Government urged to take equity stake in airlines to protect jobs

As the aviation awaits a government rescue package, easyJet’s decision to go ahead with a £174m dividend payout while calling for state aid during the coronavirus outbreak has attracted strong criticism. 

Two think-tanks, IPPR and Common Wealth, have called for any bailout to include strong conditions for workers and the public, with elements such as job security, action on climate change and a public ownership stake to be factored in.

Their specific demands are: 

• A permanent public stake to grow public wealth post-crisis
• Adoption of targets by the sector in line with the Paris Agreement, and clear, transparent plans to meet them
• Embedded worker rights and collective bargaining over wages and conditions
• The sector to pay its fair share in taxes
• No lay-offs, with firms taking full advantage of the Coronavirus Job Retention Scheme

EasyJet’s £174m dividend payout includes £60m for its founder, Stelios Haji-Ioannou, despite the company being among airlines calling for some sort of state support.

The think-tanks accuse many companies within the aviation sector of prioritising shareholders’ interests over long-term success and the financial wellbeing of staff.

Common Wealth’s research show that 50% of easyJet’s pre-tax income was allocated to dividends between 2015 and 2019 and that the holding companies owning Heathrow, Gatwick and Manchester airports regularly paid out more than 100% of the companies’ net income in dividend payments. Many firms were also paying very low tax rates, with Wizz Air, for example, maintaining a tax rate of just 3.5% over the past five years.

Mathew Lawrence, director of Common Wealth, said the coronavirus crisis demanded powerful action to ensure economic security but it should also look to the future, so the UK could “take collective steps to build a fairer future economy, one that is just and sustainable by design”. He added: “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.”

IPPR associate director for climate, Luke Murphy, said the UK must not slip back into business at usual and that all government support must support “good jobs and a more sustainable economy, rather than executives on big pay packages”. He said: “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.”

Easyjet has so far not indicated whether it had asked any of its investors to help the business.

According to The Times, the airline took legal advice on whether it could withdraw or postpone the dividend. Johan Lundgren, its chief executive, told BBC radio that the payment was “something that we are legally obliged to do”. But scores of other stock market-listed companies are withdrawing or reconsidering their annual payouts.

A spokesman for Easyjet said that the airline was not looking for a no conditions taxpayer–funded bailout. Mr Lundgren said: “We are looking for loans on a commercial basis. We are not asking for free money.”

But it is thought by many within the industry that loans are unlikely to stave off the collapse of the companies as their revenues have collapsed to such an extent. To this end, the government is thought to be looking to make an equity stake a key condition of state aid, which means it can set conditions such as protecting workers and pushing for decarbonisation targets to be met.

Individual airlines have called for different types of intervention: while Virgin Atlantic’s management team have called for £7.5bn in state aid to be made available for the industry, IAG boss Willie Walsh has been adamant that the airline does not need state cash.

Talks are continuing with transport secretary Grant Schapps. But for union Balpa, which represents many pilots and cabin staff, there are fears that intervention will come too late for many workers.

Balpa general secretary, Brian Strutton, said: “Airlines can’t survive with no revenue coming in and are already cutting wages and jobs.

“State investment in UK airlines, as other countries are doing, is essential as a matter of urgency before it’s too late.”

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