Coronavirus: Airlines ‘entering danger zone’

A group of 38 MPs has written to Chancellor Rishi Sunak urging him to take steps to support airlines during the coronavirus pandemic.

Aviation bosses have been lobbying the government for a targeted aid package to stop firms going under as a result of the slump in travel demand.

Airline industry chiefs welcomed the MPs’ call and said the sector was “entering the danger zone”.

Requests for state aid are expected from Virgin Atlantic and others.

But so far, Mr Sunak has said airlines should find other forms of funding and not turn first to the government.

A battle to survive

Broadly-speaking, the aviation sector wants two things from government.

Firstly, cash-strapped airlines and airports need emergency loans.

Despite passenger flights largely grinding to a halt, airports plan to remain open so that cargo flights, repatriation flights, some military flights and other commercial, police, rescue, Royal Mail and offshore oil and gas flights can still operate.

The fixed costs associated with keeping an airfield open (security, policing, fire service, air traffic control) are high.

Airlines have grounded planes but they still have to pay to park and maintain them. Airlines also lease some of their aircraft for eye-watering sums.

The second ask from the aviation sector is that the government suspends a number of taxes and regulatory charges.

For example, the Civil Aviation Authority is funded entirely by the industry. The industry wants the government to cover that cost, as well as Air Traffic Control charges, for the rest of the year.

When the crisis is over, they also want the Air Passenger Duty tax suspended for six months.

The MPs said in their letter that the impact of coronavirus on UK aviation had been “severe and truly unprecedented”.

They pointed out that global demand for travel had collapsed, noting that markets with severe travel restrictions in place account for 98% of passenger revenues globally.

“Restrictions have all but eliminated airline and airport revenue, but not costs, which are substantial and go far beyond solely wages,” the letter said.

“It remains unclear what the duration of the economic impact will be on the UK’s airlines and airports, who face a pressing challenge to survive.”

‘Entering the danger zone’

The MPs’ call was welcomed by the aviation industry itself. Tim Alderslade, chief executive of Airlines UK, and Karen Dee, boss of the Airport Operators Association, issued a joint statement backing the initiative.

“We’ve put countless cross-industry ideas on the table to help aviation through this, and the chancellor said in his letter this week he was open to discussing them, yet no discussion has yet taken place,” they said.

“We are now entering the danger zone, and we urge government to change tack and start to engage on a sector-wide basis before it’s too late.”

The MPs said aviation supported some 1.6 million UK jobs and the sector would be essential to support the recovery of the wider UK economy once the crisis had passed.

They called on the chancellor to provide cash support where necessary, as well as taking measures to safeguard jobs and ease regulatory and tax burdens.

On Tuesday last week, Mr Sunak said the state would only enter into negotiations with individual airlines once they had “exhausted other options”.

The government says its emergency business measures, including a Bank of England scheme for firms to raise capital and employee wage subsidies, are available for airlines.

However, Transport Secretary Grant Shapps has said he cannot rule out the state taking an ownership stake in UK airlines that have been battered by the impacts of the coronavirus outbreak.