Let Virgin Atlantic Go Bust – Better Airlines Will Emerge

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Despite public backlash, Virgin Atlantic confirmed it is still in talks with the government about a coronavirus-related bailout.

Richard Branson published an open letter to staff last week in which he said “we will do everything we can to keep the airline going – but we will need government support to achieve that”.

Branson has a short memory, in 2009 he was very much against a government bailout of British Airways. In-fact, Branson wanted the government to let British Airways go bust to let others feast on their remains.

“The government shouldn’t step in to bail them (British Airways) out. They should let them go bust. And the likes of Virgin Atlantic and others should be able to step into the shoes, take over their slots and offer a much more cost effective, in our opinion, better airline.”

Richard Branson, 22 June 2009

British Airways posted a record loss of £230 million in 2009. The tables have very much turned since then. British Airways announced a £1.95 billion profit last year while Virgin Atlantic has suffered a decade of losses.

Branson has asked the government for a £500 million commercial loan. Yet many doubt whether it could be repaid given the losses his airline has accumulated.

“This is Branson’s second go at trying to fleece the British taxpayer for state aid,” Ryanair CEO Michael O’Leary told Sky News. He said Branson is “sitting in the Virgin Islands as a tax exile.”

Branson believes a government bailout is in the public interest because Virgin Atlantic creates competition for British Airways. But the options are not simply to help Virgin Atlantic, or watch the airline go bust and give British Airways a monopoly.

Existing regulations limit slots at the Britain’s busiest airports. Heathrow and Gatwick slots, where British Airways and Virgin Atlantic operate, are priority allocated to ‘new entrant’ airlines.

In the most dramatic scenario of Virgin Atlantic going bust, history shows that demand will be filled.

There could be new start-ups, or existing airlines such as JetBlue could enter the Heathrow market and stimulate fares as it did in America. JetBlue have previously announced their intention to run services from New York and Boston to London, a key Virgin Atlantic route.

The government must now follow Branson’s own guidance for struggling airlines: let Virgin Atlantic go bust and allow others to emerge.

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