Government should have allowed airlines to collapse, according to new report

The government should have allowed airlines to collapse during the Covid-19 crisis to improve the long-term performance of the travel sector, according to a new report published today.

The wave of taxpayer money drilled into airlines to ensure they survived the sharp drop off in passenger volumes has made the sector more imbalanced, the Institute of Economics Affairs (IEA) said today.

Use of public transport is expected to be much lower due to increased home working and shifts in consumer behaviour engineered by the pandemic.

As a result, subsidies given to rail operators and airlines are now “difficult to justify,” Dr Richard Wellings, deputy research director at the IEA, said.

Customers are unlikely to swallow fare rises from rail companies seeking to plug funding shortfalls.

“The case for government spending on long-term infrastructure projects, such as HS2, has weakened further” amid a sustained drop off in ridership volumes, the IEA said.

“The pandemic has accelerated the shift towards virtual meetings and working from home,” Wellings said.

“This is having a devastating impact on public transport and the rail industry in particular, which now faces a long-term financial crisis,” he added.

Simplifying the structure of the rail industry could help reduce costs.