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COVID-19: Virgin Atlantic files for bankruptcy

The airline is seeking protection under chapter 15 of the US bankruptcy code.

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Covid-19 crisis: Virgin Atlantic files for bankruptcy

The  British airline, Virgin Atlantic, has filed for bankruptcy as the global aviation industry continues to grapple with the devastating effects of the Coronavirus pandemic.

According to a report by Daily Mirror, this recent action is coming after Virgin Australia filed for voluntary administration, a type of bankruptcy, in April.

An earlier appeal by the airline for a bailout from the British Government was turned down by ministers, leaving the airline in a race against time to secure new investment.

READ MORE: Aviation: Aviation sector grasps for stimulus in worst ever crisis

The airline’s boss, Sir Richard Branson, even offered to pledge his Caribbean holiday island Necker in exchange for investment.

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In the meantime, the airline said it will most likely run out of cash by September.

David Allison QC, for Virgin Atlantic Airways Limited, previously said: “The group’s financial position has been severely affected by the ongoing Covid-19 pandemic, which has caused unprecedented disruption to the global aviation industry.’’

‘’Passenger demand has plummeted to a level that would, until recently, have been unthinkable. As a result of the COVID-19 pandemic, the group is now undergoing a liquidity crisis.’’

(READ MORE: Bristow Helicopters sacks about 100 pilots due to Coronavirus pandemic)

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A spokesperson for Virgin Atlantic disclosed that the airline attended a court session on Tuesday as part of a solvent recapitalization process under 26(A) of the UK Companies Act 2006. That process would be going ahead with the support of the company’s majority creditors.

The airline’s official said, “Following the UK hearing held earlier today, ancillary proceedings in support of the solvent recapitalization were also filed in the US under their Chapter 15 process. These ancillary US proceedings have been commenced under provisions that allow US courts to recognize foreign restructuring processes.’’

‘’In the case of Virgin Atlantic, the process we have asked to be recognized is a solvent restructuring of an English company under Part 26A of the English Companies Act 2006.

READ MORE: Exxon Mobil, Chevron record their worst losses in history

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The UK based airline is seeking for protection under chapter 15 of the US bankruptcy code, which allows a foreign debtor to shield assets in the country.

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This move is coming less than a month after the airline disclosed that it had agreed a rescue deal worth $1.6 billion to secure its future beyond the Coronavirus crisis. Under the arrangement, Virgin’s boss, Richard Branson, would inject $200 million, with additional funds provided by investors and creditors.

This proposal needed to secure approval from creditors under a court-sanction process.

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READ ALSO: Air Peace acquires B777 Aircraft, defends order of banned B737-Max8

Mr Allison told Justice Trower that the Virgin Atlantic Group has sound business model during a high court hearing on Tuesday.

It can be recalled that Virgin Atlantic, who have been heavily impacted by the coronavirus pandemic had put in some measures to ensure the future of the airline is safeguarded. Some of these measures include the reduction of its schedule to prioritize core routes based on demand, cut over 3,000 jobs and so on.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Hospitality & Travel

Transport Fare Watch: Commuters by bus journey intercity paid more in December 2020

NBS report indicates that commuters paid more for bus journey intercity in December 2020 than they did in November 2020.

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The average fare paid by commuters for bus journey intercity increased by 4.98% from N2,240.66 in November 2020 to N2,532.19 in December 2020, according to the National Bureau of Statistics (NBS) report for the month of December 2020.

According to the report, commuters in Abuja FCT (N4,415.73), Sokoto (N3,255.20), and Lagos (N3,250.60) paid the highest bus journey fare intercity while commuters in Bayelsa (N1,550.73), Bauchi (N1,600.70), and Akwa Ibom (N1,700.54) paid the lowest bus journey fare intercity.

Other key highlights of the report…

  • The average airfare paid by air passengers for specified routes single journey increased by 0.42% from N36,301.74 in November to N36,454.59 in December 2020.
  • Passengers from Anambra (N38,700.00), Lagos (N38,550.00), Cross River (N38,500.00) paid the highest airfare were while passengers from Akwa Ibom (N32,600.00), Sokoto (N33,500.00), and Gombe (N34,750.00) paid the lowest airfare.
  • The average fare paid by commuters for bus journeys within the city increased by 6.18% from N333.86 in November 2020 to N354.49 in December 2020, according to the National Bureau of Statistics(NBS) report for the month of December 2020.
  • Commuters in Zamfara (N600.50), Bauchi (N526.30), and Cross River (N458.07) paid the highest bus journey within the states whiles commuters in Abia (N200.50), Anambra (N242.23), and Borno (N243.12) paid the lowest bus journey fare within the city.
  • The average fare paid by commuters for journey by motorcycle per drop increased by 6.14% from N276.38 in November 2020 to N293.36 in December 2020.
  • Commuters in Niger (N1,575.70), Yobe (N397.45) and Imo (N397.42) paid the highest journey fare by motorcycle per drop while commuters in Adamawa (N80.40), Katsina (N130.25) and Kebbi (N146.25) paid the lowest journey fare by motorcycle per drop.
  • The average fare paid by passengers for waterway transport increased by 0.19% from N756.84 in November 2020 to N758.27 in December 2020.
  • Passengers in Delta (N2,300.35), Bayelsa (N2,240.00) and Rivers (N2,200.00) paid the highest fare by waterway passenger transport while passengers in Borno (N240.73), Gombe (N293.24) and Kebbi (N349.64) paid the lowest fare by water way passenger transport.

 Why this matters

Cost of transportation has been noted to account for the huge chunk of the budget for most lower/middle-class Nigerians and as well takes not less than 20% of their take-home pay packages.

The increase in transport cost for the month of December 2020 may not be unconnected with the yuletide seasons that come with an unusually high cost of goods and services.

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Hospitality & Travel

Air Passengers to United States must test negative for Covid-19 before boarding flight

The United States Government wants all international passengers must provide a negative Covid-19 test before they board a flight into the country.

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The United States Government wants all international passengers to provide a negative Covid-19 test before they board a flight into the country. This is according to a report from the Wall Street Journal and confirmed by the Centers for Disease Control Prevention in the US.

The new rule will also affect United States citizens in the country.

According to the U.S. Centers for Disease Control Prevention (CDC) “Before departure to the United States, a required test, combined with the CDC recommendations to get tested again 3-5 days after arrival and stay home for 7 days post-travel, will help slow the spread of COVID-19 within US communities from travel-related infections. Pre-departure testing with results known and acted upon before travel begins will help identify infected travelers before they board airplanes.”

Based on this, all Air Passengers are required to conduct a test within 3 days before their flight to the US. departs.

“Air passengers are required to get a viral test (a test for current infection) within the 3 days before their flight to the U.S. departs, and provide written documentation of their laboratory test result (paper or electronic copy) to the airline or provide documentation of having recovered from COVID-19. Airlines must confirm the negative test result for all passengers or documentation of recovery before they board. If a passenger does not provide documentation of a negative test or recovery or chooses not to take a test, the airline must deny boarding to the passenger.”

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The order was signed by the CDC Director on January 12, 2021, and will become effective on January 26, 2021.

Last week the US imposed a testing requirement for travelers from the United Kingdom over cases of a new strain of the virus which has also been reported in the US.

What this means: New travel requirements for the negative Covid-19 test will negatively affect the global aviation sector which attracts over 340 million arrivals annually according to 2019 data seen by Nairametrics.

  • For third-world countries like Nigeria, travellers into the US will need to conduct the Covid-19 test before they depart from the United States piling pressure on testing centers across the country.
  • Though a requirement that most Nigerians are already familiar with, there will likely be pressure to avoid testing positive a few days before departure to the US.
  • Nigerians who travelled to Dubai during the Christmas holiday were also required to undertake covid-19 tests
  • Nigeria also requires visitors into the country to take the Covid-19 test before departing for Nigeria.

The global Covid-19 caseloads topped 90 million with the United States leading the pack with 22.7 million cases and over 379,000 deaths

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Just last week, the United Kingdom said that all passengers arriving in the country will be required to show negative Covid-19 test results taken within 72 hours of the commencement of their journey to prove they do not have the disease. Ireland also announced new travel rules which require visitors into the country to provide evidence of a negative Covid-19 test taken within 72 hours before arriving in the country.

Going further, the United Kingdom said on Thursday that it would extend a ban to international passengers from Southern African countries coming into the country, as part of the measures aimed at preventing the spread of a new strain of Covid-19 variant identified in South Africa.

Nigeria also requires travellers into the country to carry out a second Covid-19 test after arrival into the country or face consequences. Last week the Nigerian immigration service announced the suspension of 100 passports belonging to Nigerian passengers who refused to undergo second Covid-19 tests within 7 days of arrival into Nigeria from overseas travel.


This article was updated following new information.

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Nigerian Aviation: Exchange rate, 7.5% VAT suspension and other factors to determine survival – Experts

Stakeholders share their expectations and factors that must be addressed by the FG to aid the rebound of the sector in 2021.

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Aviation, Airline operators will pay $3,500 per passenger if they break protocols – PTF COVID-19, Global Air passenger slump to persists til 2023- Moody’s 2023- Moody’s

The aviation sector suffered setbacks due to the emergence of the COVID-19 pandemic in 2020, as the lockdown effected by many countries led to travel restrictions, reduced revenue and mass loss of jobs.

In the case of Nigeria, operators in the sector felt the impact of the pandemic more than their counterparts, as ‘old illness’ suffered by the airlines was exacerbated by the pandemic and left the operators writhing in pains.

READ: COVID-19: Over 70% of jobs lost in aviation, tourism industries in 2020 – AfDB

For the sector to survive in 2021 – in the heat of the second wave of the pandemic, stakeholders shared their expectations and factors that must be addressed by the federal government to aid the rebound of the sector.

They listed stable exchange rate, reduction of cost of operations, waivers on Customs tariffs for aircraft and spares and cost of aircraft insurance, a reversal of 25% remittance of earnings, amongst others.

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READ: Nigeria owes foreign airlines $53 million as proceeds from ticket sales – IATA

Unstable exchange rate

In an interview with Nairametrics, the Managing Director, Aero Mainstream Cargo Services, Ajibade Adewale, explained that the unstable exchange rate, especially for aviation stakeholders, has been a clog in the wheel of operations of the airlines, and most of them cannot afford to inflate their charges in line with the unstable rate.

READ: FG bars aides of VIPs from airport terminals, to grant loans to airlines, others at 5%

He said,

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“Operations of the airlines are largely dollar-denominated. Operations like aircraft purchase plus maintenance and training of staff amongst others can only be done in dollars. The only thing they do in local currency would be salaries. 

“Either airlines are allowed to access stable rates or the federal government creates an enabling environment for aircrafts maintenance or repairs here.

READ: Nigeria @ 60: The Aviation sector and its travails

“The rubber industry should be revived for investors to set up tyre manufacturing factories in Nigeria, in order to stop importing aircrafts tyres from other parts of the world. Most of the aircraft tyres are manufactured and imported from the United Kingdom (Dunlop), France (Michelin), United States of America (Goodyear), and Bridgestone (Japan).”

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He insisted that if enabling environment is created by the government, some of these companies will return to Nigeria and this will reduce cost of maintenance for the airlines.

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READ: COVID-19: Travel agencies beg FG for interest-free loans

Lack of skills to execute right policies

On creating an enabling environment, especially for maintenance factory, Capt. David Olubadewo, Managing Director, Starburst Aviation Limited and a Nigerian based in UK, explained that aviation in Nigeria is a very difficult business because the environment is unfriendly.

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He said,

“Aside from the role of the government, the industry has always been given a bad name in that light. It is not that we don’t have the people to fix it, but there are different aspects that have been compounded over the years. That is why we are where we are today.

READ: Nigeria generates N424.71 billion VAT in Q3 2020

“We have lots of very qualified people, there are lots of engineers in the United Kingdom and the United States who are Nigerians. We have people that are overqualified, but we lack the skills to execute the right policies to grow the sector.”

Cheaper loans

Olubadewo explained that most of the airlines and other industry stakeholders could not access cheaper loans because banks believe that the sector is too difficult to invest in.

“But that is wrong. It is not different from other sectors. We are all in it to make profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with -25% loss or more, but that is not happening in the UK where I pay far less interest rate.

READ: VAT collection edges higher but indicates weaker economy

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“If I take such loan in Nigeria, it means I am -28 per cent (interest rate) in red, and by the time you get to the top, you are owing millions. I cannot approach any of the banks to give me local money to do business in Nigeria. If I can go through that, you can imagine the experiences of the airlines.”

Suspension of 7.5% VAT

Recently, a member of the finance bill drafting committee and West Africa Tax Lead, PwC Nigeria, Taiwo Oyedele, disclosed via a tweet, that the federal government has again suspended the deduction of 7.5% Value Added Tax (VAT) on airfares and other air transport services.

READ: How businesses can leverage technology to survive uncertain times

According to him, the latest suspension order was scheduled to take effect on January 1, 2021, as it is contained in the 2020 finance act recently signed by President Muhammadu Buhari. Operators in the aviation sector are convinced that its implementation would ease the burden on them in 2021.

Media and Communications Manager, Dana Air, Kingsley Ezenwa, explained that his airline would be excited to plow back the proceeds of VAT removal to the business and ticket fares subsidy.

READ: COViD-19: Nigerian Railway Corporation to shut operations

He said,

“But that may not happen soon, the expected gains are subject to the actual implementation of the policy and the review of other multiple charges in the aviation industry.”

READ: COVID-19: The ‘New Normal’ for Nigerian aviation industry

What you should know

  • The FG in June 2018 issued an executive order on the suspension of VAT in air transport, but the Federal Inland Revenue Service (FIRS) claimed to be unaware of such a directive, hence it was never implemented.
  • Airline operators had complained that Nigeria is the only country that still charges VAT on air transport services. The VAT plus 36 other charges, according to the airlines, account for at least 40% of total revenue and N10 billion in taxes yearly, leaving the airlines heavily indebted and in financial distress or both in most cases.

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