It’s been some time since bankrupt airlines were on the top of the media’s bestseller list. However, we are now seeing a lot of these niche companies come back to life and become financially viable again.
Virgin Atlantic is one of those companies that has seen its share of struggles. Not only did it go bankrupt during the economic recession, but it also went through a power struggle between two of its most vocal promoters. When the airline merged with British Airways, it was the first time Virgin Atlantic was in a situation where it had to work with both British Airways and Air France.
Virgin and United Air Lines are probably the two best known airline bankruptcies on the market today. These two companies have had similar styles of promotion as the other. Neither of them was cheap to operate. Most of the losses came from the lower fare tiers because of the low amount of demand for those flights.
Virgin Australia had trouble because of a decision by a major American carrier to drop the Virgin brand name from their ticket prices. This decision to cut into the profits on all Virgin Australia flights but the top end of the business. Since this is the least profitable segment of the airline Virgin Australia went under.
Even when airlines merge they don’t always work out well. Virgin and United airlines made a deal that cut their losses by combining their profit margins. The combined profit from Virgin and UAL is now enough to support the costs of operating both airlines.
Fortunately for Virgin Atlantic and United Airlines, they have also been able to work with a strong investor group who saw the opportunity in a profitable and stable company with a good track record. British Airways and Air France made a deal with the investment group to sell a small portion of the company. As a result, Virgin Atlantic and UAL are now free of the large financial liabilities of the first merger.
A merger shows that one of the strongest media to invest in a new airline is an international group that can step in and provide funds to keep the business alive. The partnership will likely remain in the short term. The two companies must see some kind of return on their investment before they would consider merging with their competitors.
The takeover of Virgin Atlantic and Air France by an international investor could bring a couple of benefits to those two airlines. They would likely receive money from the buyer to help them fund some of the increased fuel costs. They also would probably get a favourable credit rating from a major credit agency that would help them finance their further expansion into the new markets and continue to attract more passengers to their flights.