Rolls-Royce and Airbus are pressuring the UK Government to back a bailout of Virgin Atlantic, according to a report in the Financial Times this afternoon.
The transport secretary, Grant Shapps, has been told by both companies that Virgin Atlantic plays a key role both in their operations and in supporting their supply chain throughout the UK.
Virgin Atlantic recently ordered 14 A330-900neo aircraft, pictured below, with a list price of $4.1 billion.
The wings for these aircraft are designed and manufactured by Airbus in the UK. Rolls-Royce Trent 7000 engines will power the planes, and the value of the engines is likely to be around 1/3rd of the total order cost.
Heathrow Airport is also reported to have submitted a letter supporting the arline.
The newspaper reports that the airline has now officially requested a package of commercial loans and guarantees worth £500 million. The loans are to support day-to-day costs whilst the airline remains grounded. The guarantees are required to persuade Visa, Mastercard and American Express to release the money they are retaining to cover potential Section 75 claims if the airline folds.
Talks between the airline and the Government will start this week. The FT quotes a Government source as saying that both Virgin Atlantic and easyJet may be refused support, due to Sir Richard Branson’s historic sheltering of Virgin Group profits from UK tax due to his Necker Island domicile and easyJet’s recent payment of a £170m dividend. Loganair and Eastern are expected to receive Government funding unchallenged.
Whilst not highlighted by the FT, I should add that there are also questions being asked over the appointment of advisory firm EY who will effectively tell the Government what they should do. EY has audited British Airways and latterly IAG for over 30 years.
The FT article is behind a paywall but you can read it by clicking through to Google here and selecting the top result.
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