Virgin Atlantic's £400m cash call at risk from new travel curbs

Asia's Tech News Daily

Virgin Atlantic

An effort by Virgin Atlantic to raise £400m in rescue funding has been thrown into doubt by fears of new travel curbs, raising concerns among industry observers about its survival over the winter.

Sir Richard Branson’s airline has been in talks with existing shareholders and lenders over a cash lifeline in recent weeks, after extended restrictions on travel from the UK to the United States forced it to shelve plans for a public listing.

Now Virgin Atlantic’s finances face yet more strain as the omicron variant prompts the suspension of some long-haul routes and renewed testing and quarantine obligations for travellers.

The airline, which has already made deep cost cuts and borrowed heavily, is viewed as especially vulnerable to a resurgence of coronavirus compared with listed rivals such as International Airlines Group, the owner of British Airways.

Gerald Khoo, an analyst at Liberum, said omicron “certainly doesn’t make it any easier” for airlines to raise cash. Unlike Virgin Atlantic, “the major listed airlines have done what they need to do, raising from either shareholders or governments”, he added.

Paul Charles, a former Virgin Atlantic director and the founder of consultancy The PC Agency, said the restrictions could come as a heavy blow to many airlines.

“Airlines will want these measures to be very short-term. Cash is needed to keep travel firms strong during the winter period. The last thing they need is an extensive flight ban in place.”

Virgin Atlantic is working with bankers from Houlihan Lokey to secure funding. The airline survived 2020 by raising £1.2bn from a combination of new investors and existing backers, including Sir Richard.

Fresh pain has since been heaped on the airline industry, as governments attempt to slow the spread of omicron. The UK, the US and the EU were among those to impose new travel restrictions last week and introduce tougher testing requirements.

In the UK, travellers from abroad are now required to take a PCR test on arrival and self-isolate until they receive a negative result. Nicola Sturgeon has called for a mandatory isolation period of eight days regardless.

Virgin Atlantic was critical of the restrictions on Monday, after flights were temporarily blocked to six southern African countries last Friday. Those countries are now being placed on the red list, meaning people will need to self-isolate in government-approved hotels for 10 days after they land.

Virgin Atlantic is one of only two carriers that flies directly from the UK to South Africa, the other being British Airways.

A Virgin Atlantic spokesman said the latest measures were “not a realistic long-term solution to combating variants of concern”.

“Protecting public health must always come first and we support all efforts to contain the spread of Covid-19. However, it’s vital that the skies remain open with minimal restrictions in place, in order to support economic recovery, keeping families connected and businesses running,” he said.

“We urge the UK Government to take a measured and proportionate approach to the omicron variant strain, basing action on science and data, to avoid damaging consumer confidence.”

Some of the industry's leading figures also lashed out at what they deemed “knee jerk” border restrictions.

The former British Airways boss, Willie Walsh, said: “It’s clear that these measures have been completely ineffective in the past but impose huge hardship on people who are trying to connect with family and friends and clearly massive financial damage to the tourism and airline industry.”

It comes days after the United Nations World Tourism Agency published data showing airlines and hotel operators were only now starting to see an upturn after almost two years of curbs.

The UN agency said revenues from international tourism were on track to come in between $700m (£527m) and $800m for 2021, down from $1.7 trillion in 2019, although this marked a slight improvement from 2020.

However, it warned that the recovery was fragile and could take a hit from the emergence of new strains of the virus.

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