V-Flyer

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Government to UK aviation industry: Drop Dead

Following a number of days of talks with British Airways, Virgin Atlantic, easyJet and representatives from UK airports, the Government has refused to provide a package of financial support for the UK aviation sector.

According to reports, a letter was sent by the Chancellor of the Exchequer this afternoon which made it clear that there would be no industry-wide package of measures.

BBC also covering this

BBC News - Coronavirus: No extra help for airlines, chancellor says

https://www.bbc.co.uk/news/business-52027342

Doesn't bode well

But surely at least for staff they can apply for the government wage offer support?

Airlines can defer payments to creditors to protect liquidity

etc. There's a bunch of stuff but this means no specific additional support.

Indeed thay can apply for the grant to keep staff paideven though there is a delay in that comgn through.

I'm wondering how the publicity against SRB (who i saw has now put £200m + into VS a couple of days ago) and Alex Cruz not taking a salary cut went down in the Treasury?

Perhaps their thinking is that passeger airlines are perhaps not as critical at the moment as the airlines think they are?

Saying that how many people know that SRB is sending a VS 747 to China to bring back PPE to California?

https://www.mercurynews.com/2020/03/24/ ... -response/

If you read the first line of the BBC News article, what Rishi Sunak actually said was that the government wouldn't come to the rescue of ailing airlines unless they have explored other avenues for funding first. They could step in as a last resort option, but as we saw with Flybe, it's not necessarily guaranteed.

I suspect Sunak is trying to avoid the scenario where the government has lent money to, or taken stakes in, various airlines like they were forced to do with banks circa-2007/2008 and risk never seeing that money again, as well as ensuring taxpayer's money is spent wisely in a time where there's pressure for funding elsewhere. After all, he effectively promised the NHS a blank cheque recently to tackle COVID-19. HMRC will probably never see the APD money they granted Flybe a "holiday" for prior to their collapse.

I suppose after the Flybe experience, it's a warning sign for airlines that were struggling anyway pre-COVID-19 and using this as an opportunity to get the begging bowl out to instead get their act together.

All that said, it baffles me to this day that Alitalia is being bailed out yet again and the Italian government are now re-nationalising it.

Alitalia will never die.

tontybear wrote:I'm wondering how the publicity against SRB (who i saw has now put £200m + into VS a couple of days ago) and Alex Cruz not taking a salary cut went down in the Treasury?

Just being pedantic, SRB put money into Virgin Group, not VS directly.

Alex Cruz not taking a salary for minimum 2 months.

I'd expect businesses to be borrowing against their assets given the rock bottom rates. If they can't do that, well then they're in very bad shape.

I have a few thoughts on this:

First of all, the government has already offered to pay 80% of employee wages - that is a huge contribution to all businesses, including airlines

Secondly, Virgin Atlantic asked for a whopping £7.5 billion in government aid for airlines even though other airlines like BA/IAG and Easyjet have said 'not us, we don't want any'. Seems a little presumptive of SRB to speak for the whole airline industry! Then SRB only put in £250 million into the Virgin Group, but this included hotels, cruise line, branding and many other companies - how much of this went into Virgin Atlantic is anyone's guess.

Thirdly, Virgin Atlantic is 51% owned by the Virgin Group who are registered in the British Virgin Islands, and this means that they do not pay UK Corporation tax. Yet, despite this, SRB asks for British taxpayers to bail out Virgin Atlantic. This seems a bit of a cheek to say the least!

Finally Rishi Sunak has said the government would consider purchasing equity in an airline (after other self-funding options fully explored but it is unclear whether SRB would relish selling equity to the UK government given his precarious 51% stake and the possibility of losing control of the jewel in his crown.

Some of the reporting may have been misleading according to BALPA.

"UK airline and crew interest groups are trying to allay concerns over planned government support to the industry after confusion emerged over the nature and extent of financial measures for the sector.
Pilot union BALPA insists that recent suggestions that the government is backpedalling on plans to assist the industry are “misleading”.“Discussions about unique measures for individual airlines are ongoing,” it states.
BALPA general secretary Brian Strutton says that out-of-context information extracted from the discussions has led to an “erroneous conclusion” that the government is not intending to provide help to airlines.
“There is no one-size-fits-all solution, due to the different structures and needs of each airline,” he stresses. “Each airline will need to be reviewed to ensure a good use of taxpayers’ money.”"

v1rotatev2 wrote:Finally Rishi Sunak has said the government would consider purchasing equity in an airline (after other self-funding options fully explored but it is unclear whether SRB would relish selling equity to the UK government given his precarious 51% stake and the possibility of losing control of the jewel in his crown.

Two things in response to this...

Firstly, it's worth remembering that SRB was in the process of selling part of his 51% stake to Air France-KLM, but very recently cancelled that at the eleventh hour.

Secondly, from what I've read I would say the "family silver" once upon a time was Virgin Records, but that was sold to prop up the airline during the height of the BA dirty tricks scandal. He's on record (no pun intended!) over his devastation about selling that off at the time.

To summarise, my opinion is that SRB partly or fully selling the remaining 51% isn't out of the question if it was in the best interests of the airline's future or the alternative was far worse. You can bet that DL will have an opinion over what SRB does with his stake, if only to protect their investment by virtue of their 49% stake. I also suspect SRB couldn't live with the glee from their rivals based at Waterside if VS did go under despite having an opportunity to prevent that.

VS075 wrote:

v1rotatev2 wrote:Finally Rishi Sunak has said the government would consider purchasing equity in an airline (after other self-funding options fully explored but it is unclear whether SRB would relish selling equity to the UK government given his precarious 51% stake and the possibility of losing control of the jewel in his crown.

Two things in response to this...

Firstly, it's worth remembering that SRB was in the process of selling part of his 51% stake to Air France-KLM, but very recently cancelled that at the eleventh hour.

Secondly, from what I've read I would say the "family silver" once upon a time was Virgin Records, but that was sold to prop up the airline during the height of the BA dirty tricks scandal. He's on record (no pun intended!) over his devastation about selling that off at the time.

To summarise, my opinion is that SRB partly or fully selling the remaining 51% isn't out of the question if it was in the best interests of the airline's future or the alternative was far worse. You can bet that DL will have an opinion over what SRB does with his stake, if only to protect their investment by virtue of their 49% stake. I also suspect SRB couldn't live with the glee from their rivals based at Waterside if VS did go under despite having an opportunity to prevent that.

Interesting context here, I didn't realise about the AF/KLM plans. Regarding Virgin Records - the fact that he was prepared to sell this off to save Virgin Atlantic surely shows how much he prizes his airline? I suppose he could insist that any equity sold doesn't have voting rights, but I somehow doubt the government would buy that - they'll want to have a say to protect their investment.

The AF-KL group was goign to buy a 31% stake in VS so the shareholdings would be DL - 49%, AF-AK 31% and Virgin Group 20% (somewhre in that was a chinese airline buying 10% but that never materialised)

It was announced at the same time as the Joint Venture between all 4 airlines was proulgated. But there were some caveats.

One was that if the JV wasn't approved by either the US or EU then AF-KL could withdraw from the proposed purchase.

The other was that Virgin Group could also withdraw from the sale at any time.