With the aviation industry taking a critical hit due to COVID-19, Sir Richard Branson is contemplating a move that will help raise funds to give his cash-strapped Virgin Atlantic airline a push in the right direction.
Branson and his team are considering listing the company on the London stock market, offering shares to both investment companies and private investors in a bid to fix its financial woes.
It will be a gamble on Branson’s part, as selling shares publicly could make him lose overall control of Virgin Atlantic. At present, Branson’s Virgin Group owns 51% of the airline, while the remaining shares are in possession of an American company, Delta Airlines.
However, this is seen as a calculated risk as increased funding will enable Virgin Atlantic to raise the necessary funds for refurbishment or restructuring as airways have begun to reopen following increased vaccination initiatives across the globe.
An unprecedented situation
Branson is doing his best to be upbeat about the company’s outlook.
Virgin Atlantic has been heavily dependent on air traffic between the United Kingdom and the US last April. The company posted a loss of around £659 million (US$ 912 million) thanks to an 80% drop in international air travel throughout 2020. In addition, Virgin Atlantic also laid off several thousand personnel in the wake of the pandemic.
While there has been word that the company has called in advisors to draft up a flotation plan, Virgin executives insist this is mere speculation.
If this flotation comes into being, it will mark the first time that Virgin Atlantic will sell shares to the public. Also, as stated previously, it may cause Branson’s controlling interest in the company to drop below 50%.
However, investors are taking the news with a grain of salt, given how share prices for Virgin’s competitors have yet to return to pre-pandemic levels. At present, share prices for IAG, which owns British Airways, and Easyjet remain considerably low, prompting market watchers to speculate just how long it will take for the aviation industry to recover.
Virgin Atlantic is the Virgin Group’s flagship company. Its long-running success has enabled its founder to diversify into a broad spectrum of interests, including space exploration through Virgin Galactic.
Last year, the company was in dire straits, and Branson successfully negotiated a corporate rescue package worth £1.2 billion (approximately US$ 1.7 billion). After that, however, Branson unsuccessfully petitioned the British government for a corporate bailout and had to put up his private resort on Necker Island as collateral in a bid to raise funds.