How passengers helped save Virgin Atlantic from crashing, and how they will make recovery difficult
- With no bailout from the British government, Richard Branson’s airline has managed to stay solvent through the pandemic
- Slow handling of refunds for cancelled flights gave Virgin some cash, but has also left it unpopular with passengers
More than a decade ago Time magazine anointed “You” its person of the year, in recognition of our collective effort to create free content for social media.
Today Virgin Atlantic Airways owes a similar debt of gratitude to its long-suffering customers. The cash they’ve advanced the transatlantic airline for future bookings was every bit as important as that provided by billionaire founder Richard Branson and hedge fund Davidson Kempner Capital Management in saving it from collapse. Issuing customer refunds at a snail’s pace helped the airline preserve cash during the pandemic but unhappy customers will make Virgin Atlantic’s recovery that much tougher.
The rescue suggests the British government was right to push Virgin Atlantic to exhaust other options before demanding a government bailout.
Finding private money was a tall order because the carrier entered the pandemic with a lot of debt, a paucity of assets it could sell and a track record of losses. A strategic focus on the once lucrative North American market – the destination accounted for about 70 per cent of group revenues – has become a vulnerability. The coronavirus is still ripping through the southern United States; those flying transatlantic face a fortnight in quarantine. It’s difficult to know when and to what extent demand will return.