The Government appears to have abandoned proposals for an emergency fund to help the UK aviation sector through the Covid-19 pandemic.
On 17 March, as the economic disruption caused by Covid-19 was becoming apparent, the Chancellor Rishi Sunak said: “In the coming days, my colleague the secretary of state for transport [Grant Shapps] and I will discuss a potential support package for specifically airlines and airports.”
On 24 March, however, Sunak informed the aviation industry that there would be no specific fund for the sector. He said the Government expected “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”.
“Given the significant importance of the aviation sector to our economy and economic recovery, the Government is prepared to enter negotiations with individual companies seeking bespoke support as a last resort, having exhausted other options,” said Sunak. “However, further taxpayer support would only be possible if all commercial avenues have been fully explored, including raising further capital from existing investors.”
LTT understands that Sunak’s letter came as a shock to the DfT, which had been confident that any aviation deal would include funding support for UK airports.
It is unclear why the airports deal collapsed. One source told LTT that the problem arose with airlines. Media reports on 20 March that Easyjet would go ahead with paying a £174m dividend to shareholders may have coloured the Government’s judgment. The foreign ownership of airlines may also have complicated matters and airlines had different views on a support package.
Airports were “collateral damage” in the failure of the airlines and Government to reach agreement, said the source.
The collapse in air travel poses severe financial difficulties for many UK airports.
The Welsh Government has allowed Cardiff Airport, which it owns, to repurpose a portion of a £21.2m loan to help the airport deal with the “early impacts” of the virus and “maintain solvency”. The loan was initially made last year to support the airport’s growth.
Transport minister Ken Skates said the UK Government should come forward with emergency funding for regional airports across the UK.
“Our support from the Welsh Government is a short-term solution for the airport and this is not a sustainable position,” he said. “The UK Government has the key lead in supporting the aviation industry and must change its policy towards further financial help for regional airports.”
But, with the idea of a dedicated aviation sector deal now apparently dead, Airlines UK, the Airport Operators Association, and industry body ADS, are trying to persuade the Government to amend its general support schemes to make them more useful to the aviation sector.
Among actions they want to see is the Government to extend the business rate relief for retail, leisure and hospitality to include aviation in England and Wales. The Scottish Government has already done this.
The bodies also want the Government to extend beyond May the Coronavirus Job Retention Scheme, whereby the Government will fund 80 per cent of employees’ usual monthly wage costs, up to £2,500 a month.
The bodies expect the aviation sector’s recovery to be long and slow, since it relies on international travel restrictions being lifted and consumer confidence returning to visit popular destinations such as Italy and Spain, which have been badly hit by the virus.
Huge numbers of staff in the aviation sector have been furloughed as companies cut costs.
Carlisle & Lake District Airport has closed completely until further notice. Cornwall Airport Newquay, Teesside International Airport, and London City are all closed to passenger flights.
Heathrow has closed one runway and Manchester, Birmingham and Gatwick are operating from only one terminal.
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