Will Sir Richard Branson Take Virgin Atlantic From Bankruptcy To IPO?

Sir Richard Branson is nothing if not resilient. Much of the 70-year-old billionaire’s empire (famously named Virgin as “we were all virgins at business) was on the ropes in 2020 due to COVID-19. But in 2021, Branson not only beat Bezos into space with Virgin Galactic but might take Virgin Atlantic Airways from bankruptcy to IPO.

Virgin Atlantic is one of Branson’s most beloved creations, famously founded in 1982 with a leased Boeing 747. It flew big splashy 747s and later, Boeing 787 Dreamliners and Airbus A350-900 aircraft. But it was hit hard by the pandemic, as its primary route was between the United States and London.

On February 4, 2020, Virgin Atlantic, Delta, Air France and KLM announced an expanded joint venture. It was to offer up to 341 peak daily transatlantic services, with connections to 238 cities in North America, 98 in continental Europe and 16 in the UK. Flyers could gain points and elite benefits (100+ lounges worldwide!) on any partner, starting February 13, 2020.

Unfortunately, the COVID-19 pandemic threw a wrecking ball into those plans. On March 11, President Trump announced the closing of U.S. borders, which continues in the Biden Administration. Europe shut its borders to Americans too, part of the worldwide travel shutdown that is just beginning to change after 18 months of pandemic.

With most of its lucrative transatlantic trade shut down, Virgin Atlantic tried to renegotiate aircraft leases and loans it couldn’t repay. Virgin asked the British government for 500 million pounds in loans and grants, citing the Virgin Group’s 70,000 employees worldwide. Branson even offered up his own private Necker Island in the British Virgin Islands as collateral.

The airline summarily retired its entire remaining fleet of Boeing 747 aircraft in 2020. Many were scrapped, some converted to freight, and one (“Cosmic Girl” G-VWOW, 747-41R, now N744VG) seconded to sister company Virgin Galactic. Virgin also retired its Airbus A340s. Its fleet consists now of A330 and modern A350-1000 and Boeing 787-9 aircraft, many still parked.

Nonetheless, Virgin Atlantic filed for Chapter 15 bankruptcy protection on August 4, 2020, “a way for foreign companies to let US bankruptcy courts recognize restructuring efforts happening abroad.” Those efforts eventually paid off for Virgin Atlantic, as an ‘overwhelming majority’ of 170 creditors agreed to a £1.2bn rescue deal in Britain. The restricting plan included creditors agreeing. to take 80% of what they were owed. Delta Airlines, which owns 49% of Virgin Atlantic, and the Virgin Group, which owns 51%, raised £600m cash. Virgin Atlantic agreed to shut its London Gatwick operations and cut over 3100 employees, over a third.

The effect of the pandemic on the airline industry was devastating, with as many as 16,000 planes parked and thousands of workers furloughed. The impact on Virgin Atlantic was near catastrophic.

Yet a year later, happy days are apparently here again. Virgin Atlantic is flying to international destinations, including London Heathrow from Atlanta, Boston, New York, Los Angeles, and Miami. New York-to-London bookings are said to have surged by 150% this month, while the airlines try to get the Biden Administration to let in fully vaccinated visitors.

So, with the coming demand for international travel, is it time for a Virgin Atlantic public offering, “a surprise flotation on the London Stock Exchange?”

If transatlantic travel makes a comeback, perhaps a new listing for Virgin Atlantic will make as much sense as the sudden “meme” revival of AMC Theatres shares, or the stock market embrace of Virgin Galactic.

But as economist John Maynard Keynes put it, “the markets can remain irrational longer than you can remain solvent.” Whether this will work in favor of a Virgin Atlantic IPO, or against it, is anybody’s guess.

Nonetheless, the irrepressible Branson and partners are allegedly proposing a public listing on the London Stock market. While an IPO of Virgin Atlantic shares might dilute Branson’s shares to below 50% ownership, the cash infusion would indeed help re-float the airline.

Citibank and Barclays are said to have been hired to lead the listing, with the idea of an IPO (perhaps in fall 2021) getting a serious hearing. After all, Virgin Galactic (SPCE) went public October 28, 2019. After closing at 11.75 on its first da, the space tourism company is up over 250% (closing August 10 at 31.33). This, despite operating since 2004 without flying a paying passenger into space. No, Sir Richard Branson’s sub-orbital July jaunt doesn’t count.

On the other hand, as Sky News noted, Virgin Galactic’s take-off enabled Branson to ”raise hundreds of millions of pounds to prop up struggling leisure and travel businesses.” For example, after a year delay, Virgin Voyages launched its first cruise this week.

With the rescue package, additional loans, concessions, cuts (including more employees) and the sale of several 787 Dreamliners, Virgin Atlantic should have enough cash for another few months. Perhaps then the capital markets will rain money on the airline.

On the face of it, Virgin Atlantic might have a chance at IPO success. At some point COVID-19 will be conquered, or at least tamed enough to fully resume international tourism and business. Right?

We reached out to Virgin Atlantic for comment. A spokesperson said, “Re your question about the public offering of Virgin Atlantic stock, we won’t be commenting on the speculation.” As for 49% partner Delta, which would presumably be delighted at a successful listing, a spokesperson said, “I don’t believe we would have comment on a future or planned IPO.”

Would a smaller, more efficient Virgin Atlantic be able to provide its famous service and compete for the lucrative international market? Airline pundits believe 2019 travel levels may not return until 2024. When will transatlantic travel massive enough to ‘lift all boats’ return?

COVID-19 remains the wild card. After all, delta is only the fourth letter in the Greek alphabet.

But Virgin Atlantic has its own high cards. Sir Richard Branson may be the ultimate promoter, but he has a way of making promises come true. When he founded Virgin Galactic in 2004, he vowed he would fly aboard his own space ship. Seventeen years later, he did. What better way for him to celebrate the upcoming 40th anniversary of Virgin Atlantic than with champagne on the stock exchange?

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