UK airport sector left to ‘fight on its own’ without government support

The UK government has decided to assess financial support for airports during covid-19 on a case-by-case basis, rather than providing a wholesale support package.

UK airports face an uncertain future after the government this week ruled out supporting airports and airlines with an industry-wide package and said financing measures would be used as a “last resort”.

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Chancellor Rishi Sunak, who in the past week has announced several emergency measures to support parts of the UK economy, wrote to aviation industry figures to tell airports and airlines to explore liquidity options from shareholders and lenders first, while also using some of the existing support schemes he has announced.

“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,” Sunak wrote.

His intervention comes despite a statement last week where he said the government was working on a potential support package for the industry to arrive within a few days.

The Treasury declined to say what had changed in the interim that this support was no longer available but said the industry will be able to draw upon the “unprecedented measures” announced by the government.

“The aviation sector is important to the UK economy, and will be able to draw upon the unprecedented package of measures announced by the chancellor in recent days, including a Bank of England scheme for firms to raise capital, Time to Pay flexibilities with tax bills, financial support for employees and VAT deferrals,” the spokesperson said.

“We are continuing to work closely with the sector and are willing to consider the situation of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors,” the spokesperson added.

Karen Dee, chief executive of the Airports Operators Association, said in a statement that the trade body was surprised by the move given the previous announcement and that this would mean the industry “will have to fight on its own to protect its workforce and its future”.

Several of the schemes announced by the government are unavailable to airports such as the job retention scheme, given most airports still remain open in a limited capacity, while the Business Interruption Loan Scheme applies to businesses with revenues of £45 million ($54.7 million; €49.6 million) or less, a figure superseded by most major UK hubs.

“If you’re an airport owned by the local council, the council doesn’t have the money to keep an airport open, it will use the little money it has to support the virus outbreak measures in its local area,” a spokesman for the AOA added. “If you’re an institutional investor, such as a pension fund, you have to bear in mind relevant rules, for example around current and future liabilities.”

Some airport figures believe potential support was pulled as a reaction to some measures by certain airlines. In the days between Sunak’s original statement and his letter, Virgin Atlantic requested that many staff take eight weeks of unpaid leave, while easyJet announced a £174 million dividend pay out to shareholders.

The AOA spokesman added that Heathrow Airport, the UK’s largest, was not among those seeking bailout funding as it had raised sufficient short-term finance to prepare for a no-deal Brexit. It is also the only UK airport that counts overseas sovereign wealth funds – the Qatar Investment Authority and China Investment Corporation – among its shareholders, which include Alinda Capital Partners, Ferrovial and the Universities Superannuation Scheme.

Other owners of UK airports such as Global Infrastructure Partners, AMP Capital, Ontario Teachers’ Penson Plan, IFM Investors and Macquarie Infrastructure and Real Assets either declined to comment or did not respond to requests for comment at the time of publication.

London City Airport is the only major site to close down operations, with many others running reduced services. Some of the sites remaining open are providing essential relief services such as delivery of goods or air ambulance services.

“Some cannot make a closure work but others still have it very much on the cards,” the AOA spokesman said, while the AOA said in its statement that “passenger numbers are approaching close to zero”.