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skipness1E
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:04 pm

tphuang wrote:
If confidence is gone, why would that final creditor still go forward with the plan? At this point, those LHR slots still have a lot of values. Creditors may end up with more return just by picking up the slots vs hoping that VS survives.

Normally, debtors don't just come to creditor once for debt forgiveness.

Also, why would VS do this unless it think there is a good chance that final creditor won't agree to the terms of restructuring?

There is no concept of bankruptcy restructuring in the UK, “Bankruptcy” is a failed business that’s closed or closing, and that’s the message being spread like wildfire now. Why would anyone book with them no? Anyone at all?
 
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VCVSpotter
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:12 pm

skipness1E wrote:
tphuang wrote:
If confidence is gone, why would that final creditor still go forward with the plan? At this point, those LHR slots still have a lot of values. Creditors may end up with more return just by picking up the slots vs hoping that VS survives.

Normally, debtors don't just come to creditor once for debt forgiveness.

Also, why would VS do this unless it think there is a good chance that final creditor won't agree to the terms of restructuring?

There is no concept of bankruptcy restructuring in the UK, “Bankruptcy” is a failed business that’s closed or closing, and that’s the message being spread like wildfire now. Why would anyone book with them no? Anyone at all?


So...can someone explain this to me in layman terms?? Does this mean Virgin Atlantic will get a major restructuring, or will it completely go under and cease to exist? I'm hearing both stories, and as someone who's not too familiar with the ins and outs of legal terms, it's sorta hard for me to decipher the true meaning behind all of it.....I'm sure there are likely a few other people on here with the same question.
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Ishrion
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:21 pm

VCVSpotter wrote:
skipness1E wrote:
tphuang wrote:
If confidence is gone, why would that final creditor still go forward with the plan? At this point, those LHR slots still have a lot of values. Creditors may end up with more return just by picking up the slots vs hoping that VS survives.

Normally, debtors don't just come to creditor once for debt forgiveness.

Also, why would VS do this unless it think there is a good chance that final creditor won't agree to the terms of restructuring?

There is no concept of bankruptcy restructuring in the UK, “Bankruptcy” is a failed business that’s closed or closing, and that’s the message being spread like wildfire now. Why would anyone book with them no? Anyone at all?


So...can someone explain this to me in layman terms?? Does this mean Virgin Atlantic will get a major restructuring, or will it completely go under and cease to exist? I'm hearing both stories, and as someone who's not too familiar with the ins and outs of legal terms, it's sorta hard for me to decipher the true meaning behind all of it.....I'm sure there are likely a few other people on here with the same question.


They're not ceasing operations or anything... for now. They'll continue flying whatever schedule they have while they restructure. Chapter 15 allows foreign companies to protect their U.S. assets from claims.
 
bmibaby737
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:36 pm

VCVSpotter wrote:
skipness1E wrote:
tphuang wrote:
If confidence is gone, why would that final creditor still go forward with the plan? At this point, those LHR slots still have a lot of values. Creditors may end up with more return just by picking up the slots vs hoping that VS survives.

Normally, debtors don't just come to creditor once for debt forgiveness.

Also, why would VS do this unless it think there is a good chance that final creditor won't agree to the terms of restructuring?

There is no concept of bankruptcy restructuring in the UK, “Bankruptcy” is a failed business that’s closed or closing, and that’s the message being spread like wildfire now. Why would anyone book with them no? Anyone at all?


So...can someone explain this to me in layman terms?? Does this mean Virgin Atlantic will get a major restructuring, or will it completely go under and cease to exist? I'm hearing both stories, and as someone who's not too familiar with the ins and outs of legal terms, it's sorta hard for me to decipher the true meaning behind all of it.....I'm sure there are likely a few other people on here with the same question.


Generally, if an airline in the UK runs out of money and goes into Administration, they cease flying as the CAA revokes their operating licenses. The administrators will then assess the company and who it owes money too (creditors) and try and sell off any assets that will help raise funds to pay off the creditors (and it turn pay itself for providing the service). In some cases in administration they could arrange for the airline to be sold to a new buyer. The company would need to prove they have the funds and business plan, plus all the safety procedures etc. to the CAA before they'd be allowed to fly again. So for now, no administration in the UK for Virgin Atlantic. If they did file for adminstration in the UK it would likely mean the end of Virgin Atlantic - so it would truly be a last resort and a white flag. Nothing in comparison to Chapter 11 in the USA.
 
skipness1E
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:55 pm

Ishrion wrote:
VCVSpotter wrote:
skipness1E wrote:
There is no concept of bankruptcy restructuring in the UK, “Bankruptcy” is a failed business that’s closed or closing, and that’s the message being spread like wildfire now. Why would anyone book with them no? Anyone at all?


So...can someone explain this to me in layman terms?? Does this mean Virgin Atlantic will get a major restructuring, or will it completely go under and cease to exist? I'm hearing both stories, and as someone who's not too familiar with the ins and outs of legal terms, it's sorta hard for me to decipher the true meaning behind all of it.....I'm sure there are likely a few other people on here with the same question.


They're not ceasing operations or anything... for now. They'll continue flying whatever schedule they have while they restructure. Chapter 15 allows foreign companies to protect their U.S. assets from claims.

They’ll continue flying until they run out of money. Their major markets have been closed since April and show no sign of reopening in any way before 2021. The media have tonight just splashed on them going bankrupt, with a small print caveat. It’s August already with summer lost and winter coming. From a consumer and forward booking perspective, no semi informed UK based passenger would reasonalby be expected to book with them. They’re not paying out refunds today, why would any sane person risk losing their whole fare when there are way less risky options?
 
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VCVSpotter
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 10:58 pm

Ishrion wrote:
They're not ceasing operations or anything... for now. They'll continue flying whatever schedule they have while they restructure. Chapter 15 allows foreign companies to protect their U.S. assets from claims.


bmibaby737 wrote:
Generally, if an airline in the UK runs out of money and goes into Administration, they cease flying as the CAA revokes their operating licenses. The administrators will then assess the company and who it owes money too (creditors) and try and sell off any assets that will help raise funds to pay off the creditors (and it turn pay itself for providing the service). In some cases in administration they could arrange for the airline to be sold to a new buyer. The company would need to prove they have the funds and business plan, plus all the safety procedures etc. to the CAA before they'd be allowed to fly again. So for now, no administration in the UK for Virgin Atlantic. If they did file for adminstration in the UK it would likely mean the end of Virgin Atlantic - so it would truly be a last resort and a white flag. Nothing in comparison to Chapter 11 in the USA.


Thank you both for your responses :)
Wishing the best for Virgin Atlantic, for now it looks like they can hopefully pull out of this....
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Tue Aug 04, 2020 11:19 pm

It is interesting to read all the opinions from "this is a move in the US to get one creditor on-board with a recovery plan" to "they're doomed".

I guess it is fair to say they have filed for bankruptcy protection in the US, because that's exactly what they've done.

What it means longer term is harder to say, although I do get that this kind of thing will scare the customers away.
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Trip
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:47 am

skipness1E wrote:
Why would anyone book with them no? Anyone at all?


With their major market (the USA) being shut down was anybody booking with them anyway? Today's announcement might not change much for the consumer.
 
Brystar45
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:48 am

I hope that they will recover and go back to normal, I don't want to see Virgin Atlantic gone, I think they can do it, I am sure they will recover.

It makes me sad to see all these airlines in bankrupt and all that stuffs.
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gaystudpilot
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:34 am

Revelation wrote:
It is interesting to read all the opinions from "this is a move in the US to get one creditor on-board with a recovery plan" to "they're doomed".

I guess it is fair to say they have filed for bankruptcy protection in the US, because that's exactly what they've done.

What it means longer term is harder to say, although I do get that this kind of thing will scare the customers away.


What customers?
 
gaystudpilot
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:40 am

Brystar45 wrote:
I hope that they will recover and go back to normal, I don't want to see Virgin Atlantic gone, I think they can do it, I am sure they will recover.

It makes me sad to see all these airlines in bankrupt and all that stuffs.


The industry will be lucky if demand returns to 75% of pre-US recession, pre-coronavirus levels by 2024. The landscape will be very different by 2025 in terms of markets and players. It will be very interesting to see how it plays out.
 
ChrisKen
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 2:52 am

They can currently have the cash to keep flying until September (at the very least).
Ch15 filing in the U.S is to shield assets while restructuring and the UK bankruptcy filing is to allow the restructuring to be approved (via administration). VS aren't going anywhere. Hate to break it to some UK contributors, but bankruptcy/administration is also a a useful business tool; it doesn't automatically mean curtains, far from it.
Don't forget, VS is actually the trading name of two separate airlines on different AOC's (VAA Ltd #534 & VAI Ltd #2435)
 
BrianDromey
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 7:04 am

ChrisKen wrote:
They can currently have the cash to keep flying until September (at the very least).
Ch15 filing in the U.S is to shield assets while restructuring and the UK bankruptcy filing is to allow the restructuring to be approved (via administration). VS aren't going anywhere. Hate to break it to some UK contributors, but bankruptcy/administration is also a a useful business tool; it doesn't automatically mean curtains, far from it.
Don't forget, VS is actually the trading name of two separate airlines on different AOC's (VAA Ltd #534 & VAI Ltd #2435)


There isn’t a lot of flying at the moment though and the demand for travel into late 2020 and early 2021 looks very poor. I hope VS can survive, but the capital and lease payments are enormous and income sparse. This is an issue for the entire industry.

A UK airline has never survived Administration. The CAA revoke various licenses which effective mean the airline is no longer a going concern and liquidation results. The administrators of flyBe are taking a legal challenge to this.
 
bmibaby737
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 8:04 am

ChrisKen wrote:
VS aren't going anywhere. Hate to break it to some UK contributors, but bankruptcy/administration is also a a useful business tool; it doesn't automatically mean curtains, far from it.


In the US, yes... not in the UK.

Can you name a UK airline that has filed for administration in the UK that had continued to fly?
 
ZuluTime
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 8:10 am

Can you name a UK airline that has filed for administration in the UK that had continued to fly?


Yes, European Air Charter did it under a CVA and stretching back quite some time, Gill Airways, Air Ecosse and Aberdeen Airways all did.
 
Boeing74741R
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 8:15 am

Revelation wrote:
It is interesting to read all the opinions from "this is a move in the US to get one creditor on-board with a recovery plan" to "they're doomed".

I guess it is fair to say they have filed for bankruptcy protection in the US, because that's exactly what they've done.

What it means longer term is harder to say, although I do get that this kind of thing will scare the customers away.


Yep. Here in the UK, various media outlets are putting the word "bankruptcy" into the headlines but missing the word "protection" and it's only when you bother to look into it that it's a Chapter 15 process. Now I've heard of Chapter 11 before and seen most of the big US airlines enter and emerge from it, but admittedly Chapter 15 is a new one to me.

Either way, you are right. People will just see the word "bankruptcy", take it out of context, stop reading and get frightened. Not good for consumer confidence at all and bad enough when consumer demand is at its lowest point in ages.

Having read the articles, it seems to be what some have commented on here being linked to the package unveiled last month and the key milestone will be the meetings scheduled for 25th August to vote on the plan.

VCVSpotter wrote:
Wishing the best for Virgin Atlantic, for now it looks like they can hopefully pull out of this....


+1

Once again, my thoughts are with all the staff. They have had to put up with a lot of uncertainty since this crisis kicked off and today's headlines are a tad unhelpful when taken out of context.

bmibaby737 wrote:
Generally, if an airline in the UK runs out of money and goes into Administration, they cease flying as the CAA revokes their operating licenses. The administrators will then assess the company and who it owes money too (creditors) and try and sell off any assets that will help raise funds to pay off the creditors (and it turn pay itself for providing the service). In some cases in administration they could arrange for the airline to be sold to a new buyer. The company would need to prove they have the funds and business plan, plus all the safety procedures etc. to the CAA before they'd be allowed to fly again. So for now, no administration in the UK for Virgin Atlantic. If they did file for adminstration in the UK it would likely mean the end of Virgin Atlantic - so it would truly be a last resort and a white flag. Nothing in comparison to Chapter 11 in the USA.


That's how I understand the situation as it is. It's not the end unless the dreaded 'A' word is triggered in the UK. It seems to only be the aviation industry where administration in the UK means the end for airlines when in other industries businesses continue trading until it's sold or liquidated/shut down/wound up.
 
factsonly
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 10:23 am

There will be structural over-capacity in the global air transport market for some time to come.

Simple economics now calls for capacity adjustments, this is achieved through downsizing and/or the collapse/disappearance of entire airlines.

Not saying Chapter 15 is the definite end of Virgin Atlantic, but it certainly is a sign of serious trouble.

Expect more news like this in the coming winter and into next year............................

The result will be a smaller, less complex aviation environment, a market in which the survivors will re-establish themselves.

Air transport could end up with the clock being set back several decades.
 
uta999
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:19 am

Surely putting another £1.2B into Virgin is simply delaying the inevitable until next year. Things will be no better for them then. It will eventually go the same way as Thomas Cook and Monarch. Customers won't want to book flights or holidays with a 'tainted' brand, whose future is constantly in the headlines with the words; bail-out, administration, redundancy, Chaptor 11 (or 15). It is on life-support already. Who would really notice if they go under? The route network is tiny and was getting smaller every year, even before Covid19.
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Opus99
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:22 am

uta999 wrote:
Surely putting another £1.2B into Virgin is simply delaying the inevitable until next year. Things will be no better for them then. It will eventually go the same way as Thomas Cook and Monarch. Customers won't want to book flights or holidays with a 'tainted' brand, whose future is constantly in the headlines with the words; bail-out, administration, redundancy, Chaptor 11 (or 15). It is on life-support already. Who would really notice if they go under? The route network is tiny and was getting smaller every year, even before Covid19.

Actual cash is 370m*
 
3AWM
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:27 am

UK insolvency law was changed as a part of the UK gov response to coronavirus and it supposedly now allows easier re-organisation of insolvent companies. It was reported a month or so ago that Virgin would be the first company to take advantage of the new legislation.

The difference as I understand is a re-organisation no longer requires the agreement of all classes of creditor. The insolvent company, with the support of sufficient other creditors, can apply to court to be released from certain creditor obligations.

I see this as applying specifically to aircraft leases - if the process is successful they will be able to hand back leased aircraft.

The caveat for this is that the company must have enough funds to meet obligations in the application period. I think this is the reason for the capital injection from an investment bank, it's just to cover cashflow requirements in the interim period.

If they can cut leases I see them cutting deep here and backfilling from orders when demand picks up.
 
uta999
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:28 am

Opus99 wrote:
uta999 wrote:
Surely putting another £1.2B into Virgin is simply delaying the inevitable until next year. Things will be no better for them then. It will eventually go the same way as Thomas Cook and Monarch. Customers won't want to book flights or holidays with a 'tainted' brand, whose future is constantly in the headlines with the words; bail-out, administration, redundancy, Chaptor 11 (or 15). It is on life-support already. Who would really notice if they go under? The route network is tiny and was getting smaller every year, even before Covid19.

Actual cash is 370m*


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lightsaber
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:36 am

factsonly wrote:
There will be structural over-capacity in the global air transport market for some time to come.

Simple economics now calls for capacity adjustments, this is achieved through downsizing and/or the collapse/disappearance of entire airlines.

Capacity must be cut to the point in 18 months there is a definitive shortage. But this is not rationally happening.

moderate to low profit airlines just will not have the reserves or equity.

I have no idea how to restructure Virgin into a profitable company considering it will be 2023 or so before enough traffic returns and probably 2025 until those LHR slots have high value again.

As noted before, the Virgin brand isn't what it was. I'm older, but I barely recall Virgin record stores. That is what put the brand name out there. It has been decades since the record stores were out there. That means the brand name isn't what it was.

If the brand was worth more, we would still have Virgin America and Virgin Australia wouldn't have been perpetually struggling.

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Phosphorus
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 11:37 am

Sorry, but is this all even legal? I mean, this is basically a jurisdiction shopping exercise for a company in distress.
Please correct me if I'm wrong, but VS is a UK-registered company, and must obey UK laws (English law, in this case, I gather).
The fact of filing for bankruptcy protection, in the US, should mean that VS meets at least one of two criteria:
1) not able to meet current obligations
and/or
2) liabilities exceed assets.
Curiously enough, both are on the books in the UK, as tests for company insolvency. And trading while insolvent:
https://en.wikipedia.org/wiki/Trading_while_insolvent
is actually illegal.
What gives?

Another matter -- what about non-US creditors to VS (including ticket holders, expecting refunds)? Are they to be expected to participate in US bankruptcy proceedings, to get their money back?
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Boeing74741R
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:11 pm

Some details of the (quite complex) deal are here...

https://www.headforpoints.com/2020/08/0 ... scue-plan/

Picking up on one item about aircraft leaseco’s being given a choice of reduced lease rates or aircraft being handed back, I would be surprised if they decide to go with the second option. There are plenty of widebodies on the market and demand for aircraft is weak, so I doubt it’s in their interests to have numerous aircraft suddenly taken off-lease, especially when they have a choice on the matter, with no new home even if many of them are less than 10 years old.
 
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vhtje
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:16 pm

lightsaber wrote:
factsonly wrote:
There will be structural over-capacity in the global air transport market for some time to come.

Simple economics now calls for capacity adjustments, this is achieved through downsizing and/or the collapse/disappearance of entire airlines.

Capacity must be cut to the point in 18 months there is a definitive shortage. But this is not rationally happening.

moderate to low profit airlines just will not have the reserves or equity.


So how can the market adjust its capacity without the bloodletting?

Perhaps that is a downside of capitalism - the model expects perpetual growth. When there is retraction, it means pain; the weak go bust and leave a trail of destruction.
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Polot
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:17 pm

Boeing74741R wrote:
Some details of the (quite complex) deal are here...

https://www.headforpoints.com/2020/08/0 ... scue-plan/

Picking up on one item about aircraft leaseco’s being given a choice of reduced lease rates or aircraft being handed back, I would be surprised if they decide to go with the second option. There are plenty of widebodies on the market and demand for aircraft is weak, so I doubt it’s in their interests to have numerous aircraft suddenly taken off-lease, especially when they have a choice on the matter, with no new home even if many of them are less than 10 years old.

It will be interesting to see what happens with the A330ceo. Plan was to remove them as lease expires and replace them with Neos on order. I wonder if that will be still be the case, or if the CEOs will stay around longer with reduced rates and their replacements deferred until VS is healthier.
 
FluidFlow
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:44 pm

Polot wrote:
Boeing74741R wrote:
Some details of the (quite complex) deal are here...

https://www.headforpoints.com/2020/08/0 ... scue-plan/

Picking up on one item about aircraft leaseco’s being given a choice of reduced lease rates or aircraft being handed back, I would be surprised if they decide to go with the second option. There are plenty of widebodies on the market and demand for aircraft is weak, so I doubt it’s in their interests to have numerous aircraft suddenly taken off-lease, especially when they have a choice on the matter, with no new home even if many of them are less than 10 years old.

It will be interesting to see what happens with the A330ceo. Plan was to remove them as lease expires and replace them with Neos on order. I wonder if that will be still be the case, or if the CEOs will stay around longer with reduced rates and their replacements deferred until VS is healthier.


From an outside perspective I guess the CEOs are already the cheaper leases compared to the 350s and 787s. So the goal has to be to reduce the latter rates. I still wonder why VS does not try to get rid of the 787s and consolidate in a 330/350 fleet with all pilots having the same 330 payscale. Otherwise shes the fleet of 330/350s and only have 787s.
 
Westerwaelder
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 12:45 pm

Phosphorus wrote:
Sorry, but is this all even legal? I mean, this is basically a jurisdiction shopping exercise for a company in distress.
Please correct me if I'm wrong, but VS is a UK-registered company, and must obey UK laws (English law, in this case, I gather).
The fact of filing for bankruptcy protection, in the US, should mean that VS meets at least one of two criteria:
1) not able to meet current obligations
and/or
2) liabilities exceed assets.
Curiously enough, both are on the books in the UK, as tests for company insolvency. And trading while insolvent:
https://en.wikipedia.org/wiki/Trading_while_insolvent
is actually illegal.
What gives?

Another matter -- what about non-US creditors to VS (including ticket holders, expecting refunds)? Are they to be expected to participate in US bankruptcy proceedings, to get their money back?


It is entirely legal. The devil is in the detail. VS are not filing for bankruptcy in the US (they are not a US entity as you pointed out). They are filing to protect their assets in the US while the restructuring runs it's course in the UK.

VS is now the only airline in the UK still being named and shamed for not refunding customers. All others have pulled up their socks, at least partially. VS are still dragging their feet and 120 days of waiting seems the norm, meaning they are only now refunding tickets from early April, the early stage of this crisis in the UK. My guess is, they simply don't have the money and if they refunded as they are required by law, they would have been finished already. Essentially, they are using their customers money to keep afloat. Not much of a consumer champion if you ask me...
 
Miamiairport
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:29 pm

vhtje wrote:
lightsaber wrote:
factsonly wrote:
There will be structural over-capacity in the global air transport market for some time to come.

Simple economics now calls for capacity adjustments, this is achieved through downsizing and/or the collapse/disappearance of entire airlines.

Capacity must be cut to the point in 18 months there is a definitive shortage. But this is not rationally happening.

moderate to low profit airlines just will not have the reserves or equity.


So how can the market adjust its capacity without the bloodletting?

Perhaps that is a downside of capitalism - the model expects perpetual growth. When there is retraction, it means pain; the weak go bust and leave a trail of destruction.


And that is the $64K question. Which party(ies) will fall on the sword? The airlines? The a/c lessors? The flying public? The employees? The taxpayer? Over the past 10 years there's been a huge build up of flying. Here in the US it's been highly concentrated in the ULCC space with even the US3 chasing that market segment. Suddenly the world changes and there's far less demand and demand that is profitable. So what to do with all the planes, gates, workers, etc.?

If there's no significant turnaround within the next 90 days the airline industry for all what it's experienced since deregulation (or governments privatizing airlines) sadly ain't seen nothing yet.
 
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:30 pm

Westerwaelder wrote:
Phosphorus wrote:
Sorry, but is this all even legal? I mean, this is basically a jurisdiction shopping exercise for a company in distress.
Please correct me if I'm wrong, but VS is a UK-registered company, and must obey UK laws (English law, in this case, I gather).
The fact of filing for bankruptcy protection, in the US, should mean that VS meets at least one of two criteria:
1) not able to meet current obligations
and/or
2) liabilities exceed assets.
Curiously enough, both are on the books in the UK, as tests for company insolvency. And trading while insolvent:
https://en.wikipedia.org/wiki/Trading_while_insolvent
is actually illegal.
What gives?

Another matter -- what about non-US creditors to VS (including ticket holders, expecting refunds)? Are they to be expected to participate in US bankruptcy proceedings, to get their money back?


It is entirely legal. The devil is in the detail. VS are not filing for bankruptcy in the US (they are not a US entity as you pointed out). They are filing to protect their assets in the US while the restructuring runs it's course in the UK.

VS is now the only airline in the UK still being named and shamed for not refunding customers. All others have pulled up their socks, at least partially. VS are still dragging their feet and 120 days of waiting seems the norm, meaning they are only now refunding tickets from early April, the early stage of this crisis in the UK. My guess is, they simply don't have the money and if they refunded as they are required by law, they would have been finished already. Essentially, they are using their customers money to keep afloat. Not much of a consumer champion if you ask me...


I've bolded the key parts of your response. If you are correct,
a) VS is trading while insolvent, and not declaring that
b) trying to shield part of their assets in a foreign (vs UK) jurisdiction, to the detriment of their (non-US) creditors

So yeah, I would agree with you that filing Chapter 15 in the US is not illegal per se.
However, the implications are that whatever is happening with VS outside of the US, while that Chapter 15 restructuring is ongoing, is not necessarily legal, correct?
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MIflyer12
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:37 pm

vhtje wrote:
Perhaps that is a downside of capitalism - the model expects perpetual growth. When there is retraction, it means pain; the weak go bust and leave a trail of destruction.


No, it doesn't. See Joseph Schumpeter, 1942, 'creative destruction.'

The problem is that shareholders, some governments, and especially employees don't like the destruction part. You wind up socializing business losses and yielding the walking dead - carriers everyone recognizes should have gone out of business years ago, with Alitalia as a prime example.

I don't know how VS comes out of this. It wasn't financially strong even in the last decade, which was pretty good for most carriers worldwide.
 
ScottB
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:43 pm

vhtje wrote:
Perhaps that is a downside of capitalism - the model expects perpetual growth. When there is retraction, it means pain; the weak go bust and leave a trail of destruction.


Nothing about capitalism "expects perpetual growth." Capitalism just expects that markets will determine the success or failure of companies, products, services, etc. Stock markets to some degree reward continued growth, but even firms in stagnant markets (like, for example, utilities) are rewarded if they distribute profits to their shareholders. The alternative of the weak going bust ends up being zombie companies (like Alitalia) which continue to trade seemingly endlessly, driving up prices for consumers by inhibiting more efficient competitors from entering markets.

And the current situation is pretty much the antithesis of free-market capitalism. The catastrophe underway in the airline industry, along with substantially all travel-related sectors, can be attributed to government decisions to attempt to address a pandemic. Governments closing borders, ordering companies to close shops/factories/offices, restricting movement, etc. -- that isn't capitalism.
 
MIflyer12
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 1:45 pm

Westerwaelder wrote:
It is entirely legal. The devil is in the detail. VS are not filing for bankruptcy in the US (they are not a US entity as you pointed out). They are filing to protect their assets in the US while the restructuring runs it's course in the UK.


VS did file for protection under the U.S. bankruptcy code. The anomaly - for Americans - is filing under Chapter 15. We know Chapter 11 restructurings and Chapter 7 liquidations, both very common among U.S. air carriers.

Right from the U.S. Federal Judiciary:

Chapter 15 - Bankruptcy Basics
Ancillary and Other Cross-Border Cases
Chapter 15 is a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It is the U.S. domestic adoption of the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law ("UNCITRAL") in 1997, and it replaces section 304 of the Bankruptcy Code. Because of the UNCITRAL source for chapter 15, the U.S. interpretation must be coordinated with the interpretation given by other countries that have adopted it as internal law to promote a uniform and coordinated legal regime for cross-border insolvency cases.

The purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.


Parties wondering about how this is coordinated with registration and bankruptcy proceedings in another country can have a look at the source: https://www.uscourts.gov/services-forms ... tcy-basics
 
AAIL86
Posts: 463
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 2:11 pm

uta999 wrote:
Surely putting another £1.2B into Virgin is simply delaying the inevitable until next year. Things will be no better for them then. It will eventually go the same way as Thomas Cook and Monarch. Customers won't want to book flights or holidays with a 'tainted' brand, whose future is constantly in the headlines with the words; bail-out, administration, redundancy, Chaptor 11 (or 15). It is on life-support already. Who would really notice if they go under? The route network is tiny and was getting smaller every year, even before Covid19.


Exactly. What percentage of their prior revenue went over the Atlantic? One would have to think that if there is no comprehensive transatlantic agreement for travel (perhaps via gateway cities with efficient testing schemes) by say, Q4, one would have to think they would be deeply threatened. They might not be the first to liquidate (thinking Norwegian here) but if the status quo continues they are toast.
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Phosphorus
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 2:25 pm

AAIL86 wrote:
... They might not be the first to liquidate (thinking Norwegian here) but if the status quo continues they are toast.

Norwegian is not what it used to be. It's no longer an airline with great expansion ambition, plenty of planes and dwindling cash reserves.
Norwegian of today is owned by leasing companies, has not many planes, but a lot of claims against Boeing. It's not going anywhere -- just the opposite, it's here to stay and hammer Boeing for money.
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Boeing74741R
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 3:35 pm

GDB wrote:
If BA do not change their own course of action, fast, they might not either.


Just my opinion, but I still think BA might be forced to go to the government for support, as per my prediction on this thread back in the spring. Having seen the way they’re shafting staff in order to “finish the job” with getting all cabin crew’s wages down, I’m not sure it’s morally correct to provide assistance. I also noted Willie’s words when he boasted about not needing government support around the time VS went to the government.

ScottB wrote:
And the current situation is pretty much the antithesis of free-market capitalism. The catastrophe underway in the airline industry, along with substantially all travel-related sectors, can be attributed to government decisions to attempt to address a pandemic. Governments closing borders, ordering companies to close shops/factories/offices, restricting movement, etc. -- that isn't capitalism.


It’s why a few months ago on this thread I argued the government had an obligation to provide some sort of support to VS and others as they had a role in putting them and others in dire straits with the lockdowns and “do not travel” messaging (even though back in late-March I didn’t think the pandemic would run for as long as it has). I should have known better though given it’s been British government policy for pretty much the entirety of VS’ existence to not stand in the way of trouble companies from failing and unlikely to change even they soon no longer have the EU state aid excuse to hide behind.
 
Opus99
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 3:51 pm

Boeing74741R wrote:
GDB wrote:
If BA do not change their own course of action, fast, they might not either.


Just my opinion, but I still think BA might be forced to go to the government for support, as per my prediction on this thread back in the spring. Having seen the way they’re shafting staff in order to “finish the job” with getting all cabin crew’s wages down, I’m not sure it’s morally correct to provide assistance. I also noted Willie’s words when he boasted about not needing government support around the time VS went to the government.

ScottB wrote:
And the current situation is pretty much the antithesis of free-market capitalism. The catastrophe underway in the airline industry, along with substantially all travel-related sectors, can be attributed to government decisions to attempt to address a pandemic. Governments closing borders, ordering companies to close shops/factories/offices, restricting movement, etc. -- that isn't capitalism.


It’s why a few months ago on this thread I argued the government had an obligation to provide some sort of support to VS and others as they had a role in putting them and others in dire straits with the lockdowns and “do not travel” messaging (even though back in late-March I didn’t think the pandemic would run for as long as it has). I should have known better though given it’s been British government policy for pretty much the entirety of VS’ existence to not stand in the way of trouble companies from failing and unlikely to change even they soon no longer have the EU state aid excuse to hide behind.

With regards to BA. It depends on how well they play it. Right now Liquidity is at 8.1 billion got the group. BA secured another 750M firom its aircrafts. AMEX deal for 750M and then 2.75 billion equity raising. So their Good with raising money. It’s the cash burn. If they can reduce their cash burn even further. I don’t think they’ll need government support. They can weather the storm. And they need their other revenue streams (bar the us) to open. Europe is doing much better and they can at least use that to soften the blow. VS will have about 400M and no US for how long and have no other way of raising money. So if this doesn’t work then I don’t know.

Also looks like QR has no issues giving them more money if they need it. Wonder what the cap is though but from the raising QR is dropping about 700M. IAG is by far their most successful investment so let’s see if IAG needs more what would happen
 
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Revelation
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 4:59 pm

Phosphorus wrote:
I've bolded the key parts of your response. If you are correct,
a) VS is trading while insolvent, and not declaring that
b) trying to shield part of their assets in a foreign (vs UK) jurisdiction, to the detriment of their (non-US) creditors

So yeah, I would agree with you that filing Chapter 15 in the US is not illegal per se.
However, the implications are that whatever is happening with VS outside of the US, while that Chapter 15 restructuring is ongoing, is not necessarily legal, correct?

https://uk.reuters.com/article/us-virgi ... KKCN2502RZ is a good explainer.

In particular:

The U.S. filing is an ancillary proceeding tied to a separate action filed in a British court, where Virgin Atlantic obtained approval Tuesday to convene meetings of affected creditors to vote on the plan on Aug. 25.

An airline spokeswoman said the restructuring plan was before a British court “to secure approval from all relevant creditors before implementation.” She added the “process is proceeding with the support of the majority of our creditors.”

Bloomberg reported Virgin Atlantic told a London court it could run of money in September if a restructuring deal is not approved.

Non U.S.-companies use Chapter 15 to block creditors who want to file lawsuits or tie up assets in the United States.

So (a) is false, VS is not (yet) insolvent.

And (b) is false, VS is trying to implement a recovery plan filed in the UK courts that it feels will benefit all creditors.

From VS management's point of view it's an attempt to prevent certain US creditors from tying up US assets VS needs for its overall recovery plan. And it's not just their opinion, both UK and US courts are moving forward together with the recovery plan. Remember, CH 15 requires the US court to coordinate with the non-US court.
Last edited by Revelation on Wed Aug 05, 2020 5:03 pm, edited 1 time in total.
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MIflyer12
Posts: 8271
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 5:03 pm

ScottB wrote:
And the current situation is pretty much the antithesis of free-market capitalism. The catastrophe underway in the airline industry, along with substantially all travel-related sectors, can be attributed to government decisions to attempt to address a pandemic. Governments closing borders, ordering companies to close shops/factories/offices, restricting movement, etc. -- that isn't capitalism.


Capitalism doesn't mean disregarding public health. In the U.S. there's a hundred years of public health measures - and plenty of court cases - affirming the rights of local and state governments to take steps to preserve health. Companies don't have a right to operate (or to be compensated for non-operation) without regard to air pollution, water pollution, noise pollution, etc. The U.S. has minimal (reciprocal treaty) obligations to maintain open international borders; interstate traffic is something different.

A better question for the hard-core capitalists is why they support grant and loan funds to specific industries (and their shareholders) in contravention of industry rationalization.
 
GDB
Posts: 13783
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 5:40 pm

Boeing74741R wrote:
GDB wrote:
If BA do not change their own course of action, fast, they might not either.


Just my opinion, but I still think BA might be forced to go to the government for support, as per my prediction on this thread back in the spring. Having seen the way they’re shafting staff in order to “finish the job” with getting all cabin crew’s wages down, I’m not sure it’s morally correct to provide assistance. I also noted Willie’s words when he boasted about not needing government support around the time VS went to the government.

ScottB wrote:
And the current situation is pretty much the antithesis of free-market capitalism. The catastrophe underway in the airline industry, along with substantially all travel-related sectors, can be attributed to government decisions to attempt to address a pandemic. Governments closing borders, ordering companies to close shops/factories/offices, restricting movement, etc. -- that isn't capitalism.


It’s why a few months ago on this thread I argued the government had an obligation to provide some sort of support to VS and others as they had a role in putting them and others in dire straits with the lockdowns and “do not travel” messaging (even though back in late-March I didn’t think the pandemic would run for as long as it has). I should have known better though given it’s been British government policy for pretty much the entirety of VS’ existence to not stand in the way of trouble companies from failing and unlikely to change even they soon no longer have the EU state aid excuse to hide behind.


It's Walsh that is the reason BA have not done what most of their competitors have, all across the world and for BA staff, the intolerable sight of this even including IAG members.
I wish he had pissed off in March like he should have.
In my nearly 20 years on here, if BA have done something to screw up, that was theirs and only their fault, I don't believe I have defended it. Since many things that go wrong are multi factored, the obvious examples being issues at LHR or LGW, it can mean lively debate.

Some things ARE clear cut though.
Walsh's behavior towards BA (and only BA of all IAG staff) since this crisis began and Branson's massively poor optics of asking for public money from a tax haven island.
Then again, what do I care he has a tax haven island since he didn't get any public money, not nice to find out via the media that BA, to raise money, are selling off their fine art collection.
Their WHAT? I am struggling to write this without extensive use of profanity, like a script from 'Veep' or 'Succession'. So all these these when we were told how we were too costly (while we were in effect subsidizing much of IAG), they spunked money on.......paintings?
Not shuttered the palace of stupid ideas that is Waterside yet? Why? They were planning to shift some of them over to base before all of this.

I do not wish to comment on my own situation, only that it is uncertain, let's just say the level of trust i have with my management is about the same as I have for Walsh.
While I know if not for him, that would probably not be the case, their necks are on the line too.
But that doesn't really make much difference to me does it? Just as Branson's latest financial woes don't either.
 
F9Animal
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 6:10 pm

So so sad!! I mean, we know Virgin isn't the only airline suffering right now!!! I really hope they are able to pull through!!
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Revelation
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 6:31 pm

MIflyer12 wrote:
Capitalism doesn't mean disregarding public health.

Sure it does. In capitalism, all transactions are assigned a cost and a benefit. If benefit exceeds cost, go for it. Given that a lot of costs of public health are socialized or benefit for-profit hospitals, insurance companies, pharma companies, etc there's not a lot of room for compassion in the corporate driven capitalist system. Corporations are people too, they have every right to act in their own best interest. Individuals are still people too, but they have far less resources to utilize.

You may or may not have noticed, but recent US coronavirus relief legislation addressed corporate liability limits. That's all part of the cost vs benefit analysis. Now that they know what the liabilities could be, they have a clearer view of the various trade offs they find themselves making.
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mcg
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 6:51 pm

Phosphorus wrote:
Sorry, but is this all even legal? I mean, this is basically a jurisdiction shopping exercise for a company in distress.
Please correct me if I'm wrong, but VS is a UK-registered company, and must obey UK laws (English law, in this case, I gather).
The fact of filing for bankruptcy protection, in the US, should mean that VS meets at least one of two criteria:
1) not able to meet current obligations
and/or
2) liabilities exceed assets.
Curiously enough, both are on the books in the UK, as tests for company insolvency. And trading while insolvent:
https://en.wikipedia.org/wiki/Trading_while_insolvent
is actually illegal.
What gives?

Another matter -- what about non-US creditors to VS (including ticket holders, expecting refunds)? Are they to be expected to participate in US bankruptcy proceedings, to get their money back?


I suspect the US filing was to prevent creditors from seizing airplanes.
 
mcg
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 6:55 pm

Phosphorus wrote:
AAIL86 wrote:
... They might not be the first to liquidate (thinking Norwegian here) but if the status quo continues they are toast.

Norwegian is not what it used to be. It's no longer an airline with great expansion ambition, plenty of planes and dwindling cash reserves.
Norwegian of today is owned by leasing companies, has not many planes, but a lot of claims against Boeing. It's not going anywhere -- just the opposite, it's here to stay and hammer Boeing for money.


Exactly Norwegian's most valuable asset may be it's claims against Boeing. Maybe......time will tell.
 
mcg
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 7:01 pm

Revelation wrote:
MIflyer12 wrote:
Capitalism doesn't mean disregarding public health.

Sure it does. In capitalism, all transactions are assigned a cost and a benefit. If benefit exceeds cost, go for it. Given that a lot of costs of public health are socialized or benefit for-profit hospitals, insurance companies, pharma companies, etc there's not a lot of room for compassion in the corporate driven capitalist system. Corporations are people too, they have every right to act in their own best interest. Individuals are still people too, but they have far less resources to utilize.

You may or may not have noticed, but recent US coronavirus relief legislation addressed corporate liability limits. That's all part of the cost vs benefit analysis. Now that they know what the liabilities could be, they have a clearer view of the various trade offs they find themselves making.


Exactly, the only reason business's respect public health rules is that they can be closed if they don't. The costs of complying with the rules are less than the cost's of not complying. The liability limit thing is simply an attempt to foist the costs of covid off on to regular people (which I might be ok if (and only if) the public health standards to earn this liability limit are very high. In other words to get liability relief you've got to run a very 'clean' operation).
 
Vicenza
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Re: Virgin Atlantic facing collapse

Wed Aug 05, 2020 7:25 pm

MIflyer12 wrote:
chonetsao wrote:
VS is not critical to UK economy as its routes are covered by other airlines. It should be rescued by its shareholder, not the UK government.


VS is the largest single competitor to BA long-haul, is it not? Do you think passengers will be happy paying BA prices in an environment with less competition?


Spot on, and which if the truth be known is exactly the underlying reason why so many on here want to see their demise. Indeed, it should be noted that while AIG last week raised €2.5 billion they expect another of their subsiduaries to be bailed out by the Irish government
 
tphuang
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Re: Virgin Atlantic facing collapse

Wed Aug 05, 2020 7:46 pm

Vicenza wrote:
MIflyer12 wrote:
chonetsao wrote:
VS is not critical to UK economy as its routes are covered by other airlines. It should be rescued by its shareholder, not the UK government.


VS is the largest single competitor to BA long-haul, is it not? Do you think passengers will be happy paying BA prices in an environment with less competition?


Spot on, and which if the truth be known is exactly the underlying reason why so many on here want to see their demise. Indeed, it should be noted that while AIG last week raised €2.5 billion they expect another of their subsiduaries to be bailed out by the Irish government


VS may compete on more long haul routes than any other competitors. However, BA faces plenty of actual competition on most of those routes. Based on the prices we've seen in TATL market, that VS competition really has not done much to lower our fares.

If VS goes under, some slots will probably get bought by DL and Chinese carriers, other slots some new entrant like U2, DY or others. In short, there is no shortage of carriers that could come in and lower fares.
 
uta999
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 8:13 pm

VS flies to less than 1% of the routes served by BA. People on here who claim it will limit competition and lead to fare increases are both deluded and completely wrong.

Life will go on after VS disappears. The A350s and 787s will find new homes, as will the crews. It is just a badly run business whose time is up.
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ScottB
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 9:35 pm

uta999 wrote:
VS flies to less than 1% of the routes served by BA. People on here who claim it will limit competition and lead to fare increases are both deluded and completely wrong.


1%? No. BA ordinarily serves about 260 routes non-stop from LHR, including seasonal markets. VS normally served about 20 -- so while the number of routes served was under 10% of BA's portfolio, it was far higher than "less than 1%." Further, VS was a competitor on many of the densest long-haul markets from LHR, so their competitive impact was far more meaningful than their relatively small number of routes might indicate. Far more people traveling to/from London will benefit from a competitor on JFK-LHR or LAX-LHR than STR-LHR or PSA-LHR.

MIflyer12 wrote:
Capitalism doesn't mean disregarding public health. In the U.S. there's a hundred years of public health measures - and plenty of court cases - affirming the rights of local and state governments to take steps to preserve health. Companies don't have a right to operate (or to be compensated for non-operation) without regard to air pollution, water pollution, noise pollution, etc. The U.S. has minimal (reciprocal treaty) obligations to maintain open international borders; interstate traffic is something different.


The point is not that government lacks the right to enforce public health measures, but that those measures end up distorting the market. Even with the constant diet of fear porn on practically every media outlet, lots of people want to travel but cannot due to government measures. That is government blocking the normal functioning of the market, even if there are valid considerations of public health underlying those measures.

And in the other sets of externalities you cite -- like air, water, and noise pollution -- companies are typically afforded lengthy grace periods to adjust their businesses to new regulations. That's certainly not the case here, nor is there any predictability as to whether new restrictions will be issued or when any restrictions will be lifted. That is pretty much poison to business.
 
tphuang
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Re: Updated: Virgin Atlantic seeks restructuring; files for BK in US Court

Wed Aug 05, 2020 9:45 pm

ScottB wrote:
uta999 wrote:
VS flies to less than 1% of the routes served by BA. People on here who claim it will limit competition and lead to fare increases are both deluded and completely wrong.


1%? No. BA ordinarily serves about 260 routes non-stop from LHR, including seasonal markets. VS normally served about 20 -- so while the number of routes served was under 10% of BA's portfolio, it was far higher than "less than 1%." Further, VS was a competitor on many of the densest long-haul markets from LHR, so their competitive impact was far more meaningful than their relatively small number of routes might indicate. Far more people traveling to/from London will benefit from a competitor on JFK-LHR or LAX-LHR than STR-LHR or PSA-LHR.

There is no evidence that JFK-LHR or LAX-LHR will actually lose a competitor if VS goes under, since DL will most likely still operate those routes. And I would bet pretty heavily that they will get at least some of those old VS slots if the VS goes under through either bidding process or money owed to them from VS.

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