Go Back  PPRuNe Forums > Flight Deck Forums > Rumours & News
Reload this Page >

UK government says no industry-wide bailout for aviation

Rumours & News Reporting Points that may affect our jobs or lives as professional pilots. Also, items that may be of interest to professional pilots.

UK government says no industry-wide bailout for aviation

Old 29th Mar 2020, 07:26
  #121 (permalink)  
 
Join Date: Aug 2007
Location: West Sussex
Posts: 81
Likes: 0
Received 1 Like on 1 Post
Originally Posted by Longtimer
curious as to when you booked the flight?
Flight was booked in November last year
sewushr is offline  
Old 29th Mar 2020, 11:33
  #122 (permalink)  
 
Join Date: Aug 2007
Location: england
Posts: 878
Received 6 Likes on 4 Posts
Looking on the bright side, at least the U.K. will comply with its promised reduction in green houses gases for 2020. If all U.K. airlines go bust, there is a chance we’d comply in 2021 too.
The only downside is would we really want to rely on non U.K. based airlines to get us out of the U.K. on business and leisure? It hardly ties in with the post Brexit “Britain open for business” claptrap that we’ve been sold. I think the poor old Chancellor is going to end up sticking his hand in his pocket if we do all end up confined until the end of June .
hunterboy is offline  
Old 29th Mar 2020, 14:04
  #123 (permalink)  
 
Join Date: Feb 2020
Location: London
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by hunterboy
Looking on the bright side, at least the U.K. will comply with its promised reduction in green houses gases for 2020. If all U.K. airlines go bust, there is a chance we’d comply in 2021 too.
The only downside is would we really want to rely on non U.K. based airlines to get us out of the U.K. on business and leisure? It hardly ties in with the post Brexit “Britain open for business” claptrap that we’ve been sold. I think the poor old Chancellor is going to end up sticking his hand in his pocket if we do all end up confined until the end of June .

Why wouldn't you have new airlines starting up to fill the void - after all there are going to b a lot of cheap airframes and crews sitting around. Why wouldnt we have new Virgins, Lakers, Easy's etc spring up like they did before?
cashash is offline  
Old 30th Mar 2020, 07:58
  #124 (permalink)  
 
Join Date: Aug 2007
Location: england
Posts: 878
Received 6 Likes on 4 Posts
I would say because common sense and the “free market” doesn’t always prevail. There will be a panic as the Daily Mail demands how are Brits going to get to the Costas for a tenner or Oz to visit the relatives and the government will cough up. Sadly, there doesn’t seem to be much joined up thinking in the U.K. anymore, just a sense of making it up as you go along. The whole Covid strategy demonstrates that.
hunterboy is offline  
Old 30th Mar 2020, 10:58
  #125 (permalink)  
 
Join Date: Dec 2006
Location: uk
Posts: 151
Likes: 0
Received 2 Likes on 2 Posts
When you see stories of exorbitant fares for people stuck all over the globe I say "stuff you BA and the rest"
ciderman is offline  
Old 30th Mar 2020, 11:10
  #126 (permalink)  
 
Join Date: Nov 2018
Location: London
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by ciderman
When you see stories of exorbitant fares for people stuck all over the globe I say "stuff you BA and the rest"
There are now about 40 MP's all of a sudden to demand industry wide bailout. For the children of course.
The major shareholders won't let their money disappear when they can get a free ride. They are lobbying for the bailout and they are going to get it no matter what.
torvalds is offline  
Old 30th Mar 2020, 12:30
  #127 (permalink)  
 
Join Date: Jul 2001
Location: A Gaelic Country
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
I’m surprised that airlines (or any business) do not have “rainy day” contingency funds.

There is a limit to what a government (& ultimately the Tax Payer) can afford.

Here in the UK there is the laudable salary protection costs due CV-19, then the Boris Johnson spending pledges e.g. HS2. Then there’s Trident. And then there will likely be a whopping Benefits bill if more & more self-employed or small businesses go bust. E.g. BrightHouse.

The Tax Payer cannot bail everyone out - the UK is now AA- vice AAA due to these spending issues.

I see Easyjet is getting a kicking by commentators on the online BBC News: not much sympathy there and that may well influence politicians...

Last edited by covec; 30th Mar 2020 at 12:48.
covec is offline  
Old 30th Mar 2020, 15:11
  #128 (permalink)  
 
Join Date: Aug 2007
Location: Cardiff
Posts: 642
Likes: 0
Received 1 Like on 1 Post
Originally Posted by covec
I’m surprised that airlines (or any business) do not have “rainy day” contingency funds.

There is a limit to what a government (& ultimately the Tax Payer) can afford.

Here in the UK there is the laudable salary protection costs due CV-19, then the Boris Johnson spending pledges e.g. HS2. Then there’s Trident. And then there will likely be a whopping Benefits bill if more & more self-employed or small businesses go bust. E.g. BrightHouse.

The Tax Payer cannot bail everyone out - the UK is now AA- vice AAA due to these spending issues.

I see Easyjet is getting a kicking by commentators on the online BBC News: not much sympathy there and that may well influence politicians...
In other industries, a skilled workforce and unused assets can be used by new entrants to the market and economic activity can continue. Sometimes there are the wrong assets and the workforce has the wrong skills and you have long term depression, for example the South Wales Valleys.
In the airline industry you have mobile assets and a mobile workforce so you are not constrained geographically. However, there are high costs of entry to the industry and we do not have the new entrants to the business that we used to have. If you have the funds to pass financial fitness with the regulator, you then have to persuade a card processor that you have enough money to operate. The card processor will want to know that in 9 months time you can supply the flight or refund the money. Airlines carry large cash balances but this represents money paid in advance for flights that doesn’t really belong to the airline until the flight takes place. This leads to the tension between card processors and airlines when they get into financial difficulty because the airline wants this money to continue operations and the card processors want the money available to repay passengers if the airline fails.
When an airline is operating it is monitored on a going concern basis. You can assume that historic cash flow from routes will continue. You have large costs and large revenues and so long as there is at least a small positive margin, operations continue and shareholders get a return on their investment. However an interruption to operations causes a huge problem. Revenues cease, you have to repay money in the bank to passengers, fixed costs continue even if you are not flying. The suggestion that airlines should have enough capital in case of a six month shut down is not realistic. Those funds would not provide a return on investment so investors would not fund it, there would be more profitable opportunities elsewhere.
In theory the Government can keep funding as long as someone will lend them money. The problem is that we are already running high levels of debt from the financial crisis. At the moment interest levels are low but if buyers of governement debt lose confidence in the government’s ability to repay then interest rates could rise, the pound could fall as investors sell their off government debt and inflation could rise. At the moment the government is spending this money to try to preserve economic activity for when the crisis is over to preserve future governement income. At the moment we are looking at a very sharp, hopefully short recession. However, the government is walking a tightrope, if we have large numbers of company failures, large numbers of unemployed, falling government revenues and increased government spending then the medical crisis is going to be swiftly followed by a financial one.

Last edited by runway30; 30th Mar 2020 at 15:13. Reason: Typo
runway30 is offline  
Old 30th Mar 2020, 23:20
  #129 (permalink)  
 
Join Date: Feb 2020
Location: The full half of the glass
Posts: 14
Likes: 0
Received 0 Likes on 0 Posts
Leaving lockdown

Originally Posted by runway30
At the moment we are looking at a very sharp, hopefully short recession.
Hoping for a V-shaped recession, yes. That's why so much attention is turning now to how governments can successfully navigate their way out of lockdowns.

The problem is that any such strategy has to be plausible. Since a vaccine isn't around the corner, either the virus has to be stopped in its tracks (perhaps possible in NZ) or under very tight control (the South Korea model). And/or we have to lower both the spread and the lethality - via effective treatments - to the point that the average Joe and Jane don't think they are threatening their own lives or their family's and friends' lives by going to work.

The lockdowns are now buying us some time to do that - but it's such a pity that so many of our leaders squandered the warning from events in Wuhan because a lockdown is so much more costly and risky than early action.

One example of post-lockdown planning:
aei.org/research-products/report/national-coronavirus-response-a-road-map-to-reopening
PeterWeb is offline  
Old 31st Mar 2020, 00:05
  #130 (permalink)  
 
Join Date: Jul 2001
Location: A Gaelic Country
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
runway30. That is a First Class post. Thank you.

Re the financial tightrope - that is what concerns me.

I’ve already given up and withdrawn from 2 interviews which had been placed on hold. I’m paying not one penny more into maintaining ratings bar my FI and will just accept that CV-19 stopped my dream dead. However, God Willing I’ll hit my death bed in my 90s and not sooner like some poor folk due Cv-19. Perspective.

covec is offline  
Old 31st Mar 2020, 08:09
  #131 (permalink)  
 
Join Date: Jan 2017
Location: Warwick
Posts: 197
Likes: 0
Received 0 Likes on 0 Posts
All businesses have costs and revenues, aviation has always been high risk with regular large failures and investors have to accept those risks, you can make a lot of money when all goes well, if it goes wrong you loose the lot. Many national carriers are government controlled ( for better or worse) they will survive, for the rest the strongest will pick up after the crisis others will be taken over by new investors.
The number of passengers will return to normal with time, until then tough it out like the rest of businesses,
Deltasierra010 is offline  
Old 31st Mar 2020, 08:18
  #132 (permalink)  
 
Join Date: Jun 2000
Location: LONDON England
Age: 52
Posts: 269
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by runway30
In other industries, a skilled workforce and unused assets can be used by new entrants to the market and economic activity can continue. Sometimes there are the wrong assets and the workforce has the wrong skills and you have long term depression, for example the South Wales Valleys.
In the airline industry you have mobile assets and a mobile workforce so you are not constrained geographically. However, there are high costs of entry to the industry and we do not have the new entrants to the business that we used to have. If you have the funds to pass financial fitness with the regulator, you then have to persuade a card processor that you have enough money to operate. The card processor will want to know that in 9 months time you can supply the flight or refund the money. Airlines carry large cash balances but this represents money paid in advance for flights that doesn’t really belong to the airline until the flight takes place. This leads to the tension between card processors and airlines when they get into financial difficulty because the airline wants this money to continue operations and the card processors want the money available to repay passengers if the airline fails.
When an airline is operating it is monitored on a going concern basis. You can assume that historic cash flow from routes will continue. You have large costs and large revenues and so long as there is at least a small positive margin, operations continue and shareholders get a return on their investment. However an interruption to operations causes a huge problem. Revenues cease, you have to repay money in the bank to passengers, fixed costs continue even if you are not flying. The suggestion that airlines should have enough capital in case of a six month shut down is not realistic. Those funds would not provide a return on investment so investors would not fund it, there would be more profitable opportunities elsewhere.
In theory the Government can keep funding as long as someone will lend them money. The problem is that we are already running high levels of debt from the financial crisis. At the moment interest levels are low but if buyers of governement debt lose confidence in the government’s ability to repay then interest rates could rise, the pound could fall as investors sell their off government debt and inflation could rise. At the moment the government is spending this money to try to preserve economic activity for when the crisis is over to preserve future governement income. At the moment we are looking at a very sharp, hopefully short recession. However, the government is walking a tightrope, if we have large numbers of company failures, large numbers of unemployed, falling government revenues and increased government spending then the medical crisis is going to be swiftly followed by a financial one.

Great post 👍🏻
autothrottle is offline  
Old 31st Mar 2020, 08:23
  #133 (permalink)  
 
Join Date: Jan 2004
Location: london,uk
Posts: 735
Received 4 Likes on 4 Posts
Originally Posted by cashash
Why wouldn't you have new airlines starting up to fill the void - after all there are going to b a lot of cheap airframes and crews sitting around. Why wouldnt we have new Virgins, Lakers, Easy's etc spring up like they did before?
Shareholders get wiped out, directors fired. New companies setup to buy up the assets for pennies, away you go...
peter we is offline  
Old 31st Mar 2020, 08:45
  #134 (permalink)  
 
Join Date: Aug 2007
Location: Tullamore
Posts: 27
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by covec
I’m surprised that airlines (or any business) do not have “rainy day” contingency funds.
The way modern capitalism has been allowed to work is that any company that is cash rich (has reserves) is a target for an LBO or a take over by a competitor with the competition watchdogs asleep all over the world. The superairlines should never have been allowed, the benefits of scale are overstated and you end up with small numbrs of systemically important players (cf the banks). Nationalise them if they need a bailout and break them up.
yoganmahew is offline  
Old 31st Mar 2020, 09:13
  #135 (permalink)  
 
Join Date: Jan 2017
Location: Warwick
Posts: 197
Likes: 0
Received 0 Likes on 0 Posts
“Shareholders get wiped out, directors fired. New companies setup to buy up the assets for pennies, away you go...“

Most airline have very little tangible assets, everything is leased if you can persuade investors you are credible they will provide the working capital, then you form an alliance (cartel) to reduce competition, wish we all were allowed to do that.
Deltasierra010 is offline  
Old 31st Mar 2020, 14:33
  #136 (permalink)  
 
Join Date: Feb 2020
Location: London
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by Deltasierra010
“Shareholders get wiped out, directors fired. New companies setup to buy up the assets for pennies, away you go...“

Most airline have very little tangible assets, everything is leased if you can persuade investors you are credible they will provide the working capital, then you form an alliance (cartel) to reduce competition, wish we all were allowed to do that.
It doesn't really matter who owns the airframe whether its the airline itself or a leasing company, there are still going to be hundreds sitting in the desert that are looking for new owners going very cheap.
cashash is offline  
Old 31st Mar 2020, 18:31
  #137 (permalink)  
 
Join Date: Sep 2011
Location: Northern Territory Australia
Posts: 105
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by cashash
Why wouldn't you have new airlines starting up to fill the void - after all there are going to b a lot of cheap airframes and crews sitting around. Why wouldnt we have new Virgins, Lakers, Easy's etc spring up like they did before?
why start a new airline when there are ready made ones ready to start back up.
Gove N.T. is offline  
Old 31st Mar 2020, 18:36
  #138 (permalink)  
 
Join Date: Feb 2020
Location: London
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by Gove N.T.
why start a new airline when there are ready made ones ready to start back up.
The new ones wont need taxpayer support.
cashash is offline  
Old 31st Mar 2020, 18:40
  #139 (permalink)  
 
Join Date: Nov 2018
Location: London
Posts: 0
Likes: 0
Received 0 Likes on 0 Posts
Originally Posted by Gove N.T.
why start a new airline when there are ready made ones ready to start back up.
1) To let the market evolve instead of artificially keeping the same lot (owners/shareholders) in power for centuries.
2) To allow a natural development of the aviation business to serve a genuine demand instead of pursuing the race to the bottom strategy we saw over the last decade.
torvalds is offline  
Old 31st Mar 2020, 20:39
  #140 (permalink)  
Ecce Homo! Loquitur...
 
Join Date: Jul 2000
Location: Peripatetic
Posts: 18,115
Received 2,162 Likes on 982 Posts
why start a new airline when there are ready made ones ready to start back up.
Because many are pension schemes with massive deficits and a marginally profitable airline on the side. Start a new airline and you eliminated one of the major costs. e.g.

https://www.ipe.com/british-airways-...034124.article

https://www.pionline.com/article/201...ce-new-dc-plan

https://www.ft.com/content/249be7da-...6-b9ccc4c4dbbb


ORAC is online now  

Thread Tools
Search this Thread

Contact Us - Archive - Advertising - Cookie Policy - Privacy Statement - Terms of Service

Copyright © 2024 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.