Virgin Atlantic will collapse without government aid, Branson warns

20 April 2020, 16:54

By Nick Hardinges

@NHardinges

Virgin Atlantic will collapse without receiving financial support from the government, Sir Richard Branson has warned.

The billionaire boss of Virgin Group wrote to his employees to tell them the airline needs taxpayer support in the form of a commercial loan.

Reports have emerged suggesting he could be asking for up to £500 million of public money amid the global coronavirus pandemic.

It comes as Virgin Australia, the country's second-largest airline, entered voluntary administration after a request for a bail worth 1.4 billion Australian dollars (£716 million) from the country's government was refused.

In an open letter written to staff, the Virgin chief wrote: "We will do everything we can to keep the airline going - but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for.

"This would be in the form of a commercial loan - it wouldn't be free money and the airline would pay it back (as easyJet will do for the £600 million loan the government recently gave them)."

For all the latest coronavirus updates, follow our live blog here

He warned that many airlines around the world will need financial support from governments while adding that some have already received it.

"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."

The coronavirus outbreak has forced airlines across the globe to ground the vast majority of their fleets due to travel restrictions and the collapse in demand caused by the disease.

Earlier in April, Virgin Atlantic called on the UK government to offer the country's airline industry emergency credit facilities worth up to £7.5 billion.

But, Chancellor Rishi Sunak has previously said he will not create a specific support package for the sector.

The government will, however, be prepared to negotiate with individual firms once they have "exhausted other options," such as raising cash from existing investors.

Virgin Atlantic, founded by Sir Richard, has told staff to take eight weeks of unpaid leave.

This led to people calling on the billionaire to step in and ensure their wages are paid in full.

In his letter to staff, he wrote he has "seen lots of comments about my net worth" but insisted this is calculated on the value of Virgin businesses before the coronavirus pandemic, rather than "cash in a bank account ready to withdraw".

"Over the years, significant profits have never been taken out of the Virgin Group, instead they have been reinvested in building businesses that create value and opportunities," he explained.

Financial Expert: UK will be paying back coronavirus lifeline for a "very long time"

"The challenge right now is that there is no money coming in and lots going out."

He added: "Today, the cash we have in the Virgin Group and my personal wealth is being invested across many companies around the world to protect as many jobs as possible, with a big part of that going to Virgin Atlantic."

On Monday, Branson said he and his wife Joan “did not leave Britain for tax reasons but for our love of the beautiful British Virgin Islands and in particular Necker Island.”

“Over time, we built our family home here. The rest of the island is run as a business, which employs 175 people. As with other Virgin assets, our team will raise as much money against the island as possible to save as many jobs as possible around the group.”