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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.)

Comments (135)

  • Ken says:

    Will be much the best solution by far if a ‘Phoenix’ Virgin can fly again, with fresh capital.

    Restructure the business, concentrate on profitable routes using more fuel efficient planes.

    No shame in administration under current circumstances and don’t think there is much damage to brand.

  • David Cohen says:

    What would this mean for 932 plated tickets with on-carriage to other carriers? Would IATA have to suspend them from the clearing procedures? If the new business is liability free, that comes with the implication that these would not be honoured by other airlines? Unless there’s some prior agreement with Delta and KLM/AF (who I imagine most of the flights would be with)?

  • Baji Nahid says:

    Oh god, I have flights that were ticketed by virgin but were to go on KLM and Delta. If virgin goes bust i believe i may lose my tickets unless DELTA OR KLM would like to honour these 🙁

    • Baji Nahid says:

      I have become stressed as I have saved a lot for these flights and I would be absolutely gutted if I lose these 🙁

    • Harry T says:

      Are they redemption tickets? If so, there’s a slim chance Delta might honour them (I wouldn’t count on it). KLM would likely not. The airline partners rely on Virgin paying them after you take your flight, if booking using VFC miles.

      • Baji Nahid says:

        Hey Harry!, unfortunately these were cash tickets paid on a credit card through an OTA but ticketed by virgin. One flight just got cancelled now that was for the end of may so im gonna try getting a refund from the OTA but the other flight is in November and thats still online.

        • Harry T says:

          If they are cash fares then you would be entitled to a refund or rerouting. The OTA might make it a bit more of an arduous process if they aren’t on the ball.

  • r* says:

    In this situation would the points be wiped out or would they likely transfer to the new virgin?

    • marcw says:

      No one knows.

    • Rob says:

      You can’t afford to annoy your best customers ….

      • Mikeact says:

        You mean 1000’s more will say, ‘I’m never flying Virgin again ‘? …. (if they return)
        I think not.

        • Rob says:

          If you wipe our their miles and status, there is far less reason to return.

          • Mikeact says:

            Sorry, not clear. I meant to say, they may be upset, 1000’s of their customers, but they will definitely not shun the ‘new virgin.’
            Bit like BA’s upset thousands…..of course they will fly BA again, despite what they say.

          • jc says:

            Disagree, Mikeact. No one was flying BA for the free meals. People are flying Virgin because of the miles stash / status they have there.

          • Mikeact says:

            You need to backtrack and read the numerous ‘No more BA for me’ etc etc., that have been posted on this site for months now…it’s nothing new. (And this is just one site)

  • Shacker says:

    An option for those not wanting hotel points would be a virgin gift card which can be used at other virgin group sites, the experience site for example doesn’t seem to be run by Virgin but a third party

    • Rob says:

      For big balances, booking a Virgin Holiday on miles works. Better return (0.55p) and ATOL protected.

      • Mr Magloo says:

        Very Wise

      • Ben says:

        But, are the points protected under ATOL – do they count as ‘cash’ towards the holiday?

        • Rob says:

          I would say yes because you are using miles to pay a cash bill – it is not a ‘redemption’ holiday. Bung £100 on a credit card for extra protection.

        • Craig says:

          Hi Ben, I believe they would be protected by ATOL but most travel insurance companies don’t recognise them as payment and will not payout cash in the event of a travel insurance claim.

      • Lady London says:

        Someone was saying a Virgin Holidays booking (which would bring you under ATOL protection) would only need a £100 night at, say, LGW or LHR as well as your flight.

  • Chris Heyes says:

    So if VA could be bought by Branson, that also means Branson could inject all his money into Virgin now and keep it afloat if he so desired, could he ?

    • Shacker says:

      Well he could but it wouldn’t make much sense as the debts would still be there, when he does this the debts are wiped so they can have a fresh start

      • Shacker says:

        Unless you meant after he took the deal

        • Chris Heyes says:

          Shacker, Yes after the deal , because 2/3 years down the line unless he injected his money in NEW Virgin they would be in the same position again.
          His position is inject just enough in many “Virgin Business” gain from growth.
          The problem with VA has been ALWAYS on the edge will be same in 2/3 years unless Branson devotes his time and money in New Virgin (Mainly His Time but he’s got space travel as his new toy)

          • Will says:

            Who knows, in a post apocalypse world where there are empty slots at Heathrow and less overall travel requirements an agile airline without an excessive fleet and the flexibility to try different routes might be a better model than a monolith designed to operate at 2019 levels with a near monopoly over slots and commitments on far too many aircraft.

  • BJ says:

    @Rob, would Conrad Samui Residence not work for your family? A 2 bedroom pool villa with sea view is usually at least £1000/night including tax and fees. Premium room reward night is usually over 300,000 so you would be returning your 0.33p valuation, and possibly better as prices can get to £1500/night at times.

    • TGLoyalty says:

      Only if he would be willing to pay £1k/night for a 2 bed villa in Koh Samui anyway

      • Rob says:

        Premium Room rewards are a function of the cash rate and usually nearer 0.25p per Hilton point. That’s over 60% loss vs sticking and hoping for 1p on a flight.

  • Anwar says:

    So are people still holding onto their Virgin miles ? Or is it time to press the release switch. I’ve held my horses thus far, but I’m not sure now.

    • Peter K says:

      Basically, the arguments for and against are the same as before and thus the replies will be as well.

    • philco says:

      I am still holding but I already have a ton of Hilton points and will soon have a ton more given 12x points on grocery spend on certain US issued Hilton cards.