Coronavirus: Airlines

Aviation, including airlines, has been one of the hardest-hit sectors in the coronavirus (Covid-19) pandemic. This includes the financial impact on the sector of fewer people travelling and the difficulties caused by the 14 day quarantine rules.

How is the sector impacted?

The International Air Transport Association (IATA) estimated that UK airlines would lose over £20 billion in revenue as a result of the virus. It suggested that the sector employed over 660,000 people and contributed £40 billion to the UK economy. On 10 June, the thinktank the New Economics Foundation estimated that 39,000 jobs in the aviation sector were “immediately at risk”, along with a further 31,000 in the supply chain.

The House of Commons Transport Committee said that the industry was of “huge strategic and economic importance to the UK”.

What support has the Government offered?

Airlines have had access to the range of financial assistance provided in the Government’s support package for companies. On 16 June 2020, the Government said that airlines had drawn £1.8 billion of loan support from the element of the package aimed at large businesses, the Covid corporate financing facility. Airlines have also used the coronavirus job retention scheme (the ‘furlough’).

The Government has established a taskforce to develop guidelines on how international aviation can reopen safely—one of five covering specific sectors. The taskforce is chaired by the Secretary of State for Transport, Grant Shapps, and includes representatives from the industry, trade unions and regulators.

On 11 June, the taskforce produced guidance on measures that should be put in place to protect staff and passengers when restrictions on travel are lifted, and on how passengers can travel safely. Advice included to:

  • wear face coverings in airports;
  • wash hands regularly after touching any surfaces;
  • check in all baggage including hand luggage; and
  • remain seated as much as possible during the flight.

Policy issues

Quarantine

Since 8 June, most people arriving in the UK from abroad have been required to self-isolate for 14 days. The Home Secretary, Priti Patel, said this would “guard against imported cases” of the virus, thereby preventing a “second wave”.

However, a group of airlines described the quarantine as “devastating” for tourism and applied for a judicial review of the policy. The House of Commons Transport Committee said that it was “not persuaded” that this “blanket” quarantine was the right policy option. Instead, it called for a more targeted and risk-based approach, with fewer restrictions on people travelling from countries with relatively low infection rates.

The Government has recently stated that it is “actively considering the concept of international travel corridors, including air bridges”. It said that implementation would be “guided by the science”. The Foreign Secretary, Dominic Raab, reportedly warned that air bridges and travel corridors could be subject to legal challenges.

Sector and company specific assistance

The Transport Committee noted that financial assistance to the sector so far has been through the Government’s generic business support schemes. It called for further sector-specific measures, given the “gravity of the crisis in the sector”. For example, it suggested a 12 month business rate relief scheme for airlines and airports, and a six month temporary suspension of air passenger duty.

The committee acknowledged that the Department for Transport has set up an aviation restart, recovery, and engagement unit and was devising a strategy to help the sector recover. However, it said that it had expected the Government’s strategy for the sector to be “more developed”. It called for more rapid progress, with objectives set out to:

  • minimise job losses in the sector;
  • agree international standards of passenger health protection;
  • re-examine the airport slot allocation process;
  • protect regional connectivity; and
  • ensure the industry meets its environmental obligations.

On support for specific airlines, the Government has stated that it will “only consider bespoke support for businesses once all other avenues have been exhausted”. It said it would consider factors such as “whether the business makes a material contribution to the economic activity of the UK” and the “equitable and fair treatment across businesses in the sector”. Other options it wished to see explored included raising money from shareholders.

The Government also said that any support would need to represent value for money for taxpayers. The Labour Party has argued that aid to airlines should only be granted where the airlines also commit to environmental improvements.

Redundancies and changes in condition of employment

Airlines such as British Airways (BA), Virgin Atlantic and EasyJet have been criticised for announcing redundancies and downgrading conditions of employment while employees are on furlough. The Transport Committee concluded that BA’s actions were a “national disgrace” and that they fell “well below the standards we would expect from any employer, especially in light of the scale of taxpayer subsidy, at this time of national crisis”. BA said that it was “acting to protect jobs” during the “deepest structural change in its history”. The union Unite has also opposed the moves.

The Parliamentary Under Secretary of State for Transport, Kelly Tolhurst, said that she regretted the airlines’ decisions. She stated that the job retention scheme was “not designed for taxpayers to fund the wages of employees only for those companies to put the same staff on notice of redundancy during the furlough period”.

Refunds

The Transport Committee reported that many airlines and travel operators have “failed to refund customers for package holidays and flights in a timely manner, in accordance with their legal obligations”. It suggested that the Government should consult on “whether protections should be introduced for airline passengers in the event of pandemic or other extraordinary circumstances”.

The IATA proposed a temporary amendment to European Union regulations on flight compensation, to give greater flexibility on the terms of repayments for cancelled flights.

The Government has said that it “recognises the challenges businesses are experiencing regarding refunds for cancelled holidays” but said that where a refund is due “it must be paid”.

What next?

On 29 June 2020, Baroness McIntosh of Pickering (Conservative) is due to ask the Government “what assessment they have made of the impact of Covid-19 on the airline sector, and what steps they are taking to support that sector”.

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Image by Claudio Schwarz from Unsplash.