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COVID-19: UK government should remain cautious on airline bailouts

Premium Analysis

The UK's seat capacity, for a country where international markets are more important than for Europe overall, is falling faster than in the rest of Europe. It has lost its European leadership to Russia.

The lack of surface transport (beyond maritime) even for short haul international travel could be a significant threat if air links remained curtailed for an extended period, or if UK airline bankruptcies hindered the resumption of international operations in the recovery.

The UK government is under pressure to help its airlines, whose capacity cuts are particularly severe, but the case varies by airline and should only be a last resort.

EasyJet has shown the value of self-help. British Airways has not sought government help. Jet2.com, part of Dart Group, has good liquidity. TUI Airways is part of the German TUI Group. Virgin Atlantic is important to UK long haul, but its major shareholder's residency on a private Caribbean island and non-domicility for UK tax may count against it, along with its powerful US partner. PSO networks could be widened to benefit regional airlines.

The UK government should remain cautious. Post-virus, the UK will again be an attractive aviation market – whether for the UK's or foreign airlines.

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