Branson Again Offers UK Government His Necker Island for Virgin Atlantic Help

by Miles Jackson

As a part of his second appeal. Sir Richard Branson is offering his Caribbean Island (Necker) as security in his request to the UK government to help Virgin Atlantic Airlines. The island is 74 acres, and was purchased in 1980 for about $120,000 USD. Today rough estimates have it appraised at £80 Million ($95 Million USD.) The billionaire Virgin Group boss said in an open letter to employees that he was not asking for a handout, but a commercial loan, believed to be £500m (about $615 Million USD.)

UPDATE: Chris over at RenesPoints tells us that Branson may now be looking to sell Virgin Atlantic. That certainly makes the situation as clear as mud.

This comes as Virgin Australia enters voluntary administration, what in United States is called bankruptcy, or Chapter 11. Voluntary administration means the board of an insolvent company – one that can’t pay its bills – hands full control to independent administrators. The administrators placed in charge of the airline have stated their intention is to restructure and re-finance the business and bring it out of administration as soon as possible. In this case, the process will be through a difficult economic maze, brought about by the COVID-19 pandemic. Virgin Australia has struggled with profitability prior to the travel restrictions. The airline reported seven consecutive years of losses.

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Branson Sought Help for Virgin Atlantic

Branson has seen both of his airlines greatly impacted by the global coronavirus lockdowns and travel restrictions and Sir Richard has appealed to governments in both countries (Australia and UK) for help. The Virgin Group’s boss initially applied to the UK Government for relief in March.  Its main competitor, British Airways, is also seeking aid from the government. The UK government approved a £600 million loan to EasyJet and has cautioned airlines it is not going to wholesale bail out the industry.

Unfortunately, Sir Branson cannot hope to draw resources from Virgin Australia to prop up the Virgin Atlantic brand. In addition, Delta Air Lines has a 49% stake of Virgin Atlantic and is limited by law to no more than 49.9% ownership. Delta’s CEO said yesterday that the airline was unable to offer any assistance.

Virgin Atlantic lost money in five of the last seven reporting years. In 2019 it also acquired UK regional airline Flybe. The initial buyout was for an inexpensive £2.2 million cash offer. Afterwards, Virgin infused an additional £135 million into Flybe. Unfortunately, the airline filed for administration (bankruptcy) and ceased operations in March 2020. This was a result of reduced demand attributed to the coronavirus pandemic. In addition, the UK government failed to grant a £100 million loan to Flybe. These events drained cash from Virgin Atlantic.

UK Government Assistance Denied

The UK government has made it clear that it would step in to help struggling airlines “as a last resort” on an individual analysis basis. In the meantime, government officials have mentioned the possibility of taking an ownership stake in rescued UK airlines.

Richard Branson Necker Island

Branson Relaxes on Necker Island (Image: Virgin)

Ultimately, the request for aid was denied for Virgin Atlantic. There has been a lot of pushback against Sir Richard Branson and Virgin Atlantic’s request from his main competitor, British Airways, as well as individuals in government, the press and social media. The basis for their criticism lay in the assertions that Branson has personal wealth for which he could draw. At the same time, his residence in the Caribbean island of Necker is viewed by many as a tax dodge.

He has been criticized for appealing for taxpayer aid rather than relying on his huge personal wealth. Branson’s fortune has been rumored to be well over £4 billion.

Branson’s wealth today is most likely over-estimated. It presumes the value of the Virgin Group at pre-COVID-19 operations. His personal cash reserves are most likely not enough to keep the airline operating without further assistance. He did contribute some of his ‘own’ money to the £250m that Virgin committed to employees to keep paying them during the current crisis.

Branson’s Own Words Bite Back

Richard Branson Virgin Atlantic 2009 Quote

“The government shouldn’t step in to bail them out. They should let them go bust,” Richard Branson told US news channel CNBC in 2009. This was in response to British Airways seeking assistance from the UK government following the 2008 recession.

The UpShot

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The World Waits to Travel Again

Virgin Group is facing monumental challenges as it tries to survive the current restrictions placed on the travel industry. Airlines are some of the hardest hit businesses in this pandemic. Branson is willing to offer up his home paradise and island to ensure Virgin Atlantic’s sustainability.

Do you think governments should help airlines survive? Is Branson right in asking for help to save Virgin Atlantic?
Click here for all the latest coronavirus updates and policies by airline as well as hotel, travel insurance, stimulus payment, plus our own expert advice posts.

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