Branson to land fresh £400m funding injection for Virgin Atlantic
Virgin Atlantic Airways is drawing up plans for a fresh £400m funding injection as prospects fade for an initial public offering (IPO) of Sir Richard Branson’s flagship company.
Sky News has learnt that the transatlantic carrier is in talks with its shareholders and other financial stakeholders about raising additional capital to see it through the traditionally quieter winter months.
City sources said the amount being sought by Virgin Atlantic’s management was still being finalised, but would inevitably involve Sir Richard contributing another chunk of his fortune to the pandemic-battered airline.
It is expected to be announced by the end of the year.
This week, the Virgin Group tycoon sold $300m of stock in New York-listed Virgin Galactic – bringing the total he has raised from selling shares in the space tourism business during the pandemic to more than $1bn.
Virgin Atlantic has been helped by the recent resumption of flights between the UK and US – the most profitable part of its business – but is braced for a difficult winter amid oil price volatility and other inflationary pressures.
The double take-off from Heathrow
Earlier this month, it staged a joint take-off from Heathrow with British Airways, a rare sign of collaboration between the bitter rivals, to mark the restart of flights to New York’s John F Kennedy airport.
Virgin Atlantic lost more than £650m last year as the COVID-19 crisis decimated the global aviation industry, and it expects to have made a further substantial loss in 2021.
Sky News revealed in August that Sir Richard was plotting a surprise listing on the London Stock Exchange as it pinned its hopes on a glut of demand for transatlantic travel.
However, despite positive talks with institutional investors, the need to return to normalised trading patterns has prompted them to shelve the plan indefinitely.
A significant improvement in the airline’s financial performance could yet pave the way for it to be revived, although that is unlikely for at least a year, according to one fund manager who held discussions with the company.
An IPO would have marked 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.
Virgin Atlantic has sought several rounds of funding since the start of the pandemic, the most notable of which was a £1.2bn solvent rescue package in September last year which included £200m from Sir Richard, a loan from the American hedge fund Davidson Kempner Capital Management, and substantial contributions from creditors.
It has also landed hundreds of millions of pounds more – in multiple instalments – from the sale of several Dreamliner aircraft and a further loan from Virgin Group.
The latest financial injection includes payment deferrals and other creditor assistance as well as cash, according to a City source.
Virgin Atlantic, which is majority-owned by Sir Richard’s Virgin Group, was forced to place administrators on standby last year as the pandemic-induced crisis deepened.
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.
Virgin Atlantic has nearly halved its workforce since the start of the pandemic – a move that has helped to drive significant longer-term cost savings.
The company has been cushioned by Virgin Galactic’s stock price
The airline 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 during the summer after more than a year of setbacks.
Nevertheless, the billionaire tycoon has been cushioned by Virgin Galactic’s stock price.
A Virgin Group spokesperson said this week that the latest sale would allow him to support his “portfolio of global leisure, holiday and travel businesses that continue to be affected by the impact of the COVID-19 pandemic, in addition to supporting the development and growth of new and existing businesses”.
In July, 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 taking Virgin Orbit – the commercial satellite launch group – 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.
Thousands of job cuts at the NHS will go ahead after the £1bn needed to fund the redundancies was approved by the Treasury.
The government had already announced its intention to slash the headcount across both NHS England and the Department of Health by around 18,000 administrative staff and managers, including on local health boards.
The move is designed to remove “unnecessary bureaucracy” and raise £1bn a year by the end of the parliament to improve services for patients by freeing up more cash for operations.
NHS England, the Department of Health and Social Care, and the Treasury had been in talks over how to pay for the £1bn one-off bill for redundancies.
It is understood the Treasury has not granted additional funding for the departures over and above the NHS’s current cash settlement, but the NHS will be permitted to overspend its budget this year to pay for redundancies, recouping the costs further down the line.
‘Every penny will be spent wisely’
Chancellor Rachel Reeves is set to make further announcements regarding the health service in the budget on 26 November.
And addressing the NHS providers’ annual conference in Manchester today, Mr Streeting is expected to say the government will be “protecting investment in the NHS”.
He will add: “I want to reassure taxpayers that every penny they are being asked to pay will be spent wisely.
“Our investment to offer more services at evenings and weekends, arm staff with modern technology, and improving staff retention is working.
“At the same time, cuts to wasteful spending on things like recruitment agencies saw productivity grow by 2.4% in the most recent figures – we are getting better bang for our buck.”
Health Secretary Wes Streeting during a visit to the NHS National Operations Centre in London earlier this year. Pic: PA
Mr Streeting’s speech is due to be given just hours after he became entrenched in rumours of a possible coup attempt against Sir Keir Starmer, whose poll ratings have plummeted ahead of what’s set to be a tough budget.
Mr Streeting’s spokesperson was forced to deny he was doing anything other than concentrating on the health service.
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He is also expected on Wednesday to give NHS leaders the go-ahead for a 50% cut to headcounts in Integrated Care Boards, which plan health services for specific regions.
They have been tasked with transforming the NHS into a neighbourhood health service – as set down in the government’s long-term plans for the NHS.
Those include abolishing NHS England, which will be brought back into the health department within two years.
Watch Wes Streeting on Mornings With Ridge And Frost from 7am on Sky News.
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