Richard Branson’s Virgin empire has faced many challenges in its five-decade history, from high-profile legal clashes with British Airways and failed bids to run the U.K. national lottery to abortive forays into vodka, cola and bridal wear.
The setbacks have been so numerous that overcoming them has become part of the Virgin DNA. Yet the six-month battle to save Virgin Atlantic Airways Ltd. has been a case apart, involving as it has the business that first truly took the group global and remains its best-known brand.
The battle to stop the carrier from becoming one of the highest-profile corporate victims of the coronavirus crisis was finally sealed on Wednesday after a U.K. court gave the go-ahead for a 1.2 billion-pound ($1.6 billion) rescue built around a loan from private-equity firm Davidson Kempner Capital Management.
The hard-won financing package emerged as the last, desperate option for saving the carrier after it became one of the few worldwide to be refused state support when Britain denied it access to the 330 billion-pound Covid Corporate Financing Facility, a fund tapped by half a dozen airlines.
The deal comes at a cost to Branson, who injected 200 million pounds of his own money into the company, raised through the sale of shares in Virgin Galactic Holdings Inc., the orbital tourism venture that had become his obsession in recent years.
“Branson has shown that he has a real attachment to Virgin Atlantic,” said Stephen Furlong, an airline analyst at Davy Stockbrokers in Dublin. “It’s also central to the strength of the Virgin brand and its ability to generate royalties.”
Virgin Atlantic’s challenge now will be to ride out the crisis with minimal cash burn as long-haul routes remain limited by border restrictions, while preserving flying rights at London Heathrow airport.
“They need to get through to next spring and hope that the traffic comes back,” said Nick Cunningham, an analyst at Agency Partners in London who has covered the aviation industry for 30 years. “It’s vital that they preserve cash, and that could mean more job cuts once furloughs end. But they also need to keep operations going and hang on to those slots.”
‘Massive Battle’
Branson, who turned 70 in July, was quick to highlight the threat to Virgin Group businesses posed by the virus, given their focus on travel and leisure, sectors that were effectively shut down as the pandemic gathered pace. “They are in a massive battle to survive,” he said in a March blog post. “This is the most significant crisis the world has experienced in my lifetime.”
Not long after, Branson said he had little money on hand to fund struggling brands, arguing that he was asset rich but cash poor after extracting little “significant” profit from Virgin and plowing proceeds into new businesses.