MIAMI– As the COVID-19 outbreak continues to wreak havoc across the aviation industry, Virgin Atlantic has become one of the key players in the UK to push for government support.
As the virus continues to spread, there has been an obvious decline in worldwide travel due to passenger’s fear about catching the virus.
Peter Norris, Chairman of the Virgin Group, is to write to the British Prime Minister, Boris Johnson a request for immediate financial aid, valued at around £7.5 billion, to the carrier and also to competitors to keep the market afloat.
This is due to Virgin as well as the likes of easyJet, British Airways and Ryanair, as they have all had to ground aircraft and put down options for wide-scale redundancies across the board.
Norris proposes that this bailout money would be paid back when the virus appears to have calmed down and when trading returns to normal behaviour.
On top of this, there would be a request to extend the timetable for well-valued take-off and landing slots to be kept whilst the full-scale groundings are in effect, especially going into the Summer 2020 season.
With the aviation industry in Britain being valued at around £10bn of GDP and employing around 200,000 people, COVID-19 is beginning to have a knock-on effect on this valuation.
Actions Being Taken in the UK
Virgin’s CEO Shai Weiss has agreed to take a pay-cut for four months in order to ease costs at the airline. It is currently unclear what the salary figure is at this time.
Norwegian announced earlier last week that it would be cancelling 4,000 flights and laying off about half of its staff. The important transatlantic links it provides from the likes of London Gatwick will be affected due to the expansion of the travel ban that includes the UK and Republic of Ireland.
British Airways’ Alex Cruz has stated to his 45,000-strong workforce that the airline is suffering from “a crisis of global proportions like no other we have known” as well as warning about job cuts, but did not give an exact figure in the memo released.
Ryanair has grounded flights across Europe, specifically those to Italy and Spain, both of which have declared states of emergencies after receiving heavy caseloads of the virus.
Airlines UK, an industry body, has also criticised the government in a memo, accusing it of prevarication and bean-counting.
“We’re talking about the future of UK aviation – one of our world-class industries – and unless the government pulls itself together, who knows what will be left of it once we get out of this mess”, the memo stated.
Richard Moriarty, the CEO of the Civil Aviation Authority also commented on the news from Virgin, potentially stating that it is down to the airlines to preserve their survival.
“This is the most challenging period for aviation and package holiday businesses we have witnessed,” said Moriarty, adding:
“The threat to the survival of some businesses is real the longer this goes on. They will need to take very difficult actions to secure sufficient liquidity.”
It is understood that airline bosses in the UK have expressed unhappiness at aviation ministers due to there being no emergency measures for the industry in the budget that was recently unveiled by the Chancellor Rishi Sunak.
With this being the case, and other sectors receiving the money it needs to fight the outbreak, it puts into question the volatility of the industry getting far worse.
COVID-19: The Flybe Case Study
Flybe became the first carrier to go out of business following the spread of the virus. The conditions for operations would not have been well-suited to the airline, even before the Connect Airways Consortium deal.
2016/17 saw the airline record a significant £48.5m loss, but in 2017/18, it was able to reduce it to just £9.4m. Net debt was reduced to £59.1m from £64.0m and was able to raise passenger revenues per seat to £53.79 from £48.84.
Its 2018/19 Half-Year report also suggested a drop in the losses to £8.7m, showing levels of improvement across the board.
While it could have been argued that Virgin pulling the plug was the cause of the bankruptcy, the airline would not have been sustainable in the wake of COVID-19.
With Virgin also suffering significantly through flying empty planes and its shareholder partner Delta receiving low booking numbers, it would have been a sure thing that the UK regional market was going to suffer with it too.
No matter whether the services were still in place or not, demand would have dropped with it, putting the airline into continued disrepute.
Even then, the job losses surrounding the Flybe closure were emotional and sad to see in the region.
With other airlines such as Eastern Airways and Loganair snapping up the existing routes while the administration continues, the hope would be for those airlines to offer jobs where possible. Of course, in the wake of this virus, that may not be so easy.
It will probably be likely that when the virus is controlled and reduced, and markets come back to normal, the Virgin Connect brand may be pushed in the near future, using Virgin’s own assets as opposed to what was Flybe.
IATA predicts that the total loss to the industry will amount to $113 billion in revenues, although it is expected that the figure will rise.
With that in mind, it would be in the government’s interest, not just in the UK, but also to other state actors, to bail out the industry, as a complete and total collapse of the system would wreak economic havoc which would be felt for decades to come.
From the team at Airways, our hearts go out to those affected in the industry by COVID-19. Many jobs have been lost in the process of this outbreak, and we sincerely hope for the best.