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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. 

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

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.

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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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.

You will receive a sign-up bonus of 60,000 Amex points which converts into 60,000 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.)

Comments (117)

  • Nick says:

    Would this bailout request from Airbus be from the exact same company that threatened the UK government back in 2018 over Brexit? At that time, Tom Williams, the chief operating officer of Airbus Commercial Aircraft, was asked if the company was planning to abandon its plans to build new wings in the UK, and he replied: “We are seriously considering whether we should continue that development or we should find alternate solutions.”?

    • jack says:

      The UK has bigger things to worry about than Brexit right now. Although if a hard brexit actually still happens, that and the Coronavirus will I am quite sure trash the UK economy and living standards for at least a generation.

  • AJA says:

    Both Airbus and Rolls Royce see a major customer disappearing. I am not sure whether Virgin disappearing is that good for the consumer but if the government does give loans then I think Richard Branson must pay the same amount in to support his airline, in addition to anything he has already paid) and I also think he should become UK domiciled for tax purposes.

  • Anna says:

    I seem to recall that VS recently slashed tourist routes to developing Caribbean nations because their governments couldn’t afford to pay VS a sweetener for bringing tourist revenue to the islands. And now they’re asking to be treated well!

    • TGLoyalty says:

      So commercial airline cancels unprofitable route ? I don’t see the controversy.

      They are here to make profit (or atleast break even) so they can survive if they feel they get a higher yield from other routes what’s the issue?

      • KINGB says:

        Why are they operating routes by sucking up to governments to pay for services if they cant do it themselves? Isn’t that how business works? LOL

        • TGLoyalty says:

          Yes it is. The government is trying to create tourist demand.

      • Anna says:

        If those flights were so unprofitable, why did BA pick them up so quickly?

        • Rob says:

          BA was presumably also given a bung, sorry ‘marketing support’. I guessed as much when I saw a massive ‘visit St Lucia’ British Airways ad as I was driving down the M4 from Heathrow …..

    • ChrisC says:

      BA are and have been in receipt of payments from several airports in the US to start operating flights to those airports.

      Sauce for the goose and all that!

      • ChrisC says:

        And ryan air do the same and as soon as the subsity ends they invariably end the route as well

  • 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?!

  • 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…

  • 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:

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

      • sayling says:

        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.

    • Nick says:

      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.”

      • 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.

  • TripRep says:

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

  • Anna says:

    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).

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