RUTH SUNDERLAND: Save the airlines but don’t let tycoons profit


The airline industry can be accused of many sins. 

It is infested with brassy billionaires, such as the avaricious Sir Stelios Haji-Ioannou, the founder of EasyJet, and the egregious Sir Richard Branson. 

It is responsible for pollution that is poisoning the planet. 

Customer service is sometimes woeful and industrial relations, wherever the main fault lies, are abysmal. 

So I absolutely understand why many people have deep misgivings about plans for a Government bailout that are being hatched with the help of investment bankers from the august City firm, Rothschild. 

The airline industry is infested with brassy billionaires such as the founder of EasyJet Sir Stelios Haji-Ioannou (pictured)

Plenty of angry passengers can’t see why British taxpayers owe the airlines any favours, particularly at a time when so many industries are in distress and in need of a helping hand – resulting in a bill we will all have to pay in the end. 

As one City friend of mine put it: ‘I’d be happy to see them go bust, as many airlines have over the years. Someone else will pick up the pieces and re-start them.’

I sympathise with that viewpoint, but I don’t agree. 

Yes, it sticks in the craw. Nonetheless, it is a case of when, not if, there will be a bailout. 

The only reason one has not been pushed through already is that the Government is trying to craft an arrangement that is structured in such a way that taxpayers are not taken for a ride. This is the right approach. 

However under serving some operators may be, it would cause far greater harm to let them go under at this point. 

It would be another huge blow to confidence in the stock market, as millions of small pension savers have already seen their nest-eggs drastically eroded.

In the short term, it could jeopardise the transport of medical cargoes. And when we eventually emerge from this trauma, we will need a strong aviation industry to power economic recovery. 

Therefore, just as we did with the banks a decade ago, we need to hold our noses and bail them out, because deciding not to do so out of misplaced moral scruples would be a worse evil. 

What the Government absolutely must do is make sure it is shortterm help and not a free ride. 

There must be stringent conditions attached to state support. 

These should include a ban on dividend payments for the duration and a ceiling on bosses’ pay and bonuses. 

Rishi Sunak, the Chancellor (pictured), has of course already launched unprecedented help, including £330billion of loan guarantees to businesses to get them through the crisis

Rishi Sunak, the Chancellor (pictured), has of course already launched unprecedented help, including £330billion of loan guarantees to businesses to get them through the crisis

Wealthy shareholders, including the likes of Sir Stelios and Branson’s Virgin Group, which owns a major stake in Virgin Atlantic, should also be forced to put their hands into their own, very deep pockets. 

In an ideal world Sir Stelios would be made to repay the dividend of around £60million he was due last week. 

This may not be legally enforceable, but it is a moral imperative, considering he and his family, as major shareholders in EasyJet, have had around £400million in dividends in the last four years, including the latest payout. 

BA’s parent IAG proposed a dividend of more than £300m in February, when the ravages of the coronavirus were already apparent. 

Investors who have received this largesse, including the Qatari state airline which has a large stake, should certainly share in the pain. 

The Government, on behalf of taxpayers, should take a controlling shareholding in any airlines that are saved by an injection of public money. 

That way, as and when they recover, taxpayers will take a share in the upside. 

Rishi Sunak, the Chancellor, has of course already launched unprecedented help, including £330billion of loan guarantees to businesses to get them through the crisis.  

But many airline operators have gone into this crisis laden with debt, loans taken on to buy planes that now lie idle, and cannot realistically burden themselves with billions more. 

With fleets of planes grounded as the entire planet has become a virtual no-fly zone, even those that have plenty of shortterm liquidity, such as BA’s parent company IAG, will burn through cash at an alarming rate. 

The losses suffered by the airlines are mind-boggling. 

Industry body IATA reckons the industry had lost more than £94billion in sales by the first week of March. That will already have ballooned. 

Not all of the airline industry may actually want to be bailed out. Willie Walsh, the chief executive of BA’s parent, appears keen to avoid it, but with the entire industry at a standstill, he may be unable to hold that line. 

There are concerns in Government that relatively strong operators such as IAG might be perfectly happy to see weaker rivals go under, leaving them in a position to clean up when the crisis is over. 

Whatever bailout deal is put together, the Government needs to ensure we do not end up with a monopoly able to charge what it likes. 

This is by far the biggest crisis the aviation industry has suffered in its existence. 

Coronavirus puts September 11, previously the worst, entirely in the shade. 

Here in Britain the tab will run to unknown billions. It will take time for holidaymakers and business flyers to regain sufficient confidence to travel. 

We must save the industry because we need it for our future prosperity. 

But that does not mean giving opportunist bosses and owners carte blanche to exploit this crisis of humanity for their own gain. 

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