The Financial Times has reported this afternoon that Virgin Atlantic is about to submit an official request for state aid to avoid bankruptcy.
The article is behind a paywall but you can see it by clicking here to trigger the correct Google search and then clicking the top result.
As we covered on Monday, the Government has ruled out offering a sector-wide package of support for the aviation industry. The letter from the Chancellor – there is a PDF of the letter in our article – said that the Government would only be willing to open discussions as a ‘last resort’.
The FT claims that easyJet, Loganair, Eastern and Norwegian are considering a similar request. Loganair and Eastern are considered more likely to be successful given their role in supporting the UK regions – although this logic didn’t help Flybe when it requested support. I imagine that Loganair would get support from the Scottish Parliament if it came to the crunch.
(The strategy of trying to end up as ‘last man standing’ before asking for support, because you can’t let the last man collapse, does work as you can see.)
Part of the problem is believed to be the diverse ownership base of UK airlines. British Airways is part of a Spanish company whose dominant shareholder is the state of Qatar. Virgin Atlantic is 49% owned by a US airline. Wizz, Norwegian and Ryanair’s UK operations are subsidiaries of Hungarian, Norwegian and Irish airlines. Even easyJet, which is UK headquartered and listed, is 36% controlled by Sir Stelios Haji-Ioannou who is based in Monaco.
The article also contains some interesting cash burn figures:
Ryanair has enough cash to not fly for 18 months, and could do a sale and leaseback of its aircraft which would support it for an additional 30+ months
easyJet has enough cash to last for 10 months and could do a sale and leaseback on 70% of its fleet to gain a further substantial extension (easyJet’s actions in recent weeks do not necessarily fit with this claim – it is not acting like an airline with enough cash in the bank to weather a 10 month shutdown)
Virgin Atlantic had cash of £489m at the end of 2018 but net debt stood at £1.5bn. It only owned 25% of its fleet outright, giving it minimal flexibility to raise funds via a sale and leaseback
You can find out more in the full Financial Times article using the link in the second paragraph.