BUSINESS NEWS


Virgin’s bid for £500m state aid opposed by rivals


Virgin Atlantic was in negotiations to secure a £500 million bailout from the government this week as it sought to become the first UK carrier to receive state aid in the Covid-19 crisis. The carrier is seeking both a


loan and credit guarantee – the loan to cover fixed costs of about £20 million a week while flights are grounded and a credit guarantee to stop credit card companies withholding payments. However, financially stronger


carriers remain opposed to state aid. Ryanair confirmed its opposition on April 3 as it reported a profit of almost €1 billion for the year to March despite the recent


Virgin Group chairman Richard Branson


European bodies demand EU help


Industry associations across Europe issued a joint call for action to the EU and member states on April 3 demanding “quick support”. Organisations including


shutdown, saying “We support the EU commission’s position that any government support [for the sector] must comply with all EU state aid and competition rules.” The budget giant is operating


fewer than 20 daily flights, barely 1% of its schedule. Willie Walsh, chief executive of


British Airways parent IAG, said: “A lot of weak airlines were struggling prior to this downturn and I struggle to see how they will be able to survive


even with government assistance.” Manufacturers Rolls-Royce and


Airbus wrote to transport secretary Grant Shapps last week to support Virgin’s case, with Airbus calling on the government to “do all it can to support Virgin”. Heathrow also offered support. Reports suggested ministers


are concerned about a reaction to aiding Virgin given “questions over [Virgin Group chairman] Richard Branson’s tax affairs”.


Airlines for Europe, Airports Council International and the European Travel Agents’ and Tour Operators’ Association, of which Abta is a member, warned of “an unprecedented liquidity crisis”. In a statement, they said: “The


catastrophic effect Covid-19 is having on aviation is only at the beginning. The industry has come to a complete halt and is struggling to survive. The EU must act now.” The coalition demanded EU


member states “provide financial support as quickly as possible to the whole travel ecosystem”.


Airlines seek vouchers go-ahead Ian Taylor


Airlines stepped up calls on the government to sanction the issue of vouchers in place of refunds as Iata warned carriers owe $35 billion for cancelled flights. Aviation lobby group Airlines UK


wrote to transport secretary Grant Shapps last week requesting airlines be permitted to offer vouchers instead of cash refunds as required under European rules. EC Regulation 261 on air


passenger rights stipulates that airlines pay refunds for cancelled flights within seven days. However, the volume of cancellations is heightening the risk of carriers going bust. Iata estimated the value of


global airline refunds at $35 billion last week following the mass cancellations due to coronavirus


travelweekly.co.uk


$35bn Value of refunds owed by airlines globally, according to Iata


restrictions. It warned: “The risk is airlines run out of cash before the recovery arrives.” The association issued an open


letter to agents confirming airlines will issue vouchers in place of cash refunds for cancellations through its Billing and Settlement Plan (BSP), which normally handles more than $1.25 billion a day. Iata said: “Our industry is


experiencing a critical liquidity crisis. It’s practically impossible for industry players to find sufficient financial means to keep the air travel


value chain operating in the short time airlines have before facing bankruptcy. “The best answer . . . is for


regulators to ease requirements for cash refunds and allow airlines to issue vouchers instead. These vouchers can be managed through the Iata BSP using processes and procedures that already exist.” Iata estimates airlines had on


average enough cash to operate for two months without any turnover at the start of the crisis, with European carriers’ ability to survive ranging from zero to seven months but a majority on two months or less. Several governments, including


the Netherlands, have already sanctioned the issue of vouchers in place of refunds. Iata director general Alexandre de Juniac said: “We urge others to do the same [and] to act fast.”


9 APRIL 2020


Grant Shapps 33


PICTURES: Shutterstock


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