Virgin Atlantic on the brink after Delta rules out cash injection

As it reported a loss of $534 million for the first quarter of 2020, Delta Air Lines ruled out any cash injection into Virgin Atlantic.

Virgin Atlantic’s founder, Richard Branson, warned that without financial help, the airline may collapse. He asked for $615 million in state aid in the form of loans from the British government and even offered his private island as security. 

“Together with the team at Virgin Atlantic, we will do everything we can to keep the airline going – but we will need government support to achieve that in the face of the severe uncertainty surrounding travel today and not knowing how long the planes will be grounded for,” Branson said in an open letter to the 70,000 employees of the group published on April 20, 2020.

Salvation, however, will not come from the company co-owner, Delta Air Lines, which possesses 49% of Virgin Atlantic; the remaining 51% belongs to Virgin Group. After reporting a loss of $534m for the first quarter of 2020, the U.S.-based airline ruled out any cash injection into the ailing British carrier.

“These are truly unprecedented times for all of us, including the airline industry. Government travel restrictions and stay-at-home orders have been effective in slowing the spread of the virus, but have also severely impacted near-term demand for air travel, reducing our expected June quarter revenues by 90 percent, compared to a year ago” said Ed Bastian, Delta’s chief executive officer. 

Through the Coronavirus Aid, Relief, and Economic Security (CARES) Act put in place by the U.S. government, Delta should receive at least $5.4 billion, including $1.6 billion in low-interest loans. That money should help the company maintain jobs until the end of September 2020, after which it will be authorized to carry out layoffs.

Delta is not the only U.S. airline that suffered financial damages due to the coronavirus crisis. In the preliminary documents filed with the United States Securities And Exchange Commission (SEC), United Airlines reported a $2.1 billion pretax loss as it faces the impact of low travel demand.

Another subsidiary of the Virgin Group, Virgin Australia, entered voluntary administration on April 20, 2020, after failing to secure financial aid from the Australian government amid the global COVID-19 crisis.

 

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