EasyJet has warned it faces losses of more than £800m this year and that it expects to fly at just 25% of normal capacity into next year.

The annual loss will be the first in EasyJet's 25-year history.

Although the airline said in a trading update it had taken tough action to cut costs, the warning underlines the continuing challenges for the industry.

Sky News has reported that EasyJet has signalled to the government that it may need more financial support.

There was no reference about needing state aid in the trading statement.

However, chief executive Johan Lundgren said: "Aviation continues to face the most severe threat in its history and the UK government urgently needs to step up with a bespoke package of measures to ensure airlines are able to support economic recovery when it comes."

Easyjet is putting a brave face on it, but these figures illustrate just how tough life in the aviation industry is right now.

Hopes of a rapid recovery after the lockdown were dashed when the government introduced quarantine restrictions on arrivals from abroad.

Over the summer peak , the airline was still able to operate at 38% capacity - but its expectations for the final three months of the year are clearly very limited.

Easyjet has shored up its finances by taking on loans, selling and leasing back part of its fleet and doing cost-cutting deals with its staff.

But it's still burning through cash, and while it says bookings for next summer are strong, the future remains deeply uncertain.

Like pretty much every other carrier right now, it's navigating through some very stormy skies.

The airline said it expected to sink into a pre-tax loss of between £815m and £845m in the current financial year. This is worse than analysts' forecasts of a £794m loss.
State aid

The carrier has already taken a £600m loan from the government, cut 4,500 jobs, raised £608m from selling aircraft and tapped shareholders for £419m.

EasyJet's statement said it would "continue to review its liquidity position on a regular basis and will continue to assess further funding opportunities, including sale and lease backs, should the need arise".

Sky News reported on Wednesday that the airline had warned government ministers it could need further financial support.

It is understood that no formal request has been made, but an EasyJet source said the airline "would keep all its funding options open" as it enters what could be a difficult winter trading period.

With air travel at very low levels because of the coronavirus pandemic, most European airlines are losing money, and EasyJet's larger rival Ryanair has called this winter a "write-off".

EasyJet said ongoing travel restrictions meant it would fly just 25% of planned capacity for the rest of 2020 and into 2021, behind Ryanair which is aiming for 40% in October. EasyJet's capacity figure for the key July-September months was 38%.

Holidaymakers are booking at a "very late stage" and demand for destinations is shifting rapidly due to ever-changing quarantine rules, EasyJet added.

UK airlines have called for tax breaks and other measures to help them through the crisis as well as an airport testing regime for Covid-19 to shorten the 14-day quarantine rule, which now applies to most European countries.

On Wednesday, the UK government said it was looking at ways to reduce the quarantine with a report due in early November.

The carrier grounded its entire fleet on 30 March as Britain went into a lockdown before returning to the skies with only a very limited schedule in the middle of June.

EasyJet has already announced it it cutting up to 4,500 jobs, or almost one third of its staff, mirroring moves by airlines worldwide.

"Removing cost from the business is a key management priority and will position EasyJet to emerge from the pandemic in an even more competitive position for the long term," the company said.

"At this stage, given the continued level of short-term uncertainty, it would not be appropriate to provide any financial guidance for the 2021 financial year," it added.

The airline will formally report its annual results for the year ending September on 17 November.