State Aid please...

Is VS so much of a risk that they can’t raise funds through commercial/investor avenues? Surly they can levy some funds against assets, I read that SRB is offering Necker up to help.

SRBs personal tax status is not relavent in my view. Nor is his supposed net worth. Government has bailed out all sorts of firms in the past and their foreign ownership hasn't been much of an issue when push came to shove when offering grants or loans.

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He might have been worth £4bn but now not so much. Plus how much of that does he have as ready cash.

Completely agree with this. I think VS is being held in disdain in some quarters because of SRB (some of what I read elsewhere is pure nonsense and there are some who are more than happy to see VS fail purely because of the figurehead), usually by those of a certain political slant. I also think net worth is irrelevant and some people don't realise that net worth does not necessarily mean cash in SRB's bank account.

I do think SRB has an obligation to open his wallet, which is what appears to be happening for VS and other companies within the Virgin empire, but then given the government have effectively killed the short-term market by telling people to stay at home and the FCO advising against all but essential foreign travel (all for public health reasons of course, which I'm not arguing against), they have some obligation to offer special support to the aviation industry that goes above what's being offered to all businesses - not unlimited support, but enough to at least let them come out the other side. Obviously what we don't know is what VS and the government discussed and what was rejected that led to them being forced to go away and come back with a new proposal.

Is VS so much of a risk that they can’t raise funds through commercial/investor avenues? Surly they can levy some funds against assets, I read that SRB is offering Necker up to help.

It depends what assets are available and if they're not being used as security for something else already.

SRBs personal tax status is not relavent in my view. Nor is his supposed net worth. Government has bailed out all sorts of firms in the past and their foreign ownership hasn't been much of an issue when push came to shove when offering grants or loans.

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He might have been worth £4bn but now not so much. Plus how much of that does he have as ready cash.

Completely agree with this. I think VS is being held in disdain in some quarters because of SRB (some of what I read elsewhere is pure nonsense and there are some who are more than happy to see VS fail purely because of the figurehead), usually by those of a certain political slant. I also think net worth is irrelevant and some people don't realise that net worth does not necessarily mean cash in SRB's bank account.

I do think SRB has an obligation to open his wallet, which is what appears to be happening for VS and other companies within the Virgin empire, but then given the government have effectively killed the short-term market by telling people to stay at home and the FCO advising against all but essential foreign travel (all for public health reasons of course, which I'm not arguing against), they have some obligation to offer special support to the aviation industry that goes above what's being offered to all businesses - not unlimited support, but enough to at least let them come out the other side. Obviously what we don't know is what VS and the government discussed and what was rejected that led to them being forced to go away and come back with a new proposal.

Is VS so much of a risk that they can’t raise funds through commercial/investor avenues? Surly they can levy some funds against assets, I read that SRB is offering Necker up to help.

It depends what assets are available and if they're not being used as security for something else already.

I think most people know that SRB doesn't have lots of cash sitting around, and understand that his money is tied up in his businesses. However, we must remember it isn't just cash he is asking for - he is asking the Treasury for £500m in commercial loans and guarantees. It seems inconceivable that he can't raise that money himself through equity release or guarantees on his rumoured £4bn fortune - for instance his stake in Virgin Galactic could be worth half that amount alone. If he really wanted to raise the money, he could do. And, if it is such a safe bet then why not put his own money where his mouth is?

What we are really seeing is that SRB knows that Virgin Atlantic is in deep trouble, and that there is a good chance any money put into it won't come back. He doesn't want to offer up his own assets as guarantees as he knows that he will probably lose them, so instead he plays innocent (and broke) and tries to put the guilt-trip on the Treasury. The good news is that the Treasury have knocked back his proposal and told him to make it more realistic, and have engaged Morgan Stanley to go through it with a fine toothcomb.

According to CNN Branson is prepared to put Necker up as collateral

https://edition.cnn.com/2020/04/20/busi ... index.html

According to CNN Branson is prepared to put Necker up as collateral

https://edition.cnn.com/2020/04/20/busi ... index.html

That helps, but he is asking for £500m, and Necker Island was valued at about £50m. At best that is a tiny 10% of what he is asking for and a distressed sale would probably mean even less.

The good news is that the Treasury have knocked back his proposal and told him to make it more realistic, and have engaged Morgan Stanley to go through it with a fine toothcomb.

Could indeed be good news for VS in that there is maybe a better chance of sympathetic experts like Morgan Stanley advising HMG to approve the proposal - given Morgan Stanley's own stellar financial expertise in getting themselves into a super big mess themselves but escaping their own mess by liberating $107 billion for themselves in Federal loans back in September 2008?

A cynic might suggest it's far more likely that the MS bean counters will recommend an HMG refusal and hope that they or another of the big boys would later be paid a pile of cash in liquidation and administration fees to pick over the VS carcass (accidentally selling the best bits to their own investment arm, making sure any loans or aircraft leases that are via their own good offices take priority in any pay-outs possible after exorbitant fees deducted and dumping the rest as a super complicated financial instrument to rip off our pension funds 2 years down the line .....)

Purely imo there are a few things at play here:

- SRB’s net worth might not be anywhere near what’s reported

- SRB is having problems raising cash, yes he has assets but they’re not the same thing. The last thing I would offer up as security is my home - he’s done that with Necker island.

- the govt bailouts are for viable businesses that are a going concern. VS is not. A hypothetical profit after 2021 isn’t going to wash.

I don’t think they will get state help, and I don’t think VS want to pay the market rate for finance - which to a distressed airline in an industry that’s grounded, is going to be very expensive.

Purely imo there are a few things at play here:

- SRB’s net worth might not be anywhere near what’s reported

- SRB is having problems raising cash, yes he has assets but they’re not the same thing. The last thing I would offer up as security is my home - he’s done that with Necker island.

- the govt bailouts are for viable businesses that are a going concern. VS is not. A hypothetical profit after 2021 isn’t going to wash.

I don’t think they will get state help, and I don’t think VS want to pay the market rate for finance - which to a distressed airline in an industry that’s grounded, is going to be very expensive.

No expert here but is it fair to say VS is not a viable business? I guess it depends on what you define as viable. Most businesses such as retail for example you would say a business with sufficient cash flows to manage its liabilities and financial obligations and turn a profit. But in my opinion the airline industry is very different partly a factor of exposure to oil prices and terror attacks - there are many airlines that don't consistently turn a profit and yet are viable in that they have survived for decades and have cash flows to meet their obligations.

Specifically VS has grown in strength, turning a profit for the first time for a while several years ago and since the partnership with Delta. I would argue that was it not for Covid-19 no one would question whether VS was viable and would be on the brink.

It is a tricky one for the government. On the one hand you have the not too distant memories of Monarch, Thomas Cook and Flybe which both suggests there is no point throwing good money after bad (Flybe), whilst also highlighting the loss of choice for consumers and impact of jobs for thousands of pilots, cabin crew and elsewhere along the supply chain. Equally the government is facing all sorts of demands for SMEs and large corporates, let alone the health crisis itself. Australia is obviously a different airline in a differnt market and subject to a different government but I think Virgin Australia (albeit in administration) receiving no government support may only indicate the outcome here. Virgin Australia was no. 2 airline providing both domestic and int'l competition to Qantas with an employee base of c.16k. Hard to think VS no.2 airline competing only on a handful of long-haul route with a smaller customer base would be viewed differently (although I know different government making the decision).

So far it seems that the government aid has been consistent across the sector - all companies can benefit from the 80% furlough scheme for instance (including VS), and the same criteria for government loans are applied across the board - for instance this is why Easyjet could access their loan but VS couldn't as they didn't meet the criteria for guarantees - although the same criteria was applied.

Another package the government are considering is a £4bn industry-wide guarantee against deposits for ATOL registered travel agents (presumably including Virgin's travel arm) - this may persuade people to accept a voucher rather than demanding a cash refund, as the government will pay out if the operator fails.

https://www.telegraph.co.uk/business/20 ... el-sector/

However, what VS are asking for is a special case to be made just for them, and I'm not sure if that is realistic.

- SRB’s net worth might not be anywhere near what’s reported.

More to the point, and something which often falls on deal ears whenever people have a pop at SRB over his net worth, net worth doesn't always equal cash in the bank. There's been a lot of conjecture on the subject so I don't know who to believe anymore.

No expert here but is it fair to say VS is not a viable business? I guess it depends on what you define as viable. Most businesses such as retail for example you would say a business with sufficient cash flows to manage its liabilities and financial obligations and turn a profit. But in my opinion the airline industry is very different partly a factor of exposure to oil prices and terror attacks - there are many airlines that don't consistently turn a profit and yet are viable in that they have survived for decades and have cash flows to meet their obligations.

If you read some of the comments over on a.net (a whole 11 page thread), quite a few people over there are vocally adamant that VS are doomed and should be allowed to fail. Some people over there are also wanting Norwegian to fail simply because they never liked how they setup different subsidiaries in different countries. Recall how it became a political issue in the US to grant them a permit.

I agree that the aviation industry (and by extension the travel industry as a whole) is heavily exposed to global events and sudden downturns in the economy and travel demand. COVID-19 is one example, another example includes 9/11.

I've been consistent that the government has a role to play in supporting the aviation industry given they have played a role in plunging the industry into sudden distress by telling people to stay at home and the FCO advising against all but essential foreign travel (which again I accept is for public health reasons). Not in blank cheque terms, but enough to see them through to the other side to ensure there's some sort of industry remaining and we don't have monopolies. I do accept though that downturns often become a survival of the fittest exercise.

However, what VS are asking for is a special case to be made just for them, and I'm not sure if that is realistic.

I thought SRB was on record saying they were after what easyJet got?

what VS are asking for is a special case to be made just for them, and I'm not sure if that is realistic.

Agreed. Sadly VS falls very much in the “nice to have” category rather than an essential service.

When borders finally reopen and travel restrictions are lifted it’s almost impossible to see how every route will be reinstated, every aircraft will return to service and every seat will be allowed to be sold. None of which bodes well for the viability of an airline that was barely profitable in the good times.

VS are nice to have to the extent that no they don't provide crucial access to destinations not already served (other than Havana ) granted, but something that often sees governments/regulators jump in is competition. VS aren't equivalent to BA in terms of route coverage and never will be but at least on transatlantic routes you'd have to say that the VS/DL partnership was pretty weighty competition to keep pricing in check,no? If you then look at other routes VS often ensure three operators on routes e.g. Jo'burg, Mumbai/Delhi, Washington, Hong Kong off the top of my head, let alone routes to the Carribean or Lagos where VS are the only direct challenger to BA.

Having said all that, looking at the continent (France, Spain, Germany, Italy, Netherlands) all countries operate with national flag carriers that have if not a monopoly, significant dominance over challengers. If you then think worst case Norwegian doesn;t survive then transatlantic competition from the UK really takes a hit.

I thought SRB was on record saying they were after what easyJet got?

Yes, but read my post. The point is that loans were available to Easyjet and VS on equal terms - both of them could apply for it, however there were the same criteria that had to be met. Easyjet could meet those criteria as they had guarantees in the many assets they had such as aircraft they owned. Unfortunately VS could not - their aircraft are leased, their property is rented, even their landing slots are already guaranteeing other loans.

The government was entirely even-handed here. At what point does VS take responsibility for the situation it finds itself in - that it has far fewer savings for a rainy day than its competitors? More than this, it appears they have been spending money that their customers have paid for their future bookings on current operations.

VS are nice to have to the extent that no they don't provide crucial access to destinations not already served (other than Havana ) granted, but something that often sees governments/regulators jump in is competition. If you then think worst case Norwegian doesn;t survive then transatlantic competition from the UK really takes a hit.

Agreed, competition is vital.

But these are not normal times and with such huge, unprecedented demand for government support across virtually all sectors of the economy, I fear ensuring families can still get a good price to go on holiday to Orlando will be pretty near the bottom of Rishi Sunak’s list of priorities.

Should VS (and/or Norwegian) go under, new competition for BA will emerge in due course, when the market demands it. But for the next couple of years I doubt demand will be high enough to need it. It’s going to be a long, long time before we need 40-odd flights a day again between the UK and NYC, or however many it used to be.

Bloomberg reporting that Delta is unable to make any further investment and raises the possibility that VS could face going through insolvency proceedings;

https://news.sky.com/story/coronavirus- ... c-11977216

https://www.bloomberg.com/news/articles ... nistration

The Bloomberg article says that VS has enough funds to get through to mid-summer.

The Bloomberg article says that VS has enough funds to get through to mid-summer.

The chances of any meaningful resumption of long-haul air travel by mid-summer are, I would say, slim at best and very likely non-existent.

I fear the future of VS now depends on whether the government decides it’s worth saving in order to maintain some semblance of competition to BA, or SRB miraculously finding a few hundred million more down the back of his sofa.

looks like it was nice knowing you...……..

If VS does run out of cash - I expect Branson and Delta will pre-pack it. It will emerge debt free and ready to fly.

I also expect airlines will use this time to change all the things they have dreamed off, but couldn’t previously. I’m sure BA will use it to move on many on the cabin crew stuck on the old worldwide contracts and mixed fleet will take over. Willie Walsh has stayed on for a reason.

SRB is now looking for a buyer for VS and has shelved the prospect of getting state aid.

https://www.telegraph.co.uk/business/20 ... tic-buyer/

SRB is now looking for a buyer for VS and has shelved the prospect of getting state aid.

https://www.telegraph.co.uk/business/20 ... tic-buyer/

Does anyone know if this will be Delta's share, Virgin's share or both?
Also, if he can't find a buyer, do we think the government will more likely to give aid? Personally, I think it would be wrong for the government and the country to lose another airline, especially given that Virgin isn't as 'poorly managed' as the likes of FlyBe, Thomas cook, and Monarch.

Getting pretty desperate now for VS. I would assume nothing is off the table re: ownership to ensure survival, with SRB no doubt retaining a small stake for brand purposes.

A reminder that Flying Club is separated and operated in another venture between Virgin and Delta outside of VS operating as Virgin Red or Virgin Loyalty Group.

I for one am disgusted if VS needs to go down this route. The level of support by UK Govt is embarrassing for UK aviation, they’ve given EZY 600m whilst they paid out dividends including 60m to Stelios. Lufthansa is expected to need a bailout and AF KLM among with Us carriers have received one.

Let us all just think of the prospect that VS is sold, only for the UK Govt to then bailout (Spanish registered) IAG weeks later...

The whole thing stinks. My thoughts are with the 9000+ colleagues who must be under unimaginable pressure right now.

VS weren't refused the £500m loan by the government, but they were asked to resubmit their bid. The FT reported that the government wanted more to be done to show that funds could not be raised through shareholders, and that the forecasts for the next 2-5 years be adjusted so that they were more realistic. Surely this seems reasonable?

However, it seems at face value that VS have decided that resubmitting this bid along these lines seems too onerous, and are now looking elsewhere for someone else to take on the risk.

The suggestion is VS has got five weeks (ie end of May) to find a buyer before it calls in the administrators. At which point, of course, it might go back to the government and say “look, we really have done everything we can like you asked, NOW can we have state aid?”.

headforpoints points out that any sale to new investors would probably wipe out DL’s 49% stake and the majority of the Virgin group’s although it might keep a minority holding for brand licensing purposes as with most of the other Virgin brands.

It also points out that although there are believed to be dozens of interested parties, at least 51% of the airline’s ownership will still have to be UK/EU-based which complicates matters given that most potential investors are likely to be elsewhere.

So it’s not over yet but if VS is saved it could be a very different airline to the one we know.

SRB is now looking for a buyer for VS and has shelved the prospect of getting state aid.

https://www.telegraph.co.uk/business/20 ... tic-buyer/

Does anyone know if this will be Delta's share, Virgin's share or both?
Also, if he can't find a buyer, do we think the government will more likely to give aid? Personally, I think it would be wrong for the government and the country to lose another airline, especially given that Virgin isn't as 'poorly managed' as the likes of FlyBe, Thomas cook, and Monarch.

With the share, it would depend what offers are tabled and if Delta themselves become that desperate for cash they will be open to a partial or full sale of their stake. Either way, SRB is likely to get a lot less than what he was about to get from Air France-KLM.

As for government support, I guess that would depend if the new regime come up with a new plan that’s more viable than whatever was being pitched before. I agree though it’s not good for British aviation to lose yet another airline.

The suggestion is VS has got five weeks (ie end of May) to find a buyer before it calls in the administrators. At which point, of course, it might go back to the government and say “look, we really have done everything we can like you asked, NOW can we have state aid?”.

headforpoints points out that any sale to new investors would probably wipe out DL’s 49% stake and the majority of the Virgin group’s although it might keep a minority holding for brand licensing purposes as with most of the other Virgin brands.

It also points out that although there are believed to be dozens of interested parties, at least 51% of the airline’s ownership will still have to be UK/EU-based which complicates matters given that most potential investors are likely to be elsewhere.

So it’s not over yet but if VS is saved it could be a very different airline to the one we know.

The real challenge whenever I read “dozens of interested parties” is differentiating the time wasters and those who are after a quick buck from those who are good for the money, in it for the long-haul and want to see it thrive.

If Greybull are in the mix somewhere, I’d be very worried seeing what happened to Monarch and Comet on their watch.