UK Chancellor Rishi Sunak dashed UK aviation leaders’ hopes of a general bail-out of the sector this week, but pledged to consider “bespoke support as a last resort” for individual airlines.
Leading carriers jointly submitted a series of requests for emergency funds, tax deferrals and credit guarantees last week, with Department for Transport (DfT) officials reportedly “stunned” to learn how rapidly airlines could run out of cash.
Representatives of easyJet, British Airways owner IAG, Ryanair and Virgin Atlantic met transport secretary Grant Shapps to urge support for the sector.
Virgin Group chairman Richard Branson suggested the carriers needed up to £7.5 billion to survive. However, US airlines are pressing the US government for $50 billion.
An industry source noted on Tuesday: “All airline schedules will collapse to nothing within 48 hours. Then the issue for airlines will be liquidity.”
Airline bosses have sought a multibillion-pound state-backed credit facility, a freeze on air traffic control charges, a suspension of air passenger compensation rules, temporary cancellation of APD and financial guarantees to release payments held by credit card companies.
The Chancellor responded on Tuesday in a letter to the industry noting the measures already taken to support large UK companies and said: “Further taxpayer support would only be possible if all commercial avenues have been fully explored.”
Should the government act to support individual carriers or airports, Sunak wrote: “Terms would be structured to protect taxpayers’ interest.”
However, Sunak also noted: “The transport secretary and his officials are willing to discuss industry-wide measures that could be helpful to deal with the immediate crisis.”
Shapps promised measures “shortly” last week.
Air Operators’ Association chief executive Karen Dee urged the Chancellor to reconsider, saying: “Our industry will now have to fight on its own to protect its workforce and its future. A case-by-case approach with dozens of UK airports is simply not feasible.”
As recently as March 3, airline chiefs were refuting suggestions they would need state aid. IAG chief executive Willie Walsh told an Airlines for Europe summit in Brussels: “Governments should stay away.”
Speaking at the same event, Ryanair chief executive Michael O’Leary said: “The last thing we need is state aid. Let the bankrupt go bankrupt.”
IAG and Ryanair also threatened legal action when the government considered supporting Flybe before the carrier collapsed on March 5.
The government resolved one of the carriers’ concerns last week when it pledged to pay 80% of the wages of workers on unpaid leave up to a limit of £2,500 a month.
Sunak also highlighted the decision to defer VAT payments until the end of June which should help cash flow, and dismissed the demand to suspend APD noting: “With fewer passengers flying, APD liabilities will be reduced.”
The government is expected to take equity stakes in any airlines it does bail out in the same way the Treasury bailed out and took stakes in several banks during the 2008 financial crash.
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