Airline bosses imagine a green traffic light designation for safer countries will stimulate european air travel. some hope. a baleful red alert is flashing over their industry. rising infection rates have prompted renewed lockdowns from glasgow to madrid. worsening prospects for travel and leisure companies are exemplified by easyjet. without fresh finance, the uk low-cost airline could run out of money next year.

Lexs base case has been that a slew of high-profile corporate disasters was unlikely, absent a serious second wave. that serious second wave is now materialising. in the uk, france, spain and italy, death rates are rising back to levels last seen this spring. airports resemble the mary celeste. bars, restaurants and cinemas are closing again, some of them for good.

State stimulus will persist via low rates. direct government support in the form of soft loans, guarantees and wage support is attenuating. that will reduce the availability of private finance too. financial stress will afflict companies that were in decent shape before the pandemic, as well as those whose prospects were already marginal.

Easyjet is the unhappy canary down this coal mine. before the outbreak, the brand popular with cost-conscious middle-class flyers was making profitable progress in crowded european skies. on thursday, the group warned it would chalk up a pre-tax loss as high as 845m in its 2020 financial year, which just ended.

A cash burn of 700m per quarter should moderate as the airline cuts flights to 25 per cent of capacity. even so, daniel roeska of bernstein says the group needs air travel to start recovering for easter or summer 2021 at the latest. that depends on unpredictable pandemic and medical solutions to it.

Easyjet has 2.3bn in cash and equivalents and an investment-grade credit rating. liquidity would drop below a comfortable minimum of 1bn by april without new capital. about 28 per cent of easyjet belongs to the wealthy haji-ioannou family, according to bloomberg. this could make a hoped-for state bailout unpopular. a debt and rights issue is an obvious alternative.

But there is a snag, which applies across a swath of businesses. coronavirus may diminish cash flows for several years. if so, there is little justification for pumping up capital bases already inflated with rainy day money. around the world, hundreds of billions of shareholders equity is now in unusual jeopardy.

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