ESYJY Easy Jet PLC (QX)

By Benjamin Katz and Stephen Fidler 

LONDON -- The U.K. is balking at a full-scale bailout of its airlines, telling British carriers to seek out private-sector remedies first and making clear the uneven hurdles the global aviation industry faces in finding ways to survive the fallout of the new coronavirus outbreak.

Airlines around the world have furloughed workers, cut pay and canceled flights -- some grounding nearly all of their flying capacity -- to weather a collapse in demand by travelers and a patchwork of travel bans by governments aimed at containing the spreading virus. The International Air Transport Association said earlier Tuesday it now expects airlines to lose some $252 billion in revenue this year -- more than double a worst-case estimate of $113 billion given earlier this month. Air traffic is expected to drop 38% for the year, the trade body said. It doesn't expect a fast recovery.

Amid that crisis, governments are approaching assistance for the industry differently, making the contours of a path for a global recovery more difficult to see. Norway, Denmark and Sweden, for instance, have promised cash to national and regional carriers.

The French and Dutch governments have said they are prepared to do what is necessary to secure the survival of Air France-KLM. Germany's Deutsche Lufthansa AG is in talks with Germany and the governments of other countries where its network airlines are based for similar financial support.

The U.S. Congress has been considering various proposals for how to aid airlines as well as other industries, part of a massive stimulus package that could be finalized Tuesday. Airlines have asked for about $58 billion in grants and loans, though administration officials initially favored granting credit over cash, The Wall Street Journal has reported.

China, meanwhile, has subsidized some carriers to keep them providing some basic services.

The U.K., home to carriers like British Airways and Virgin Atlantic, is so far going in a different direction. In a letter to airlines and airports on Tuesday, Rishi Sunak, the country's Chancellor of the Exchequer, akin to the Treasury secretary in the U.S., said the government is prepared to enter into negotiations with individual companies but only as "a last resort."

Airlines are being encouraged to first pursue all other commercial avenues, including raising capital from existing investors or renegotiating payment terms with financial stakeholders, according to the letter.

In the U.K, trade bodies have been calling for an injection of cash. Virgin Atlantic, part owned by Delta Air Lines Inc., had previously called for the government to provide as much as 7.5 billion pounds ($8.8 billion) for the sector.

In his letter, Mr. Sunak outlined measures he has previously announced for the wider economy, including offering payroll relief, and allowing companies with investment-grade ratings or the equivalent to access working capital via a Bank of England loan facility. The government is currently looking at options for companies in the aviation sector that can't access such financing.

The chancellor said any individual package would need to be structured to protect taxpayers' interests. A U.K. government official said economic relief measures outlined by Mr. Sunak last week would apply to airlines, too, including deferred taxes.

"We are reviewing the letter from the Chancellor alongside the measures announced last week for businesses," low-cost carrier easyJet PLC said in a statement. "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 for International Consolidated Airlines Group SA, the owner of British Airways, said the company had received the letter, but declined to comment further. A Virgin Atlantic spokesman declined to comment.

Write to Benjamin Katz at ben.katz@wsj.com and Stephen Fidler at stephen.fidler@wsj.com

(END) Dow Jones Newswires

March 24, 2020 15:16 ET (19:16 GMT)

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