UK government considers buying equity in airlines to keep them afloat
The UK government is considering buying equity stakes in airlines and other companies hardest hit by the coronavirus.
It comes after warnings that the measures announced by chancellor Rishi Sunak earlier this week will not be enough to save them from collapse.
The plans under consideration would see billions of pounds of taxpayer money injected into companies including British Airways in exchange for shares that would eventually be sold back to private investors, according to a report in the Financial Times.
Two sources told the FT that the government was considering the move after bankers warned the £330bn in loan guarantees may not stave off collapse for those companies most affected, including airlines whose revenues are expected to all but dry up.
They are considering a “a Tarp-like programme”, referencing the US troubled asset relief programme from the financial crisis to support American banks.
It is thought that a capital injection will be required in exchange for equity, because a loan alone for a company without income “is not going to work”, a source briefed on the plans told the FT.
Another person said that the companies including airlines had entered the crisis with too much debt and could not take on much extra borrowing.
A UK official confirmed talks were taking place and said the government was being advised by bankers from investment bank Rothschild.
He warned the final outcome could be more complicated than a Tarp-type scheme, however.
UK transport secretary Grant Shapps said earlier this week, the government would not allow “world-leading, well-run, profitable” airlines to collapse and that an announcement would be made imminently.
A spokesperson for British Airways declined to comment.