A nose-dive in passenger demand has pushed Virgin Atlantic to the brink of running out of cash in September if its creditors fail to approve a $1.5 billion restructuring deal. The airline, which is 51% owned by founder Richard Branson’s Virgin Group and 49% by Delta Air Lines, filed for bankruptcy protection last week.

💎 Data Digs

Although Virgin Atlantic attributes its downfall to the pandemic, its liquidity issues predate the virus. In 2018, the airline reported a $75 million loss on revenue of $3 billion.

To save his struggling airline and his other travel businesses during the pandemic, Branson prepared to liquidate up to $500 million of his stake in his space tourism brand, Virgin Galactic.

Despite having no sales, Virgin Galactic has seen tremendous growth in 2020. Since June 27, its follower count on Twitter has grown by 3.2% and the number of employees on LinkedIn increased from 298 to 310.

🔬 Failure Blueprint

  • After three years of profit, Virgin Atlantic reported two straight years of losses in 2017 and 2018.
  • The company cited higher fuel costs, Brexit, and complications with Rolls-Royce engines used in its jets as the reasons for its business struggles.
  • With $630 million in cash and $850 million in long-term debt in 2018, Virgin Atlantic targeted 2021 as the earliest it could return to profitability.
  • Due to the pandemic, Virgin Atlantic laid off 3,550 employees, shuttered its Gatwick Airport base, and Branson begged the British government for a bailout.

⚡ Opportunity

It’s a bad time for the entire tourism industry, especially airlines. The International Air Transport Association (IATA) says air travel won’t recover from the pandemic until 2024.

Instead of looking at the skies for a growth opportunity, Branson is looking at space. In the same week that Virgin Atlantic declared bankruptcy protection, Virgin Galactic announced that it will be conducting its rocket-powered spaceflight test this fall. If all goes well, Branson will be flying on the spaceship in early 2021.

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