Should Virgin Atlantic Be Bailed Out? Let us Know What You Think…

Some links to products and partners on this website will earn an affiliate commission.

It is no secret that Virgin Atlantic desperately needs state aid to avoid collapse. Reports over the weekend, however, stated that the government has asked Virgin Atlantic to resubmit its proposal for a £500 million bailout. Specifically, the airline needs to demonstrate that its shareholders – the Virgin Group with 51% and Delta Airlines with 49% – have exhausted all other options for raising cash.

Since letters from the bosses of Airbus, Rolls-Royce, etc. haven’t had the desired impact, Sir Richard Branson is now becoming more personally involved in the public relations effort. Click here to read an open letter to Virgin staff, published online.

I am positive that no reasonable reader WANTS Virgin Atlantic to fail. But that is substantially different from UK taxpayers being willing to PAY TO SAVE Virgin Atlantic.

So… in a slightly different format to our usual, I’d like to invite readers to join the debate… Should Virgin Atlantic be bailed out?

Here’s my take…

The Political Optics are Terrible

As mentioned above, Virgin Atlantic is owned 51% by a notorious tax exile – even though every single one of us would live on our own private island in the Caribbean if we could – and 49% by a large American airline. Although Sir Richard Branson is obviously a paper billionaire, rather than a cash billionaire, and his claims of being a proper expat ring somewhat more true than other famous tax exiles, the UK government obviously needs to make a bailout extremely painful for Sir Richard.

Setting aside the ownership structure, much was made of the fact that Conservative gains in the December elections came from many northern constituencies that would traditionally vote Labour. Are those voters going to be particularly impressed with bailing out an airline that, being exaggeratedly blunt, is nothing more than a way for middle and upper class southerners to enjoy more competitively-priced holidays to North America and the Caribbean? I’m not aware of a single Virgin Atlantic route that would be considered crucial for business “connectivity”, yet isn’t offered by one or more airlines such as British Airways or a US-based airline.

Would it be Throwing Away Money Anyhow?

Virgin Atlantic has rarely been profitable. I believe that the airline made some profit in 2015 and 2016, but was loss-making before and after. If Virgin Atlantic couldn’t make substantial profits during boom times – BA / IAG, Ryanair and Easyjet certainly did – then it’s hard to imagine Virgin Atlantic being profitable until the coronavirus crisis is a distant memory. As a result, it’s hard to imagine Virgin Atlantic actually being able to repay any loans from the exchequer.

Being profitable isn’t necessarily crucial, provided that Virgin Atlantic has good collateral with which it can guarantee a loan. However, my understanding is that Virgin Atlantic only owns a handful of its aircraft – the rest being leased – and that even its valuable Heathrow slots have been mortgaged. And that’s assuming that travel bounces back so strongly that Heathrow slots remain worth something…

How Would a Bailout Even be Structured?

Sir Richard wants a “commercial loan”, similar to the one that Easyjet received. Even if the Chancellor is willing to overlook the lack of a strong credit rating or decent asset collateral, he would still be left with a political problem.  If Virgin Atlantic repays the loan and returns to financial health, all of the airline’s profits would flow to a tax exile and a large American corporation. If Virgin Atlantic goes bust, the taxpayer will have lost £500 million or more.

A solution might involve the government taking some or all of Virgin Atlantic’s equity, diluting both the Virgin Group and Delta Airlines. But an unprofitable airline isn’t worth much. The sale of 31% to Air France was reportedly priced at £220 million, giving a total value of £700 million or so for 100% of the airline, back in the boom times! If we charitably say that airlines are worth 30-35% of what they were worth back in January – IAG’s share price has fallen from 670p to 215p – then the entire equity of Virgin Atlantic would be worth perhaps £200-250 million.

Of course, Sir Richard and Delta Airlines wouldn’t receive a single pence. New shares would need to be issued, leaving the UK government owning a substantial stake in an airline. Leaving aside the inevitable lawsuits from IAG and others until the coronavirus aftermath, how would these shares be sold in the future? It’s not nearly so simple as it was with Lloyds and RBS – slowly selling shares on the stock exchange – because Virgin Atlantic isn’t publicly traded.

So either the government’s shares would need to be privatised on the stock market as an IPO or another buyer would need to be found, all the while keeping in mind that the airline would need to be 51+% British owned if it wanted to retain its right to fly its current routes. Quite the headache…

The “Save Jobs” Argument

Governments around the world have recognised that the coronavirus could cause an economic collapse deeper than the Great Depression. To avoid that happening, great pains are being taken to support jobs. Although one might start to wonder who will eventually pay for all of this, it is undeniably cheaper to save a job today than it is to create one tomorrow.

According to their 2018 annual report, Virgin Atlantic has 8,500 employees. £500 million works out to nearly £60,000 per employee, with no guarantee that £500 million will be enough to keep Virgin Atlantic alive for more than a few months without travel. I don’t intend to be flippant, but I suspect that a fair few Virgin Atlantic employees would prefer a direct redundancy payout of £25,000 and to go find another job…

Besides that… the “save jobs” argument didn’t matter much when Flybe and Thomas Cook collapsed. Nor is Virgin Atlantic prohibited from requesting aid under the UK’s Coronavirus Job Retention Scheme.

Your Turn

As much as I would like for Virgin Atlantic to survive – I am one of those who benefit most from competition between airlines and healthy airline miles schemes – I doubt that I would participate in a crowd-funded effort to save the airline. Nor do I really think that the airline can justify a claim on UK taxpayer funds.

But who cares what I think… what about you?  Keep it civilised, but what do you think the Chancellor of the Exchequer should do? Let Virgin Atlantic collapse? Or bail it out?


  1. geoff davies says

    what has he being doing with the cash left in the bank.i,am sure he can use his own cash first once that is nearly gone then apply

  2. Graham Tully says

    Given that rich banks were bailed out by the government in the aftermath of the financial crisis, it’s rather hypocritical to say other rich companies shouldn’t be bailed out. If the government is worried about possible lawsuits arising from any takeover bid, make it a condition of any deal that they will be protected from lawsuits. By the same token, an application to save jobs under the Coronavirus Job Retention Scheme should also be a condition of any bailout. In fact, a bailout should be made conditional on acceptable solutions to every argument outlined in the article. And if the other parties don’t agree, then – no bailout.

    • cinereus says

      RB claims VS is “creating positive social and environmental impact has always been at the heart of this brand”. It’s an airline and the man is deluded.

      This is a person with over £4 billion, who once sued the NHS, and who has not paid income tax in this country for 14 years.

      Even working from a MMT perspective, it’s a materially different situation to bailing out banks.

      • Craig Sowerby says

        Indeed. Banks were a different matter entirely. Pretty much everybody needs banks and a functioning financial system, whilst a long-haul airline is a middle class luxury…

      • Chris says

        Of course one would like Virgin to survive as it competes on the Atlantic against airlines whose fares were already absurdly high pre-covid, and for the sake of its employees. But why should inessential businesses that have never turned a profit – and would probably be unable to repay a loan – be bailed out when that same money could be used more productively elsewhere? Of course Branson’s assets are mostly not liquid and would be hard to sell for a decent price at present, but few people would believe he couldn’t save Virgin if he truly wanted to. To that extent, covid will shake the moral contract between employees and employers that did not do all they could to protect jobs. In my case I will be less inclined to use airlines or hotels that treated their staff abysmally. Qatar firing flight crew but still making them pay for training takes the biscuit. I would feel less safe on an airline that had let go long-serving cabin crew with minimum legal compensation, then hired back whoever they could find on lousy terms. I feel betrayed by United sending me pompous e mails about their commitment to social distancing, then at least on some well-publicised flights jamming people in precisely as before. What else aren’t they being wholly frank about? It reminds me years ago of PanAm Alert when to impress passengers with their commitment to security, Pan American hired dogs from a theatrical agency for a photo op. Airlines think passengers forget negatives, accidents etc, and care only about fares, but this time I’m not so sure.

  3. spk says

    Virgin Atlantic will never be profitable with current fleet and routes. The biggest problem with it is landing slots in LHR
    1. Wipe out current shareholders of both BA and Virgin
    2. Loan cash to Virgin
    3. Transfer some slots and aircraft from BA to Virgin and make the routes competitive.
    4. Sell the stake in 3-5 years when they both are profitable.

    • Craig Sowerby says

      Interesting idea for if the entire airline industry is nationalised…

      Rather than slimming down BA, you could merge Easyjet with Virgin Atlantic to make a proper airline with short haul connections to long haul… (with some Heathrow slots coming from BA)

  4. Graham Tully says

    A poorly thought through precedent was set in the UK with the recent easyJet bailout… Norwegian has received a government bailout in Norway… Scandinavian airline SAS has long been part-owned by the governments of Denmark and Sweden… instead of throwing vast sums of money at individual airlines, I think the airline industry as a whole needs to be rationalised (and perhaps part-nationalised), and this crisis may provide a good opportunity to do so.

    • Craig Sowerby says

      Easyjet accessed a corporate debt support scheme open to all UK companies with a solid credit rating. It’s not really a precedent for a bailout of the airline industry. If it were then SRB wouldn’t be begging…

  5. RD says

    To me it is hypocritical to bailout Easyjet, especially after they gave the dividend knowing issues were coming, and then not do similar to other airlines. So unless they take back that aid to Easyjet then I think they need to offer it to other airlines as well. But frankly I wish they would not bailout any of them.

    Including BA when this invariably hits them as well.

    On another point, I don’t agree that the VA workers would be happy to take redundancy and find another job. Just where are you expecting them all to go and find another comparable job when the fallout of this is realised?

    • Craig Sowerby says

      Looking forward to the autumn, when VS has collapsed after blowing through the £500 million without travel restarting, would you rather have had a redundancy payout back when the airline’s collapse was obvious, or would you have rather taken the chance on the company’s unlikely survival, knowing that you would end up with nothing if it ultimately fails?

      So since my point is that supporting the employees is the best argument for a bailout, just skip the bailout part and give some money to the employees…

      • Joe Deeney says

        Jobs is an issue, but Virgin employees certainly won’t be the only people facing that problem in the next 0-6 months. Therefore, unless it was part of a much broader Government intervention in the economy, I don’t see that alone convincing anyone at the Treasury.

        Given that Virgin Atlantic hardly ever makes any money even in good times, the real question for any investor (and in the current situation that de facto includes new lenders) – whether commercial or government – is surely, “why will this business be profitable as a result of my investment?”. I just can’t make a good case for how Virgin, as currently constructed, would be able to answer that question.

        It’s very sad, but unfortunately the way forward is pretty clear: Administration, with the more modern aircraft (or leases anyway, perhaps on reduced terms), practical airport slots, and possibly brand rights, spun off to either the Government or commercially. New contracts for the necessary crew et al, and suppliers, would be renegotiated (presumably at lower than current rates).

        A smaller, leaner operation might have some chance of making money, would save some jobs, provide some competition, etc.

        If it can be linked in somehow with a short-haul operation, so much the better.

  6. andy..T says

    I think it is a little unfair to call Richard Branson a “notorious” tax exile. If just being a tax exile is not descriptive enough and you really see a need for poetic licence why not refer to him as a “well known” tax exile?

    • Craig Sowerby says

      Fair point… I suppose the word I was looking for is “notable” not “notorious”. Although I’m not sure how many other billionaire tax exiles are quite so identified with the place they choose to live.

      • Carl Binney says

        Why should they be given anything without Mr B putting his hand in his own pocket. I say it is an interest free loan but only if it is matched by his own monies.

    • cinereus says

      Why? He’s one of the worse tax exiles (and well-known for being so). Preferable would be “notorious scumbag tax exile”.

  7. David Blake says

    Virgin Atlantic is a commercial operation and should be viewed as such. I am loathe to personally use taxpayer’s money to support the airline unless there is a sound reason to do so and a chance to recover any funds invested.

    I have not seen any comment about Delta and the financial support they may or may not be able to bring to Virgin – they own 49% of the company. Maybe Mr. Trump will provide funding to Delta and Virgin?


    As Branston – Pickle has made much of being an advocate of unfettered capitalism over the years why on earth why should be allowed to access public money now? Let him empty his bank account and sell his damned island first. Personal fortunes can go down as well as up. That’s the “free” market.

  9. Gabriel says

    I dont dont should my money.despite that he have money use his money first and hes good manager he will flow otherwise no public money should be involved .to many ask for money then give a shit about when thsi pass and go back to old dirty stuff


    You reap what you sow Mr Branson – Sued the NHS so you deserve everything coming your way

  11. jean younis says

    i think denmark and poland have said no money for tax exiles and people who do not pay tax in their country
    should happen here
    branson should use some of his own money – also should apply to other airlines as well

  12. David Safir says

    On economic and commercial grounds. no bailout – but the UK government should facilitate a commercial loan sufficient to allow VS to cover costs in hibernation until it can re-launch with 8 aircraft flying LHR-DEL HKG + JNB and LGW + MAN-BGI LAS + MCO, leaving DL 4 daily LHR-US slots to compete with BA/AA.

    For 30+ years VS has – despite BA dirty tricks – offered consumers an alternative that has earned exceptional loyalty from staff and passengers.; and whatever his reasons for moving from the UK. why is R Branson’s investment in VS less acceptable than Qatar’s in IAG?

  13. Sridevikosana says

    Yessss Virgin Atlantic needs a bailout by the Uk government. Richard is the most employee friendly bosses that we have ever seen . His experience in running his brainchild Virgin Atlantic is a prime example of how an entrepreneur can change employees lives for good . We need to Respect his over fifty years of keeping Virgin brand flying high and learn to be resilient like him in difficult times . This covid19 situation is one of those . For no fault of his , grounding flights is the decision taken by the government putting soo many lives at risk . So stop criticising and judging him without knowing his employee friendly business dealings rather learn to be a successful entrepreneur like Sir Richard . He is a role model to many upcoming youngsters interested in starting with little and working hard to make an imposing brand like his . We wish him the best and we are sure Rishi Sunak is wise enough and bailout Virgin Atlantic for the required amount which Richard will invest wisely . God bless him with every success . Cheers

Leave a Reply

Your email address will not be published. Required fields are marked *