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Virgin Atlantic abandons plan for Government bailout, has five weeks to find a buyer (Telegraph)

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The Sunday Telegraph reports that Sir Richard Branson has abandoned plans for a Government bailout of Virgin Atlantic and is now desperately seeking a trade buyer.

The airline will be put into administration at the end of May if this cannot be achieved.  Accountancy firm EY is reportedly already lined up to act as administrator.

The airline is reported to have hired investment bank Houlihan Lokey, which specialises in distressed debt situations, to approach potential investors.  50 parties are believed to have asked for financial information.

Interestingly, none appear to be trade buyers.  Names quoted included hedge fund Lansdowne Partners, Singapore’s sovereign wealth fund, US private equity group Centerbridge Partners and distressed debt investor Cerberus.

Potential bidders are expected to form consortia to submit bids.  It is important to remember that a 51% shareholding must remain with UK or European Union entities under EU aviation law.  Only Lansdowne Partners, of the names listed above, has a qualifying domicile.

Delta Air Lines, currently a 49% shareholder, has already said that it will not commit further funds to the airline as it deals with its own financial crisis.  Delta is keener to take money out of Virgin Atlantic, with the airline currently owed $200m which was due as a transition payment to reflect the addition of Air France and KLM into the Delta / Virgin transatlantic joint venture.

Delta’s CEO Ed Bastian is quoted as telling MSNBC that it supported administration, believing that there would be bidders for the assets.  Any solution is likely to see Delta’s shareholding wiped out, but this is unlikely to be a major problem as the real value for the airline is in the joint venture agreement.  Virgin Group may be reduced to a minority stake unless there is an issue over hitting the 51% EU quota.

Is this really the last throw of the dice?

Not necessarily.

It is possible that the airline will return to the Government with a request for aid before putting the airline into administration.  As we covered, the original bail-out request was rejected because the airline was not believed to have exhausted all other potential options.  This new process may be a way of proving to the Government that no other alternative is possible.

The Sunday Telegraph article is here.

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Comments (349)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • J says:
    26 Apr26 April 07:31

    A not so young man named Branson,
    Hung by one hand from a transom,
    Sychophantly and craven,
    From within his tax haven,
    Tried to hold the UK Gov to ransom!

  • Anna says:
    26 Apr26 April 07:38

    Branson has done himself and Virgin absolutely no favours with his complete failure to acknowledge the revulsion his tax-avoiding antics have caused, however it would still be a huge blow to the staff who have done nothing to deserve losing their jobs. Also the loss of Virgin would leave MAN even more pitifully served on trans-Atlantic routes. I have never flown with them but have plenty of friends and colleagues who do.

    • Callum says:
      26 Apr26 April 08:29

      I really can’t see what that would achieve?

    • Mr(s) Entitled says:
      26 Apr26 April 08:43

      If the demand is there someone else will move into MAN. It depends what the numbers look like when we come through this. If Virgin survive, and the numbers aren’t there, they will leave anyway.

      One could argue that Flybe were more important to the UK economy than Virgin and at the time they were asking for less money and perhaps a more certain bet with domestic routes that could still run.

      I have long felt that politically, having hammered Labour for over a decade on their bailouts, that it would be advantageous to allow some high profile names to fail. You have to expect that Virgin and their high profile non-dom are a good candidate. Arcadia another.

      Sad for the staff as you say but then staff in this situation are rarely to blame. No different for Flybe or Thomas Cook. Let’s hope someone steps in to pick them up from administration if that is the trajectory.

    • melonfarmer says:
      26 Apr26 April 09:26

      Is he breaking the law is the question? No he’s not. Tax avoidance is legal. The UK has a funny attitude to business and success (particularly entrepreneurial). Companies are obliged to maximise shareholder returns. Hate Amazon? Then stop using them!

      I appreciate this is from the Guardian, but during the reported take over of Cobham they wrote:

      “Cobham has only recently steadied itself after 5 profit warnings [..] and critics have accused Advent (PE) of snapping up the company cheaply as it recovers”.

      Er, is that the whole point of Capitalism? Yet no one wants to live in “Jeremy Corbyn’s Venezuela!”

      Branson’s desire to plaster his face over anything he has an interest in may be his undoing. I couldn’t care less what stupid stunt he’s up to (crashing boats, balloons, whatever).

      • MJ says:
        26 Apr26 April 10:06

        You’re right that being resident in the BVI even if it’s to avoid tax isn’t illegal.

        But then equally so, the government is under no obligation to bail out a company owned by somebody like that, especially one which isn’t really profitable (2/3 years of small profits over the last 10 years do not count, especially when the last couple years have been great for the airline sector)

        Plus the government tends to do things they thing their voters will agree with, many voters think Branson has done something “wrong” by being resident in the BVI, as well as suing the NHS (there are claims that Virgin Care pumps all of its money back into the NHS but Branson also claims he’s not in tbe BVI for tax reasons so…)

        • A350Aviator says:
          27 Apr27 April 10:38

          Maybe you could have thought that virgin are buying new planes? Everybody is quick to complain that virgin isn’t profitable but nobody mentions the fact that, over the last few years, they have been having a load of 787’s and A350’s delivered to them, that cost money?

          They make more than lots of other airlines do.

          • Genghis says:
            27 Apr27 April 10:45

            Have a look at the Wendover Productions videos on Youtube. I’m no expertt on aviation economics. But the cost of an aeroplane is actually rather small relative to fuel prices – of late anyway. So getting new aircraft (you don’t need the cash upfront, remember) which are more fuel efficient actually saves money. No?

          • Rob says:
            27 Apr27 April 11:09

            That has been the driver for buying new aircraft for most airlines – new plane + reduced fuel costs is better than old plane + higher fuel costs. That’s before you get to the fact that old planes are, well, old and don’t benefit from the bigger windows, pressurisation benefits etc found on new planes made from composites.

  • Ken says:
    26 Apr26 April 07:40

    Arguably suits some in Government to see a household name go under.
    Will strengthen their case that lockdown can’t go on too much longer without catastrophic economic consequences.
    Grim times for the staff but bailouts in the aviation sector got the look of bottomless pit about them.

    • Kev 85 says:
      26 Apr26 April 08:32

      It would be a pretty poor example to use as virgin have cancelled a lot of their flights in May so even if the lockdown were lifted tomorrow (it obviously won’t be), they wouldn’t start trading again.

  • Neil says:
    26 Apr26 April 07:40

    It annoys me that the Government view BA as so important and worth saving but not Virgin. At least Virgin fly from other parts of the UK. BA should be called London Airways.

    • Heathrow Flyer says:
      26 Apr26 April 08:00

      Ah, the old ‘London Airways’ gag.

      BA aren’t a charity. It’s just not economically viable to set up a profitable hub outside of LHR. Even LGW barely washes its face.

      You don’t open a Waitrose on a council estate. And I say that as someone from the North.

      • Ian says:
        26 Apr26 April 08:23

        Don’t they have council estates in the South? Or private estates in the North?

      • J says:
        26 Apr26 April 08:42

        They’re not typical private business either as they’ve had bail outs in the past and they get a lot of their strength from being a former state owned monopoly. It’s not a level playing field – although same is true in most big countries.

      • sunguy says:
        26 Apr26 April 12:54

        HF.

        You do realise that if it weren’t for Maggie and her penchant for privatisation, (that and along with some over-interpreted rules from the EU that other countries don’t read in the same way!) that BA would actually be publicly owned – it was/is the flag carrier! The government cant really allow BA to go into administration and will always save it because it is the flag carrier – its a bit like the BBC – the government seem intent on de-funding it but will never let it die….teetering on the brink…because of its history.

        Other private companies (even ones like Thomas Cook who were once nationalised) they really don’t give a flying faff about. A number of the once government (infrastructure) institutions have a similar mindset as was drilled into them at their sell off – make as much money, spend as little as possible and dont worry, the tax payer will help if you get into difficulties….

        As for the London Airways mindset – well, actually it kindof is – London is the most populous city in the UK and has a huge financial centre – arguably the biggest in Europe – so, in the mindset of the above (make as much money, spend as little as possible) – why spend money going from regional airports if other companies will do it for you…..(and get themselves into trouble by doing so) – “there’s always a bus or the train for when these routes fail.”….if you are flying somewhere that folks want to go, they will always fly on it – no matter how difficult it is to get there….

        Unfortunately “London Airways” is like saying “EBC” instead of BBC – because 99% of the output concentrates on England and the English point of view on the main stations…and unfortunately its quite close to the truth….but its all economics of trying to please the most number of people by sacrificing others.

        So, as much as I *REALLY* want BA to have competition and to act as “nicely” as Virgin would like to think they do and to offer simple, easy trips from regional airports, it will never be a fair playing field unless the privitisation mindset is removed and lets face it thats never going to happen!

      • Lady London says:
        26 Apr26 April 16:11

        Surprisingly, there are some Little Waitroses adjacent to council estates in London..

      • Robert Edwards says:
        27 Apr27 April 07:41

        Waitrose opened in Barry South Wales. A strange move. Now closed and gone.

    • Callum says:
      26 Apr26 April 08:08

      What gives you that impression?

      London airways is a terrible name.

    • Nick_C says:
      26 Apr26 April 08:48

      Has the Government said they will bail out BA?

      • Rob says:
        26 Apr26 April 13:09

        They will. The BA strategy is to let everyone else go to the wall and then demand a soft bailout on the grounds there is no-one left. Like a kid which murders its parents and asks for clemency at the trial due to being an orphan.

    • Mark Wren says:
      26 Apr26 April 08:55

      Branson is a crook. He make out he started with nothink.but was private educated.and his parents wete rich.when he started virgin Atlantic.he was slashing prices but 9 times out of ten virgin is dearer on flights. Basically they have been trading while insolvent .relying on deposit.everythink is leased.there will be another entrepreneur.to take over..

    • Novice says:
      26 Apr26 April 09:30

      @Neil well it annoys me when people make the case that at least Virgin fly from outside London because they only fly to some places which are common holiday destinations which I have already been so I end up having to connect anyway when I’m flying to places. So how is it helping people in the north? It is only helping if you go Orlando and Barbados every year which frequent flyers don’t. And I’m saying this from someone who doesn’t live in London. I’m more likely to find BA connection than find a suitable Virgin and I don’t even bother with BA if I can help it.

      I don’t understand why people get patriotic over airlines. I don’t like ME3 countries’ human rights but I love their airlines because at the end of day, I care about my experience.

      Btw, I have nothing against Virgin. I’m just stating facts that people need to stop pretending they are helping people outside London fly all over the world when they aren’t.

      • J says:
        26 Apr26 April 09:53

        Direct connections are important. The ME3 are a good option for Australia/NZ or the Middle East obviously, but for most other routes they’re irrelevant. Cape Town is 11 hours or so direct from London, flying with the ME3 would nearly double it. Same for Tokyo, Hong Kong etc. The qsuite is nice but most people especially travelling on business value their time. Also funny to see people going on about the ME3 who oppose any state aid for Virgin – the ME3 are subsidised and would not exist without the billions they’ve had from their rulers.

        • Novice says:
          26 Apr26 April 10:21

          I have nothing against Branson or Virgin as I have repeatedly said. However I am not a business traveller but a very frequent tourist and Virgin doesn’t have the routes I want to go and from where I live I always tend to need connections anyway so then I only care about my experience as in the product etc. And, as a writer I have enough time and can write from anywhere in the world so it doesn’t make a difference to me to have to sit in a business/first lounge for a couple of hours. I understand time is money etc but why have a mediocre 11 hrs flight when you can get a better experience by adding a couple hours.

          I once lounge hopped for 4 hours because I wanted to try a first class of a certain airline.

          Virgin should have positioned themselves as a carrier with a lot of far flung places in the world from outside London then they could have had an argument for having USP because other leisure carriers outside London are geared for the Europe tourists. And some of us don’t like budget carriers as it tests our patience too much.

          • Harry T says:
            26 Apr26 April 11:03

            @Novice
            Good point. Living in Newcastle, I pretty much always have to connect when flying anywhere further than Amsterdam, to be honest. Any service outside of a short hop either requires a connection or irregular once or twice weekly flights to English tourist hubs I have no interest in visiting.

          • J says:
            26 Apr26 April 11:05

            Nearly doubling the flight time, the risk of missing a connection – if you’re a writer it’s feasible, for most people especially travelling on work flying direct is more attractive. It’s also a tremendous waste of emissions to nearly double the amount of miles you’re flying!

          • J says:
            26 Apr26 April 11:07

            Yes from the North a change in Amsterdam is the same as changing in London – I’m referring to flying to South Africa or Asia via the Middle East (a connection in Europe does not add on much time).

          • Lady London says:
            26 Apr26 April 16:14

            @Novice OT what kind of writer are you?

          • Novice says:
            26 Apr26 April 16:22

            The type that likes my privacy type 😂 @Lady London 😏

      • Neil says:
        26 Apr26 April 14:03

        It’s basic business. Why should we be forced to travel to London to fly with our “national” airline. I’m not being patriotic over an airline. I’m saying it’s wrong that they’re seen as some special institution or flag carrier when they don’t do anything to support the regional pockets of the UK. I’ve flown to lots of places in the world and have never flown BA. I would associate my loyalty to Emirates or KLM over BA as they’re easier to fly with than our flag carrier. Easyjet has more right to call itself the flag carrier. I resent my taxes going to help BA when they don’t offer routes to us outside of London. Say what you like, that’s my (and a lot of people around here) opinion. At least Virgin fly to these other places rather than none.

        • Novice says:
          26 Apr26 April 14:52

          I agree with what you said about BA. But Virgin doesn’t fly to any places that matter outside London unless you go seasonally to Vegas, LA, Orlando, and Barbados. When I wanted to go anywhere they fly, they don’t fly when I want. So I don’t see how you can justify saying that Virgin are useful.

          • Rob says:
            26 Apr26 April 14:55

            Imagine that Virgin reduces BA’s pricing by 10% though, on routes where they compete. You could very quickly justify a loan on the basis that the benefit to taxpayers is substantially higher.

        • Heathrow Flyer says:
          26 Apr26 April 21:49

          Neil – you’re not seeing the bigger picture.

          Take GSK as a simple example – BA enables GSK to do business globally. Whilst GSK’s HQ is a stone’s throw from LHR they also have multiple sites throughout the UK – providing jobs and investment that benefits the whole of the UK. (Including a large site in Barnard Castle – near where I’m from).

          It’s an over-simplification but just because you can’t fly from Manchester to San Francisco on BA, doesn’t mean BA doesn’t benefit the whole of the UK economy.

    • Andrew says:
      26 Apr26 April 09:31

      Quote:- “At least Virgin fly from other parts of the UK.”

      Summer only flights to Orlando from Paisley International aren’t exactly an inspiration.

      United & Delta usually run daily services from the Capital.

  • Nige says:
    26 Apr26 April 07:48

    Rob – What will you be doing with your Virgin Miles?

  • Algor says:
    26 Apr26 April 08:03

    I’ve been holding off with transfer to Hilton for a long time but it’s time now.

    Once transfer is complete I’ll have nearly 1M HH points, wonder when will I have a chance to use them …

    • Henry says:
      26 Apr26 April 08:08

      *If transfer is complete.

    • Lady London says:
      26 Apr26 April 16:23

      I moved my tiny stash to Hilton 1 month ago. I had struggled to use it. Vaguely I was thinking maybe do a one-way from US on Delta using them. But hadn’t got round to checking if using VS miles for that would mean I would pay VS ‘taxes’ (high) or Delta taxes (low).

      So I moved as I don’t run the Virgin card and no other expectatiob to increase my VS stash quickly.

      If I’d had 200,000 or more, though, I would have stuck with Virgin. Because that’s where somewhere nice in J starts. If the airline survives in any form these are likely to be worth much more than anything you could convert them to.

  • Henry says:
    26 Apr26 April 08:07

    Surely Rob will be doing a Captain Smith and be going down with the ship? 🚢

  • Johnny Tabasco says:
    26 Apr26 April 08:08

    Isn’t this Branson very publicly looking to exhaust all avenues before returning to the Government in a months time ?

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