Virgin Atlantic’s hopes of an imminent government bailout suffered a setback yesterday as it emerged the government has hired Wall Street bank Morgan Stanley to examine the case for state aid.
Industry sources suggest any rescue could now be several weeks away.
Virgin Atlantic had hoped for a decision on its request for a £500 million loan and credit guarantee this week if not before Easter.
The airline needs the funds to cover fixed costs of about £20 million a week and the credit guarantee to release funds from card companies withholding payments.
It is understood the carrier is not in immediate danger. An industry source insisted: “Virgin Atlantic can weather the storm longer into the year.”
However, the same source suggested: “There is only one plan right now and that is government support.”
Morgan Stanley joins investment bank Rothschild and business advisory and accountancy giant EY in advising ministers on any deal.
Rothschild was drafted in to advise the Treasury on aid to the aviation sector at the end of March. EY acted as administrator to Flybe which was owned by the Connect Airways consortium led by Virgin Atlantic when it collapsed in early March.
Chancellor Rishi Sunak has pledged to consider “bespoke support” for individual carriers, but only as a last resort” when they have “exhausted other options”.
The Chancellor made clear in a letter to the aviation sector: “Further taxpayer support would only be possible if all commercial avenues have been fully explored including raising further capital from existing investors and discussing arrangements with financial stakeholders.”
Should cash be made available, Sunak wrote: “Terms would be structured to protect taxpayers’ interest.”
The government would also have regard, he said, to “whether the business makes a material contribution to the economic activity of the UK, the importance of maintaining a thriving competitive aviation sector and equitable and fair treatment across businesses”.
Ministers are reportedly concerned at the potential reaction to rescuing a carrier jointly owned by the billionaire Sir Richard Branson and US carrier Delta Air Lines which reported a $4.8 billion post-tax profit for 2019.
Delta was one of 10 US carriers to agree a $25-billion bail-out from the US government this week.
The UK government has said it remains “willing to consider the situation of individual firms so long as all other government schemes have been explored and all commercial options exhausted”.
