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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.

How to earn Virgin Points from UK credit cards

How to earn Virgin Points from UK credit cards (April 2024)

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, the Reward+ card has a bonus of 18,000 Virgin Points and the free card has a bonus of 3,000 Virgin Points):

Virgin Atlantic Reward+ Mastercard

18,000 bonus points and 1.5 points for every £1 you spend Read our full review

Virgin Atlantic Reward Mastercard

3,000 bonus points, no fee and 1 point for every £1 you spend Read our full review

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 20,000 Membership Rewards points, which convert into 20,000 Virgin Points.

American Express Preferred Rewards Gold

Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review

The Platinum Card from American Express comes with 40,000 Membership Rewards points, which convert into 40,000 Virgin Points.

The Platinum Card from American Express

40,000 bonus points and a huge range of valuable benefits – for a fee Read our full review

Small business owners should consider the two American Express Business cards. Points convert at 1:1 into Virgin Points.

American Express Business Platinum

40,000 points sign-up bonus and an annual £200 Amex Travel credit Read our full review

American Express Business Gold

20,000 points sign-up bonus and FREE for a year Read our full review

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.)

Category

Virgin Atlantic and Flying Club

Comments (349)

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

  • TGLoyalty says:
    26 Apr26 April 09:18

    Just had more Morrison’s purchase miles approved today.

    Still missing any for transactions post 11th March but before it closed. am I alone or anyone else missing some?

    • Tom1 says:
      26 Apr26 April 10:02

      All of my morrisons ones have been taking 48-53 days from date of transaction to when the points appear in VS.
      So on that basis you still have another week or so I think. 🤞

    • The Urbanite says:
      26 Apr26 April 11:48

      I”ve had 40k FC points approved and delivered now for transactions until the 23rd February. Waiting on the final 8k to be approved from transactions made on the 24th February.

      Wonder what the hold up is when others have had all theirs approved from transactions well into March!

  • AspirationalFlyer says:
    26 Apr26 April 09:18

    I cancelled my VA credit card yesterday in advance of the annual fee being due. Sad but near impossible to justify in the circumstances.

  • insider says:
    26 Apr26 April 09:27

    Rob – what are you going to do with you FC miles?

  • Craig says:
    26 Apr26 April 09:28

    Could someone please remind me of the S75 implications, we have flights booked with Virgin though my wife’s IHG CC with me as a supplementary cardholder. The tickets were over £100 each and ticketed separately but booked in my name. Are Creation required to cover the cost of us rebooking in the unfortunate event of Virgin becoming insolvent or a new buyer not honouring existing tickets?

    • Tom1 says:
      26 Apr26 April 10:14

      Did you pay on the supp card?
      Don’t think s75 applies in that case.
      Here’s the link you need

      https://headforpoints.com/2019/06/14/section-75-rights-as-a-supplementary-cardholder/

      • Craig says:
        26 Apr26 April 10:20

        Thanks Tom, that covers most of it, she is a beneficiary and did authorise the purchase so looks like we are covered for at least a refund. It’s additional costs of replacing the flight that might be trickier but worth the fight I think?

        • Tom1 says:
          26 Apr26 April 10:23

          Yes – agreed. I found this on MSE forum I think…. but don’t know the source, so don’t know whether it’s fact or someone’s opinion. Hope it’s fact!

          ++
          Section 75 of the Consumer Credit Act 1974, a statutory right, makes the credit card issuer (“creditor”) jointly liable with the merchant (“supplier”) for any breach of contract or misrepresentation. A claim for consequential losses in respect of breach of contract can in some cases be more than the original transaction amount. For example, if an airline goes bust and you lose your flights, then the cost of replacement flights will usually be much higher than the price of the original flights. The card holder (“debtor”) can claim against the credit card issuer (“creditor”) for such consequential losses in order to put him into the same position that he would have been in if the breach of contract had not occurred.
          ++

  • Spaghetti Town says:
    26 Apr26 April 09:37

    Just list it on crowd cube!

  • Adam says:
    26 Apr26 April 09:51

    Disclosure – sat on 6 figures of FC miles. But also previously worked in restructuring/insolvency (including of airlines).

    For me this is simply necessary gamesmanship.

    Gov has made unprecedented (sorry I know, word of the times) intervention, and is effectively propping up thousands of unprofitable businesses which, frankly, are unviable in the medium term. I personally don’t think VS is one of these (I’ve also seen much on here about VS’ losses from 10 years ago. Completely irrelevant). However, VS clearly isn’t helped by the bullseye on its figurehead (history tells us society looks to point fingers in crises, whether justified or not).

    A full market correction is necessary and will happen. Rishi knows that.

    He also knows what he’s doing by holding VS over the edge of a cliff. Gov shouldn’t be #1 fund when the private capital markets are still operating. This isn’t 2008. VS should be looking to raise private capital first, even if the debt is expensive and the shareholders are diluted down to a Ryanair baggage fee.

    If the capital markets do dry up, either completely or without state underwriting, then it comes down to balancing an earlier-than-desired bailout (economically, this will get far worse) vs the economic/PR connotations of letting it go vs the flipside PR connotations of being seen to hold Figurehead’s feet to the fire. I don’t think sovereignty of the airline comes into it either. Blimey, our whole financial system and economy isn’t built on sovereignty.

    Personally, I think VS will be around in 2 years. The capital it needs to raise isn’t insurmountable and there is plenty on which to base an investment case. It’s very possible, however, this is only doable via insolvency. Sources of cash drains such as loyalty schemes (and gift cards in retail) tend to be first on the chopping list, and so I don’t hold much hope for my miles. But, I’d rather gamble to be able to fly UC on the first open VS route, than stay in Hiltons for the next 5 years.

    Bit of a Sunday morning brain dump whilst by 8 week old naps on me. No answers of course, but nobody has any of those…

    • Mark says:
      26 Apr26 April 10:06

      I agree, this is just a show for the gov.

    • Tom1 says:
      26 Apr26 April 10:11

      I like this.
      Have you considered booking UC rewards flights now for some point in the 2021, paying fees with credit card?
      If VS goes bust (I know you don’t think it will) then credit card s75 needs to put you in same position as you would if the breach of contract didn’t happen (I.e. pay for equivalent flight on another route/airline)
      If VS survive, you cancel your redemption with a £30 cancellation fee?
      Depending if the cc company actually passes on the money to Virgin right now, you could also be giving them a fee-free loan/cash advance.

      You would obviously need to be booking a flight that you would take – in case the credit card route comes in to play.

      • mr_jetlag says:
        26 Apr26 April 10:24

        @Tom1 if it’s to realize some value from your miles, I’d just buy wine / HH points or any other avenue that gets you out of the currency asap.

        Booking a flight is a wager that miles will continue to be worth something in a year’s time. The cost of that wager is the taxes and fees, for net 0 gain (as you are just preserving value). It’s even better to sit on them for 0 cost. The only reason to burn now is if you know a massive (>50%) deval is coming, but the airline survives.

        • Tom1 says:
          26 Apr26 April 10:31

          Yes that’s right.
          I’m basically seeing the refundable booking as a £30 insurance policy to reserve the value of my miles. (Is also cash flow as the fees element is payable now, but that doesn’t worry me).

          If it goes bust, I’m getting (hopefully) a business class flight on another airline, instead of hotel points. (I explained somewhere else, but I have HH points already, so unlikely to use more HH points until 2022 at earliest. By which time they may devalue further (?)).

          If it doesn’t go bust, I’ve lost £30 and retain the points to use another time.

          • mr_jetlag says:
            26 Apr26 April 10:38

            Makes sense if you don’t value hotel points. I don’t think this was tested as Flybe had no FFP, but the card company may take the view that s75 applies to the taxes/fees paid not the value of the entire flight. You could then go to insurance but most already have Corona exclusions or waivers. If you have the miles and can float the cash, of course all this is moot and would love to hear how it goes.

          • John says:
            26 Apr26 April 11:11

            Paying £1 on a credit card covers you in full for a flight over £100.

            So I don’t see how paying at least £100 plus some miles means you aren’t covered for a replacement flight.

            I suspect that you’d have to go to MCOL to be repaid the cost of an equivalent flight (and only if you minimised the cost rather than splurging on the most expensive flight you can find), and the card provider may no longer want you as a customer afterwards.

      • Doug M says:
        26 Apr26 April 10:27

        I’ve yet to see any proof of this. It’s an interesting idea, and someone pointed to a Financial Ombudsman case, but the circumstances were quite different. For clarity I’m just saying I think this is a reach, and I’ve yet to see proof of it happening previously.

        • Tom1 says:
          26 Apr26 April 10:39

          Yep. That’s what I’m missing – the cases to prove.

          • Adam says:
            26 Apr26 April 11:02

            I’ve given this some serious flip-flopping thought a few times, and you hit the nail with preserving value. Where I got to (in no particular order – you decide which was the nail in the coffin…)

            1) Some previously concrete legislation has become fundamentally unpredictable (suspending director wrongful trading provisions a good example). I’m wary of relying on untested consumer protection laws right now and it backfiring with unintended consequences.

            2) My 8 week old. Also very unpredictable!

            3) Trying to convince my other half this is a good idea…

    • mr_jetlag says:
      26 Apr26 April 10:16

      great post. I work in private debt / cap markets and fully agree that the core business is viable and this COULD be gamesmanship / managing expectations for current equity and bond holders to be wiped out / massively diluted. Sunak’s previous experience stands him in good stead as he would have been doing something similar albeit on the other side of the fence.

    • Simon says:
      26 Apr26 April 10:17

      The Gov have bailed out Easyjet to the tune of £600m with their biggest shareholder Stelios (+ family) at 34-35%. They are tax exiles living in Monaco but Easyjet pays UK Corp Tax. With this in mind why not assist Virgin; owned 51% by Branson, a tax exile in the BVI, but Virgin paying UK Corp Tax?

      Quick question if anyone knows. If you transfer Virgin FC to Hilton. Can you transfer them back?

      • mr_jetlag says:
        26 Apr26 April 10:33

        Because if aviation shrinks by half over the next 5yrs these airlines wont be paying Corp Tax for a long time to come. The pie is smaller, so better to back the likely winners (EZY, FR) rather than the losers.

      • Vinz says:
        26 Apr26 April 10:34

        Yes you can but the transfer rate from Hilton to virgin is terrible

      • The Savage Squirrel says:
        26 Apr26 April 10:38

        Yes you can transfer back but you’re not going to want to…..
        100,000 miles -> 150,000 HH points
        then back the other way:
        150,000 HH -> 22,500 miles

        OUCH!

      • Rob says:
        26 Apr26 April 13:03

        The Government bailout scheme is only available to companies who have rated, tradeable debt instead of standard bank debt. Unfortunately (and it is mainly bad luck) Virgin never bothered issuing tradeable debt. easyJet did. easyJet can therefore borrow from the Government and Virgin cannot.

    • Richard says:
      26 Apr26 April 11:23

      Agree with most of the comment, don’t agree on FC being on the chopping block.

      There might be a 20-30% devaluation but zeroing FC accounts would be suicidal. No business recovery plan for virgin that can succeed starts with shoving two fingers and virgins biggest customers to that extent

    • Cam says:
      26 Apr26 April 11:37

      I concur with the analysis above. The ownership restrictions also (AFAIK) apply only to voting rights, not to equity generally; sophisticated financial investors may be able to find ways around this, with preferred stock, loans, etc. A pre-pack administration could also help to reduce aircraft lease and other fixed costs.

      • Cam says:
        26 Apr26 April 11:45

        As an addendum, I also don’t see the FFP being massively devalued as likely; there is too much value in keeping customers loyal to a restructure airline.

        As a thought, I seem to recall seeing some press that FlyBe might be resurrected. What about the possibility of linking FlyBe to a restructure Virgin Atlantic? This could help with hubbing at MAN and EDI, thereby reducing head to head competition with BA outside of major routes, and better leverage the DL JV.

        The discussion here has mostly focused on BA vs VS. However, for the UK aviation sector overall, one needs to consider also the impact of the loss of Thomas Cook and Monarch. They weren’t business or network carriers, and arguably there was excess capacity (particularly with a fall in demand), but the increasing market concentration should be considered.

  • jamie says:
    26 Apr26 April 10:17

    I don’t understand the talk about closing Virgin Money credit cards….surely they are not under threat if Virgin Atlantic folds or not??

    • Stu says:
      26 Apr26 April 10:31

      People are considering the cost of a non refundable fee for the premium card, In order to earn miles in an airline scheme that *may*not have an airline!

  • vol says:
    26 Apr26 April 10:42

    I posted earlier but my message wasn’t published for some reason 🤷🏽‍♀️

    Not really a mega collector of Virgin Miles still I do have some – where can I make use of these or spend these in the event that it all goes belly up or landing gear up, even

    • Peter K says:
      26 Apr26 April 10:53

      Certain words like cash$$back are banned.

      If it all goes wrong you are too late. It’s pre-emptively or never.

    • Lady London says:
      26 Apr26 April 16:09

      You can transfer to Hilton, IHG, Eurostar. Only in specific chunk sizes though. It’s on the Flying Club website and also here very extensively commented across threads since late March.

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