[Analysis] easyJet’s aggressive cost-cutting plans could be too drastic, says GlobalData

Following recent news that easyJet has begun consultations on plans to close bases at Stansted, Southend and Newcastle and that 727 of its UK-based pilots are at risk of redundancy, as well as a third of its entire workforce, Ralph Hollister, Analyst, Travel & Tourism at GlobalData, a leading data and analytics company, offers his view on the situation:

“Although it is vital that easyJet cuts costs to operate efficiently amid the current level of demand for air travel, there is a danger that its streamlining initiatives could be too aggressive. The airline could end up being left bare and short of labour if demand continues to surge as European governments continue to relax travel restrictions – pilots that are made redundant won’t simply sit back and wait for the airline to re-employ them when sufficient demand levels return.

“IATA does not expect pre-coronavirus demand levels to return until at least 2023. Although easyJet and many other carriers have echoed these sentiments, they shouldn’t completely bank on this being the case. The airline needs to put itself in a position where it can react quickly to sudden changes in the external environment ready to consume more of the returning demand.

“Although limiting cost-cutting plans comes with obvious risks, airlines need to find a happy medium to have both scenarios covered in the event of pick up in sustained demand that is quicker than expected.”

30^th June 2020