UK chancellor Rishi Sunak on Tuesday warned the aviation industry that “bespoke support” would only be provided to companies if they cannot receive the required assistance from banks and shareholders.
In a letter to industry executives, Sunak said that that the government was “prepared to enter negotiations with individual companies,” but noted that the terms would be “structured to protect taxpayers’ interests.”
The letter, which was obtained by the Financial Times, puts paid to the idea of a sweeping support package for the entire aviation industry.
“The government recognises the challenging times facing the aviation sector as a result of COVID-19,” Sunak wrote, noting that companies in the sector should first engage with shareholders, lenders, and the markets to preserve cash and maximise liquidity.
“The aviation sector plays an important role in the UK’s economy, facilitating domestic connectivity to all parts of the country and the strong trade links the UK enjoys.”
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Sunak pointed to the measures announced by the government last week, including the employers’ wage grant and his decision to defer VAT payments until the end of June.
“This should have a very significant impact on all companies and I expect it will be helpful to the aviation sector in these times,” he said.
Sunak also noted that he was hoping to “resolve” an issue that might prevent airlines from accessing support from the Bank of England.
High turnover companies can access funding through the Bank of England's new Covid Corporate Financing Facility, but only if they are rated as investment grade.
“I am in discussions to resolve this,” Sunak wrote.
Airlines are confronting an almost unprecedented crisis in coronavirus, and analysts have warned that many may collapse under the weight of falling demand from travellers.
The International Air Transport Association (IATA), an aviation industry trade group, said on Tuesday that airline revenues globally could plummet by $252bn (£201bn) in 2020 as a result of the crisis.
“The airline industry faces its gravest crisis. Within a matter of a few weeks, our previous worst case scenario is looking better than our latest estimates. But without immediate government relief measures, there will not be an industry left standing,” said Alexandre de Juniac, the IATA director-general and CEO.