CIT0024
Written evidence submitted by Airlines UK
Airlines UK is the trade association for UK airlines. Our members are 2Excel, British Airways, CargoLogicAir, DHL, easyJet, Jota Aviation, Jet2.com, Norwegian Air UK, Ryanair, TUI Airways, Titan Airways, Virgin Atlantic, and West Atlantic. We welcome the opportunity to submit evidence to the Transport Committee inquiry into “Coronavirus: implications for transport”. For direct relevance, our submission will focus on the impact to the UK aviation sector.
What support does the aviation sector need?
Across the EU and globally, states have recognised the importance of their airline industries as vital national infrastructure, offering bespoke support packages (See Annex II). Notably, the U.S. has granted airlines access to $58 billion in loans and payroll grants, Norway has suspended its air passenger tax until 31 October, and France has provided a €700 million tax aid to its airline sector, not including a €7bn loan support package for Air France-KLM. Yet, no bespoke package of support has been provided by the UK Government for UK aviation – the third largest aviation industry in the world, behind China and the US.
It is these global examples of liquidity support, regulatory easing and the alleviation of costs which will be vital to protecting our skilled workforce and delivering a strong, nationwide economic recovery for our island nation. As an industry, we are asking for support measures including:
o An ongoing review of the Government Job Retention Scheme, acknowledging that industries including aviation and tourism will take longer to recover than others. As an essential ask, measures should include a “tapering” of the scheme or extension behind June 30 to protect jobs. o The suspension of new Air Passenger Duty payments for six months once the current crisis ends in order to stimulate demand and allow for the recovery of consumer confidence. o The waiving of ATC and CAA charges for the whole of 2020, with payments guaranteed by HMG. o An extension of the business rate relief measures to include aviation, as the Scottish Government has done.
In a letter addressed to the aviation industry from the Chancellor on 17 March, it was suggested Government would be willing to discuss industry-wide measures of support for UK aviation and we hope this is still the case. However, no such discussions have taken place thus far.
What are the implications of COVID-19 for aviation?
Aviation, as an international industry, has sat at the forefront of the economic impact of the COVID-19 crisis, affected by complicated networks of border closures, travel restrictions, drops in passenger demand and the wider economic downturn.
It would be no exaggeration to say that the impact of this crisis will, in the long term, be worse felt than that of the 2008 economic crisis, or the knock-on economic impact of 9/11. The projected economic fallout has changed week on week, with IATA’s latest projection1 in April forecasting a drop in global airline passenger revenues of $314 billion in 2020 – a 55% decline compared to 2019.
The impact will be particularly acute for the UK, which IATA shows will be the worst revenue hit country in Europe2:
1 https://www.iata.org/en/pressroom/pr/2020-04-14-01/ CIT0024
o the UK industry is facing a $26.1bn revenue loss and over 660,000 jobs at risk o the German industry is facing a $17.9bn revenue loss o the French industry is facing a $14.3bn revenue loss
The impact for the airline industry is sharp, because whilst revenue has been all but eliminated, substantial costs remain. These include leasing commitments, the need to maintain and insure aircraft, continued operational oversights and compliance, and also refunds on services cancelled amid a complicated network of border closures.
A recent Centre for Cities Report3 demonstrates the impact the crisis will also have for employment in individual communities. The research shows that the most vulnerable communities to the economic impact of COVID-19 are those with an aviation industry employing a sizable share of the workforce. Crawley (Gatwick) and Luton are recognised as the most exposed towns, with over half of jobs in Crawley at risk of furloughing or being lost completely. This is to say nothing of the impact on the local tourism industries, from larger operators to local businesses on the high street.
As an island nation, air connectivity will continue to be a vital component for the UK’s success as a trading nation, particularly as we look to our post-Brexit future. Whilst we face this turbulent period, Airlines UK members will continue to work with Government on vital repatriation services to support citizens overseas, as well as supplying key air freight including PPE equipment to our NHS.
Restart & Recovery
Airlines UK will work collaboratively with the Department for Transport and other agencies on “Restart & Recovery”, examining what conditions are needed to support a restart in operations including public health & safety standards.
We are clear that any response for air travel has to be international, given the need for consistency and should work in partnership with bodies including ICAO, IATA and Eurocontrol. Any public health measures must be driven by the science, and we anticipate will need to be flexible to that effect – allowing for changing responses based on risk, similar to security screening processes now.
Speculated proposals for a 14-day quarantine on all arrival passengers into the UK would be a blunt tool approach to this issue with major economic repercussions for UK PLC. The direction of travel on aviation- related public health measures is to ensure those travelling on board an aircraft do so in a sterile environment with appropriate checks occurring upstream and consistent measures applied internationally. A blanket 14-day quarantine at this stage risks cutting the UK off from the rest of the world at the same time as other global economies begin to reopen.
A common and co-ordinated approach across the aviation sector internationally will ensure not only consistency but also confidence and clarity for the passenger, as airlines come to restart their operations.
May 2020
2https://www.iata.org/en/pressroom/pr/2020-04-23-03/
3 https://www.centreforcities.org/blog/what-does-the-covid-19-crisis-mean-for-the-economies-of-british- cities-and-large-towns/ CIT0024
ANNEX I – Background to UK Aviation Industry
The aviation sector is a major contributor to the UK economy supporting 4.5% of the UK’s GDP by inputs to the air transport sector and foreign tourists arriving by air4.
It directly contributes to and supports some 1.6 million jobs across our nations and regions – including in the aerospace & tourism industry5.
Alongside this, inbound tourism in the UK contributes over £20 billion per annum6 and the UK aerospace industry contributes a further £20 billion.
40% of the UK’s trade by value is transported by air and AUK’s members transport 1 million tonnes of air cargo annually.
ANNEX II – Examples of International State Support for Aviation
Sweden – Swedish airlines are offered credit guarantees worth a maximum of £415 million. In partnership with Denmark, state-backed credit guarantees worth £243 million have also been provided for the national carrier Scandinavian Airlines.
France – Offer of €700 million in tax aid to the airline sector as well as a deferral of aviation taxes due between March & Dec 200 to Jan 2021. In partnership with the Netherlands, France has also offered Air France–KLM a €10 billion deal of support in the form of Government & bank loans.
Finland – €600 million state guarantee to assist the national carrier, Finnair.
Australia – AUS$715 million relief package dedicated to Australian aviation industry, involving the refunding and ongoing waiving of government charges including aviation fuel excise, air services charges on domestic airline operations. Upfront AU$159 million to Australian airlines for reimbursement of charges paid by domestic airlines since 1 Feb 2020.
USA – Airlines have been granted access to $58 billion, split evenly between loans and payroll grants. This includes dedicated packages for U.S. passenger airlines and U.S. cargo carriers.
4 https://www.iata.org/en/iata-repository/publications/economic-reports/united-kingdom--value-of-aviation/ 5 https://www.iata.org/en/iata-repository/publications/economic-reports/united-kingdom--value-of-aviation/ 6 https://www.tourismalliance.com/downloads/TA_408_435.pdf