Sir Richard Branson is reportedly putting Virgin Atlantic up for sale as he seeks a buyer by the end of May. He is effectively giving up on the U.K. government giving a £500 million loan.
Who will buy? Virgin Atlantic has an iconic brand but chronic losses.
Virgin Atlantic posted profits only three times last decade while British Airways soared to record profitability.
British Airways’ owner IAG is not asking for government support. EasyJet, also profitable, received a £600m loan.
Virgin accumulated £211m of losses last decade for a negative 0.1% operating margin. British Airways made £11 billion at a 10% margin. Virgin has yet to report its 2019 accounts.
More worryingly, Virgin was still unprofitable in recent years despite forming a joint-venture with Delta Air Lines
Delta owns 49% of Virgin but last week said it would not help Virgin or its other airline investments.
“We’re not in a position to be making any financial commitments to any of them,” Delta CEO Ed Bastian told investors. “They are aware of that.” Delta is focusing resources on its own operation.
Bastian suggested Virgin Atlantic could enter administration and restructure, as sister carrier Virgin Australia is doing. Branson’s Virgin Group owns 10% of Virgin Australia.
“If they are required to go through an administrative process in the U.K., I’m confident they could re-emerge,” Bastian told MSNBC. “It could take a legal process to get through that.”
Branson for now seems focused on new capital and not entering administration.
Houlihan Lokey is fielding investment interest from approximately 50 companies, the Telegraph said. Included are Centerbridge Partners, Cerberus Capital Management, Lansdowne Partners, Northill Capital Read, and Singapore sovereign wealth fund Temasek.
Temasek is also the owner of Singapore Airlines, which bought 49% of Virgin Atlantic in 1999 for £600m but sold the stake to Delta in 2013 for only £224m. Temasek regularly reviews opportunities and previously looked at Hong Kong Airlines.
The search for a new investor comes as Branson last December called off a plan to sell a 31% stake in Virgin to Air France-KLM, proposed two years ago.
That deal would have ended Branson’s majority ownership and control since his stake would have been diluted from 51% to 20%. Delta and Air France-KLM would have owned 80%, effectively sidelining Branson. Virgin Atlantic would still have been based in the U.K.
Branson could again look to sell part of his stake and lose control. Or new shares could be issued with Delta’s blessing, although Delta would probably prefer Branson’s stake be diluted so Delta can wield more power.
A Virgin spokesperson confirmed Houlihan Lokey’s appointment and said, “Discussions with a number of stakeholders continue and are constructive, meanwhile the airline remains in a stable position.”