Virgin Atlantic Returns to Skies Bracing for Three-Year Slump
(Bloomberg) -- Virgin Atlantic Airways Ltd., fresh from getting a $1.5 billion rescue package Tuesday, is anticipating a sluggish recovery in air travel that won’t see demand returning to 2019 levels for at least three years.
The British carrier founded by Richard Branson is resuming passenger flights next week with trips to Hong Kong, New York and Los Angeles. Widespread border restrictions and a U.K. quarantine for most long-haul arrivals mean “it’s basically essential travel only,” Chief Customer Officer Corneel Koster said in an interview.
“Bookings initially are looking limited and load factors will be relatively low,” Koster told Bloomberg Television. “We do believe there is pent-up demand out there. But we don’t know when our major market to and from the U.S. will open. And corporate demand will take time to recover.”
Virgin Atlantic is clawing its way back from the brink of failure after securing a package including 200 million pounds ($252 million) from Branson and 170 million pounds from hedge fund Davidson Kempner Capital Management. The Crawley, England-based carrier, which was refused a state bailout, is now “funded and prepared for all scenarios,” Koster said, whether the reopening of the crucial North Atlantic market takes weeks or months.
“We are going to take it one step of a time,” he said. “We think it will take at least three years to get back to 2019 levels.”
The return of Chinese students to U.K. universities after the summer break should provide a boost for Hong Kong services that begin Monday, he said.
A U.K. court-sanctioned process to make the restructuring plan binding on all creditors if it gets support from 75% of them should be concluded by the end of August or in early September, Koster said. “We know we have the support of our major creditors.”
In a bid to slash costs and save the company, Shai Weiss, Virgin Atlantic’s chief executive officer, eliminated more than 3,000 jobs and shuttered its London Gatwick base to focus on hubs at London Heathrow and Manchester airports. All told, operations will shrink by about one-third, according to Koster, who said a return to Gatwick is possible once markets revive.
“I would expect we will be, but it’s a matter of time,” he said.
Koster said Virgin Atlantic has had “superb support” from leasing firms and planemaker Airbus SE, with handovers of both A350 and A330-900neo jets being re-phased over a longer period. Some deliveries will still be taken in the months ahead, he said.
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