Billionaire Branson offered to put his Caribbean private island up as collateral as the airline the Virgin Group holds a 51% stake in seeks cash to survive the COVID 19 pandemic. But speaking on CNBC, Bastian said the US firm was not in a position to come up with additional funds for Virgin Atlantic.
The UK government has told airlines based in the country to look for other funding sources in place of a government bailout and Bastian was unequivocal in his response when asked if Delta was likely inject cash to support its subsidiary, saying funds were required to support the US carrier’s business.
“On the Delta front, we are not in a position to invest any more money into Virgin. We’re already at the ownership cap of 49%. And candidly with the cash that we need to protect our own business, that’s where our focus is.”
Bastian said he “trusted” Virgin to work through its challenges with the government and suggested the firm may be required to go through an administrative process in the UK.
“I’m confident they could re-emerge. There’s a need for the Virgin brand in the UK marketplace. I’m confident once we get through and we understand where this virus is going to get to a point people will feel safe to travel again, you know, the Virgin brand will be strong once more. It could take a legal process to get through that.”
Bastian had earlier explained the series of cost cutting measures which Delta had put in place which means the firm has reduced its cash burn from $100 million a day at the start of March to $50 million a day at the end of the month.
“In this current quarter…we’ve been able to find ways to reduce 50% of our total operating expenses…from a standing still position just 30 days ago. Over $5 billion of cash we’re saving in the current quarter alone,” said Bastian.
Likewise he said the firm had been successfully tapping sources of liquidity.
“We received on Monday the first instalment from the treasury department on the PSP payment, $2.7 billion, we expect to end at the end of June with at least $10 billion of cash in the bank with opportunities to raise more as we go forward.”
Delta posted a net loss of $534 million for the first three months of the year and has raised $5.4 billion in cash since the end of March, including a $3 billion term loan and $1.2 billion from aircraft sale leasebacks. It also drew down $3 billion of an existing credit facility and cut planned capital expenditures by the same amount.
“The decade of work we put into the balance sheet to lower debt and build unencumbered assets has been critical to our success in raising capital and we expect to end the June quarter with approximately $10 billion in liquidity,” Delta’s chief financial officer Paul Jacobson said in a release.
Delta’s moves to cut costs and raise liquidity were welcomed by analysts at Cowen who said that the firm was well placed to deal with the impact of COVID 19.
“Delta is not immune from the global impact of the coronavirus pandemic but, the company is one of the group's best positioned to withstand the downturn. The company's cost-cutting efforts should prove beneficial going forward, although there is more work to be done.,” Cowen said in a note.
“We continue to look for clarity around aircraft retirements and fleet resizing, near-term impact from cash refunds, and future product enhancements. The company is still attempting to frame what they want to look like in a post COVID-19 world. There will likely be a continued focus on safe, premium service. We expect management to take a holistic view of the business and pinpoint what works and what doesn't,” Cowen added.
