Virgin Atlantic appoints advisors to manage a bankruptcy process

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Sky News reported this afternoon that Virgin Atlantic has appointed restructuring specialists Alvarez & Marsal to oversee a potential pre-pack insolvency of the airline.

This does not necessarily mean that administration is inevitable, and as Sky points out it is a legal requirement of the directors to prepare for such an eventually if it looks like it may be necessary.

Because of the way that pre-pack administrations work, this would NOT mean the end of the airline.

Under a pre-pack, the airline would declare itself bankrupt and would be immediately sold to a pre-arranged buyer.  This buyer is highly likely to be Sir Richard Branson, potentially with new partners.

Virgin Atlantic appoints advisors to manage a bankruptcy process

The new shareholders would acquire the assets of the existing business but not its liabilities.  The airline would therefore emerge debt free.  The process would also allow it to shed leases on aircraft which were no longer required.

One issue, however, would be the potential loss of its Heathrow Airport landing and take-off slots.  Many people have forgotten that many of Virgin’s slots are secured against a £220 million loan and would be forfeit if that loan was not repaid.

It is possible that any announcement this weekend to force visitors to the UK into 14 days quarantine, including returning UK citizens, could be a trigger for administration.

Changes to UK insolvency proceedings as part of the response to coronavirus allow the airline to continue trading whilst going through a restructuring without the directors being personal liable for the debt.  This increases the chances that the airline would be able to emerge intact in some form.

Virgin Flying Club should emerge unscathed, especially as your miles are legally owned by Virgin Red / Virgin Group Loyalty Company.  Virgin Atlantic is not a shareholder in this business, which is owned jointly by Virgin Group and Delta Air Lines.  However, in reality your miles will have little value if the cannot be redeemed for flights as it is unlikely that Virgin Red has enough funding to pay for redemptions with third parties.

The full Sky News article is here.  Mark Kleinman, the author, has had a decent track record recently of accurate scoops covering the problems at Flybe and Virgin Atlantic.

Virgin Atlantic appoints advisors to manage a bankruptcy process

How to earn Virgin Atlantic miles from UK credit cards

As a reminder, there are various ways of earning Virgin Flying Club miles from UK credit cards.  Many cards also have generous sign-up bonuses!

Click here to read our detailed summary of all UK credit cards which earn Virgin Flying Club miles.  That page is regularly updated with the latest special offers and will still be accurate even if you are reading this article months after publication.

(Want to earn more Virgin Flying Club miles?  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.)

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Comments

  1. @Rob What’s likely to happen to vouchers from the Virgin Atlantic credit card?

    • Obviously unclear, since the airline would have the right to walk away from any contract it wants to.

  2. Catherine says:

    What should we do with our points then? Should we transfer them to Hilton ASAP or just leave them in Virgin for now? I have about 100,000 that I’d rather not lose.

    • I have 300,000. Up till now I have thought the upside reward of keeping them there outweighed the risk. Probably don’t feel that way now – but might have left it too late anyway. Oh well.

      I did cancel my Rewards card though as the £160 fee was due.

    • CarsCarpal says:

      I was thinking of booking a flight in the future (when I would want to go) as there is more chance of the tickets being honoured than there is of me keeping my 250k miles. Worst case after that is I claw the money back from my credit card, seemed to make sense?

      If I lose the miles then the whole Avios / Airmiles game will be dead to me. No more subscription credit cards, no more loyalty, I’ll simply fly with whoever is cheapest.

      • CarsCarpal says:

        To clarify: I meant to say is I am thinking of booking right now, a flight far into the future.

        • It is a decent punt AS LONG AS it is a flight you actually want to take, because your card company may eventually pay for a new flight but it won’t give you the cash value of a new flight!

          • CarsCarpal says:

            Thanks Rob, great to hear your opinion. And yes agreed – I would definitely be aiming for flights I wouldn’t want to move/change.

  3. What would happen to existing future bookings? They could decide to not honor any? But probably unlikely?

    • I have close to 1m points and really not sure what to do ?

      @Rob, what are you doing ?

  4. John Stewart says:

    What happens to Virgin Holidays and people who have been waiting for refunds for several months?

  5. Delphina says:

    Would be reassuring to received some clarity from Flying Club!
    I’m sitting on nearly 800k which I have been saving hard for a long time – and still spending on Virgin Atlantic Reward Plus Credit card. Really wondering if I should switch and start saving for Avios instead??

  6. Crumbs says:

    My Virgin card anniversary is coming up. Actually would intend to keep the card, but what are my chances of getting a refund on the card fee if VS goes belly up? As the bank won’t be able to provide the benefits of the card, think I should get at least a pro rata refund?

    • Crumbs. I asked a Virgin Money agent the same thing and he said I wouldn’t get a refund. As I have the free Rewards card as well I cancelled the Plus card and saved the £160.

      • Why do people think Virgin Money is going bust, unbelievable

        • Jack, it’s no so much Virgin Money going bankrupt, it’s the VFC points you earn on the credit card. If the airline goes and then fails to recognise the points from VFC (assuming they don’t disappear) what’s the point of having the card?.

  7. Murray says:

    I’m genuinely at a loss of what to do – we have a decent amount of flying club miles and wouldn’t get much use out of them transferring to a partner like Hilton. Would Virgin likely still honour our miles after being bought out?

    • Qwertyknowsbest says:

      Too many lazy questions on H4P these days. We all appreciate help and others experience, but so many now asking without even bothering to read recent threads.

    • insider says:

      the lesson for most here is to try not to hoard your miles when you have an option not to. The only way to get the value from your points is to use them! There’s no honour in being the richest points holder when the music stops.

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