Sir Richard Branson’s Virgin Atlantic Airways is plotting a surprise flotation on the London Stock Exchange as it pins its hopes on a rapid rebound in transatlantic travel.
Sky News has learnt that Virgin Atlantic has been holding talks with institutional investors about making its public market debut just five months after landing a fresh £160m capital injection.
City sources said this weekend that institutions’ response to management presentations led by the airline’s executives had been positive, and that an autumn announcement of an intention to float now looked likely.
An initial public offering (IPO) would mark the first time since Virgin Atlantic’s launch in 1984 that it has sold shares to the public – and would almost certainly see Sir Richard relinquish overall control of the business.
Bankers at Citi and Barclays have been hired to oversee the listing, according to insiders.
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Virgin Atlantic is majority-owned by Sir Richard’s Virgin Group, which holds a 51% stake.
Delta Air Lines owns the remaining 49%, with the company having scrapped a deal in late 2019 that would have seen Air France-KLM acquiring a 31% shareholding from Sir Richard.
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Selling shares to the public would inevitably mean Virgin’s stake being diluted unless Sir Richard elected to subscribe for new equity in the IPO.
A flotation of Virgin Atlantic would be another milestone for an airline which has been among the industry’s worst-hit by the pandemic, largely because of its dependence on lucrative UK-US flights.
Last September, it assembled a £1.2bn rescue package which included a £200m injection from its founder, a loan from the American hedge fund Davidson Kempner Capital Management, and substantial contributions from existing creditors.
That restructuring was implemented on a solvent basis, but only after administrators had been placed on standby.
The aviation industry’s failure to stage a rapid recovery amid continued travel restrictions led Virgin Atlantic to seek a total of approximately £300m more – in two instalments – that was generated by the sale of several Dreamliner aircraft and a further loan from Virgin Group.
Virgin Atlantic is not in urgent need of new funding, with adequate financing in place to see it through the next few months, according to insiders.
However, executives including Sir Richard are said to back the idea of a listing to provide additional future opportunities to raise money during the post-COVID recovery and beyond.
A presentation to City investors made in the last few days is said to focus on Virgin Atlantic’s strong positioning to take advantage of pent-up demand for international travel.
Bookings on the key New York-to-London route are said to have surged by 150% this month, although the industry continues to seek further concessions from the Biden administration to open up travel to the US for fully vaccinated passengers.
Virgin Atlantic has also nearly halved its workforce since the start of the pandemic – a move that has helped to drive significant longer-term cost savings.
Going public would bring Virgin Atlantic into line with many of its publicly traded peers, such as British Airways’ parent International Airlines Group, easyJet, Ryanair, American Airlines and Cathay Pacific.
Between them, IAG and easyJet have raised billions of pounds to steer them through the COVID-19 crisis, although they are likely to require further funding given that many executives do not believe pre-coronavirus levels of demand will be seen again until 2024.
Virgin Atlantic is not the only part of Sir Richard’s business empire which has felt the pressure of the pandemic.
The UK arm of Virgin Active also came close to collapse after putting a restructuring deal to landlords, lenders and shareholders.
His Virgin Voyages cruise operation finally embarked on its maiden journey this week after more than a year of setbacks.
Nevertheless, the billionaire tycoon has been buoyed by the performance on the New York stock market of Virgin Galactic, which has soared in value and enabled him to raise hundreds of millions of pounds to prop up struggling leisure and travel businesses.
Last month, Sir Richard flew aboard a Virgin Galactic trip to the edge of space, days before his even-wealthier rival, the Amazon founder Jeff Bezos, did the same on a Blue Origin vehicle.
Sir Richard is now in the process of taking Virgin Orbit public through a merger with a US-listed special purpose acquisition company (SPAC).
A Virgin Atlantic spokesman said the airline did not comment on speculation.
Octopus Energy Group, Britain’s largest residential gas and electricity supplier, is plotting a £10bn demerger of its technology arm that would reinforce its status as one of the country’s most valuable private companies.
Sky News can exclusively reveal that Octopus Energy is close to hiring investment bankers to help formally separate Kraken Technologies from the rest of the group.
The demerger, which would be expected to take place in the next 12 months, would see Octopus Energy’s existing investors given shares in the newly independent Kraken business.
A minority stake in Kraken of up to 20% is expected to be sold to external shareholders in order to help validate the technology platform’s valuation, according to insiders.
One banking source said that Kraken could be valued at as much as $14bn (£10.25bn) in a forthcoming demerger.
Citi, Goldman Sachs, JP Morgan and Morgan Stanley are among the investment banks invited to pitch for the demerger mandate in recent weeks.
A deal will augment Octopus Energy chief executive Greg Jackson’s paper fortune, and underline his success at building a globally significant British-based company over the last decade.
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Octopus Energy now has 7.5m retail customers in Britain, following its 2022 rescue of the collapsed energy supplier Bulb, and the subsequent acquisition of Shell’s home energy business.
In January, it announced that it had become the country’s biggest supplier – surpassing Centrica-owned British Gas – with a 24% market share.
It also has a further 2.5m customers outside the UK.
Image: Kraken is an operating system licensed to other energy providers, water companies and telecoms suppliers. Pic: Octopus
Sources said a £10bn valuation of Kraken would now imply that the whole group, including the retail supply business, was worth in the region of £15bn or more.
That would be double its valuation of just over a year ago, when the company announced that it had secured new backing from funds Galvanize Climate Solutions and Lightrock.
Shortly before that, former US vice president Al Gore’s firm, Generation Investment Management, and the Canada Pension Plan Investment Board increased their stakes in Octopus Energy in a transaction valuing the company at $9bn (£7.2bn).
Kraken is an operating system which is licensed to other energy providers, water companies and telecoms suppliers.
It connects all parts of the energy system, including customer billing and the flexible management of renewable generation and energy devices such as heat pumps and electric vehicle batteries.
The business also unlocks smart grids which enable people to use more renewable energy when there is an abundant supply of it.
In the UK, its platform is licensed to Octopus Energy’s rivals EON and EDF Energy, as well as the water company Severn Trent and broadband provider Cuckoo.
Overseas, Kraken serves Origin Energy in Australia, Japan’s Tokyo Gas and Plentitude in countries including France and Greece.
Its biggest coup came recently, when it struck a deal with National Grid in the US to serve 6.5m customers in New York and Massachusetts.
Sources said other major licensing agreements in the US were expected to be struck in the coming months.
Kraken, which is chaired by Gavin Patterson, the former BT Group chief executive, is now contracted to more than 70m customer accounts globally – putting it easily on track to hit a target of 100m by 2027.
Earlier this year, Mr Jackson said that target now risked being seen as “embarrassingly unambitious”.
Last July, Kraken recruited Amir Orad, a former boss of NICE Actimize, a US-listed provider of enterprise software to global banks and Fortune 500 companies, as its first chief executive.
A demerger of Kraken will trigger speculation about an eventual public market listing of the business.
Its growth in the US, and the relative public market valuations of technology companies in New York and London, may put the UK at a disadvantage when Kraken eventually considers where to list.
One key advantage of demerging Kraken from the rest of Octopus Energy Group would be to remove the perception of a conflict of interest among potential customers of the technology platform.
A source said the unified corporate ownership of both businesses had acted as a deterrent to some energy suppliers.
Kraken has also diversified beyond the energy sector, and earlier this year joined a consortium which was exploring a takeover bid for stricken Thames Water.
The boss of Ryanair has told Sky News the president of the European Commission should “quit” if she can’t stop disruption caused by repeated French air traffic control strikes.
Michael O’Leary, the group chief executive of Europe’s largest airline by passenger numbers, said in an interview with Business Live that Ursula von der Leyen had failed to get to grips, at an EU level, with interruption to overflights following several recent disputes in France.
The latest action began on Thursday and is due to conclude later today, forcing thousands of flights to be delayed and cancelled through French airspace closures.
Mr O’Leary told presenter Darren McCaffrey that French domestic flights were given priority during ATC strikes and other nations, including Italy and Greece, had solved the problem through minimum service legislation.
He claimed that the vast majority of flights, cancelled over two days of action that began on Thursday, would have been able to operate under similar rules.
Mr O’Leary said of the EU’s role: “We continue to call on Ursula von der Leyen – why are you not protecting these overflights, why is the single market for air travel being disrupted by a tiny number of French air traffic controllers?
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Image: Ryanair has cancelled more than 400 flights over two days due to the action in France. File pic: PA
“All we get is a shrug of their shoulders and ‘there’s nothing we can do’. We point out, there is.”
He added: “We are calling on Ursula von der Leyen, who preaches about competitiveness and reforming Europe, if you’re not willing to protect or fix overflights then quit and let somebody more effective do the job.”
The strike is estimated, by the Airlines for Europe lobby group to have led to at least 1,500 cancelled flights, leaving 300,000 travellers unable to make their journeys.
Image: Michael O’Leary believes the EU can take action on competition grounds. Pic: PA
Ryanair itself had axed more than 400 flights so far, Mr O’Leary said. Rival easyJet said on Thursday that it had cancelled 274 services over the two days.
The beginning of July marks the start of the European summer holiday season.
The French civil aviation agency DGAC had already told airlines to cancel 40% of flights covering the three main Paris airports on Friday ahead of the walkout – a dispute over staffing levels and equipment quality.
Mr O’Leary described those safety issues as “nonsense” and said twhile the controllers had a right to strike, they did not have the right to close the sky.
DGAC has warned of delays and further severe disruption heading into the weekend.
Many planes and crews will be out of position.
Mr O’Leary is not alone in expressing his frustration.
The French transport minister Philippe Tabarot has denounced the action and the reasons for it.
“The idea is to disturb as many people as possible,” he said in an interview with CNews.
Passengers are being advised that if your flight is cancelled, the airline must either give you a refund or book you on an alternative flight.
If you have booked a return flight and the outbound leg is cancelled, you can claim the full cost of the return ticket back from your airline.
Ryanair and easyJet have cancelled hundreds of flights as a French air traffic controllers strike looms.
Ryanair, Europe’s largest airline by passenger numbers, said it had axed 170 services amid a plea by French authorities for airlines to reduce flights at Paris airports by 40% on Friday.
EasyJet said it was cancelling 274 flights during the action, which is due to begin later as part of a row over staffing numbers and ageing equipment.
The owner of British Airways, IAG, said it was planning to use larger aircraft to minimise disruption for its own passengers.
The industrial action is set to affect all flights using French airspace, leading to wider cancellations and delays across Europe and the wider world.
Ryanair said its cancellations, covering both days, would hit services to and from France, and also flights over the country to destinations such as the UK, Greece, Spain and Ireland.
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Group chief executive Michael O’Leary has campaigned for a European Union-led shake-up of air traffic control services in a bid to prevent such disruptive strikes, which have proved common in recent years.
He described the latest action as “recreational”.
Image: Michael O’Leary. Pic: Reuters
“Once again, European families are held to ransom by French air traffic controllers going on strike,” he said.
“It is not acceptable that overflights over French airspace en route to their destination are being cancelled/delayed as a result of yet another French ATC strike.
“It makes no sense and is abundantly unfair on EU passengers and families going on holidays.”
Ryanair is demanding the EU ensure that air traffic services are fully staffed for the first wave of daily departures, as well as to protect overflights during national strikes.
“These two splendid reforms would eliminate 90% of all ATC delays and cancellations, and protect EU passengers from these repeated and avoidable ATC disruptions due to yet another French ATC strike,” Mr O’Leary added.