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Sat, 24 October 2020

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Coronavirus: Rishi Sunak tells airlines they will only get bailed out as a 'last resort'

Coronavirus: Rishi Sunak tells airlines they will only get bailed out as a 'last resort'

Chancellor Rishi Sunak

3 min read

Britain's coronavirus-hit airlines have been warned that they will only be bailed out by the Government "as a last resort".

In a letter to aviation industry bosses, Chancellor Rishi Sunak urged carriers to tap up shareholders and lenders first before calling on taxpayers to prop them up.

And he said extra help would only be made available once all other options "have been fully explored".

Airlines across the globe have grounded flights because of the coronavirus outbreak, amid a wave of travel bans aimed at containing the spread of the virus.

IAG, which owns British Airways, has already announced plans to cut its flying capacity by at least 75% in April, with boss Willie Walsh delaying his retirement to handle the crisis.

Virgin Atlantic has also said it will ground 75% of its fleet by 26 March, with capacity cut by up to 85% at some points in April.

Virgin's staff have meanwhile been asked to take eight weeks' unpaid leave as the firm tries to make sure "cash is preserved, costs are controlled and the future of the airline is safeguarded".

In his letter to the major airlines, first reported by Sky News, Mr Sunak pointed out that they could already make use of wider aid schemes announced by the Treasury, including deferring VAT payments and grants to cover staff salaries. 

And the Chancellor wrote: "The priority for all companies should now be to reassess their cashflow positions in the light of Friday's announcements.

"We would expect all companies to be pursuing all possible actions to preserve cash and maximise liquidity, including engaging with shareholders, lenders and the markets and utilising all available assets and facilities."

Mr Sunak said the "significant importance of the aviation sector to our economy and economic recovery" meant minsters were "prepared to enter negotiations with individual companies seeking bespoke support as a last resort, having exhausted other options".

But he said such help "would only be possible if all commercial avenues have been fully explored, including raising further capital from existing investors and discussing arrangements with financial stakeholders".

The Chancellor added: "Terms would be structured to protect taxpayers' interest, and the government would expect to have regard to factors including but not limited to whether the business makes a material contribution to the economic activity of the UK, the importance of maintaining a thriving competitive aviation sector in the UK to deliver connectivity and the equitable and fair treatment across businesses in the sector."

'APOCALYPSE'

Airlines have reportedly been pressing the Government to freeze air traffic control charges and agree a four-month waiver of a European law which requires them to compensate customers for any cancelled flights.

Industry group the International Air Transport Association (IATA) has warned that airlines face "apocalypse" if governments do not step in to help.

The organisation's head, Alexandre de Juniac, said: "Travel restrictions and evaporating demand mean that, aside from cargo, there is almost no passenger business.

"There is a small and shrinking window for governments to provide a lifeline of financial support to prevent a liquidity crisis from shuttering the industry."

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