UK government draws up plans to buy…

UK government draws up plans to buy airline shares, that would eventually be sold back to private investors, to keep them afloat during Covid-19
2020-03-21 09:47:00
The FT has reported that the UK government is preparing plans to buy equity stakes in airlines and other companies hardest hit by the coronavirus crisis, after being warned that the economic packages it has announced so far will not be enough to save them. This is still in discussion. The plans would see the UK taxpayer inject billions of pounds into companies including British Airways in exchange for shares that would eventually be sold back to private investors. The airlines, unlike companies selling essential items, currently have almost zero customers – taking holidays and leisure breaks is no longer desirable, or indeed, permitted.  So the airlines and airport will have almost no income. The government plan for the airlines is “an infusion of capital in exchange for equity.”  That is safer for the government than a loan, that may never be repaid, even when airlines get back to operating nearly normally.  Many airlines already have huge debts. They cannot borrow more commercially. Some airlines wanted state loans and tax relief, but that might not be enough during a sustained shutdown in the global aviation industry. The US might also take equity stakes in their domestic airlines. .Tweet UK government draws up plans to buy into airlines Taxpayer injection for British Airways and other companies in return for shares A UK official confirmed that talks were taking place which could see the state end up with equity stakes in British airlines  By David Crow in New York and Jim Pickard in London 21.3.2020 The UK government is drawing up plans to buy equity stakes in airlines and other companies hardest hit by the coronavirus crisis after being warned that the economic packages it has announced so far will not be enough to save them. The plans would see the UK taxpayer inject billions of pounds into companies including British Airways in exchange for shares that would eventually be sold back to private investors, according to three people briefed on the proposals. Two of the people said the government was contemplating the move after being warned by bankers that the support it has already unveiled — including £330bn of loan guarantees — would not be enough to stave off the collapse of companies that had seen their revenues all but evaporate. “They are coming up with a Tarp-like programme for certain industries like the airlines,” said one of the people, referencing the US troubled asset relief programme that was rolled out during the financial crisis to support American banks. “There are certain industries where there will need to be an infusion of capital in exchange for equity,” they said. “The challenge with a loan is if you make a loan to a company with no revenues, then accounting will say it’s impaired.” They added: “For those companies that are really virtually shut down because of this virus a loan in many ways is not going to work.” The person said that, in addition to airlines, “at some point the government will need to think about all the industries and businesses that might be severely impaired”. “The airlines are obvious, but there will be others,” they said. A second person briefed on the plans said that some companies

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