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Virgin Atlantic may receive a lifeline bailout under the Government’s new ‘Project Birch’

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Another window of opportunity has opened for Virgin Atlantic.  The Treasury revealed, via the Financial Times this morning, that it is about to launch ‘Project Birch’ to bail out ‘strategic’ businesses.

‘Project Birch’ is an admission by the Government that the country will suffer disproportionate damage if key businesses in specific sectors collapse under the weight of coronavirus. Aviation, aerospace and steel are amongst those expected to benefit.

The Treasury is quoted as saying:

“In exceptional circumstances, where a viable company has exhausted all options and its failure would disproportionately harm the economy, we may consider support on a ‘last resort’ basis. …… We are putting in place sensible contingency planning and any such support would be on terms that protect the taxpayer.”

The key point is whether failure would “disproportionately harm the economy”.  Whilst you may suspect that Virgin Atlantic would not necessarily be included here, it is known that the scheme is likely to include Jaguar Land Rover which has a similar niche market position and which is seeking £1 billion.

What both companies have in common are large high-tech supply chains with UK manufacturing, which in the case of Virgin Atlantic is primarily Airbus, via its sites in Wales, and Rolls-Royce.

Virgin Atlantic Project Birch

Tata Steel is also rumoured as a beneficiary of ‘Project Birch’.  Tata is believed to have approached the Government for a £500 million bail-out over recent days.

Whilst the scheme could include the Government taking equity stakes, it is believed that the preference is for carefully targetted loans.

Meanwhile, it was revealed over the weekend that Virgin Atlantic’s debt holders have appointed Deloitte to advise them and to help co-ordinate a joint response to any proposals.  Attempts to put the airline into a pre-pack administration, where it is immediately bought back debt-free for £1, are being hampered by the rules surrounding airport slot ownership during insolvency and the fact that Virgin’s Heathrow slots have been used to guarantee a loan.

Sir Richard Branson has recently raised funds by selling down part of his stake in Virgin Galactic, with much of this money earmarked for Virgin Atlantic.  49% shareholder Delta Air Lines is blocked from providing additional support under the terms of its own bailout by the US Government.

The FT article is behind a paywall but City AM has a summary here.

We are also expecting confirmation of the €9 billion bailout of Lufthansa by the German Government over the next 24-48 hours.  It is believed that the package has hit a stumbling block due to the insistence that existing orders for €5 billion of new Airbus aircraft are met, despite the airline no longer having any need for them, and concerns that the EU will block the proposal.

Virgin Atlantic may receive a lifeline under Government's new 'Project Birch'

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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 (37)

  • jimA says:

    Its going to need some pretty fancy accounting to make TATA steel appear as a viable company

  • James says:

    It’s well named ta-ta to taxpayer money

  • Kevin Howell says:

    No way should Virgin be baked out companies such as Hull Trains who are stand alone but provide an excellent service should be helped before any company that was losing money before the pandemic or is it look after London again

    • happeemonkee says:

      Ahem, and Manchester too

    • ChrisBCN says:

      Isn’t helping Hull trains also helping London as that’s the busiest stop on the route? Perhaps we should keep Hull trains pootling around Hull, we wouldn’t want to help London would we.

    • John says:

      Standalone?? Hull Trains is owned by the UK’s biggest transport operator.

  • John Muir says:

    The UK don’t need Virgin, it will survive quite nicely without the loss making airline and should not be supported.

    • Andrew Grant says:

      So you would rather ALL the jobs at Virgin go as well as a great number of jobs at ancillary suppliers, and then see air fares rise when there is no competition. I bet you would be one of the first to complain when your next flight costs a huge amount more because there is no competition.

      • John Muir says:

        Virgin is not the only competitor on BA routes. Last count there is about 3 that only has Virgin as a competitor. The UK flyer has loads of choices when you include going indirect which all acts as a competitor to BA. As to the other jobs in other companies, there won’t be as many as you think as they would be downsizing anyway and other airlines will still be using their services as will any mew airlines that would take over routes if they where profitable in the first place. Virgin’s accounts would also need to be more open to show where all the money goes if they want Governmemt assistance of any kind.

      • John Muir says:

        Virgin are usually more expensive any way. Virgin is not the only competitor on BA routes. Last count there is about 3 that only has Virgin as a competitor. The UK flyer has loads of choices when you include going indirect which all acts as a competitor to BA. As to the other jobs in other companies, there won’t be as many as you think as they would be downsizing anyway and other airlines will still be using their services as will any mew airlines that would take over routes if they where profitable in the first place. Virgin’s accounts would also need to be more open to show where all the money goes if they want Governmemt assistance of any kind.

  • David says:

    Virgin Flying Club website down for 2 days now; could they be freezing Miles transactions pending Virgin Atlantic administration/re-structuring?

  • David says:

    Thanks; “qui vivra verra” (as Air France might have said)