Want to know the richest airline in Europe? It’s not BA, Air France, or even Ryanair – it’s WizzAir, the Hungarian low cost airline. Conservative estimates suggest the airline has enough cash to weather current travel restrictions for at least 20 months, without flying a single plane.
This is precisely why many have been left scratching their heads as to why the UK Government, which has thus far failed to reach terms with UK based Virgin Atlantic, just handed an airline with incredibly deep pockets, which absolutely does not need cash, £300 million in “bailout” loans.
The distinction between a bailout and a loan is an important one to examine, because it’s the essence of why the UK Government move is so confusing. If anyone who doesn’t need money can count on government support before those who do need money, there are going to be quite a few hands opening up.
Virgin Atlantic is not seeking a bailout, it’s seeking a loan, of which the full amount, plus likely interest would be repaid in full to the Government and therefore UK taxpayers. Virgin Atlantic is seeking a loan, because it’s in desperate need, due to the unprecedented times we all collectively ace.
By all accounts, the intention of the loan program setup by the UK Government is to support businesses impacted by covid-19 -aka coronavirus, and particularly those facing risk or need. Unlike Virgin Atlantic, which is formally at risk, and in need of cash injection, WizzAir is in neither camp.
WizzAir seized an opportunity for a 0.6% loan, which in banking terms is practically free money.
The UK Government isn’t foolish to profit off its loan capabilities, but in helping WizzAir before Virgin, very awkward optics are everywhere. If every business in Europe that wanted cheap access to cash took it, there would be no money left in the world, at least certainly not from Her Majesty’s Treasury.
Who in the UK wouldn’t love to borrow large sums of money at 0.6% interest? Why not buy a larger house, or a Ferrari while you’re at it?
The point is “need” and a foreign airline with no need just jumped the queue over a domestic airline with great need, based on a technicality in financing form tick boxes. WizzAir has UK employees in the hundreds, and all competition in UK aviation matters, but it’s incomparable to BA or Virgin.
But Aren’t Most Airlines “International”?
Even though it has UK subsidiaries and is traded in London markets, WizzAir is not a domestic airline, and certainly isn’t going to be the great hope for challenging British Airways as a “second” flag carrier, or adding innovation to long haul flying. And no, British Airways is not a bonafide flag carrier, though in many ways enjoys the perks of one.
But then again British Airways isn’t British – it’s owned by IAG which is a Spanish company, but has Qatar Airways as its single largest shareholder.
Where the distinction is, or should be drawn in terms of covid-19 related government support, typically falls upon the impact it will have on domestic jobs and connectivity.
In this regard, Virgin Atlantic or British Airways is far more important to the UK public, putting other financial and geographical factors aside.
Despite the financing challenges presented by US based Delta Airlines 49% ownership in Virgin Atlantic, and the lightning rod effect of having a well known billionaire in control of the other 51%, it’s impossible not to feel like the UK Government is acting with some level of malice toward the airline.
After all, EasyJet secured £600m in government loan funding, just days after Cypriot billionaire owner Stelios Haji-Ioannou withdrew £60m from the airline for personal gain, in the same week it cut free meals for flight crews. Both billionaire owned, both important to UK travel.
For the peanut gallery critics saying why doesn’t Delta buy more of Virgin – they can’t. 49% is the maximum allowed by EU law. The UK Government making money off of WizzAir isn’t a problem in itself, but putting the needs of airlines without actual need for cash, above those which do is odd.
Some form of malice, or inflexibility is the only way you can explain handing practically free money to a foreign airline which doesn’t need it, while refusing to offer a similar loan package, rumored to be only £200m more to Virgin Atlantic, with thousands more domestic jobs and many more vital routes connecting the UK to the world at stake.