UK to buy stakes in airiness

London: Amid a worldwide drop in the number of people flying due to the coronavirus, the government of the United Kingdom is considering buying a stake in British Airways and other UK based airlines.
According to reports in the Financial Times, the UK government is drawing up contingency plans to buy equity stakes in the countries’ airlines and other businesses hardest hit by the coronavirus pandemic. This latest news comes after warnings that the economic packages that the government has announced so far to help UK businesses weather the storm will not be enough to save the airlines.
In its plan, the United Kingdom would see billions of pounds of taxpayer money being used to purchase airline shares, which will then later be sold back to private investors according to people familiar with the idea.
Of the people in the know, two of them told the FT that the government was contemplating the move after being warned by senior bankers that the support for businesses that it had unveiled last week would not be enough to save the airline industry.

So far, Prime Minister Boris Johnson’s Chancellor of the Exchequer, Rishi Sunak, has promised UK businesses £330 billion worth of loan guarantees and promised to pay 80% of employee’s salaries up to the amount of £2,500 per month. This alone would not be enough to save the airline industry after they have been forced to ground flights, while at the same time seeing virtually all revenue dry up.
“They are coming up with a Tarp-like program for certain industries like the airlines,” said one of the people, referencing the US troubled asset relief program that the American government came up with when it bailed out the banks following the 2008 financial crisis.
“There are certain industries where there will need to be an infusion of capital in exchange for equity…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.”