Airline billionaires told: Put hands in your OWN pockets to help the bailout

Sir Richard Branson and other billionaire aviation investors should reach into their own pockets and contribute to any bailout deal for the sector, former Ministers have demanded.

The Government is thought to be on the verge of agreeing a multi-billion pound rescue deal for airlines and airports – which could include the State taking stakes in the firms – amid their battle to survive the coronavirus crisis.

But research by the MoS has found that the industry’s biggest firms – which count billionaires and sovereign wealth funds among their largest investors – have paid out more than £12billion in dividends and share buybacks in the past five years.

With companies already facing bankruptcy and planning thousands of job cuts, the figures will raise questions about whether more earnings should be saved up for disaster scenarios.

Lord Myners, a former City Minister who worked on the bank bailouts of 2008, and former Business Secretary Sir Vince Cable are among those who said any Government support deal ‘should involve participation by existing owners’.

Lord Myners told the MoS: ‘The taxpayer isn’t there to provide a one-way bet for owners, but to protect jobs and the economic and social framework.’ 

A number of large UK companies have been bracing for an downturn over the past few years by trimming debt piles, slimming oversized businesses and boosting cash reserves. However, many aviation firms have continued making large payouts, with big chunks going directly to billionaire founders and overseas shareholders. Now the coronavirus pandemic has grounded planes, they are running out of money.

Branson’s Virgin Group, the majority shareholder in Virgin Atlantic Airways, has called on the Government to provide £7.5billion of emergency support for the sector. Airport bosses, including executives from Heathrow and Gatwick, have asked to be part of any rescue deal.

It is not clear how any bailout fund would be divided and which companies would be included. But Transport Secretary Grant Shapps held talks with a number of major airlines – thought to include Virgin Atlantic, Ryanair, easyJet and British Airways owner International Airlines Group – and airports last week. 

Heathrow announced on Friday that it would need to ‘reorganise and shrink our operation’ in response to the coronavirus crisis but added that it has £3.3billion available to maintain ‘at least a 12-month liquidity horizon’. 

Heathrow has also paid out £2.15billion in dividends since 2015. This would have been divided up among a consortium of large, mainly foreign, investors who own the airport. Spain’s Ferrovial will have taken more than £500million, while the Qatar Investment Authority and China Investment Corporation received around £430 million and £215million respectively.

In the same period, Gatwick – which was owned by a number of sovereign wealth funds during these years – paid out £1.1billion.

British Airways owner IAG has paid out €2.4billion (£2.2billion) in dividends since 2015, and has also completed share buybacks worth €1.7billion in this time. Around 20 per cent of this total – nearly £800million – will have gone to IAG’s largest shareholder, the state-owned Qatar Airways. 

Ryanair bought back €3.2billion of shares in the period and paid out €918million of dividends. Michael O’Leary, the airline’s controversial chief executive, owns around four per cent of its stock and so would have taken around £150million.

EasyJet came under fire last week for completing a £174million dividend payment while participating in bailout talks. The latest payment takes its total since 2015 to £1.2billion. Greek-Cypriot billionaire Sir Stelios Haji-Ioannou and his family own more than a third of the company, and so would have taken more than £400million of this total, including about £60million last week.

Virgin Atlantic, which is a private company 51 per cent-owned by billionaire Branson’s Virgin Group, has not declared a dividend since 2014 when it paid out £88million. Each of the firms has also paid out tens of millions of pounds to executives in the past five years, although many bosses have agreed to take pay cuts during the Covid-19 crisis.Branson and Haji-Ioannou are not on the boards of Virgin Atlantic or EasyJet and so are not in charge of dividend decisions.

Lord Myners suggested the Government should provide financing through interest-paying bonds that can be converted into shares. The price of these convertible bonds should be at a ‘small premium’ to current stock market values, Lord Myners said. He added: ‘If no existing owners subscribe for the new security, they will own a smaller percentage of a healthier business than they own now. If this doesn’t appeal, they have to contemplate the consequences of administration.’

Sir Vince Cable said he is concerned about the prospect of Heathrow getting financial assistance from the State without it being ‘conditional on shareholders making a contribution’ to recognise the dividends they have been paid.

Last weekend, the Centre for Aviation warned that without assistance, most of the world’s airlines would be bankrupt by the end of May.