Today, Virgin Atlantic’s owners have put the airline up for sale amid difficulties in the coronavirus pandemic. The decision comes as the airline is struggling to secure the £500m bailout it needs from the government. That said, a spokesperson for the airline said the airline was not giving up hope of financial support. The search for investors is said to be just one option that would keep the airline afloat.
Virgin Atlantic is up for sale
Virgin Atlantic founder and co-owner Richard Branson has come under fire in recent weeks for seeking out a £500m (US$618m) bailout from the UK government to save Virgin Atlantic. The airline, like the majority in the industry, has been heavily affected by the coronavirus pandemic, virtually halting international air travel. However, while comments have been made, it appears that Branson really is in trouble. The airline has now been put on the market, looking for buyers to save it from demise.
Today (26th April 2020), the Telegraph shared that Richard Branson is seeking a buyer to purchase Virgin Atlantic. Although it was reported that the airline needs to be sold by the end of next month. However, a spokesperson told Simple Flying that this was false.
It is reported that Virgin Atlantic needs around 100 private financial investors to save it. These companies would form a consortium to fund the airline throughout the pandemic and beyond. However, the actions of this investment would leave founder Richard Branson without a stake.
So far, 50 investors have expressed their interest in finding out more about purchasing the airline after Delta Air Lines said that it would not be able to provide any financial support. (This, of course, is to be expected taking into account the impact of the coronavirus on Delta’s own business).
UK government negotiations are not over
The decision to put Virgin Atlantic up for sale comes as the UK government has still not granted the airline the state aid that it needs. However, just because Virgin Atlantic has not yet secured government funding does not mean that it never will. In fact, a spokesperson said that talks are still going on between the carrier and the UK government.
A spokesperson told Simple Flying:
“Because of significant costs to our business caused by unprecedented market conditions which the Covid-19 crisis has brought with it, we are exploring all available options to obtain additional external funding…Meanwhile, we continue to take decisive action to reduce our costs, preserve cash, and protect jobs…Virgin Atlantic is committed to continuing to provide essential connectivity on competitive terms to consumers and businesses in Britain and beyond, once we emerge from this crisis.”
They continued to say that there was no urgency to seek a buyer. The representative also dismissed claims that the airline had lost faith in a government bailout. Selling the airline is just one option if the funding does not come through. So, what options does Virgin Atlantic have?
Virgin’s options: between a rock and a hard place
Virgin Atlantic is looking to broaden its options to cover every eventuality. The thing is that none of its options are ideal. Presumably, the best outcome for the airline would be to secure government aid. It would allow the airline to continue operating in its current structure. The cash injection would help it along its way.
However, even this outcome has its drawbacks. Would £500m even be enough to see Virgin Atlantic through the future? There’s not only the costs to be paid while the airline is grounded but also the time it will take to claw back expenditure afterward. Though £500m is a decent sum of money, it could run out quickly.
Virgin Atlantic’s second option is the one its currently exploring: its sale. New investors could radically transform the airline and bring a renewed enthusiasm post-coronavirus.
The other option is one that Branson has already pursued with another airline: administration. If that happens, staff will be laid off and contracts with suppliers cut. Of course, all airlines, including Virgin Atlantic, are trying their utmost to avoid this outcome.
There’s still time before prospective buyers have to decide whether to purchase Virgin Atlantic. Do you think it will be sold? Let us know your thoughts in the comments.