March 24, 2020 / 2:49 PM / 4 months ago

Britain to stricken airlines: try raising your own money first

LONDON (Reuters) - Britain has told airlines it will only consider stepping in to help them survive the coronavirus crisis once they have explored the possibility of raising capital from other sources including existing investors.

FILE PHOTO: A British Airways plane taxis past tail fins of parked aircraft to the runway near Terminal 5 at Heathrow Airport in London, Britain March 14, 2020. REUTERS/Simon Dawson/File Photo

The aviation industry is hoping for a specific aid package, in addition to the support measures already announced for British businesses, after the finance minister said last week that he would hold discussions with airlines and airports.

UK airlines such as easyJet (EZJ.L), IAG-owned (ICAG.L) British Airways and Virgin Atlantic have almost no revenue coming in after demand for air travel came to a standstill, forcing them to ground hundreds of planes, and putting thousands of jobs and the future of the sector at risk.

But any special aviation assistance package appeared to be on ice on Tuesday, after a letter from the finance minister Rishi Sunak to airlines and airports.

The letter told airlines to look at their financial positions following the government measures for all business announced last week, which included a promise to pay a massive share of private sector wage bills and a deferral of value-added tax bills.

“We would expect all companies to be pursuing all possible actions to preserve cash and maximise liquidity, including engaging with shareholders, lenders and the markets, and utilising all available assets and facilities,” Sunak said in the letter, dated Tuesday, which was posted by media on Twitter.

The British guidance came as the aviation industry body IATA called on governments to hurry up and provide bailouts or risk half of airlines facing possible bankruptcy within weeks.

Sunak’s letter also said, however, that the transport minister was still discussing industry-wide measures to help with the crisis.

A report in the Financial Times on Saturday said that the British government was planning to buy equity stakes in airlines and other companies affected by the pandemic.

JOBS, LIQUIDITY

Earlier this month, easyJet and Virgin Atlantic asked for government support to help them survive. IAG, a long-time critic of state support for airlines, has not publicly asked for help.

Both easyJet and IAG have said in recent weeks that they have strong balance sheets.

IAG declined to comment on Sunak’s letter on Tuesday.

EasyJet said it was reviewing the letter alongside the government measures announced last week. “Our immediate focus is on liquidity and protecting jobs and we are working with the government to make best use of these measures,” a spokeswoman added.

FILE PHOTO: Easyjet and British Airways planes are pictured at Gatwick airport as the spread of the coronavirus disease (COVID-19) continues, Gatwick Airport, Britain, March 23, 2020. REUTERS/Peter Nicholls/File Photo

The budget carrier specifically asked the government for access to finance to help with liquidity crunches, the suspension of passenger taxes and air traffic charges, and longer relaxation of airport slot rules.

The company has come under fire for asking for government support in the same week as it paid out 174 million pounds to shareholders in dividends. It said it was legally obliged to make the payment following decisions made before the crisis.

Virgin Atlantic, which had asked for the government to provide up to 7.5 billion pounds in emergency credit facilities, declined to comment on Sunak’s letter. It is owned by billionaire Richard Branson and U.S. airline Delta.

Reporting by Sarah Young and William Schomberg; Editing by Estelle Shirbon and Pravin Char

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