How Far Will The Governemnt Go?

April 21, 2010 - PRLog -- As a result of the recent Volcanic Ash Cloud covering most of northern Europe, the effect on the UK airline industry has been disastrous. The latest estimates are that in excess of 150,000 people stranded abroad. The cost of this is racking up daily due to accommodation and food costs as well as alternative travel arrangements, on top of the normal overheads the airlines are still responsible for. The European Union’s Passenger Bill of Rights puts the responsibility for the costs on the shoulders of the airline themselves.

This morning there has been a call from a number of airlines for Government intervention based on the scale of this disaster, based on the fact that this is an “uninsurable event”. This will be subject to the EU decision makers first of all, due to a ban on Government subsidies for airlines, but indications seem to be that there will be some form of intervention and assistance provided.

There is of course a precedent for this kind of Government intervention.
The Government announced the highly controversial bank bailout plan, which has now run to a cost of £850bn, and in 2009 Peter Mandelson announced a package of support totalling £2.3bn for the car industry.

The question I would raise would be where would you draw the line on this kind of intervention?
The airlines are losing money daily as a result of the flight ban, however what about the knock on effects? Hotels will be losing money from tourism with people unable to come to the UK. Transportation to and from airports has obviously dramatically dropped over the last 6 days, as would the income from the stores based at airports, and all of the staff employed by these industries. Would all of these be able to claim as well?

If this is the case, what of the mortgage brokerage industry? As a result of the credit crunch, which would be classified by many as an “uninsurable event”, many mortgage brokers were unable to continue, and the rising cost of FSA membership is putting further pressure on others. This is also not to mention the fact that the Government backing is now giving certain lenders competitive advantages in the market place, and the publicity they are getting with lending commitments for example is leading to a lot of customers going direct, putting more pressure on the broker industry. The continuing reform of the FSA, changes to reporting policies, and CCA regulation all of which is adding costs to the day to day running of a mortgage brokerage.

It would however raise an interesting question; in the event of the airline industry getting a bailout, having set these precedents over recent years, how far would the Government go?

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