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.
The cyber attack on Jaguar Land Rover (JLR), which halted production for nearly six weeks at its sites, cost the company roughly £200m, it has been revealed.
Latest accounts released on Friday showed “cyber-related costs” were £196m, which does not include the fall in sales.
Profits took a nose dive, falling from nearly £400m (£398m) a year ago to a loss of £485m in the three months to the end of September.
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Revenues dropped nearly 25% and the effects may continue as the manufacturing halt could slow sales in the final three months of the year, executives said.
The impact of the shutdown also hit factories across the car-making supply chain.
Slowing the UK economy
The production pause was a large contributor to a contraction in UK economic growth in September, official figures showed.
Had car output not fallen 28.6%, the UK economy would have grown by 0.1% during the month. Instead, it fell by 0.1%.
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How cyber attack ‘effectively hacked GDP’
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Reacting to JLR’s impact on the GDP contraction, its chief financial officer, Richard Molyneux, said it was “interesting to hear” and it “goes to reinforce” that JLR is really important in the UK economy.
The company, he said, is the “biggest exporter of goods in the entire country” and the effect on GDP “is a reflection of the success JLR has had in past years”.
Recovery
The company said operations were “pretty much back running as normal” and plants were “at or approaching capacity”.
Production of all luxury vehicles resumed.
Investigations are underway into the attack, with law enforcement in “many jurisdictions” involved, the company said.
When asked about the cause of the hack and the hackers, JLR said it was not in a position to answer questions due to the live investigation.
A run of attacks
The manufacturer was just one of a number of major companies to be seriously impacted by cyber criminals in recent months.
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Are we in a cyber attack ‘epidemic’?
High street retailer Marks and Spencer estimated the cost of its IT outage was roughly £136m. The sum only covers the cost of immediate incident systems response and recovery, as well as specialist legal and professional services support.
The Co-Op and Harrods also suffered service disruption caused by cyber attacks.
Four people were arrested by police investigating the incidents.
Sir Keir Starmer and Rachel Reeves have scrapped plans to break their manifesto pledge and raise income tax rates in a massive U-turn less than two weeks from the budget.
The decision, first reported in the Financial Times, comes after a bruising few days which has brought about a change of heart in Downing Street.
Read more: How No 10 plunged itself into crisis
I understand Downing Street has backed down amid fears about the backlash from disgruntled MPs and voters.
The Treasury and Number 10 declined to comment.
The decision is a massive about-turn. In a news conference last week, the chancellor appeared to pave the way for manifesto-breaking tax rises in the budget on 26 November.
She spoke of difficult choices and insisted she could neither increase borrowing nor cut spending in order to stabilise the economy, telling the public “everyone has to play their part”.
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‘Aren’t you making a mockery of voters?’
The decision to backtrack was communicated to the Office for Budget Responsibility on Wednesday in a submission of “major measures”, according to the Financial Times.
The chancellor will now have to fill an estimated £30bn black hole with a series of narrower tax-raising measures and is also expected to freeze income tax thresholds for another two years beyond 2028, which should raise about £8bn.
Tory shadow business secretary Andrew Griffith said: “We’ve had the longest ever run-up to a budget, damaging the economy with uncertainty, and yet – with just days to go – it is clear there is chaos in No 10 and No 11.”
How did we get here?
For weeks, the government has been working up options to break the manifesto pledge not to raise income tax, national insurance or VAT on working people.
I was told only this week the option being worked up was to do a combination of tax rises and action on the two-child benefit cap in order for the prime minister to be able to argue that in breaking his manifesto pledges, he is trying his hardest to protect the poorest in society and those “working people” he has spoken of so endlessly.
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Ed Conway on the chancellor’s options
But days ago, officials and ministers were working on a proposal to lift the basic rate of income tax – perhaps by 2p – and then simultaneously cut national insurance contributions for those on the basic rate of income tax (those who earn up to £50,000 a year).
That way the chancellor can raise several billion in tax from those with the “broadest shoulders” – higher-rate taxpayers and pensioners or landlords, while also trying to protect “working people” earning salaries under £50,000 a year.
The chancellor was also going to take action on the two-child benefit cap in response to growing demand from the party to take action on child poverty. It is unclear whether those plans will now be shelved given the U-turn on income tax.
A rough week for the PM
The change of plan comes after the prime minister found himself engulfed in a leadership crisis after his allies warned rivals that he would fight any attempted post-budget coup.
It triggered a briefing war between Wes Streeting and anonymous Starmer allies attacking the health secretary as the chief traitor.
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Wes Streeting: Faithful or traitor? Beth Rigby’s take
Read more: Is Starmer ‘in office but not in power’?
The prime minister has since apologised to Mr Streeting, who I am told does not want to press for sackings in No 10 in the wake of the briefings against him.
But the saga has further damaged Sir Keir and increased concerns among MPs about his suitability to lead Labour into the next general election.
Insiders clearly concluded that the ill mood in the party, coupled with the recent hits to the PM’s political capital, makes manifesto-breaking tax rises simply too risky right now.
But it also adds to a sense of chaos, given the chancellor publicly pitch-rolled tax rises in last week’s news conference.
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