Ministers have flown in a leading accountancy firm to advise them on rescue requests from airlines and airport-owners that could cost taxpayers billions of pounds.
Sky News has learnt that EY was appointed at the weekend by the Department for Transport (DfT) as talks with carriers including Virgin Atlantic Airways and LoganAir, the regional airline, enter a critical phase.
Britain’s aviation industry has warned that it is running out of time to secure funding that would keep some of its most prominent players aloft as the coronavirus outbreak creates the biggest crisis in its history.
Sources said on Tuesday that EY had been hired to conduct due diligence on the finances and rescue funding requests of troubled airlines and airport operators, which also face ruin as a result of the pandemic.
Rothschild, the investment bank, is also working with the government on its aviation sector rescue plans.
Last week, Rishi Sunak, the chancellor, appeared to reject pleas for a sector-wide bailout, indicating that state aid would be available “only as a last resort” and only once the support of broader government schemes and companies’ existing shareholders had been pursued.
Virgin Atlantic is seeking several hundred million pounds of government funding in the form of credit facilities and guarantees against the payments being held back by credit card companies.
EasyJet is also regarded as a likely candidate to require taxpayer’s support if the effective shutdown of the aviation industry lasts for longer than three months.
On Monday, easyJet grounded its entire fleet and said it would furlough thousands of staff.
EY, which has been acting as administrator to Flybe, the regional airline which collapsed into administration last month, declined to comment.
A spokesman for the DfT said: “The aviation sector is important to the UK economy, and firms can draw upon the unprecedented package of measures announced by the chancellor, including schemes to raise capital, flexibilities with tax bills, and financial support for employees.
“We are continuing to work closely with the sector and are willing to consider the situation of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors.”
Tim Alderslade, the chief executive of lobbying group Airlines UK, described the situation facing airlines as “grave” and said the government was “not doing enough on some of the cross-industry measures they could be putting in place to prop up the sector in the here and now, and to stimulate demand once we enter the recovery stage”.
“At the very top of the list is allowing airlines to issue vouchers instead of refunds in the event of cancellations, like other EU countries are now doing, which would hugely help with liquidity and support carriers through the coming months,” Mr Alderslade said.
Airlines also want ministers to underwrite hundreds of millions of pounds in regulatory and air traffic control charges as they seek to navigate through the escalating coronavirus crisis.