Yahoo Finance Coronavirus: Richard Branson warns of Virgin Atlantic collapse without government loan
Virgin tycoon Richard Branson warned on Monday 20 April that Virgin Atlantic could collapse under the weight of the coronavirus crisis if it did not receive a government loan.
The tycoon even suggested that his Caribbean island could be offered as collateral for the loan, noting that his team “will raise as much money against the island as possible to save as many jobs as possible around the group.”
The airline is seeking a £500m ($624m) rescue package involving commercial loans and guarantees, even as the UK government has warned aviation firms to first seek funding from other sources.
In an open letter to Virgin’s 70,000 employees, Branson said that while the company would do “everything” to keep the airline going, it will “need government support to achieve that.”
Branson pointed to “the severe uncertainty” surrounding travel, and said the airline did not know how long its aircraft would be grounded.
“This would be in the form of a commercial loan — it wouldn’t be free money and the airline would pay it back,” Branson wrote, pointing to the £600m package granted to EasyJet (EZJ.L).
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Last month, chancellor Rishi Sunak warned that airlines would only receive “bespoke support” from the government if they could not secure the required assistance from lenders and shareholders.
Virgin Atlantic was last week told to resubmit its bailout proposal to the government to demonstrate the extent to which it had sought funding from other sources, according to the Financial Times.
Airlines are confronting an extraordinary crisis in coronavirus, and analysts have warned that many will collapse due to a complete fall-off in demand from travelers.
“The reality of this unprecedented crisis is that many airlines around the world need government support and many have already received it,” said Branson.
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“Without it there won’t be any competition left and hundreds of thousands more jobs will be lost, along with critical connectivity and huge economic value.”
Virgin Atlantic, which is 51% owned by Branson’s Virgin Group, last month initiated a recruitment freeze across the company and said that its chief executive and senior leaders would take significant short-term pay cuts.
Branson also warned on Monday that Virgin Australia was “fighting to survive” and said it would need support to get through the crisis.
“We are hopeful that Virgin Australia can emerge stronger than ever, as a more sustainable, financially viable airline,” he said.
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