EasyJet shares decline for third day after cash raise; consolidation needed?

EasyJet (LON:EZJ) shares were declining for a third consecutive trading day on Monday as the reaction to the rejected takeover approach and cash raise is continuing to impact the share price.

On Thursday, EasyJet announced they had rejected a takeover approach from an unnamed bidder. It was later reported that the suitor was fellow budget airline Wizz Air (LON:WIZZ).

And Ryanair (LON:RYA) boss Michael O’Leary has aired his views on the potential deal in the airline industry.

“Both EasyJet and Wizz will either need to be taken out or . . . coalesce together,” O’Leary said in an interview with the Financial Times. “Consolidation needs to happen and will happen. It’s an inevitability, particularly coming out of Covid.”

The comments provide an insight into the industry which has been hammered by the pandemic for the past 18 months. However, O’Leary said Ryanair was not interested in M&A at the moment.

UBS comments
Further weighing on shares of EasyJet were comments from UBS. In a research note from Friday, analysts at the Swiss bank said that EasyJet’s recovery will likely trail its competitors in Europe, with other budget carriers likely to hit pre-pandemic traffic levels earlier due to having less focus on the UK.

The UK has some of the strictest travel regulations in Europe although there is some expectation that these may be eased over the coming weeks.

UK Health Secretary Sajid Javid said he wants to remove the PCR test requirement for travellers entering the UK “as soon as I possibly can”.

Rights issue
The news follows last week’s rights issue where EasyJet raised £1.2 billion which will be partly used to expand its services from some popular airports.

EasyJet said the proceeds are expected to, “materially improve EasyJet’s ability to deliver long-term value to shareholders through providing the Group with the flexibility to take advantage of long-term strategic and investment opportunities expected to arise as the European aviation market emerges from the COVID-19 pandemic”.

The Telegraph reported today that EasyJet may be eyeing up slots at Gatwick if IAG’s (LON:ICAG) plan to run a low-cost subsidiary from the airport gets knocked back by the Unite union.

At 10:33BST, shares in EasyJet were trading lower by 14% at 585.2 pence per share.