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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.


HFP Virgin Atlantic Rewards credit card

How to earn Virgin Points from UK credit cards (September 2021)

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, one has a bonus of 30,000 Points until 15th October 2021):

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Virgin Atlantic Reward Mastercard

The UK’s most generous free Visa or Mastercard at 0.75 points / £1 Read our full review

Virgin Rewards Plus credit card

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You can also earn Virgin Points from various American Express cards – and these have sign-up bonuses too.

American Express Preferred Rewards Gold is FREE for a year and comes with 30,000 Membership Rewards points, which convert into 30,000 Virgin Points:

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American Express Preferred Rewards Gold

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Until 2nd November 2021, there is a special offer on The Platinum Card from American Express.

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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.)

Comments (296)

  • Keiths says:

    Maybe contentious, but if the airlines have chosen structures that have minimized their obligations to HMRC then why should the government bail them out?

    I have skin in the game here with about 0.75m miles between BA and VS, but at the moment that is not a priority.

    My ire is more directed at Branson. I think his airline is great, and have some U/C booked for Sept, but from his tax exile of Neckar I am not convinced he has the right to request anything from the UK govt. Once he puts in a few billion, which we knows he can if he wanted to, then ask for a bailout.

    All the companies with a complex structure to avoid tax now see the chickens coming home to roost.

    • Mr(s) Entitled says:

      Can he put in “a few billion”?

      How much of this wealth do you think is in cash or other liquid assets vs being in (now significantly depreciated) shares in his own companies? Further I suspect a lot of his assets will be illiquid. He could perhaps raise finance against some assets but then he has to find a lender and one that can move quickly. Maybe a lender like the UK government?

    • Doug M says:

      I was looking the other day at a story of the US cruise line industry looking for a bailout. Base yourself offshore to avoid taxes, then when the brown hits the fan you come begging for US tax payer cash. The gov they have right now they’ll probably get it too.

      • Mr(s) Entitled says:

        You can still bail them out (especially if governmental advice is the root cause) but that doesn’t mean that shareholders don’t feel the pain.

        It is possible to save Virgin and hurt Branson if that is what you see as just.

      • Mr(s) Entitled says:

        To be clear, I am not arguing that it is right. But maybe pragmatic.

        I read that US Airlines are seeking $50bn have spent $45bn in the last few years on share buybacks, thus increasing their own wealth and the wealth of their shareholders. Pain needs to be shared around.

        However lenders of last resort hold most of the cards. One condition I would make is that head offices move on-shore for a minimum of X years or for as long as the debt remains.

        • Doug M says:

          It’s not a question of hurting Branson, it’s about any bailout being appropriate. VS seemingly were operating on little or no actual cash, more reliant on future ticket sales to fund current flights. That seems like a fundamentally flawed business. My deepest concern lies with those that may lose jobs.
          So long as any bailout comes with some big strings I don’t have a problem.
          In terms of businesses that deliberately offshore, it’s a much more difficult situation, and I don’t have any answers. You didn’t pay taxes, but it’ll be our citizens that suffer consequences. Tough times and decisions.

    • Nick M says:

      Exactly this! He made his bed now not only does he not want to lie on it, he wants the tax payer to buy him a new bed. An example needs to be set that this will not be tolerated any longer.

  • M Jones says:

    I found the Air Passenger Duty (APD) issue interesting with flybe and this will rear its head again soon with all UK Airlines. Virgin and Partners were apparently asking for a derferment in payment of this tax to help flybe through. But, APD is paid by the Customer at the time of reservation, not by the airline, who just hold (or should hold this money) pending payment to The Govt. It seems fairly clear that airlines are actually using this (public) money for their own cashflow. So what then happens if airlines get bailed out and hold on to our Tax money which they will neither refund to us, nor pay over to The Government anytime soon?

    • John says:

      Same as any business which goes bankrupt owing VAT or corp tax or employers NI or whatever

      • M Jones says:

        But, if they are bailed out they are not bankrupt. So, Customers have pre-paid Tax which airlines are refusing to refund. An abuse of the APD refund regulations.

    • TGLoyalty says:

      What’s the difference between that and how everyone treats VAT? The comments here are devoid of reality.

      The government has already announced a 3 month holiday on vat payments.

      • Rob says:

        The VAT holiday is a joke. The Government says delaying my payment from April to July will result in a ‘£30 billion cash injection to the economy’. Well, yes, but only if I spend the VAT and then go to jail in July because I have no cash to pay.

        • Mac D says:

          I thought it was now until March 2021…

          • Rob says:

            No, HMRC website says deferred until June.

          • Aeronaut says:

            Rob, take another look…

            gov.uk / pay-vat

            “Because of coronavirus (COVID-19), you can delay (defer) any VAT payments due between 20 March 2020 and 30 June 2020. If you choose to defer a VAT payment, you will have until 31 March 2021 to pay it.”

          • Rob says:

            Thanks. Best to pay it before I accidentally boost the economy with it though!

            I’m currently prepaying my June SA payment, now deferred to Jan, because I want to get it all on my Miles & More card in case they pull the plug on HMRC acceptance for personal payments (business payments already get you a warning).

        • Chrisasaurus says:

          It’s worse then a joke because it implies that the practice of using collected tax as working capital is acceptable…

  • Grant says:

    Is it possible to transfer Virgin miles out to a family members HIlton account? My wife and I both have miles but she doesn’t have an active Hilton Honors account.

    • Rob says:

      Open one for her. She can then transfer, for free, her Hilton points to you.

  • jack says:

    Virgin staff seem a lot happier than BA staff, most Virgin crew really love their jobs – the difference is obvious to any frequent BA/VS flyers. Anyway putting VS employees out of work because of a dislike for Branson makes no sense. And any BA customer should be concerned by VS going under because BA is only going to exploit reduced competition. Worth remembering too BA has a long history of breaking the law to hurt the competition and consumers (dirty tricks and various price fixing scandals).

    • Keiths says:

      I think that is exactly my point. He could do an awful lot more to help his staff at this difficult time. He could offload many assets, most of which would be liquid, but depends on price, and subsidise his staff for a very long time. If he goes down to his last billion it will be a shame, but compared to his cc who can’t put food on the table….
      I am as far away from Marxist as you can possibly get so this isn’t an anti-capitalist rant. It is about sharing the pain.

  • Michelle says:

    Hi, I have two upgrade vouchers for virgin from their credit card. Does anyone know, if I cancel the card as it’s up for renewal, are my vouchers safe – well
    as much as they can be? Thanks

  • Nathan says:

    Can anybody call to mind any of the beardy’s businesses actually make a profit?

    As for any tax payer bail out cash actually making its way into VA Crew pockets? That won’t happen. Any millions handed over will service debt and existing obligations that don’t involve aircraft being in the air. To assume that your money would actually help hard-pressed cabin crew is fanciful. It would seem to be a comforting thought to some on here but IMHO it’s borderline delusional.

    • TGLoyalty says:

      If the staff have been asked to not work then they are furloughed and I assume will now receive 80% of their normal wage.

    • jack says:

      State aid in return for equity? I’m sure BA will end up taking state aid anyway, they just want to put Virgin out of business first. Finnair, Lufthansa, Air France/KLM and the US carriers are all taking state aid.

      • Secret Squirrel says:

        For anyone SMS VA today to transfer points, has anybody received a confirmation today? Someone stated it took 4x hours yesterday..

        • fivebobbill says:

          I posted posted earlier in the thread this morning:

          Done this this morning, 140,000 to 210,000 HH, took all of 15 minutes with a few texts back and forth.
          FYI, they will need Virgin no, Hilton no, Name, DOB & Address.
          Painless

          • fivebobbill says:

            Actually, to be clear. I sent them a text after midnight last night and they came back to me at 9am this morning. Took 15 mins and a few texts thereafter.

          • Secret Squirrel says:

            Mine done at 9am, no reply as yet!

        • Mac D says:

          I’m still waiting from 5am…

        • Gail says:

          I haven’t had SMS response so used WhatsApp and just had texts to confirm the transfers from three family members to HH. This is their response to my question about time to transfer:

          “Normally It can take up to 30 days but due to us being busy with covid-19 I need to advise you it may take longer but not sure on the time frame :)”

        • Gail says:

          VAFC WhatsApp number is 07481 339184

  • Kathy Mallam says:

    HFP never mentions Jet2. Is this because you consider them a holiday company (like TUI) rather that an airline? Do you have any idea about adits financial status?. We use it in the same way as we use Easyjet.

    • Rob says:

      Truth is that they have no loyalty scheme and, with 80% of our readers around London, they are rarely on our radar. They certainly don’t have the resources of easyJet or Ryanair though. They are a public company so you can download their glossy accounts.

      • Charlieface says:

        They used to have a decent scheme, it closed years ago 2012 IIRC

  • BrianN says:

    So if virgin atlantic did go bust would we still be able to transfer flying club miles to partners such as ihg or hilton?

    I presume the 241 vouchers from the virgin money credit card become worthless?

    Thanks

    • Micky says:

      No chance they will be paying out cash to pay for their loyalty points if the are bankrupt

      • Novice says:

        Good thing I only have 5000+ points

        • Secret Squirrel says:

          You wouldn’t be able to transfer out then as Hilton is min 10k!

          • Novice says:

            Not bothered. Most was bonus for getting a cc.

            I’m not against the airline at all. I actually don’t hate branson like some do here. I think he is a spirited entrepreneur who has done well for himself.

            But, I am against a bailout.

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