And Now; Who Gets the Bail Outs?

By David Hopwood | March 20, 2020

Almost every major airline is effectively grounded. There are opinions including from CAPA that by the end of May most airlines in the world will be at least technically bankrupt. The fall out from the shut-down is enormous with suppliers, manufacturers, airports, holidays companies, hotels and car hire all struggling. In the US alone, it’s estimated that 11 million aviation-related jobs are at risk. Paris-CDG airport is closing two runways in the next few days to allow for additional aircraft parking. Johannesburg-OR Tambo this morning isn’t allowing non-South Africans to disembark from international flights. It’s a mess.

So the impact is catastrophic and now comes the manoeuvrings on who should receive support, under what conditions and how much?

  • Stricken airline Norwegian seems to be the first to receive direct support having received £250 million from its government after flirting with a collapse for weeks.
  • We reported earlier that Indian aviation will be receiving a $1.6 billion tax holiday.
  • US airlines are seeking a $50 billion aid package amid controversy as to whether for example, American Airlines deserve support.
  • Boeing has sought $60 billion in aid for itself and its supply chain. The Trump administration has said that would back Boeing: it doesn’t hurt that Boeing is a major defence contractor. Nikki Haley, the former US ambassador to the UN resigned from the Boeing board in protest.

And now in the UK, the British government has asked City of London bankers Rothschild to advise government ministers on a package of measures to relieve the strain on airlines. Rothschild is reported to be examining the finances of the major UK airlines prior to a presumed multi-billion-pound rescue plan. Earlier this week Virgin, IAG, Ryanair and EasyJet were in talks with the transport secretary Grant Shapps on the possible measures, including:

  • State-backed loans of potentially billions of pounds to ease cashflow problems
  • A freeze on air traffic control charges
  • Suspension of air passenger duty once a near-normal schedule resumes
  • A suspension of the EU regulation obliging airlines to compensate for cancelled flights.

Help on employee costs is also being sought as well as pressure to release money held by credit card companies.

There is some possibility that the potential indebtedness to the government could be converted to equity, resulting in the state part-owning a number of airlines, which would be highly controversial. And as they say, money doesn’t just grow on trees; someone is going to have to pay for any state aid.

Any thoughts on who that might be?

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