[AMcWhirter]

Sunday Telegraph reports that Flybe’s administrator has opened talks with the government to nationalise the airline.

[paywall]

https://www.telegraph.co.uk/business/2020/03/28/state-takeover-collapsed-flybe-works/

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PhilipHart

[SimonS1]

Could be an interesting step. Government takes it over and you have a state airline. Then you bring other airlines in difficulties under the same umbrella.

Virgin wants money, Government airline takes shares. Same with BA and others.

Just like government acquired stakes in banks in 2008-2009. After the crisis the stakes can be sold….I believe government made £5bn from the work out of Northern Rock.

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PhilipHart

[ASK1945]

[postquote quote=994958][/postquote]

I think that it’s odds-on the the UK gpvernment will require a portion of the equity of any airline for which it provides funding, so what you have written is almost certainly accurate.

However, there is no report of a profit of £5b that I can find, from the sale ot the government’s shares in Northern Rock, which cost £47b in 2007/8. There are reports that the government planned to dispose of the remaining shares in April 2020, and that these would provide a profit – but that’s almost certainly off the agenda for some time, now; maybe for years.

[SimonS1]

[quote quote=994959]However, there is no report of a profit of £5b that I can find, from the sale ot the government’s shares in Northern Rock,[/quote]

https://www.bmmagazine.co.uk/news/treasury-to-receive-5bn-from-northern-rock/%3famp

Northern Rock was nationalised as opposed to taking a stake. £5bn is the profit from the work out.

Same could apply to FlyBe, business nationalised.

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PhilipHart

[ASK1945]

[postquote quote=994979][/postquote]

Thanks SimonS1

However, your link didn’t work for me. I am sorry but I am guilty of sloppy writing. When I referred to “the government’s shares” of course I meant the 100% of shares, ie nationalisation.

At the beginning of 2008, the government took over NR. There are differing reports of how much this cost – some reports say £47b, others £37b. it was a complex deal, involving more than just buying all the shres. Since then they have sold off considerable chunks (starting with a sale of equity to Virgin Money) and reports in 2017 predicted that the taxpayer was expected to end up with a surplus, as the Treasury at that time still owned the entire £4.7bn of equity in NRAM, that would turn into profit if it were sold at book value.

This was to be done by April 2020. It’s unlikely now of course and I don’t know what the current book value is. It presumably is considerably less than £5b.

[AMcWhirter]

Kenya Airways in deep financial trouble. I did think it was a mistake for KQ to launch its first transatlantic route to JFK which must have been costly both to operate and promote.

Within a matter of days KQ had to reduce service frequency owing to poor loads.

https://www.businessdailyafrica.com/corporate/companies/KQ-applies-for-State-bailout-to-remain-afloat/4003102-5509618-qdkjpuz/index.html

[esselle]

I’ve read today that the government of Dubai are to make an equity investment in Emirates.

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GivingupBA

[SimonS1]

[postquote quote=995238][/postquote]

Unfortunately when you overlay Coronavirus with corruption, problems soon mount up.

When I was there last month there was an article in the press talking about how the leasing of aircraft was taking place at non competitive rates through a separate company, inevitably with some political snouts in the trough.

[TupeloKid]

If the long term impact of the virus (only an “if”, until it happens, but still a reasonable working assumption), is that demand for air travel will be lower, why should an airline be bailed out. This would amount to subsidising unwanted capacity.

[SimonS1]

[postquote quote=995618][/postquote]

That may still be preferable to having tens of thousands of people unemployed.

[canucklad]

Reports in the news today that Easyjet will run out of money by August should be concerning to all of us.

It’s incumbent on our governments to arrive at a pragmatic common sense exit strategy. I’d have thought, getting people on the move again as soon as healthily possible must be near the top of the priority list.

Secondary economies all across the world, but more specifically here in the UK and across Europe need Ryanair, Easyjet and the other LCC’s.
They play a vital role in driving the wealth in those economies.

Failed airlines just mean that the road to recovery will be delayed. That delay could be the very tipping point to some of those economies falling over the edge in to the financial desert.

Subsidies or nationalization might be the only option to stave of long lasting, non-recoverable financial disaster.

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capetonianm

[FaroFlyer]

If Governments simply underwrote / guaranteed vouchers issued by airlines that would avoid the extreme outflows from airlines paying for cancelled flights, and it would also avoid the need for a cash injection. If airlines subsequently go bankrupt then Governments would honour the vouchers.

Governments would only be underwriting the vouchers, not bailing out the airlines, as there should be no need for immediate external additional funding. If the liability for 3 months cancellations was being underwritten by Governments then airlines could go to shareholders for additional funding by way of a Rights issue.

[SimonS1]

[postquote quote=995642][/postquote]

The only thing to remember is that the story in the media is Stelios spin, which is a continuation of his long term agenda to cancel the Airbus deal and get rid of the CFO.

Though to be honest if the government put money in they would surely insist on a cancellation of the £4bn Airbus spend, and if that happened Stelios seems to be quite happy to inject money himself.

Which would suit everyone, since government agenda has undoubtedly hardened as a result of the recent dividend which left £60m in Stelios pocket…..proving that the shareholders are quite capable to fund the business themselves….

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canucklad, cwoodward

[Swissdiver]

Switzerland will have a rather pragmatic approach on this topic. Let me try to summarise what the Federal Council has just announced:
– Loans and not anything else
– No money should leave Switzerland in any way (e.g. no dividend, no transfer, …)
– They are in discussion with Austria and Belgium to have a coordinated action (Lufty group)
– Easyjet Switzerland will be treated as a Swiss airline, like Swiss
– ZRH, GVA and BSL will also be helped, as well as logistics companies on these airports (and SkyGuide)

[Tom Otley]

Greenpeace UK has written a letter to the Chancellor detailing what should be expected from the airlines if they do get a bailout from the UK taxpayer.

Dear Chancellor,

We write regarding the economic support package that the Government is currently considering for the aviation sector in light of COVID-19. It is essential that no aviation sector worker is put into further hardship in these challenging times: the public purse can and must support people working in the airline industry, to avoid the loss of thousands of people’s immediate incomes and their economic security.

It is vital that money provided to support the public interest is spent in the public interest. Airlines and airports have benefitted from significant subsidies and tax exemptions to date, with very limited constraints on their operations. You were therefore right, in your letter to the sector on 24th March, to make clear that bespoke support for individual companies will only be considered as a last resort, once all commercial avenues have been fully explored. It is also right that any government support should be structured to protect taxpayers’ interests, and that the Government takes account of the contribution businesses make to the UK economy and society.

However, further stringent conditions need to be applied to reflect the multiple crises we are facing. While all of our minds are rightly focused on the need to protect ourselves and our communities against the serious health threat of COVID-19 and its wider economic impacts, the climate and nature emergencies have not gone away and are quietly getting worse. Indeed, aviation sector carbon emissions are increasing globally, and airports are a major contributor to local air and noise pollution, risking public health. Any bailouts that are granted must be used to address these challenges together, and avoid exacerbating them.
Therefore any support packages for airline companies must set conditions to protect workers’ rights, prevent public money from being diverted into the pockets of shareholders, and reorientate the industry towards helping to meet the Paris climate agreement. Demand reduction measures should be implemented gradually over time to bring the sector within safe limits for the climate. These measures must be accompanied by the government laying the groundwork to fully decarbonise transport, starting with investing in rail and bus networks nationally and internationally, electrifying and powering those networks with renewables.

The conditions for any state support package for companies in the aviation sector must include:

Equity
The government should take and maintain a controlling stake post-crisis to protect public finances and to exert necessary environmental and social oversight on this sector, rather than offering loans or grants with no strings attached.

Environment
Adoption of near-term climate targets by the sector in line with the Paris Agreement, and clear, transparent plans to meet them that do not rely on offsets but a reduction in carbon emissions in absolute terms. To date, aviation has been a ‘rogue’ sector on tackling the climate emergency, with high carbon growth plans jeopardising the UK’s ability to meet our national and international commitments. The continuation of this behaviour must not be enabled with public money.

Employment
Acceptance of workers’ rights and union representation, and collective bargaining over wages and conditions. This must include a real Living Wage and no lay-offs for the duration of the corona emergency, with firms taking full advantage of the Coronavirus Job Retention Scheme and, in the longer term, full support for workers transitioning to lower carbon industries with more potential for growth.

Tax
The laws around dividend payment must be suspended during any bailout, to prevent public money being diverted into the pockets of shareholders. The sector must finally begin paying its fair share in taxes, and put a cap on executive pay.
A new fiscal regime for aviation should be introduced that is fairer, helps reduce emissions in the sector, and raises additional revenues to invest in zero carbon transport options. A well-designed Frequent Flier Levy or Air Miles Levy, replacing the existing Air Passenger Duty, could reduce demand without removing access to flights from those with limited alternatives, or limited resources, by shifting the tax burden to frequent leisure fliers.

All of our lives have suddenly changed, and the Government must show solidarity with impacted workers. At the same time, the airline industry’s ongoing expansion is causing significant damage to the climate, adding to environmental costs whilst paying very little tax. Public money must be used to address social and environmental priorities, as well as economic needs. While workers from the sector and others across the country are worrying about their health and how they will pay their rent, public money cannot and must not be used to pay bonuses or dividends to shareholders. When the banks were bailed out a decade ago no such measures were applied; these banks continued to fail, and continue to ignore the public interest and fuel the climate emergency today.

We urge you to resist any aviation industry lobby attempts to rush the Government into an unconditional and unfair bailout package. Instead, the Government must use this moment to firmly embed the social and environmental conditions above, which would ensure proper support and protection is given to workers, and that the industry is required to transition to a more sustainable model in the long-term.

Yours sincerely,
Rebecca Newsom, Head of Political Affairs, Greenpeace UK
Leo Murray, Director of Innovation, Possible
Mathew Lawrence, Director, Common Wealth
Anna Hughes, Director, Flight Free UK
Anna Vickerstaff, Senior UK Campaigner, 350.org
Carys Roberts, Executive Director, IPPR
Christina and Victoria Smyth, Co-chairs, H-and-F no third runway
David Adler, Fellow, European University Institute
Dorothy Guerrero, Head of Policy and Advocacy, Global Justice Now
Fran Boait, Executive Director, Positive Money
Gabrielle Jeliazkov, Lead Campaigner for Just Transition in the North Sea Campaign, Platform London
Fatima Ibrahim and Hannah Martin, Co Executive Directors, Green New Deal UK
James Meadway, Economist and former advisor to Shadow Chancellor
Jamie Peters, Director of Campaigning Impact, Friends of the Earth (England, Wales and Northern Ireland)
John Stewart, Chair, HACAN
Kerry Moscogiuri, Director of Supporter Campaigns and Communications, Amnesty International UK
Luke Hildyard, Executive Director, High Pay Centre
Miatta Fahnbulleh, CEO, New Economics Foundation
Neil Spurrier, Teddington Action Group
Peter Sanders, Chairman, Stop Stansted Expansion
Dr Richard Hull, Institute for Creative and Cultural Entrepreneurship, Goldsmiths, University of London
Robert Palmer, Executive Director, Tax Justice UK
Roger Haydon, Chairman, Aircraft Noise Action Group
Rose Bridger, Coordinator, Global Anti-Aerotropolis Movement
Thomas M. Hanna, Research Director, The Democracy Collaborative
Will Stronge, Director, Autonomy

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TupeloKid, Jacob, TominScotland, Ekond222, canucklad

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