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'

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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  1. mr_jetlag says:

    I’ll be very surprised if the EU block Germany, they’ve already declared a virtual free for all on state aid. “No bonuses for execs” yeahhh sure.

    • Lady London says:

      “no bonuses for execs”
      “no dividends to be paid to shareholders while loan is not repaid”
      “no increase in transfer pricing paid out of the loan recipient to companies within the same group”
      “no increase in head office / overhead / central services contributions by the loan recipient”
      “no spend on new projects by the company till the loan is repaid”.

      Good luck enforcing even this obvious list.

      Why are we calling this a loan? we’re still revovering from baling out rich bankers in 2008.

      Commercially most of the qualifying businesses are lost causes so far as capital is concerned. The only thing the British taxpayer
      will get is a few jobs kept until the next businesd inconvenience event when those companies will want another handout.

      Better to stop now before we start.

      Although I now respect Sir Richard Branson for selling holdings in Virgin Galactic to raise money for Virgin Atlantic, which was technically optional for him, Virgin had long enough (10 years) to prove it would not contribute taxable corporate profits for the UK taxpayer and they have no assets. That’s not going to change after this crisis.

  2. Project Birch – The magic money tree

    • Andrew says:

      Ah, the tree…

      I was thinking of the traditional public school punishment.

      • Yes, I thought it might be what Johnson is going to do to Cummings!

  3. Virgin Atlantic is hardly a key business by any stretch of the imagination: when it comes down to it, they are little more than a regional airline and one guys ego trip. Also, take anything the treasury say with a large dose of salts, not long ago their boss was saying that the economy would bounce back rapidly then just six days ago he did a u-turn on that – so brilliantly competent he couldn’t even get the direction of travel correct.

    • Spaghetti Town says:

      A lot of Heathrow airport and Rolls Royce employees would disagree with you.

      • Because they have nobody in the current market to replace their orders. In normal times they actually would not care because they know that someone else is willing. For example in normal times Airbus would’ve lost the 14 a330neos but would’ve gained 12 A350 orders by Qantas. And LHR the slots would’ve sold the next day

        • Isn’t that the point? In normal times the airline would not get Government help, but these are not normal times.

        • The point is that it is not key, even in these circumstances. Even if they go bust other airlines will take over the slots and will still require all the same services Virgin does. It might be even more beneficial to customers and the economy were Virgin slots to be taken over by a large number of different carriers serving a wider market through a more diverse route network than that offered by Virgin.

          • Spaghetti Town says:

            Would they though BJ? Unlikely to be the case at Manchester and Gatwick. No one will take over virgin there.

          • I thought Virgin had already quit Gatwick? Manchester, llthey have already abandoned expansion plans. Not sure saving them would make any difference. Not really convinced my own suggestion at LHR would come to pass anyway, most likely result would be more indirect flights via the ME and more frequencies to the same USA hubs by the same USA carriers. What I would rather see is both BA and Virgin get close to the Brink with Government stepping in to save both but with massive restructuring to provide real completion via equal slots at LHR, requirements for domestic connection etc – a pipe dream I know but some meaningful competition would be great. it

  4. Simon says:

    Could FlyBe be resurrected under such a scheme? It was critical for moving lots of people around UK (including myself)

  5. Chrish says:

    Good move by the Government Offer Virgin a loan to keep them going for us until we can spend our miles that we have collected “thank you Boris”
    All we need now is conformation when do we need transfer the rest to Hilton
    Any idea Rob @

  6. Lady London says:

    I note that Tata now has *both* hands out for the UK government begging bowl.

    Tata’s riches make SRB look like a pauper.

    Tata wanting the UK to give their company JLR Jaguar Landrover a handout?

    Tata Steel wanting more subsidies? Apparently Tata got away with dumping the British Steel workers’ pension liabilities by pleading poverty. It seems they planned this in two moves.
    Despite the original deal for the sale of British Steel already having let Tata buy the business free of a major part of the pension liability. IIRC a very few years later Tata got its begging bowl out again and succeeded in dumping most of the rest of the remaining pension liabilities, that they’d originally agreed to keep as part of the deal, onto the British government. Funnily enough the remaining new Tata Steel pension scheme is now overfunded and likely to be divested, I think I saw recently. They’ve also had other deals and handouts.

    Where does it stop?

    Companies bought by Tata seem to have many services and supplies taken out of the UK to other companies. Such as I have frequently been called by agencies calling from India yo engage me for Tata Consultancy services India, who are the outsourced providers of many formerly employed service departments such as IT, in companies Tata acquires in the UK.

    So whose money from the UK is flowing where? Where are the jobs going? Time the UK government learned that some protectionism does stl make economic sense. The Germans Dutch and French (amongst others) do it.

    • mr_jetlag says:

      should probably just cut out the middleman and bail out tata from the international dev funds budget.

    • Tia M says:

      Totally agree with you about all big UK companies are out sourcing jobs to other countries!!! Whiles they take UK tax payers money!!! UK Gov should try to protect UK jobs for all hard working people in UK.

  7. Spaghetti Town says:

    The black hole that is tata steel.

    • Lady London says:

      I believe Tata know how to work the system and we in the UK are mugs.

      • Bootlace says:

        Tata, Tech Mahindra, Infoys, HCL. Wipro , Cognizant et al, All Untrustworthy B*stards IMHO.
        They should all be handled the same way that President Trump has dealt with Huawei in the States.

        • Lady London says:

          Funnily enough I am a big fan of Huawei even though I am aware of some risk.
          I think they have been targeted as a pawn in a trade / tarif/ access battle by the US, unfairly.

          I do not know all the companies you mention, although I have had or been offered contracts with 2 o 3 of them, so I am not sure if they are all doing the same to rip off the UK as my bits of contact with Tata make me think.

          What I am sure about is while social protection is definitely excessive in some European countries in light of what those countries can sustain long term, the UK could definitely start standing up for keeping British companies British (Cadbury Schweppes, anyone?) and protecting British jobs and their supply chains to a more impactful industrial policy that will support the UK economy. They’ve been pussies and it’s got to stop.Look what France and Germany are getting away with.Why are Spanish workers of IAG, who don’t work for IAG’s existing profit driver British Airways, being kept safer than longstanding UK employees of British Airways.

        • Bazza says:

          What’s this, support for Trumps methods? The liberals will be after you! You will be going against globalisation next and suggesting leaving the EU is a good idea to protect job….

  8. Surprised that no-one has asked the big question – what does this mean for your Virgin miles Rob?

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

  10. James says:

    It’s well named ta-ta to taxpayer money

  11. 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.

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

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