Want to know the richest airline in Europe? It’s not BA, Air France, or even Ryanair – it’s WizzAir, the Hungarian low cost airline. Conservative estimates suggest the airline has enough cash to weather current travel restrictions for at least 20 months, without flying a single plane.
This is precisely why many have been left scratching their heads as to why the UK Government, which has thus far failed to reach terms with UK based Virgin Atlantic, just handed an airline with incredibly deep pockets, which absolutely does not need cash, £300 million in “bailout” loans.
The distinction between a bailout and a loan is an important one to examine, because it’s the essence of why the UK Government move is so confusing. If anyone who doesn’t need money can count on government support before those who do need money, there are going to be quite a few hands opening up.
Virgin Atlantic is not seeking a bailout, it’s seeking a loan, of which the full amount, plus likely interest would be repaid in full to the Government and therefore UK taxpayers. Virgin Atlantic is seeking a loan, because it’s in desperate need, due to the unprecedented times we all collectively ace.
By all accounts, the intention of the loan program setup by the UK Government is to support businesses impacted by covid-19 -aka coronavirus, and particularly those facing risk or need. Unlike Virgin Atlantic, which is formally at risk, and in need of cash injection, WizzAir is in neither camp.
WizzAir seized an opportunity for a 0.6% loan, which in banking terms is practically free money.
The UK Government isn’t foolish to profit off its loan capabilities, but in helping WizzAir before Virgin, very awkward optics are everywhere. If every business in Europe that wanted cheap access to cash took it, there would be no money left in the world, at least certainly not from Her Majesty’s Treasury.
Who in the UK wouldn’t love to borrow large sums of money at 0.6% interest? Why not buy a larger house, or a Ferrari while you’re at it?
The point is “need” and a foreign airline with no need just jumped the queue over a domestic airline with great need, based on a technicality in financing form tick boxes. WizzAir has UK employees in the hundreds, and all competition in UK aviation matters, but it’s incomparable to BA or Virgin.
But Aren’t Most Airlines “International”?
Even though it has UK subsidiaries and is traded in London markets, WizzAir is not a domestic airline, and certainly isn’t going to be the great hope for challenging British Airways as a “second” flag carrier, or adding innovation to long haul flying. And no, British Airways is not a bonafide flag carrier, though in many ways enjoys the perks of one.
But then again British Airways isn’t British – it’s owned by IAG which is a Spanish company, but has Qatar Airways as its single largest shareholder.
Where the distinction is, or should be drawn in terms of covid-19 related government support, typically falls upon the impact it will have on domestic jobs and connectivity.
In this regard, Virgin Atlantic or British Airways is far more important to the UK public, putting other financial and geographical factors aside.
Despite the financing challenges presented by US based Delta Airlines 49% ownership in Virgin Atlantic, and the lightning rod effect of having a well known billionaire in control of the other 51%, it’s impossible not to feel like the UK Government is acting with some level of malice toward the airline.
After all, EasyJet secured £600m in government loan funding, just days after Cypriot billionaire owner Stelios Haji-Ioannou withdrew £60m from the airline for personal gain, in the same week it cut free meals for flight crews. Both billionaire owned, both important to UK travel.
For the peanut gallery critics saying why doesn’t Delta buy more of Virgin – they can’t. 49% is the maximum allowed by EU law. The UK Government making money off of WizzAir isn’t a problem in itself, but putting the needs of airlines without actual need for cash, above those which do is odd.
Some form of malice, or inflexibility is the only way you can explain handing practically free money to a foreign airline which doesn’t need it, while refusing to offer a similar loan package, rumored to be only £200m more to Virgin Atlantic, with thousands more domestic jobs and many more vital routes connecting the UK to the world at stake.
I think that the British Public wouldn’t be happy to bail out Richard Branson when he probably has enough money to do it himself
Your argument is entirely invalidated by the sheer fact that Wizzair doesn’t need money, and has enough money to bail out other airlines itself.
Branson’s wealth is immaterial here, just as it was when Stelios Haji-Ioannou, owner of EasyJet secured a loan, only weeks after telling EasyJet employees they were losing free meals, and withdrawing over 60m from the airline, presumably for his caviar fund. You can’t be selective about which billionaires you choose to focus on, and which you don’t.
Virgin Atlantic employs more people in the UK than WizzAir by a large muiltiple.
If Wizzair doesn’t need the money why is it so reluctant to issue refunds to it’s passengers who now cannot fly due to Covid 19, lockdowns and suspension of flights between the UK and Romania. They appear to have nothing but contempt for their passengers and it appears for this pandemic when they are so keen to fly to many countries during this time, putting profits way ahead of passenger safety and their health.
In order to mitigate the impacts of Brexit, Wizz Air founded Wizz air UK, a subsidiary of Wizz air. It has a UK AOC in order to facilitate continued flights from the UK. The differences between Wizz & Virgin are huge. Wizz is a profitable going concern which is suffering some liquidity issues due to the current Covid 19. Through careful management of its finances the company has amassed a reasonable financial cushion. Wizz has continued and will continue to contribute tax revenues and currently has sufficient assets to cover the government loan. Going to the bank for a loan when you have money is no problem. Trying to get a loan when you are insolvent & have no way of paying it back is another matter.
Virgin has made no overall profit and therefor no corporate tax contribution since at least 2008, no doubt this situation will remain unchanged for the foreseeable future. Delta which hold 49% is not prepared to assist, probably due to the $12.1 billion it has spent over the past 10 years in share buybacks. “Privatize the profits socialize the losses”. Judging by the pathetic net asset value and VAs complete inability to turn a regular profit, I would envisage the £500 million loan RB requested to be very risky! There is no guarantee he will use these funds for the benefit of the airline. The problems with VA are not liquidity but structural. It is simply not profitable, it’s inability to make money in the good times speaks volumes. I have no clue why RB continues to maintain his interest in a loss making business but then I have no idea how much is being drawn down through the management of the airlines parent company, Virgin Group Holdings Ltd, let me see where is that based? Somewhere else that’s British & Virgin perhaps? It’s not for me or my children to prop up the business ventures & vanity projects or RB
I disagree someone who has grown all is businesses successful more than our governments at going public. He has the best people you could want when your travelling and the best and safest planes trains ect
This is a personal vendetta against a man who has been knighted by our sovereign for his business and helping charities all over the world.so your doubting our queens intelligence. As for Whizz Air being given help which they don’t need some one in government wants to make sure its justified or he should be hing out to dry.
To be fair Wizzair does have a CAA AOC.
And let’s not forget IAG’s operational HQ is waterside and listed on the LSE as well as BMAD with the vast majority of Mkt Cap held on LSE. but also if you dig deep enough it does get down you have to ask, should the Qataris fund BA vs HMG? after they are the largest individual shareholder of IAG 🙂
This is so bad. I think we all agree that we love Virgin (great service, awesome lounges, great mileage redemptions) and I don’t know anyone who even remotely likes Wizz Air. After their commercial “ban business class” I came close to throwing up. Ultimately I would be a blessing for the environment and civilisation if Wizz Air went into administration
Virgin Atlantic is, without a doubt, my favorite airline. The Virgin staff are the gold standard of how to treat customers. The service has always been great. Virgin was a great innovator years ago with Premium economy and Upper Class, and its lounges are unique and fun, unlike the standard business class lounges. It would be sad to see them fail. If they do survive, perhaps this crisis will be the kick in the pants they need to be innovative again. When we do resume flying (soon I hope) again, my first flight will be Upper Class on Virgin. I’m rooting for them to hang in there.
Gib – just to keep you honest, I think QA owns about 25% of IAG, not a majority. Wouldn’t want TPG calling out an otherwise spot on post on a minor detail!
Hey Neil, I could be wrong, but I believe Qatar at 25% is the largest single shareholder. Perhaps that’s inconsistent with my writing (I need to look) but it’s true to the best of my knowledge and in the IAG financial disclosures.
Yep – that all sounds right. Was just talking about the reference to it owning a “majority” (which implies 50%+). All good now!
I think you hit the nail on the head when you mentioned malice. There’s absolutely no justification for the government to refuse a loan to Virgin Atlantic. To grant Wizzair this money is like a slap in the face. The employees are the real losers, certainly not Richard. Many thousands of them are waiting anxiously to see if they still have jobs in a few months time. I would have thought that another 10k people claiming unemployment would be going directly against the Tory ethos. Or maybe they just like prolonging the agony, either way a decision needs to be made and fast.
People need to stop mentioning Branson’s wealth as a reason that Virgin should not get funds. His entire company employs over 100k people, he can’t salvage Virgin Atlantic, which is a large part of the entire Virgin company, alone. And please, stop with the bailout talk. Airlines did not choose to have zero demand for flying. Nor did they do anything to cause themselves to have zero demand for flying. This is about saving people’s jobs, not who has enough money.
This is a rather naive and biased article. Suggesting that Virgin operates more vital routes out of the UK than Wizz Air is simply wrong. Every single route Virgin operates is operated by at least one other airline out of the same metro area, if not the same airport. Wizz Is on the other hand the sole carrier to many destinations especially in Eastern Europe.
While Virgin should (and I would love to see that happen) be able to get a loan as well, it’s no surprise that it’s rather easy and quicker for Wizz to get it. A cash strong company, with a successful business model (in the UK and beyond), hundreds of UK based tax paying employees and a track record of annual profits, will and should get loans easier and at better rates.
It’s like saying the long-term unemployed person, which has a track record of racketeering and money laundering (not comparing it to Virgin) should get a loan before and at equal interest rates than the 9-to-5 guy who has been living within his means, has a successful and realistic plumbing business and has always paid his credit card in time.
SB, your arguments are on solid foundation, and I agree in principle that rewarding financial responsibility has merit.
However, you’re assuming WizzAir and Virgin applied and initiated the process at the same time. I don’t believe that’s the case.
Further, Virgin was ever closer to the 9-5 dependability and creating profit, particularly through learning across the JV network. I know you’re not directly making the comparison you did with Virgin, but they’re hardly the drunk unemployed uncle here.
Appreciate the response Gilbert!
Uncle Alex and his pals are the only drunk uncles in the room, intoxicated on the resources they’ve drained from BA and focussed wholly on continuing their profiteering at any cost with no consideration of their own employees and customers. This approach will accumulate and I believe IF there are alternatives, we will see the impact of #FlyAbBA on load factors as people refect on their actions in the past 5weeks, realise there are better alternatives out there. and start trying them.
Without massive changes Virgin Atlantic isn’t a viable airline as it sits today: In the bad times It haemorrhages money; in the good times (at best) it eeks a slight profit – and often still makes a loss.
That Air France/ KLM walked away from it (in the recent good times) should give an impression of the risk in VA when reviewing the bottom line in detail.
I am assuming/ hoping at this point the management are trying to get the government’s backing to support them coming out of insolvency rather than trying to get a loan to stay afloat. A smaller more focussed VA may be able to weather the storm / attract investment from a third party to keep it going.
I think virgin atlantic should be entitled to a bail out just like all the other airlines who are getting it virgin are by far the best to fly with we have been to Florida numerous times with them and they always come up trumps please think of all his staff that wouldnt have jobs and help Virgin get through this
Maybe if Virgin actually owned more of it’s planes rather than selling them, paying shareholders & then leasing the same planes back, they would be worthy of sympathy. But they don’t. And I speak as someone who loves flying VA. But the business isn’t worthy of its staff. Nothing to do with pick a billionaire. Will I miss it? Yes. Will I miss the ethos that currently underpins it? I’m sorry, no.
I think it is beyond credibility to Expect the British Public to bail out any of these airlines. as to Virgin providing a service, suggest you list all the ports not already serviced by B.A. Lets see how important they are to the Majority of British taxpayers. At Least with Wizz they have opened up many Eastern European ports not serviced by B.A.at low cost to the public
? No one is talking about bailouts. They’re talking about low interest loans. If even airlines which don’t need them are getting them, why not all of them?
A very simple fact that a loan needs to be repaid. Who would you prefer to lend to? Someone who doesn’t need it, has massive cash reserves and runs a very, I am presuming this, profitable business. Or a business always struggling to make a profit, on the verge of bankruptcy and no collateral.
It’s not a difficult choice.
If VA are seeking a loan then what collateral would be behind it. VA have offered an Island but that is only worth a small % of the loan requested, £30m vs £500m.
Otherwise VA have very little in assets the put against a £500m loan.
No mention of bailouts??? Well for a start the headline and first paragraph of your column suggests otherwise
UK Government has made available a number of schemes to help businesses in need to weather the Covid storm. There should be and no doubt is one set of rules that need to be followed, boxes ticked, and hopefully cheques written without bias or malice. It is of no consequence whether I had a great flight to MCO or a terrible trip to LTN. It should be down to “Is the money needed to weather the Covid storm”. If yes, then make it available. Please never lose track of the fact that any business is bigger than any one person.
Politicians have shares in Wizzair.
Follow the money. £300 million straight into the pockets of shareholders.
Let’s get it all into prospective if they pay there taxes to Britain then the government should look at the case but virgin don’t and have made a loss the last few years so why should British tax payers money be used. People seem to forget he told his staff they would on 8 weeks leave without pay where’s the loyalty for your staff it’s not if he can afford it and the same goes for Whizzair if they can afford to keep afloat for 20 months they don’t need bailout I’m sure there’s British business that could do with help. The problem now is it’s all about the MONEY.
Andrew, I think you need to check the ownership of SpanglishQatari airways, branded as BA! and that of others who have received loans.
Bottom line there a very small number of very small airlines that are wholly British.
So you can only comment on the page if you agree to virgin being bailout
No, drama queen, all comments get moderated and moderation takes time.
I would hazard a guess that, like it or not, Whizzair is just the more sensible company to give a loan to.
Case in point? How long have they been around? Yet they have enough capital to last twenty months. That’s sensible business making.
How long have Virgin been around? It was up to them to put something away for a rainy day. A shock to the airline industry such as covid19 wasn’t as unexpected to many in the risk analysis business.
And then consider that Virgin is part of a wider group if companies, including the ones doing very well in state sponsord private healthcare in the UK at the moment, as well as pretty much the only provider of cable TV in the UK – a position they acquired through brute force and regulatory help.
And consider the Virgin group also effectively received subsidy after subsidy whilst running much of the UK’s Raul franchises into the ground. If you’d ever travelled Virgin East Coast in the UK, paying over a hundred pounds to travel less than four hundred miles, standing up on an over booked train built and paid for by the UK taxpayer in the 1980s, then you’ll have less sympathy for this brand and its box of public finance sucking PR tricks.
Why are you making a point of telling everyone they are Hungarian? Just to stir up some racial hatred of foreigners?
Lets be frank here just about every business in the UK has foreign investment from utility companies to football clubs the loans from government unlike you have no consideration of who owns the business, if they do business in the uk employ uk citizens and are solvent then they get a loan.
Also your argument about cheap money is simply ridiculous, we all cant go borrowing millions because paying the capital back is the difficult part not the interest.
one out of ten for journalism must do better
You’re barking down the wrong tree here. Open borders and travel is the slant here, if any.
The point is simple. If every solvent business in the UK took out a huge 0.6 % loan, when they absolutely did not need it, there would be no money left in HM Treasury for businesses which need support and can pay it back. WizzAir doesn’t employ even a fraction of those other airlines in the UK do, and that’s the basis of why the optics are bad.
Lots of interesting comments
Monarch were not helped
Thomas Cook weren’t helped
Flybe nor helped
Virgin should not therefore be helped
Wiz are a safe bet so can be helped
Whose is next. Logan Air
Leave a comment