Richard Branson, Denmark and the tricky issue of government bailouts
Miles Dean, Head of International Tax, comments on Richard Branson and government bailouts, in Spear’s.
Miles’ comments were published in Spear’s, 28 April 2020, and can be found here.
“Virgin Atlantic is a British airline. 49% happens to be owned by the American airline Delta (who have said they will not bail Virgin out, as they have their own house to look after). Sir Richard Branson’s offshore holding structure owns the balance. Branson’s personal tax affairs and the fact that Virgin Atlantic is foreign-owned appear to be the reason why the request for a government bailout has been met with such scorn. But this doesn’t add up – either Virgin Atlantic qualifies for a bailout from the Government or it doesn’t.
“The “campaigners”, up in arms at the bailout request, are myopic in their agenda pushing. The fact that a UK headquartered airline has foreign shareholders should have no bearing on whether the company has a legitimate claim for a bailout. The business is quite clearly headquartered in the UK and was, until the Covid crisis, reportedly on the way back into profit. It employs hundreds of staff in the UK and provides economic benefits, not least in acting as a major competitor to British Airways. It also changed the way in which we fly – for the better. Unlike many of the low cost airlines that are so prevalent today, Virgin Atlantic sought to provide a superior service, from providing limos to shuttle you to and from the airport, to lounges that really were VIP. For these reasons alone, Virgin Atlantic deserves a hearing.
“But there is no obvious reason why Branson should offer Necker Island as collateral for a government loan (unless it is an asset of Virgin Atlantic, or one of its subsidiaries). It is reportedly worth between £25m-£50m and as such 10% loan-to-value at best – only a politician would be stupid enough to accept that deal.
“Perhaps it’s nothing more than a cynical publicity stunt from the much derided billionaire, after all there is no such thing as bad publicity. It might be that he bowed to pressure from the media and public at large. As someone who campaigned for Remain, it would be ironic for Branson if the Government was unable to grant a bailout on the basis it amounted to illegal State Aid.”