Virgin Atlantic is fighting for survival, but its recent job cuts were less about a short-term need to shed workers and more a strategy to entice investors.
Earlier this week, Virgin announced that it would cut 3,150 jobs due to falling demand and cashflow concerns due to COVID-19. That amounted to 1/3 of the Virgin Atlantic workforce. Virgin’s London Gatwick base was also closed and the carrier will retire its four-engine 747-400. While falling demand and cashflow concerns certainly played a role, an internal memo to pilots reveal an previously-unspoken ulterior motive: convince the UK government and investors that Virgin was ready for a cash infusion.
Per Reuters, the May 6th memo to pilots stated:
“In order for us to qualify for financial support from HM Government or the private sector it is critical that we demonstrate that we have taken all self-help measures in a timely fashion so we can secure the funding we need to survive.”
Virgin Atlantic declined to respond specifically to the note, except to note that “discussions are ongoing and constructive” among employees, unions, the UK government, and potential investors.
Sir Richard Branson, who owns 51% of Virgin Atlantic, has put Necker Island, his own island home in the British Virgin Isles, up for collateral.
The job cuts and Gatwick closures were the first steps to convince the UK Virgin will take meaningful changes to become solvent. Now Branson and Delta Air Lines, who together own Virgin Atlantic, will try to seek out private equity before approaching the UK government again as a last resort. Branson’s tax-free hideaway in the Caribbean and Delta’s refusal to inject any more cash into its investment will likely be two additional barriers to any government rescue package.
CONCLUSION
Branson’s recent note to employees did not mention job cuts. While everyone should have seen them coming, that omission further suggests that these jobs are being sacrificed, hopefully on a temporary basis but likely on a much longer basis, to secure outside funding.
> Read More: Richard Branson’s Questionable Plea For A Virgin Atlantic Bailout
Like Australia’s position with EK’s round handling unit British taxpayers are not in the mood to bailout a company controlled by A) Foreign ownership 2) Branson living in a tax exempt country thus not paying British taxes 3) He flaunts his lifestyle. Delta is not putting anymore money in they just don’t have it nor would it be a wise investment because if a rescue package/bid comes it most certainly it will have a condition regarding Delta most likely unfavorable. Delta’s worldwide expansion much like Chiba’s “Silk Road” are in trouble
Unfortunately al this people don’t have a job anymore
The only solution the uk government give the money and take completely ownership of virgin, no more branson and no more delta and in few years put back on the market for sale
That isn’t going to happen. The UK doesn’t need Virgin and at the moment people are sick of dysfunctional businesses bearing the Virgin brand all paying money in to Branson’s tax free bank accounts in the BVI.
Richard Branson lives in Necker Island and yes, he doesn’t pay PERSONAL tax in the UK. But all of his businesses are registered in the countries in which they do business (mostly the UK) and pay ALL business taxes running to many millions unlike many large organisations such as Amazon & Google who register all of their European operations in Dublin and pay minimal levels of tax in countries that contribute huge sums to their bottom line.
Andy, on this I will agree. Branson may be dodging personal taxes, but he’s certainly paid his fair share in the UK, USA, and Australia for his various Virgin brands.
All companies should operate for the benefit and in the interest of its shareholders who invested capital and own the company. There is nothing ulterior about a company making prudent decisions that leads to long term viability and stability. It’s about time executive management focuses on shareholders instead of enriching themselves and fleecing shareholders.
Yest this is a pssibility but probably better to let it go. Its been apalingly run for a number of years with few real assets and a lot of debt so hardly a good prospect from a financial backers point of view. However if the government did have to step in and I see no reason why then it will need a complete clear out of management and probably the same for staff many of whom basked in the company with the feeling that they were in a romantic Branson world.
Let’s face it with supply and demand as it now is for airlines is there really a need for VIRGIN ATLANTIC? taxpayers money is better spent elsewhere
Funny thing is that BA is a national carrier in name only.
Qatar airlines owns the majority share 25%+, it’s a subsidiary of IAG an Anglo-Iberian multinational holding company registered in Madrid, Spain.
But the UK let Thomas Cook closer to a true UK airline, and Flybe going into administration.
But BA had no great love for competition.
I do hope that VA survives as they had some sweet awards on DL.
Your comment is missing one point. Why Wizz Air that is 100%foreign dis get 300millions loan from the taxpayer?? You are biased and obviously don’t see the bigger picture of lose of UK jobs and less competition for BA who also lying about not getting help from the taxpayers…
Andy has hit the nail on the head regarding Richard Branson does not pay personal taxes (which I feel is fair), but does pay business taxes in the countries Virgin are based.
Not just this article on a Virgin bailout/future, but other posts on other sites as well, people should be ashamed of themselves giving Mr Branson such a hard time in times of hardship!!
Comments about how Virgin should disappear off the face of the earth, how Mr Branson’s company should not be helped by the government blah, blah, blah!!
Without out people like Mr Branson in the world taking risks setting up businesses like Virgin, there would be a lot more people unemployed in the world and fewer careers for pilots, cabin crews etc.
Mr Branson started from nothing, took a gamble purchasing a secondhand Boeing 747-100 and started Virgin Atlantic.
I take my hat off to him as I feel he deserves not to pay personal taxes after all the employment he has created not just at Virgin, but outside suppliers as well!!
I am no way affiliated with Virgin Atlantic, just a modest wage slave who has never taken the gamble like Mr Branson to start so many business like Virgin.
Remember, at Mr Bransons age, he could quite easily walk away from Virgin and spend the rest of his days basking in the sun on Necker Island, but he hasn’t!! Instead he is fighting for Virgin and the jobs to keep the brand alive and to have a future for many more years!!
I feel people should get off their high horses and show a bit more respect to him, the man has done nothing wrong. Three cheers for Richard I say!!
There is no acceptable commercial reason to let it survive
Matthew, do you understand what ‘ulterior motive’ means? The UK government has said on many occasions that they will only provide public funds to businesses that have fine everything they can to raise money elsewhere. Given that the air travel industry, particularly international travel, is going to look very different for some time, how else do you think Virgin Atlantic can make their business attractive to investors or worthy of public money?
This is just the opposite of an ulterior motive, it’s sound (if unpalatable) business sense although the true picture makes for less enticing clickbait.
Andy, I disagree. My “ulterior motives” argument is based upon how Virgin has characterized the job cuts versus what you concede is the real reason behind them.
There is nothing more than Willie Walsh wants. That is to see Virgin Atlantic go broke.
Walsh does not like compatition.
BA is now a low cost airline where a glass of water costs money. This is for short haul routes. I can bet my bottom dollar if Virgin go under there will be no competition in the long haul routes from Heathrow.
That’s when BA will charge what they like for tickets and go so low perhaps charge to use the lavatory on an aircraft.
Virgin must survive as meglomaniac Walsh will do whatever he wants.
I say to him. Retire now.