(Bloomberg) – It took 200 million pounds ($ 250 million) of Richard Branson’s money to secure the rescue of his Virgin Atlantic Airways Ltd.
The disbursement marks the latest example of the industry’s lasting ability to reduce fortune, although the British billionaire is not surprised, as he once said, “If you want to be a millionaire, start with a billion dollars and launch a new airline.” .
The airline business has long been irresistible to a larger-than-life magnate cohort. From Tony Fernandes of AirAsia Group Bhd to JetBlue Airways Corp. founder David Neeleman, some of the world’s most celebrated entrepreneurs have built fortunes by transporting people across the sky. But with air travel easing in the blockade, the coronavirus has affected even those that have been toughened by volatility and the thin margins of the capital-intensive industry.
The market values of 10 major publicly traded airlines linked to prominent tycoons tracked by the Bloomberg Billionaires Index have fallen in value by $ 14 billion since the start of the year.
The crisis has already claimed many victims. Earlier this year, Warren Buffett closed a losing bet on four major US airlines, acknowledging that the investment had lost money for Berkshire Hathaway Inc. It was his second round after retiring from the sector.
Latam Airlines Group SA, the largest airline in Latin America, whose shareholders include the Cueto family from Chile, sought protection from the bankruptcy court in New York. In March, Neeleman, who founded companies like Canada’s JetBlue and WestJet Airlines, downloaded more than 80% of his preferred shares at Brazilian airline Azul SA after a $ 30 million personal loan was triggered.
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The crisis has also brought to the surface structural problems or latent tensions. Norwegian Air Shuttle ASA’s debt burden forced it to restructure. The discount airline, whose co-founder Bjorn Kos was a former fighter pilot who challenged giants like British Airways on transatlantic routes, remains heavily indebted and warned that he will likely need to raise more capital.
European budget operator EasyJet Plc, which has just emerged from a nearly full fleet ground connection, has also struggled with internal conflicts. Its founder and largest shareholder, Stelios Haji-Ioannou, launched a failed attempt to remove the executive leadership and block the purchase of Airbus SE aircraft, arguing that the airline neither needed nor could pay.
The family conflict has really helped protect the South Korean Cho family, whose holding company Hanjin Kal Corp. owns Korean Air Lines Co. shares and Jin Air Co. Hanjin Kal shares soared 143% in 2020 due to a battle for control of the company. Shares of individually operating airlines have declined.
The industry may recover quickly enough to stop some losses. There have been signs that demand for travel has started to pick up, fueling hopes that the stress on beleaguered carriers will ease.
But any return to business as always is far away. Delta Air Lines Inc. cut plans to restore some service after a resurgence in coronavirus cases in the US undermined an incipient recovery in travel demand. Even with the restructuring, Virgin Atlantic said in a statement that it only expects to return to profitability starting in 2022.
(Updates with details of Delta’s plans in the final paragraph).
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