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British Government So Enraged with Airlines Still Paying Out Dividends They May Not Offer Bailouts

British Government So Enraged with Airlines Still Paying Out Dividends They May Not Offer Bailouts

a close up of an airplane

The British government is said to be unhappy with certain big players in the UK aviation industry still paying out shareholder dividends that it may now not offer a comprehensive bailout to keep the sector afloat amidst the Covid-19 pandemic. After initially promising a bespoke rescue package for airlines and airports in the country, the government has now backtracked saying companies must exhaust all commercial opportunities first.

The decision is said to have stemmed from an announcement by easyJet that it would continue to pay out a £174 million dividend payout to shareholders, including £61 million to billionaire founder Sir Stelios Haji-Ioannou. easyJet said it was legally obliged to pay out the dividends, despite asking for government money to keep the airline afloat.

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Photo Credit: Virgin Atlantic

The Chancellor, Rishi Sunak wrote to airlines on Friday saying that bailouts would now only be offered as “a last resort” and only once “all commercial avenues have been fully explored, including raising further capital from existing investors”. The letter came as a blow to some businesses in the sector who had been hoping for a bailout within days.

Virgin Atlantic has written to the British government begging for a £7.5 billion package to support airlines and airports across the UK. The president of the International Air Transport Association (IATA) warned yesterday that many airlines, especially in Europe, could go bust by May.

Yesterday, Alexandre de Juniac said new estimates suggested global airlines could lose as much as $252 billion because of the Coronavirus crisis.

“Airlines are desperately trying to survive in the most difficult times imaginable. We have the people and the experience to see this through. But, to be perfectly frank, we don’t have the money,” de Juniac commented

“… we need governments to bridge us to the point where we can start to recover,” he continued.

easyJet has come under scrutiny after placing staffers on unpaid leave and trying to push through wide-sweeping changes to terms and conditions because of the outbreak. Reacting to the change in heart from Sunak, a spokesperson for easyJet said the airline was studying the letter, commenting:

“Our immediate focus is on liquidity and protecting jobs and we are working with the government to make best use of these measures.”

Only last week, sources claimed the British government was studying the feasibility of taking equity stakes in struggling airlines in order to stave off collapse. That may still happen in certain cases but the chance of an industry-wide bailout is now looking far more remote.

The owner of British Airways said it had a strong cash position and had initially distanced itself from any bailout package. However, IAG is now said to be in talks for a potential bailout after the true scale of the crisis became evident.

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