Government hires Morgan Stanley to advise on Virgin Atlantic bailout, talks ongoing

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• J says:

  15 Apr15 April 19:48

  I’m always impressed with Virgin – best of the European airlines and most of their crew really love their job, so they deserve to survive. Without another British rival, BA would only hike prices and cut even more corners on service. Looking forward to a nice Virgin Upper class redemption when all this is over!

  • ChrisWKR says:

    15 Apr15 April 19:52

    Shame they never made consistent profits over the last few years, then – and UK Govt policy is to not support unprofitable businesses

  • Mikeact says:

    15 Apr15 April 19:59

    Just a reminder, you don’t have to fly with BA. Out of London, you can get almost all places around the World.

    • J says:

      15 Apr15 April 20:04

      Virgin provide significant competition on direct routes though. It’s a waste of time (as well as environmentally wasteful) to connect somewhere if a direct flight is possible.

      • ChrisWKR says:

        15 Apr15 April 20:12

        Not too sure most people care about the environment enough to pay more than a small x% more if there’s a bigger saving around.

        • J says:

          15 Apr15 April 20:30

          I think inefficient indirect routes will eventually be taxed more aggressively – at least within the EU, which can be positioned as more sustainable and conveniently also helps European airlines. Easy political win.

    • LB says:

      15 Apr15 April 22:11

      …Out of London, you can go anywhere in the world – as long as you connect 😉

      • TGLoyalty says:

        15 Apr15 April 22:41

        That’s true for many of the uk airports 🙂

        • Chrisasaurus says:

          16 Apr16 April 08:47

          I think that was the point being made

• BA-flyer says:

  15 Apr15 April 20:18

  I suspect Virgin have put a hold on all transfers to hotel partners. Two weeks after requesting a transfer by text (all security details provided), they emailed to ask for the same security details again. (I think this was a ploy to delay the transfer). A week after I replied, no sign of the hotel points but the miles are gone.

  • José says:

    16 Apr16 April 00:03

    Same for me with about the same time – with the added odd question of how do I redeem my miles?
    Also got a message on the virgin credit card statement saying I had got a reward for spending £20’000 and to call up to find out about it. Anyone know what that might be?

    • The Urbanite says:

      16 Apr16 April 00:53

      Rewards for that £20k spend are laid out here – https://www.virginatlantic.com/gb/en/flying-club/credit-card.html/#terms

      Dependent on the status you hold.

• jimA says:

  15 Apr15 April 20:24

  why would Virgin make their miles worthless They gain quite a bit from charges on redemptions

  • Chrisasaurus says:

    16 Apr16 April 08:51

    Because

    A) they gain sweet FA on redemptions if their planes are on the ground and
    B) they are a massive liability on the balance sheet and with cash evaporating something needs to help it balance.

    That said I’m sitting on my healthy six-figure balance. Like Rob (though a tiny fraction) I have no need for another million hotel points I cant use so the effective return of converting them would be next to zero anyway.

• Sean says:

  15 Apr15 April 20:35

  One thing the Gov’t need to do is stop the massive “Brand payments” to the bearded one and his neckar empire

  • Rob says:

    15 Apr15 April 20:57

    They are surprisingly small as a % of turnover.

    • Colin MacKinnon says:

      15 Apr15 April 21:06

      If you sell something for £100 and make 10%, then a £1 payment is 10% of the profits, albeit a small percentage of turnover.

      And BA makes just 2% on turnover!

      • Heathrow Flyer says:

        15 Apr15 April 23:35

        Colin – I’m interested where your 2% figure comes from?

        By my maths BA’s operating margin was around 15% in FY19.

      • Rob says:

        15 Apr15 April 23:36

        It is something like £10m on turnover of £2.8bn. Peanuts. Costs less than a chunk of TV advertising and massively more effective.

    • Ken says:

      15 Apr15 April 23:09

      Large enough to ensure VA loses money every year though.

  • Thomas Howard says:

    15 Apr15 April 21:39

    And re-brand as “UK International Airline” in courier font?

    • memesweeper says:

      16 Apr16 April 08:55

      Comic sans 🙂

• Tariq says:

  15 Apr15 April 20:39

  VS would just have to realign their route network. Clearly they have value in their LHR slots. If USA is closed to visitors, those people will want to go on vacation elsewhere. We could see a revival of some of the former VS routes like MRU.

  • Anna says:

    15 Apr15 April 20:54

    Small island nations are even less likely to let us in.

    • guesswho2000 says:

      16 Apr16 April 00:39

      Small island nations are more likely to require foreign capital

    • Tim says:

      16 Apr16 April 02:49

      Your favourite small island narion and a few others are linked to the UK in a unique way. Technically, if the UK says, ‘open your doors’, then they need to open their doors. In reality, it will never come to that. One, do we need them to open their doors, two, will we want them to open their doors if they do not want them to open their doors, but linked to both is three – it would be easier for many, apart from a few financiers and lawyers now, if the overseas territories were no longer territories. And the Foreign Office is coming on side with the Treasury now. So who knows?!?! Maybe we’ll go the French, Dutch and Danish way and see MP’s from Cayman, Bermuda et al ?! Less likely Bermuda; more likely the Caribbean lot. 🙂

      • Anna says:

        16 Apr16 April 11:13

        I for one would welcome that, it might result in a bit more transparency!

• KP says:

  15 Apr15 April 21:04

  Rob’s investment banking and finance experience is of real value here. He’s been able to lay down the nuts and bolts behind the story really well. Something which the so-called airline bloggers out there can’t do, because they have no real brains… apart from heavily advertising credit cards to earn commission

• BJ says:

  15 Apr15 April 21:17

  Conservative Party donors I guess?

• letBAgonesbe says:

  15 Apr15 April 22:05

  This may be a very silly question but….

  Would it not be “cheaper” for the Virgin Group AND the government to let it go bankrupt and then for Virgin to start “all over”?

  • J says:

    15 Apr15 April 22:17

    The big US Airlines have been in chapter 11 at various points but I don’t think there is really a UK equivalent. Although I’m sure Land of Leather and various furniture stores used to regularly go bust and quickly resume under a new name. Don’t think a major airline could pull it off.

    • Lady London says:

      16 Apr16 April 00:22

      Chapter 11 = Administration, kind of?

      • J says:

        16 Apr16 April 07:09

        Chapter 11 somehow seems an easy way to shake off debts though? Even Delta have been in Chapter 11.

        • A says:

          16 Apr16 April 12:31

          Chapter 11 and administration are similar (both billed as rescue proceedings) but different in a number of important respects (including in C11 existing management remain in charge; in administration, an insolvency practitioner takes over running the business).

          Administration doesn’t work to rescue airlines in the UK in the same way as C11 does in the US. Some of those are Chapter 11 vs Administration differences. But some are specific to airline business. It is really difficult (but not impossible) for an airline to keep its fleet flying during admnistration :
          – risk of operating licence from CAA beign revoked as due to staff attrition, loss of key personnel etc, and management now being non-specialist insolvency practitioner the operator is now no longer competent to secure the safe operation of the aircraft;
          – suppliers of fuel, ground handling equipment etc round the world are likely to stop providing services and may arrest aircraft for unpaid charges;
          – similarly, airports can do the same for their unpaid charges;
          – engine lessors and aircraft lessors may exercise remedies to terminate leases and seek possession of their engines/aircraft (various limitations on enforcing security in administration don’t apply to aircraft leases);
          – insolvency practitioners can become personally liable for certain post-insolvency liabilities – some cannot be easily/commercially insured against given the major risks that running an airline can involve

          Will be interesting to see if we do in fact implement a form of special administration for airlines as has been mooted – that would go some way to helping, but the duty to use funds to repatriate is likely to inhibit a going concern sale.

        • J says:

          16 Apr16 April 14:38

          Interesting thanks for the explanation.

  • Lady London says:

    15 Apr15 April 23:57

    Yes
    Let’s hope the brains at EY and Morgan Stanley can come up with this.
    By far the cheapest all round.

    Wonder which solution earns more ongoing fees for investment bankers, Big Four accounting firms and management consultancies?

    To have the courage to recommend letting it go down cleanly now would be a landmark decision that would indicate corporate life really is changing.

  • Will says:

    16 Apr16 April 00:01

    That’s probably my instinctive choice but you then have contagion.

    It might be good for the long term prospects of a version of the airline to jettison its debt but ultimately if it does default on it that’s not just bad for the person who is owed the money, and whoever they owe money to etc etc but more broadly you risk losing confidence in lending more generally if we face mass defaults across the economy.

    There’s been talk of this not being a liquidity issue like 2007/08 but really back then it was just a bunch of people who’d borrowed money that they couldn’t repay.

    The economic consequence of this may well end up being a bunch of people who have borrowed money they cant afford to repay. This time though we have more debt globally so it’s a bigger problem if contagion of defaults spreads.

    Look forward to printing money, inflation and a return of interest rates. Possibility of an absolutely unimaginable economic future ahead due to current levels of endebtedness, particularly hard for UK due to obsession with house prices and reliance of normal people on near zero interest rates.

    • memesweeper says:

      16 Apr16 April 08:57

      ‘you risk losing confidence in lending more generally if we face mass defaults across the economy’

      Mass defaults? I think that’s a racing certainty, isn’t it?

  • Nick_C says:

    16 Apr16 April 09:53

    That should be the strategy for BA.

    If Branson wants to save his loss making vanity project, let him use his own money for that.

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