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Virgin Atlantic to ask for state aid to avoid bankruptcy

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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’.

Virgin Atlantic to ask for state aid

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.

How to earn Virgin Points from UK credit cards

How to earn Virgin Points from UK credit cards (April 2024)

As a reminder, there are various ways of earning Virgin Points from UK credit cards.  Many cards also have generous sign-up bonuses.

You can choose from two official Virgin Atlantic credit cards (apply here, the Reward+ card has a bonus of 15,000 Virgin Points):

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Small business owners should consider the two American Express Business cards. Points convert at 1:1 into Virgin Points.

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Click here to read our detailed summary of all UK credit cards which earn Virgin Points. 

(Want to earn more Virgin Points?  Click here to see our recent articles on Virgin Atlantic and Flying Club and click here for our home page with the latest news on earning and spending other airline and hotel points.)

Category

Virgin Atlantic and Flying Club

Comments (295)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • JamesR says:
    27 Mar27 March 18:25

    Virgin rebooked me with BA. Im assuming if virgin tank that flight is still secure with BA?
    Theres no weird clauses between airlines or something?

  • Colin MacKinnon says:
    27 Mar27 March 18:29

    I’m out .

    If Virgin stays in business, not sure what route I would use in near future (was in South Africa this year and USA fees etc are too high) So not much use for their miles.

    If UK government don’t play ball, then I’ll lose my miles – unless Virgin get them over to Hilton in time.

    So HH for me is a no risk option.

  • Peter Williamson says:
    27 Mar27 March 18:35

    Why would we bail out and airline that is 49% owned by a non-british shareholder?

    • Shoestring says:
      27 Mar27 March 18:39

      self interest

      ie UK benefits from various things:
      – competition vs BA and others
      – connectivity
      – old Beardy good chap, shouldn’t end up a pauper

      • Peter Williamson says:
        27 Mar27 March 18:44

        I take your points, but where they leave gaps in the market – other operators will pick up.

        • Shoestring says:
          27 Mar27 March 18:49

          BA/ Oneworld would hike prices hugely on key routes UK-USA

          could be 2-3 years like that before new competition stepped up

        • jack says:
          27 Mar27 March 18:53

          The loss of BMI was very clearly bad for consumers… Losing another British airline which competes with BA as a brand and on many routes spells disaster for passengers.

      • TGLoyalty says:
        27 Mar27 March 19:28

        Employment of mostly the British public and all the jobs that support the airlines operations – catering, logistics etc

        It’s not just about competition.

  • jack says:
    27 Mar27 March 18:47

    As it is BA are consistently poor and mediocre. Virgin are generally not, and so a welcome alternative on routes where they compete. Losing Virgin would be a terrible shame – BA would have even less of a reason to give a toss about it customers. Fair enough, you don’t like Richard Branson and you’re a British Airways customer but Virgin going would be crap for BA passengers too. Maybe BA would devalue Avios? Scrap the Amex 2 for 1? As well as obviously hike prices and cut even more corners on service because well BA know full well they’d be able to get away with it.

  • Mikeact says:
    27 Mar27 March 18:50

    For Sale. 1654 VirginMiles.
    Never been a fan.

  • Gumshoe says:
    27 Mar27 March 18:55

    Any lessening of competition on TATL routes would be very bad news for passengers. BA/AA could more or less charge what they want, particularly in the UK POS market where DL and UA are less relevant.

    • jack says:
      27 Mar27 March 19:01

      Virgin also provide competition to South Africa, important for some and with SAA and their issues BA ending up with a monopoly would really suck.

    • Erico1875 says:
      27 Mar27 March 19:15

      I noticed this on India routes. Kingfisher gone, Jet gone, Virgin dropping Mumbai , BA prices were high.
      If only Ryanair did longhaul

  • Jason Robinson says:
    27 Mar27 March 18:59

    Can anyone get through to Flying Club. I get welcome to Virgin Atlantic Flying club blah blah blad an then beep beep beep and call cut off.

    • Shoestring says:
      27 Mar27 March 19:01

      SMS works to transfer miles to Hilton

      • Denis says:
        27 Mar27 March 20:34

        Do you send all details in one SMS or there are multiple texts? Thank you.

        • Shoestring says:
          27 Mar27 March 20:41

          send everything in text 1

          they come back to you: are you certain you want us to transfer xxx to Hilton

          you say yes

          they do it

          • Walenby says:
            27 Mar27 March 20:49

            Anywhere else to transfer them to even if it’s a bad exchange rate?

          • Shoestring says:
            27 Mar27 March 20:52

            Virgin Wines should come onstream in a few fays

          • Denis says:
            27 Mar27 March 21:18

            Thanks a lot! Will do it tomo.

          • Sprout7 says:
            28 Mar28 March 08:55

            Sorry to be a pain but I just want to double check the level of detail you include in the text..
            Am I right in assuming I put:
            My name
            My flying club number
            My Hilton membership number
            Quantity to be transferred
            Do I need to put any passwords? (presumably not..)

            Many thanks

      • Crafty says:
        27 Mar27 March 21:40

        How / where? Apologies if I’ve missed.

      • Colin MacKinnon says:
        27 Mar27 March 21:41

        Actually, the miles are owned by a separate company.

        It would be a bad day if a grant/loan to a foreign owned company was not to be disclosed by our. Government.

    • Benilyn says:
      27 Mar27 March 19:05

      Call US number via Skype / Google hangous, goes thru immediately. Just transferred points to Hilton…

    • Born2sKydive says:
      27 Mar27 March 21:05

      Yep me to just now. It’s like watching a gallows be made the night before an execution 😥

  • will says:
    27 Mar27 March 19:04

    Aside from staff and leases what costs do the airlines have?

    • Mr(s) Entitled says:
      27 Mar27 March 19:08

      They need to pay the tax man (as we all do, but HMRC are often the ones to turn out the lights).

      • Shoestring says:
        27 Mar27 March 19:12

        indeed they are: if you think about it, HMRC are protecting the UK population as a whole, state aid is forbidden in most cases anyway

        if you ever felt ouch when HMRC snuffed out a football team, try to see the bigger picture: somebody was leaching off the rest of us and running an unsustainable business that relied on effectively stealing money/ deferring payments rightfully owed which couldn’t be paid, hope vs reality

        • jack says:
          27 Mar27 March 19:14

          Alitalia, Finnair, Lufthansa and more are taking state aid though. BA will happily take state aid too, they just want to put Virgin out of business too.

          • Shoestring says:
            27 Mar27 March 19:20

            @jack very true

            UK has always played it too straight

            think about the ways Germany & France protect their state industries & keep them in national hands – and the huge taxes those enterprises pay into Germany/ France version HMRC coffers

          • Shoestring says:
            27 Mar27 March 19:25

            here’s an idea: so post-Brexit UK should limit foreign ownership of essential industries to 49%

            who’d argue with that? it’s already an EU rule for certain key industries

          • jack says:
            27 Mar27 March 20:02

            @shoestring, what’s an essential industry though? All airlines or just some? I don’t see any harm in Wizz Air/Ryanair – not a fan of easyJet tbh if I’m going budget I may as well go really cheap.

          • Shoestring says:
            27 Mar27 March 20:04

            Ryanair would be tricky as it’s not UK but Irish! 🙂

            I take your point, but as long as the rules are clear and understood by all, no problemo

    • Mr(s) Entitled says:
      27 Mar27 March 19:12

      They might also be locked into a bad fuel deal given a) the price and b) that I doubt they were ever expecting near zero demand.

      • will says:
        27 Mar27 March 23:35

        Yes I suspect that’s the biggest issue that they can’t negotiate out of right now.

        The lease companies should be open for restructuring the leases, talks with their creditors etc on the basis that the hours are not being put on the airframes/engines and I suspect the airports would be able to negotiate on whatever fees are payable for parked up aircraft.

        Fuel hedges must be the real killer.

    • Mikeact says:
      27 Mar27 March 19:31

      Petrol?

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