Ministers should be under no illusion about the crisis in aviation, warns Airlines UK chief executive Tim Alderslade
The aviation and travel industries enter the new year in a state of nervous expectation – hopeful the next 12 months can’t be as bad as 2020 but apprehensive about what lies ahead.
Before the Christmas break, we had reason to be cheerful. The successful roll-out of the government’s Test-to-Release scheme, following months of industry lobbying, began the long-awaited process of opening up international travel.
Following a catastrophic nine months of trading – during which UK airlines remained solvent only by taking on eye-watering amounts of debt in the absence of the once-promised support package from the Chancellor – this was something of a relief.
But three weeks can be a long time in a pandemic and we enter 2021 having taken one step forwards and two steps back.
The combination of a multitude of global travel bans and tier 4 restrictions now covering most of the UK, not to mention a possible national lockdown, means air travel will be at a minimum for at least the initial quarter of the year.
With the critical spring and summer seasons looming, this is not a situation any of us wanted to be in.
Ministers should not be under any illusions as to what the sector requires in the short term.
Put simply, if we cannot move beyond the initial Test-to-Release scheme and put in place a robust and credible ‘phase two”’ mass testing regime for aviation, the future of our industry will be very uncertain indeed.
Without the ability to bring in critical revenue, airlines may have no alternative but to tap the Chancellor for assistance, only this time in the form of grants rather than loans.
There remains a limit to the amount of debt carriers can take on, having already done everything asked of them by the Chancellor and absorbed billions from private investors, banks and the Treasury.
All that money will have to be paid back. Indeed, if we enter a new national lockdown, it is not unreasonable for aviation and travel to expect the same kind of support as handed out to the hospitality industry, on the basis that trading has in effect been shut down.
What does a ‘phase two’ testing regime look like?
Well, the sector is united in believing a combination of pre-departure testing and the roll-out of rapid, daily tests that can eliminate the need for quarantine upon arrival in the UK is the answer.
Crucially, time is of the essence. Ideally, rapid testing can be introduced within weeks and aviation – a critically important, strategic sector for the UK – should be seen as worthy of utilising this technology sooner rather than later.
This needs to be the government’s short-term objective, and we look forward to working with them to achieve it.
Success will mean the difference between a summer season saved and balance sheets replenished, or further businesses lost in the travel sector and the strong likelihood of failures within aviation.
‘We need progress on strategic issues’
What else do we look for from ministers in 2021?
If what I describe above is ‘tactical’, we also require progress on the ‘strategic’. One of the big frustrations of our sector is the apparent lack of government ‘vision’ for aviation.
What exactly does the government envisage for our future? What is the role of ministers in helping us get there? Is it to ‘let the market decide’ or should the government be looking to pull more of the levers at its disposal to try to shape the market?
On each of these questions we do not yet have enough sense of the answer.
For several decades the approach of ministers has been to be as liberal as possible. On access rights for airlines (UK and overseas), ownership structures and connectivity, we have adopted a laissez faire approach that – in good times – served us well.
There is a reason we entered the pandemic as the third-largest aviation market in the world.
But that strength has also been our more recent weakness. As Covid hit and other countries took steps to support their aviation sectors, the UK government remained on the sidelines, unable to pivot towards a more-interventionist approach out of kilter with its traditional modus operandi.
We fear the result is a relative strengthening of competitor nations at the expense of the UK when it comes to the ability of airlines to grow out of the pandemic.
Large overseas carriers which have received billions in state support will be in a much better position to increase market share and compete with UK carriers, including on routes to and from Europe and beyond to the US and Middle East.
By failing to support UK-based airlines in the same way, the government runs the risk of helping to export our connectivity to heavily subsidised overseas airlines.
This may be a reasonable choice intellectually. Connectivity may trump the jobs and GDP UK-based airlines can provide – although we should not forget that each British Airways aircraft based at Heathrow is supported by 300 UK-based jobs.
However, ministers should make clear what the strategy is as we move beyond Covid – to resume the business-as-usual, liberal approach or adopt something new?
And if the choice is to remain as we are, we need progress on the things that will enable the sector to get back on its feet without government subsidies.
I have already mentioned testing. In the medium term, what about Heathrow expansion and airspace modernisation? Both need to be given greater impetus before the year is out.
The same is true of our post-Brexit existence. The trade deal has many implications for aviation – some good (unlimited UK-EU travel and unrestrictive ownership structures for existing UK carriers); some not so good depending on who you ask (wet-leasing arrangements that disadvantage some UK-based carriers).
But the agreement provides the UK with the ability to do things it was not able to as a member of the EU.
Will the government remove the ‘double taxation’ anomaly of domestic Air Passenger Duty (APD) to boost regional connectivity?
Will it introduce a more reasonable approach to passenger rights legislation? What about slot reform? And what kind of new bilateral arrangements with EU member states on non-scheduled operations can we expect?
These are big questions and, of course, we are not helped by being in the middle of this dreadful pandemic. But over the course of 12 months, alongside the short-term safeguarding of the industry, it’s not unfair to expect further clarity on our future direction of travel.
We cannot properly do justice to ‘Global Britain’ without it.