Virgin Atlantic is being forced to fight for survival after Richard Branson’s request for a loan from the UK government was rejected. Ed Bastian, CEO of Delta Air Lines which owns 49% of Virgin Atlantic, has this week ruled out providing financial assistance after Delta looks to protect its own future.
Delta focuses on itself
Delta is prioritizing its own survival and, after its first-quarter loss of $534 million, is actually expecting a payment of $200 million from Virgin Atlantic. The debt relates to a combined venture agreed by the airlines for the Delta-Air France-KLM joint venture.
In the last 30 days, according to Sky News, Delta has halved its operating costs. A $5.4 billion coronavirus bailout has been awarded by the US government to Delta, which has also applied for an additional loan of $4.6 billion.
As reported by Bloomberg, when asked about helping out Virgin Atlantic, Delta CEO, Ed Bastian, said, “With our crisis in cash, we need to protect our own business. That’s where our focus is.”
He also said that he was confident that Virgin Atlantic could re-emerge if it did have to go through a UK administration process.
Administration looms for Virgin Atlantic
Virgin Atlantic had its request for a loan of $615 million (£500 million) rejected by the UK government, but Richard Branson is still lobbying for the bailout. The government remains unconvinced that Virgin Atlantic has sufficiently explored other avenues for obtaining commercial financing.
Giants of the aerospace industry Airbus and Rolls-Royce have voiced their support for a Virgin Atlantic bailout as the airline’s collapse could also drag them down. London Heathrow Airport and Manchester Airport have also reported that the loss of Virgin Atlantic would have a negative effect.
In an open letter to employees published on Tuesday, Richard Branson said that everything would be done to keep Virgin Atlantic going, “…but we will need government support to achieve that in the face of severe uncertainty surrounding travel today…” He also said that the government bailout would not be free money, but a commercial loan that would be repaid by Virgin Atlantic.
In his letter, Branson says he is prepared to put up his beloved home of Necker Island in the British Virgin Islands, along with other Virgin assets, as security for loans. He said that he aims to save as many jobs as possible throughout the Virgin Group.
What next for Delta?
As reported in AP News, Delta CEO, Ed Bastian said that it’s anyone’s guess how long it will it will take for travel to return to pre-coronavirus levels, “…whether it’s three years or two years, or four years…” In a Delta management earnings conference call, according to Investor’s Business Daily, Ed Bastian indicated that Delta Air Lines was open to testing out new ways to make the airline profitable.
Among the suggestions put to Bastian were having less crowded flights, less variable fare pricing, spacing out passengers in the cabin, and removing seats to carry more cargo in the cabin. Bastian wouldn’t speculate as to what Delta might actually do, but said, “I think all those are fair observations.”