Virgin Atlantic boss urges Boris Johnson to sanction £7.5bn airline bailout
The PM will be told by Virgin Atlantic bosses that the airline industry needs government aid worth up to £7.5bn, Sky News learns.
Sunday 15 March 2020 06:37, UK
Britain's airline industry needs emergency government support worth up to £7.5bn to avert a catastrophe that would wipe out tens of thousands of jobs, Boris Johnson will be told next week.
Sky News has learnt that Peter Norris, the chairman of Virgin Atlantic Airways' majority shareholder, Virgin Group, will write to the prime minister on Monday to warn that the sector needs immediate financial aid to survive.
The bailout request will come ahead of what could prove to be the bloodiest week in British aviation history, with British Airways, Virgin Atlantic, easyJet and Ryanair all expected to announce mass groundings of aircraft and potentially huge redundancies as the COVID-19 crisis escalates.
Sources said that Mr Norris's letter - which is also understood to be being signed by Shai Weiss, Virgin Atlantic's chief executive - would ask the government to provide airlines with a credit facility to help them finance themselves through a potentially protracted period of negligible revenue.
That support, which the Virgin chairman estimates would be worth between £5bn and £7.5bn across the industry, would include cash advances and guarantees, as well as other measures to ensure that credit card companies do not continue to hoard revenue from airline bookings.
Under Mr Norris's blueprint, this emergency financing would be repaid once trading returns to more normal levels.
One source close to the airline, which was founded by Sir Richard Branson in 1984, said that Mr Norris would also ask the PM to extend the timetable for allowing airlines to keep planes grounded without losing their prized take-off and landing slots for the entire summer season.
The latter request is significant because it reflects the growing belief among aviation bosses that the sector may not begin to stage a recovery until the autumn.
Mr Norris's letter comes just weeks after Flybe, Europe's largest regional airline, collapsed into administration following lengthy talks with the government about a bailout.
Virgin Atlantic was also a shareholder in Flybe, but pulled the plug on injecting new money into the Exeter-based carrier when it became clear how widespread the impact of the coronavirus might become.
Mr Weiss has already agreed to take a pay cut for four months as part of efforts to cut costs as the industry adjusts to a brutal new reality.
The trade body IATA has estimated that the airline industry globally could forfeit $113bn in revenue as a result of COVID-19 - a figure it may have to increase again.
This week, Alex Cruz, BA's chief executive, told the flag-carrier's 45,000 staff that it was being engulfed by "a crisis of global proportions like no other we have known".
Mr Cruz warned of impending job cuts, although he declined to say in his message to employees how many would be affected.
He added that the COVID-19 situation was "more serious" than the financial crisis of 2008, the SARS epidemic and the terrorist attacks of September 11, 2001.
The UK aviation industry generates approximately £10bn of GDP and employs roughly 200,000 people.
It has been poleaxed by the outbreak of the coronavirus, and the restrictions placed on travellers by governments around the world.
President Donald Trump's decision to extend to the UK and Ireland the ban on non-US citizens travelling there from Europe will be acutely painful to BA and Virgin.
Other airlines, including Germany's Lufthansa, Norwegian and Air France-KLM, have suggested that they are likely to need financial support from their respective governments.
The White House is also likely to assemble an aid package worth tens of billions of dollars for US carriers.
Some, such as Delta Air Lines, which is a shareholder in Virgin Atlantic, have begun reporting negative bookings - where more customers are cancelling existing tickets than buying new ones.
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Restrictions in Italy, Poland and Spain have decimated more than half of Ryanair's business, while easyJet is expected to update the London Stock Exchange on the projected impact of the crisis on its finances early next week.
An executive at one of Europe's largest airlines said he expected its entire fleet to be grounded by the end of next week.
The scale of the challenge for airlines is also reflected in the existential challenge confronting airports and providers of services to the industry.
Myriad hotels are now running at occupancy levels of less than 10%, with only companies with well-fortified balance sheets likely to survive.
Virgin Group and Virgin Atlantic declined to comment on Saturday night.