Many have commented over the past few weeks about how Virgin Atlantic could soon fall into bankruptcy. And much of the commentary from the media seems to me like they are looking forward to such a prospect. Or at least dead against some from of bailout.
Here is why I think that WON’T happen.
Every Airline Is Struggling At The Moment
Sure, Virgin Atlantic may be struggling at the moment. But name one airline that isn’t?
Even EasyJet, one of Europe’s biggest airlines are saying they are facing issues. Yet where are the headlines saying they will fail? Well, other than their founder saying recently that the airline will run out of money by August if they don’t cancel an aircraft order.
Sure, the management have written to the UK government asking for cash. This doesn’t mean they’re close to bankruptcy though. It just means that they could do with a hand to carry on as they are.
I find myself in a similar position. For an indefinite amount of time, I will be on 80% pay. Could I do with that additional 20% to carry on as I was before? Yes. Will I struggle to pay all of my bills at the end of the month? No. If the option was available to me, would I be taking a trip this month as I have been? Probably not.
See what I’m getting at here? In order to carry on as they were at the end of 2019, Virgin Atlantic will need extra cash. If they don’t get it, will they be out of business? I can’t see it happening. Instead, they might be a lot smaller than they were.
Obviously I don’t know the exact details of Virgin Atlantic’s finances, but as an outsider looking in, this is how things appear to me.
Richard Branson Won’t Let Them
Love him or hate him, we all know Richard Bransons character. Virgin Atlantic is his baby. Long after he passed on all his other companies, he kept hold of the airline. Whilst it was planned that he would relinquish his majority shareholding, this was called off in December 2019. As such, he still owns 51% of the airline. The other 49% is owned by the US airline, Delta.
As of the time of writing, Branson has already invested over £210million into the Virgin group, parent company of Virgin Atlantic.
Obviously, his pockets are only x amount deep. Therefore if the airline is in that much trouble, he wont be able to bail them out.
But Branson is a good businessman. Therefore will likely be able to beg, borrow and… well maybe not steal in order to raise the funds necessary to keep the airline afloat.
Then theres the share that Delta Airlines own. It won’t do their financial situation any good to see Virgin Atlantic fail. As they are a huge airline, they could help out too. Although due to them having their own business to worry about, this can’t be guaranteed.
As touched upon above, Richard Branson is either a love or hate character. Therefore, I suspect a lot of the negative press is down to people wanting him to fail as opposed to the airline.
But let’s not forget. Virgin Atlantic employ around 9000 people. Thats a lot of people that will be out of a job. But that doesn’t matter as long as you can gain a few more clicks…
It can’t be much fun being one of the many Virgin Atlantic employees currently taking unpaid leave and having to constantly read that you might not have a job to go back to.
They Have A Good Number Of Assets
As of 2018, Virgin Atlantic are listed as having £1.8billion worth of assets. Even if they have zero in the bank, they have an awful lot to fall back on. Which goes back to my first point. If they don’t get any form of bail out, then they will have to rely on cashing in these assets.
From the information I could find, none of the Airbus A330’s are owned. However, they do own 15 of their 42 aircraft. If times get really tough, they could sell them off.
Then there are the number of slots they own at London Heathrow. In early 2016, Oman Air paid $75million for a single slot pair at the airport. Therefore selling just a few prime slots could add more to their funds. And it’s unlikely they would even have to cancel any flights either. With a sizeable operation at London Gatwick, they could operate the more profitable routes from there.
Post 9/11, Virgin Atlantic moved a number of routes from Gatwick to Heathrow – London to Boston springs to mind. And opposite, in the case of the London to Miami route. So they aren’t against moving operations around as and when needed.
They Are Still Operating Cargo Flights
Its not like Virgin Atlantic don’t have anything coming in at all. Along with a number of repatriation flights, they have also been operating a number of cargo only flights over the past few weeks.
Whilst these flights don’t make as much as if they were running at full capacity, there is a lot of demand for cargo flights at the moment.
And let’s not forget, that while a plane is sat grounded, it generally doesn’t make any money. However, that is the case during normal times. And these aren’t normal times. Sure, the airline is likely losing a ton of cash all the time it’s not running a full schedule. Although I suspect the situation isn’t quite as dire as if the aircraft were grounded during regular times. The airline has already placed a number of staff on unpaid leave. So theres a saving. There is also fuel costs that the airline will be saving on. The same goes for maintenance. Not nearly as many routine checks are needed on an active aircraft as opposed to a stored one. There is still some maintenance required however.
Going back to cargo, the airline wont need to provide meals or any in flight entertainment on the cargo only flights. Other areas where they would normally spend that now wont be needed.
Whilst I suspect the airline will shrink in size if it doesn’t get some from of government help, I am struggling to see them disappear completely.