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Billionaire Branson says Virgin’s airlines need state aid to survive

Branson said in a letter to staff Monday posted online that he’s doing everything possible to keep Virgin Atlantic Airways Ltd. going.
Image: Brendon Thorne/Bloomberg

British billionaire Richard Branson said his airlines in the UK and Australia won’t survive the coronavirus crisis without state support, and that his Virgin Group lacks the resources to see them through the pandemic.

Branson said in a letter to staff Monday posted online that he’s doing everything possible to keep Virgin Atlantic Airways Ltd. going. It needs a UK-backed commercial loan to ride out the crisis, while Virgin Australia is “fighting to survive,” he said.

The entrepreneur is struggling to convince governments to rescue his brands given his own highly visible wealth and long-time residency in the West Indies that’s led him to be viewed as a tax exile. The companies pay taxes in the countries where they are based and operate, and more than 70 000 people work in Virgin operations across 35 countries, according to the letter.

Britain has yet to decide on Virgin Atlantic’s weeks-old application for hundreds of millions of pounds in support, while Virgin Australia Holdings Ltd. was told by the government in Canberra Monday that it will receive no further financial help, the Australian Financial Review reported.

Branson said he left Britain not for tax reasons “but for our love of the beautiful British Virgin Islands,” and that he has never taken significant profits out of Virgin Group. He’s chosen instead to plow money into new businesses, such as his latest Virgin Galactic Holdings Inc. space-tourism venture.

“I’ve seen lots of comments about my net worth, but that is calculated on the value of Virgin businesses around the world before this crisis, not sitting as cash in a bank account ready to withdraw,” he said.

Branson has committed to injecting $250 million into his brands to save jobs, and he said in the letter that “a big part” is going to Virgin Atlantic.” But with “no money coming in and lots going out,” that in itself won’t be enough, he said.

Virgin Australia’s situation is the most critical, with debts of more than A$5 billion ($3.2 billion) at the end of 2019. Branson now holds only a 10% stake in the Brisbane-based carrier, compared with 51% of Virgin Atlantic.

Virgin Australia had asked the government for a A$1.4 billion loan, convertible into equity, to see it through the crisis. The is dominated by Qantas Airways Ltd. in essentially a two-player market, and hasn’t made an annual profit for seven years.

© 2020 Bloomberg

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The mere existence of Virgin Atlantic was proof of the giddy heights that there was excess cheap money floating around for the rich to use willy nilly.

Let it be part of the creative destruction that has yet to happen.

I’ve now realised there exist no true “capitalist” country…even the ‘free’ USA. During the boom years, corporations (and their senior execs) rake it in hansomely. During downturn ‘shocks” ( like we see now & 2008/09 sub-prime crisis) the Govt is requested for bail-outs….to provide a socialist protective umbrella over corporations that used debt too aggressively to grow.

Is capitalism not meant to be with little/minimal govt interference (or support)? Aren’t one supposed to allow private corporations to fail?(…so that it rids itself of inefficiencies & mistakes made).

Even the EU is a large socialist group with “big daddy” protection. Collectivism. Almost like a hybrid….the owners of capital remain that of business (and taxes paid to govt).

…so in a true capitalist society, one is allowed for corporations to go under?

I’m going to have to burn my (economics) varsity books…! These were written before China was a modern country 🙁

Yes,
Sure it is reasonable for the taxpayer to support a strategic industry, then shareholding needs to be taken. Yet BA refused, just wanted the taxpayer to pay.

Hopefully more people will realize how rigged the game is for the top 0.1% and burn their economics handbooks!

Argentina introduced a wealth tax 2-3% for personal wealth over us$3million, yet still withholding such a tax for companies.

Yes,
Sure it is reasonable for the taxpayer to support a strategic industry, then shareholding needs to be taken. Yet BA refused, just wanted the taxpayer to pay.

Hopefully more people will realize how rigged the game is for the top 0.1% and burn their economics handbooks!

Argentina introduced a wealth tax 2-3% for personal wealth over us$3million, yet still withholding such a tax for companies.

Mr Branson has built his wealth on other peoples money – listing a company to raise capital for his business and then buying the shares back for a fraction of the IPO. Now he has chosen to take his wealth out of Britain, not contributing to the coffers but pleasing with Britain to bail him out with more “Free” money. I hope they see the light and support only those businesses that support Britain by paying their taxes.

End of comments.

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