Will the state take back control of aviation?

Het Financieele Dagblad

Practically all airlines find themselves in financial distress and are asking governments for state aid in an attempt to survive the coronacrisis. The sector was one of the first to be affected by the coronavirus outbreak and is likely to be affected the longest. KLM is knocking on the Dutch government's door for support in these times. They already receive a substantial subsidy on labour costs, but the company wants more.

Capital injections

Other countries are coming to the rescue as well. The U.S. government is talking about a 50 billion dollar support package for large companies such as American Airlines and Delta. Air France already has an agreement for a state guarantee of 4 billion euros on additional bank credit and Lufthansa has also asked the government for a capital injection. If the Dutch government makes a financial contribution now, it will have to do so for a longer period of time, says Floris de Haan, senior researcher in aeronautics at the Erasmus Centre for Urban, Port and Transport Economics at Erasmus School of Economics. If other companies are also supported, the margins will remain thin and it will take years before loans are repaid.

Possible solutions

According to de Haan, financial support from the government is a good idea if you believe that a national airline is necessary in order to be directly connected to other economic centres. An NS-model would be an option for the future, with the airline providing a service in exchange for a concession and compensation. Another solution would be nationalisation of the company, as happened in Italy with Alitalia. Such a public model is at odds with the private model chosen in the 1980s, says de Haan. Anyone who believes that consolidation of airlines is important and wants aviation to operate privately will therefore not be keen on state aid.

Researcher
Faculty
Erasmus School of Economics
More information

The entire article from Het Financieele Dagblad can be downloaded above, 7 April 2020 (in Dutch).