UK airlines and airports told not to expect industry-wide bailout
British airlines and airports have been told they will not receive an industry-wide bailout, despite an initial pledge of support from the chancellor last week.
The news emerged as the International Air Transport Association (Iata) called for urgent government assistance and warned that airlines would lose $252bn (£215bn) in revenues in 2020 – more than double its “worst-case” forecast two weeks ago.
UK-based airports – which are still operating cargo flights and repatriation services – warned they may have to shut down temporarily following the Treasury’s decision on Tuesday afternoon.
The chancellor, Rishi Sunak, wrote to airline and airport executives on Tuesday reiterating the measures he announced on Friday to support jobs and industry across all sectors, including paying the bulk of staff wages and deferring some rates and tax payments.
His letter said that “as a last resort” there could be discussions with individual firms after those measures had been taken into account – but made clear that, for now, he does not share the aviation industry’s view that it is a special case.
The government’s view of the sector is understood to have been hardened by the decision of airlines including easyJet to continue with planned dividend payments to shareholders. EasyJet said it had a legal obligation to proceed with a £171m payout, which will give the largest shareholder, Stelios Haji-Ioannou, another £60m windfall.
Sunak warned that “taxpayer support would only be possible if all commercial avenues have been fully explored, including raising further capital from existing investors”.
He also said the government would have to consider “equitable and fair treatment of businesses across the [aviation] sector”, a factor that could scupper any negotiations or bailouts for specific airlines. British Airways owner IAG has already distanced itself from rivals’ calls for assistance, and filed complaints in January when it appeared that Flybe – the first airline to go bust since the coronavirus outbreak – could get state aid.
EasyJet said it was reviewing the chancellor’s letter and measures announced last week for businesses. A spokeswoman said: “Our immediate focus is on liquidity and protecting jobs and we are working with the government to make best use of these measures.”
Airports were surprised by the decision. The chief executive of the Airport Operators Association, Karen Dee, said: “After [the government] publicly announced a support package for airports and airlines, we’re surprised by where we find ourselves today.”
Scheduled passenger traffic is virtually gone from many airports, with even Heathrow mainly seeing repatriation flights and cargo services.
Dee said airports were taking unprecedented steps to safeguard staff and operations through the crisis, and some were considering shutting down for a period. However, some were still providing “lifeline services” for remote communities and to ensure freight and vital medical supplies arrived in the UK.
She added: “While countries across Europe have recognised the vital role airports play and are stepping into the breach, the UK government’s decision to take a case-by-case approach with dozens of UK airports is simply not feasible to provide the support necessary in the coming days.”
Airports have urged the deferral of other taxes, and the easing of regulatory costs and constraints, while global flight restrictions continue.
Meanwhile, the global airlines body, Iata, said European airlines were the most likely to collapse first, following earlier warnings that most carriers worldwide would be bankrupt by May. Countries that cover 98% of commercial air passenger revenues now have restricted travel, with airlines announcing mass-groundings of their fleets.
Iata’s director general, Alexandre de Juniac, called for government aid to airlines “with maximum speed”.
He added: “We are working hard to survive … we need governments to bridge the gap.” Iata said that revenues would be down 44% on last year.