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U.K. and European Governments Defer ATC Charges for Airlines
The U.K. government has supported action by European authorities to allow airlines to defer the payment of charges for air navigation services. This will include charges for both the U.K. and European airspace being deferred for up to 14 months for the period between February to May 2020. According to the U.K. government’s official website, in February alone the top ten airlines in the U.K. would have paid a total of £47.2 million ($58.8 million) in charges for operating within Europe’s airspace.
U.K. Transport Secretary Grant Shapps said: “This is a very difficult time for airlines, but they continue to provide a vital service bringing UK citizens home and transporting vital medical supplies. Deferring these charges will further help airlines, on top of the unprecedented package of economic measures recently announced by the Chancellor, to support businesses through this challenging period.” The deferral has been welcomed by aviation industry advocacy groups though some are calling for the U.K. government to take further action.
Tim Alderslade, Chief Executive of Airlines UK, the industry association representing UK-registered carriers, said: “This is welcome news and we thank the Government for voting in favor of the proposals. Whilst it will help with short-term liquidity, it only refers to ATC (Air Traffic Control) charges for February to May, a period in which global aviation has virtually ground to a halt and charges for airlines would’ve been substantially reduced anyway. Further measures, including extending this deferral or ideally waiving ATC charges for the whole year, and doing likewise with other costs like CAA charges, will also be needed to help get airlines through this unprecedented downturn.”
There has been controversy regarding the extent to which the aviation industry is or isn’t being assisted by governments. A group calling themselves “Stay Grounded” is asking that any assistance to airlines come with caveats that protect workers’ rights and reduce carbon emissions. A spokesperson for the group told the BBC: “Now, airlines, airports and manufacturers are demanding huge and unconditional taxpayer-backed bailouts. We cannot let the aviation industry get away with privatizing profits in the good times, and expect the public to pay for its losses in the bad times.”
Within the industry, there has been conjecture as to the extent to which U.K. airlines should accept state assistance. easyJet’s largest shareholder Sir Stelios Haji-Ioannou, who founded easyJet in 1995, has criticized the company for taking government assistance in the form of a £600 million ($747 million) loan instead of canceling an order with Airbus worth an estimated £4.2 billion ($5.2 billion). The airline announced this week an agreement with Airbus had been reached to defer deliveries of 24 A320 aircraft due between 2020-2022 until beyond 2023.
British Airways’ parent company IAG has so far resisted access to the government loan scheme as it has a healthy liquidity finance sheet. Instead, it has announced a series of measures designed to mitigate the worldwide drop in passenger demand such as furloughing over 30,000 staff and canceling aircraft leases due for renewal in the next two years. However, BA had its credit rating downgraded on Thursday which took it out of the ‘investment grade’, a requirement for the U.K. government’s COVID Corporate Financing Facility. The grade drop will potentially make it more difficult and increasingly expensive for British Airways to access any capital it may need in the future.
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