellor and MP letter.

You may find that a Very Large Donation to the Tory Party is more effective. It's the only way to get into their "We will actually represent your interests" club. The membership is very small, of course, as not everyone can afford a multi-million pound bung.

Cugel

[Oldjohnw]

There is a serious principle involved here about supporting airlines (compared with other companies), except perhaps for the universal offer for all business in relation to staff pay.

Air travel is a huge environment disaster and should be discouraged. Bailing out such an industry is spending taxpayer money on aiding environmental destruction, quite apart from paying money to in effect support the payment of dividends which could apply to other companies.

Worth a Chancellor and MP letter.

You may find that a Very Large Donation to the Tory Party is more effective. It's the only way to get into their "We will actually represent your interests" club. The membership is very small, of course, as not everyone can afford a multi-million pound bung.

Cugel

Oh! what a cynic! TBH, I've spent about the Ree decades lobbying ministers. I couple of times i have been heard. But all change starts, not with government, but with persistent little people.

[Psamathe]

.....
Air travel is a huge environment disaster and should be discouraged. Bailing out such an industry is spending taxpayer money on aiding environmental destruction, quite apart from paying money to in effect support the payment of dividends which could apply to other companies.....

I agree completely but we also subsidise the oil companies/hydrocarbons/fossil fuels as well I think the same should apply to that (i.e. remove those subsidies that are not related to C-19)

UK has biggest fossil fuel subsidies in the EU, finds commission
...
The commission report warned that the total subsidies for coal, oil and gas across the EU remained at the same level as 2008. This is despite both the EU and G20 having long pledged to phase out the subsidies, which hamper the rapid transition to clean energy needed to fight climate change.
...

Ian