UK government says no industry-wide bailout for aviation
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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 .
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 .
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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 .
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?
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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.
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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"
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.
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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...
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.
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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...
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 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
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Leaving lockdown
Originally Posted by runway30
At the moment we are looking at a very sharp, hopefully short recession.
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
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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.
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.
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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,
The number of passengers will return to normal with time, until then tough it out like the rest of businesses,
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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.
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 👍🏻
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?
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Originally Posted by covec
I’m surprised that airlines (or any business) do not have “rainy day” contingency funds.
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“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.
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.
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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.
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.
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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?
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Originally Posted by Gove N.T.
why start a new airline when there are ready made ones ready to start back up.
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.
Ecce Homo! Loquitur...
why start a new airline when there are ready made ones ready to start back up.
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
