Coronavirus: What Does the Future of UK Aviation Look Like?
The aviation industry is one of the worst-affected by the coronavirus outbreak and fear continues to grip the industry as the future of aviation looks even more vulnerable. Without state aid, some of the world’s most recognised airlines and airports may suffer blows that they won’t be able to recover..
With UK lockdown restrictions set to continue until at least March, multiple airlines have cancelled flights due to the decline in consumer demand and travel restrictions imposed by governments to stem the virus from spreading.
The International Air Transport Association (IATA) has now stated that the coronavirus crisis could cost airlines USD 157 billion (GBP 114 billion). IATA Director General Alexandre de Juniac stated that 2020 was the worst year for aviation ‘bar none’. The revised losses far exceed June 2020 expectations of USD 84.3 billion.
Financial markets have responded strongly to the data, and it is clear that the global airline industry is in an unprecedented state of emergency. Aviation news has shown plunges in airline shares worldwide, and some airlines are projecting revenues losses of 80%.
What impact is the coronavirus having on UK aviation?
Without emergency financial support, the UK aviation industry is facing bankruptcy. Airlines are acting fast to try and preserve their businesses by making financial sacrifices to protect as many jobs as possible.
Virgin Atlantic and British Airways are just two of many airlines making these sacrifices. British Airways Chief Executive Alex Cruz has decided not to take a salary for two months. Sir Richard Branson, the owner of Virgin Atlantic, has committed to investing GBP 215 million into his empire; Chief Executive Shei Wess also vowed to take a 20% pay cut for four months.
The aviation industry is crying for government help. Though Britain’s treasury is said to be working towards a bailout package, if they don’t act quickly enough, a lot of well-known and profitable firms will be forced out of business.
Richard Branson described the global pandemic as:
“the most significant crisis the world has experienced”, and that the chances of securing economic recovery depended “critically upon governments around the world.”
EY stated that disruptions caused by the COVID-19 pandemic had created 25 profit warnings, with 23 of those coming from businesses within the travel and leisure sector. Mounting financial pressures have seen hundreds of airport staff laid off across the country due to the decline in tourism.
Many airlines have also been forced to ground their fleets, which is adding to the pressures of commercial operations. Carriers that have had to cancel services were facing new issues under the EU’s “use-it-or-lose-it” rule too, which would require companies to fly near-empty planes to keep take-off and landing slots.
How is the government supporting the future of UK aviation?
Last year, UK Secretary of State for Transport, Grant Shapps, scheduled a meeting with government officials to put together a multi-billion-pound rescue package for the UK’s aviation industry. Mr Shapps has since confirmed that the UK aviation industry has now received over GBP 7.2 billion in government aid.
Shapps commented, “we provided furlough to 52,000 aviation staff, worth GBP 1.2 billion. We provided the COVID Corporate Financing Facility (CCFF) scheme worth about GBP 3 billion. We provided guarantees for loans through UK export finance of GBP 3.4 billion to airlines – GBP 1.4 billion to EasyJet and GBP2 billion for British Airways. These are large numbers.”
Shapps has stated that a full recovery plan for the aviation industry will be released later on this year but has not provided a specific date.
Karen Dee, The Airport Operators Association (AOA), stated that summer 2021 has to be a successful run for the aviation industry in order for it to survive. “A comprehensive aviation recovery package is needed to see airports though the government-ordered shutdown of aviation. This must include targeted financial support as well as a clear pathway to re-start by easing travel restrictions when it is safe to do so, including thorough testing.”
Other countries have also stepped up to support the aviation industry. New Zealand has vowed to give their national carrier, Air New Zealand USD 900 million, the United States has drawn up a USD 58 billion proposal for their airline industry, and Australia’s aviation industry will receive USD 750 million
What does the future of the aviation industry look like after the coronavirus?
The longer the Coronavirus crisis lasts, the more uncertain the future of the aviation industry becomes. Governments have started to act, and the measures being drafted out should help airlines weather the global economic storm caused by the coronavirus. However, the financial aid provided will need to be heavy to increase the chances of a future for the aviation industry.
Without consumer demand and with closed borders, the global aviation industry is in Armageddon. But, the world will want to go back to business as usual as soon as possible. So, there is still the possibility that once everything settles, good money will come into the pocket for airlines.
However, with UK Prime Minister Boris Johnson, providing hope that UK lockdown restrictions could be eased by summer, it’s optimistic that the UK could experience summer holidays this year, providing a much-needed boost for the aviation industry.