Airlines UK: It has never been this bad for carriers

The chief executive of Airlines UK gave evidence at a Transport Select Committee meeting, warning MPs that the nation’s carriers “have to restructure” and that it “has never been this bad” for the industry during a crisis.

Asked about up to 18,000 job losses announced by Virgin Atlantic, British Airways and Ryanair last week despite an extension to the government’s coronavirus job retention scheme, Tim Alderslade said the uncertainty about how airlines can return to the skies was forcing them to make decisions now for a future in which demand may continue to be low.

“I want to get across to you the scale of this disaster,” Alderslade told MPs. “It has never been this bad. There are travel restrictions. Demand has completely stopped. We don’t know when this [lockdown] will be lifted. We don’t know about the recovery. We don’t know what the public health stipulations will look like. Until we know that we can’t get flying again.”

Echoing the now-common belief that it will take two to three years for demand to return to 2019 levels, Alderslade said: “We are going to have a much smaller, much leaner aviation sector for the next few years. We will probably see lower frequencies and lower capacity for some time.

“Airlines have to restructure to survive, otherwise they’ll go out of business. They have to take out costs wherever they can.”

Alderslade joined calls for the government to extend the job retention scheme, “at least” until September or October, but agreed the programme “can’t last forever”. He said jobs so far saved by the scheme might not be sustainable when the scheme ends at the end of June, which is why some airlines felt the need to restructure now rather than waiting.

When asked why airlines are not seeking multi-billion-pound support packages as their European counterparts are, Alderslade pointed out that some – such as Easyjet and Virgin Atlantic – have or are in the process of applying for loans through the Covid Corporate Financing Facility. “The government has been quite open about the fact that it is happy to discuss bespoke packages, which we welcome, but there have also been other measures taken to help airlines. The 80/20 slot rule was suspended with UK support – though we’ll probably need to see that extended to the end of the year – and airlines have also had ATC charges deferred 14 months. I think our main focus now is what happens when we get back to business and once airlines start recovering in the coming weeks, and how we can ensure that we can stimulate demand. We welcomed the original announcement from the chancellor that there would be a bespoke package for the industry, but we have not been unhappy with the measures announced so far.

“I can’t speak for individual airlines on whether that’s enough, but we know many of our members are trying to access liquidity from the government. What we need to see now is an appreciation from the government that we are an incredibly important sector and that we need to kickstart the recovery as soon as possible. The way they can do that is to extend the furlough scheme and the other schemes on charges. We’d also love to see a deferral of APD charges. What that will do is help airlines stimulate demand – if their cash costs are lower they can keep their prices low and people will want to start getting on a plane for holidays and business trips.

“We are the third-largest aviation market in the world behind the US and China, and our members have been doing great work to support citizen repatriation and freight operations. The key question for us is whether the government sees the industry as it should. I remain to be convinced. To some extent we are a victim of our own success, and I think the government, and the Department for Transport in particular, sometimes sees their role as just managing that process rather than intervening and trying to build up aviation as a key asset. That is a worry.”

Willie Walsh, CEO of BA parent International Airlines Group, is due to give evidence to the Transport Select Committee on Monday after saying he could not attend this Wednesday's session.