Bailing out the Airline Sector

Earlier this month, the UK regional airline Flybe became the first victim in the airline sector of the coronavirus outbreak, after failing to secure a £100 million government-guaranteed refinancing package.

This week UK airline bosses are calling for an immediate multibillion-pound emergency bailout to prevent the industry from potentially being wiped out by the coronavirus pandemic.

Virgin Atlantic’s chairman Peter Norris has written to the Prime Minister y saying the airline industry needs emergency government support worth 7.5 billion pounds or risks the loss of tens of thousands of jobs,
British Airways has warned, “We can no longer sustain our current level of employment and jobs would be lost – perhaps for a short term, perhaps longer term.”
Ryanair told the staff they may be forced to take leave from Monday. The crew may be allocated to take unpaid leave due to cancelled flights and schedule changes.
The Unite union said that without the government’s help thousands of jobs were under threat. Its comments come on the back of a call from pilots’ union Balpa for ministers to act immediately to prevent UK aviation “being wiped out” by the pandemic.
Unite’s four-point plan includes a proposal that the government should consider taking a financial stake in airlines and airports to help ensure their survival.
This highlights the need to review the way in which the aviation industry is taxed. Flight paths are ‘land’ and a public resource. They are managed by a private-public partnership company, National Air Traffic Control Services NTCS), which was set up to distance air traffic control from the Civil Aviation Authority (the CAA), which is responsible for overall regulation. Applying the principles on which land value taxation is based, we might say that air traffic should be limited by decisions about the number of flight paths that are permitted. These flight paths can then be allocated through the leasing by auction of landing and take-off slots. Under such a regime, the government would get rid of duties and surcharges, which are a complex and clumsy way of rationing air space which is, of its nature, limited. If the present duties and surcharges are phased out, the landing slots will be worth more and the government will get its revenue anyway.

By bringing landing slots back into public ownership it becomes possible to kill two birds with one stone. Airlines can receive the funding they require from sale of landing slots to the government and the state receives ongoing rents on the leaseback of these slots to fund public services.

* Joe is a member of Hounslow Liberal Democrats and Chair of ALTER.

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10 Comments

  • We are now living in interesting times…
    It is obvious, that this time next year things will not only be very different from how they look today, but we will also be thinking differently.

    So the question I suggest isn’t: do we try and prop up the existing and soon to be old world order (which has to change dramatically within the next couple of decades without CoVid19), or do we encourage the grassroots entrepreneurship necessary to raise a new phoenix from the ashes.

  • Jenny Barnes 20th Mar '20 - 9:26am

    BA hasn’t asked for a bailout. Branson can sell his island. When he’s down to his last billion, then there might be some justification. Think creative destruction. The government should be supporting the workers (ha!) with UBI, not billionaires. But they’ll support their class, like always.

  • @Jenny Barnes I agree. We should think firstly of the cabin crew, pilots, and all the other workers effected. Then we need to protect our aviation infrastructure, which may require nationalisations. Profitable businesses should be helped to stay liquid whilst demand is so low, but it should not be to socialise losses.

    Given aviations role in climate change, now (or when demand begins to return) would be a good time to address emissions from flights. We need a carbon tax, and punitive measures for energy inefficient airlines. It’s time to push the airline industry harder when it comes to climate change.

    Bio jet-fuel (not a perfect solution, I know) is used at airports around the world – none of them are in the UK. Now we know that the government can just create money as and when needed (QE), lets deliver some of that in the form of a Green New Deal.

  • Yes, we now know that nurses van drivers counter staff are all important NOT hedge funders millionaires (has Mogg etc supported charities or done a Bill Gates with his Foundation?) . As QE can produce the ‘magic money forest’ this can pay out all the money needed to continue peoples lives so that the country gets back to normal quickly.

  • This virus has basically done a good job of protecting the climate at the price of a terrible loss of life. New tests done at the point of embarkation or arrival will allow international travel to resume (once the tests have been developed) but it won’t test for a different virus so logically that means the end of mass tourism as we know it, at least to less sanitary places where they eat odd things, so much of Asia, Africa and S.America.

    In Africa the coronavirus is just starting to ramp up so not sure what will happen there as there will be no free Western medical resources to help and they have some serious stuff like Ebola to throw into the mix.

    For those out of work I would guess there will be plenty of jobs in a much expanded border force!

  • Paul Barker 20th Mar '20 - 2:42pm

    Not a penny for the Airlines.
    Most will go bust but come the Autumn someone will restart them with cheap Airplanes & Staff on lower Wages, there will be bargains to be had.
    Any Public money should be tied to a low-carbon future & that rules the Airlines out for now.
    We should be focusing on helping the newly unemployed including the previously Self-Employed.

  • If BA and Virgin need to be bailed out over the next few weeks, they should be part nationalised or fully nationalised as the banks were.
    Richard Branson has pocketed enough public money for his business ventures over the years.
    Both are profitable companies and could be privatised at a profit for the tax payer at a later date.

  • It is ironic that when we get what we want, we immediately think of ways of reversing it. Air flight causes and will contribute more to climate change over the coming years. We should take this down turn in aviation to pursue a more climate friendly route to air travel. The airlines might be more receptive to measures such as a frequent flier levy in return for ensuring their surviving Covid 19.

  • Richard Underhill 28th Mar '20 - 9:47am

    We should look at the accounting treatment of landing rights as intangible assets.
    Who owns them? who created them? Are they taxed? If so, to what extent?
    What is the ALTER view?

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