Link airline coronavirus rescue package to climate targets, campaigners urge
Campaigning groups have called for any Government bailout of airline companies due to the impact of the coronavirus to include conditional links for worker rights, fair taxing systems and transparent action plans on climate change.
The aviation sector has been stung by the Covid-19 outbreak, with flights cancelled and many operating within the sector calling for economic support packages to assist them during what is anticipated to be a prolonged period of disruption.
The aviation sector is currently in discussions with the UK’s transport secretary Grant Shapps to propose a rescue package. The Financial Times is reporting that billions of pounds of taxpayer money would be used to buy equity stakes in UK airlines like British Airways; these shares would then be sold back to private investors at a later date.
While discussions on the bailout continue, two UK think tanks, IPPR and Common Wealth, have called for any deal to consist of strong conditions for workers’ rights and decarbonisation aligned to the Paris Agreement.
The campaigners are calling for the bailout to include an agreement from the sector that carbon reduction targets in line with the Paris Agreement are adopted by companies, and that clear and transparent plans are shared to showcase how the targets will be met.
Already, key members of the UK aviation industry, including Boeing, Virgin Atlantic and London City Airport are among a coalition that has pledged to achieve net-zero carbon emissions in the sector by 2050, to assist with the UK's overall net-zero strategy.
A roadmap to accompany the launch suggests the sector believes it can accommodate a 70% increase in passengers by 2050, while reducing carbon emissions from more than 30 million tonnes a year to net-zero. New aircraft and engine technology and smarter flight operations have been heralded as some of the solutions to support the transition.
It has been suggested that if the UK is to meet its 2050 net-zero target, Ministers must develop sector-specific strategies with time-bound, numerical targets for decarbonising the international aviation and shipping (IAS), which sit outside of the UK’s national net-zero target.
Alongside enshrined carbon targets, the campaigners want the Government to ensure that worker rights regarding wages and conditions and that the sector pays its fair share in taxes are embedded into the rescue plan.
IPPR’s associate director for climate Luke Murphy said: “Following this period of unprecedented economic intervention, we must not just slip back into business as usual. It is vital that decisions taken today support good jobs and a more sustainable economy, rather than executives on big pay packages.
“If the government is going to bail out the airlines, that must mean taking a long-term equity stake and conditions to keep workers employed, a crackdown on runaway executive pay and dividend payouts, and an overwhelming focus on decarbonisation. It must also mean firms must pay their fair share of tax.”
Virgin Atlantic’s bosses have come under fire for calling for £7.5bn in state aid to be made available to keep the industry afloat. Others within the sector appear more pragmatic, however, with IAG’s boss Willie Walsh claiming that the airline does not require state aid.
Analysis from Common Wealth suggests that the calls for state aid are being made despite airlines paying out multi-million-pounds in dividends to key stakeholders.
EasyJet has appealed for taxpayer support during the Covid-19 disruption, yet looks set to pay its founder £60m. Common Wealth found that EasyJet and British Airways have paid out dividends in excess of £2.6bn since 2014, with 50% of EasyJet’s pre-tax income allocated to dividends, on average, between 2015 and 2019.
The holding companies owning Heathrow, Gatwick and Manchester airports have also paid out multi-billion-pound sums in dividends, of which £3.3bn was paid by Heathrow Airport Holdings alone. Common Wealth claims that dividend payments by some companies were regularly in excess of 100% of company income.
The campaign group also notes that some companies in the sector are paying very low tax rates, with Wizz Air maintaining an effective tax rate average – the average rate at which corporate profits are taxed - of 3.5% between 2015-2019. In comparison, the FTSE100 average 23% as a whole in 2018.
Common Wealth’s director Mathew Lawrence said: “Extraordinary and difficult times are already producing extraordinary measures. With the Chancellor now considering injecting cash into the airline industry in return for shares, it is vital that public support for the sector comes with conditions attached that work for all of us.
“A bailout should build up a permanent public ownership stake, ensure job security, tackle runaway CEO pay and preferential shareholder treatment, and critically, drive a step-change in the sector's contribution to fighting climate change. The crisis demands immediate action to ensure economic security for all. But in doing so, we can take collective steps to build a fairer future economy, one that is just and sustainable by design.”
The impacts of the coronavirus are being felt on the sector globally. The collapse in global travel has jeopardised the jobs of 750,000 people employed by US airlines, with the three largest airlines in the US, American, Delta, and United, are now asking employees to volunteer for unpaid leave.