Coronavirus: Government will not provide industry-wide airline rescue package
The government will not provide a single support package for the UK’s airlines and airports, but will instead provide aid on a case-by-case basis.
The decision is an apparent u-turn on the government’s original plan. Last week chancellor Rishi Sunak said he would be discussing a potential package for “specifically airlines and airports”.
Instead, Sunak had written to sector members setting out how they could benefit from the economy-wide measures set out to protect the UK’s businesses last week.
State investment will only be considered once companies have tried to raise capital from existing investors.
In the letter, which City PM has seen, Sunak wrote: “Given the significant importance of the aviation sector to our economy… the government is prepared to enter negotiations with individual companies as a last resort”.
Before that, the chancellor wrote, “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.”
Additional support will only become available “if all commercial avenues have been fully explored, including raising further capital from existing investors and discussing arrangements with financial stakeholders”.
Over the weekend there had been much speculation about the nature of the government’s assistance to airlines.
Sign up to City PM’s Midday Update newsletter, delivered to your inbox every lunchtime
Last week low-cost Norwegian Air became one of the first carriers to receive a bailout after Norway’s government offered it a 3bn (£250m) krone credit facility.
Several airlines, such as Virgin Atlantic and Easyjet, had openly called for government aid.
However, some airlines have expressed concerns that the £330bn loan facility unveiled for businesses last week may not be open to them due to their lacking an investment grade rating.
In response, Sunak wrote: “I am in discussions to resolve this uncertainty and further announcements will be made shortly.”
Airport Operators’ Association chief executive Karen Dee said: “After having publicly announced a support package for airports and airlines, we’re surprised by where we find ourselves today.
“Our industry will now have to fight on its own to protect its workforce and its future”.
Tim Alderslade, chief executive of industry body Airlines UK, said: “We welcome the announcement that government will enter into negotiations with individual airlines seeking additional bespoke support, recognising the fundamental importance of the aviation sector to the UK economy.
“It is essential that the economy-wide measures announced thus far are implemented as quickly as possible, with accompanying further guidance, to support airlines through this unprecedented period”.
An Easyjet spokesperson said: “We are reviewing the letter from the Chancellor alongside the measures announced last week for businesses.
“Our immediate focus is on liquidity and protecting jobs and we are working with the Government to make best use of these measures.”
More to follow.