Q:

Should the UK government bail out its airlines?

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Rachel Amos
The Senate
15 Mar 2020

A: SenseCheck

  • 3 Yes
  • 0 Unclear
  • 4 No
SenseCheck complexity

Newest Answer Oldest Answer

  • 05 May 2020
  • No

    Complex

    The airlines have got out of jail many times before generally by a bit of luck or bail outs. In the late 90's they were dead in the water and managed to float the data network they had via Equant and that cash got most of them though the next rough period.
    There has not been perhaps a level playing field with some legacy airlines having a very unionised workforce compared with the "challengers" , but then the legacy airlines have been bailed out before.
    When I see that IAG are investing m's into start ups like Monese I just don't see why now they need to get free capital when they have played risk with the capital they have.
    This event I believe will fundamentally impact how we do things going forward, the lure of travel to collect air miles and points will be gone, people will want to be working remotely, digitally and travel will not be the norm any more with some major cost benefits for companies as well where we have all seen T and E going out of control.
    I do not see why we would invest money into businesses that have got bloated and lazy,
    The airlines all seem to be claiming that the noose is Airbus or Boeing for them and committed orders , what better way to solve that then to go into administration and let the creditors negotiate and a buyer be negotiated. Would shareholders be wiped out, yep for sure so with a roll on impact on pension funds, but I think it should be done.
    As a sector I compare it to when massive funds were invested into fibre cable late 90's and the equity holders got cleaned out and the debt holders took the assets as cash was king. That changed the sector in a very positive way and the airlines need a massive wake up call to end the practices of a lifetime

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    Paul
    Gooner Holdings

  • Comment

  • 04 May 2020
  • Comment

  • 02 May 2020
  • Comment

  • 09 Apr 2020
  • Yes

    Complex

    Coronavirus has caused a steep decline in the demand for aviation, and the effects thereof are likely to have adverse impacts in both the short and long term. While metropolitan areas will see short-term workforce impacts, a lapse in aviation infrastructure could cause economic damage long after we bear the brunt of Covid-19.

    As airlines and airports look to cut costs in response to decreased demand, workers are put at risk. But because aviation is a tradable industry—bringing consumers from other places into a local market and generating more local-serving jobs—the employment losses from aviation are compounded in urban/metropolitan markets.

    It may seem that these problems could primarily be solved at the individual level; the aviation industry is, after all, a multibillion dollar one, and so perhaps the government could provide financial support to those employees who would lose work and most need the help—in this way taxpayer funds wouldn’t go to the already-wealthy or to stock buybacks. Yet this solution misses a key aspect of the problem: infrastructure and its multiplicative effects on our economic health.

    After 9/11, the US airline industry experienced reduced demand and was bailed out. Even after this support, however, “aviation employment and airline financials were still depressed a year later.” Aviation is an essential piece of our global and national economies and so we need airline companies and airports to have their infrastructure (both labor and capital) in place as soon as possible after this crisis dies down. If we do not provide some kind of financial support for the airlines and therefore delay aviation infrastructure returning to its pre-pandemic levels, Covid-19’s economic downturn could last well beyond the direct effects of the virus.
    At the same time, a key provision could be that consumer rights groups are included in negotiations so that the taxpayers who foot the bill for the bailout are included in deliberations.

    For more, see the Brookings Institute piece below.

    https://www.brookings.edu/research/we-should…

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    Liam Patell
    University of Oxford

  • Comment

  • 31 Mar 2020
  • No

    Very Complex

    The bailout of airlines (and big corporations in general) presents an ethical dilemma as it encourages risky corporate behaviour and increases market inequality.

    If the government is worried about individual employees, it should bail out individuals based on their needs rather than expecting employees to be compensated from the remnants of corporate bailouts.

    It is likely, given corporate strategies in previous crises (notably bank behaviour in the 2008 crisis) that funds given to airlines would primarily go towards subsidising shareholders, stock buybacks, and compensating those in managerial or executive positions. These corporations are again lobbying for bailouts, exerting a pressure that small businesses are unable to match. Both facets of the problem suggest that if we care about addressing wealth inequality, bailing out the airline industry is a bad idea.

    Finally, companies should have buffers to face uncertainty even when specific adverse events can not be predicted. Bailing out companies with taxpayer money and then allowing them to finance buying back their own stock instead of building a liquidity buffer sends a clear message: that the government is comfortable with large corporations prioritising their own commercial interests, doesn't value conservative budgeting, and will continue to use taxpayers to foot the bill in a cynical “government put.”

    https://medium.com/incerto/corporate-sociali…

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    Tamsin Ogilvie
    The Senate

  • Comment

  • 26 Mar 2020
  • No

    Complex

    Treat the airlines (and airports) in the same way as the the other sectors that have been 'paused' for a period of months. The industry has depended on indirect government subsidies for years, and used their profits to prop up their share price in order to reward their senior managers instead of holding reserves for difficult times. A positive side effect is less emissions.

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    Jan Edmunds
    The Senate

  • Comment

  • 21 Mar 2020
  • Comment

  • 19 Mar 2020
  • No

    Very Complex

    Fewer airlines means less pollution. Governments have carbon footprint goals and this is a gift-wrapped way of meeting them!

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    Adrian Smith
    The Senate

  • Comment

  • 15 Mar 2020
  • No

    Very Complex

    The UK has passed a green emissions law and has the target of zero emissions by 2050. Rushing to prop up an polluting industry in a time of crisis, when the NHS and other sectors may need this money more, could be a mistake.

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    Tamsin Ogilvie
    The Senate

  • Comment

  • 15 Mar 2020
  • Yes

    Complex

    To maintain established positions in the global aviation market, to support economic recovery by facilitating global trade and the movement of people, and to ensure that other nation’s airlines don’t enjoy comparative advantage through their own state aid.

    But it needs to be measured and ideally in cooperation with other trade partners.

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    John Bartley
    The Senate

  • Comment

  • 15 Mar 2020
  • Comment