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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)

  • Peter Martin says:

    Looks as though it’s time to run up the Virgin rewards credit card to offset any loss in value of the miles!

    • Andrew M says:

      I’ve read this several times but I still can’t work out what it means.

      • Travel Strong says:

        Making a special effort to use the entire credit limit every month to max out on miles earnt. No doubt including manufactured spend, or curve metal, or the few remaining curve blue opportunities.

        • Andrew M says:

          Ah, I see, thanks. It’s interesting that some people think the correct response to Virgin’s difficulties is to try to obtain as many points as possible while others think the solution is to off load all their points! I’ve hedged by bets by sending a big chunk to Hilton while still retaining enough points with Virgin for a few ANA First redemptions.

        • Benilyn says:

          What are the remaining blue curve oppurtunities?

          • Travel Strong says:

            Anything not captured in the MCC codes they are now charging for, plenty of options out there. As an example, do a test transaction for your favoured ISA provider to see if the MCC code is favourable.

      • Travel Strong says:

        Not that devaluation of miles is in any way hinted at in the article or anywhere else, or thought particularly likely. Really, this is no reason to ‘run up’ your miles any more so than any other time.

        • Chrisasaurus says:

          Make an extra effort to pay for extra miles (yes, pay as in the opportunity cost of earning 1.8p on plat or next best elsewhere) because you believe they will be devalued?

          Deliberately invest in an asset specifically because you think it will lose value?

          I’m no investment whiz but that doesn’t sound like the sorta thing smart people would do…

      • Chrisasaurus says:

        My guess is that Mr Martin thinks that if he runs up a massive credit card debit with Virgin Money then when VS go under he can refuse to pay it back and somehow… um.. (the next few steps only he can explain) maybe he just really likes being taken to court I dunno

        • Peter Martin says:

          I do mean that I will run up the card – and default on it if I lose value in promised rewards. They will pass it on to debt collectors – who will eventually settle for 10 – 15 p in the £.

          As with the last recession – there is not enough court time in the next 6 years to take every defaulter to court!!

          • Lady London says:

            Ummm..won’t that trash your credit record though?

          • Joe says:

            Can’t they just give you a load of points that can’t infact be redeemed?

          • Charlieface says:

            You could do that anyway even not Virgin cards. And Virgin cards are operated by Virgin Money owned by Clydesdale, so immaterial

          • will says:

            Unless you are asset less it’s a fairly easy process to get a court to put a charge on any property you might own if you default on a credit card debt.

            If you own a ltd company that doesn’t have any assets easier to take out a 50k bounce back loan, pay yourself a salary for the next 12 months then fold and default on it.

            I’m pretty sure that will take up at least one Panorama in years to come.

          • BrightonReader says:

            Why would you even plan to do this?

            Trash your credit record. Which may even impact the limits on your other cards (adversely) and ability to get loans and credit in the future (also adversely)

            A CCJ on your record won’t look good.

            And somehow this is sticking it to a Virgin Money?? (Of which Virgin group owns less than 15%)

            I’m going to assume there is a clause in the T&Cs enabling them to withdraw the rewards scheme any any time as well.

          • Callum says:

            Thank you! It’s people doing stupid stuff like this that generates profits for the CC companies, thus subsidising all our points!

            Though in all serious, DO NOT DO THAT. I would only take that strategy if you were terminally ill and had no estate. (Even then, it’s basically theft – so I’m not sure I would unless I really needed it!)

          • Peter Martin says:

            I didn’t really make myself clear. I have had the Virgin rewards cc since they launched it. The Virgin Money cards are now part of Clydesdale Bank.
            Anyhow, I got the card as they promised rewards based on my spend and for the payment of an annual fee.
            So, if I do not have the ”benefits” of the promised rewards – I am not bound by the ”liabilities”, either.
            So, as a minimum (though up to value of any lost rewards) – the annual fee payments and any interest or other charges paid to Clydesdale will be required to be refunded.
            After that – the remaining outstanding balance would be negotiated between the parties.
            Hugely, hugely unlikely to end up in court.

          • Callum says:

            That makes even less sense than your original post!

            So your new plan is to borrow loads on the Virgin credit card and then refuse to pay any of the interest charges or the annual fee and then negotiate on paying back the balance? If they don’t agree to waive it (the annual fee I can see them agreeing to if they can’t issue vouchers or points anymore, but certainly not the interest and DEFINITELY not the balance) then it quite possibly could end up in court. At the very least you’ll get a default on your credit report.

          • BrightonReader says:

            I really don’t see it ending well for you but sure go ahead.

            It might work inside your head but not in the real world.

            And yes they will take you to the County Court. It’s really easy to do and as they will have done it bedore they know exacty what they are doing with filling in the paper work, having extacts of the T&Cs etc etc

            When they win and you fail to pay as agreed then they can apply to put a charge on your house (if you are a owner of have a mortgage) or send your employer an attachment of earnings order so they get their money before it even hits your bank.

          • Chrisasaurus says:

            That is hands down the most ludicrous non-shoestring post of the year, but if nothing else watching a grown up trying to rationalise theft if fascinating from a psychological perspective

          • Chrisasaurus says:

            And for good measure posted his intent on a public forum (please tell me that’s not his real name) in advance!

            Ladies and gentlemen I think we have a winner…

        • Peter Martin says:

          Well goodness me – there are a few apologists for the Banks on here!!
          If I buy something that does not come with all it’s promised accessories – then I have various remedies – and one of them is to negotiate a discount with the vendor! So, if you consider travel rewards as an accessory to your card spend – then their non-delivery would give rise to ‘negotiation’.
          Also, the vast majority of credit card defaults / disputes do not go near any County Court (google unenforceable credit card debt). A creditor needs every bit of the paper involved – with all of the proscribed terms accurately displayed – see the Consumer Credit Act.
          It is RARE that the Banks can get all their ducks in a row .

          • Lady London says:

            Somewhere in the small print you will find a statement that miles/points are worth .0004pence or so each, or even less.

            Your arguments will be thrown out of court at great cost to yourself. The credit record damage will start as soon as you fail to pay anything due and that’s where the damage is regardless of whether anyone bothers to take you to court or not.

  • Young L says:

    Transferred 180k miles to Hilton in March, still have not got the it. What can I do?

    • Peter K says:

      Contact Virgin Atlantic.

    • J says:

      Did you complete data protection? You may have missed an email from ‘Fcsverify’, which you need to reply to with a few details before they release the points. I received the email 3 weeks after the points transfer had been confirmed over SMS.

      • Chris says:

        Same here. Received the email about 48 hours after using the whats app service to transfer out to HH. It was badly worded and asking for information that I didn’t think particularly relevant (previous address, previous email address) so I was suspicious enough to want to confirm it was them by reopening the conversation on whats app. When they confirmed it was genuine I replied with what they wanted and the points landed in my HH account within a couple of days. The whole thing took under 2 weeks.

  • Dubious says:

    I thoguth I read that Branson is selling a 50% of his holding in Virgin Galactic…presummable to raise funds for other investments…

  • Peter says:

    If my understanding of the rules is correct, the airline that would emerge from a pre-pack administration would not be the same entity as Virgin Atlantic. It would therefore need permission to operate from the CAA. As Virgin Atlantic’s creditors would probably be nursing heavy losses, would Sir Richard be likely to pass the fit and proper person test?

    • Rob says:

      Flybe shows that you can sell an operating licence. More on this tomorrow.

    • pauldb says:

      The restructuring articles linked in the early comments seem to imply that a newer subsidiary Virgin Atlantic International owns the slots and has its own operator licence (CAA confirms this). I imagine that VAA going bust is a technical default of the secured loans but if the debt holders are willing I would think there loans can continue as VAI debt (with or without a haircut, different to other VAA debt). VAI becomes New Virgin, bought and recapitalised by Branson.

      • pauldb says:

        VG buys VAI from VAA, VAA reorganises (dumps liabilities), then VAI buys VAA. Beautiful circularity.

      • Rob says:

        This is why Alvarez & Marsal are worth their fees!

      • ankomonkey says:

        I wonder what they might call ‘new Virgin’. Virgin Red – nope, that failed. Virgin Connect – nope, that never took off (literally). Australia and Atlantic – nope, they both failed. Cola, Records, Megastore – nope, they all failed.

        So where did SRB make his billions exactly? Hot air balloon experiences?

        • Callum says:

          I see no reason to change it from Virgin Atlantic. It’s not as if failing during a pandemic is really going to affect their reputation – people will understand. Otherwise you’d have to drop Virgin (and Branson) completely.

          He made his money from Virgin Records/Megastores. I’m sure he got a fair chunk from Virgin Atlantic and Trains though.

        • pauldb says:

          To fill the airline hole, Virgin Group has a $1b stake in Virgin Galactic which is listed, in case that valuation sounds ridiculous to you too.
          Hard to know exactly how much of that is gain, but the only number I quickly found was that Virgin put in the first $100m for that stake.

  • Mr Matthew Quinton says:

    If I have a flight booked with miles and they go through the pre pack administration is my flight lost?
    sorry if this is an obvious question, I have saved for three years for this flight. My first ever upper class with my wife on the A350.

  • Froggitt says:

    If the LHR slots are security for loans the new company is likely to default on, trashing Gatwick last week doesn’t seem like the brightest marble in the box.

    • Callum says:

      That’s not how business works! Gatwick is not going to give up or jeopardise millions of pounds of revenue just because Richard Branson wasn’t complimentary enough about them! (Though I missed what he said? I’m assuming it was nothing that bad?)

      • Chrisasaurus says:

        I don’t think from my understanding that VS will lose the slots but if they did, and needed a new base, now would be Gatwick’s opportunity to lock in an agreement more catered to their own interests – given they’ve seen how quickly they’re ditched when it comes to choosing

      • Froggitt says:

        I meant trash as in pull out of

        • Callum says:

          Oh sorry, my mistake. I haven’t been following it – has that actually happened yet?

  • Amit says:

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

    • Rob says:

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

  • 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.

    • Ian says:

      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.

        • Rob says:

          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.