MIAMI – UK chancellor of Exchequer Rishi Sunak wrote to airline and airport executives on Tuesday, emphasizing support measures for the aviation industry, but denying them any loans.
On Friday, Sunak announced actions such as paying the majority of staff salaries and deferring interest rates and tax payments as other forms of funding prior to any bailout, the latter which will be discussed only as “at last resort” and if companies have “exhausted other options.”
Today, the chancellor announced economic support only for self-employed UK citizens starting in June.
Urgent actions for an unprecedented crisis in the UK
In the past week, the CEOs of Heathrow (LHR), Gatwick (LGW) and Manchester (MAN) airports wrote a letter to the UK Prime Minister warning him that they may have to cut services and operations, affecting thousands of jobs and airlines as a consequence of the plunge in passenger traffic.
Following the initiative, the UK’s Airport Operators Association (AOA) Chief Executive, Karen Dee, declared that the government must make an “unequivocal commitment” to sustain the UK aviation industry, as some airports will shut down in the coming weeks unless urgent action is taken.
Today, Dee responded to Sunak, saying that “not only does the decision today leave airports struggling to provide critical services, it will hamper the UK recovery;” also mentioning that, in contrast, Europe has recognized the vital role airfields play in stepping into the breach.
Flybe (BE) was the first UK airline to go bankrupt after the fallout of the virus that further hit its revenues. Even though BE requested a loan to stay operative, the government denied it, adducing that the situation was prior to the COVID-19 spread.
On his part, Virgin Group (VS) CEO Peter Norris wrote a letter to PMOUK to request immediate financial aid valued at around £7.5bn for UK carriers to keep the market afloat. Also, VS CEO, Shai Weiss agreed to take a pay-cut for four months as the airline grounded aircraft and cut operations.
In addition, VS founder, Richard Branson made a US$250m further investment in the group while also asking for a state bailout.
Crown jewel British Airways (BA) had to cut capacity by 75% as well as ground its fleet while its CEO, Alex Cruz, warned of further job cuts, stating that “airlines with a weak balance sheet, or carrying large debts, are facing a dire future.”
Furthermore, Ryanair (FR) had to cut flights until May, grounding most of its fleet except to aid European Governments for rescue and movement of essential flights, according to its CEO Michael O’Leary.
EasyJet (U2) also requested government loans as has a legal obligation to pay £171m in dividends to shareholders, including £60m to its founder, Stelios Haji-Ioannou.
The airline has parked the majority of its aircraft after it made reductions on its services but is currently working with the government to make the best use of these measures to protect jobs, according to VS spokeswoman.
Moreover, Norwegian (DY) canceled 3,000 flights between March and June and laid off half of its staff. With the announcement, DY CEO Jacob Schram encouraged authorities to immediately implement measures to reduce the financial impact to protect aviation infrastructure and jobs.
After International Air Transportation Association (IATA) suggested worldwide governments free at least $US250bn in bailouts so carriers would be armored to avoid bankruptcy in the face of the current crisis, it updated yesterday its revenue impact report, forecasting US$252bn in losses for the industry in 2020.
The previous scenario of a loss of US$113bn got worse after several countries established travel restrictions affecting international and domestic flights worldwide.
However, as airlines and aerospace companies continue taking cost-saving measures and cutting operations following guidelines of non-essential activities and precautionary procedures, they have yet to endure this unprecedented crisis that could get worse in the coming months.