British billionaire Richard Branson said his airlines in the U.K. and Australia won’t survive the coronavirus crisis without state support, and that his Virgin Group lacks the resources to see them through the pandemic.
Branson said Monday he’s doing everything possible to keep Crawley, England-based Virgin Atlantic Airways Ltd. going, but that it needs a U.K.-backed loan to ride out the crisis. Virgin Australia Holdings Ltd. is meanwhile “fighting to survive,” he said in a letter to staff posted online. Branson also said he would offer his Necker Island estate in the Caribbean as collateral.
The entrepreneur is struggling to convince governments to rescue his brands given his own highly visible wealth and long-time residency in the West Indies, which has led him to be viewed as a tax exile. Group companies pay taxes in the countries where they are based and operate, and more than 70,000 people work in Virgin operations across 35 nations, according to the letter.
Britain has yet to decide on Virgin Atlantic’s weeks-old application for hundreds of millions of pounds in support. The government has asked the airline to provide details of its efforts to seek private-sector funding and hired Morgan Stanley to assess its profitability, viability and contribution to the U.K. economy, according to people with knowledge of the matter.
Virgin Atlantic in turn says it has engaged U.S. bank Houlihan Lokey to ensure that its exploring all non-state funding options.
“We are continuing to work closely with the sector and are willing to consider the situation of individual firms, so long as all other government schemes have been explored and all commercial options exhausted, including raising capital from existing investors,” the U.K. Department for Transport said in a statement.
Morgan Stanley declined to comment.
Government Snub
Virgin Australia’s meanwhile appears dire, with the carrier told by the government in Canberra on Monday that it will receive no further financial help, the Australian Financial Review reported. The airline’s board will meet late Monday with little option but to hand the company over to administrators, the newspaper reported.
Branson, who is worth about $6 billion according to the Bloomberg Billionaires Index, said in his letter he left Britain not for tax reasons “but for our love of the beautiful British Virgin Islands,” and that he has never taken significant profits out of Virgin Group. The 69-year-old mogul has chosen instead to plow money into businesses such as Virgin Galactic Holdings Inc., his space-tourism venture.
“I’ve seen lots of comments about my net worth, but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw,” he said.
Branson has committed to injecting $250 million into his brands to save jobs, of which “a big part” is going to Virgin Atlantic, according to the letter. Moves are also under way to raise money against his Necker Island home and other assets, though with “no money coming in and lots going out,” such measures alone won’t be enough, he said.
Any loan to Virgin Atlantic would be on commercial terms and fully repayable, the entrepreneur said, citing 600 million pounds ($746 million) in U.K. government-backed financing for discount carrier EasyJet Plc.
Virgin Atlantic customers including planemaker Airbus SE, engine manufacturer Rolls-Royce Holdings Plc and airport operators Heathrow Ltd. and Manchester Airports Group have written to the government saying how important Virgin Atlantic is to their business. Branson also said in his letter that a collapse would remove the chief rival to British Airways, pushing up fares.
Virgin Australia’s situation is even more critical, with debts of more than A$5 billion ($3.2 billion) at the end of 2019.
Branson now holds only a 10% stake in the Brisbane-based carrier, compared with 51% of Virgin Atlantic. Etihad Airways, Singapore Airlines, Nanshan Group and HNA Group each have holdings of about 20%.
Virgin Australia had asked the government for a A$1.4 billion loan, convertible into equity, to see it through the crisis. It competes in what’s essentially a two-player market dominated by Qantas Airways Ltd., and hasn’t made an annual profit for seven years.
–With assistance from David Hellier and Alex Morales.
This article was provided by Bloomberg News.
