Rolls-Royce and Airbus support £500m Virgin Atlantic coronavirus bail-out (FT)

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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.

Rolls-Royce and Airbus support £500m Virgin Atlantic bail-out

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.

Rolls-Royce and Airbus support £500m Virgin Atlantic bail-out

How to earn Virgin Atlantic miles from UK credit cards

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

Click here to read our detailed summary of all UK credit cards which earn Virgin Flying Club miles.  That page is regularly updated with the latest special offers and will still be accurate even if you are reading this article months after publication.

(Want to earn more Virgin Flying Club miles?  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.)

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Comments

  1. Kazim says:

    What’s to stop virgin cancelling their orders with Airbus, once they get the cash they desire and then placing an order for Boeing aircraft all equipped with GE engines?!

  2. Richard Relief says:

    Time to move your Virgin miles to somewhere safer? There are a couple of hotel schemes that will give you a bit of a haircut but 50% of something is better than 100% of nothing?

    • marcw says:

      Be quick. Virgin FC move miles to hotels once a month. Next one, and likely to be the last one, is this friday.

      • Mac D says:

        They are taking 24hrs to reply to the text/whatsapp lines now so good luck to anyone trying for this week

      • BrianN says:

        How do you know it’s just once a month?

        Also, a transfer takes up to 30 days. So are you saying the transfer is actually instant but they only do it once a month?

    • berneslai says:

      30 days transfer time on points. Points have left my Virgin account but not been added to my Hilton account – this could be a nervy wait.

      Oh, and they should not get a bailout under any circumstances.

      • David says:

        Yes they should.

        • KINGB says:

          No they should not get a bail out. Get Branson and Delta to bail them out. T The UK can survive without Virgin

          • Spaghetti Town says:

            I disagree. I quite enjoy getting my £240 round trip fares to New York city.

            More strangely, how are Norwegian still soldiering on?

          • Callum says:

            Norwegian got a bailout.

            Richard Branson uses a tax haven because the British government explicitly allow it. If they don’t like it (and they shouldn’t), then they shouldn’t let it happen in the first place.

            Not to mention it isn’t a bailout of Richard Branson, it’s Virgin Atlantic. I.e. the tens of thousands of full tax paying British workers who face losing their jobs at the absolutely worst time possible. Branson will remain spectacularly wealthy regardless of whether it survives or not. He’s not the one who will truly suffer…

  3. Mac D says:

    No way should they get a bailout even though I would be sad for my miles.

    The government has provided no support for small LTD directors who take a small PAYE salary and pay the rest of their salaries by dividends as I am sure many of you know, so no way in hell should a large company be getting support beyond the furlough of workers!

    • Jonathan says:

      On the otherhand we pay less tax so it stands to reason we’ll get less support. Whilst I don’t like the policy we game the system to pay no NI yet get our full stamps, and only 7.5% tax compared to 20% so you can’t really complain.

      • James H says:

        +100
        Quite agree, and refreshing to see someone else in this game acknowledge how much we do benefit against those on PAYE.

      • 7.5% for certain classes/ industries, isn’t it?

        Plus dividends are taxed now, then there’s Corp Tax, and IR35 imminent for many.

        The differences are becoming smaller

        • Micky says:

          Yes very few benefits and the amounts unlikely end up at a 7.5% saving these days

      • Micky says:

        The amount of any of tax saved does not really amount to that much and it is within the rules of the system. The government has decided to deliberately leave these small businesses out leaving small businesses out to dry.

        Not sure what setup you have but many directors pay NI as well

        • TGLoyalty says:

          But tax savings were enough for you to go to the trouble of doing it.

          You wouldn’t have done it if it wasn’t worth the extra £££

          • Micky says:

            People do it because that is what is advised by accountants across the country, it’s also the most efficient but the benefits now are limited but there isn’t any benefit to not doing it until now.

          • Lady London says:

            In the case of a lot of types of work such as mine, for many years now the only way work if offered is if you are a Ltd. So unless the rate of pay is very high we have disproportionate costs and risks for what we earn as compared to an equivalent employee.

            I would love my employers to be forced to provide me a pension plan and contribute to it, provide me employment protection, protect me from race, religion, gender and age bias, and pay all my insurance premiums including P.I., pay my accountant and auditors, etc. Also not to be out of a job when a project is cancelled from on high. Or wait….if some virus is going around, or other event. The employee will still be there, regardless of his performance he may last a very long time. Generally we are like providers of other services – the money they pay us isn’t for us to come it’s because we will go in due course and have to find our next work.

            We take many risks including financial risks, which are not remunerated and it is up to us to make the best of things. Because by employing us the employer has saved huge amounts in Employers’ NI, and quite possibly 50-60% of the cost of an employee overall, depending how they do their sums. Plus they retain almost complete flexibility. We get certain benefits but we have to arrange them ourselves and they are not huge.

            IR35 isn’t going to help either contractors, who now find fewer opportunities, or employers, who will end up losing flexibility and paying more for less.

            So the rate has to be really excellent otherwise things work out even enough overall. How many contractors got “furloughed”? Thought so. How many employees?

          • Jonathan says:

            I don’t employee contractors as not a fan of their high daily rates and I don’t agree with zero hour contracts either. But since you ask their are no redundancies and no furloughed staff either. We’re riding it out similar to what Rob is doing on full pay do we don’t get any government support either.

          • Mac D says:

            You make it sound like because directors setup a limited company they did it to save on tax and now they should suffer for doing something wrong. Being a small business owner and paying taxes as set out by the government should not be seen as something negative and reducing taxes, there are plenty of risks and downsides.

          • mvcvz says:

            Every last syllable Lady London has just said is absolutely on the money. Having operated my own Ltd for some thirty years, it became obvious to me a couple of years ago that the so-called benefits were no longer sufficiently substantial to offset all the downsides. So I closed it down and took on a salaried consultancy post for what I intend to be the final few years of my working life. It was without question the best professional decision I ever made.

    • According to a piece in MoneySavingExpert, they have had confirmation from HM Treasury that:

      “Limited company directors, even if they’re the only employee, can furlough their PAYE income – ie, get 80% of salary up to £2,500/mth. This isn’t likely to be huge as most earn more via dividends (and there’s no help there), but it’s something, and you can combine it with universal credit. Unfortunately, unlike the self-employment scheme, if you do this, technically you can’t then work for the firm, but you can continue to perform your statutory director’s obligations, eg, official legal filings.”

      https://www.moneysavingexpert.com/news/2020/03/coronavirus-self-employed-and-employment-help/#limited

      • Mac D says:

        Yes but most will pay 12.5k on the PAYE which in this case would work out to be equivalent to 10k per year and it means you can not do any work, unlike self employed who can claim up to 50k per year but still work.

  4. Can we take it that the new Manchester clubhouse isn’t going to open on time lol 😀

  5. Just my observation but my feeling is that Virgin had started to price themselves out of the market. They hike their peak prices well beyond those of BA, to the extent that many northerners who previously flew Virgin to Orlando and other destinations were instead choosing to travel with BA via London, despite the added inconvenience. (Though it’s generally become so expensive to fly direct to Orlando, people now often fly to another US city and then get a domestic connection).

  6. Stephen says:

    Has anyone successfully made a S75 for consequential loss for airline insolvency / cancelled flights, in terms of getting a new flight booked (if not already abroad)?

    If so, what credit card provider? Was it a reward booking or cash?

    Thanks

    • Never heard of being done but, to be fair, there has never been a major UK insolvency. When airberlin went down, for example, I reckon under 100 people had unflown long haul flights.

      • marcw says:

        Was Thomas Cook not big enough for you? I bet they transported more passengers than Virgin Atlantic.

        • We’re talking about using S75 on redemptions.

          If you have 2 Upper booked on VS can you make your card company buy you 2 x BA Business Class seats?

      • Stephen says:

        Thanks Rob, I had 3 x ANA (Virgin) redemption to Tokyo next week. Looking to reschedule for April 2020, but they won’t book further than 331 days.

        I’m in two minds whether to book something in for Dec 2020, and change the date at a later time (if Virgin are still around) with the hope that S75 would cover it

    • I’ve just booked a one-way from Sao Paulo to Heathrow in upper class next February for 70,000 miles plus $24 in tax. In theory there’s a $50 cancellation penalty, though since that’s more than the tax I’m not sure if they would insist on payment of the extra to release the miles.

      Paid for the tax on an Amex Gold credit card, so we’ll see if it comes to it what a S75 claim yields….

      • Stephen says:

        Will that be covered if less than £100? Depends if they view the miles as having any financial value?

        • If they don’t I figure I’m not going to get any more than the tax back anyway…. In that case even if I lose the $24 I’m not much worse off and I don’t have hundreds tied up in taxes and fees in the meantime.

        • The alternative I was looking at was a return to Delhi in upper class – £520 plus 75,000 miles.

  7. Opuada says:

    Yeah they put BA to shame but have absolutely nothing to show for it. 82M in reserves going into this crisis? that sounds like a fat joke to me

    • £480m cash at end of 2018. Financial Times was wrong and corrected their article.

      • Opuada says:

        oh thats makes more sense. I still think they dont’ really give BA that much run for threir money

  8. Does making a VS points booking offer any sort of protection for the points being lost? ie book flight on points, airline goes bankrupt does s75 cover the flight? And if virgin are still around by christmas, the points booking could be cancelled for £30?

    • That’s what we’re discussing. No-one knows. You can argue that under S75 the card company has to buy you cash flights.

      It would not be a crazy gamble given the low canx fee.

      • Charlieface says:

        I wouldn’t say no-one knows.
        That the credit card has joint liability to fulfil the contract is undisputed. There was some discussion whether EC261 is actually contractual, but the FOS seemed to have ruled it is and allowed S75 claims. The only remaining question is whether a cash refund includes the notional value of the miles, in the case of vouchers used for a purchase they ruled the refund should include it. I haven’t heard of our specific case yet, though.

        • TGLoyalty says:

          But under S.75 you wouldn’t ask for a cash refund you would ask for replacement flights.

          That’s why you need to make sure you book a flight you actually want to use as you will get your taxes back or a replacement flight. Your flying club miles are worthless in a scenario where flying club has gone bankrupt

          • Charlieface says:

            No, the S75 claim would be for the airline’s contract, which allows you to choose a full refund or a reroute if the flight is changed.

          • And in most cases surely your credit card company wouldn’t and couldn’t book you replacement flights anyway.

            I wonder if in the case of Amex they might offer Avios/MR points to book the equivalent BA flights, which may work out cheaper for them (especially for Upper Class redemptions) and would provide the closest equivalent recompense.

            I’d be happy with that as an outcome, so long as BA does survive with the EC programme intact….

            Not everyone is going to be able to book flights they actually want to use of course, as they may have no immediate plans, or enough miles (without risking further cash/MR points/Clubcard points etc.)

  9. Stephen says:

    I wonder if Virgin Atlantic credit card (Virgin Money) have any liability for the lost miles if Flying Club no longer exists?

    I guess the best that they would provide is a refund of the yearly fees?

    • I would have thought any current year fee at least since they can no longer honor the miles earning benefit.

  10. Jack R says:

    This gave me a good chuckle, from Reuters last April.

    (Reuters) – After reporting a loss for two straight years Virgin Atlantic is targeting a return to profitability in 2021, helped in part by the launch of new routes and its acquisition of British regional airline Flybe.

    • Jack R says:

      More fateful words from the same article – “Virgin Atlantic’s finance chief Tom Mackay said that while economic factors would continue to challenge the carrier in the year ahead, it was in a strong cash position.”
      Little did he know….

  11. Wendy says:

    Just a quick thank you to Rob and the team for keeping us informed of what you have during this time. Thanks to you I was ahead of the game when it came to figuring out how to move forward regarding my 2-4-1 Avios flights to Toronto on the 17th April.

    In the end they had a class change (lost the 1st class cabin) and provided me with the First class phone number so I was able to call and cancel and had no charges. But I was fully prepared for doing it online with the workaround provided here. Plus just keeping up to date with the daily happenings, often having the info here before BA emailed.

    Thanks for all you do to keep us in the loop.

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