Virgin Atlantic told to resubmit its proposal for a £500m Government bail-out (FT)

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Virgin Atlantic’s initial proposal for a £500 million bail-out has been thrown out by the Government, according to a Financial Times report, although it has been encouraged to make a new submission.

The report suggests that the Government did not believe that the airline had done enough to exhaust other potential funding routes.

This will clearly always be a difficult hurdle for Virgin Atlantic to clear, given that it is 51% owned by Virgin Group and 49% by Delta Air Lines.  Delta received its own multi-billion dollar bailout package from the US Government last week, most of which is not repayable, despite spending over $3 billion on share buy-backs and dividends in 2019 alone.

Virgin Atlantic told to resubmit its proposal for a £500m bail-out

Sir Richard Branson has injected $250 million into Virgin Group businesses as emergency funding in recent weeks, of which around $100 million is believed to have gone to the airline.  Virgin Voyages, his start-up cruise company, is also likely to have needed substantial support after the initial sailings were cancelled.

The FT also suggests that the Government feels that the Virgin Atlantic business plan underlying the loan request is too optimistic.  It implies that the airline is forecasting a pick-up in air traffic between the UK and United States which is seen as unrealistic.  The airline has said that it supplied two-year and five-year business plans as part of its submission.

Virgin Atlantic told to resubmit its proposal for a £500m bail-out

The £500 million request is believed to cover a commercial loan as well as a Government guarantee to the major credit card issuers to encourage them to release funds for pre-paid tickets.  The card companies are not releasing this money as they are legally liable to repay it under Section 75 rules if the airline fails.

(It is worth noting that the Government does not need to actually provide the bank loan requested.  It can simply agree to provide a guarantee for 90% – 100% of the sum with a commercial bank funding it.  This means that no money actually leaves the Treasury unless the airline fails.)

The full Financial Times article is behind a paywall but you can read it by clicking here to bring up a Google search and then clicking on the top result.

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Comments

  1. Mikeact says:

    Once again , management shown up for what they are….can’t even write a proper business plan without it being picked up. Even more troubling if they had help from a major third party ,which obviously they must have. Totally disgraceful.

    • I think that’s a bit harsh on them saying they can’t write a proper business plan.

      If the government think virgins return to business is too optimistic then perhaps the government might suggest when commercial air travel might resume.

      They can’t even say when you’ll be able to sit down on a blanket in a park right now, or buy a football to kick around in said park and they are making the rules.

      Also remember they were advocating in the beginning that they were using the best scientific information to time restrictions precisely and they knew what they were doing, so why can’t they say when things can return?

    • Callum says:

      Once again, clueless armchair commentators shown up for what they are….

      I was going to say I can’t see how you’d draw any conclusions on this given you don’t have the slightest idea what’s in their business plan, but then I remembered we now live in a world where people genuinely don’t care about truth or facts. How utterly depressing.

    • Mikeact says:

      You’re absolutely right, pressed the button and then reflected that I was a bit too critical, but couldn’t pull it back of course. Apologies all round.

  2. Heathrow Flyer says:

    Looks like South African have reached the end of the line.

    • I’ve had a lot of good flights with SAA and good service. Loved flying to Johannesburg with them on an A340 (wonder if there’ll be many opportunities to fly on one of those again…) Good domestic flights too on SAA and full service but competition from comair and flysafair/kulula at the budget end I don’t think SAA were competitive. Unfortunately SAA got into an awful state under the previous government with some serious mismanagement and corruption. Ramaphosa, thd current president is doing a good job but there’s more important things to do than bail out SAA (again).

  3. James B says:

    At what point do we need to start thinking about strategies to protect Flying Club miles in the event that a collapse of VS is looking likely? Any suggestions?

    • About 3 weeks ago for a lot of people on here

    • Seems like you can redeem miles for Virgin Wines vouchers again (that was suspended a couple weeks back) although they are poor value obviously, better than nothing I guess!

    • Yeah that point was 3-4 weeks ago. A lot of people have transferred out of FC. Most seem to be picking Hilton, which is what I did.

  4. You might have noticed that the newspaper industry is in crisis too with no option for government support (newspapers can’t/shouldn’t receive govt money for reasons of editorial independence). The FT is no exception.

    If you value journalism like this then consider paying for it rather than promoting ways of circumventing the paywall.

  5. Natalie says:

    Should I be transferring my Virgin Atlantic miles?

  6. Graeme says:

    Is there any news Rob on Virgin extending the expiry date of their companion reward for cc spend?? I have one expiring in October and would like to use it to upgrade an economy redemption to premium. Thanks

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