Virgin Atlantic Archives – London Air Travel

Virgin Atlantic Going Concern Warning

Virgin Atlantic’s Directors and Auditors have commented on the ability of the airline to trade as a going concern following COVID-19.

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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.

Virgin Atlantic To Fly To St Vincent

Virgin Atlantic will fly from London Heathrow to the Caribbean island of St Vincent twice weekly from June 2021.

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Virgin Atlantic Airbus A330neo Aircraft (Image Credit: Virgin Atlantic)

Virgin Atlantic is to launch a new route from London Heathrow to the Caribbean island of St Vincent from June 2021.

This will be the only direct service to the island from Europe. Virgin Atlantic will fly to St Vincent twice weekly. The island is served by Argyle International Airport.

Flights will operate twice weekly with Airbus A330-300 aircraft. As is par the course with new route announcements Virgin Atlantic, flights have not yet gone on sale. Nor has Virgin provided an indicative schedule. Flights should be on sale from Tuesday 24 November.

This move reflects, in part, a “pivot” to leisure traffic. Virgin’s official release alludes to relatively less stringent COVID-19 testing and quarantine restrictions in the Caribbean. Though, in truth, nobody knows what COVID-19 travel restrictions will be in place in six months’ time.

At present, all Virgin Atlantic flights are operating from London Heathrow Terminal 2. No date has been given for the reopening of Terminal 3. Based on current trends, this will be many months away.

Virgin Atlantic To Launch Heathrow – Lahore & Islamabad

Virgin Atlantic will fly from London Heathrow to Islamabad and Lahore from December 2020.

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Virgin Atlantic Logo (Image Credit: Virgin Atlantic)

Virgin Atlantic is to launch two new routes from London Heathrow to Lahore and Islamabad.

The flights will launch in December and will go on sale in September.

Virgin will fly from London Heathrow to Lahore four times weekly and to Islamabad three times weekly.

The airline has not confirmed exact details on aircraft and timings. Virgin will also fly from Manchester to Islamabad.

This decision is likely to be driven in part by the fact that the European Aviation Safety Agency has banned Pakistan International Airlines from flying to the European Common Aviation Area. Although, the Civil Aviation Authority has allowed Pakistan International Airlines to wet lease aircraft from other airlines.

Airlines are currently focused on routes that generate cash. A route such as this should provide sufficient passenger volumes from VFR (Visiting Friends & Relatives) traffic to be cash flow positive.

Also as airlines are unlikely to benefit from a airport slot usage waiver in the winter season, they will need to use their full slot portfolio to avoid forfeiting slots.

BA also flies from London Heathrow to Islamabad having returned to the city in 2019 after a gap of more than ten years. This will increase to five times weekly in September and daily in October. It would be surprising not to see a similar competitive response from BA.

Virgin Atlantic Secures Financial Support Package

Virgin Atlantic has announced a package of financial support measures to secure the future of the airline in the medium term.

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Virgin Atlantic has announced a new package of financial support measures for the airline.

The package comprises both the direct injection of cash as well as cash flow support through the deferral of fees.

Throughout the course of negotiations various numbers have been put on the package from upwards of £500m. Today’s package has been valued at £1.2bn over the next 18 months.

In addition, Virgin will seek to achieve cost savings of £280m a year and savings of £880m over the next five years through the deferral and refinancing of the delivery of new Airbus A350-1000 and Airbus A330 neo aircraft.

The restructuring package is based on a five year business plan where 2019 demand for air travel may not recover until 2024. Virgin Atlantic aims to be profitable by 2022.

Speaking to the Financial Times, Virgin Atlantic CEO Shai Weiss said:

“This is not a plan for another plan . . . our job has been to take a very severe look into 2021 specifically. We funded the plan for the worst case rather than best case as you would expect us to do.”

Under the package, Virgin Group will retain 51% control of Virgin Atlantic. Delta will also remain a 49% shareholder. Delta has today, in announcing its own financial results, written down its investment in Virgin Atlantic and taken a charge of $200m.

Virgin Group will provide the airline with a direct cash injection of £200m. Virgin Group has disposed of some its interest in Virgin Galactic to fund this. It will also defer payments for the use of the Virgin brand name and logo.

US private equity firm Davidson Kempner Capital Management will provide £170m of new debt. This will be secured against assets of the airline.

Delta Air Lines will not provide any direct financial investment as it is prohibited from doing so having received support from the US government under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

Delta has agreed to defer payments for shared services such as IT and payments due to it under its transatlantic joint-business with Virgin Atlantic. The total value of deferred fees to Delta and Virgin has been put at £400m over the life of the plan.

According to news reports, Virgin’s credit card payment processors, Cardnet and First Data, have also agreed to release funds they have withheld in case of the airline’s collapse.

The financial support package will require court approval and this should be granted within the next 43 days. Virgin’s bondholders who hold security over Virgin Atlantic’s slots at London Heathrow will need to support the package. There will inevitably be a lot of legal detail that has not been disclosed today.

Virgin Atlantic “Racing To Stitch Together £900m Rescue”

The latest of Virgin Atlantic’s plans to secure new financial support.

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Virgin Atlantic aircraft at London Heathrow (Image Credit: Heathrow)

News on the planned refinancing of Virgin Atlantic has been relatively quiet in recent weeks.

That’s not necessarily a bad sign. Leaks to the press happen for a reason and less so when people are busy making progress behind closed doors.

Mark Kleinman of Sky News has today, Saturday 27 June 2020, published an account of the current state of play.

The planned refinancing of Virgin Atlantic is complex with multiple interests and parties involved.

Based on the account by Mark Kleinman, who obviously has excellent sources and is consistently ahead of his competitors, this is the current state of play.

Virgin Atlantic is targeting an overall privately funded package of around £800m-£900m. This is higher than its earlier stated target of £750m of government and private sector support. Virgin seems to have given up on any hope of state support.

There is an informal deadline of early July to have at least an outline agreement in place.

It is also claimed that much of the overall package of funding for Virgin will come from the deferral of fees and payments owed by the airline, rather than new capital.

Delta and Virgin Group

Virgin Group and Delta Air Lines who own 51% and 49% of the airline respectively are said to be providing around £250m of new funding for Virgin Atlantic.

How this will be comprised is not clear.

In the case of support from Delta and Virgin Group, Delta CEO Ed Bastian has previously said it is unable to provide further financial support due to it having received financial assistance from the US Government under the CARES (Coronavirus Aid, Relief, and Economic Security) Act.

Virgin Group has disposed of some its interest in Virgin Galactic to raise nearly $500m in funds to support Virgin businesses.

Currently, Virgin Atlantic and Virgin Holidays pay a percentage of their revenues as a royalty for the use of the Virgin name and logo to a company called VAL TM Ltd. In the last published accounts for VAL TM Ltd for the year to 31 December 2018, it reported revenues of over £19m.

Virgin Atlantic and Delta also make sales and purchases between each other under their transatlantic joint-business. In Virgin Atlantic’s last published accounts for the year to 31 December 2018, it made £6.4m of sales to Delta and purchases of £72.2m from Delta.

Under a concept known as “transfer pricing” Virgin Atlantic has to make “arms length” payments to Delta and Virgin Group for services it receives from them, but deferring these would at least provide some cash flow relief.

Whilst Virgin Group is expected to retain control of Virgin Atlantic, it has not been confirmed whether Delta will retain its shareholding.

Other Support

As has been previously reported, Elliott Management Corporation are in discussions to provide up to £250m in debt funding. As is Davidson Kempner Capital Management which is said to be a marginal front runner.

These organisations are no pushover. They will not provide new funding unless they are confident they can get it back regardless of what ultimately happens to Virgin Atlantic. How they will obtain security given Virgin leases most of its fleet and has already mortgaged Heathrow slots is not known.

Virgin is also hoping to secure support from credit card companies who have been withholding funds because of the risk of the airline falling into administration.

The airline also has a revolving credit facility of $237m, secured against certain assets, which is due to expire in 2021 and it is seeking to amend and extend.

Virgin Atlantic Reinstates More Routes At London Heathrow

Virgin Atlantic will reinstate more destinations at London Heathrow throughout August and September 2020.

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Virgin Atlantic is to restart flying to more destinations at London Heathrow, with the aim of reinstating most of its London route network by the end of October 2020.

Virgin will restart scheduled passenger flights from Monday 20 July, flying from London Heathrow to Hong Kong. Los Angeles and New York JFK will follow on Tuesday 21 July.

The following Virgin Atlantic routes will be added in August:

Saturday 1 August – Barbados
Tuesday 4 August – Shanghai
Tuesday 18 August – Miami
Sunday 23 August – Lagos

The following Virgin Atlantic routes will be added in September:

Tuesday 1 September – Delhi, Las Vegas, Mumbai, Seattle and Washington Dulles
Sunday 6 September – Tel Aviv
Tuesday 8 September – San Francisco
Friday 14 September – Johannesburg
Saturday 15 September – Atlanta

The following Virgin Atlantic routes will be added in October:

Thursday 1 October – Antigua, Boston
Friday 2 October – Montego Bay, Grenada (via Antigua)
Sunday 4 October – Tobago (via Antigua)
Tuesday 6 October – Orlando

Virgin Atlantic To Resume Passenger Flights From 20 July

Virgin Atlantic is to resume passenger flights on a small number of routes from 20 July 2020.

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Virgin Atlantic is to resume passenger flights at London Heathrow from Monday 20 July 2020.

Since late April, Virgin has suspended all passenger operations, operating cargo-only flights.

Virgin will reinstate passenger flights from London Heathrow to Hong Kong and Orlando from 20 July 2020.

Flights to Los Angeles, New York JFK and Shanghai will resume from Tuesday 21 July 2020.

At the time of publication flights, except Orlando, have been loaded on to the Virgin Atlantic website. Schedules indicate flights to Los Angeles will operate twice daily and flights to New York JFK will operate 4-5 daily. This does seem high for the restart of operations.

Virgin plans to reinstate more routes in August and these will be announced over the next two weeks. The airline expects to reinstate routes gradually throughout 2020 and into 2021 as demand for air travel returns. This will depend a large part on the lifting of travel restrictions and the impact of the UK’s mandatory quarantine regime on arriving passengers.

Virgin Atlantic has relocated to London Heathrow Terminal 2, due to temporary closure of Terminal 3.

In common with other airlines, passengers are asked to maintain social distancing throughout the airport and to scan their own boarding pass at the aircraft gate. Face masks are also required at London Heathrow and on board aircraft.

Virgin’s in-flight service has been reduced with a streamlined meal service and only soft drinks. Full details of these measures are available from Virgin Atlantic.

Virgin Atlantic’s London Heathrow Route Network

Virgin Atlantic has confirmed its London route network after the consolidation of flights at London Heathrow.

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Virgin Atlantic has confirmed its planned route network at London Heathrow following its decision to suspend flights at London Gatwick for the foreseeable future.

The airline plans to gradually resume services throughout 2020 with a view to restoring a full flying programme in the summer of 2021.

The following routes will remain at London Heathrow:

Atlanta, Boston, Cape Town (winter seasonal), Delhi, Havana, Hong Kong, Johannesburg, Lagos, Las Vegas, Los Angeles, Miami, Mumbai, New York JFK, San Francisco, Seattle, Shanghai, Tel Aviv, Washington Dulles.

Virgin has previously suspended Newark and dropped plans to launch Sao Paulo.

Delta, Virgin’s transatlantic joint-business partner, has not confirmed when it plans to resume services from London Heathrow.

The following former Gatwick routes will operate at London Heathrow by Sunday 28 March 2021:

Antigua, Barbados, Grenada, Montego Bay, Orlando.

Virgin has previously suspended St Lucia.

Note that at the time of publication, Virgin is still selling these destinations on its website from Gatwick. It is likely that these destinations will be allocated new flight numbers when they transfer to Heathrow.

Virgin has not confirmed exact frequencies for its Heathrow schedule, other than that Tel Aviv will increase to twice daily.

Virgin Atlantic is currently operating from London Heathrow Terminal 2. No date has been set for its return to Terminal 3.

Virgin Atlantic Unveils Radical Restructuring

Virgin Atlantic has outlined plans for a radical restructuring as it seeks to secure Government support.

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Virgin Atlantic Boeing 747 Aircraft (Image Credit: Virgin Atlantic)

Virgin Atlantic has unveiled plans for a radical restructuring as it seeks to secure Government support for a state backed loan.

The airline is in consultation with its trade unions on job cuts of up to 3,150 staff, which is almost a third of its workforce.

Virgin Leaves London Gatwick

Virgin will consolidate its London operations at London Heathrow for the foreseeable future.

The airline has already temporarily transferred operations from Gatwick, where it used to operate routes such as Antigua, Barbados, Grenada, Montego Bay and Orlando, to Heathrow.

The airline had already planned to transfer its service to Havana to Heathrow in June. St Lucia was also due to be suspended in June.

Virgin was due to reinstate a service New York JFK at Gatwick this summer, which will now not happen. Passengers with bookings from Gatwick will be contacted in the coming days with their new flight details.

Virgin plans to lease its slots at Gatwick to enable a return to the airport. Though, with Norwegian also temporarily leaving the airport until 2021 and uncertainty over BA’s presence at the airport, it will be difficult to find airlines willing to operate them.

The departure of Virgin Atlantic from Gatwick is symbolic as it was of course where it launched its first flight to Newark in 1984.

At Heathrow, where the airline has temporarily transferred flights to Terminal 2, Virgin has suspended Newark and cancelled plans to launch Sao Paulo. At present, a planned winter seasonal service to Cape Town is still due to go ahead.

Fleet

Virgin Atlantic will immediately retire its last seven remaining Boeing 747 aircraft.

It will also retire four Airbus A330-200 aircraft by early 2022. Virgin accelerated the retirement of its last three Airbus A340 aircraft earlier this year.

Virgin has not made any comment on plans for the delivery of its remaining Airbus A350-1000 aircraft, which were all due to be delivered by 2021.

The airline remains in discussions with the UK government about state support which could include a loan and a credit guarantee to prevent credit companies from withholding funds. Virgin is also in discussion with third party investors to secure additional finance. Delta, which owns 49% of the airline, says it is unable to provide any financial support.

According to leaked comments from the Treasury, it did not consider Virgin Atlantic’s business plans for the next 2-5 years to be realistic. These deep capacity cuts, along with some form of contribution from its two shareholders, should assist in making a case for state support.

Virgin Atlantic Transfers Flights From Gatwick To Heathrow

Virgin Atlantic is to temporarily transfer all remaining flights from London Gatwick to London Heathrow airport.

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Virgin Atlantic Logo (Image Credit: Virgin Atlantic)

Virgin Atlantic is to temporarily transfer what few remaining flights operate from London Gatwick to London Heathrow airport.

This will take effect for outbound flights from Tuesday 24 March 2020.

The last outbound flights from London Gatwick operated today, Monday 23 March.

On Tuesday 24 March, the last inbound flights will arrive at London Gatwick. These are VS90 from Grenada and St Lucia and VS34 from Antigua.

On Tuesday 24 March, flight VS147 to Havana (formerly VS63 when operated at Gatwick) and VS133 to Antigua (formerly VS33 when operated at Gatwick) will operate from London Heathrow.

A number of destinations Virgin Atlantic ordinarily serves from Gatwick, such as Orlando, are suspended due to travel restrictions.

As Virgin is currently operating a severely limited schedule until the end of April, this arrangement is likely to continue for some weeks at least.

There has been a recent trend for Virgin to transfer routes from Gatwick to Heathrow. Havana was due to transfer Heathrow in June 2020 and Las Vegas was transferred last year. Other routes such as Cancun and St Lucia have been suspended.

If the medium to long term impact of Coronavirus does lead to a significant fall in demand for air travel, the transfer from Gatwick to Heathrow could well become permanent. Should Norwegian permanently withdraw from Gatwick and BA follow Virgin, this would be very damaging to the airport.