
Virgin Atlantic has just published, somewhat belatedly, its annual report and financial statements for the year to 31 December 2019.
Although the report was clearly drafted months ago in advance of it recapitalisation last year, it has only just been published on the Virgin Atlantic website and has not yet been filed at Companies House.
The airline group, which includes Virgin Holidays, reported a loss before tax and exceptional items for the year of £29.5m.
Like all airlines, Virgin Atlantic has been severely impacted by COVID-19. The court sanctioned solvent recapitalisation in July enabled Virgin Atlantic to secure new sources of debt and partial relief of debts owed to creditors.
When a company prepares a set of financial statements, its Directors are required to assess the ability of the company to continue to trade as a going concern. The company’s auditors are also required to comment on this.
To do this, Virgin Atlantic has modelled different scenarios for the resumption of passenger flights through 2020 and 2021. These are detailed extensively from page 57 of the report.
The airline has modelled its ability to trade as a going concern on an expected case of travel restrictions being lifted throughout 2021. In this instance, Virgin considers that, following its solvent recapitalisation, it would have sufficient funds to continue to trade for the next 12 months.
Virgin has also modelled an alternative scenario with more severe travel restrictions remaining in place until the summer, dubbed the August 2021 scenario. In this instance, Virgin Atlantic and its auditors have stated that further measures will be required to ensure the airline can continue to trade.
Virgin has since undertaken further measures such as the sale and leaseback of aircraft. Before its solvent recapitalisation, Virgin did seek state support but was rebuffed by the Treasury. Given that Virgin’s ability to operate passenger flights is in part impacted by restrictions imposed by the UK government and BA has secured a state guaranteed loan of £2 billion, it may have a stronger case for state support.
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