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DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sat May 09, 2020 9:35 pm

F737NG wrote:
DobboDobbo wrote:
F737NG wrote:
Doesn't seem to have affected other UK airlines that are actually well-run.

VS operating profit (e.g. before disposals and exceptional items) in £m
2014: 2.6
2015: 22.5
2016: 39.8
2017: (32.7)
2018: (11.5)

Off fairly static revenues of at least £2,600m in each of those years, they averaged an operating profit margin of just 0.14%.
Other UK airlines, who also had relatively static revenues in the 2014 - 2018 period, have had much higher profit margins.

jet2 averaged 5.43%, Eastern Airways averaged 2.77%, Loganair averaged 2.78% and easyJet averaged 9.2%
Out of these UK 4 airlines, only Loganair in 2018 recorded an operating loss.

VS is not well-run and should be left to go under.


This is all very interesting, but as with many other posters you’ve overlooked the reality of how VS returns value to its shareholders (hint: it’s not via distributable profits).

This undermines your point.



I've gone back and added 'Other operating and overhead costs' to the operating profit figure, since this is the only line item in the statement of comprehensive income where owners can extract value before finance and tax charges are applied.

If, and I do mean a very generous if, all of these costs can be directly apportioned to owners taking 'excess' revenue to reduce the tax liability, then VS' 5-year average operating margin rises to 8.46%.

That's still lower than FR at an average of 19.9% margin, BA at 12.1% and even Aegean at 10.4%

With just 5.4m passengers/year and ~35 aircraft, VS is barely in the top 30 European airlines. It's small-fry.


FlyBE was double the size in both passengers carried and fleet size, yet despite being more important to UK travellers (connectivity between the regions) was allowed to fold.

VS does nothing special. TUI, jet2, or another airline similar to Norwegian could easily replace them.


That’s great, but you said:

F737NG wrote:
VS is not well-run and should be left to go under.


Are you now saying that Jet2, Loganair, Eastern and Easyjet are not well run and should be left to go under?

Or have you changed your criteria?
 
tphuang
Posts: 5703
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Sat May 09, 2020 10:15 pm

Easyjet is a consistently profitable airline that actually has asset to secure the loans. Vs doesn’t have that ability. I don’t see why easyjet paying its owners is any different from other airlines giving dividends and stock buybacks. Also in this case, giving royalty for virgin branding is marketing and giving money to delta is just the product of being the weaker partner in a jv. Both of which they would need to continue to give as long as its in a jv with delta and use the virgin name.

At this point, vs doesn’t have asset to secure loans and can’t come close to turning profit in current environment. What is there to justify bailout?
 
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F737NG
Posts: 61
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Re: Virgin Atlantic needs government support?

Sat May 09, 2020 11:22 pm

DobboDobbo wrote:
F737NG wrote:
This is all very interesting, but as with many other posters you’ve overlooked the reality of how VS returns value to its shareholders (hint: it’s not via distributable profits).

This undermines your point.



That is very interesting, but you haven't proven your point.


See? Any idiot can play the one-line response game.

I gave a very favourable view of the owners' potential returns based on your supposed knowledge of how the owners extract the value from VS. Given that the actual percentage returns are not public knowledge and therefore unverifiable, I revert to my original comment that the numbers are rubbish (for any non-state run airline).

Bad financial numbers, combined with a small fleet, very low number of passengers and a relatively easy-to-replicate route network, makes them an awful prospect to support / invest in by the UK government.
At least the regionals give value back to the taxpayer by helping UK connectivity.
 
Opus99
Posts: 1302
Joined: Thu May 30, 2019 10:51 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 12:31 am

 
alfa164
Posts: 3776
Joined: Sat Oct 06, 2012 2:47 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 1:59 am

Dmoney wrote:
You lack of shame and humanity is obvious and you want to lecture others? It's revolting behavior. You want poor Deliveroo workers and care workers and everyone else in the country who pays their taxes to give free money to bailout a billionaire.



You could say exactly the same thing about any funds directed at BA/IAG.


zkojq wrote:
...if anybody here is naive enough to think that this is about anything other than IAG trying to get rid of a big competitor before taking as much no-strings-attached government money as possible, then I've got a bridge in London to sell them.



:checkmark: :checkmark: :checkmark:
I'm going to have a smokin' hot body again!
I have decided to be cremated....
 
jomur
Posts: 379
Joined: Sun Jun 19, 2016 6:36 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 8:30 am

sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.
 
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qf789
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Re: Virgin Atlantic needs government support?

Sun May 10, 2020 8:51 am

Just a reminder to discuss the topic without the personal comments towards each other out of the discussion, if this continues the thread will be locked
Forum Moderator
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 9:14 am

F737NG wrote:
DobboDobbo wrote:
F737NG wrote:
This is all very interesting, but as with many other posters you’ve overlooked the reality of how VS returns value to its shareholders (hint: it’s not via distributable profits).

This undermines your point.



That is very interesting, but you haven't proven your point.


See? Any idiot can play the one-line response game.

I gave a very favourable view of the owners' potential returns based on your supposed knowledge of how the owners extract the value from VS. Given that the actual percentage returns are not public knowledge and therefore unverifiable, I revert to my original comment that the numbers are rubbish (for any non-state run airline).

Bad financial numbers, combined with a small fleet, very low number of passengers and a relatively easy-to-replicate route network, makes them an awful prospect to support / invest in by the UK government.
At least the regionals give value back to the taxpayer by helping UK connectivity.


I’m not sure resorting to personal comments (referring to me as an idiot) is the right way to prove anything or to add credibility to your point (which was based upon you making a material error in any event).

There is nothing further to say.
 
BrianDromey
Posts: 2839
Joined: Sun Dec 10, 2006 2:23 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 9:46 am

Opus99 wrote:
https://www.thetimes.co.uk/article/virgin-atlantics-shai-weiss-in-last-ditch-plea-for-help-6lh5d8sjl

VS CEO interview on today’s times


Shai Weiss wrote:
Weiss was adamant that the cost cuts would allow it to repay the state in full within five years — at a rate of up to £100m a year. “I can assure you that Virgin Atlantic can become sustainably profitable in order to repay the debt,” he said. “These facilities may not actually be drawn down — they’re there to ensure that the airline can operate. But I would say that within two to five years, we would pay it back, and probably even sooner. This is not a handout. We will repay it with interest.”


This is the fundamental issue - VS is simply laying debt on top of more debt. Further borrowing undermines the airlines ability to generate a decent return for the investors in the long term. I don't see how an airline, barely profitable in a booming market, can generate enough cash from their business in what might be the worst recession on history. How can a smaller VS, with demand suppressed globally possibly expect to repay money at the rate of £100 million a year? They have already borrowed against everything that is not nailed down and now need to borrow against a government guarantee.

If VS really are loosing money at the rate of £15 million a week, £500 million only gets them to the end of the year, or maybe early next year. Q2 is traditionally heavily loss making for the majority of airlines. The UK and US are the two nations most affected by COVID-19, "lock-down" will continue throughout the summer season and travel restrictions will likely continue for many months after that. Even worse, NYC is the epicentre of the US outbreak, undoubtedly the key O&D market for VS and a huge DL hub. For any hope of long-term survival VS need to survive through to summer 2021.

Im not sure if there is enough time left to save VS, unless the airline can be put in cold storage for a year and avoid administration, which would trigger the automatic loss of their AOC. This would have to involve DL taking a serious haircut on the £200 million owed (can they afford this themselves?), the majority of employees being laid off and aircraft lessors/lenders signing up too. Is there a business to be saved here?
 
BA777FO
Posts: 581
Joined: Sun Apr 22, 2018 2:58 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 9:49 am

jomur wrote:
A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


That's a very one-dimensional calculation - to find the total cost you'd also need to factor in lost revenue to HMRC through future unpaid taxes. A Virgin captain (and I appreciate many of the Virgin jobs to go wouldn't be on similar salaries) would be paying ~£80,000+ in income tax and VAT alone. Add the VAT, fuel duty, APD etc they'd no longer be paying plus the employer NI tax that £500m would be recouped in a year or so if all remained employed.
 
Teachflyer
Posts: 1
Joined: Sun May 10, 2020 9:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 10:08 am

jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


I think the last paragraph is key. I had a lot of time for VS and don't want to see them fail, but I think they are playing some pretty dirty tricks on their customers at the moment. The payal incentive and refusal to process refunds are both low tactics which have made me reconsider their customer focussed attitude. They are clearly trying to retain cash and they must be on a pretty slim wicket if this is their only way of retaining liquidity to avoid going bankrupt.
 
sevenheavy
Posts: 973
Joined: Tue Mar 23, 2004 3:30 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 10:21 am

jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.

Your calculation on paying benefits simply doesn’t stack up. Using your own assumptions, the flight deck pool alone would repay the £500m in tax in less than 7 years. Add in The rest of the workforce and it’s half that. I’m not even going to factor in that for every VS employee there would be at least two or three others from various catering, cleaning, Airport, security and dozens of other support companies.

Conservatively, assuming hugely decreased passenger volumes and acknowledging that many customers would book elsewhere, the APD alone would generate an additional £200m per year.

There would also be all of the operational spending such as parking, landing fees, aircraft manufacturing etc. which would mean other companies such as HAL, Rolls Royce etc. Would pay more in tax and keep more people employed.

So, even if the government loaned the full £500m (which it wouldn’t necessarily), and even if they got none of it back and no additional company tax from VS as a result, the income tax contributions would likely cover it in a couple of years.

Airlines are the top of a supply chain that can be traced right down to small manufacturing and service businesses and the effects would penetrate many layers, most of which I’m not even including here. Simply claiming that it would be cheaper to pay all the staff benefits pretty much sums up the lack of even basic fact checking that’s runs through this thread
So long 701, it was nice knowing you.
 
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F737NG
Posts: 61
Joined: Thu Aug 30, 2018 7:12 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 11:23 am

BrianDromey wrote:
This is the fundamental issue - VS is simply laying debt on top of more debt. Further borrowing undermines the airlines ability to generate a decent return for the investors in the long term. I don't see how an airline, barely profitable in a booming market, can generate enough cash from their business in what might be the worst recession on history. How can a smaller VS, with demand suppressed globally possibly expect to repay money at the rate of £100 million a year? They have already borrowed against everything that is not nailed down and now need to borrow against a government guarantee.

If VS really are loosing money at the rate of £15 million a week, £500 million only gets them to the end of the year, or maybe early next year.


Exactly.

Operating margins at British Airways and Virgin Atlantic (before exceptional items)
Image
Source: Forbes


For anyone connected to the airline, that makes for very worrying reading.

What's interesting is that despite being troubled by its previous parent company's woes, German airline Condor is in a much better position than Virgin whilst also being the de facto number 2 airline in its home country.

Condor has almost double the number of passengers carried (9.4m against 5.4m), but only 51% more aircraft (53 against 35), higher operating profit off lower revenue (€57m profit from €1.7bn as opposed to a £-45.3m loss from £2.78bn), 51% fewer employees (4,900 against 10,020) despite operating from 7 bases as opposed to Virgin Atlantic's 4.

Whichever way you look, the fundemental numbers for Virgin are awful.

There are more financially viable companies in the UK that could do with government support to see them through the Coronavirus crisis.
Last edited by F737NG on Sun May 10, 2020 11:52 am, edited 1 time in total.
 
CFRPwingALbody
Posts: 387
Joined: Thu Oct 19, 2017 8:13 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 11:34 am

Virgin Atlantic suffered a lot from the 787 RR Trent1000 trouble. They operated on their one at the same time. The Trent1000 trouble is just behind us. The trans atlantic partnership has just started, AFAIK this should have been the first season for the Delta, VA, KLM/AF partnership. And now Covid-19 ruins the season. All conditions seem to go against VA.
I don't know if VA is better off with a clean slate, or if it's market position will be taken over by competitors.
I hope that there remains competition in the UK, thus not a monopoly for BA+AA. I think the teaming up of VA+Delta was very welcome. But also for VA to much debt isn't good.
 
Westerwaelder
Posts: 300
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 12:04 pm

BA777FO wrote:
jomur wrote:
A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


That's a very one-dimensional calculation - to find the total cost you'd also need to factor in lost revenue to HMRC through future unpaid taxes. A Virgin captain (and I appreciate many of the Virgin jobs to go wouldn't be on similar salaries) would be paying ~£80,000+ in income tax and VAT alone. Add the VAT, fuel duty, APD etc they'd no longer be paying plus the employer NI tax that £500m would be recouped in a year or so if all remained employed.


How many VS pilots actually live in the UK?
 
jomur
Posts: 379
Joined: Sun Jun 19, 2016 6:36 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 12:39 pm

sevenheavy wrote:
jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.

Your calculation on paying benefits simply doesn’t stack up. Using your own assumptions, the flight deck pool alone would repay the £500m in tax in less than 7 years. Add in The rest of the workforce and it’s half that. I’m not even going to factor in that for every VS employee there would be at least two or three others from various catering, cleaning, Airport, security and dozens of other support companies.

Conservatively, assuming hugely decreased passenger volumes and acknowledging that many customers would book elsewhere, the APD alone would generate an additional £200m per year.

There would also be all of the operational spending such as parking, landing fees, aircraft manufacturing etc. which would mean other companies such as HAL, Rolls Royce etc. Would pay more in tax and keep more people employed.

So, even if the government loaned the full £500m (which it wouldn’t necessarily), and even if they got none of it back and no additional company tax from VS as a result, the income tax contributions would likely cover it in a couple of years.

Airlines are the top of a supply chain that can be traced right down to small manufacturing and service businesses and the effects would penetrate many layers, most of which I’m not even including here. Simply claiming that it would be cheaper to pay all the staff benefits pretty much sums up the lack of even basic fact checking that’s runs through this thread


On the same basis they can lend that money to hundreds of other companies which pay way more tax, including both company and employees personal tax AND still get the the loan plus interest back and over the same time scale the Government would have more money back than what they would from Virgin. Although there would be a few other jobs lost from companies supporting Virgin it won't be any where near near the number compared to what they could save directly.

The Government doesn't have a bottomless pit of money unlike what some seem to think. Also the climate change groups are flexing their muscles meaning it will be harder to give money to aviation without concessions.
Last edited by jomur on Sun May 10, 2020 12:55 pm, edited 1 time in total.
 
tphuang
Posts: 5703
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 12:39 pm

F737NG wrote:
BrianDromey wrote:
This is the fundamental issue - VS is simply laying debt on top of more debt. Further borrowing undermines the airlines ability to generate a decent return for the investors in the long term. I don't see how an airline, barely profitable in a booming market, can generate enough cash from their business in what might be the worst recession on history. How can a smaller VS, with demand suppressed globally possibly expect to repay money at the rate of £100 million a year? They have already borrowed against everything that is not nailed down and now need to borrow against a government guarantee.

If VS really are loosing money at the rate of £15 million a week, £500 million only gets them to the end of the year, or maybe early next year.


Exactly.

Operating margins at British Airways and Virgin Atlantic (before exceptional items)
Image
Source: Forbes


For anyone connected to the airline, that makes for very worrying reading.

What's interesting is that despite being troubled by its previous parent company's woes, German airline Condor is in a much better position than Virgin whilst also being the de facto number 2 airline in its home country.

Condor has almost double the number of passengers carried (9.4m against 5.4m), but only 51% more aircraft (53 against 35), higher operating profit off lower revenue (€57m profit from €1.7bn as opposed to a £-45.3m loss from £2.78bn), 51% fewer employees (4,900 against 10,020) despite operating from 7 bases as opposed to Virgin Atlantic's 4.

Whichever way you look, the fundemental numbers for Virgin are awful.

There are more financially viable companies in the UK that could do with government support to see them through the Coronavirus crisis.


Condor does target a different customer based than VS. At this point, it's clear VS can't last while trying to compete with its small LHR portfolio against BA, yet it continues to try for this strategy that's going nowhere.

A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.

The claim they can somehow pay $100 million a year to British gov't in the current climate after paying off creditors, virgin group and DL is laughable.
 
Bhoy
Posts: 566
Joined: Tue Apr 18, 2006 1:50 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 1:04 pm

F737NG wrote:
What's interesting is that despite being troubled by its previous parent company's woes, German airline Condor is in a much better position than Virgin whilst also being the de facto number 2 airline in its home country.

Condor has almost double the number of passengers carried (9.4m against 5.4m), but only 51% more aircraft (53 against 35), higher operating profit off lower revenue (€57m profit from €1.7bn as opposed to a £-45.3m loss from £2.78bn), 51% fewer employees (4,900 against 10,020) despite operating from 7 bases as opposed to Virgin Atlantic's 4.


That's comparing Apples with Oranges...

Condor's fleet has 16 763s for longhaul, the rest of the fleet (320s/321s/753s) are used on short routes to the Mediterranean, so obviously they'll carry a lot more Passengers in a given day given that they can fit 2-3 sectors in in the time Virgin operates a single sector.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 2:07 pm

tphuang wrote:
A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.


Here are a list of airlines that have received bespoke state aid (therefore apparently lacking the flexibility to make changes during the bad times) and which by your criteria should not survive this.

Air France
KLM
Lufthansa (I think also it’s group members)
Iberia
United Airlines
American Airlines
Delta

You can probably add to that each of the wholly / majority state owned airlines such as Emirates, Qatar, Thai, Singapore, the Chinese Carriers, I think the world would be very different if each of these were allowed to fold as you appear to advocate for...
 
Dmoney
Posts: 134
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 2:13 pm

DobboDobbo wrote:
tphuang wrote:
A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.


Here are a list of airlines that have received bespoke state aid (therefore apparently lacking the flexibility to make changes during the bad times) and which by your criteria should not survive this.

Air France
KLM
Lufthansa (I think also it’s group members)
Iberia
United Airlines
American Airlines
Delta

You can probably add to that each of the wholly / majority state owned airlines such as Emirates, Qatar, Thai, Singapore, the Chinese Carriers, I think the world would be very different if each of these were allowed to fold as you appear to advocate for...



Your claim makes no sense. You don't seem to distinguish between viable airlines and those who are chronically unprofitable and owned by tax dodgers.

Might also notice some of them aren't purely profit focused. Air France has roles beyond shovelling the max amount of cash to tax exiles. Means it's political for them to treat their staff in the same way other companies do, or cut connectivity to unprofitable markets in the same way. On the flip side the state as legitimate interest in their survival. It's called a mixed economy.

But your focused on giving money to billionaires.
 
Dmoney
Posts: 134
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 2:16 pm

sevenheavy wrote:
jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.

Your calculation on paying benefits simply doesn’t stack up. Using your own assumptions, the flight deck pool alone would repay the £500m in tax in less than 7 years. Add in The rest of the workforce and it’s half that. I’m not even going to factor in that for every VS employee there would be at least two or three others from various catering, cleaning, Airport, security and dozens of other support companies.

Conservatively, assuming hugely decreased passenger volumes and acknowledging that many customers would book elsewhere, the APD alone would generate an additional £200m per year.

There would also be all of the operational spending such as parking, landing fees, aircraft manufacturing etc. which would mean other companies such as HAL, Rolls Royce etc. Would pay more in tax and keep more people employed.

So, even if the government loaned the full £500m (which it wouldn’t necessarily), and even if they got none of it back and no additional company tax from VS as a result, the income tax contributions would likely cover it in a couple of years.

Airlines are the top of a supply chain that can be traced right down to small manufacturing and service businesses and the effects would penetrate many layers, most of which I’m not even including here. Simply claiming that it would be cheaper to pay all the staff benefits pretty much sums up the lack of even basic fact checking that’s runs through this thread



Your numbers are wrong. There wouldn't be any deadweight loss due to VS going under. It's not like a specialized factory where if the company dies the assets go unused. Demand is not affected by the survival of VS at all.
 
User avatar
F737NG
Posts: 61
Joined: Thu Aug 30, 2018 7:12 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 3:01 pm

tphuang wrote:
Condor does target a different customer based than VS. At this point, it's clear VS can't last while trying to compete with its small LHR portfolio against BA, yet it continues to try for this strategy that's going nowhere.

A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.



Yet targetting a different passenger profile is not working for them.
As you say, a business that isn't flexible to make changes is one that eventually folds. It needs a new strategy and to get its cost base in order.


Bhoy wrote:
That's comparing Apples with Oranges...

Condor's fleet has 16 763s for longhaul, the rest of the fleet (320s/321s/753s) are used on short routes to the Mediterranean, so obviously they'll carry a lot more Passengers in a given day given that they can fit 2-3 sectors in in the time Virgin operates a single sector.



The simple take-away from that is that Condor have spent their financial resources better by acquiring more productive assets and are using them better.

With the exception of Cathay Pacific, supported by Cathay Dragon and HK Express, Emirates, and Singapore Airlines, supported by Silk Air (all of whom have a completely different modus operandi and are many multiples larger anyway), name another major airline that is long-haul only, not state-run and doing well?

And yet, failed to acquire bmi, didn't know how to scale-up Virgin Little Red, got involved with FlyBE...
 
tphuang
Posts: 5703
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 4:13 pm

DobboDobbo wrote:
tphuang wrote:
A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.


Here are a list of airlines that have received bespoke state aid (therefore apparently lacking the flexibility to make changes during the bad times) and which by your criteria should not survive this.

Air France
KLM
Lufthansa (I think also it’s group members)
Iberia
United Airlines
American Airlines
Delta

You can probably add to that each of the wholly / majority state owned airlines such as Emirates, Qatar, Thai, Singapore, the Chinese Carriers, I think the world would be very different if each of these were allowed to fold as you appear to advocate for...

These airlines are all profitable during recent years and have managed to raise cash in public market.

In America, any loans given out need to be secured by assets. What are vs asset that’s encumbered?
 
joeyw
Posts: 9
Joined: Tue Feb 11, 2020 8:56 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 4:23 pm

jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


An internal document which is surfing Twitter right now apparently shows this amount of refund 'requests' VS have - so with probably single handed amount of resource in their Finance team running these for two companies, delays are likely to occur. I've been told refunds aren't automatic and generated manually by their Finance team. Personally, I don't think they are purposely withholding money, just using basic business; resource vs cost.

Image
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 5:16 pm

tphuang wrote:
DobboDobbo wrote:
tphuang wrote:
A business that barely breaks even during good times and isn't flexible enough to make changes during bad times is not a business that can survive.


Here are a list of airlines that have received bespoke state aid (therefore apparently lacking the flexibility to make changes during the bad times) and which by your criteria should not survive this.

Air France
KLM
Lufthansa (I think also it’s group members)
Iberia
United Airlines
American Airlines
Delta

You can probably add to that each of the wholly / majority state owned airlines such as Emirates, Qatar, Thai, Singapore, the Chinese Carriers, I think the world would be very different if each of these were allowed to fold as you appear to advocate for...

These airlines are all profitable during recent years and have managed to raise cash in public market.

In America, any loans given out need to be secured by assets. What are vs asset that’s encumbered?


The CARES act in the US includes loans and grants. You also ignore (again) VS’s business structure. Never let the facts get in the way of your predetermined outcome.

The key question is whether, but for the Covid-19 crisis, the relevant airline would have had any viability issue. Anyone arguing that the test is something different is quite frankly ignoring reality.
 
sevenheavy
Posts: 973
Joined: Tue Mar 23, 2004 3:30 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 5:43 pm

Dmoney wrote:
sevenheavy wrote:
jomur wrote:

The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.

Your calculation on paying benefits simply doesn’t stack up. Using your own assumptions, the flight deck pool alone would repay the £500m in tax in less than 7 years. Add in The rest of the workforce and it’s half that. I’m not even going to factor in that for every VS employee there would be at least two or three others from various catering, cleaning, Airport, security and dozens of other support companies.

Conservatively, assuming hugely decreased passenger volumes and acknowledging that many customers would book elsewhere, the APD alone would generate an additional £200m per year.

There would also be all of the operational spending such as parking, landing fees, aircraft manufacturing etc. which would mean other companies such as HAL, Rolls Royce etc. Would pay more in tax and keep more people employed.

So, even if the government loaned the full £500m (which it wouldn’t necessarily), and even if they got none of it back and no additional company tax from VS as a result, the income tax contributions would likely cover it in a couple of years.

Airlines are the top of a supply chain that can be traced right down to small manufacturing and service businesses and the effects would penetrate many layers, most of which I’m not even including here. Simply claiming that it would be cheaper to pay all the staff benefits pretty much sums up the lack of even basic fact checking that’s runs through this thread



Your numbers are wrong. There wouldn't be any deadweight loss due to VS going under. It's not like a specialized factory where if the company dies the assets go unused. Demand is not affected by the survival of VS at all.


Right. So in a world where unemployment levels are skyrocketing to record levels across the globe, everyone from VS will literally walk straight into a new (equivalent) job, other airlines will pick up the capacity and suppliers will instantly find new business to plug the gap? All of this in an industry which is shrinking and unlikely to be hiring for many many months, probably years. In the same sentence, you say demand is unaffected by VS failing, yet somehow other airlines are going to fill a void that you say isn’t there?

Does this logic apply to everyone who loses their job because of this pandemic, or is this somehow specific to VS? Because pretty much every economy across the globe is proving you wrong.

We now have both ends of the spectrum from the anti VS camp. One says it’s cheaper to just pay everyone benefits for the next 20 years. The other says they’ll start their new jobs on exactly the same salary the very next day while the rest of the (shrinking) industry somehow picks up the slack.
So long 701, it was nice knowing you.
 
tphuang
Posts: 5703
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 5:52 pm

DobboDobbo wrote:
tphuang wrote:
DobboDobbo wrote:

Here are a list of airlines that have received bespoke state aid (therefore apparently lacking the flexibility to make changes during the bad times) and which by your criteria should not survive this.

Air France
KLM
Lufthansa (I think also it’s group members)
Iberia
United Airlines
American Airlines
Delta

You can probably add to that each of the wholly / majority state owned airlines such as Emirates, Qatar, Thai, Singapore, the Chinese Carriers, I think the world would be very different if each of these were allowed to fold as you appear to advocate for...

These airlines are all profitable during recent years and have managed to raise cash in public market.

In America, any loans given out need to be secured by assets. What are vs asset that’s encumbered?


The CARES act in the US includes loans and grants. You also ignore (again) VS’s business structure. Never let the facts get in the way of your predetermined outcome.

The key question is whether, but for the Covid-19 crisis, the relevant airline would have had any viability issue. Anyone arguing that the test is something different is quite frankly ignoring reality.

And the British government also has a pretty extensive payroll support program which airlines can take advantage of. I don't see what the difference is with psp. All that money goes to paying staff.

Again, unless vs business structure changes, it does not change the fact it has mountain of debt, no assets to borrow against and can't turn profit during good times. Vs is not viable. Why don't you show us how vs can be viable? And once you do that, now take into consideration that demand won't reocver for 5 years and how they can be viable with that?
 
JibberJim
Posts: 163
Joined: Tue Nov 08, 2016 1:33 pm

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 6:31 pm

DobboDobbo wrote:
The key question is whether, but for the Covid-19 crisis, the relevant airline would have had any viability issue. Anyone arguing that the test is something different is quite frankly ignoring reality.


No it's not, viability is not binary, pre the financial crash the banks were all "viable", but the reality was they were mis-managed and didn't have sufficient resources to deal with changed circumstances. Simply because the scale of this crisis is so large doesn't mean there's a free reign to not have any reserves or assets for any slight road-bump.
 
caaardiff
Posts: 207
Joined: Sat Jul 15, 2006 3:14 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 8:36 pm

Is there a rough figure of how much debt VS has and where it is spread? Would it be better if VS/SRB can raise the funding to pay off loans secured against assets, thus freeing up the assets to use for the Government funding? They won't have previous loans and interest to pay then.
 
Dmoney
Posts: 134
Joined: Tue Mar 17, 2020 9:53 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 11:17 pm

sevenheavy wrote:
Dmoney wrote:
sevenheavy wrote:

All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.

Your calculation on paying benefits simply doesn’t stack up. Using your own assumptions, the flight deck pool alone would repay the £500m in tax in less than 7 years. Add in The rest of the workforce and it’s half that. I’m not even going to factor in that for every VS employee there would be at least two or three others from various catering, cleaning, Airport, security and dozens of other support companies.

Conservatively, assuming hugely decreased passenger volumes and acknowledging that many customers would book elsewhere, the APD alone would generate an additional £200m per year.

There would also be all of the operational spending such as parking, landing fees, aircraft manufacturing etc. which would mean other companies such as HAL, Rolls Royce etc. Would pay more in tax and keep more people employed.

So, even if the government loaned the full £500m (which it wouldn’t necessarily), and even if they got none of it back and no additional company tax from VS as a result, the income tax contributions would likely cover it in a couple of years.

Airlines are the top of a supply chain that can be traced right down to small manufacturing and service businesses and the effects would penetrate many layers, most of which I’m not even including here. Simply claiming that it would be cheaper to pay all the staff benefits pretty much sums up the lack of even basic fact checking that’s runs through this thread



Your numbers are wrong. There wouldn't be any deadweight loss due to VS going under. It's not like a specialized factory where if the company dies the assets go unused. Demand is not affected by the survival of VS at all.


Right. So in a world where unemployment levels are skyrocketing to record levels across the globe, everyone from VS will literally walk straight into a new (equivalent) job, other airlines will pick up the capacity and suppliers will instantly find new business to plug the gap? All of this in an industry which is shrinking and unlikely to be hiring for many many months, probably years. In the same sentence, you say demand is unaffected by VS failing, yet somehow other airlines are going to fill a void that you say isn’t there?

Does this logic apply to everyone who loses their job because of this pandemic, or is this somehow specific to VS? Because pretty much every economy across the globe is proving you wrong.

We now have both ends of the spectrum from the anti VS camp. One says it’s cheaper to just pay everyone benefits for the next 20 years. The other says they’ll start their new jobs on exactly the same salary the very next day while the rest of the (shrinking) industry somehow picks up the slack.


You are claiming more people are going to fly because of VS. that's not true.


Anyway whose arguing for VS to go under, we are just arguing against Branson getting free money. Equity should take their lumps and get diluted to 1%. Then we can talk about saving the company. Norwegian did it.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 11:47 pm

tphuang wrote:

Vs is not viable. Why don't you show us how vs can be viable? And once you do that, now take into consideration that demand won't reocver for 5 years and how they can be viable with that?


Therein lies the fault in your argument.

VS has traded for 36 years through 9/11, SARS, MERS and the 2008 crash surviving each of those. The correct start point is therefore that VS is demonstrably viable absent Covid.

If you want to argue that VS is unviable because of Covid, then I’d say every airline under the sun is not viable.

No one is pretending that all will go back to normal when this is over - or course it won’t. The point is to give airlines the space to restructure to face this new normal going forward.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Sun May 10, 2020 11:52 pm

JibberJim wrote:
DobboDobbo wrote:
The key question is whether, but for the Covid-19 crisis, the relevant airline would have had any viability issue. Anyone arguing that the test is something different is quite frankly ignoring reality.


No it's not, viability is not binary, pre the financial crash the banks were all "viable", but the reality was they were mis-managed and didn't have sufficient resources to deal with changed circumstances. Simply because the scale of this crisis is so large doesn't mean there's a free reign to not have any reserves or assets for any slight road-bump.


Okay - to apply your criteria against some airlines who have received government support to deal with what you describe as this “slight road bump”:

Lufthansa - not viable.
Air France - not viable.
KLM - not viable.
Iberia - not viable.
Alitalia - not viable.
United Airlines - not viable.
American Airlines - not viable.
Delta - not viable.
Thai - not viable.
Singapore Airlines - not viable.

You can expect this list to grow as more airlines resources deplete. Do you spot a trend here (hint: every airline under the sun is now not viable because this is a tiny bit more serious than a bump in the road...)
 
tphuang
Posts: 5703
Joined: Tue Mar 14, 2017 2:04 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 12:11 am

DobboDobbo wrote:
tphuang wrote:

Vs is not viable. Why don't you show us how vs can be viable? And once you do that, now take into consideration that demand won't reocver for 5 years and how they can be viable with that?


Therein lies the fault in your argument.

VS has traded for 36 years through 9/11, SARS, MERS and the 2008 crash surviving each of those. The correct start point is therefore that VS is demonstrably viable absent Covid.

If you want to argue that VS is unviable because of Covid, then I’d say every airline under the sun is not viable.

No one is pretending that all will go back to normal when this is over - or course it won’t. The point is to give airlines the space to restructure to face this new normal going forward.


Why does it matter how viable vs was 20 years ago? The fact is that their two most recently reported years had negative margins. And now the market is heading to its worst crisis in possibly its entire history. What justification is there to keep around the weakest airline that has neither cash nor assets to back the loans. At some point, the loan would have to make sense commercially.

When other airlines get support, they normally have positive cash flow and assets to secure the loans.
 
Arion640
Posts: 3162
Joined: Fri Mar 31, 2017 5:15 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 12:16 am

Westerwaelder wrote:
BA777FO wrote:
jomur wrote:
A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


That's a very one-dimensional calculation - to find the total cost you'd also need to factor in lost revenue to HMRC through future unpaid taxes. A Virgin captain (and I appreciate many of the Virgin jobs to go wouldn't be on similar salaries) would be paying ~£80,000+ in income tax and VAT alone. Add the VAT, fuel duty, APD etc they'd no longer be paying plus the employer NI tax that £500m would be recouped in a year or so if all remained employed.


How many VS pilots actually live in the UK?


Probably the vast majority. They’ll still be paying UK income tax regardless of where they live.
 
Cedar
Posts: 76
Joined: Mon Dec 25, 2017 1:07 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 1:41 am

DobboDobbo wrote:
tphuang wrote:

Vs is not viable. Why don't you show us how vs can be viable? And once you do that, now take into consideration that demand won't reocver for 5 years and how they can be viable with that?


Therein lies the fault in your argument.

VS has traded for 36 years through 9/11, SARS, MERS and the 2008 crash surviving each of those. The correct start point is therefore that VS is demonstrably viable absent Covid.

If you want to argue that VS is unviable because of Covid, then I’d say every airline under the sun is not viable.

No one is pretending that all will go back to normal when this is over - or course it won’t. The point is to give airlines the space to restructure to face this new normal going forward.


It is ONLY viable to the 2 shareholders - Branson makes his royalty & DL gets more access to LHR slots & half of JV revenue. It is not viable for an investor or anyone else unless it is restructured.
They've lasted this long & through all of that only because they have managed to make enough just to get by & enogh to satisfy the shareholders.

Why do you think - when the separate VAIL Operator Certificate with it's own LHR slots was set up & leveraged against a $370 mill loan - it was admittedly done "incase the airline goes bust" where the loaner would take ownership of these slots under VAIL, but Branson maintains the Virgin Atlantic name with LGW slots - this was DL's idea to protect their investment & maitain access to LHR if airline goes bust.

They saw the writing on the wall.

Cedar
 
Westerwaelder
Posts: 300
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:36 am

Arion640 wrote:
Westerwaelder wrote:
BA777FO wrote:

That's a very one-dimensional calculation - to find the total cost you'd also need to factor in lost revenue to HMRC through future unpaid taxes. A Virgin captain (and I appreciate many of the Virgin jobs to go wouldn't be on similar salaries) would be paying ~£80,000+ in income tax and VAT alone. Add the VAT, fuel duty, APD etc they'd no longer be paying plus the employer NI tax that £500m would be recouped in a year or so if all remained employed.


How many VS pilots actually live in the UK?


Probably the vast majority. They’ll still be paying UK income tax regardless of where they live.


Are you sure? BA has plenty of long haul pilots living in France and Spain. Taxation is where your centre of living is. If you can show you reside in France, you become liable for tax there.
 
Westerwaelder
Posts: 300
Joined: Fri Apr 03, 2020 12:27 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 4:42 am

And while discussion rages on and on about how worthwhile it would be to save VS:

https://www.google.com/amp/s/news.sky.c ... s-11985678
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 7:36 am

tphuang wrote:
DobboDobbo wrote:
tphuang wrote:

Vs is not viable. Why don't you show us how vs can be viable? And once you do that, now take into consideration that demand won't reocver for 5 years and how they can be viable with that?


Therein lies the fault in your argument.

VS has traded for 36 years through 9/11, SARS, MERS and the 2008 crash surviving each of those. The correct start point is therefore that VS is demonstrably viable absent Covid.

If you want to argue that VS is unviable because of Covid, then I’d say every airline under the sun is not viable.

No one is pretending that all will go back to normal when this is over - or course it won’t. The point is to give airlines the space to restructure to face this new normal going forward.


Why does it matter how viable vs was 20 years ago? The fact is that their two most recently reported years had negative margins. And now the market is heading to its worst crisis in possibly its entire history. What justification is there to keep around the weakest airline that has neither cash nor assets to back the loans. At some point, the loan would have to make sense commercially.

When other airlines get support, they normally have positive cash flow and assets to secure the loans.


I’m not saying the relevant issue is whether it was viable it was 20 years ago - the relevant issue is whether it was viable prior to Covid-19 and in any sensible measure it was. If you are forming your view having (once again) ignored VS’s financial structure - in particular how VS returns value to its shareholders - that is for you but it undermines your opinion.

If you keep ignoring the relevant facts, it doesn’t assist your argument it undermines it.

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 7:52 am

Cedar wrote:
It is ONLY viable to the 2 shareholders - Branson makes his royalty & DL gets more access to LHR slots & half of JV revenue. It is not viable for an investor or anyone else unless it is restructured.

They've lasted this long & through all of that only because they have managed to make enough just to get by & enogh to satisfy the shareholders.

Why do you think - when the separate VAIL Operator Certificate with it's own LHR slots was set up & leveraged against a $370 mill loan - it was admittedly done "incase the airline goes bust" where the loaner would take ownership of these slots under VAIL, but Branson maintains the Virgin Atlantic name with LGW slots - this was DL's idea to protect their investment & maitain access to LHR if airline goes bust.

They saw the writing on the wall.

Cedar


I think the first point is correct - if Branson and Delta want another investor on board they will have to change the structure. They will also have to put their hands in their pockets if they can (appreciate Deltas hands are tied). For example if the government do assist they might ask for a golden share.

Of course in this context we are taking about investment viability not the viability of the underlying business (the two being slightly different issues).

The transaction you refer to was undertaken in 2015 - since then there has been the double whammy of the B789 engine problems and the currency fluctuations of Brexit. If they saw the current crisis they have more foresight than most. Of course, many corporate transactions have the apportionment / limiting of liability at their heart and that would be no exception.

It’ll be interesting to see if something like an administration can effectively restructure the airline to emerge in a viable form if a solvent restructure is not available.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 8:06 am

Westerwaelder wrote:
And while discussion rages on and on about how worthwhile it would be to save VS:

https://www.google.com/amp/s/news.sky.c ... s-11985678


Leaving aside the obvious stresses to staff, it’d be interesting to see if a pre-pack administration would be effective in the current climate.

We have no chapter 11 type protection in the U.K. which is problematic for airlines in particular as administration invariably means the loss of the AOC and closing of aircraft leases etc. However, many of these problems could be overcome at a time where no airlines are flying at all. Whether that deals with all of them I don’t know, but there is a chance if the airline cannot be restructured solvently.
 
jomur
Posts: 379
Joined: Sun Jun 19, 2016 6:36 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 8:06 am

DobboDobbo wrote:

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.


And that is give the money to more companies that employ more people that stand a better chance of survival long term and don't waste your money if you cannot get it back.

Do you work for Virgin by any chance as it seems you would give them cash regardless of their financial state? Just curious. I could understand if you did, as it would explain how you react.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 8:15 am

jomur wrote:
DobboDobbo wrote:

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.


And that is give the money to more companies that employ more people that stand a better chance of survival long term and don't waste your money if you cannot get it back.

Do you work for Virgin by any chance as it seems you would give them cash regardless of their financial state? Just curious. I could understand if you did, as it would explain how you react.


I have no connection whatsoever to Virgin Atlantic, the Virgin Group, Delta, Branson (or anyone similar you can think of). I don’t work in aviation at all.

I am on the sidelines, but it is clear from the various postings that there is a lot of vitriol towards Branson which is guiding opinion in the airline business. That is simply not relevant to the key question.

There is also a lot of bad information on how the airline works and the benefits it brings to the U.K. For example, your post ignores the vast sums it will pay to the treasury in APD, fuel duty, PAYE, VAT (and various other taxes). Smaller companies don’t deliver that to the same degree and the oversight of them is not practicable. There is also the matter of VS’s supply chain. Supporting companies further down the supply chain is pointless if their main customer disappears - which is why governments tend to support larger companies more than smaller ones.
 
Boeing74741R
Posts: 1452
Joined: Tue Apr 17, 2007 5:44 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 8:57 am

sevenheavy wrote:
jomur wrote:
sevenheavy wrote:

The fact that VS are still very much still in business 2 months into this proves that they were well prepared for any established downturn scenario. Today for example, they’re operating almost 20 cargo sectors which is almost a third of their usual schedule. A pretty good effort compared to most.

I wish everyone, in any industry affected by this terrible pandemic, a safe passage through this. Stay positive and stay safe.


The true fact is that Virgin are still only going because they are refusing to repay its customers whose flights have been cancelled within the legal time frame of 7 days. They are deliberately keeping hold of the money for over 90 to 100 days. No one seems to have been repaid by Virgin for sometime.

A quick calculation, the cost of unemployment benefits, without taking into consideration future increases, the UK Government could pay the 6000 staff benefits for 20 years and still have some change out of £500 million. The chances of every one still unemployed after 20 years would be nil, so that money would go even further.


All airlines are doing the same. For every post about a VS refund there are many of the same about EZ, FR, BA, AF, AA etc. etc. (I’m personally experiencing this exact issue with EZ) I get that it’s frustrating but they simply don’t have the manpower and other resources to process all of the refunds at once. Most of the money sits with credit card companies anyway.


Indeed. I was supposed to fly with easyJet last week which I paid for on credit card, but got the e-mail one week prior confirming it was cancelled (I knew it wasn't going to happen, but nothing's confirmed until it's confirmed plus the App on my phone was still trying to get me to check in), so I duly put in a request for a refund and promised I would get it "within 28 days". easyJet also got access to government support recently despite the protestations of Sir Stelios. I am still waiting for my refund.

I also don't understand why VS are being singled out here given all airlines are refunding people at differing speeds. I see Michael O'Leary recently confessed it will take 6 months for Ryanair to process their refunds. Did I miss the vitriol on here given his well-known stance on (not giving) refunds, or is it the popular opinion of a.net that O'Leary is a good egg? :scratchchin:

I'm not saying it's right to delay refunds, but if it's a manual process and a small team processing many times more refunds than they would do normally, I can understand why it's a slow process. The same staff probably have other duties they're still expected to do besides processing refunds.

Dmoney wrote:
You are claiming more people are going to fly because of VS. that's not true.


So are you saying that all those who are due to fly on VS from MAN will still do so with alternate carriers if VS did go under?

I suspect not. Those who are determined to travel will find a way, but there is a link between demand and the presence of a direct flight. Not everyone will put up with an alternative or a one-stop option if, for instance, timings or pricing are far worse.

Dmoney wrote:
Anyway whose arguing for VS to go under, we are just arguing against Branson getting free money.


Go back and read through this thread. There are numerous posters on here calling for VS to be allowed to fail, as well as you and several others trying to make it all about SRB.
Last edited by Boeing74741R on Mon May 11, 2020 8:59 am, edited 1 time in total.
 
jomur
Posts: 379
Joined: Sun Jun 19, 2016 6:36 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 8:58 am

DobboDobbo wrote:
jomur wrote:
DobboDobbo wrote:

The wider benefits to the U.K. taxpayer and society from VS have been explained at length in this thread and I won’t repeat them here.


And that is give the money to more companies that employ more people that stand a better chance of survival long term and don't waste your money if you cannot get it back.

Do you work for Virgin by any chance as it seems you would give them cash regardless of their financial state? Just curious. I could understand if you did, as it would explain how you react.


I have no connection whatsoever to Virgin Atlantic, the Virgin Group, Delta, Branson (or anyone similar you can think of). I don’t work in aviation at all.

I am on the sidelines, but it is clear from the various postings that there is a lot of vitriol towards Branson which is guiding opinion in the airline business. That is simply not relevant to the key question.

There is also a lot of bad information on how the airline works and the benefits it brings to the U.K. For example, your post ignores the vast sums it will pay to the treasury in APD, fuel duty, PAYE, VAT (and various other taxes). Smaller companies don’t deliver that to the same degree and the oversight of them is not practicable. There is also the matter of VS’s supply chain. Supporting companies further down the supply chain is pointless if their main customer disappears - which is why governments tend to support larger companies more than smaller ones.


Its not a vast amount, taxes relevant to the aviation industry would still be paid if Virgin didn't exist as their passengers would most likely fly with another airline. PAYE is a small amount considering the rather small amount of staff they have.

I doubt that many of the companies supply Virgin depend totally in them would survive longterm regardless of Virgin existing or not. I am not saying they might suffer some short term difficulties but they would survive.

Personally I'm not a fan of SRB but that doesn't mean I think Virgin should get no money regardless, I just think that the same rules that apply to every other company asking for a Government loan should apply to Virgin. Currently, regardless of what any one else thimks, the UK Government don't think it qualifies for one otherwise it would have received one by now. In the future?..maybe..
 
Arion640
Posts: 3162
Joined: Fri Mar 31, 2017 5:15 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 9:09 am

Westerwaelder wrote:
Arion640 wrote:
Westerwaelder wrote:

How many VS pilots actually live in the UK?


Probably the vast majority. They’ll still be paying UK income tax regardless of where they live.


Are you sure? BA has plenty of long haul pilots living in France and Spain. Taxation is where your centre of living is. If you can show you reside in France, you become liable for tax there.


Just a guess! I know Virgin doesn’t have the network to commute in like BA does.

I’m pretty sure you still have to pay income tax in the UK even if your residence is abroad.
 
RexBanner
Posts: 51
Joined: Sun Nov 04, 2007 11:37 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 9:50 am

Only on the proportion of work that is carried out in the U.K. For a Virgin pilot that amount is obviously minimal, usually falls inside the tax free allowance and, for the extreme case where it doesn’t, is normally taken care of by the dual tax agreements between the two countries. Anyway thread drift..
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:03 am

jomur wrote:
Its not a vast amount, taxes relevant to the aviation industry would still be paid if Virgin didn't exist as their passengers would most likely fly with another airline. PAYE is a small amount considering the rather small amount of staff they have. .


I don’t think you can credibly assert that it is not a vast amount, or that passengers would fly elsewhere. This is a further example of the bad information flying around in the subject.

Taking the first point, VS say they turnover around £250m in air passenger duties and £135m in payroll taxes. This will obviously reduce if it survives, but this is a fairly large slice of the circa £500m liquidity they are seeking in a 12 months period. This doesn’t include VAT, the cost of universal credit or the knock on effect of suppliers and the loc economy as the money cycles round the system. It is not unreasonable to say that the government would get its money back in taxes in a 12 month period. That is not the same as repaying a loan, but it illustrates the difference in approach between commercial lenders and government.

Taking the second point, it is extraordinarily unlikely that VS passengers would fly elsewhere - certainly not in the short term. Carriers the world over are (or shortly will) be cutting capacity. If a competitor exits the market that capacity will not be replaced in the short term, and economic theory suggests that this will likely not be replaced in the mid to long term unless a new competitor emerges (and how likely is that).

jomur wrote:
I doubt that many of the companies supply Virgin depend totally in them would survive longterm regardless of Virgin existing or not. I am not saying they might suffer some short term difficulties but they would survive
.


It is possible they would survive, but there is obviously no guarantee of that. What we do know is that as VS, BA and others contract, their suppliers will contract also. This means fewer jobs, less tax being paid, more universal credit being paid and less cash cycling through the system (which also lowers tax take). It is a viscous circle, but protecting the entity at the top of the supply chain mitigates this damage throughout the chain. All of this plays into the calculations.

jomur wrote:
Personally I'm not a fan of SRB but that doesn't mean I think Virgin should get no money regardless, I just think that the same rules that apply to every other company asking for a Government loan should apply to Virgin. Currently, regardless of what any one else thimks, the UK Government don't think it qualifies for one otherwise it would have received one by now. In the future?..maybe
..


This largely repeats what you said last week, so I’ll repeat what I said to you then which answers the point:

DobboDobbo wrote:
First, the government are in the process of gathering evidence on the aviation industry and developing policy to understand its importance and what can be done to preserve it as far as possible. We do not yet know the outcome of this process. We also know that any bespoke support from the U.K. government is to be a last resort. In the last few weeks we have seen BA and VS commence restructures which will be ongoing for about 8 weeks. Therefore, on the issue of whether the U.K. government is prepared to support VS, your point is at best premature.

Second, the comparison between what I (Or any other private individual or company) would/should do with their money and what the government would/should do with it is a bad one. The governments job is very different to that of a private person. The comparison is simply not relevant.

Third, it’s not just the 6,000+ jobs at VS at stake (this assumes a cut of 25% of their workforce). It’s their suppliers, from the staff at the airport, to the travel agents, to the engine and aircraft manufacturers. You could give handouts to all of them, but it would be more economical to support the anchor of that supply chain to continue trading. Many of the thousands of smaller businesses you feel could be saved for less money may themselves be reliant upon a VS or a BA - meaning that “saving” them would be largely pointless if their chief customer fails.

Fourth, whether you like him or not Branson has already put hundreds of millions of dollars of his own money into supporting the Virgin group (of which something like $100m has gone to VS). I’d imagine (but obviously don’t know) he would be willing to do more if he could. Whether he has the cash or the ability to access cash (e.g. borrowing, sale of assets) I don’t know either. Either way, he clearly has given (not lent) money to VS so therefore your inference that he is unwilling to put his money where his mouth is plainly wrong, and following through the logic of your argument wouldn’t you agree the government should be sympathetic in principle to supporting VS given he has already done so?

Finally, the nature of the various stimuli announced have or are costing the treasury an absolute fortune. The sums VS are seeking are a drop in the ocean. There is little point stimulating the economy if there is nothing left to stimulate as we come out of the other side of this.


My view is that the economic consequences of this pandemic are unprecedented and disproportionately affect the aviation / tourism sectors. They will have to adjust to the new normal, but governments should be willing to assist where appropriate to facilitate this transition. That will likely not be known until June or July IMO.
 
jomur
Posts: 379
Joined: Sun Jun 19, 2016 6:36 pm

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:36 am

DobboDobbo wrote:
jomur wrote:
Its not a vast amount, taxes relevant to the aviation industry would still be paid if Virgin didn't exist as their passengers would most likely fly with another airline. PAYE is a small amount considering the rather small amount of staff they have. .


I don’t think you can credibly assert that it is not a vast amount, or that passengers would fly elsewhere. This is a further example of the bad information flying around in the subject.

Taking the first point, VS say they turnover around £250m in air passenger duties and £135m in payroll taxes. This will obviously reduce if it survives, but this is a fairly large slice of the circa £500m liquidity they are seeking in a 12 months period. This doesn’t include VAT, the cost of universal credit or the knock on effect of suppliers and the loc economy as the money cycles round the system. It is not unreasonable to say that the government would get its money back in taxes in a 12 month period. That is not the same as repaying a loan, but it illustrates the difference in approach between commercial lenders and government.

Taking the second point, it is extraordinarily unlikely that VS passengers would fly elsewhere - certainly not in the short term. Carriers the world over are (or shortly will) be cutting capacity. If a competitor exits the market that capacity will not be replaced in the short term, and economic theory suggests that this will likely not be replaced in the mid to long term unless a new competitor emerges (and how likely is that).

jomur wrote:
I doubt that many of the companies supply Virgin depend totally in them would survive longterm regardless of Virgin existing or not. I am not saying they might suffer some short term difficulties but they would survive
.


It is possible they would survive, but there is obviously no guarantee of that. What we do know is that as VS, BA and others contract, their suppliers will contract also. This means fewer jobs, less tax being paid, more universal credit being paid and less cash cycling through the system (which also lowers tax take). It is a viscous circle, but protecting the entity at the top of the supply chain mitigates this damage throughout the chain. All of this plays into the calculations.

jomur wrote:
Personally I'm not a fan of SRB but that doesn't mean I think Virgin should get no money regardless, I just think that the same rules that apply to every other company asking for a Government loan should apply to Virgin. Currently, regardless of what any one else thimks, the UK Government don't think it qualifies for one otherwise it would have received one by now. In the future?..maybe
..


This largely repeats what you said last week, so I’ll repeat what I said to you then which answers the point:

DobboDobbo wrote:
First, the government are in the process of gathering evidence on the aviation industry and developing policy to understand its importance and what can be done to preserve it as far as possible. We do not yet know the outcome of this process. We also know that any bespoke support from the U.K. government is to be a last resort. In the last few weeks we have seen BA and VS commence restructures which will be ongoing for about 8 weeks. Therefore, on the issue of whether the U.K. government is prepared to support VS, your point is at best premature.

Second, the comparison between what I (Or any other private individual or company) would/should do with their money and what the government would/should do with it is a bad one. The governments job is very different to that of a private person. The comparison is simply not relevant.

Third, it’s not just the 6,000+ jobs at VS at stake (this assumes a cut of 25% of their workforce). It’s their suppliers, from the staff at the airport, to the travel agents, to the engine and aircraft manufacturers. You could give handouts to all of them, but it would be more economical to support the anchor of that supply chain to continue trading. Many of the thousands of smaller businesses you feel could be saved for less money may themselves be reliant upon a VS or a BA - meaning that “saving” them would be largely pointless if their chief customer fails.

Fourth, whether you like him or not Branson has already put hundreds of millions of dollars of his own money into supporting the Virgin group (of which something like $100m has gone to VS). I’d imagine (but obviously don’t know) he would be willing to do more if he could. Whether he has the cash or the ability to access cash (e.g. borrowing, sale of assets) I don’t know either. Either way, he clearly has given (not lent) money to VS so therefore your inference that he is unwilling to put his money where his mouth is plainly wrong, and following through the logic of your argument wouldn’t you agree the government should be sympathetic in principle to supporting VS given he has already done so?

Finally, the nature of the various stimuli announced have or are costing the treasury an absolute fortune. The sums VS are seeking are a drop in the ocean. There is little point stimulating the economy if there is nothing left to stimulate as we come out of the other side of this.


My view is that the economic consequences of this pandemic are unprecedented and disproportionately affect the aviation / tourism sectors. They will have to adjust to the new normal, but governments should be willing to assist where appropriate to facilitate this transition. That will likely not be known until June or July IMO.


So if Virgins passengers are not going fly any way so how will they survive in a market that is going to have serious over capacity issues? Virgin won't be able to survive on the approximately 177000 customers of Virgin Holidays they had last year.
 
DobboDobbo
Posts: 1158
Joined: Thu Mar 03, 2016 1:02 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:44 am

jomur wrote:
So if Virgins passengers are not going fly any way so how will they survive in a market that is going to have serious over capacity issues? Virgin won't be able to survive on the approximately 177000 customers of Virgin Holidays they had last year.


The point is capacity won’t be replaced, not the behaviour of VS’s passengers. If the 35-40 or so aircraft VS operated are suddenly removed from the market you cannot reasonably expect The 35-40 aircraft to be added back into the system immediately.

The key point is to give the airlines time to adjust to the new normal whilst keeping the industry as well positioned as possible to grow from 2021 - removing competition in the U.K. market does not help this objective.
 
FluidFlow
Posts: 788
Joined: Wed Apr 10, 2019 6:39 am

Re: Virgin Atlantic needs government support?

Mon May 11, 2020 10:53 am

The only way forward for VS is in my opinion to cut the fleet in half, get rid of all the 787s, close everything except for LHR and get all the pilots into one salary group (A330/A350, with the rate of the A330).

Thats the only way to be somewhat viable in the future. The problem is, if the government gives them money, they cant make 3000-4000 people redundant to become economically viable, because if they continue with 30+ aircraft, predominantly in the leisure market VS will be toast till the end of 2021. But taking government money and cut everything in half will be hard to achieve. Maybe some kind of Norway deal is possible. Wipe out current share holders and get lessors and bond holders on board but then it will be hard to cut off the 787.

VS is just in a horrible position. No market, to many aircraft, to many employees, to much debt. The 787s were just really bad luck with the RR engines. I hope they can get rid of them and shrink back to a sustainable size. Even if they work now, the airline can only survive with way less aircraft and bases (only LHR) and needs to get rid of one type and the 787 is the outliner here, especially if VS can bring the pilots down to A330 pay level (the A350 ones).

So I still think the government should not give money except there is a clear strategy that includes massive cuts to everything, because with 35+ aircraft VS will need 1-2 additional billions over the next 3 years to survive.

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