The French government’s €15bn bailout of its aerospace has prompted calls for the UK government to do the same. But should it?
Few areas of industry have been untouched by the COVID-19 crisis, but none have had the rug pulled from beneath them quite as spectacularly as civil aerospace.
The immediate impact of a more or less worldwide shutdown in passenger flights, coupled with concerns over the longer-term impact of the virus on air travel, has had a devastating impact on a sector whose biggest problem until a few months ago was how it could continue along a seemingly irresistible growth curve whilst reducing its environmental impact.
Aerospace industries around the world have felt the impact, and the UK sector – the second largest in Europe after France – is no exception. Last month, Rolls-Royce plc announced plans to cut almost a fifth of its workforce (mainly from its civil aerospace business) 400 core jobs are at risk at Bombardier in Northern Ireland; and Airbus – which has furloughed around half of the staff at its wing factory in Broughton – is also reported to be considering mass redundancies.
Meanwhile, relations between the industry and the government are becomingly increasingly strained, with BA, easyJet and Ryanair joining forces to sue the government over its quarantine rules.
Against this backdrop, business leaders across industry are now calling on the UK government to follow France which has put in place a €15bn financial rescue package aimed at protecting jobs, driving investment in low-carbon technologies and modernising the supply chain.
Amongst those calling for action are industry body ADS Group which this week set out five priority areas for support for the industry including a pragmatic plan to resume flights, rapid expansion of government support for low carbon aerospace technology and pulling forward public procurement to support jobs and cashflow.
“Around the world, our international competitors are acting to support airlines, manufacturers and their supply chains,” said the group’s CEO Paul Everitt. “Tens of thousands of UK jobs are now at risk and the UK government must urgently put in place the measures we need to make sure our industry is not left behind.”
In our April 16-23 poll we asked whether readers think a government rescue package for the aerospace industry is warranted, and if so, what it should look like. Should government protect jobs and expertise at all costs in the hope that normality will return sooner rather than later? Should any assistance be carefully targeted at technologies and processes that will potentially give the UK a technological edge? Or should the industry be left to find its own way through the crisis, even if that means tens of thousands of redundancies and a sector vastly reduced in size?
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Yes, but only with a number of contractually binding preconditions, transparently and publicly agreed to by all parties:
> Bailout only to be used to protect jobs, not to protect profits;
> Bailouts conditional on a published commitment and plan to reduce emissions ‘substantially’;
> No bailouts to any organisation that operates out of a tax haven;
> No bailouts to any organisation that is more than 50% foreign owned;
> All bailouts to be repaid, at an agreed rate, once an organisation goes into profit.
Of course, as a realist I realise that the Tories will actually squirt money at airlines with no strings attached and executives will get huge bonuses and jobs will still be lost…
If we can help out the banks in a time of crisis, then we should certainly help any wealth creating engineering sectors.
With the following provisos:
They are based and pay their taxes in the UK
The govt takes a share of the company.
I work for Collins Aerospace Wolverhampton and if this bailout was possible it will still take months even years to rectify the mess Covid 19 have brought to the industry.
I think if we are going put money into the sector they should have to modernise their procurement
and be forced to bring on board and develop new suppliers to the industry.
The worldwide aerospace industry is a massive business and the UK was still a major player in it. We are at great risk of losing another industry for short term benefit ti the economy; as we have lost textiles, steel and power plant where a generation ago the UK was a leader. What is worrying to me is that we are no replacing these with investments that generate future wealth, but moving money around in the low-paid service sector.
The banks were bailed out in 2008, but they have little material cost so it was purely protection of currency. Rolls Royce gas turbines look very close to disaster and would be easy to help by investing in the back-up generation for the non-reliable section that is desperately needed, but insisting on protecting UK jobs, rather than (as Drax is proposing) buying a German gas turbine and exporting skilled jobs to Germany.
Given that our parliament and its advisors are almost all arts graduates, I do not hold out a lot of hope for the aerospace industry.
It seems nearly everyone needs a very basic lesson in economics.
Before the Government can give money to one group, it has to first take it away from another group or borrow it. And borrowing more and more money is not sustainable and makes things worse. The economy is in big trouble. The government has to make a decision on whether it’s better to bail out industries (with no guarantee that doing so will protect jobs) or pay unemployment to people when they are made unemployed. Not an easy decision but the money doesn’t magically appear from nowhere (without the economic slight-of-hand inflation and theft-from-savers that is “quantative easing”). Perhaps the airline industry should be expected to prop itself up after many good years.
The Government should nationalise them so that the taxpayer gets value for money. Then there should be a discounted option for shareholders to buy back at some prescribed formula at a later date. Nobody loses and the future is protected. Most of the prospective customers of the aerospace industry are governments or quasi-governmental.
Seeing penny pinching, aggressive,self indulgent companies who are content to cream off the largest profits possible for the poorest standard of service being supported by the tax payer is totally abhorrent.
They need to up their game dramatically if they now expect the general public to support them.
Purposely not named specific guilty companies but we can all guess the main offenders.
This is a Conservative Government that decried the bailout of the banks and refuses to nationalise anything. A Government that believes in a free market, despite that free market not working and a Government that has everyone tightening their belts for the past 10 years and is about to tell the country to tighten them more, due to the cornovirus with their inability to run a business (UK). Fat chance we should give airlines a bailout, when we mere mortals must go further into debt to support them.
In 1971 Rolls-Royce was nationalised under the Heath government. It had hit a brick wall trying to build carbon fibre blades for the RB211 engine against stiff contractual conditions imposed by the US and Lockheed for the TriStar aeroplane, ISTR including having to undercut the competition by 15%. The car side was left as a private concern. Since then, RR has built itself into a world leader in triaxial engines, including civil and marine versions of the Trent series and initiated the real-time monitoring of engines in flight back to Derby.
All of this would have been lost if Heath hadn’t acted, although I suspect much of it was for military reasons in the depths of the Cold War. All the same, we should be helping industry of all types, taking an equitable interest in the companies when necessary.
During the financial crash of 2008, prompted by sub-prime mortgage selling and dodgy financial practices, we had to nationalise in full or in part 4 large banks. Yes., the tax payer has not recovered its investment yet but the alternative would have been a complete collapse in the UK and also the global financial network, which would have made the present pandemic seem like a picnic. Again this was the Brown government behaving correctly.
Whatever the problems of the corona virus, it is a pandemic which will be over one day, probably once a working vaccine has been developed, or at least held under control. The present government has been incompetent and careless in the extreme so I don’t expect too much but at a minimum it should act to protect industries that are not only high skill employers but also part of our rich heritage. This must include the aerospace industry which is much larger than many think. There is no option. Complaining about increasing debt is valid but the solution to that problem is to tax those individuals and companies that have been avoiding paying UK tax for decades, not wring our hands and be sorry for ourselves.
The reality is that the money will have to be paid, one way or another, and it is probably better for the economy to fund people in jobs (ie. bailout) so that they can work, pay taxes and spend their wages into other businesses.
With proper controls and conditions bailouts can work but unfortunately this government doesn’t have a good record of successfully implementing anything, so I’m not optimistic !
Yes, the money has to come from somewhere, so it would be good to ensure everyone is paying their taxes. It also might be good to assess priorities on other money sinks: HS2, Trident, F35, …
The French €15 billion ‘bailout’ consists of a number of support schemes in the € hundred-millions, €3 billion in loans directly from the French state and a further €4 billion in commercial bank loans backed by French government: https://www.ft.com/content/d5d30e5a-9319-4bb4-95e2-c75b16495738 Not sure how the balance (€5-6 billion?) is accounted for, smoke and mirrors I suspect and not quite as generous as it appears at face value. A similar UK scheme would be, in your words ‘delaying the inevitable’ I’m afraid. There are a lot of brand-new unsold aircraft across the world, no demand for them and neither grants nor loans to carry on making even more will change that reality
Whichever decision the government makes it is not them that will pay, but the British public. If they have to spend my money then I would prefer it to be spent on supporting and enhancing manufacturing industries that would add value and create wealth for many years to come. I totally agree that priority should be given to those companies that are British owned or those that pay their fair share of taxes and re-invest profit in the country. As for supporting airlines, are any British owned and paying their taxes as they should.
I also agree with ekij about the waste of money on HS2, if the government were serious about “The Northern Powerhouse” they would start the project in the north by building a high speed link west to east and link up with London later.
Not so much a bail out as orders. Fund Tempest so that it is available for the RAF to replace Typhoon circa 2035-40. Buy Yeovil built helicopters for the Army/Navy/Airforce & Search & Rescue.
Brexit is a voluntary withdrawal from Airbus. Losing our part in the Airbus supply chain is not helpful. Perhaps we should abandon the Crash Out Brexit we seem to be heading for the sake of more than Aerospace. There are alternative variations.
Priority should be to develop aero technologies as otherwise throwing money at the old technologies just to keep jobs will give us the result of good ol ship industry of gone by years!!
From Greenpeace:
“Four major airlines have been handed a total of £1.8 billion in publicly funded loans, without any commitments to reduce emissions or even keep their workers on the payroll.
The airlines include: EasyJet – £600million, Wizz Air – £300million, British Airways – £300million and RyanAir – £600million.
Despite receiving hundreds of millions each, and putting thousands of employees on the furlough scheme, airlines are still lobbying the government for a sector-wide bailout.
Throughout the health crisis, airlines have been taking public money and still announcing sweeping redundancies. After putting 30,000 staff on the furlough scheme, British Airways borrowed an extra £300 million from the government. Then, last week the airline announced it would cut 12,000 jobs and change the employment terms for their remaining staff.”
Couldn’t have said this better. if it protects jobs and keps the working class afloat yes. If they can still make a profit and over bonus then use that first before the uk tax payer has to front the money.
So the premise here is that we need to have jobs. There are so many talented people in the aerospace industry that it is a waste of resources to simply bail out the large companies in the hope that things will return to normal. Over the next decade or so we will have to change our carbon use dramatically to avoid a complete environmental, financial and societal collapse. Why can’t the money be used to invest in people to create a new and sustainable infrastructure? There is so much scope for creating new, skilled, engineering employment that supports a vision of the future without carbon heavy industries that enrich a few, keep us busy and destroy the planet. A proper investment in a green ‘New Deal’ offers far more job security than bailing out the airlines until they collapse or our environment gets so unpredictable, that no one will be able to fly anyway. Real jobs for a regenerative future.
World wide the Aviation industry is suffering from cognitive dissonance over air travel. Governments on the one hand have been taken in by the mantra of cutting carbon emissions and usage and the need for sustainability, and on the other, are compelled to maintain or ideally expand economic growth. Aviation through both production of aircraft together with their use by passengers for business and leisure is a key part of that. Whatever side of that debate you are on this is the back drop.
If you are for expansion and see that the economic benefits both out weigh the potential environmental issues and contribute ultimately to cleaner and expanded aviation based mobility, then you must make the case for it strongly and confidently as a benefit. From an engineering perspective, who wants to work on a product to improve it and possibly expand its markets when your backers are sceptical at best about it? Supporters must first make the case for aviation based mobility and avoid the distractions of so called ‘green’ aviation – electric powered or not. There may be a time for these but not for a long while.
If you really think that aviation is fundamentally a bad thing, then be honest and open about it and defend your position to the public, both here and in developing countries who really need the benefits it brings. Have we forgotten that travel broadens the mind?
Agree with Another Steve & Aaron
Plus, the government should take a majority stake in any company it supported. I think the reason that BA has taken such a hammering from its owner is that they are hoping the government will jump in to save it at any cost.
The airline industry is dead in it’s present form. Cov 19 will not go away so we will all have to learn to live in our own little bubble both at home and when traveling. This means traveling in isolated pods in trains and planes. Clearly the cost of travel will be for the rich only, the rest are back to the stone age or as far as you can get in your electric car.g
Reply to DavidD 16th June: Hear hear! couldn’t have put it better myself.