Virgin Atlantic Goes Bankrupt, Bailouts?

[amishmanish]

In the 2008 crisis, there were a host of these Investment banks, Insurance players and rating institutions who were all in cahoots. The executives at the top were making millions in bonuses (which many of them would have used to buy bitcoin). Despite all this, they were all bailed out with a "too big to fail" tag and zero prosecutions.

Compare them with Richard Branson who started his first company as a teenager by selling magazines and records. He is a true blood entrepreneur and has added a lot of value over the years to the economy as well as culture in general, not to forget the jobs and good times he gave the people. He had a role to play in the Concorde too, if i am not mistaken.

For his history of risk-taking, hard work and entrepreneurship alone, i think he must be bailed out no matter what people think about it. We need these risk-takers and value creators who build up enterprises through sheer power of will and hard work. The number of people in staff and associated industries who would be saved is itself worth it.

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[tbterryboy]

At the end of the day if they didn't have insurance against it, why do they get a bail out? That is what I always wondered, when wall street bankrupted 12 years ago, they were protected and bailed out because if they failed there would be too many people who have invested into those companies that would fail as well and become poor, but I do not get why the government had to pay them yet still not own them.

If I took out a loan from a bank and fail to pay for it, they will end up seizing my house or if it is a business seize my business, so why can't the government do the same for the banks? Just give them money but also take a bit of their stock as well, that way you can pay the tax payers back by lowering taxes thanks to new income from wall street. Same here, if Airlines can't continue and beg money, give them money in exchange of stocks, that would be smarter.

[wxa7115]

Compare them with Richard Branson who started his first company as a teenager by selling magazines and records. He is a true blood entrepreneur and has added a lot of value over the years to the economy as well as culture in general, not to forget the jobs and good times he gave the people. He had a role to play in the Concorde too, if i am not mistaken.

For his history of risk-taking, hard work and entrepreneurship alone, i think he must be bailed out no matter what people think about it. We need these risk-takers and value creators who build up enterprises through sheer power of will and hard work. The number of people in staff and associated industries who would be saved is itself worth it.

But you said it yourself, he is a risk taker and if you do that then you can get great rewards as he has done during his life but you need to also accept the risks that comes with it, that is unavoidable, and while some may say that it was impossible for anyone to predict the current crisis that we are facing, and in a way they will be right, at the same time companies are run in a way that tries to get as many profits as possible on the short term without any care for the future and once a crisis hits them they suddenly find themselves overextended and with no capital to face the crisis.

If I'm completely honest I'm not really sorry for those business owners, I understand they're having a really hard time but this is the way the economy should work, only to businesses that are well run and that take precautions and that saved their profits to endure the difficult times ahead should survive, if a business owner no matter how successful he has been in the past does not plan for this then he does not deserve to keep himself in business.

[bearexin]

They will still have to bail them out. Anything that has to do with transportation was badly hit by the coronavirus. I have not been to the airport, but I can tell with the land transportation companies here that nothing is really moving from them since the Coronavirus, although they have started getting back into business a little. When it all started they were all stopped and nothing like public transportation. Most of them wouldn’t be able to pay their staff at this time.

Moreover if they should close, that means a lot of people who are relying on them, their staff, are definitely going to be jobless and that will increase the rate of unemployment, which is not good for the economy.

[exstasie]

It's not like Virgin Atlantic is an essential business in the first place anyway.

Essential travel is essential.

This whole "essential vs. non-essential" distinction is pretty upsetting anyway. It's just more of the government picking winners and losers. Imagine being a business owner and being told your doors need to remain closed indefinitely (for years maybe) because the livelihood you chose wasn't important enough!

The real reasons they shouldn't be bailed out: moral hazard (think of all the companies and people that won't get bailed out), plus it's simply unsustainable. See Japan's stagnant growth and mega high debts over the last 3 decades. That's what happens when you use public debt to prop up unprofitable companies.

[mu_enrico]

Why Virgin Atlantic couldn't receive bailout? What did Richard Branson do?
It's not fair!

https://www.businesstraveller.com/features/these-airlines-have-received-a-bailout/

[amishmanish]

If I'm completely honest I'm not really sorry for those business owners, I understand they're having a really hard time but this is the way the economy should work, only to businesses that are well run and that take precautions and that saved their profits to endure the difficult times ahead should survive, if a business owner no matter how successful he has been in the past does not plan for this then he does not deserve to keep himself in business.

I think its a little harsh to judge a business by its capacity to respond in the present crisis. We haven't seen this kind of a situation in a century. You can accept a business to be ready for some sort of change in business secnario, for example, Nokia wasn't ready.You can blame a business for over-leveraging like OYO hotels. Yet, in the present condition, hospitality, tourism and transportation are the hardest hit.  If it was okay to bail-out criminal investment banks, it should be okay to bail out real businesses.
Richard Branson has also been trying to get into the space tourism business. The man is full of vanity for buying islands and his flashy lifestyle but he is a visionary and a good marketer of ideas. If there is nothing he has done wrong in running his business then he deserves a bailout.

[audaciousbeing]

The impact of coronavirus is second to none and one of the most hit businesses is the airline industry and Virgin is not the first airline to fold in recent times. But looking at the impact of those who will be affected, then its ok in my opinion that the government should offer them bailout. It is essential that the impact on the people working there is a key thing and bailout in itself is not free money as people have come to believe rather its a loan with relaxed conditions and at this time, every help is needed in other to help the economy get back on its feet.

[Yatsan]

Aviations companies are one among the many businesses that are directly affected by the effect of the Coronavirus pandemic to the world. Since there are already several travel bans to those countries that have huge amount of infected cases, many flights are temporarily being cancelled and postponed to keep people safe away from getting infected by the infectious and deadly virus that is up to now still do not have any cure.

Aviation companies are all facing the phase of bankruptcy due to the decreasing demand of people travelling because of the travel ban and implementing health protocols. Providing a bailout on a certain company just to save them from possible bankruptcy would sound unfair for the other existing aviation companies for they are also struggling and making everything to exit this situation. Providing a bailout at the middle of pandemic would mean no sense for they cannot still get back into operation so how come they would need such financial assistance that might be used else where. Also, US government is still facing a financial problem on how they would execute the paying of the stimulus to the people that are also affected by the pandemic which is a lot more important rather than giving a bailout approval just to save an aviation company that is still unidentifiable on when can go back into operation while pandemic is still on and still no vaccine have been proven to end this crisis.

[mu_enrico]

I understand if people feel bailouts are unfair, but it feels unjust from the business side too. When everything was great, workers demand (at least) minimum wage, and the government demand taxes, but when everything suddenly goes south. Everyone throws the businessman under the bus and says, "your problem, not mine."

Arguments from Trump and the airline unions include the concern that airlines could lose many thousands of skilled professionals they will need as the demand for air travel returns and grows in the future. There are also very real human concerns for mid-career people losing good-paying jobs that may be hard for them to replace. I can understand these human concerns. I grew up in an airline family, and we had hard times during several long strikes, one of which shut the entire airline down and left my dad temporarily out of work. Some years later, my best friend’s father—a flight engineer—lost his job when new cockpit technology eliminated the need for such a position.

But those human concerns collide with a harsh reality: air travel will not have recovered six months from now, and the post-pandemic aviation industry will be quite different from what it was in recent decades.

Source.

[wxa7115]

If I'm completely honest I'm not really sorry for those business owners, I understand they're having a really hard time but this is the way the economy should work, only to businesses that are well run and that take precautions and that saved their profits to endure the difficult times ahead should survive, if a business owner no matter how successful he has been in the past does not plan for this then he does not deserve to keep himself in business.

If it was okay to bail-out criminal investment banks, it should be okay to bail out real businesses.

This is precisely my problem, no one should get a bailout, not banks, Virgin Atlantic or any business for that matter because the moment there is a bailout everyone will want one and every single industry will feel justified to get it, now some may argue that we need to help the air travel industry in these difficult times but the truth is that the demand itself has changed, the travel industry is going to face a lot of problems during the next years even after the pandemic is over.

There has been a massive amount of jobs lost during this year and people are afraid that they may be next so they are not going to travel as much for tourism, and business travel is also going to be very limited as people are going to decide that it is cheaper to have a video conference and close deals that way, this means that the size of the pie is going to get smaller and when that is the case businesses will have to disappear, that is the way the free market economy works and trying to go against this only creates distortions in the markets which will eventually be corrected anyway.

[mu_enrico]

Probably what most people skip, or only scratch the surface, is about the moral hazard theory:

Moral hazard is a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior. Any time two parties come into an agreement with one another, moral hazard can occur.

Any time an individual does not have to suffer the full economic consequences of a risk, moral hazard can occur. In the business world, moral hazard can occur when governments make the decision to bailout large corporations.

Source.

That said, the bailouts would make corporations more reckless. One can say COVID is a force-majeure, but corporations should prepare for the worse, just like any other business which receives little or no help from the government.

[Jet Cash]

Branson is a treasonous money grabber, who belittled the UK, and tried to force us into staying in the EU. He is also a mate of Obama, and tries to manipulate politics to disadvantage the country in favour of his elite banking friends. Freddie Laker that Virgin airlines, so it isn't even a Branson creation. Why should the country on which he turned his back support him after he has milked the airline company?

[tbterryboy]

Well, the pandemic did prevented airlines from making money, people are not flying around as you might imagine which really hurts the companies as well. However it is a hard part to indulge, think about it you are a British company and everything you have is British and money goes there, but the assets are in America and you work with American everything on your job that is in America, so when you want to sell those planes for example you sell it on American soil to American people (probably) which means you have to deal with American laws as well.

I don't know what American airlines will do, not like the people who can buy those assets are rich right now neither, they are not flying people too so everything is really a bit screwed right now, I am not sure what could be done at this point.

[so98nn]

I think this thread discuss how US might wanna go for bailouts on the near future. Will bailouts become more frequent?

It is very first thing if such popular airline is going bankrupt then they will have to support the employees and directorish levels in the first place by getting bailouts from the interested investors.

Same thing is happening in Indian region where government is actually auctioning out military divisions which helps Indian military to produce artillery products. I mean surely this is only for big investors like Ambani group of industries, TATA industries and more.

You never know, VA airline might be taken over by some private investor if things went off the chart.

[crzy]

The last bailouts I think was on the financial crisis in 2008 and that move helps a lot of businesses who suffer a lot because of crisis and of course there's a criteria for that and not all dying companies can avail that services from the government.

They legally file for bankruptcy to protect their assets and to ask for the help of the government, and I think the government should really help them. The Airline industries are dying, if there's no tourism and a banned travel will affect them that much, this could be the end for them. I wonder how the airlines companies prepared for the crisis because I believe they should have a reserve fund for the uncertainties like this.