Virgin Atlantic Ltd 2020 Financial results
Virgin Atlantic Ltd has released its annual financial results for the year ending 31st December 2020. The Group, comprising Virgin Atlantic, Virgin Holidays and Virgin Atlantic Cargo, reported revenue figures of £868 million, down from £2.9 billion in 2019; a pre-tax loss of £659 million before tax and exceptional items, and fair value movements versus a loss of £22 million in 2019. These results reflect the toughest year in the airline’s 36-year history and the immense challenges that the airline industry has faced due to the Covid-19 pandemic.
Despite the incredibly tough backdrop, the company made a significant contribution towards the national effort to protect lives, from transporting vital PPE and medical supplies, to volunteering to support NHS frontline services. Virgin Atlantic Cargo enjoyed a record year, launching 12 new cargo-only routes for the first time in the airline’s history. Throughout the pandemic, the airline continued to deliver unrivalled customer service and was voted Britain’s only Five Star Airline by APEX for the fourth consecutive year in the Official Airline Ratings. In addition, Virgin Atlantic received Diamond Status from APEX for delivering the highest standards of cleanliness and demonstrating a steadfast commitment to ensuring its customers and people can fly safe and fly well.
Virgin Atlantic’s Response to Covid-19
- Virgin Atlantic responded swiftly to the crisis, suspending Shanghai flights on 1 February 2020 and immediately shifting focus to liquidity preservation. Through disciplined focus on operating only cash positive flying, ASKs were reduced by 73% year on year and passenger flying was suspended for 90 days from 21 April.
- For the first time in the airline’s history, Virgin Atlantic established a cargo-only flight business transporting critical supplies to the UK. This resulted in a record year for cargo performance, with revenue of £319m, up 49% year on year.
- Decisive action was taken to resize and reshape Virgin Atlantic; consolidating operations to London Heathrow; simplifying the fleet by retiring Boeing 747-400 and Airbus A340-600 aircraft early; and rebranding Virgin Holidays to Virgin Atlantic Holidays. Even in the toughest times, the amazing people of Virgin Atlantic are what sets it apart and they have made tremendous sacrifices. Sadly, the number of people employed had to be reduced by 41% to 5,907* in order for the airline to emerge from the crisis. Combined, these actions contributed more than £300m in cost reduction.
- On 4 September 2020, Virgin Atlantic completed the £1.2bn privately funded solvent recapitalisation of the airline. Two further financing transactions closed in Q1 2021, raising an additional £330m, with the proceeds paying down debt and bolstering the airline’s cash position.
- £880m of fleet capital expenditure was deferred, realigning growth and capital investment in line with demand for travel.
- More than £600m was processed in cash refunds, relating to more than 220,000 claims. The full backlog was cleared by November 2020 and standard processing times resumed.
- From the start of the pandemic, the airline supported the NHS with our people volunteering at NHS Nightingale and the London & St John Ambulance services, providing critical support as well as administering the vaccine. Virgin Atlantic Cargo carried over 8.5 million kilos of essential medical supplies including respirators, ventilator parts, face masks, scrubs, testing kits, aprons and eye protection and PPE equipment into the UK, helping to keep NHS frontline workers safe.
Full Year 2020 Financial Results Summary
- ASKs decreased by 73% year on year and passenger numbers decreased by 80% year on year, reflecting the dramatic impact of the COVID-19 pandemic on our operation.
- Total revenue decreased from £2.9bn in 2019 to £868m for the year ending 31st December 2020.
- Cargo revenue increased by 49% to £319m reflecting a record year of performance.
- The growth in cargo-only flying helped to offset the reduction in passenger flying, resulting in total sectors flown decreasing from 23,551 in 2019 to 10,601 in 2020.
- Passenger numbers decreased from 5.8m in 2019 to 1.1m in 2020.
- Total operating costs for the Group decreased from £2.9bn in 2019 to £1.4bn in 2020, reflecting the reduced level of flying operations and the significant actions taken to resize and reshape Virgin Atlantic.
- The Group, comprising Virgin Atlantic, Virgin Holidays and Cargo, reported EBIT pre-exceptional items loss of £511m vs a profit of £74m in 2019. Company statutory loss after tax of £864m, including the impact of £93m of exceptional items as a result of the COVID-19 pandemic. Year-end cash position of £191 million, prior to further financing activities that completed in Q1 2021.
Shai Weiss, CEO, Virgin Atlantic commented: “2020 has been the toughest year in our 36-year history. We have taken incredibly difficult decisions, reshaping and resizing the business to reduce costs, preserve cash and crucially, to protect as many jobs as possible. At the start of 2020, we were on course to return to profitability, however, few could have predicted the scale and impact of the global crisis that the Covid-19 pandemic would bring. Ongoing travel restrictions, border closures and country-wide lockdowns reduced demand for travel and drove unprecedented levels of customer refunds, with over £600 million processed by Virgin Atlantic during 2020.
“While we welcome the adoption of a risk-based traffic light framework and that progress is being made towards the resumption of international travel at scale from 17 May, it doesn’t go far enough, given that economic recovery and 500,000 UK jobs are at stake. Now we need certainty that the framework will allow for a phased removal of testing and quarantine. With world leading vaccination programmes in both the UK and US, and evidence to support safe reopening through testing, there is a clear opportunity to open up travel and no reason to delay beyond May 17.
“With the unwavering support of our people, our creditors and shareholders, Virgin Group and Delta Air Lines, we continue to bolster our balance sheet in anticipation of the resumption of international travel from May 17th. We remain confident that Virgin Atlantic will get back to its best for our people and our customers, emerging from the crisis a sustainably profitable airline.”
Oli Byers, CFO, Virgin Atlantic commented: “Our 2020 financial results reflect the immense challenges that our industry has faced due to the Covid-19 pandemic. Aviation was one of the first industries to be affected and will be one of the last to fully recover. Since February 2020, we have been guided by the single mission of ensuring Virgin Atlantic’s survival, through a laser focus on reducing our costs, preserving cash and protecting as many jobs as possible.
“We’re proud to have completed a £1.2bn privately funded, solvent recapitalisation with the continued support of our partners and shareholders, which enabled us to strengthen our balance sheet through a £200m investment from Virgin Group, reduced five-year fleet capex spend by £880m and £335m in cost savings. In January 2021 we further supported our liquidity position through the completion of the sale and leaseback of two 787s, and on 15 March 2021, we completed financing worth £160 million, including a further £97 million of shareholder support.
“With the successful mass rollout of vaccines and the implementation of testing regimes, customers are booking for travel for Q2 2021 and beyond. Meanwhile, on the back of a record 2020, operating nearly 4,000 cargo only sectors, carrying more than 7,000 tonnes of PPE and delivering £319 million in revenues, Virgin Atlantic Cargo continues to keep global supply chains running.”