Virgin Group said it’s engaged the investment bank Houlihan Loukey to find new investors for struggling Virgin Atlantic, but denied a report that billionaire Richard Branson’s holding company is looking to sell the airline.
“Richard and the Virgin Group are committed to the airline, and are not looking to sell Virgin Atlantic,” a spokesperson said by email. “They recognise that further investment will be necessary to make up for the total loss of revenue due to Covid-19.”
According to the Telegraph newspaper, Branson is seeking a buyer by the end of May and is effectively giving up on the U.K. government giving a £500 million loan.
Who would buy into Virgin Atlantic? It has an iconic brand but chronic losses.
Operating margins at British Airways and Virgin Atlantic (before exceptional items)
Virgin Atlantic posted profits only three times last decade while British Airways soared to record profitability.
British Airways’ owner IAG is not asking for government support. EasyJet, also profitable, received a £600m loan.
Virgin accumulated £211m of losses last decade for a negative 0.1% operating margin. British Airways made £11 billion at a 10% margin. Virgin has yet to report its 2019 accounts.
More worryingly, Virgin was still unprofitable in recent years despite forming a joint-venture with Delta Air Lines
Delta owns 49% of Virgin but last week said it would not help Virgin or its other airline investments.
“We’re not in a position to be making any financial commitments to any of them,” Delta CEO Ed Bastian told investors. “They are aware of that.” Delta is focusing resources on its own operation.
Bastian suggested Virgin Atlantic could enter administration and restructure, as sister carrier Virgin Australia is doing. Branson’s Virgin Group owns 10% of Virgin Australia.
“If they are required to go through an administrative process in the U.K., I’m confident they could re-emerge,” Bastian told MSNBC. “It could take a legal process to get through that.”
Branson for now seems focused on new capital and not entering administration.
According to the Telegraph, Houlihan Lokey is fielding investment interest from approximately 50 companies, including Centerbridge Partners, Cerberus Capital Management, Lansdowne Partners, Northill Capital Read, and Singapore sovereign wealth fund Temasek.
Temasek is also the owner of Singapore Airlines, which bought 49% of Virgin Atlantic in 1999 for £600m but sold the stake to Delta in 2013 for only £224m. Temasek regularly reviews opportunities and previously looked at Hong Kong Airlines.
This afternoon, Sir Richard Branson, Founder of Virgin Atlantic Airways, greets Miami from the wing ... [+]
The search for new funding comes as Branson last December called off a plan to sell a 31% stake in Virgin to Air France-KLM, proposed two years ago.
That deal would have ended Branson’s majority ownership and control since his stake would have been diluted from 51% to 20%. Delta and Air France-KLM would have owned 80%, effectively sidelining Branson. Virgin Atlantic would still have been based in the U.K.
Branson could again look to sell part of his stake and lose control. Or new shares could be issued with Delta’s blessing, although Delta would probably prefer Branson’s stake be diluted so Delta can wield more power.
https://news.google.com/__i/rss/rd/articles/CBMidGh0dHBzOi8vd3d3LmZvcmJlcy5jb20vc2l0ZXMvd2lsbGhvcnRvbjEvMjAyMC8wNC8yNi9icmFuc29uLXRvLXNlbGwtdmlyZ2luLWF0bGFudGljLWljb25pYy1icmFuZC1idXQtY2hyb25pYy1sb3NzZXMv0gF4aHR0cHM6Ly93d3cuZm9yYmVzLmNvbS9zaXRlcy93aWxsaG9ydG9uMS8yMDIwLzA0LzI2L2JyYW5zb24tdG8tc2VsbC12aXJnaW4tYXRsYW50aWMtaWNvbmljLWJyYW5kLWJ1dC1jaHJvbmljLWxvc3Nlcy9hbXAv?oc=5
2020-04-26 17:05:32Z
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