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n9801f
Topic Author
Posts: 300
Joined: Tue Apr 13, 2004 8:29 am

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 12:17 am

United1 wrote:
Although I do feel both of these moves by DL violate the spirit of what Cares was intended to do.

It's noteworthy that Virgin Group has tested limits of US airline financial regulations before, and it has often lacked transparency.

The US initially denied Virgin Group's proposal to start Virgin America (in 2006) on the grounds that it had too much British control and failed to establish that it was a US citizen. Continental Airlines reportedly led opposition to Virgin’s startup proposal. (1)

Virgin America initially refused to file federally required profitability disclosures (Form 41) with DOT. Competing airlines protested. (2) Eventually Virgin America was forced to file. (3)

The citizenship question resurfaced when US hedge funds sold their stake in Virgin America in 2009. Was Virgin America was then majority British owned? (4)

In all cases, Virgin's status as private company shielded it from disclosures required of US-listed stock companies, so it was hard for members of the public to see for themselves..

(1) https://www.sfgate.com/bayarea/article/ ... 464659.php
(2) https://www.cbsnews.com/news/alaska-tel ... rica-does/
(3) https://crankyflier.com/2013/05/14/virg ... ng-public/
(4) https://www.wsj.com/articles/SB123663746387076621



chonetsao wrote:
However I do feel we need more details on this 'loan'. Currently the information available is rather opaque.

:checkmark:

Agreed! I just paid my taxes. Where is the money going?
 
kiowa
Posts: 832
Joined: Wed Jun 08, 2011 12:37 am

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 3:38 am

ah414211 wrote:
If true, Delta should be required to pay back all of the tax payer funded bailout dollars immediately!


Absolutely! You would think that all of the stimulus money would go to the citizens of the US.
 
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Rajahdhani
Posts: 677
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Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 4:49 am

To add, here's a press release from May 2020 (admittedly, during a much worse off time financially for the carrier);
https://news.delta.com/delta-actions-address-financial-impact-covid-19
Delta is undertaking cost reduction initiatives, including:

Instituting a company-wide hiring freeze and offering voluntary leave options
Parking aircraft, and evaluating early retirements of older aircraft
In addition, the recent fuel price decline provides approximately $2 billion of full-year expense benefit.

Balance Sheet and Cash Flow

Delta has also made the following cash flow decisions:

Deferring $500 million in capital expenditures
Delaying $500 million of voluntary pension funding
Suspending share repurchases


So, the carrier understands how to struggle and the steps needed to get itself out of a financial hell.
It was a brutal move - but based on what we were facing, it was a necessitated move on their part.

When they needed more money - employees once again, took it on the chin:

Per November 2020:
https://www.reuters.com/article/us-delta-air-workers/delta-pilots-vote-for-pay-cuts-in-deal-that-avoids-furloughs-through-2022-idUSKBN2852LA
Delta Air Lines Inc pilots voted in favor of a deal that avoids furloughs through Jan. 1, 2022 in exchange for pay cuts, a union representing the pilots said on Wednesday.


Per December 2020:
https://www.11alive.com/article/news/health/coronavirus/delta-cuts-costs-lowers-fares/85-c4c51415-45c3-4e75-b006-ff911703fc6b
Ed Bastian, Delta's CEO, and himself a former accountant, has been keenly aware of the effect the financial hits would take on its 70,000-employee worldwide workforce. "Our people have taken voluntary unpaid leaves of absence, with over 40,000 of our people taking virtually the entire summer off without pay -- and that's half our team," Bastian said. "We had 20% of our people early retire, so we have clearly reduced the size of the airline by a meaningful amount."


For the purposes of nostalgia, during another crisis - here's how DL's employees responded:

https://www.deltamuseum.org/exhibits/exhibits/aircraft/b-767-the-spirit-of-delta
"This airplane and most of all, the spirit of Project 767, reflect that which makes Delta unique. The Delta people.” David C. Garrett, Jr., Delta president & CEO, 1982

Project 767
In Spring 1982, the airline industry was troubled by a weak economy, high fuel prices and deregulation. After 35 consecutively profitable years, Delta posted a net loss. As a way of expressing their appreciation for company support during this trying time, Delta employees spearheaded “Project 767” to raise money to pay for Delta’s first Boeing 767.


Validly, is VS worth supporting when DL employees and shareholders pay for it?

To cross the pond, though;

https://www.businesstravelnews.com/Procurement/Virgin-Atlantic-Completes-Recapitalization-to-Cut-1150-More-JobsVirgin Atlantic CEO Shai Weiss said: "The completion of the private-only, solvent recapitalization of Virgin Atlantic removes much of the uncertainty we faced and represents a major step forward in our fight for our survival.
"Now we must focus our efforts on securing our long-term future, by ensuring that Virgin Atlantic not only survives but thrives as passenger demand returns."


And Per Virgin Atlantic's own corporate disclosure:
https://corporate.virginatlantic.com/gb/en/media/press-releases/boeing-787-deal.html
Background
The private only, solvent recapitalisation of Virgin Atlantic completed on 4 September 2020. The Plan delivered a refinancing package worth c.£1.2bn over 18 months, in addition to the self-help measures already taken:
£280m in cost savings per year, £880m reduction in fleet capex in the next five years
Shareholders Virgin Group and Delta provided c.£600m in support over the life of the plan, including a £200m investment from Virgin Group and the deferral of c.£400m of shareholder payments such as brand fees and Joint Venture related costs.
The airline continues to have the support of credit card acquirers (Merchant Service Providers) Lloyd’s Cardnet, First Data and American Express.
Davidson Kempner Capital Management, a global institutional investment management firm, provided £170m of secured financing and the airline’s largest creditors and suppliers are contributing an additional £450m by way of deferrals


Mind you, earlier this year when Branson threatened to sell the carrier, and so VS was forced to look to the Government of the U.K. for funding;

https://www.reuters.com/article/us-health-coronavirus-virgin-atlantic/virgin-atlantic-says-still-talking-with-uk-government-on-coronavirus-funds-idUSKCN22801J
The comments came after the Sunday Telegraph reported here that founder Richard Branson was seeking a buyer for the airline and had set a May-end deadline for a sale, and that talks with the government for a 500 million pound ($618.35 million) bailout package had been "effectively shelved."
 
Josh76040
Posts: 31
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Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 5:10 am

Delta’s acceptance of PSP monies for payroll frees up the carrier’s own funds. That does not mean that they have the right to then use the funds that are freed up to go prop up failing foreign enterprises. If they have enough money to invest in VS and LATAM, they have enough to pay their employees without PSP. The US government needs to pull the plug on Delta; call back the PSP monies and let Delta wither, if need be.
 
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Rajahdhani
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Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 7:05 am

To clarify:

https://www.businesstraveller.com/features/these-airlines-have-received-a-bailout/
As with other U.S airlines Delta Airlines has accessed funding as part of the U.S the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
It will receive $5.4 billion from the Payroll Support Program (PSP) to support staff salaries and benefits, which comes in two forms: a direct grant of $4.1 billion, and a low-interest rate loan of $1.6 billion. The Atlanta-based airline will also provide the government with warrants to acquire about 1% of Delta stock at $24.39 per share over five years.


...and from the Source - the U.S. Department of the Treasury:

https://home.treasury.gov/policy-issues/cares/preserving-jobs-for-american-industry/payroll-support-program-payments

As specified in section 4113 of the CARES Act, the amount to be received by each air carrier or contractor is based on its payroll expenses from April 2019 through September 2019, subject to proration. Funds received by these air carriers and contractors must exclusively be used for the continuation of payment of employee wages, salaries, and benefits.

DELTA AIR LINES INC. ATLANTA GA 04/20/2020 $5,593,698,668 $1,648,109,600 6,757,317 $24.39
 
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NWAESC
Posts: 1688
Joined: Thu Aug 30, 2007 1:02 pm

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 10:20 am

skipness1E wrote:
If, as was likely in 2020, VS collapsed, then Delta becomes badly outgunned in the London market, they return to being a poor third against BA/AA and UA almost overnight, the VS loyalty base is up for grabs and hard fought market share vanishes.
We all love getting very angry at things in 2021, perhaps step back, pause for breath, see the wider strategy might be a coherent one bringing employee value and reward tomorrow and just chill?

Nah that was dumb, let the shrieking continue. x


Are you lost? This is no place for that kind of sound logic and intentional mindset.

Much easier to do a cannonball into the performative outrage pool.
"Nothing ever happens here, " I said. "I just wait."
 
MIflyer12
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Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 11:50 am

We've got the BBC story, badly written, and then badly interpreted by some. Coming at this from another angle, just how much do you want the government making business decisions for airlines? When were Alitalia or Aeroflot known for service and efficiency?

DL spent $3.1 Billion on 18K voluntary employee separations. WN spent some. UA spent some. AA spent some. Do you want Congress (or Treasury) making decisions at the less-than-$100 million level? Could you imagine Trump saying '$3.1 Billion is a lot of money. Just furlough them instead?' I could.
 
n9801f
Topic Author
Posts: 300
Joined: Tue Apr 13, 2004 8:29 am

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 3:12 pm

MIflyer12 wrote:
just how much do you want the government making business decisions for airlines?

If the government is giving my tax money to airlines, I definitely DO want it involved with how that money is spent.

If airlines don't want to be accountable for what they do with my money, then they shouldn't accept it in the first place.
 
n9801f
Topic Author
Posts: 300
Joined: Tue Apr 13, 2004 8:29 am

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 4:00 pm

MIflyer12 wrote:
When were Alitalia or Aeroflot known for service and efficiency?

While I don't generally advocate for government involvement in airline business matters, I note that many world-class airlines began as government companies, including Delta partners and investments.

Air France (a Delta partner), Lufthansa, and British Airways are all top drawer airlines which are generally efficient and usually provide excellent service. All began as government companies.

And what about China Eastern? Government controlled. Delta invested $450M.

So Delta apparently knows that government involvement isn't always bad.

Besides, the US government proved to be an extremely shrewd, savvy airline investor in the mid-2000's when it guaranteed rescue loans through ATSB to struggling airlines in exchange for fees and stock warrants. Total loan monies were repaid in full and the government profited from its sale of the warrants. (1)(2) Bottom line is the US government, through ATSB, showed surprising prowess at understanding the airline business.

(1) https://www.wsj.com/articles/SB114895120797865882
(2) https://www.treasury.gov/press-center/p ... s2979.aspx


Today is no different. If Delta wants to enjoy use of my tax money, it should expect oversight.
 
2eng2efficient
Posts: 82
Joined: Wed Jul 08, 2020 5:30 pm

Re: New Delta loan to Virgin Atlantic?

Wed Mar 17, 2021 5:09 pm

Deferral of VS payment obligations by DL is clearly a permissible use of its working capital under the PSP, which does not give the U.S. government comprehensive control of any carriers’ financial management. Certainly supporting VS makes strategic sense for DL, and the fact that this is a noncash transaction makes this a non-issue almost. Was there even an 8-K filed about it? It’s borderline immaterial.

I am getting a crack out of the armchair lawyers in here that think they know better than a Fortune 500 company and its internal/external counsel.

If you are concerned about misappropriation of PSP monies, please write a letter to the Inspector General of the Treasury.

This law firm has some excellent resources about PSP compliance if you are interested:
https://www.nixonpeabody.com/en/ideas/a ... r-carriers

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