Investment bank ‘to advise on keeping UK airlines in business’

Morgan Stanley is reportedly to advise the government on a package of measures to keep UK airlines afloat during the coronavirus crisis

The Wall Street investment bank, originally drafted in to handle a possible bailout of Virgin Atlantic, has been awarded a broader mandate to examine ways to support the entire airline sector in Britain, sources told Reuters.

“The situation was more complicated than expected,” one said, adding that any bailout of Virgin Atlantic might prompt other airlines to request state aid.

Morgan Stanley’s expanded role comes as British Airways began a massive restructure and the boss of Heathrow warned that the UK risks destroying its aviation sector by not propping up airlines as countries such as the US and France have done.

Airlines around the world are struggling with the fallout of the coronavirus pandemic as air travel has been brought to a virtual standstill, threatening thousands of jobs.

Morgan Stanley is working closely with Rothschild, which won a similar government mandate earlier this year to handle talks with airlines and other British companies bearing the brunt of the coronavirus pandemic, the sources said.

Any bailout of Virgin Atlantic would only come after all other possibilities, including a sale, had been fully explored, one of the sources said.

A Virgin Atlantic spokesperson said it was exploring all available options to obtain additional external credit, adding it was working with Houlihan Lokey on private sector funding and ongoing discussions with stakeholders were “constructive”.

Meanwhile, founder and part owner Sir Richard Branson and the Virgin Group were committed to the airline and were not looking to sell it, a representative for the group said on Friday.

But if no bailout is granted and Virgin Atlantic ends up collapsing, then the government will need to review the competitive landscape on transatlantic flights as BA would emerge as a winner, another source reportedly said.

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