The Madrid-based International Airlines Group (IAG), a holding corporation controlling five airlines (British Airways, Iberia, Aer Lingus, Vueling, and LEVEL),…
U.K. Airlines Await Decision on Possible Government Bailout Packages
The British Airline Pilots’ Association (BALPA) has discounted reports made earlier this week that the U.K. Chancellor (the U.K. Government’s chief financial minister) would only include airlines in any industry bailouts under consideration “as a last resort.” BALPA General Secretary Brian Strutton said: “It is unhelpful that correspondence is leaked out of the context of discussions. It gives rise to the erroneous conclusion that there is no chance of any Government help for UK airlines.”
Mr. Strutton was responding to a report published by Sky News on Tuesday which cited a letter from Rishi Sunak, the Chancellor, to airline executives which stressed the importance of the sector to the country. However, Mr. Sunak advised airline bosses that “the government is prepared to enter negotiations with individual (airlines) seeking bespoke support as a last resort, having exhausted other options.”
The other options Mr. Sunak is referring to are the government’s position that all companies should be “pursuing all possible actions to preserve cash and maximize liquidity, including engaging with shareholders, lenders and the markets and utilizing all available assets and facilities.”
Virgin Atlantic had called for a government injection into the industry of £7.5billion ($9.1 billion) while Willie Walsh, chief executive of British Airways’ parent company IAG, has been vocally opposed to any bailout. Mr. Walsh has, however, not been opposed to any government assistance to airline employees.
BALPA had supported the government’s approach with Mr. Strutton saying that “each airline will need to be reviewed to ensure a good use of taxpayers money. The Government will be looking at areas such as the airline’s financial state, whether it could raise the cash in other ways, or if it’s crucial to the UK transport system. These deliberations still are ongoing so we should await the outcomes.”
However, BALPA is seeking some clarity for its over 10,000 members and others who rely on the industry by asking that the government “confirm it is still committed to protecting the jobs of the 1.5 million workers who depend on the aviation sector.”
Further comments were forthcoming from BALPA on Thursday as analysis of the U.K. Government’s Coronavirus Job Retention Scheme, announced on March 20, highlighted concerns about terminology used and delays in implementation.
“From the scant details we have now, it seems like a terrible mess,” said Mr. Strutton. “We are very concerned that some people will simply fall through the net of this provision, and that it may give an employer a ridiculous incentive to give a few staff lots of work and furlough the rest.”
The potential future of the U.K.’s airlines may depend on the government’s financial response to the crisis, caused by an unprecedented drop in demand because of fears of the novel coronavirus and the subsequent travel restrictions enacted around the world.
An updated impact assessment by IATA on Tuesday warned that government stimulus packages may come too late for a number of airlines. The report stated that the average airline has cash and equivalents coverage of revenues to sustain two months of operation.
The airline industry has traditionally only operated on a margin of 3-5 percent and this lack of liquidity may see a significant number of carriers cease operation without government assistance.
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