Air France and KLM just agreed to terms on €10 billion Euros of support from the French, and Dutch Governments. Jobs are saved, crucial non-stop connectivity is maintained and competition lives on. Similar stories are emerging from Germany, Norway, Finland and Spain, but the UK thus far, is like a feather floating in the wind, with no clear direction.
British Airways and Virgin Atlantic, the two most identifiable UK airline brands, can’t even agree on whether bailouts, which are really just low interest loans, should exist; while government has made a mockery of what “support in a crisis” represents.
In Norway, even Norwegian, the debt ridden low cost airline which has been rumored for insolvency in years, has just secured a £230 million lifeline. Norwegian plays a vital place in aviation, keeping short and long haul fares low for consumers throughout Europe and beyond.
The UK Government’s “hands off” approach to vital financial assistance is quickly becoming a competitive liability. Relief efforts across Europe and the USA are scaling up, allowing airlines to address present and future, while honing new concepts for what travel may look like. Thus far, it’s chosen to dish out money exclusively to airlines which don’t need assistance.
Virgin Atlantic offered abundant clarity that a loan was necessary to protect staff and remain solvent, as it just turned the corner to profitability once more, asking the government for support in the form of £500m in loans. Thus far, those proposals have failed to pass government muster. Virgin Atlantic continues to be an airline leading customer service trends, creating a competition which makes all airlines, including British Airways, better.
The point is simple: even if you don’t fly, or even prefer any of the airlines in today’s travel landscape, they each play a role making travel better for consumers. Without them, it could all be vastly different and generally not for the better.
Meanwhile, WizzAir, Europe’s most cash flush airline, with absolutely zero need for a loan managed to secure one in no time, because who wouldn’t take 0.6% interest cheap cash for the ole’ coffers? EasyJet, another cash rich airline, whose billionaire founder took out £60m from the airline himself just days into the covid-19 crisis, also managed to secure a hefty £600m loan, which it too does not need.
Somehow, that billionaire owner wasn’t flogged on the front pages of tabloids for weeks like another, despite attempts to have EasyJet crew accept contracts which don’t even allow for free meals when operating flights, in the very same week he withdrew millions.
Are these normal times?
In normal times, it would make sense for dotted I’s and crossed T’s companies with healthy balance sheets to have easier access to cash loans, but the present concept of assistance from government is to support businesses in difficult circumstances, so as to help them weather the storm and protect thousands of UK jobs.
If David Beckham started asking for covid-19 government loans, just because it was a great way to secure cheap 0.6% interest cash for a new 7th house in LA, eyebrows would raise – so why it’s any different for cash rich airlines, some of which employ a mere fraction of UK employees that others do, is a fair question to ask.
And then there’s the megastar, British Airways. The “almost” flag carrier.
British Airways, by all accounts, is playing an ambitious hand in the midst of a crisis, cheered on from the owners box by Willie Walsh, the cunning CEO of parent company IAG.
In the understatement of the century, the airline has sent mixed signals, stating to IAG shareholders that the coffers are flush from tremendous profits, while simultaneously telling staff they’d need to sign “join or die” contracts with reduced wages, benefits and concessions due to the crisis.
A “no” would be a virtual last day, as part of 12,000 planned job cuts.
British Airways workforce is expected to drop by 12,000, including pilots, crew, ground staff and office teams. Knowing this likelihood, the airline has expressed no interest in government assistance, and is yet to have sought any. It’s a rare opportunity to use a scapegoat – aka coronavirus – to enact extreme workforce changes without easy blow back from unions.
Workers who’ve enjoyed the longest tenure with the airline are said to be the first on the chopping block, as the airline looks to cut out higher paid crew members. Of course in airline crew terms, higher paid typically means decent living wage, in normal real terms.
The shrewd move made sense when IAG supported the “no assistance” notion across all brands, but when Iberia and Vueling took a hefty $1.2 billion loan from the Spanish Government, it removed any doubt that the “no assistance” position IAG is taking for British Airways centers around long held desires for unfettered cuts.
Cynics believe the airline is waiting in hopes of Virgin Atlantic failing, and only then will ask for financial support – but only once the 12,000 jobs are gone, so they can’t become a condition of any government cash injection.
Capitalizing on a crisis is something even the traditionally ruthless UK banking sector has avoided, with a majority of larger players delaying workforce cuts until the worst of the health crisis passes. It’s an incredibly competitive landscape, but British Airways opposition position is making the UK Governments unenviable task of finding solutions to ensure a safe future for UK aviation even more difficult.
Putting the scores on the doors, it’s the UK arm of Hungarian airline WizzAir – £300m, EasyJet – £600 million and the two most recognizable UK airline brands, zero.
The UK Government’s approach is now a liability, as the rest of Europe scales up relief efforts. If the UK fails to protect its airlines, thousands upon thousands of jobs remain to be lost, in times when the prospect of picking up a new one are low. With each day, airlines around the world have a head start on plotting the future, while the UK’s airlines plot doomsday scenarios.