An unlevel playing field

Within the industry, there have been allegations that bailouts recipients have been given an unfair competitive advantage. This is particularly true in Europe, where the support doled out by national governments has thus far totalled €38 billion ($45bln), with another €4 billion still under discussion. According to Transport & Environment’s bailout tracker, the largest single recipients of aid have been Air France (€8 billion) and Lufthansa (€6.8 billion).

RyanAir, which itself accepted a £600 million ($820 million) loan from the Bank of England as part of the UK’s Covid Corporate Financing Facility (CCFF), has been particularly critical of the government support received by its competitors. The low-cost airline has filed more than two dozen legal challenges arguing that the bailouts are in breach of EU state aid rules. It has had mixed results in the courts thus far, winning cases over aid given to KLM and TAP, but losing in cases involving SAS and Finnair. Several legal challenges are still pending.

“If Europe is to emerge from this crisis with a functioning single market, airlines must be allowed to compete on a level playing field,” an airline statement to one legal defeat read. “Subsidies [...] encourage inefficiency and will harm consumers for decades to come.”

EasyJet CEO Johan Lundgren has been similarly critical, saying that the “unevenly distributed” state aid packages “risk distorting the market”. In an August 2021 interview with Simple Flying, Lundgren expressed doubts that airlines would be able to repay government loans.

“There’s no historical evidence that the financial performance of these airlines … can ever repay this,” he said. “Will it be the case that one sunny day, when we look the other way, some of these debts will be written off because the governments are also owners of these airlines?”

Like RyanAir, easyJet also secured a £600 million ($820 million) loan as part of the CCFF scheme.

A missed opportunity for the climate

Governments have also been criticised for not insisting that any taxpayer-funded assistance be dependent on airlines making certain sustainability commitments. While some aid packages – like those given to Air France, KLM and Austrian Airlines – did include some climate conditions, most did not. There were no so-called “green strings” attached to the US or Asian bailouts, and even the aforementioned European exceptions were deemed “insufficient to meaningfully reduce emissions” in an analysis by Transport & Environment.

Environmental groups and other critics allege that failing to tie government assistance to significant emissions reductions was a missed opportunity.

For Naveo’s Richard Brown, some of the criticisms levelled at the bailouts don’t seem entirely fair.

“I see the criticism of aviation bailouts as being voiced by the same group of environmentalists who are determined to reduce aviation growth,” he said. “Aviation is trying to find a way to grow sustainably – through sustainable fuels, electric technology, hydrogen, etc. But will the environmental lobby pivot to allowing sustainable expansion rather than wanting to stop it and reduce it?”

The Satair Takeaway

As this month’s articles have attempted to demonstrate, there are many arguments for and against the aviation industry’s COVID-19 bailouts. Whenever there is so much taxpayer money involved, controversy and strong opinions are bound to follow.

But one thing that both sides seem to agree on is that without the bailouts, many airlines would not have made it through the crisis. Proponents and critics alike should also be able to agree that the government aid packages didn’t just save airlines. They were a lifeline for the entire aerospace industry.

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